10-KPeriod: FY2009

CARPENTER TECHNOLOGY CORP Annual Report, Year Ended Jun 30, 2009

Filed August 20, 2009For Securities:CRS

Summary

Carpenter Technology Corporation (CRS) filed its 2009 10-K report amidst a challenging economic environment. Fiscal year 2009 saw a significant 30% decline in net sales to $1.36 billion, largely due to weakened global manufacturing activity impacting key end-use markets such as aerospace, automotive, and industrial. The company responded by reducing production, headcount, and SG&A expenses while focusing on maintaining core capabilities and exploring international growth opportunities. Despite the downturn, Carpenter generated positive free cash flow, demonstrating operational resilience. Key financial metrics reflect the economic pressures, with income from continuing operations dropping to $47.9 million from $200.5 million in the prior year. The company's backlog also significantly decreased from $485 million to $230 million. However, Carpenter maintained its long-standing dividend payment and continued its commitment to research and development, investing $15.4 million in innovation. The report also highlights the company's efforts to manage raw material price volatility through surcharges and forward contracts and notes ongoing environmental remediation liabilities. Investors should closely monitor the company's ability to navigate the ongoing economic uncertainty and capitalize on market recovery.

Financial Highlights

31 data points
Beta

Revenue

$1.36B

15.2% Gross Margin

Net Income

$47.90M

3.5% Net Margin

EPS (Diluted)

$1.08

Cash & Equivalents

$340.10M

Free Cash Flow

$145.50M

Financial Statements
Beta
Revenue$1.36B
Cost of Revenue$1.16B
Gross Profit$207.20M
R&D Expenses$15.40M
SG&A Expenses$133.80M
Operating Income$64.00M
Interest Expense$16.10M
Net Income$47.90M
EPS (Basic)$1.08
EPS (Diluted)$1.08
Shares Outstanding (Basic)43.90M
Shares Outstanding (Diluted)44.20M

Key Highlights

  • 1Significant decline in net sales by 30% to $1.36 billion in fiscal year 2009, attributed to global economic downturn impacting key end markets.
  • 2Income from continuing operations fell sharply to $47.9 million, down from $200.5 million in the prior year.
  • 3Backlog of orders decreased substantially from $485 million to $230 million as of June 30, 2009.
  • 4Company implemented cost-saving measures including production hour reductions, headcount elimination, and SG&A expense cuts.
  • 5Generated positive free cash flow of $11.2 million in fiscal year 2009 despite challenging market conditions.
  • 6Continued investment in R&D with $15.4 million spent on company-sponsored research and development.
  • 7Maintained a consistent quarterly dividend of $0.18 per common share throughout fiscal year 2009.

Frequently Asked Questions

The primary drivers of the revenue decline were weakened global manufacturing activity resulting from the economic downturn. This impacted demand across key end-use markets, including aerospace, industrial, energy, automotive, and consumer sectors, leading to reduced shipment volumes and sales.

Carpenter responded by implementing several cost-saving measures. These included reducing production hours by 30-40%, eliminating over 300 positions, reducing selling, general, and administrative expenses, tightening credit and receivables control, and reducing inventory levels. Concurrently, the company focused on protecting core workforce capabilities and investing in new products and R&D.

Despite the economic challenges, Carpenter generated positive free cash flow of $11.2 million in fiscal year 2009, which management views as a demonstration of its ability to manage through downturns. The company believes its cash position, cash generated from operations, and available borrowing capacity under its credit facilities will be sufficient to fund its operating activities and obligations for the foreseeable future.

Key risks include the cyclical nature of demand in its end-use markets, particularly aerospace and energy. Other risks include intense competition, volatility in raw material prices, potential supply chain disruptions, environmental regulations, litigation, and dependence on key personnel. The report also notes the impact of excess global manufacturing capacity and potential customer substitution of materials.