10-KPeriod: FY2013

CARPENTER TECHNOLOGY CORP Annual Report, Year Ended Jun 30, 2013

Filed August 23, 2013For Securities:CRS

Summary

Carpenter Technology Corporation (CRS) reported strong financial performance for the fiscal year ended June 30, 2013. The company saw a significant increase in net sales, driven by the full-year inclusion of the Latrobe acquisition and robust demand in the aerospace and defense sector. Despite some headwinds in industrial and consumer, and medical markets due to customer destocking and falling titanium prices, the company demonstrated operational improvements and enhanced liquidity through credit facility expansion. Key initiatives for the year included progress on the new Athens, Alabama facility, which remains on time and under budget, positioning the company for future growth in premium products. Management highlighted improved operational execution and strategic contract wins. The company maintained its long-standing dividend payout, underscoring a commitment to shareholder returns. Looking ahead, Carpenter Technology continues to focus on expanding its capabilities and market presence in key growth areas.

Financial Highlights

53 data points
Beta

Revenue

$2.27B

19.1% Gross Margin

Net Income

$146.10M

6.4% Net Margin

EPS (Diluted)

$2.73

Total Assets

$2.88B

Cash & Equivalents

$257.50M

Free Cash Flow

$188.50M

Financial Statements
Beta
Revenue$2.27B
Cost of Revenue$1.84B
Gross Profit$433.50M
R&D Expenses$19.40M
SG&A Expenses$200.80M
Operating Income$232.70M
Interest Expense$21.00M
Net Income$146.10M
EPS (Basic)$2.75
EPS (Diluted)$2.73
Shares Outstanding (Basic)52.90M
Shares Outstanding (Diluted)53.20M

Key Highlights

  • 1Net sales increased by 12% to $2.27 billion, primarily driven by the Latrobe acquisition and strong aerospace demand.
  • 2Aerospace and defense segment sales grew by 18% (24% excluding surcharges), indicating strong demand for premium products.
  • 3The company is investing heavily in a new $500 million manufacturing facility in Athens, Alabama, expected to be operational by April 2014.
  • 4Operational execution improved, with cost per ton reduction in Specialty Alloys Operations for the fourth consecutive year.
  • 5Liquidity was enhanced by expanding the revolving credit facility to $500 million.
  • 6The company maintained its quarterly dividend of $0.18 per share, continuing over 100 years of dividend payments.
  • 7Net income increased to $146.1 million ($2.73 per diluted share) from $121.2 million ($2.53 per diluted share) in the prior year.

Frequently Asked Questions

The acquisition of Latrobe Specialty Metals, Inc. (Latrobe) in February 2012 had a significant positive impact, contributing $266.1 million to net sales in fiscal year 2013. The integration of Latrobe's operations reportedly exceeded deal economics, and management highlighted operational improvements and cost synergies from the acquisition.

Carpenter Technology utilizes pricing surcharges, indexing mechanisms, base price adjustments, and commodity forward contracts to mitigate the impact of volatile raw material costs. While these measures generally protect gross profit dollars, they can have a dilutive effect on gross margin percentages due to lag effects and the structure of surcharges.

The company's growth is significantly driven by demand in the aerospace and defense sector, which showed strong performance. The energy market also saw increased sales. Management is focused on expanding capabilities in premium products, particularly through the new Athens, Alabama facility, to meet demand in these growing, high-value markets.

Carpenter Technology is making substantial capital investments, notably the $500 million state-of-the-art manufacturing facility in Athens, Alabama, to increase premium product capacity. Research and development expenditures were around $19.4 million, reflecting a commitment to innovation and the development of new material solutions.