Earnings per diluted share of
Results significantly impacted by COVID-19
Action plan implemented to safeguard employees and customers against COVID-19
Initiated actions to maintain solid balance sheet and preserve liquidity
“Our third quarter results reflected solid execution in a challenging environment due to the impact of the 737 MAX production halt as well as the COVID-19 pandemic,” said Tony.
“Looking ahead, visibility is limited given the ongoing COVID-19 pandemic and its potential impact on demand patterns across our end-use markets. We remain in close contact with our customers and will continue working alongside them to fulfill their material requirements. We believe our financial position remains healthy and we are executing targeted portfolio restructurings and cost reductions to drive enhanced flexibility. While we cannot predict the duration of COVID-19 and the total impact it will have on our business, we remain fully committed to the safety of our employees and continuing to serve as a critical supply chain partner for our customers during this difficult time. Our long-term growth profile remains solid as we are a key supplier of mission-critical applications with strong customer relationships, a deep solutions portfolio and established market leadership across a number of attractive end-use markets.”
Savings Actions Initiated to Address COVID-19 and Preserve Liquidity
COVID-19 related disruptions negatively impacted operating income results by approximately
As the COVID-19 pandemic continues to impact global economic conditions and near-term customer demand patterns, the Company has taken several actions to initiate cost savings and preserve liquidity. These actions include implementing temporary furloughs for certain production and maintenance employees across facilities based on planned production scheduling, implementing a global hiring freeze and reducing planned capital expenditures for fiscal year 2021 by approximately 25-30% from fiscal year 2020. The Company also initiated actions to reduce working capital levels, principally inventory, to align with anticipated customer demand and expects that working capital represents a significant opportunity for cash generation in the near-term.
In addition, the Company recently approved actions to exit the downstream oil and gas (
The Company has identified additional actions to preserve and manage cash and has plans to deploy those actions as deemed necessary to respond to the evolving situation.
Total liquidity, including cash and available credit facility borrowings, was
Financial Highlights
($ in millions) | Q3 | Q3 | Q2 | |||||||||||||||||||||
FY2020 | FY2019 | FY2020 | ||||||||||||||||||||||
$ | 585.4 | $ | 609.9 | $ | 573.0 | |||||||||||||||||||
Net Sales Excluding Surcharge Revenue (a) | $ | 495.0 | $ | 503.0 | $ | 471.2 | ||||||||||||||||||
Operating Income | $ | 58.7 | $ | 73.2 | $ | 55.0 | ||||||||||||||||||
Operating Income Excluding Special Items (a) | $ | 58.7 | $ | 73.2 | $ | 57.3 | ||||||||||||||||||
Net Income | $ | 39.9 | $ | 51.1 | $ | 38.8 | ||||||||||||||||||
Cash Provided from Operating Activities | $ | 72.3 | $ | 10.0 | $ | 21.8 | ||||||||||||||||||
Free Cash Flow (a) | $ | 13.0 | $ | (37.0) | $ | (34.5) | ||||||||||||||||||
(a) Non-GAAP financial measures explained in the attached tables | ||||||||||||||||||||||||
Net sales for the third quarter of fiscal year 2020 were
Operating income was
Cash provided from operating activities in the third quarter of fiscal year 2020 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 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 INCOME
(in millions, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
$ | 585.4 | $ | 609.9 | $ | 1,743.8 | $ | 1,738.8 | |||||||||
Cost of sales | 475.9 | 486.7 | 1,409.0 | 1,416.9 | ||||||||||||
Gross profit | 109.5 | 123.2 | 334.8 | 321.9 | ||||||||||||
Selling, general and administrative expenses | 50.8 | 50.0 | 159.0 | 148.3 | ||||||||||||
Restructuring charges | — | — | 2.3 | — | ||||||||||||
Operating income | 58.7 | 73.2 | 173.5 | 173.6 | ||||||||||||
Interest expense | (4.9 | ) | (7.1 | ) | (15.6 | ) | (20.3 | ) | ||||||||
Other (expense) income, net | (3.9 | ) | 1.9 | (3.4 | ) | 0.1 | ||||||||||
Income before income taxes | 49.9 | 68.0 | 154.5 | 153.4 | ||||||||||||
Income tax expense | 10.0 | 16.9 | 34.6 | 35.3 | ||||||||||||
NET INCOME | $ | 39.9 | $ | 51.1 | $ | 119.9 | $ | 118.1 | ||||||||
EARNINGS PER COMMON SHARE: | ||||||||||||||||
Basic | $ | 0.82 | $ | 1.06 | $ | 2.47 | $ | 2.45 | ||||||||
Diluted | $ | 0.82 | $ | 1.05 | $ | 2.46 | $ | 2.43 | ||||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||
Basic | 48.1 | 47.7 | 48.0 | 47.7 | ||||||||||||
Diluted | 48.3 | 48.1 | 48.4 | 48.1 | ||||||||||||
PRELIMINARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine Months Ended | ||||||||
2020 | 2019 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 119.9 | $ | 118.1 | ||||
Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||
Depreciation and amortization | 92.2 | 90.9 | ||||||
Non-cash restructuring charges | 1.5 | — | ||||||
Deferred income taxes | 7.0 | 7.0 | ||||||
Net pension expense | 11.5 | 8.7 | ||||||
Share-based compensation expense | 12.4 | 12.7 | ||||||
Net loss on disposals of property, plant and equipment and assets held for sale | — | 0.7 | ||||||
Gain on insurance recovery | — | (11.4 | ) | |||||
Changes in working capital and other: | ||||||||
Accounts receivable | 7.6 | (12.1 | ) | |||||
Inventories | (85.2 | ) | (168.3 | ) | ||||
Other current assets | (5.2 | ) | 7.6 | |||||
Accounts payable | (26.9 | ) | 36.6 | |||||
Accrued liabilities | (33.4 | ) | (25.2 | ) | ||||
Pension plan contributions | (4.9 | ) | (4.3 | ) | ||||
Other postretirement plan contributions | (2.7 | ) | (2.5 | ) | ||||
Other, net | 1.1 | (1.3 | ) | |||||
Net cash provided from operating activities | 94.9 | 57.2 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of property, plant, equipment and software | (144.0 | ) | (130.7 | ) | ||||
Proceeds from disposals of property, plant and equipment and assets held for sale | 0.3 | 0.3 | ||||||
Acquisition of business, net of cash acquired | — | (79.0 | ) | |||||
Proceeds from sales and maturities of marketable securities | — | 2.9 | ||||||
Proceeds from insurance recovery | — | 11.4 | ||||||
Net cash used for investing activities | (143.7 | ) | (195.1 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Credit agreement borrowings | 331.1 | 163.9 | ||||||
Credit agreement repayments | (181.1 | ) | (63.9 | ) | ||||
Net change in short-term credit agreement borrowings | 0.3 | 27.0 | ||||||
Dividends paid | (29.1 | ) | (28.9 | ) | ||||
Proceeds from stock options exercised | 4.3 | 3.7 | ||||||
Withholding tax payments on share-based compensation awards | (7.8 | ) | (4.4 | ) | ||||
Net cash provided from financing activities | 117.7 | 97.4 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (2.9 | ) | 3.2 | |||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 66.0 | (37.3 | ) | |||||
Cash and cash equivalents at beginning of period | 27.0 | 56.2 | ||||||
Cash and cash equivalents at end of period | $ | 93.0 | $ | 18.9 | ||||
PRELIMINARY
CONSOLIDATED BALANCE SHEETS
(in millions)
(Unaudited)
2020 | 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 93.0 | $ | 27.0 | ||||
Accounts receivable, net | 374.4 | 384.1 | ||||||
Inventories | 869.0 | 787.7 | ||||||
Other current assets | 40.7 | 37.4 | ||||||
Total current assets | 1,377.1 | 1,236.2 | ||||||
Property, plant and equipment, net | 1,395.2 | 1,366.2 | ||||||
325.1 | 326.4 | |||||||
Other intangibles, net | 61.2 | 67.2 | ||||||
Deferred income taxes | 3.8 | 4.2 | ||||||
Other assets | 267.0 | 187.6 | ||||||
Total assets | $ | 3,429.4 | $ | 3,187.8 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Short-term credit agreement borrowings | $ | 170.0 | $ | 19.7 | ||||
Accounts payable | 209.6 | 238.7 | ||||||
Accrued liabilities | 136.4 | 157.6 | ||||||
Total current liabilities | 516.0 | 416.0 | ||||||
Long-term debt | 552.4 | 550.6 | ||||||
Accrued pension liabilities | 359.7 | 371.2 | ||||||
Accrued postretirement benefits | 122.8 | 122.1 | ||||||
Deferred income taxes | 151.5 | 142.7 | ||||||
Other liabilities | 108.5 | 65.1 | ||||||
Total liabilities | 1,810.9 | 1,667.7 | ||||||
STOCKHOLDERS’ EQUITY | ||||||||
Common stock | 280.1 | 279.0 | ||||||
Capital in excess of par value | 325.7 | 320.4 | ||||||
Reinvested earnings | 1,696.1 | 1,605.3 | ||||||
Common stock in treasury, at cost | (328.1 | ) | (332.8 | ) | ||||
Accumulated other comprehensive loss | (355.3 | ) | (351.8 | ) | ||||
Total stockholders' equity | 1,618.5 | 1,520.1 | ||||||
Total liabilities and stockholders' equity | $ | 3,429.4 | $ | 3,187.8 | ||||
PRELIMINARY
SEGMENT FINANCIAL DATA
(in millions, except pounds sold)
(Unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Pounds sold (000): | |||||||||||||||
Specialty Alloys Operations | 59,052 | 65,296 | 175,660 | 189,678 | |||||||||||
Performance Engineered Products | 3,202 | 3,540 | 9,874 | 9,572 | |||||||||||
Intersegment | (116 | ) | (918 | ) | (1,800 | ) | (1,798 | ) | |||||||
Consolidated pounds sold | 62,138 | 67,918 | 183,734 | 197,452 | |||||||||||
Net sales: | |||||||||||||||
Specialty Alloys Operations | |||||||||||||||
Net sales excluding surcharge | $ | 398.8 | $ | 393.3 | $ | 1,174.5 | $ | 1,111.0 | |||||||
Surcharge | 89.3 | 105.0 | 287.7 | 324.4 | |||||||||||
Specialty Alloys Operations net sales | 488.1 | 498.3 | 1,462.2 | 1,435.4 | |||||||||||
Performance Engineered Products | |||||||||||||||
Net sales excluding surcharge | 107.1 | 125.9 | 319.1 | 343.3 | |||||||||||
Surcharge | 1.5 | 2.8 | 4.9 | 10.1 | |||||||||||
Performance Engineered Products net sales | 108.6 | 128.7 | 324.0 | 353.4 | |||||||||||
Intersegment | |||||||||||||||
Net sales excluding surcharge | (10.9 | ) | (16.2 | ) | (40.8 | ) | (45.5 | ) | |||||||
Surcharge | (0.4 | ) | (0.9 | ) | (1.6 | ) | (4.5 | ) | |||||||
Intersegment net sales | (11.3 | ) | (17.1 | ) | (42.4 | ) | (50.0 | ) | |||||||
Consolidated net sales | $ | 585.4 | $ | 609.9 | $ | 1,743.8 | $ | 1,738.8 | |||||||
Operating Income (Loss): | |||||||||||||||
Specialty Alloys Operations | $ | 76.4 | $ | 73.6 | $ | 233.7 | $ | 195.3 | |||||||
Performance Engineered Products | (0.3 | ) | 16.6 | (2.0 | ) | 28.3 | |||||||||
Corporate (including restructuring charges) | (17.8 | ) | (17.3 | ) | (58.8 | ) | (51.5 | ) | |||||||
Intersegment | 0.4 | 0.3 | 0.6 | 1.5 | |||||||||||
Consolidated operating income | $ | 58.7 | $ | 73.2 | $ | 173.5 | $ | 173.6 | |||||||
The Company has two reportable segments, Specialty Alloys Operations (“SAO”) and Performance Engineered Products (“PEP”).
The SAO segment is comprised of Carpenter Technology’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 income (expense), net.
PRELIMINARY
NON-GAAP FINANCIAL MEASURES
(in millions, except per share data)
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
ADJUSTED OPERATING MARGIN EXCLUDING SURCHARGE REVENUE AND SPECIAL ITEMS | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net sales | $ | 585.4 | $ | 609.9 | $ | 1,743.8 | $ | 1,738.8 | ||||||||
Less: surcharge revenue | 90.4 | 106.9 | 291.0 | 330.0 | ||||||||||||
Net sales excluding surcharge revenue | $ | 495.0 | $ | 503.0 | $ | 1,452.8 | $ | 1,408.8 | ||||||||
Operating income | $ | 58.7 | $ | 73.2 | $ | 173.5 | $ | 173.6 | ||||||||
Special items: | ||||||||||||||||
Restructuring charges | — | — | 2.3 | — | ||||||||||||
Acquisition-related costs | — | — | — | 1.2 | ||||||||||||
Operating income excluding special items | $ | 58.7 | $ | 73.2 | $ | 175.8 | $ | 174.8 | ||||||||
Operating margin | 10.0 | % | 12.0 | % | 9.9 | % | 10.0 | % | ||||||||
Adjusted operating margin excluding surcharge revenue and special items | 11.9 | % | 14.6 | % | 12.1 | % | 12.4 | % | ||||||||
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 SHARE EXCLUDING SPECIAL ITEMS | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||
Three months ended | $ | 49.9 | $ | (10.0 | ) | $ | 39.9 | $ | 0.82 | |||||||
Special item: | ||||||||||||||||
None reported | — | — | — | — | ||||||||||||
Three months ended | $ | 49.9 | $ | (10.0 | ) | $ | 39.9 | $ | 0.82 | |||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.3 million for the three months ended |
ADJUSTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||
Three months ended | $ | 68.0 | $ | (16.9 | ) | $ | 51.1 | $ | 1.05 | |||||||
Special item: | ||||||||||||||||
None reported | — | — | — | — | ||||||||||||
Three months ended | $ | 68.0 | $ | (16.9 | ) | $ | 51.1 | $ | 1.05 | |||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.1 million for the three months ended |
ADJUSTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||
Nine months ended | $ | 154.5 | $ | (34.6 | ) | $ | 119.9 | $ | 2.46 | |||||||
Special item: | ||||||||||||||||
Restructuring charges | 2.3 | (0.5 | ) | 1.8 | 0.04 | |||||||||||
Nine months ended | $ | 156.8 | $ | (35.1 | ) | $ | 121.7 | $ | 2.50 | |||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.4 million for the nine months ended |
ADJUSTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||
Nine months ended | $ | 153.4 | $ | (35.3 | ) | $ | 118.1 | $ | 2.43 | |||||||
Special item: | ||||||||||||||||
Acquisition-related costs | 1.2 | — | 1.2 | 0.03 | ||||||||||||
Nine months ended | $ | 154.6 | $ | (35.3 | ) | $ | 119.3 | $ | 2.46 | |||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 48.1 million for the nine months ended |
Management believes that earnings 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 | Nine Months Ended | |||||||||||||||
FREE CASH FLOW | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Net cash provided from operating activities | $ | 72.3 | $ | 10.0 | $ | 94.9 | $ | 57.2 | ||||||||
Purchases of property, plant, equipment and software | (49.7 | ) | (49.0 | ) | (144.0 | ) | (130.7 | ) | ||||||||
Proceeds from disposals of property, plant and equipment and assets held for sale | 0.1 | 0.2 | 0.3 | 0.3 | ||||||||||||
Acquisition of business, net of cash acquired | — | — | — | (79.0 | ) | |||||||||||
Proceeds from insurance recovery | — | 11.4 | — | 11.4 | ||||||||||||
Dividends paid | (9.7 | ) | (9.6 | ) | (29.1 | ) | (28.9 | ) | ||||||||
Free cash flow | $ | 13.0 | $ | (37.0 | ) | $ | (77.9 | ) | $ | (169.7 | ) | |||||
Management believes that the free cash flow measure provides useful information to investors regarding our 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 | Nine Months Ended | |||||||||||||||
NET SALES BY END-USE MARKET | 2020 | 2019 | 2020 | 2019 | ||||||||||||
End-Use Market Excluding Surcharge Revenue: | ||||||||||||||||
Aerospace and Defense | $ | 293.4 | $ | 273.8 | $ | 858.3 | $ | 747.6 | ||||||||
Medical | 47.7 | 47.1 | 135.2 | 125.0 | ||||||||||||
Transportation | 27.8 | 33.5 | 91.4 | 94.3 | ||||||||||||
Energy | 28.8 | 40.8 | 88.7 | 114.7 | ||||||||||||
Industrial and Consumer | 67.8 | 71.9 | 191.9 | 224.0 | ||||||||||||
Distribution | 29.5 | 35.9 | 87.3 | 103.2 | ||||||||||||
Total net sales excluding surcharge revenue | 495.0 | 503.0 | 1,452.8 | 1,408.8 | ||||||||||||
Surcharge revenue | 90.4 | 106.9 | 291.0 | 330.0 | ||||||||||||
Total net sales | $ | 585.4 | $ | 609.9 | $ | 1,743.8 | $ | 1,738.8 | ||||||||
Media Inquiries: | Investor Inquiries: |
+1 610-208-2278 | |
hbeardsley@cartech.com | +1 212-739-6740 |
brad@theplunkettgroup.com |
Source:
2020 GlobeNewswire, Inc., source