Carpenter Technology Corporation (NYSE: CRS) (the “Company”) today
announced financial results for the fiscal second quarter ended
December 31, 2021. For the quarter, the Company reported a net
loss of $29.4 million, or $0.61 loss per diluted share. Excluding
the special item, adjusted loss per diluted share was $0.58 for the
quarter.
“Demand continues to improve as the recovery takes hold across
our end-use markets, with our backlog up 35 percent sequentially
and 106 percent year-over-year,” said Tony R. Thene, President and
CEO of Carpenter Technology. “We continue to see signs of the
Aerospace recovery with lead times increasing despite any near-term
uncertainties from the latest wave of COVID-19 cases. In addition,
during the quarter, we signed several customer contracts with
Aerospace customers that include favorable pricing and expanded
share opportunities.”“Our Performance Engineered Products segment
finished ahead of our expectations for the second quarter of fiscal
year 2022, driven primarily by strong demand in the Medical end-use
market. Within the Specialty Alloys Operations segment, near-term
operational headwinds impacted our performance in the current
quarter including production employee COVID-19 isolations, supply
chain disruptions, and hiring challenges in a difficult labor
environment. In addition, the unplanned outage of the press at our
Reading, PA facility limited our ability to meet our production
targets in the quarter.”“We believe the operational challenges are
short term in nature and are focusing our efforts on increasing our
production rates to keep pace with growing demand. We are on-track
with repairs to the Reading press and expect to have it operational
in the current quarter. Looking ahead, we believe that we are well
positioned for growth given the increasing demand across our
end-use markets, our strong customer relationships, and the role
our critical solutions play in the supply chain.”
Financial Highlights
| ($ in millions except per
share amounts) |
Q2 |
|
Q2 |
|
Q1 |
| |
FY2022 |
|
FY2021 |
|
FY2022 |
|
Net sales |
$ |
396.0 |
|
|
$ |
348.8 |
|
|
$ |
387.6 |
|
| Net sales excluding surcharge
(a) |
$ |
314.9 |
|
|
$ |
299.4 |
|
|
$ |
312.9 |
|
| Operating loss |
$ |
(31.5 |
) |
|
$ |
(89.0 |
) |
|
$ |
(19.1 |
) |
| Adjusted operating loss
excluding special items (a) |
$ |
(29.8 |
) |
|
$ |
(32.3 |
) |
|
$ |
(17.5 |
) |
| Net loss |
$ |
(29.4 |
) |
|
$ |
(84.9 |
) |
|
$ |
(14.8 |
) |
| Loss per share |
$ |
(0.61 |
) |
|
$ |
(1.76 |
) |
|
$ |
(0.31 |
) |
| Adjusted loss per share
(a) |
$ |
(0.58 |
) |
|
$ |
(0.61 |
) |
|
$ |
(0.28 |
) |
| Net cash (used for) provided
from operating activities |
$ |
(89.2 |
) |
|
$ |
83.6 |
|
|
$ |
(47.0 |
) |
| Free cash flow (a) |
$ |
(116.3 |
) |
|
$ |
51.0 |
|
|
$ |
(71.2 |
) |
| |
|
|
|
|
|
| (a) Non-GAAP
financial measures explained in the attached tables |
| |
Net sales for the second quarter of fiscal year 2022 were $396.0
million, compared with $348.8 million in the second quarter of
fiscal year 2021, an increase of $47.2 million (or 14 percent), on
a 9 percent increase in shipment volume. Net sales excluding
surcharge were $314.9 million, an increase of $15.5 million (or 5
percent) from the same period a year ago. The results reflect
higher shipments to the Medical, Transportation, Industrial and
Consumer and Distribution end-use markets partially offset by lower
shipments to the Aerospace and Defense and Energy end-use
markets.
Operating loss was $31.5 million compared to operating loss of
$89.0 million in the prior year period. The prior year period
included a goodwill impairment charge of $52.8 million. The
improved results reflect higher sales as well as the full
recognition of various cost savings actions taken in fiscal year
2021.
COVID-19 related costs, the special item excluded from adjusted
operating loss in the current quarter, totaled $1.7 million. The
COVID-19 related costs consisted of direct incremental operating
costs including outside services to execute enhanced cleaning
protocols, additional personal protective equipment, isolation pay
for production employees potentially exposed to COVID-19 and
various operating supplies necessary to maintain the operations
while keeping employees safe against possible exposure in the
Company’s facilities. Special items in the prior year period
included $3.9 million of COVID-19 related costs as well as a $52.8
million goodwill impairment charge.
Cash used for operating activities in the second quarter of
fiscal year 2022 was $89.2 million compared to cash provided from
operating activities of $83.6 million in the same quarter last
year. The decrease in operating cash flow primarily reflects
investments in working capital, most notably inventory. The Company
expects the inventory build in the first half of the year to be
temporary and anticipates that inventory will be reduced in the
second half of fiscal year 2022. Free cash flow in the second
quarter of fiscal year 2022 was negative $116.3 million, compared
to positive $51.0 million in the same quarter last year. The
decrease in free cash flow was primarily due to investments in
working capital partially offset by lower capital expenditures in
the current year quarter. Capital expenditures in the second
quarter of fiscal year 2022 were $19.1 million, compared to $26.6
million in the same quarter last year.
Total liquidity, including cash and available revolver balance,
was $391.6 million at the end of the second quarter of fiscal
year 2022. This consisted of $96.9 million of cash and $294.7
million of available borrowing under the Company’s credit
facility.
Conference Call and Webcast Presentation
Carpenter Technology will host a conference call and webcast
presentation today, February 2, 2022 at 10:00 a.m. ET, to discuss
the financial results of operations for the second quarter of
fiscal year 2022. 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
electronics 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 StatementsThis press release
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, 2021, Form 10-Q for the quarter ended September 30, 2021
and the exhibits attached to those filings. 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; (15) fluctuations in oil and gas prices and production;
(16) uncertainty regarding the return to service of the Boeing 737
MAX aircraft and the related supply chain disruption; (17)
potential impacts of the COVID-19 pandemic on our operations,
financial results and financial position; (18) our efforts and
efforts by governmental authorities to mitigate the COVID-19
pandemic, such as travel bans, shelter in place orders and business
closures, and the related impact on resource allocations and
manufacturing and supply chains; (19) our status as a “critical”,
“essential” or “life-sustaining” business in light of COVID-19
business closure laws, orders and guidance being challenged by a
governmental body or other applicable authority; (20) our ability
to execute our business continuity, operational, budget and fiscal
plans in light of the COVID-19 pandemic; and (21) our ability to
successfully carry out restructuring and business exit activities
on the expected terms and timelines. 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 OPERATIONS(in millions, except per share
data)(Unaudited)
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
December 31, |
|
December 31, |
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
| NET SALES |
|
$ |
396.0 |
|
|
$ |
348.8 |
|
|
$ |
783.6 |
|
|
$ |
702.1 |
|
| Cost of sales |
|
|
382.9 |
|
|
|
342.8 |
|
|
|
745.3 |
|
|
|
692.6 |
|
| Gross profit |
|
|
13.1 |
|
|
|
6.0 |
|
|
|
38.3 |
|
|
|
9.5 |
|
| |
|
|
|
|
|
|
|
|
| Selling, general and
administrative expenses |
|
|
44.6 |
|
|
|
42.2 |
|
|
|
88.9 |
|
|
|
84.5 |
|
| Restructuring and asset
impairment charges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10.0 |
|
| Goodwill impairment |
|
|
— |
|
|
|
52.8 |
|
|
|
— |
|
|
|
52.8 |
|
| Operating loss |
|
|
(31.5 |
) |
|
|
(89.0 |
) |
|
|
(50.6 |
) |
|
|
(137.8 |
) |
| |
|
|
|
|
|
|
|
|
| Interest expense, net |
|
|
10.1 |
|
|
|
7.9 |
|
|
|
20.3 |
|
|
|
14.6 |
|
| Debt extinguishment losses,
net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8.2 |
|
| Other (income) expense,
net |
|
|
(6.6 |
) |
|
|
(1.3 |
) |
|
|
(10.7 |
) |
|
|
1.1 |
|
| |
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(35.0 |
) |
|
|
(95.6 |
) |
|
|
(60.2 |
) |
|
|
(161.7 |
) |
| Income tax benefit |
|
|
(5.6 |
) |
|
|
(10.7 |
) |
|
|
(16.1 |
) |
|
|
(29.7 |
) |
| |
|
|
|
|
|
|
|
|
| NET LOSS |
|
$ |
(29.4 |
) |
|
$ |
(84.9 |
) |
|
$ |
(44.1 |
) |
|
$ |
(132.0 |
) |
| |
|
|
|
|
|
|
|
|
| LOSS PER COMMON SHARE: |
|
|
|
|
|
|
|
|
| Basic |
|
$ |
(0.61 |
) |
|
$ |
(1.76 |
) |
|
$ |
(0.91 |
) |
|
$ |
(2.74 |
) |
| Diluted |
|
$ |
(0.61 |
) |
|
$ |
(1.76 |
) |
|
$ |
(0.91 |
) |
|
$ |
(2.74 |
) |
| |
|
|
|
|
|
|
|
|
| WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING: |
|
|
|
|
|
|
|
|
| Basic |
|
|
48.6 |
|
|
|
48.3 |
|
|
|
48.5 |
|
|
|
48.3 |
|
| Diluted |
|
|
48.6 |
|
|
|
48.3 |
|
|
|
48.5 |
|
|
|
48.3 |
|
| |
|
|
|
|
|
|
|
|
PRELIMINARYCONSOLIDATED
STATEMENTS OF CASH FLOWS(in millions)(Unaudited)
| |
|
Six Months Ended |
| |
|
December 31, |
|
|
|
|
2021 |
|
|
|
2020 |
|
| OPERATING ACTIVITIES |
|
|
|
|
|
Net loss |
|
$ |
(44.1 |
) |
|
$ |
(132.0 |
) |
|
Adjustments to reconcile net loss to net cash (used for) provided
from operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
|
65.3 |
|
|
|
59.6 |
|
|
Non-cash restructuring and asset impairment charges |
|
|
— |
|
|
|
8.7 |
|
|
Debt extinguishment losses, net |
|
|
— |
|
|
|
8.2 |
|
|
Goodwill impairment charge |
|
|
— |
|
|
|
52.8 |
|
|
Deferred income taxes |
|
|
(17.6 |
) |
|
|
(10.1 |
) |
|
Net pension (income) expense |
|
|
(3.6 |
) |
|
|
8.1 |
|
|
Share-based compensation expense |
|
|
5.6 |
|
|
|
5.4 |
|
|
Net loss on disposals of property, plant and equipment |
|
|
0.2 |
|
|
|
0.1 |
|
|
Changes in working capital and other: |
|
|
|
|
|
Accounts receivable |
|
|
— |
|
|
|
64.2 |
|
|
Inventories |
|
|
(109.8 |
) |
|
|
155.8 |
|
|
Other current assets |
|
|
(7.4 |
) |
|
|
(26.8 |
) |
|
Accounts payable |
|
|
26.9 |
|
|
|
(13.1 |
) |
|
Accrued liabilities |
|
|
(42.9 |
) |
|
|
(3.1 |
) |
|
Pension plan contributions |
|
|
(0.2 |
) |
|
|
(4.7 |
) |
|
Other postretirement plan contributions |
|
|
(1.9 |
) |
|
|
(1.2 |
) |
|
Other, net |
|
|
(6.8 |
) |
|
|
(0.3 |
) |
|
Net cash (used for) provided from operating
activities |
|
|
(136.3 |
) |
|
|
171.6 |
|
| INVESTING ACTIVITIES |
|
|
|
|
|
Purchases of property, plant, equipment and software |
|
|
(33.4 |
) |
|
|
(59.9 |
) |
|
Proceeds from disposals of property, plant and equipment and assets
held for sale |
|
|
1.8 |
|
|
|
1.5 |
|
|
Proceeds from divestiture of business |
|
|
— |
|
|
|
20.0 |
|
|
Net cash used for investing activities |
|
|
(31.6 |
) |
|
|
(38.4 |
) |
| FINANCING ACTIVITIES |
|
|
|
|
|
Net change in short-term credit agreement borrowings |
|
|
— |
|
|
|
(170.0 |
) |
|
Proceeds from issuance of long-term debt, net of offering
costs |
|
|
— |
|
|
|
395.5 |
|
|
Payments on long-term debt |
|
|
— |
|
|
|
(250.0 |
) |
|
Payments for debt extinguishment costs, net |
|
|
— |
|
|
|
(8.2 |
) |
|
Payments for debt issue costs |
|
|
— |
|
|
|
(1.1 |
) |
|
Dividends paid |
|
|
(19.7 |
) |
|
|
(19.5 |
) |
|
Withholding tax payments on share-based compensation awards |
|
|
(3.1 |
) |
|
|
(2.2 |
) |
|
Net cash used for financing activities |
|
|
(22.8 |
) |
|
|
(55.5 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
0.2 |
|
|
|
0.6 |
|
| (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS |
|
|
(190.5 |
) |
|
|
78.3 |
|
| Cash and cash equivalents at
beginning of period |
|
|
287.4 |
|
|
|
193.1 |
|
| Cash and cash equivalents at
end of period |
|
$ |
96.9 |
|
|
$ |
271.4 |
|
PRELIMINARYCONSOLIDATED
BALANCE SHEETS(in millions)(Unaudited)
| |
|
December 31, |
|
June 30, |
|
|
|
|
2021 |
|
|
|
2021 |
|
| ASSETS |
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
96.9 |
|
|
$ |
287.4 |
|
|
Accounts receivable, net |
|
|
307.0 |
|
|
|
308.7 |
|
|
Inventories |
|
|
534.7 |
|
|
|
425.7 |
|
|
Other current assets |
|
|
105.7 |
|
|
|
95.6 |
|
|
Total current assets |
|
|
1,044.3 |
|
|
|
1,117.4 |
|
| Property, plant and equipment,
net |
|
|
1,429.6 |
|
|
|
1,457.5 |
|
| Goodwill |
|
|
241.4 |
|
|
|
241.4 |
|
| Other intangibles, net |
|
|
39.5 |
|
|
|
43.1 |
|
| Deferred income taxes |
|
|
5.6 |
|
|
|
5.3 |
|
| Other assets |
|
|
119.5 |
|
|
|
106.5 |
|
|
Total assets |
|
$ |
2,879.9 |
|
|
$ |
2,971.2 |
|
| |
|
|
|
|
| LIABILITIES |
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
170.3 |
|
|
$ |
142.4 |
|
|
Accrued liabilities |
|
|
124.0 |
|
|
|
163.9 |
|
|
Total current liabilities |
|
|
294.3 |
|
|
|
306.3 |
|
| Long-term debt |
|
|
695.0 |
|
|
|
694.5 |
|
| Accrued pension
liabilities |
|
|
213.1 |
|
|
|
222.6 |
|
| Accrued postretirement
benefits |
|
|
97.4 |
|
|
|
98.6 |
|
| Deferred income taxes |
|
|
141.3 |
|
|
|
156.9 |
|
| Other liabilities |
|
|
105.7 |
|
|
|
100.0 |
|
|
Total liabilities |
|
|
1,546.8 |
|
|
|
1,578.9 |
|
| STOCKHOLDERS' EQUITY |
|
|
|
|
| Common stock |
|
|
280.1 |
|
|
|
280.1 |
|
| Capital in excess of par
value |
|
|
315.9 |
|
|
|
322.6 |
|
| Reinvested earnings |
|
|
1,235.5 |
|
|
|
1,299.3 |
|
| Common stock in treasury, at
cost |
|
|
(308.0 |
) |
|
|
(317.4 |
) |
| Accumulated other
comprehensive loss |
|
|
(190.4 |
) |
|
|
(192.3 |
) |
|
Total stockholders' equity |
|
|
1,333.1 |
|
|
|
1,392.3 |
|
|
Total liabilities and stockholders' equity |
|
$ |
2,879.9 |
|
|
$ |
2,971.2 |
|
PRELIMINARYSEGMENT
FINANCIAL DATA(in millions, except pounds
sold)(Unaudited)
| |
Three Months Ended |
|
Six Months Ended |
| |
December 31, |
|
December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
| Pounds sold (000): |
|
|
|
|
|
|
|
|
Specialty Alloys Operations |
|
43,248 |
|
|
|
38,602 |
|
|
|
86,256 |
|
|
|
81,970 |
|
|
Performance Engineered Products |
|
2,776 |
|
|
|
1,534 |
|
|
|
5,148 |
|
|
|
2,998 |
|
|
Intersegment |
|
(2,942 |
) |
|
|
(516 |
) |
|
|
(4,792 |
) |
|
|
(1,000 |
) |
|
Consolidated pounds sold |
|
43,082 |
|
|
|
39,620 |
|
|
|
86,612 |
|
|
|
83,968 |
|
| |
|
|
|
|
|
|
|
| Net sales: |
|
|
|
|
|
|
|
|
Specialty Alloys Operations |
|
|
|
|
|
|
|
|
Net sales excluding surcharge |
$ |
251.6 |
|
|
$ |
251.6 |
|
|
$ |
509.8 |
|
|
$ |
506.4 |
|
|
Surcharge |
|
79.2 |
|
|
|
48.8 |
|
|
|
153.0 |
|
|
|
94.7 |
|
|
Specialty Alloys Operations net sales |
|
330.8 |
|
|
|
300.4 |
|
|
|
662.8 |
|
|
|
601.1 |
|
| |
|
|
|
|
|
|
|
|
Performance Engineered Products |
|
|
|
|
|
|
|
|
Net sales excluding surcharge |
|
83.8 |
|
|
|
54.1 |
|
|
|
157.4 |
|
|
|
115.3 |
|
|
Surcharge |
|
1.9 |
|
|
|
0.7 |
|
|
|
2.9 |
|
|
|
1.4 |
|
|
Performance Engineered Products net sales |
|
85.7 |
|
|
|
54.8 |
|
|
|
160.3 |
|
|
|
116.7 |
|
| |
|
|
|
|
|
|
|
|
Intersegment |
|
|
|
|
|
|
|
|
Net sales excluding surcharge |
|
(20.5 |
) |
|
|
(6.3 |
) |
|
|
(39.4 |
) |
|
|
(15.2 |
) |
|
Surcharge |
|
— |
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
(0.5 |
) |
|
Intersegment net sales |
|
(20.5 |
) |
|
|
(6.4 |
) |
|
|
(39.5 |
) |
|
|
(15.7 |
) |
| |
|
|
|
|
|
|
|
|
Consolidated net sales |
$ |
396.0 |
|
|
$ |
348.8 |
|
|
$ |
783.6 |
|
|
$ |
702.1 |
|
| |
|
|
|
|
|
|
|
| Operating (Loss) Income: |
|
|
|
|
|
|
|
|
Specialty Alloys Operations |
$ |
(20.3 |
) |
|
$ |
(11.6 |
) |
|
$ |
(26.2 |
) |
|
$ |
(30.2 |
) |
|
Performance Engineered Products |
|
3.0 |
|
|
|
(7.2 |
) |
|
|
3.6 |
|
|
|
(10.9 |
) |
|
Corporate (including restructuring and asset impairment
charges) |
|
(14.5 |
) |
|
|
(70.6 |
) |
|
|
(28.6 |
) |
|
|
(97.1 |
) |
|
Intersegment |
|
0.3 |
|
|
|
0.4 |
|
|
|
0.6 |
|
|
|
0.4 |
|
|
Consolidated operating loss |
$ |
(31.5 |
) |
|
$ |
(89.0 |
) |
|
$ |
(50.6 |
) |
|
$ |
(137.8 |
) |
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 Additive business and the Latrobe and Mexico
distribution businesses. The Amega West business was part of the
PEP segment however the business was divested during the quarter
ended September 30, 2020. 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 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 (income) 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 (income) 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 (income) expense, net.
PRELIMINARYNON-GAAP
FINANCIAL MEASURES(in millions, except per share
data)(Unaudited)
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
December 31, |
|
December 31, |
|
ADJUSTED OPERATING MARGIN EXCLUDING SURCHARGE REVENUE AND SPECIAL
ITEMS |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
| |
|
|
|
|
|
|
|
|
| Net sales |
|
$ |
396.0 |
|
|
$ |
348.8 |
|
|
$ |
783.6 |
|
|
$ |
702.1 |
|
| Less: surcharge revenue |
|
|
81.1 |
|
|
|
49.4 |
|
|
|
155.8 |
|
|
|
95.6 |
|
| Net sales excluding surcharge
revenue |
|
$ |
314.9 |
|
|
$ |
299.4 |
|
|
$ |
627.8 |
|
|
$ |
606.5 |
|
| |
|
|
|
|
|
|
|
|
| Operating loss |
|
$ |
(31.5 |
) |
|
$ |
(89.0 |
) |
|
$ |
(50.6 |
) |
|
$ |
(137.8 |
) |
| Special items: |
|
|
|
|
|
|
|
|
|
COVID-19 costs |
|
|
1.7 |
|
|
|
3.9 |
|
|
|
3.3 |
|
|
|
11.8 |
|
|
Restructuring and asset impairment charges |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
10.0 |
|
|
Goodwill impairment |
|
|
— |
|
|
|
52.8 |
|
|
|
— |
|
|
|
52.8 |
|
| Adjusted operating loss |
|
$ |
(29.8 |
) |
|
$ |
(32.3 |
) |
|
$ |
(47.3 |
) |
|
$ |
(63.2 |
) |
| |
|
|
|
|
|
|
|
|
| Operating margin |
|
(8.0) % |
|
(25.5) % |
|
(6.5) % |
|
(19.6) % |
| |
|
|
|
|
|
|
|
|
| Adjusted operating margin
excluding surcharge revenue and special items |
|
(9.5) % |
|
(10.8) % |
|
(7.5) % |
|
(10.4) % |
Management believes that removing the impact of raw material
surcharge 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. In
addition, management believes that excluding the impact of special
items from operating margin is helpful in analyzing the operating
performance of the Company, as these items are not indicative of
ongoing operating performance. 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.
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED LOSS PER SHARE EXCLUDING SPECIAL ITEM |
|
Loss Before Income Taxes |
|
Income Tax Benefit |
|
Net Loss |
|
Loss Per Diluted Share* |
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2021, as reported |
|
$ |
(35.0 |
) |
|
$ |
5.6 |
|
|
$ |
(29.4 |
) |
|
$ |
(0.61 |
) |
| |
|
|
|
|
|
|
|
|
| Special item: |
|
|
|
|
|
|
|
|
|
COVID-19 costs |
|
|
1.7 |
|
|
|
(0.3 |
) |
|
|
1.4 |
|
|
|
0.03 |
|
| |
|
|
|
|
|
|
|
|
| Three months ended
December 31, 2021, as adjusted |
|
$ |
(33.3 |
) |
|
$ |
5.3 |
|
|
$ |
(28.0 |
) |
|
$ |
(0.58 |
) |
| |
|
|
|
|
|
|
|
|
| * Impact per
diluted share calculated using weighted average common shares
outstanding of 48.6 million for the three months ended
December 31, 2021. |
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED LOSS PER SHARE EXCLUDING SPECIAL ITEMS |
|
Loss Before Income Taxes |
|
Income Tax Benefit |
|
Net Loss |
|
Loss Per Diluted Share* |
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31, 2020, as reported |
|
$ |
(95.6 |
) |
|
$ |
10.7 |
|
|
$ |
(84.9 |
) |
|
$ |
(1.76 |
) |
| |
|
|
|
|
|
|
|
|
| Special items: |
|
|
|
|
|
|
|
|
|
COVID-19 costs |
|
|
3.9 |
|
|
|
(0.9 |
) |
|
|
3.0 |
|
|
|
0.06 |
|
|
Goodwill impairment |
|
|
52.8 |
|
|
|
(0.1 |
) |
|
|
52.7 |
|
|
|
1.09 |
|
| |
|
|
|
|
|
|
|
|
| Three months ended
December 31, 2020, as adjusted |
|
$ |
(38.9 |
) |
|
$ |
9.7 |
|
|
$ |
(29.2 |
) |
|
$ |
(0.61 |
) |
| |
|
|
|
|
|
|
|
|
| * Impact per
diluted share calculated using weighted average common shares
outstanding of 48.3 million for the three months ended December 31,
2020. |
| |
|
ADJUSTED LOSS PER SHARE EXCLUDING SPECIAL ITEM |
|
Loss Before Income Taxes |
|
Income Tax Benefit |
|
Net Loss |
|
Loss Per Diluted Share* |
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, 2021, as reported |
|
$ |
(60.2 |
) |
|
$ |
16.1 |
|
|
$ |
(44.1 |
) |
|
$ |
(0.91 |
) |
| |
|
|
|
|
|
|
|
|
| Special item: |
|
|
|
|
|
|
|
|
|
COVID-19 costs |
|
|
3.3 |
|
|
|
(0.8 |
) |
|
|
2.5 |
|
|
|
0.05 |
|
| |
|
|
|
|
|
|
|
|
| Six months ended
December 31, 2021, as adjusted |
|
$ |
(56.9 |
) |
|
$ |
15.3 |
|
|
$ |
(41.6 |
) |
|
$ |
(0.86 |
) |
| |
|
|
|
|
|
|
|
|
| * Impact per
diluted share calculated using weighted average common shares
outstanding of 48.5 million for the six months ended
December 31, 2021. |
| |
|
ADJUSTED LOSS PER SHARE EXCLUDING SPECIAL ITEMS |
|
Loss Before Income Taxes |
|
Income Tax Benefit |
|
Net Loss |
|
Loss Per Diluted Share* |
|
|
|
|
|
|
|
|
|
|
|
Six months ended December 31, 2020, as reported |
|
$ |
(161.7 |
) |
|
$ |
29.7 |
|
|
$ |
(132.0 |
) |
|
$ |
(2.74 |
) |
| |
|
|
|
|
|
|
|
|
| Special items: |
|
|
|
|
|
|
|
|
|
COVID-19 costs |
|
|
11.8 |
|
|
|
(3.5 |
) |
|
|
8.3 |
|
|
|
0.17 |
|
|
Restructuring and asset impairment charges |
|
|
10.0 |
|
|
|
(2.4 |
) |
|
|
7.6 |
|
|
|
0.16 |
|
|
Goodwill impairment |
|
|
52.8 |
|
|
|
(0.1 |
) |
|
|
52.7 |
|
|
|
1.09 |
|
|
Debt extinguishment losses, net |
|
|
8.2 |
|
|
|
(2.0 |
) |
|
|
6.2 |
|
|
|
0.13 |
|
| |
|
|
|
|
|
|
|
|
| Six months ended
December 31, 2020, as adjusted |
|
$ |
(78.9 |
) |
|
$ |
21.7 |
|
|
$ |
(57.2 |
) |
|
$ |
(1.19 |
) |
| |
|
|
|
|
|
|
|
|
| * Impact per
diluted share calculated using weighted average common shares
outstanding of 48.3 million for the six months ended December 31,
2020. |
| |
Management believes that loss per share adjusted to exclude the
impact of the special items is helpful in analyzing the operating
performance of the Company, as these items are not indicative of
ongoing operating performance. 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 |
|
Six Months Ended |
| |
|
December 31, |
|
December 31, |
|
FREE CASH FLOW |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
| Net cash (used for) provided
from operating activities |
|
$ |
(89.2 |
) |
|
$ |
83.6 |
|
|
$ |
(136.3 |
) |
|
$ |
171.6 |
|
| Purchases of property, plant,
equipment and software |
|
|
(19.1 |
) |
|
|
(26.6 |
) |
|
|
(33.4 |
) |
|
|
(59.9 |
) |
| Proceeds from disposals of
property, plant and equipment and assets held for sale |
|
|
1.8 |
|
|
|
1.5 |
|
|
|
1.8 |
|
|
|
1.5 |
|
| Proceeds from divestiture of
business |
|
|
— |
|
|
|
2.4 |
|
|
|
— |
|
|
|
20.0 |
|
| Dividends paid |
|
|
(9.8 |
) |
|
|
(9.9 |
) |
|
|
(19.7 |
) |
|
|
(19.5 |
) |
| |
|
|
|
|
|
|
|
|
| Free cash flow |
|
$ |
(116.3 |
) |
|
$ |
51.0 |
|
|
$ |
(187.6 |
) |
|
$ |
113.7 |
|
Management believes that the free cash flow measure provides
useful information to investors regarding the Company's financial
condition because it is a measure of cash generated which
management evaluates for alternative uses.
PRELIMINARYSUPPLEMENTAL
SCHEDULE(in millions)(Unaudited)
| |
|
Three Months Ended |
|
Six Months Ended |
| |
|
December 31, |
|
December 31, |
|
NET SALES BY END-USE MARKET |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
| End-Use Market Excluding
Surcharge Revenue: |
|
|
|
|
|
|
|
|
|
Aerospace and Defense |
|
$ |
134.0 |
|
|
$ |
148.5 |
|
|
$ |
268.8 |
|
|
$ |
296.0 |
|
|
Medical |
|
|
40.4 |
|
|
|
29.0 |
|
|
|
77.4 |
|
|
|
59.0 |
|
|
Transportation |
|
|
28.5 |
|
|
|
25.8 |
|
|
|
60.0 |
|
|
|
50.2 |
|
|
Energy |
|
|
16.0 |
|
|
|
17.7 |
|
|
|
32.2 |
|
|
|
39.0 |
|
|
Industrial and Consumer |
|
|
66.4 |
|
|
|
56.3 |
|
|
|
132.7 |
|
|
|
119.4 |
|
|
Distribution |
|
|
29.6 |
|
|
|
22.1 |
|
|
|
56.7 |
|
|
|
42.9 |
|
| |
|
|
|
|
|
|
|
|
| Total net sales excluding
surcharge revenue |
|
|
314.9 |
|
|
|
299.4 |
|
|
|
627.8 |
|
|
|
606.5 |
|
| |
|
|
|
|
|
|
|
|
| Surcharge revenue |
|
|
81.1 |
|
|
|
49.4 |
|
|
|
155.8 |
|
|
|
95.6 |
|
| |
|
|
|
|
|
|
|
|
| Total net sales |
|
$ |
396.0 |
|
|
$ |
348.8 |
|
|
$ |
783.6 |
|
|
$ |
702.1 |
|
|
Media Inquiries: |
Investor Inquiries: |
| Heather Beardsley |
The Plunkett Group |
| +1 610-208-2278 |
Brad Edwards |
| hbeardsley@cartech.com |
+1 914-582-4187 |
| |
brad@theplunkettgroup.com |
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