PHILADELPHIA, July 27, 2023 (GLOBE NEWSWIRE) -- Carpenter Technology Corporation (: CRS) (the “Company”) today announced financial results for the fiscal fourth quarter and year ended June 30, 2023. For the quarter, the Company reported net income of $38.4 million, or $0.78 earnings per diluted share.
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 Tony R. Thene, President and CEO of Carpenter Technology. “Our performance was driven by increased productivity at our facilities, improved product mix and realized price increases.”
“Notably, the Specialty Alloys Operations (“SAO”) segment demonstrated significant improvement, reaching $80.0 million of adjusted operating income, up from $49.0 million in the previous quarter and $20.0 million in the previous year quarter. SAO reached adjusted operating income margin of 16.8 percent, a meaningful increase over the previous quarter’s 11.9 percent margin."
“In addition to the strong operating performance, we generated $144 million in adjusted free cash flow for the current fourth quarter.”
“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 $61 million to $67 million. This would exceed the first quarter of fiscal year 2020, our most profitable first quarter in recent history, and would also be a meaningful step up over the historical trend of a sequential seasonal decline in profits in the first quarter of the fiscal year.”
“We are well-positioned to realize our target: we are operating in a strong demand environment in which our customers want more material, sooner, resulting in record backlogs. We are increasing our productivity across facilities, as evidenced by our performance in the fourth quarter of fiscal year 2023, and we are actively managing our preventive maintenance schedules to protect our unique assets, serve our customers and maximize shipments.”
“This is an exciting time at Carpenter Technology. Macro trends are increasing demand across our end-use markets for our broad portfolio of specialized solutions. We have leading capabilities and capacity with a difficult-to-replicate system of assets, and we continue to drive improved productivity to capture the demand.”
Financial Highlights
| Q4 | Q4 | YTD | YTD | |||||||||||
| ($ 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 $758.1 million compared with $563.8 million in the fourth quarter of fiscal year 2022, an increase of $194.3 million (or 34 percent), on 19 percent higher shipment volume. Net sales excluding surcharge were $560.0 million, an increase of $156.8 million (or 39 percent) from the same period a year ago.
Operating income for the fourth quarter of fiscal year 2023 was $62.9 million compared to operating income of $24.6 million in the prior year period. These results primarily reflect strong commercial execution and improved end-use market conditions compared to the prior year period.
Earnings for the fourth quarter of fiscal year 2023 was $0.78 per diluted share compared to $0.05 per diluted share in the prior year quarter. Excluding special items, adjusted earnings per diluted share in the fourth quarter of fiscal year 2022 was $0.00. The increase in earnings per share is driven by significantly higher profitability due to increased volume, improving product mix and higher selling prices.
Cash provided from operating activities in the fourth quarter of fiscal year 2023 was $174.9 million, compared to $106.9 million in the same quarter last year. The increase in operating cash flow primarily reflects higher earnings and inventory reductions during the current quarter. Adjusted free cash flow in the fourth quarter of fiscal year 2023 was $144.1 million, compared to $74.4 million in the same quarter last year. The increase in adjusted free cash flow was primarily due to higher cash from operating activities in the current quarter. Capital expenditures were $30.8 million in the fourth quarter of fiscal year 2023 compared to $32.8 million in the same quarter last year.
Total liquidity, including cash and available revolver balance, was $392.8 million at the end of the fourth quarter of fiscal year 2023. This consisted of $44.5 million of cash and $348.3 million of available borrowings under the Company’s credit facility.
Conference Call and Webcast Presentation
Carpenter Technology will host a conference call and webcast presentation today, July 27th at 10:00 a.m. ET, to discuss the financial results of operations for the fourth quarter and full 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 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 fiscal year ended June 30, 2022, Form 10-Q for the fiscal quarters ended September 30, 2022, December 31, 2022, and March 31, 2023, 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 a qualified workforce and 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) the impact of potential cyber attacks and information technology or data security breaches; (17) inability of suppliers to meet obligations due to supply chain disruptions or otherwise; (18) inability to meet increased demand, production targets or commitments; (19) the ability to manage the impacts of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; and (20) geopolitical, economic, and regulatory risks relating to our global business, including geopolitical and diplomatic tensions, instabilities and conflicts, such as the war in Ukraine, as well as compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations. 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 press release 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 | Year Ended | |||||||||||||
| June 30, | June 30, | |||||||||||||
| 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 | ||||||||
| June 30, | ||||||||
| 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 | ) | ||||||
