10-KPeriod: FY2011

CARPENTER TECHNOLOGY CORP Annual Report, Year Ended Jun 30, 2011

Filed August 24, 2011For Securities:CRS

Summary

Carpenter Technology Corporation's (CRS) 2011 10-K filing highlights a company undergoing significant strategic expansion and integration. The company is in the process of acquiring Latrobe Specialty Metals for approximately $558 million, a move expected to bolster its specialty metals offerings. Additionally, CRS has made strategic acquisitions in the energy sector with Amega West Services and Oilfield Alloys. To meet growing demand from the aerospace and energy industries, Carpenter announced plans to build a new $500 million state-of-the-art manufacturing facility. The company operates across three segments: Advanced Metals Operations, Premium Alloys Operations, and Emerging Ventures. Fiscal year 2011 saw a substantial increase in net sales to $1.675 billion, driven by strong demand in aerospace, industrial, and energy markets. This performance reflects successful pricing and mix management strategies, as well as increased shipment volumes. Despite increased investments in capital expenditures and acquisitions, the company is focused on strengthening its financial position for future growth.

Financial Highlights

55 data points
Beta

Revenue

$1.68B

14.9% Gross Margin

Net Income

$71.00M

4.2% Net Margin

EPS (Diluted)

$1.59

Total Assets

$1.99B

Cash & Equivalents

$492.50M

Free Cash Flow

$64.20M

Financial Statements
Beta
Revenue$1.68B
Cost of Revenue$1.43B
Gross Profit$249.00M
R&D Expenses$18.90M
SG&A Expenses$149.50M
Operating Income$96.40M
Interest Expense$17.10M
Net Income$71.00M
EPS (Basic)$1.59
EPS (Diluted)$1.59
Shares Outstanding (Basic)44.10M
Shares Outstanding (Diluted)44.70M

Key Highlights

  • 1Acquisition of Latrobe Specialty Metals for approximately $558 million, expected to close in the first half of fiscal year 2012, to enhance specialty metal capabilities.
  • 2Strategic acquisitions of Amega West Services and Oilfield Alloys to strengthen presence in the energy sector.
  • 3Announcement of plans to construct a new $500 million, 400,000 sq ft manufacturing facility to meet growing demand for premium products, primarily in aerospace and energy.
  • 4Significant increase in net sales to $1.675 billion in fiscal year 2011, a 40% rise from the prior year, driven by strong demand across key end-use markets.
  • 5Improved operating income to $96.4 million in fiscal year 2011, a substantial increase from $11.7 million in fiscal year 2010, reflecting higher volumes, pricing actions, and product mix improvements.
  • 6Growing backlog of orders, reaching approximately $623 million as of June 30, 2011, with substantially all expected to be shipped within fiscal year 2012.
  • 7Focus on capacity expansion and strengthening customer relationships, including negotiations for expanded long-term agreements.

Frequently Asked Questions

Carpenter Technology Corporation operates in three reportable segments: Advanced Metals Operations (AMO) focuses on manufacturing and distributing high-temperature alloys, stainless steels, and titanium in forms like bars, rods, wire, and powder, serving diverse markets including aerospace, industrial, consumer, automotive, and medical. Premium Alloys Operations (PAO) manufactures and distributes premium high-temperature alloys and stainless steels in forms like ingots and billets, with a significant portion of sales to the aerospace and energy industries. Emerging Ventures includes recent acquisitions like Amega West and Oilfield Alloys, primarily serving the energy market.

Key growth drivers include strong demand in the aerospace and energy sectors. Strategic initiatives involve significant expansion, including the pending acquisition of Latrobe Specialty Metals, the integration of Amega West and Oilfield Alloys, and the planned construction of a new $500 million state-of-the-art manufacturing facility. The company is also focused on pricing and product mix management to improve profitability and strengthen customer relationships through expanded long-term agreements.

Fiscal year 2011 showed a strong recovery with net sales of $1.675 billion and improved operating income. The company anticipates continued demand growth in its strategic end markets, with projected net sales growth of over 10% (excluding the Latrobe acquisition) in fiscal year 2012. Operating income is also expected to increase significantly. While free cash flow is projected to be slightly negative in fiscal year 2012 due to increased capital spending and working capital, the company believes its liquidity and borrowing capacity are sufficient to fund its operations, capital expenditures, and the Latrobe acquisition.

Carpenter Technology faces several risks, including the cyclical nature of its end markets (aerospace and energy), potential integration challenges and costs associated with the Latrobe acquisition, delays or cost overruns in capital expansion projects, volatility in raw material prices, competition, and environmental and litigation risks. Dependence on key raw materials and potential supply chain disruptions are also noted.