Carpenter Technology Reports First Quarter Fiscal Year 2022 Results
“Demand patterns across our end-use markets continue to improve as our backlog finished up 25 percent sequentially and 49 percent year-over-year,” said
“Our Performance Engineered Products segment finished ahead of our expectations driven primarily by strong demand for our titanium fasteners in the Aerospace and Defense end-use market. Within the Specialty Alloys Operations segment, our performance was impacted by short-term operational delays including COVID-19 isolations at key work centers, supply chain disruptions across the world and hiring challenges in a difficult labor environment. The operational delays resulted in a temporary build in inventory during the current quarter, which negatively impacted our cash flow.”
“Looking ahead, we plan to continue navigating near-term challenges and partnering with our customers during the recovery. We are well positioned for growth in our core business with a strong financial position, including
Financial Highlights
($ in millions except per share amounts) | Q1 | Q1 | Q4 | ||||||||
FY2022 | FY2021 | FY2021 | |||||||||
$ | 387.6 | $ | 353.3 | $ | 421.6 | ||||||
Net Sales Excluding Surcharge (a) | $ | 312.9 | $ | 307.2 | $ | 348.1 | |||||
Operating Loss | $ | (19.1 | ) | $ | (48.8 | ) | $ | (70.7 | ) | ||
Adjusted Operating Loss Excluding Special Items (a) | $ | (17.5 | ) | $ | (30.9 | ) | $ | (12.5 | ) | ||
Net Loss | $ | (14.8 | ) | $ | (47.1 | ) | $ | (57.1 | ) | ||
Loss per Share |
$ | (0.31 | ) | $ | (0.98 | ) | $ | (1.18 | ) | ||
Adjusted Loss Per Share (a) | $ | (0.28 | ) | $ | (0.58 | ) | $ | (0.28 | ) | ||
Cash (Used For) Provided from Operating Activities | $ | (47.0 | ) | $ | 88.0 | $ | 74.5 | ||||
Free Cash Flow (a) | $ | (71.2 | ) | $ | 62.6 | $ | 42.6 |
(a) Non-GAAP financial measures explained in the attached tables
Net sales for the first quarter of fiscal year 2022 were
Operating loss was
The special item excluded from adjusted operating loss in the current quarter totaled
Cash used for operating activities in the first quarter of fiscal year 2022 was
Total liquidity, including cash and available credit facility borrowings, was
Conference Call and Webcast Presentation
Non-GAAP Financial Measures
This press release includes discussions of financial measures that have not been determined in accordance with
About
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
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
Three Months Ended | |||||||
2021 | 2020 | ||||||
$ | 387.6 | $ | 353.3 | ||||
Cost of sales | 362.4 | 349.8 | |||||
Gross profit | 25.2 | 3.5 | |||||
Selling, general and administrative expenses | 44.3 | 42.3 | |||||
Restructuring and asset impairment charges | — | 10.0 | |||||
Operating loss | (19.1 | ) | (48.8 | ) | |||
Interest expense, net | 10.2 | 6.7 | |||||
Debt extinguishment losses, net | — | 8.2 | |||||
Other (income) expense, net | (4.1 | ) | 2.3 | ||||
Loss before income taxes | (25.2 | ) | (66.0 | ) | |||
Income tax benefit | (10.4 | ) | (18.9 | ) | |||
NET LOSS | $ | (14.8 | ) | $ | (47.1 | ) | |
LOSS PER COMMON SHARE: | |||||||
Basic | $ | (0.31 | ) | $ | (0.98 | ) | |
Diluted | $ | (0.31 | ) | $ | (0.98 | ) | |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||||
Basic | 48.5 | 48.3 | |||||
Diluted | 48.5 | 48.3 | |||||
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Three Months Ended | |||||||
2021 | 2020 | ||||||
OPERATING ACTIVITIES | |||||||
Net loss | $ | (14.8 | ) | $ | (47.1 | ) | |
Adjustments to reconcile net loss to net cash (used for) provided from operating activities: | |||||||
Depreciation and amortization | 32.5 | 30.9 | |||||
Non-cash restructuring and asset impairment charges | — | 8.7 | |||||
Debt extinguishment losses, net | — | 8.2 | |||||
Deferred income taxes | (8.0 | ) | (3.9 | ) | |||
Net pension (income) expense | (1.8 | ) | 4.1 | ||||
Share-based compensation expense | 2.8 | 2.7 | |||||
Net loss on disposals of property, plant and equipment | — | 0.1 | |||||
Changes in working capital and other: | |||||||
Accounts receivable | (3.8 | ) | 42.0 | ||||
Inventories | (66.5 | ) | 84.9 | ||||
Other current assets | (13.2 | ) | (23.0 | ) | |||
Accounts payable | 69.3 | (7.4 | ) | ||||
Accrued liabilities | (41.7 | ) | (8.0 | ) | |||
Pension plan contributions | (0.2 | ) | (2.9 | ) | |||
Other postretirement plan contributions | (0.7 | ) | (0.6 | ) | |||
Other, net | (0.9 | ) | (0.7 | ) | |||
Net cash (used for) provided from operating activities | (47.0 | ) | 88.0 | ||||
INVESTING ACTIVITIES | |||||||
Purchases of property, plant, equipment and software | (14.4 | ) | (33.3 | ) | |||
Proceeds from divestiture of business | — | 17.6 | |||||
Net cash used for investing activities | (14.4 | ) | (15.7 | ) | |||
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 | (9.8 | ) | (9.7 | ) | |||
Withholding tax payments on share-based compensation awards | (3.0 | ) | (2.2 | ) | |||
Net cash used for financing activities | (12.8 | ) | (45.7 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | — | (0.8 | ) | ||||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (74.2 | ) | 25.8 | ||||
Cash and cash equivalents at beginning of fiscal year | 287.4 | 193.1 | |||||
Cash and cash equivalents at end of period | $ | 213.2 | $ | 218.9 |
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
2021 | 2021 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 213.2 | $ | 287.4 | |||
Accounts receivable, net | 311.6 | 308.7 | |||||
Inventories | 491.4 | 425.7 | |||||
Other current assets | 110.7 | 95.6 | |||||
Total current assets | 1,126.9 | 1,117.4 | |||||
Property, plant and equipment, net | 1,440.9 | 1,457.5 | |||||
241.4 | 241.4 | ||||||
Other intangibles, net | 41.1 | 43.1 | |||||
Deferred income taxes | 6.2 | 5.3 | |||||
Other assets | 103.4 | 106.5 | |||||
Total assets | $ | 2,959.9 | $ | 2,971.2 | |||
LIABILITIES | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 212.0 | $ | 142.4 | |||
Accrued liabilities | 120.4 | 163.9 | |||||
Total current liabilities | 332.4 | 306.3 | |||||
Long-term debt | 694.8 | 694.5 | |||||
Accrued pension liabilities | 218.1 | 222.6 | |||||
Accrued postretirement benefits | 98.3 | 98.6 | |||||
Deferred income taxes | 150.5 | 156.9 | |||||
Other liabilities | 98.2 | 100.0 | |||||
Total liabilities | 1,592.3 | 1,578.9 | |||||
STOCKHOLDERS' EQUITY | |||||||
Common stock | 280.1 | 280.1 | |||||
Capital in excess of par value | 316.3 | 322.6 | |||||
Reinvested earnings | 1,274.7 | 1,299.3 | |||||
Common stock in treasury, at cost | (311.3 | ) | (317.4 | ) | |||
Accumulated other comprehensive loss | (192.2 | ) | (192.3 | ) | |||
Total stockholders' equity | 1,367.6 | 1,392.3 | |||||
Total liabilities and stockholders' equity | $ | 2,959.9 | $ | 2,971.2 |
PRELIMINARY
SEGMENT FINANCIAL DATA
(in millions, except pounds sold)
(Unaudited)
Three Months Ended | |||||||
2021 | 2020 | ||||||
Pounds sold (000): | |||||||
Specialty Alloys Operations | 43,008 | 43,368 | |||||
Performance Engineered Products | 2,372 | 1,466 | |||||
Intersegment | (1,852 | ) | (486 | ) | |||
Consolidated pounds sold | 43,528 | 44,348 | |||||
Net sales: | |||||||
Specialty Alloys Operations | |||||||
Net sales excluding surcharge | $ | 258.2 | $ | 254.8 | |||
Surcharge | 73.7 | 45.9 | |||||
Specialty Alloys Operations net sales | 331.9 | 300.7 | |||||
Performance Engineered Products | |||||||
Net sales excluding surcharge | 73.6 | 61.2 | |||||
Surcharge | 1.0 | 0.6 | |||||
Performance Engineered Products net sales | 74.6 | 61.8 | |||||
Intersegment | |||||||
Net sales excluding surcharge | (18.9 | ) | (8.8 | ) | |||
Surcharge | — | (0.4 | ) | ||||
Intersegment net sales | (18.9 | ) | (9.2 | ) | |||
Consolidated net sales | $ | 387.6 | $ | 353.3 | |||
Operating (Loss) Income: | |||||||
Specialty Alloys Operations | $ | (5.9 | ) | $ | (18.6 | ) | |
Performance Engineered Products | 0.6 | (3.6 | ) | ||||
Corporate (including restructuring and asset impairment charges) | (14.2 | ) | (26.6 | ) | |||
Intersegment | 0.4 | — | |||||
Consolidated operating loss | $ | (19.1 | ) | $ | (48.8 | ) |
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
The PEP segment is comprised of the Company’s differentiated operations. This segment includes the
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.
PRELIMINARY
NON-GAAP FINANCIAL MEASURES
(in millions, except per share data)
(Unaudited)
Three Months Ended | |||||||||
ADJUSTED OPERATING MARGIN EXCLUDING SURCHARGE REVENUE AND SPECIAL ITEMS | 2021 | 2020 | |||||||
Net sales | $ | 387.6 | $ | 353.3 | |||||
Less: surcharge revenue | 74.7 | 46.1 | |||||||
Net sales excluding surcharge revenue | $ | 312.9 | $ | 307.2 | |||||
Operating loss | $ | (19.1 | ) | $ | (48.8 | ) | |||
Special items: | |||||||||
COVID-19 costs | 1.6 | 7.9 | |||||||
Restructuring and asset impairment charges | — | 10.0 | |||||||
Operating loss | $ | (17.5 | ) | $ | (30.9 | ) | |||
Operating margin | (4.9 | )% | (13.8 | )% | |||||
Adjusted operating margin excluding surcharge revenue and special items | (5.6 | )% | (10.1 | )% |
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 |
$ | (25.2 | ) | $ | 10.4 | $ | (14.8 | ) | $ | (0.31 | ) | |||||||||||||||
Special item: | ||||||||||||||||||||||||||
COVID-19 costs | 1.6 | (0.7 | ) | 0.9 | 0.03 | |||||||||||||||||||||
Three months ended |
$ | (23.6 | ) | $ | 9.7 | $ | (13.9 | ) | $ | (0.28 | ) | |||||||||||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.5 million for the three months ended |
||||||||||||||||||||||||||
ADJUSTED LOSS PER SHARE EXCLUDING SPECIAL ITEMS | Loss Before Income Taxes | Income Tax Benefit | Net Loss | Loss Per Diluted Share* | ||||||||||||||||||||||
Three months ended |
$ | (66.0 | ) | $ | 18.9 | $ | (47.1 | ) | $ | (0.98 |
) | |||||||||||||||
Special items: | ||||||||||||||||||||||||||
COVID-19 costs | 7.9 | (2.6 |
) | 5.3 | 0.11 | |||||||||||||||||||||
Restructuring and asset impairment charges | 10.0 | (2.4 |
) | 7.6 | 0.16 | |||||||||||||||||||||
Debt extinguishment losses, net | 8.2 | (2.0 |
) | 6.2 | 0.13 | |||||||||||||||||||||
Three months ended |
$ | (39.9 | ) | $ | 11.9 | $ | (28.0 | ) | $ | (0.58 |
) | |||||||||||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.3 million for the three months ended |
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 | |||||||
FREE CASH FLOW | 2021 | 2020 | |||||
Net cash (used for) provided from operating activities | $ | (47.0 | ) | $ | 88.0 | ||
Purchases of property, plant, equipment and software | (14.4 | ) | (33.3 | ) | |||
Proceeds from divestiture of business | — | 17.6 | |||||
Dividends paid | (9.8 | ) | (9.7 | ) | |||
Free cash flow | $ | (71.2 | ) | $ | 62.6 |
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 | |||||||
NET SALES BY END-USE MARKET | 2021 | 2020 | |||||
End-Use Market Excluding Surcharge Revenue: | |||||||
Aerospace and Defense | $ | 134.9 | $ | 147.5 | |||
Medical | 37.1 | 30.0 | |||||
Transportation | 31.4 | 24.5 | |||||
Energy | 16.2 | 21.3 | |||||
Industrial and Consumer | 66.3 | 63.1 | |||||
Distribution | 27.0 | 20.8 | |||||
Total net sales excluding surcharge revenue | 312.9 | 307.2 | |||||
Surcharge revenue | 74.7 | 46.1 | |||||
Total net sales | $ | 387.6 | $ | 353.3 |
Media Inquiries: | Investor Inquiries: |
+1 610-208-2278 | |
hbeardsley@cartech.com | +1 914-582-4187 |
brad@theplunkettgroup.com |

Source: Carpenter Technology Corporation