01—Abstract
Summary
Summary of the 10-K filed August 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Carpenter Technology Corporation (CRS) reported a net loss of $229.6 milliona for the fiscal year ended June 30, 2021, a significant decline from the prior year's net income of $1.5 million.
This loss was driven by a substantial decrease in net sales, down 32% to $1,475.6 millionb, primarily impacted by the COVID-19 pandemic which led to reduced demand across key markets like Aerospace and Defense. The company also incurred significant special charges, including a $52.8 million goodwill impairment charge for its Additive business, substantial LIFO decrement charges, and restructuring and asset impairment costs. Despite the challenging financial performance, the company ended the fiscal year with improved liquidity, $582.0 million in total, including $287.4 million in cash.
Management highlighted efforts in cost reductions, productivity gains, and strengthening customer relationships during the downturn, positioning the company for a projected recovery in demand. The company also generated positive free cash flow of $132.0 millionc. The Aerospace and Defense segment, which is the largest contributor to sales, saw a 46% decrease in net sales, while other segments also experienced declines, except for the Transportation segment which saw a 9% increase.
Looking ahead, Carpenter Technology anticipates a strengthening of demand across its end-use markets and is focused on optimizing operations and leveraging its premium specialty alloy offerings. The company's ability to navigate raw material price volatility, manage its debt, and execute its strategic initiatives will be crucial for future financial performance. Investors should monitor the recovery in the aerospace sector and the company's success in its additive manufacturing initiatives.
02—Key points
Key Highlights
- Reported a net loss of $229.6 million for fiscal year 2021, compared to a net income of $1.5 million in fiscal year 2020.
- Net sales decreased by 32% year-over-year to $1,475.6 million, largely due to the impact of the COVID-19 pandemic on key markets.
- Significant special charges included a $52.8 million goodwill impairment for the Additive business, LIFO decrement charges, and restructuring/asset impairment charges.
- Total liquidity improved to $582.0 million, with $287.4 million in cash, indicating a solid liquidity position.
- Generated positive free cash flow of $132.0 million, an improvement from $21.8 million in the prior year.
- Aerospace and Defense sales, the largest segment, declined by 46%, reflecting industry-wide impacts from the pandemic.
- The company is positioned for a recovery, anticipating strengthening demand in its core end-use markets.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2021, Carpenter Technology Corp lost $0.16.
- Revenue$1.48B100.0%
- Cost of revenue−$1.47B99.9%
- Gross profit$1.0M0.1%
- Operating costs−$249.6M16.9%
- Operating income−$248.6M16.8%
- Interest, other & tax$19.0M1.3%
- Net income−$229.6M15.6%
04—Financials
Financial Highlights
Figures from 10-KFY2021filed August 19, 2021Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $1.48B$2.18B | −32.3% |
| Gross Profit | $1.00M$329.40M | −99.7% |
| R&D Expenses | $19.70M$28.00M | −29.6% |
| SG&A Expenses | $180.20M$201.00M | −10.3% |
| Operating Income | -$248.60M$25.30M | −1082.6% |
| Interest Expense | $32.70M$19.80M | +65.2% |
| Net Income | -$229.60M$1.50M | −15406.7% |
| EPS (Basic) | $-4.76$0.02 | −23900.0% |
| EPS (Diluted) | $-4.76$0.02 | −23900.0% |
| Shares Outstanding (Basic) | 48.30M48.10M | +0.4% |
| Shares Outstanding (Diluted) | 48.30M48.20M | +0.2% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Carpenter Technology's financial performance in FY2021?
The primary driver of the net loss in fiscal year 2021 was a significant decrease in net sales, down 32% to $1,475.6 million, largely attributable to the adverse impact of the COVID-19 pandemic on customer demand, particularly in the Aerospace and Defense sector. The company also incurred substantial special charges, including a goodwill impairment of $52.8 million for its Additive business, LIFO decrement charges, and restructuring and asset impairment costs.
How did Carpenter Technology manage its liquidity and cash flow during FY2021?
Carpenter Technology improved its liquidity position, ending FY2021 with $582.0 million in total liquidity, which includes $287.4 million in cash and cash equivalents and $294.6 million in available borrowing capacity under its credit facility. The company also generated positive free cash flow of $132.0 million, up from $21.8 million in the prior year, by managing working capital, including a significant reduction in inventory, and by controlling capital expenditures.
What is the outlook for Carpenter Technology's key end-use markets?
Management anticipates a strengthening of demand across its end-use markets, signaling the beginning of a broad-based recovery. The Aerospace and Defense market, while significantly impacted in FY2021, is expected to recover as aircraft build rates normalize. The company is also focused on leveraging its capabilities in areas like additive manufacturing to capitalize on future growth opportunities.
Were there any significant asset impairments or restructuring charges?
Yes, Carpenter Technology recorded a significant goodwill impairment charge of $52.8 million related to its Additive reporting unit within the Performance Engineered Products (PEP) segment. This was due to slower-than-expected growth in additive manufacturing applications compounded by COVID-19 impacts. Additionally, the company incurred $16.6 million in other restructuring and asset impairment charges in FY2021.
06—Continue