12th Consecutive Quarter of Year-over-Year Earnings Growth
Record Second Quarter Operating Income at Specialty Alloys Operations (SAO)Aerospace and Defense and Medical End-Use Markets Sales Up Double Digits Year-over-YearPHILADELPHIA, Jan. 30, 2020 (GLOBE NEWSWIRE) — Carpenter Technology Corporation (NYSE: CRS) (the “Company”) today announced financial results for the fiscal second quarter ended December 31, 2019. For the quarter, the Company reported net income of $38.8 million, or $0.79 earnings per diluted share. Excluding special items, adjusted earnings per diluted share was $0.83 in the quarter.“Our second quarter results reflect a continuation of our consistent year-over-year earnings growth, backlog expansion and record operating performance at SAO,” said Tony Thene, Carpenter Technology’s President and CEO. “Operating income at SAO reached its highest level on record as we continue to drive a richer product mix by prioritizing higher-value solutions across our end-use markets. In addition, customer activity at our Athens facility remains high and we received four Vendor Approved Process (VAP) approvals this quarter.”“The second quarter marked our 12th consecutive quarter of year-over-year sales growth and backlog growth. We generated double-digit year-over-year revenue growth in the Aerospace and Defense end-use market as our leading solutions, sub-market diversity and participation on practically all major industry platforms continue to drive strong performance. In addition, sales in the Medical end-use market increased double digits compared to last year as demand for our high-value solutions remains high.”“In the near-term, we are actively evaluating and executing on opportunities to mitigate the impact of the Boeing 737 MAX supply chain disruption. We believe we can partially mitigate the impact to our business through our broad sub-market participation and by leveraging our diverse portfolio of leading applications across other attractive end-use markets.”“Longer-term, we continue to place strategic emphasis on advancing our leadership in emerging technologies and best positioning Carpenter Technology for sustainable growth. We recently opened our Emerging Technology Center on our Athens campus and customer collaborations around additive manufacturing are accelerating. The construction of our hot strip mill on our Reading campus remains on target and will enable us to further capitalize on our soft magnetics solutions portfolio and the anticipated growth associated with expanding electrification initiatives across multiple markets. The strategic investments we are making for the future of our industry are critical to strengthening our position as a solutions provider and driving long-term success for our diverse base of customers.”Financial HighlightsNet sales for the second quarter of fiscal year 2020 were $573.0 million compared with $556.5 million in the second quarter of fiscal year 2019, an increase of $16.5 million (3 percent), on 7 percent lower volume. Net sales excluding surcharge were $471.2 million, an increase of $21.8 million (5 percent) from the same period a year ago.Operating income was $55.0 million compared to $55.4 million. These results primarily reflect stronger product mix across all end-use markets, partially offset by higher spending in key growth areas.Cash provided from operating activities in the second quarter of fiscal year 2020 was $21.8 million, compared to $37.8 million in the same quarter last year. The decrease in operating cash flow primarily reflects additional working capital investments partially offset by higher income levels. Free cash flow in the second quarter of fiscal year 2020 was negative $34.5 million, compared to negative $90.9 million in the same quarter last year. The improvement in free cash flow was primarily due to the fact that the second quarter of last year included the acquisition of LPW Technology Ltd. (LPW), which was partially offset in the current quarter by higher capital expenditures and additional working capital investments. Capital expenditures were $46.7 million in the second quarter of fiscal year 2020 compared to $40.1 million in the same quarter last year.Total liquidity, including cash and available revolver balance, was $305.1 million at the end of the second quarter of fiscal year 2020. This consisted of $29.9 million of cash and $275.2 million of available borrowings under the Company’s credit facility.Conference Call and Webcast PresentationCarpenter Technology will host a conference call and webcast presentation today, January 30th at 10:00 a.m. ET, to discuss the financial results of operations for the second 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 MeasuresThis 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 TechnologyCarpenter Technology Corporation is a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, transportation, energy, industrial, medical, 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 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, Form 10-Q for the quarter ended September 30, 2019, 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; and (16) uncertainty regarding the return to service of the Boeing 737 MAX aircraft and related supply chain disruption. 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.
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