Carpenter Technology Corporation (NYSE: CRS) (the “Company”) today
announced financial results for the fiscal first quarter ended
September 30, 2019. For the quarter, the Company reported net
income of $41.2 million, or $0.85 earnings per diluted share.
“Our first quarter results represent our 11th consecutive
quarter of year-over-year earnings growth and our best first
quarter operating income performance in six years,” said Tony
Thene, Carpenter Technology’s President and CEO. “Our
solutions approach continues to drive a richer product mix and
strong performance at SAO where we delivered record first quarter
operating income. In addition, we received one additional
qualification for our Athens facility during the quarter and
customer engagement levels remain high.”
“The first quarter also marked our 11th consecutive quarter of
year-over-year backlog growth, including healthy increases in our
key Aerospace and Defense and Medical end-use markets. During the
first quarter, Aerospace and Defense sales excluding surcharge
increased 19% to record first quarter levels due to our diverse
solutions portfolio across multiple attractive sub-markets.
Sales excluding surcharge in the Medical end-use market increased
11% over last year as we continue benefiting from our expanded OEM
customer relationships and leading titanium solutions.”
“Moving forward, our strategic focus is centered on strong
commercial execution and securing capacity gains and manufacturing
improvements via the Carpenter Operating Model. We also continue to
operate with a sharp eye on the future and ensuring we best
position Carpenter Technology for sustainable long-term profitable
growth. To that end, we have built an end-to-end additive
manufacturing platform and customer collaborations continue to
rapidly increase. In addition, the expansion of our soft
magnetics capabilities remains on target as we look to capitalize
on our high-value portfolio and the expected disruptive impact of
electrification. We believe these investments in critical emerging
technologies are necessary to sustain our position as a leading
solutions provider and critical supply chain partner for our
customers in the years and decades to come.”
Financial Highlights
($ in
millions) |
|
Q1 |
|
Q1 |
|
Q4 |
|
|
|
|
FY2020 |
|
FY2019 |
|
FY2019 |
|
|
Net Sales |
$ |
585.4 |
|
|
$ |
572.4 |
|
|
|
$ |
641.4 |
|
|
|
Net Sales
Excluding Surcharge Revenue (a) |
$ |
486.6 |
|
|
$ |
456.3 |
|
|
|
$ |
533.3 |
|
|
|
Operating
Income |
$ |
59.8 |
|
|
$ |
45.0 |
|
|
|
$ |
67.9 |
|
|
|
Net Income |
$ |
41.2 |
|
|
$ |
31.5 |
|
|
|
$ |
48.9 |
|
|
|
Cash Provided from
Operating Activities |
$ |
0.7 |
|
|
$ |
9.4 |
|
|
|
$ |
175.1 |
|
|
|
Free Cash Flow
(a) |
$ |
(56.4 |
) |
|
$ |
(41.7 |
) |
|
|
$ |
115.8 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) Non-GAAP financial measures explained in the attached
tables |
|
|
|
|
|
|
|
|
|
|
|
Net sales for the first quarter of fiscal year 2020 were $585.4
million compared with $572.4 million in the first quarter of fiscal
year 2019, an increase of $13.0 million (2 percent), on 5 percent
lower volume. Net sales excluding surcharge were $486.6 million, an
increase of $30.3 million (7 percent) from the same period a year
ago.
Operating income was $59.8 million compared to $45.0 million in
the prior year period. These results primarily reflect richer
product mix, strong commercial and operating execution and improved
market conditions in key end-use markets compared to the prior year
period.
Cash provided from operating activities in the first quarter of
fiscal year 2020 was $0.7 million, compared to $9.4 million in the
same quarter last year. The decrease in operating cash flow
primarily reflects investments in working capital partially offset
by higher income levels. Free cash flow in the first quarter
of fiscal year 2020 was negative $56.4 million, compared to
negative $41.7 million in the same quarter last year. The
decrease in free cash flow was primarily due to lower cash from
operating activities and higher capital expenditures in the current
year quarter. Capital expenditures were $47.5 million in the first
quarter of fiscal year 2020 compared to $41.6 million in the same
quarter last year.
Total liquidity, including cash and available revolver balance,
was $341.1 million at the end of the first quarter of fiscal year
2020. This consisted of $24.6 million of cash and $316.5 million of
available borrowings under the Company’s credit facility.
Conference Call and Webcast Presentation
Carpenter Technology will host a conference call and webcast
presentation today, October 24th at 10:00 a.m. ET, to discuss the
financial results of operations for the first quarter of fiscal
year 2020. Please dial +1 412-317-9259 for access to the live
conference call. Access to the live webcast will be available at
Carpenter Technology’s website
(http://www.carpentertechnology.com), and a replay will soon be
made available at http://www.carpentertechnology.com. Presentation
materials used during this conference call will be available for
viewing and download at http://www.carpentertechnology.com.
Non-GAAP Financial Measures
This press release includes discussions of financial measures
that have not been determined in accordance with U.S. Generally
Accepted Accounting Principles (GAAP). A reconciliation of the
non-GAAP financial measures to their most directly comparable
financial measures prepared in accordance with GAAP, accompanied by
reasons why the Company believes the non-GAAP measures are
important, are included in the attached schedules.
About Carpenter Technology
Carpenter Technology Corporation is a
recognized leader in high-performance specialty alloy-based
materials and process solutions for critical applications in the
aerospace, defense, medical, transportation, energy, industrial and
consumer markets. Founded in 1889, Carpenter
Technology has evolved to become a pioneer in premium
specialty alloys, including titanium, nickel, and cobalt, as well
as alloys specifically engineered for additive manufacturing (AM)
processes and soft magnetics applications. Carpenter
Technology has expanded its AM capabilities to provide a
complete end-to-end solution to accelerate materials innovation and
streamline parts production. More information about Carpenter
Technology can be found at www.carpentertechnology.com.
Forward-Looking Statements
This presentation contains forward-looking statements within the
meaning of the Private Securities Litigation Act of 1995. These
forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ from those projected,
anticipated or implied. The most significant of these uncertainties
are described in Carpenter Technology’s filings with the Securities
and Exchange Commission, including its report on Form 10-K for the
year ended June 30, 2019 and the exhibits attached to that filing.
They include but are not limited to: (1) the cyclical nature of the
specialty materials business and certain end-use markets, including
aerospace, defense, medical, transportation, energy, industrial and
consumer, or other influences on Carpenter Technology’s business
such as new competitors, the consolidation of competitors,
customers, and suppliers or the transfer of manufacturing capacity
from the United States to foreign countries; (2) the ability of
Carpenter Technology to achieve cash generation, growth, earnings,
profitability, operating income, cost savings and reductions,
qualifications, productivity improvements or process changes; (3)
the ability to recoup increases in the cost of energy, raw
materials, freight or other factors; (4) domestic and foreign
excess manufacturing capacity for certain metals; (5) fluctuations
in currency exchange rates; (6) the effect of government trade
actions; (7) the valuation of the assets and liabilities in
Carpenter Technology’s pension trusts and the accounting for
pension plans; (8) possible labor disputes or work stoppages; (9)
the potential that our customers may substitute alternate materials
or adopt different manufacturing practices that replace or limit
the suitability of our products; (10) the ability to successfully
acquire and integrate acquisitions; (11) the availability of credit
facilities to Carpenter Technology, its customers or other members
of the supply chain; (12) the ability to obtain energy or raw
materials, especially from suppliers located in countries that may
be subject to unstable political or economic conditions; (13)
Carpenter Technology’s manufacturing processes are dependent upon
highly specialized equipment located primarily in facilities in
Reading and Latrobe, Pennsylvania and Athens, Alabama for which
there may be limited alternatives if there are significant
equipment failures or a catastrophic event; (14) the ability to
hire and retain key personnel, including members of the executive
management team, management, metallurgists and other skilled
personnel; and (15) fluctuations in oil and gas prices and
production. Any of these factors could have an adverse and/or
fluctuating effect on Carpenter Technology’s results of operations.
The forward-looking statements in this document are intended to be
subject to the safe harbor protection provided by Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended.
Carpenter Technology undertakes no obligation to update or revise
any forward-looking statements.
PRELIMINARYCONSOLIDATED
STATEMENTS OF INCOME(in millions, except per share
data)(Unaudited)
|
|
Three Months Ended |
|
|
September 30, |
|
|
2019 |
|
2018 |
|
|
|
|
|
NET SALES |
|
$ |
585.4 |
|
|
$ |
572.4 |
|
Cost of sales |
|
472.8 |
|
|
480.7 |
|
Gross profit |
|
112.6 |
|
|
91.7 |
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
52.8 |
|
|
46.7 |
|
Operating income |
|
59.8 |
|
|
45.0 |
|
|
|
|
|
|
Interest expense |
|
(5.4 |
) |
|
(6.3 |
) |
Other (expense) income,
net |
|
(0.3 |
) |
|
1.6 |
|
|
|
|
|
|
Income before income
taxes |
|
54.1 |
|
|
40.3 |
|
Income tax expense |
|
12.9 |
|
|
8.8 |
|
|
|
|
|
|
NET INCOME |
|
$ |
41.2 |
|
|
$ |
31.5 |
|
|
|
|
|
|
EARNINGS PER COMMON
SHARE: |
|
|
|
|
Basic |
|
$ |
0.85 |
|
|
$ |
0.66 |
|
Diluted |
|
$ |
0.85 |
|
|
$ |
0.65 |
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING: |
|
|
|
|
Basic |
|
47.9 |
|
|
47.6 |
|
Diluted |
|
48.3 |
|
|
48.2 |
|
|
|
|
|
|
PRELIMINARYCONSOLIDATED
STATEMENTS OF CASH FLOWS(in millions)(Unaudited)
|
|
Three Months Ended |
|
|
September 30, |
|
|
2019 |
|
2018 |
OPERATING ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
41.2 |
|
|
$ |
31.5 |
|
Adjustments to reconcile net
income to net cash provided from operating activities: |
|
|
|
|
Depreciation and amortization |
|
30.6 |
|
|
29.7 |
|
Deferred income taxes |
|
3.5 |
|
|
1.2 |
|
Net pension expense |
|
3.8 |
|
|
2.9 |
|
Share-based compensation expense |
|
4.1 |
|
|
3.0 |
|
Net loss on disposals of property, plant and equipment and assets
held for sale |
|
— |
|
|
0.1 |
|
Changes in working capital and
other: |
|
|
|
|
Accounts receivable |
|
(2.1 |
) |
|
(3.5 |
) |
Inventories |
|
(51.1 |
) |
|
(50.5 |
) |
Other current assets |
|
(10.1 |
) |
|
(6.5 |
) |
Accounts payable |
|
18.0 |
|
|
47.5 |
|
Accrued liabilities |
|
(30.8 |
) |
|
(40.8 |
) |
Pension plan contributions |
|
(2.4 |
) |
|
(2.3 |
) |
Other postretirement plan contributions |
|
(0.9 |
) |
|
(0.8 |
) |
Other, net |
|
(3.1 |
) |
|
(2.1 |
) |
Net cash provided from operating activities |
|
0.7 |
|
|
9.4 |
|
INVESTING ACTIVITIES: |
|
|
|
|
Purchases of property, plant,
equipment and software |
|
(47.5 |
) |
|
(41.6 |
) |
Proceeds from disposals of
property, plant and equipment and assets held for sale |
|
0.1 |
|
|
0.1 |
|
Proceeds from sales and
maturities of marketable securities |
|
— |
|
|
2.9 |
|
Net cash used for investing activities |
|
(47.4 |
) |
|
(38.6 |
) |
FINANCING ACTIVITIES: |
|
|
|
|
Credit agreement
borrowings |
|
88.1 |
|
|
— |
|
Credit agreement
repayments |
|
(38.1 |
) |
|
— |
|
Net change in short-term
credit agreement borrowings |
|
7.9 |
|
|
— |
|
Dividends paid |
|
(9.7 |
) |
|
(9.6 |
) |
Proceeds from stock options
exercised |
|
2.6 |
|
|
3.2 |
|
Withholding tax payments on
share-based compensation awards |
|
(7.5 |
) |
|
(4.1 |
) |
Net cash provided from (used for) financing activities |
|
43.3 |
|
|
(10.5 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
|
1.0 |
|
|
0.5 |
|
DECREASE IN CASH AND CASH
EQUIVALENTS |
|
(2.4 |
) |
|
(39.2 |
) |
Cash and cash equivalents at
beginning of period |
|
27.0 |
|
|
56.2 |
|
Cash and cash equivalents at
end of period |
|
$ |
24.6 |
|
|
$ |
17.0 |
|
|
PRELIMINARYCONSOLIDATED
BALANCE SHEETS(in millions)(Unaudited)
|
|
September 30, |
|
June 30, |
|
|
2019 |
|
2019 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
24.6 |
|
|
$ |
27.0 |
|
Accounts receivable, net |
|
383.4 |
|
|
384.1 |
|
Inventories |
|
837.6 |
|
|
787.7 |
|
Other current assets |
|
64.0 |
|
|
37.4 |
|
Total current assets |
|
1,309.6 |
|
|
1,236.2 |
|
Property, plant and equipment,
net |
|
1,380.2 |
|
|
1,366.2 |
|
Goodwill |
|
324.5 |
|
|
326.4 |
|
Other intangibles, net |
|
64.9 |
|
|
67.2 |
|
Deferred income taxes |
|
4.0 |
|
|
4.2 |
|
Other assets |
|
258.3 |
|
|
187.6 |
|
Total assets |
|
$ |
3,341.5 |
|
|
$ |
3,187.8 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Current liabilities: |
|
|
|
|
Short-term credit agreement borrowings |
|
$ |
77.6 |
|
|
$ |
19.7 |
|
Accounts payable |
|
259.9 |
|
|
238.7 |
|
Accrued liabilities |
|
129.1 |
|
|
157.6 |
|
Total current liabilities |
|
466.6 |
|
|
416.0 |
|
Long-term debt |
|
550.9 |
|
|
550.6 |
|
Accrued pension
liabilities |
|
366.8 |
|
|
371.2 |
|
Accrued postretirement
benefits |
|
122.3 |
|
|
122.1 |
|
Deferred income taxes |
|
154.6 |
|
|
142.7 |
|
Other liabilities |
|
103.3 |
|
|
65.1 |
|
Total liabilities |
|
1,764.5 |
|
|
1,667.7 |
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
Common stock |
|
279.8 |
|
|
279.0 |
|
Capital in excess of par
value |
|
317.5 |
|
|
320.4 |
|
Reinvested earnings |
|
1,636.8 |
|
|
1,605.3 |
|
Common stock in treasury, at
cost |
|
(329.5 |
) |
|
(332.8 |
) |
Accumulated other
comprehensive loss |
|
(327.6 |
) |
|
(351.8 |
) |
Total stockholders' equity |
|
1,577.0 |
|
|
1,520.1 |
|
Total liabilities and stockholders' equity |
|
$ |
3,341.5 |
|
|
$ |
3,187.8 |
|
|
PRELIMINARYSEGMENT
FINANCIAL DATA(in millions, except pounds
sold)(Unaudited)
|
Three Months Ended |
|
September 30, |
|
2019 |
|
2018 |
Pounds sold (000): |
|
|
|
Specialty Alloys Operations |
60,044 |
|
|
62,714 |
|
Performance Engineered Products |
3,250 |
|
|
2,732 |
|
Intersegment |
(996 |
) |
|
170 |
|
Consolidated pounds sold |
62,298 |
|
|
65,616 |
|
|
|
|
|
Net sales: |
|
|
|
Specialty Alloys Operations |
|
|
|
Net sales excluding surcharge |
$ |
393.2 |
|
|
$ |
361.5 |
|
Surcharge |
97.9 |
|
|
114.0 |
|
Specialty Alloys Operations net sales |
491.1 |
|
|
475.5 |
|
|
|
|
|
Performance Engineered Products |
|
|
|
Net sales excluding surcharge |
107.9 |
|
|
108.0 |
|
Surcharge |
1.5 |
|
|
3.7 |
|
Performance Engineered Products net sales |
109.4 |
|
|
111.7 |
|
|
|
|
|
Intersegment |
|
|
|
Net sales excluding surcharge |
(14.5 |
) |
|
(13.2 |
) |
Surcharge |
(0.6 |
) |
|
(1.6 |
) |
Intersegment net sales |
(15.1 |
) |
|
(14.8 |
) |
|
|
|
|
Consolidated net sales |
$ |
585.4 |
|
|
$ |
572.4 |
|
|
|
|
|
Operating income: |
|
|
|
Specialty Alloys Operations |
$ |
81.0 |
|
|
$ |
52.8 |
|
Performance Engineered Products |
(2.0 |
) |
|
7.3 |
|
Corporate costs |
(19.1 |
) |
|
(15.8 |
) |
Intersegment |
(0.1 |
) |
|
0.7 |
|
Consolidated operating income |
$ |
59.8 |
|
|
$ |
45.0 |
|
The Company has two reportable segments, Specialty Alloys
Operations (“SAO”) and Performance Engineered Products (“PEP”).
The SAO segment is comprised of Carpenter’s major premium alloy
and stainless steel manufacturing operations. This includes
operations performed at mills primarily in Reading and Latrobe,
Pennsylvania and surrounding areas as well as South Carolina and
Alabama.
The PEP segment is comprised of the Company’s differentiated
operations. This segment includes the Dynamet titanium business,
the Carpenter Powder Products (CPP) business, the Amega West
business, the Carpenter Additive (Additive) business and the
Latrobe and Mexico distribution businesses. Effective July 1, 2019,
the Company's LPW, CalRAM and Powder businesses in Alabama and West
Virginia were combined into the Additive business. The businesses
in the PEP segment are managed with an entrepreneurial structure to
promote flexibility and agility to quickly respond to market
dynamics. It is our belief this model will ultimately drive
overall revenue and profit growth. The pounds sold data above
for the PEP segment includes only the Dynamet, CPP and Additive
businesses.
Corporate costs are comprised of executive and director
compensation, and other corporate facilities and administrative
expenses not allocated to the segments. Also included are items
that management considers not representative of ongoing operations
and other specifically-identified income or expense items.
The service cost component of net pension expense, which
represents the estimated cost of future pension liabilities earned
associated with active employees, is included in the operating
results of the business segments. The residual net pension
expense is comprised of the expected return on plan assets,
interest costs on the projected benefit obligations of the plans,
and amortization of actuarial gains and losses and prior service
costs and is included in other (expense) income, net.
PRELIMINARYNON-GAAP
FINANCIAL MEASURES(in millions, except per share
data)(Unaudited)
|
|
Three Months Ended |
|
|
September 30, |
ADJUSTED OPERATING MARGIN
EXCLUDING SURCHARGE REVENUE |
|
2019 |
|
2018 |
|
|
|
|
|
Net sales |
|
$ |
585.4 |
|
|
$ |
572.4 |
|
Less: surcharge revenue |
|
98.8 |
|
|
116.1 |
|
Net sales excluding surcharge
revenue |
|
$ |
486.6 |
|
|
$ |
456.3 |
|
|
|
|
|
|
Operating income |
|
$ |
59.8 |
|
|
$ |
45.0 |
|
|
|
|
|
|
Operating margin |
|
10.2 |
% |
|
7.9 |
% |
|
|
|
|
|
Adjusted Operating margin
excluding surcharge revenue |
|
12.3 |
% |
|
9.9 |
% |
|
Management believes that removing the impact of raw material
surcharge revenue from operating margin provides a more consistent
basis for comparing results of operations from period to period,
thereby permitting management to evaluate performance and investors
to make decisions based on the ongoing operations of the
Company. Management uses its results excluding these amounts
to evaluate its operating performance and to discuss its business
with investment institutions, the Company’s board of directors and
others.
|
|
Three Months Ended |
|
|
September 30, |
FREE CASH FLOW |
|
2019 |
|
2018 |
|
|
|
|
|
Net cash provided from operating activities |
|
$ |
0.7 |
|
|
$ |
9.4 |
|
Purchases of property, plant,
equipment and software |
|
(47.5 |
) |
|
(41.6 |
) |
Proceeds from disposals of
property, plant and equipment and assets held for sale |
|
0.1 |
|
|
0.1 |
|
Dividends paid |
|
(9.7 |
) |
|
(9.6 |
) |
|
|
|
|
|
Free cash flow |
|
$ |
(56.4 |
) |
|
$ |
(41.7 |
) |
|
Management believes that the free cash flow measure provides
useful information to investors regarding our financial condition
because it is a measure of cash generated which management
evaluates for alternative uses.
PRELIMINARYSUPPLEMENTAL
SCHEDULE(in millions)(Unaudited)
|
|
Three Months Ended |
|
|
September 30, |
NET SALES BY END-USE
MARKET |
|
2019 |
|
2018 |
End-Use Market Excluding
Surcharge Revenue: |
|
|
|
|
Aerospace and Defense |
|
$ |
286.1 |
|
|
$ |
239.6 |
|
Medical |
|
44.0 |
|
|
39.5 |
|
Transportation |
|
33.0 |
|
|
31.4 |
|
Energy |
|
33.0 |
|
|
37.5 |
|
Industrial and Consumer |
|
60.2 |
|
|
74.6 |
|
Distribution |
|
30.3 |
|
|
33.7 |
|
|
|
|
|
|
Total net sales excluding
surcharge revenue |
|
486.6 |
|
|
456.3 |
|
|
|
|
|
|
Surcharge revenue |
|
98.8 |
|
|
116.1 |
|
|
|
|
|
|
Total net sales |
|
$ |
585.4 |
|
|
$ |
572.4 |
|
Carpenter Technology (NYSE:CRS)
Historical Stock Chart
From Aug 2024 to Sep 2024
Carpenter Technology (NYSE:CRS)
Historical Stock Chart
From Sep 2023 to Sep 2024