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Actionable news in CRS: CARPENTER TECHNOLOGY CORP,

Carpenter Technology: William J. Rudolph, Jr Michael A. Hajost

The following excerpt is from the company's SEC filing.

+1 610-208-3892

+1 610-208-3476

wrudolph@cartech.com

mhajost@cartech.com

CARPENTER TECHNOLOGY REPORTS FIRST QUARTER RESULTS

Reported earnings per share $0.18 per share or $0.26 adjusted for restructuring charges and special items

Net sales of $455.6 million

Free Cash Flow of $6.6 million

WYOMISSING, Pa. October 22, 2015 Carpenter Technology Corporation (NYSE: CRS) today announced financial results for the quarter ended September 30, 2015. Carpenter reported net income of $8.9 million or $0.18 per diluted share. Excluding restructuring charges and special it ems, earnings per share would have been $0.26 per diluted share in the quarter. This compares to a reported net income of $13.5 million or $0.25 per diluted share in the same quarter last year.

Financial Highlights

($ in millions)

FY2016

FY2015

Net Sales

Net Sales Excluding Surcharge (a)

Operating Income

Net Income

Free Cash Flow (a)

(a) non-GAAP financial measure explained in the attached tables

Comment

Overall I am encouraged by how the team has responded to the industry challenges in the quarter, said Tony Thene, Carpenters president and chief executive officer. As we signaled in our most recent public comments, the weakness in the Energy end-use market continues to impact our sequential volume and operating performance.

We have also seen this market weakness begin to affect order patterns for customers in our Industrial and Consumer end-use market. These challenges coupled with our normal seasonality, resulted in a 15 percent sequential volume decline in the quarter.

We continued to drive operating cost improvements and reduce overhead costs in our Specialty Alloys Operations (SAO) segment as operating margins were relatively flat sequentially notwithstanding the significantly lower volume. The cost improvement initiatives are particularly important in this environment of declining volumes and will better position us to capitalize on the operating margin benefits from these cost structure changes as the volumes return.

As expected, our Performance Engineered Products (PEP) segment was impacted by the lower sequential demand in the current quarter for Aerospace titanium fastener materials and powder products for the Industrial and Consumer end-use market. The operating income results of the Oil and Gas businesses in PEP were sequentially flat as we continue to manage cost structure and take appropriate actions as a result of the depressed activity in this end-use market.

Net Sales and Operating Income

Net sales for the first quarter of fiscal year 2016 were $455.6 million, and net sales excluding surcharge were $385.1 million, a decrease of $55.0 million (or 12 percent) from the same quarter last year, on 19 percent lower volume.

Operating income was $24.8 million, an increase of $2.7 million from the first quarter of the prior year. Operating incomeexcluding pension earnings, interest and deferrals (EID) and restructuring charges and special itemswas $32.6 million, an increase of $8.1 million (or 33 percent) from the first quarter of the prior year. These results reflect a stronger mix of products within the SAO segment and lower operating costs which were partially offset by lower overall volume.

Restructuring Charges and Special Items

The first quarter results include restructuring charges and special items of $0.08 per diluted share, consisting of restructuring costs, consulting fees and a discrete tax item as a result of a decision to sell an equity method investment in India.

Cash flow from operations was $41.5 million in the first quarter of fiscal year 2016, which included a $33.0 million increase in inventory and a $20.5 million decrease in other working capital. This compares to a cash flow from operations of $15.0 million in the prior years first quarter, which included a $30.8 million increase in inventory, an $11.8 million increase in other working capital and $2.8 million of pension contributions. Free cash flow in the first quarter of fiscal year 2016 was $6.6 million, compared to negative $53.5 million in the same quarter last year. Capital expenditures in the first quarter of fiscal year 2016 were $29.9 million, compared to $59.0 million in the prior years first quarter.

Total liquidity, including cash and available revolver balance, was $524 million at the end of the first quarter. This consisted of $31 million of cash and $493 million of available borrowing under the Companys credit facility.

End-Use Markets

Q1 FY16

Sales*

Ex.

Surcharge

(in Millions)

vs.

Q1 FY15

Q4 FY15

Aerospace and Defense

Transportation

Medical

Industrial and Consumer

* Excludes sales through Carpenters Distribution businesses

Aerospace and Defense

Sequential results reflect normal seasonal impacts and supply chain adjustments for titanium fastener material

Sales of engine materials were up modestly year-over-year

Sales of structural materials were up year-over-year on stronger volume and improved mix

Defense material sales were up year-over-year with continued spending on supported programs

The North American quarterly average directional and horizontal rig count was down 51 percent year-over-year

SAO Oil and Gas revenue was down 42 percent sequentially and 51 percent year-over-year

PEP Oil and Gas revenue was down 24 percent sequentially and 65 percent year-over-year

Position gains on engine fasteners, valve and fuel system applications drove a richer sales mix year-over-year

Increasing fuel efficiency standards are driving global demand growth for Carpenters materials

North American light vehicle and heavy duty truck production is forecasted to hit near-record levels

Medical market sales were down...


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