PHILADELPHIA,
Fourth Quarter Fiscal Year 2023 Highlights
- Exceeded target to return to fiscal year 2019 operating income run rate by the end of fiscal year 2023
- Achieved adjusted operating income of
$62.9 million , up from$39.3 million in the previous quarter and$14.9 million in the fourth quarter of fiscal year 2022 - Specialty Alloy Operations segment adjusted operating income reached
$80.0 million , up from$49.0 million in the previous quarter and$20.0 million in the fourth quarter of fiscal year 2022 - Net sales excluding surcharge up 14% sequentially and up 39% year-over-year
- Generated
$175 million of cash from operations,$144 million in adjusted free cash flow
First Quarter Fiscal Year 2024 Outlook
- Expect operating income to be in the range of
$61 million to$67 million , in line with previous guidance - Expectations would exceed the operating income in the first quarter of fiscal year 2020, our most profitable first quarter in recent history, and be above the historical trend of a sequential seasonal decline in profits
- With a strong first quarter, well positioned in fiscal year 2024 to take a meaningful step towards our long-term goal of doubling fiscal year 2019 operating income by fiscal year 2027
- Exceeding targeted productivity gains could accelerate earnings growth in fiscal year 2024 versus current projections
“More than a year ago, we set the goal to return to pre-pandemic (fiscal year 2019) profitability on a run-rate basis by the end of fiscal year 2023. We exceeded that goal in the fourth quarter,” said
“Notably, the Specialty Alloys Operations (“SAO”) segment demonstrated significant improvement, reaching
“In addition to the strong operating performance, we generated
“Returning to our pre-pandemic profitability is an important milestone on our journey to doubling our operating income by fiscal year 2027 (vs. fiscal year 2019), and we expect to continue our momentum into fiscal year 2024. For the first quarter of fiscal year 2024, we expect operating income to be in the range of
“We are well-positioned to realize our target: we are operating in a strong demand environment in which our customers want more material, sooner, resulting in record backlogs. We are increasing our productivity across facilities, as evidenced by our performance in the fourth quarter of fiscal year 2023, and we are actively managing our preventive maintenance schedules to protect our unique assets, serve our customers and maximize shipments.”
“This is an exciting time at
Financial Highlights
Q4 | Q4 | YTD | YTD | |||||||||||
($ in millions except per share amounts) | FY2023 | FY2022 | FY2023 | FY2022 | ||||||||||
Net sales | $ | 758.1 | $ | 563.8 | $ | 2,550.3 | $ | 1,836.3 | ||||||
Net sales excluding surcharge (a) | $ | 560.0 | $ | 403.2 | $ | 1,848.0 | $ | 1,400.0 | ||||||
Operating income (loss) | $ | 62.9 | $ | 24.6 | $ | 133.1 | $ | (24.9 | ) | |||||
Adjusted operating income (loss) excluding special items (a) | $ | 62.9 | $ | 14.9 | $ | 133.1 | $ | (34.0 | ) | |||||
Net income (loss) | $ | 38.4 | $ | 2.6 | $ | 56.4 | $ | (49.1 | ) | |||||
Earnings (loss) per diluted share | $ | 0.78 | $ | 0.05 | $ | 1.14 | $ | (1.01 | ) | |||||
Adjusted earnings (loss) per diluted share (a) | $ | 0.78 | $ | 0.00 | $ | 1.14 | $ | (1.06 | ) | |||||
Net cash provided from operating activities | $ | 174.9 | $ | 106.9 | $ | 14.7 | $ | 6.0 | ||||||
Adjusted free cash flow (a) | $ | 144.1 | $ | 74.4 | $ | (67.6 | ) | $ | (83.1 | ) | ||||
(a) non-GAAP financial measures explained in the attached tables |
Net sales for the fourth quarter of fiscal year 2023 were
Operating income for the fourth quarter of fiscal year 2023 was
Earnings for the fourth quarter of fiscal year 2023 was
Cash provided from operating activities in the fourth quarter of fiscal year 2023 was
Total liquidity, including cash and available revolver balance, 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
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 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
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
Three Months Ended | Year Ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Net sales | $ | 758.1 | $ | 563.8 | $ | 2,550.3 | $ | 1,836.3 | ||||||
Cost of sales | 639.1 | 491.8 | 2,213.0 | 1,686.5 | ||||||||||
Gross profit | 119.0 | 72.0 | 337.3 | 149.8 | ||||||||||
Selling, general and administrative expenses | 56.1 | 47.4 | 204.2 | 174.7 | ||||||||||
Operating income (loss) | 62.9 | 24.6 | 133.1 | (24.9 | ) | |||||||||
Interest expense, net | 14.1 | 13.4 | 54.1 | 44.9 | ||||||||||
Debt extinguishment losses, net | — | 6.0 | — | 6.0 | ||||||||||
Other expense (income), net | 0.2 | (0.2 | ) | 6.5 | (12.7 | ) | ||||||||
Income (loss) before income taxes | 48.6 | 5.4 | 72.5 | (63.1 | ) | |||||||||
Income tax expense (benefit) | 10.2 | 2.8 | 16.1 | (14.0 | ) | |||||||||
Net income (loss) | $ | 38.4 | $ | 2.6 | $ | 56.4 | $ | (49.1 | ) | |||||
EARNINGS (LOSS) PER COMMON SHARE: | ||||||||||||||
Basic | $ | 0.78 | $ | 0.05 | $ | 1.15 | $ | (1.01 | ) | |||||
Diluted | $ | 0.78 | $ | 0.05 | $ | 1.14 | $ | (1.01 | ) | |||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||
Basic | 48.9 | 48.6 | 48.8 | 48.5 | ||||||||||
Diluted | 49.4 | 48.7 | 49.2 | 48.5 | ||||||||||
Cash dividends per common share | $ | 0.20 | $ | 0.20 | $ | 0.80 | $ | 0.80 |
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Year Ended | ||||||||
2023 | 2022 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | 56.4 | $ | (49.1 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided from operating activities: | ||||||||
Depreciation and amortization | 131.0 | 131.4 | ||||||
Acquisition-related contingent liability release | — | (4.7 | ) | |||||
Debt extinguishment losses, net | — | 6.0 | ||||||
Deferred income taxes | (0.4 | ) | (3.1 | ) | ||||
Net pension expense (income) | 19.9 | (7.3 | ) | |||||
Share-based compensation expense | 16.4 | 10.8 | ||||||
Net loss on disposal of property, plant, and equipment and assets held for sale | 2.5 | 2.0 | ||||||
Changes in working capital and other: | ||||||||
Accounts receivable | (144.5 | ) | (79.0 | ) | ||||
Inventories | (140.3 | ) | (71.9 | ) | ||||
Other current assets | 13.0 | 8.3 | ||||||
Accounts payable | 29.2 | 95.7 | ||||||
Accrued liabilities | 38.2 | (24.5 | ) | |||||
Pension plan contributions | — | (0.7 | ) | |||||
Other postretirement plan contributions | (3.3 | ) | (1.7 | ) | ||||
Other, net | (3.4 | ) | (6.2 | ) | ||||
Net cash provided from operating activities | 14.7 | 6.0 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of property, plant, equipment and software | (82.3 | ) | (91.3 | ) | ||||
Proceeds from disposals of property, plant and equipment and assets held for sale | — | 2.2 | ||||||
Net cash used for investing activities | (82.3 | ) | (89.1 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Credit agreement borrowings | 183.7 | — | ||||||
Credit agreement repayments | (183.7 | ) | — | |||||
Proceeds from issuance of long-term debt, net of offering costs | — | 296.6 | ||||||
Payments on long-term debt | — | (300.0 | ) | |||||
Payments for debt extinguishment costs, net | — | (6.0 | ) | |||||
Payments for debt issue costs | (1.9 | ) | (0.8 | ) | ||||
Dividends paid | (39.4 | ) | (39.2 | ) | ||||
Proceeds from stock options exercised | 5.0 | — | ||||||
Withholding tax payments on share-based compensation awards | (3.8 | ) | (3.4 | ) | ||||
Net cash used for financing activities | (40.1 | ) | (52.8 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (2.0 | ) | 2.7 | |||||
DECREASE IN CASH AND CASH EQUIVALENTS | (109.7 | ) | (133.2 | ) | ||||
Cash and cash equivalents at beginning of year | 154.2 | 287.4 | ||||||
Cash and cash equivalents at end of year | $ | 44.5 | $ | 154.2 |
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
2023 | 2022 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 44.5 | $ | 154.2 | ||||
Accounts receivable, net | 531.3 | 382.3 | ||||||
Inventories | 639.7 | 496.1 | ||||||
Other current assets | 66.4 | 86.8 | ||||||
Total current assets | 1,281.9 | 1,119.4 | ||||||
Property, plant, equipment and software, net | 1,383.8 | 1,420.8 | ||||||
241.4 | 241.4 | |||||||
Other intangibles, net | 28.7 | 35.2 | ||||||
Deferred income taxes | 6.6 | 5.7 | ||||||
Other assets | 111.5 | 109.8 | ||||||
Total assets | $ | 3,053.9 | $ | 2,932.3 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 278.1 | $ | 242.1 | ||||
Accrued liabilities | 181.3 | 133.5 | ||||||
Total current liabilities | 459.4 | 375.6 | ||||||
Long-term debt | 693.0 | 691.8 | ||||||
Accrued pension liabilities | 190.1 | 196.6 | ||||||
Accrued postretirement benefits | 45.8 | 77.4 | ||||||
Deferred income taxes | 170.3 | 162.4 | ||||||
Other liabilities | 99.2 | 98.0 | ||||||
Total liabilities | 1,657.8 | 1,601.8 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock | 280.7 | 280.1 | ||||||
Capital in excess of par value | 328.4 | 320.3 | ||||||
Reinvested earnings | 1,228.0 | 1,211.0 | ||||||
Common stock in treasury | (298.0 | ) | (307.4 | ) | ||||
Accumulated other comprehensive loss | (143.0 | ) | (173.5 | ) | ||||
Total stockholders' equity | 1,396.1 | 1,330.5 | ||||||
Total liabilities and stockholders' equity | $ | 3,053.9 | $ | 2,932.3 |
PRELIMINARY
SEGMENT FINANCIAL DATA
(in millions, except pounds sold)
(Unaudited)
Three Months Ended | Year Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Pounds sold (000): | |||||||||||||||
Specialty Alloys Operations | 61,528 | 51,626 | 212,050 | 187,754 | |||||||||||
Performance Engineered Products | 3,328 | 2,808 | 11,864 | 10,662 | |||||||||||
Intersegment | (3,428 | ) | (2,674 | ) | (9,792 | ) | (10,304 | ) | |||||||
Consolidated pounds sold | 61,428 | 51,760 | 214,122 | 188,112 | |||||||||||
Net sales: | |||||||||||||||
Specialty Alloys Operations | |||||||||||||||
Net sales excluding surcharge | $ | 477.2 | $ | 327.2 | $ | 1,540.6 | $ | 1,137.1 | |||||||
Surcharge | 189.8 | 157.7 | 673.0 | 428.5 | |||||||||||
Specialty Alloys Operations net sales | 667.0 | 484.9 | 2,213.6 | 1,565.6 | |||||||||||
Performance Engineered Products | |||||||||||||||
Net sales excluding surcharge | 107.6 | 92.9 | 397.1 | 336.7 | |||||||||||
Surcharge | 11.1 | 2.9 | 36.6 | 7.8 | |||||||||||
Performance Engineered Products net sales | 118.7 | 95.8 | 433.7 | 344.5 | |||||||||||
Intersegment | |||||||||||||||
Net sales excluding surcharge | (24.8 | ) | (16.9 | ) | (89.7 | ) | (73.8 | ) | |||||||
Surcharge | (2.8 | ) | — | (7.3 | ) | — | |||||||||
Intersegment net sales | (27.6 | ) | (16.9 | ) | (97.0 | ) | (73.8 | ) | |||||||
Consolidated net sales | $ | 758.1 | $ | 563.8 | $ | 2,550.3 | $ | 1,836.3 | |||||||
Operating income (loss): | |||||||||||||||
Specialty Alloys Operations | $ | 80.0 | $ | 30.0 | $ | 179.1 | $ | 9.6 | |||||||
Performance Engineered Products | 5.9 | 10.3 | 31.8 | 18.1 | |||||||||||
Corporate | (22.5 | ) | (15.5 | ) | (75.5 | ) | (52.8 | ) | |||||||
Intersegment | (0.5 | ) | (0.2 | ) | (2.3 | ) | 0.2 | ||||||||
Consolidated operating income (loss) | $ | 62.9 | $ | 24.6 | $ | 133.1 | $ | (24.9 | ) |
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 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)
ADJUSTED OPERATING MARGIN EXCLUDING | ||||||||||||||||
SURCHARGE REVENUE AND SPECIAL ITEMS | Three Months Ended | Year Ended | ||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Net sales | $ | 758.1 | $ | 563.8 | $ | 2,550.3 | $ | 1,836.3 | ||||||||
Less: surcharge revenue | 198.1 | 160.6 | 702.3 | 436.3 | ||||||||||||
Net sales excluding surcharge revenue | $ | 560.0 | $ | 403.2 | $ | 1,848.0 | $ | 1,400.0 | ||||||||
Operating income (loss) | $ | 62.9 | $ | 24.6 | $ | 133.1 | $ | (24.9 | ) | |||||||
Special items: | ||||||||||||||||
COVID-19 costs | — | 0.6 | — | 5.9 | ||||||||||||
COVID-19 employee retention credits | — | (12.7 | ) | — | (12.7 | ) | ||||||||||
Acquisition-related contingent liability release | — | — | — | (4.7 | ) | |||||||||||
Environmental site charge | — | 2.4 | — | 2.4 | ||||||||||||
Adjusted operating income (loss) | $ | 62.9 | $ | 14.9 | $ | 133.1 | $ | (34.0 | ) | |||||||
Operating margin | 8.3 | % | 4.4 | % | 5.2 | % | (1.4)% | |||||||||
Adjusted operating margin excluding surcharge revenue and special items | 11.2 | % | 3.7 | % | 7.2 | % | (2.4)% |
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 EARNINGS PER DILUTED SHARE EXCLUDING SPECIAL ITEM | Earnings Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | |||||||||
Three months ended | $ | 48.6 | $ | (10.2 | ) | $ | 38.4 | $ | 0.78 | ||||
Special item: | |||||||||||||
None reported | — | — | — | — | |||||||||
Total impact of special item | — | — | — | — | |||||||||
Three months ended | $ | 48.6 | $ | (10.2 | ) | $ | 38.4 | $ | 0.78 | ||||
* Impact per diluted share calculated using weighted average common shares outstanding of 49.4 million for the three months ended |
ADJUSTED EARNINGS PER DILUTED SHARE EXCLUDING SPECIAL ITEMS | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||
Three months ended | $ | 5.4 | $ | (2.8 | ) | $ | 2.6 | $ | 0.05 | |||||||
Special items: | ||||||||||||||||
COVID-19 costs | 0.6 | — | 0.6 | 0.01 | ||||||||||||
COVID-19 employee retention credits | (12.7 | ) | 2.8 | (9.9 | ) | (0.20 | ) | |||||||||
Environmental site charge | 2.4 | (0.5 | ) | 1.9 | 0.04 | |||||||||||
Debt extinguishment losses, net | 6.0 | (1.3 | ) | 4.7 | 0.10 | |||||||||||
Total impact of special items | (3.7 | ) | 1.0 | (2.7 | ) | (0.05 | ) | |||||||||
Three months ended | $ | 1.7 | $ | (1.8 | ) | $ | (0.1 | ) | $ | — | ||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.7 million for the three months ended |
ADJUSTED EARNINGS PER DILUTED SHARE EXCLUDING SPECIAL ITEM | Earnings Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | |||||||||
Year ended | $ | 72.5 | $ | (16.1 | ) | $ | 56.4 | $ | 1.14 | ||||
Special item: | |||||||||||||
None reported | — | — | — | — | |||||||||
Total impact of special item | — | — | — | — | |||||||||
Year ended | $ | 72.5 | $ | (16.1 | ) | $ | 56.4 | $ | 1.14 | ||||
* Impact per diluted share calculated using weighted average common shares outstanding of 49.2 million for the year ended |
ADJUSTED LOSS PER DILUTED SHARE EXCLUDING SPECIAL ITEMS | Loss Before Income Taxes | Income Tax Benefit | Net Loss | Loss Per Diluted Share* | ||||||||||||
Year ended | $ | (63.1 | ) | $ | 14.0 | $ | (49.1 | ) | $ | (1.01 | ) | |||||
Special items: | ||||||||||||||||
COVID-19 costs | 5.9 | (1.3 | ) | 4.6 | 0.08 | |||||||||||
COVID-19 employee retention credits | (12.7 | ) | 2.8 | (9.9 | ) | (0.20 | ) | |||||||||
Acquisition-related contingent liability release | (4.7 | ) | 1.1 | (3.6 | ) | (0.07 | ) | |||||||||
Environmental site charge | 2.4 | (0.5 | ) | 1.9 | 0.04 | |||||||||||
Debt extinguishment losses, net | 6.0 | (1.3 | ) | 4.7 | 0.10 | |||||||||||
Total impact of special items | (3.1 | ) | 0.8 | (2.3 | ) | (0.05 | ) | |||||||||
Year ended | $ | (66.2 | ) | $ | 14.8 | $ | (51.4 | ) | $ | (1.06 | ) | |||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.5 million for the year ended |
Management believes that earnings (loss) per diluted share adjusted to exclude the impact of 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 | Year Ended | |||||||||||||||
ADJUSTED FREE CASH FLOW | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Net cash provided from operating activities | $ | 174.9 | $ | 106.9 | $ | 14.7 | $ | 6.0 | ||||||||
Purchases of property, plant, equipment and software | (30.8 | ) | (32.8 | ) | (82.3 | ) | (91.3 | ) | ||||||||
Proceeds from disposals of property, plant and equipment and assets held for sale | — | 0.3 | — | 2.2 | ||||||||||||
Adjusted free cash flow | $ | 144.1 | $ | 74.4 | $ | (67.6 | ) | $ | (83.1 | ) |
Management believes that the adjusted 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. Historically, this non-GAAP financial measure included cash used for dividends paid on outstanding common stock and participating securities. Management believes that excluding cash dividends paid from adjusted free cash flow will provide a more direct comparison to operating cash flow, a GAAP-defined financial measure. Fiscal year 2022 has been reclassified to conform to the current presentation.
PRELIMINARY
SUPPLEMENTAL SCHEDULES
(in millions)
(Unaudited)
Three Months Ended | Year Ended | ||||||||||
NET SALES BY END-USE MARKET | 2023 | 2022 | 2023 | 2022 | |||||||
End-Use Market Excluding Surcharge Revenue: | |||||||||||
Aerospace and Defense | $ | 294.2 | $ | 178.5 | $ | 919.5 | $ | 599.6 | |||
Medical | 66.6 | 53.7 | 241.3 | 177.2 | |||||||
Transportation | 36.8 | 32.9 | 121.8 | 125.2 | |||||||
Energy | 34.8 | 21.0 | 104.3 | 76.3 | |||||||
Industrial and Consumer | 96.6 | 82.4 | 339.4 | 297.2 | |||||||
Distribution | 31.0 | 34.7 | 121.7 | 124.5 | |||||||
Total net sales excluding surcharge revenue | 560.0 | 403.2 | 1,848.0 | 1,400.0 | |||||||
Surcharge revenue | 198.1 | 160.6 | 702.3 | 436.3 | |||||||
Total net sales | $ | 758.1 | $ | 563.8 | $ | 2,550.3 | $ | 1,836.3 |
Investor Inquires:
John Huyette
+1 610-208-2061
jhuyette@cartech.com
Media Inquiries:
+1 610-208-2278
hbeardsley@cartech.com
Source:
2023 GlobeNewswire, Inc., source