01—Abstract
Summary
Summary of the 10-K filed August 25, 2015. Cited figures are marked; the original filing is the authoritative source.
Carpenter Technology Corporation (CRS) operates as a global leader in the manufacturing and distribution of specialty metals.
The company is structured into two primary segments: Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP), serving diverse markets including aerospace, defense, energy, transportation, and medical. In fiscal year 2015, Carpenter Technology reported net sales of $2.23 billiona, a slight increase from the prior year, driven by growth in aerospace, defense, medical, and transportation sectors, partially offset by weakness in the energy market. However, net income saw a significant decrease to $58.7 million from $132.8 million in FY 2014, impacted by increased operating costs, lower oil and gas prices affecting the energy segment, and restructuring charges totaling $29.1 million.
The company's backlog stood at $543 millionb as of June 30, 2015, with most expected to ship in FY 2016. Key risks include cyclicality in end markets, raw material price volatility, and operational challenges.
02—Key points
Key Highlights
- Net sales for fiscal year 2015 were $2.23 billion, a 2% increase year-over-year, driven by strong performance in aerospace and defense, medical, and transportation markets.
- Net income significantly declined to $58.7 million in FY 2015, down from $132.8 million in FY 2014, attributed to increased operating costs and a challenging energy market.
- The company incurred $29.1 million in restructuring charges during FY 2015, primarily related to workforce reductions and facility exits, aimed at generating approximately $30 million in annual cost savings.
- Positive free cash flow of $74.4 million was achieved in FY 2015, a significant improvement from negative $147.8 million in FY 2014, driven by lower capital expenditures.
- The company's backlog of firm orders was $543 million as of June 30, 2015, with a substantial portion expected to be fulfilled in fiscal year 2016.
- Significant risks identified include the cyclical nature of key end markets (aerospace, defense, energy), volatility in raw material prices, and potential operational disruptions.
- Carpenter Technology announced a $500 million share repurchase program in October 2014, with $375.5 million remaining authorization as of June 30, 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Carpenter Technology Corp kept $0.03.
- Revenue$2.23B100.0%
- Cost of revenue−$1.91B85.7%
- Gross profit$318.3M14.3%
- Operating costs−$206.8M9.3%
- Operating income$111.5M5.0%
- Interest, other & tax−$52.8M2.4%
- Net income$58.7M2.6%
Where FY2015 revenue went
$2.23B- Cost of revenue: $1.91B, 86% of revenue
- Net income: $58.7M, 2.6% of revenue
- R&D: $18.7M, 0.8% of revenue
- SG&A: $177.7M, 8.0% of revenue
- Interest, other & tax: $52.8M, 2.4% of revenue
Kept 2.6% as net incomeNet income $58.7M · 2.6%R&D $18.7M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed August 25, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $2.23B$2.17B | +2.5% |
| Cost of Revenue | $1.91B$1.77B | +7.6% |
| Gross Profit | $318.30M$398.90M | −20.2% |
| R&D Expenses | $18.70M$18.50M | +1.1% |
| SG&A Expenses | $177.70M$186.90M | −4.9% |
| Operating Income | $111.50M$212.00M | −47.4% |
| Interest Expense | $27.70M$17.00M | +62.9% |
| Net Income | $58.70M$132.80M | −55.8% |
| EPS (Basic) | $1.11$2.48 | −55.2% |
| EPS (Diluted) | $1.11$2.47 | −55.1% |
| Shares Outstanding (Basic) | 52.60M53.30M | −1.3% |
| Shares Outstanding (Diluted) | 52.70M53.60M | −1.7% |
05—Questions
Frequently Asked Questions
What are Carpenter Technology's main business segments?
Carpenter Technology operates through two main reportable segments: Specialty Alloys Operations (SAO), which comprises its premium alloy and stainless steel manufacturing, and Performance Engineered Products (PEP), which includes its differentiated operations like titanium, powder metal, and distribution businesses.
How did the energy market impact Carpenter Technology's performance in fiscal year 2015?
The decline in oil and gas prices significantly impacted the energy market segment, leading to a 6% decrease in sales for that sector in fiscal year 2015. This weakness in the energy market was a key factor contributing to the overall decline in net income compared to the prior year.
What is the company's strategy for managing raw material price volatility?
Carpenter Technology employs several strategies to mitigate the impact of volatile raw material prices. These include using pricing surcharges, indexing mechanisms, base price adjustments, and engaging in raw material forward contracts. However, there can be short-term impacts and challenges in fully recovering cost increases due to lags in surcharge mechanisms or firm-price sales arrangements.
What significant restructuring actions did the company undertake in fiscal year 2015?
In fiscal year 2015, Carpenter Technology initiated a restructuring plan that included eliminating approximately 200 salaried positions and 60 outsourced positions, along with other non-labor costs. These actions were designed to yield about $30 million in annual overhead cost savings and were expected to be substantially complete by the end of Q1 FY 2016.
06—Continue