CRS
$50.21
Carpenter Technology
($.71)
(1.39%)
Earnings Details
2nd Quarter December 2022
Thursday, January 26, 2023 8:00:00 AM
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Summary

Carpenter Technology (CRS) Recent Earnings

Carpenter Technology (CRS) reported 2nd Quarter December 2022 earnings of $0.13 per share on revenue of $579.1 million. The consensus earnings estimate was $0.12 per share on revenue of $543.9 million. Revenue grew 46.2% on a year-over-year basis.

Carpenter Technology Corp is engaged in the manufacturing, fabrication and distribution of specialty metals. The Company operates in two business segments: Specialty Alloys Operations and Performance Engineered Products.

Results
Reported Earnings
$0.13
Earnings Whisper
-
Consensus Estimate
$0.12
Reported Revenue
$579.1 Mil
Revenue Estimate
$543.9 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Carpenter Technology Reports Second Quarter Fiscal Year 2023 Results

Second Quarter Highlights

Reported earnings per share of $0.13 improved from loss per share of $0.61 in prior year period
Net sales up 46% year-over-year; Net sales excluding surcharge up 34% year-over-year
Backlog up 9% sequentially and 107% year-over-year

PHILADELPHIA, Jan. 26, 2023 (GLOBE NEWSWIRE) -- Carpenter Technology Corporation (NYSE: CRS) (the “Company”) today announced financial results for the fiscal second quarter ended December 31, 2022. For the quarter, the Company reported net income of $6.2 million, or $0.13 earnings per diluted share.

“The second quarter of fiscal year 2023 was a meaningful step on our path back to pre-pandemic levels and further long-term growth,” said Tony R. Thene, President and CEO of Carpenter Technology. “Our return to profitability was driven by ongoing strong demand in each of our end-use markets, as evidenced by the continued growth of our backlog, and increased throughput across our manufacturing facilities.”

“The Specialty Alloys Operations (‘SAO’) segment demonstrated continued improvement with operating income of $30.3 million for the second quarter of fiscal year 2023. The results for SAO were driven by the ongoing aerospace ramp and our focus on increasing our productivity and throughput. The Performance Engineered Products (‘PEP’) segment had another strong quarter with operating income of $9.3 million, led by our Dynamet Titanium and Additive businesses.”

“Looking ahead, we remain confident in our growth trajectory. We continue to see strong demand across each of our end-use markets and are focused on driving operational improvements. As a result, we expect to realize accelerating sales momentum and improved margins.”

Financial Highlights

  Q2 Q2 Q1
($ in millions except per share amounts) FY2023 FY2022 FY2023
Net sales $579.1  $396.0  $522.9 
Net sales excluding surcharge (a) $420.8  $314.9  $375.7 
Operating income (loss) $22.6  $(31.5) $8.3 
Adjusted operating income (loss) excluding special item (a) $22.6  $(29.8) $8.3 
Net income (loss) $6.2  $(29.4) $(6.9)
Earnings (loss) per share $0.13  $(0.61) $(0.14)
Adjusted earnings (loss) per share (a) $0.13  $(0.58) $(0.14)
Net cash used for operating activities $(86.4) $(89.2) $(78.0)
Free cash flow (a) $(113.7) $(116.3) $(101.3)
       
(a) Non-GAAP financial measures explained in the attached tables
 

Net sales for the second quarter of fiscal year 2023 were $579.1 million, compared with $396.0 million in the second quarter of fiscal year 2022, an increase of $183.1 million (or 46 percent), on a 17 percent increase in shipment volume. Net sales excluding surcharge were $420.8 million, an increase of $105.9 million (or 34 percent) from the same period a year ago.

Operating income was $22.6 million compared to operating loss of $31.5 million in the prior year period. Earnings per share in the second quarter of fiscal year 2023 was $0.13 compared to loss of $0.61 per share in the prior year quarter. Excluding the special item, adjusted earnings per share in the second quarter of fiscal year 2022 was loss of $0.58. The improvement in operating income and earnings per share is primarily the result of increased shipments as activity levels continued to ramp to meet improving market conditions in key end-use markets compared to the prior year period.

Cash used for operating activities in the second quarter of fiscal year 2023 was $86.4 million compared to $89.2 million in the same quarter last year. Free cash flow in the second quarter of fiscal year 2023 was negative $113.7 million, compared to negative $116.3 million in the same quarter last year. The operating cash flow and free cash flow performance in the second quarter of fiscal year 2023 reflects improved earnings offset by higher cash used for inventory to meet growing demand. Capital expenditures in the second quarter of fiscal year 2023 were $17.5 million, compared to $19.1 million in the same quarter last year.

Total liquidity, including cash and available revolver balance, was $237.0 million at the end of the second quarter of fiscal year 2023. This consisted of $20.0 million of cash and $217.0 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, January 26, 2023, at 10:00 a.m. ET, to discuss the financial results of operations for the second quarter of fiscal year 2023. 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 Statements

This 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 fiscal year ended June 30, 2022, Form 10-Q for the quarter ended September 30, 2022, 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 ability to execute our business continuity, operational, budget and fiscal plans in light of the COVID-19 pandemic; and (20) 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. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements.


PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)

  Three Months Ended Six Months Ended
  December 31, December 31,
  2022  2021   2022   2021 
         
NET SALES $579.1 $396.0  $1,102.0  $783.6 
Cost of sales  509.1  382.9   977.2   745.3 
Gross profit  70.0  13.1   124.8   38.3 
         
Selling, general and administrative expenses  47.4  44.6   93.9   88.9 
Operating income (loss)  22.6  (31.5)  30.9   (50.6)
         
Interest expense, net  13.0  10.1   25.6   20.3 
Other expense (income), net  1.9  (6.6)  5.4   (10.7)
         
Income (loss) before income taxes  7.7  (35.0)  (0.1)  (60.2)
Income tax expense (benefit)  1.5  (5.6)  0.5   (16.1)
         
NET INCOME (LOSS) $6.2 $(29.4) $(0.6) $(44.1)
         
EARNINGS (LOSS) PER COMMON SHARE:        
Basic $0.13 $(0.61) $(0.02) $(0.91)
Diluted $0.13 $(0.61) $(0.02) $(0.91)
         
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:        
Basic  48.8  48.6   48.7   48.5 
Diluted  49.0  48.6   48.7   48.5 


PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)

  Six Months Ended
  December 31,
   2022   2021 
OPERATING ACTIVITIES    
Net loss $(0.6) $(44.1)
Adjustments to reconcile net loss to net cash used for operating activities:    
Depreciation and amortization  64.8   65.3 
Deferred income taxes  (0.9)  (17.6)
Net pension expense (income)  9.9   (3.6)
Share-based compensation expense  7.1   5.6 
Net loss on disposals of property, plant and equipment  0.6   0.2 
Changes in working capital and other:    
Accounts receivable  (58.5)   
Inventories  (226.7)  (109.8)
Other current assets  (4.1)  (7.4)
Accounts payable  62.1   26.9 
Accrued liabilities  (12.1)  (42.9)
Pension plan contributions     (0.2)
Other postretirement plan contributions  (1.5)  (1.9)
Other, net  (4.6)  (6.8)
Net cash used for operating activities  (164.5)  (136.3)
INVESTING ACTIVITIES    
Purchases of property, plant, equipment and software  (31.0)  (33.4)
Proceeds from disposals of property, plant and equipment and assets held for sale     1.8 
Net cash used for investing activities  (31.0)  (31.6)
FINANCING ACTIVITIES    
Short-term credit agreement borrowings, net change  41.2    
Credit agreement borrowings  60.1    
Credit agreement repayments  (20.1)   
Dividends paid  (19.7)  (19.7)
Withholding tax payments on share-based compensation awards  (3.4)  (3.1)
Net cash provided from (used for) financing activities  58.1   (22.8)
Effect of exchange rate changes on cash and cash equivalents  3.2   0.2 
DECREASE IN CASH AND CASH EQUIVALENTS  (134.2)  (190.5)
Cash and cash equivalents at beginning of year  154.2   287.4 
Cash and cash equivalents at end of period $20.0  $96.9 


PRELIMINARY
CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)

  December 31, June 30,
   2022   2022 
ASSETS    
Current assets:    
Cash and cash equivalents $20.0  $154.2 
Accounts receivable, net  441.6   382.3 
Inventories  722.7   496.1 
Other current assets  99.1   86.8 
Total current assets  1,283.4   1,119.4 
Property, plant and equipment, net  1,390.5   1,420.8 
Goodwill  241.4   241.4 
Other intangibles, net  31.7   35.2 
Deferred income taxes  5.2   5.7 
Other assets  104.3   109.8 
Total assets $3,056.5  $2,932.3 
     
LIABILITIES    
Current liabilities:    
Short-term credit agreement borrowings $81.2  $ 
Accounts payable  304.7   242.1 
Accrued liabilities  124.4   133.5 
Total current liabilities  510.3   375.6 
Long-term debt  692.4   691.8 
Accrued pension liabilities  199.4   196.6 
Accrued postretirement benefits  78.3   77.4 
Deferred income taxes  162.0   162.4 
Other liabilities  93.0   98.0 
Total liabilities  1,735.4   1,601.8 
STOCKHOLDERS’ EQUITY    
Common stock  280.1   280.1 
Capital in excess of par value  315.3   320.3 
Reinvested earnings  1,190.7   1,211.0 
Common stock in treasury, at cost  (298.4)  (307.4)
Accumulated other comprehensive loss  (166.6)  (173.5)
Total stockholders’ equity  1,321.1   1,330.5 
Total liabilities and stockholders’ equity $3,056.5  $2,932.3 


PRELIMINARY
SEGMENT FINANCIAL DATA
(in millions, except pounds sold)
(Unaudited)

 Three Months Ended Six Months Ended
 December 31, December 31,
  2022   2021   2022   2021 
Pounds sold (000):       
Specialty Alloys Operations 49,442   43,248   94,006   86,256 
Performance Engineered Products 2,978   2,776   5,304   5,148 
Intersegment (1,920)  (2,942)  (3,920)  (4,792)
Consolidated pounds sold 50,500   43,082   95,390   86,612 
        
Net sales:       
Specialty Alloys Operations       
Net sales excluding surcharge$346.2  $251.6  $651.9  $509.8 
Surcharge 149.6   79.2   291.3   153.0 
Specialty Alloys Operations net sales 495.8   330.8   943.2   662.8 
        
Performance Engineered Products       
Net sales excluding surcharge 98.0   83.8   185.6   157.4 
Surcharge 8.7   1.9   14.4   2.9 
Performance Engineered Products net sales 106.7   85.7   200.0   160.3 
        
Intersegment       
Net sales excluding surcharge (23.4)  (20.5)  (41.0)  (39.4)
Surcharge       (0.2)  (0.1)
Intersegment net sales (23.4)  (20.5)  (41.2)  (39.5)
        
Consolidated net sales$579.1  $396.0  $1,102.0  $783.6 
        
Operating income (loss):       
Specialty Alloys Operations$30.3  $(20.3) $50.2  $(26.2)
Performance Engineered Products 9.3   3.0   15.6   3.6 
Corporate (16.4)  (14.5)  (33.5)  (28.6)
Intersegment (0.6)  0.3   (1.4)  0.6 
Consolidated operating income (loss)$22.6  $(31.5) $30.9  $(50.6)
                

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 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 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.


PRELIMINARY
NON-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 ITEM  2022   2021   2022   2021 
         
Net sales $579.1  $396.0  $1,102.0  $783.6 
Less: surcharge revenue  158.3   81.1   305.5   155.8 
Net sales excluding surcharge revenue $420.8  $314.9  $796.5  $627.8 
         
Operating income (loss) $22.6  $(31.5) $30.9  $(50.6)
Special item:        
COVID-19 costs     1.7      3.3 
Adjusted operating income (loss) $22.6  $(29.8) $30.9  $(47.3)
         
Operating margin  3.9% (8.0)%  2.8% (6.5)%
         
Adjusted operating margin excluding surcharge revenue and special item  5.4% (9.5)%  3.9% (7.5)%
             

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 EARNINGS PER SHARE EXCLUDING SPECIAL ITEM Income Before Income Taxes Income Tax Expense Net Income Earnings Per Diluted Share*
         
Three Months Ended December 31, 2022, as reported $7.7 $(1.5) $6.2 $0.13
         
Special item:        
None reported         
         
Three Months Ended December 31, 2022, as adjusted $7.7 $(1.5) $6.2 $0.13
         
* Impact per diluted share calculated using weighted average common shares outstanding of 49.0 million for the three months ended December 31, 2022.


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 ITEM Loss Before Income Taxes Income Tax Expense Net Loss Loss Per Diluted Share*
         
Six Months Ended December 31, 2022, as reported $(0.1) $(0.5) $(0.6) $(0.02)
         
Special item:        
None reported            
         
Six Months Ended December 31, 2022, as adjusted $(0.1) $(0.5) $(0.6) $(0.02)
         
* Impact per diluted share calculated using weighted average common shares outstanding of 48.7 million for the six months ended December 31, 2022.


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.
 

Management believes that earnings (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  2022   2021   2022   2021 
Net cash used for operating activities $(86.4) $(89.2) $(164.5) $(136.3)
Purchases of property, plant, equipment and software  (17.5)  (19.1)  (31.0)  (33.4)
Proceeds from disposals of property, plant and equipment and assets held for sale     1.8      1.8 
Dividends paid  (9.8)  (9.8)  (19.7)  (19.7)
         
Free cash flow $(113.7) $(116.3) $(215.2) $(187.6)
                 

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.


PRELIMINARY
SUPPLEMENTAL SCHEDULE
(in millions)
(Unaudited)

  Three Months Ended Six Months Ended
  December 31, December 31,
NET SALES BY END-USE MARKET 2022 2021 2022 2021
End-Use Market Excluding Surcharge Revenue:        
Aerospace and Defense $200.4 $134.0 $383.8 $268.8
Medical  62.7  40.4  112.5  77.4
Transportation  27.3  28.5  51.0  60.0
Energy  22.6  16.0  40.9  32.2
Industrial and Consumer  78.6  66.4  147.0  132.7
Distribution  29.2  29.6  61.3  56.7
         
Total net sales excluding surcharge revenue  420.8  314.9  796.5  627.8
         
Surcharge revenue  158.3  81.1  305.5  155.8
         
Total net sales $579.1 $396.0 $1,102.0 $783.6


Media Inquiries:Investor Inquiries:
Heather BeardsleyThe Plunkett Group
+1 610-208-2278Brad Edwards
hbeardsley@cartech.com+1 914-582-4187
 brad@theplunkettgroup.com

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Source: Carpenter Technology Corporation