01—Abstract
Summary
Summary of the 10-K filed August 11, 2023. Cited figures are marked; the original filing is the authoritative source.
Carpenter Technology Corporation (CRS) demonstrated a significant turnaround in fiscal year 2023, shifting from a net loss in the prior year to a net profit of $56.4 milliona.
This improvement was driven by a substantial 39% increase in net sales, reaching $2.55 billionb, primarily fueled by strong demand in the Aerospace and Defense sector, which saw a 63% year-over-year increase. The company also experienced growth in its Medical, Energy, and Industrial and Consumer segments. This performance marks a return to pre-pandemic profitability levels and positions the company to pursue its goal of doubling operating income by fiscal year 2027.
The company's Specialty Alloys Operations (SAO) segment was a key driver of this recovery, with operating income improving dramatically to $179.1 millionc from a near break-even result in the prior year. The Performance Engineered Products (PEP) segment also showed improvement, with operating income rising to $31.8 million.
Despite facing inflationary pressures and supply chain disruptions, Carpenter Technology has managed to pass on cost increases through surcharges and pricing strategies, while also focusing on productivity improvements. The company maintains a strong liquidity position with access to a $350 milliond credit facility.
02—Key points
Key Highlights
- Achieved profitability in FY2023 with a net income of $56.4 million, a significant improvement from a net loss of $49.1 million in FY2022.
- Net sales increased by 39% to $2.55 billion in FY2023, driven by strong demand across key end-use markets, especially Aerospace and Defense (+63%).
- Specialty Alloys Operations (SAO) segment saw a dramatic recovery, with operating income increasing to $179.1 million from $9.6 million in FY2022.
- Successfully managed inflationary pressures and supply chain disruptions through surcharges and pricing strategies, leading to an improved adjusted gross margin of 18.3% in FY2023.
- Backlog of orders excluding surcharge grew to $2,123.3 million as of June 30, 2023, up from $1,539.3 million in the prior year, indicating strong future demand.
- Maintained a strong liquidity position with $44.5 million in cash and $348.3 million available under its credit facility as of June 30, 2023.
- Company's stock performance outpaced the S&P MidCap 400 and its Peer Group in FY2023, with a total shareholder return of 119.6%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2023, Carpenter Technology Corp kept $0.02.
- Revenue$2.55B100.0%
- Cost of revenue−$2.21B86.8%
- Gross profit$337.3M13.2%
- Operating costs−$204.2M8.0%
- Operating income$133.1M5.2%
- Interest, other & tax−$76.7M3.0%
- Net income$56.4M2.2%
Where FY2023 revenue went
$2.55B- Cost of revenue: $2.21B, 87% of revenue
- Net income: $56.4M, 2.2% of revenue
- R&D: $24.4M, 1.0% of revenue
- SG&A: $204.2M, 8.0% of revenue
- Interest, other & tax: $76.7M, 3.0% of revenue
Kept 2.2% as net incomeNet income $56.4M · 2.2%R&D $24.4M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2023filed August 11, 2023Financial Statements
FY2023 against FY2022
| Line item | FY2023FY2022 | Change |
|---|---|---|
| Revenue | $2.55B$1.84B | +38.9% |
| Gross Profit | $337.30M$149.80M | +125.2% |
| R&D Expenses | $24.40M$20.40M | +19.6% |
| SG&A Expenses | $204.20M$174.70M | +16.9% |
| Operating Income | $133.10M-$24.90M | +634.5% |
| Interest Expense | $54.10M$44.90M | +20.5% |
| Net Income | $56.40M-$49.10M | +214.9% |
| EPS (Basic) | $1.15$-1.01 | +213.9% |
| EPS (Diluted) | $1.14$-1.01 | +212.9% |
| Shares Outstanding (Basic) | 48.80M48.50M | +0.6% |
| Shares Outstanding (Diluted) | 49.20M48.50M | +1.4% |
05—Questions
Frequently Asked Questions
What were the main drivers of Carpenter Technology's financial performance in fiscal year 2023?
The primary drivers for Carpenter Technology's improved financial performance in FY2023 were a significant increase in net sales, particularly in the Aerospace and Defense sector, improved product mix, realized price increases, and enhanced operational efficiencies. The Specialty Alloys Operations segment showed a substantial turnaround in profitability.
How did Carpenter Technology address inflationary pressures and supply chain disruptions?
Carpenter Technology utilized raw material surcharges and other pricing strategies to pass on increased costs related to raw materials, energy, and labor. The company also focused on initiatives to maximize productivity and achieve capacity gains to mitigate these challenges.
What is the outlook for Carpenter Technology based on the backlog and market demand?
The company reported a record backlog of $2,123.3 million as of June 30, 2023, indicating strong future demand. Management believes they are well-positioned to capitalize on this demand, supported by positive macro trends in their key end-use markets and their leading capabilities.
Are there any significant risks or concerns highlighted in the report?
Key risks include the cyclical nature of some of their end-use markets (aerospace, defense, energy), reliance on critical raw materials which can be subject to supply chain disruptions and price volatility, and the complexity of their manufacturing processes which require significant capital investment. The company also notes potential impacts from environmental regulations and the need to manage labor relations.
06—Continue