01—Abstract
Summary
Summary of the 10-Q filed February 9, 2015. Cited figures are marked; the original filing is the authoritative source.
Carpenter Technology Corporation (CRS) reported its fiscal second-quarter and year-to-date results for the period ending December 31, 2014.
Net sales increased by 9%a for the quarter and 10% for the six months, driven by higher volumes and a richer product mix, particularly in aerospace, industrial, and medical sectors. However, net income declined for both periods, primarily due to higher operating costs, increased depreciation related to the Athens facility, and a press outage. The company is proactively addressing the slowdown in the oil and gas market due to falling oil prices by aligning its cost structure with lower demand in those areas.
Despite a decrease in overall operating income compared to the prior year, the company maintained compliance with its debt covenants and had significant available borrowing capacity. Carpenter Technology also announced a new $500 millionb share repurchase program in October 2014, demonstrating a commitment to returning value to shareholders. The company's outlook for the second half of fiscal year 2015 remains positive, expecting higher sales volume and a stronger mix.
02—Key points
Key Highlights
- Net sales increased 9% year-over-year to $548.4 million for the quarter ended December 31, 2014, and 10% to $1,098.2 million for the six-month period.
- The company experienced a decline in net income to $24.1 million for the quarter ($0.45/diluted share) and $37.6 million for the six months ($0.70/diluted share), compared to the prior year periods.
- Gross profit decreased 11% for the quarter to $85.0 million and 22% for the six months to $154.1 million, with gross margin also declining due to higher operating costs and depreciation.
- The oil and gas sector is showing signs of slowdown due to falling oil prices, leading CRS to take cost-alignment actions in related businesses.
- Carpenter Technology initiated a $500 million share repurchase program in October 2014 and repurchased $10.0 million of stock during the quarter.
- The company maintained compliance with its debt covenants, with a consolidated interest coverage ratio of 15.7 to 1.00 and a debt to capital ratio of 31% as of December 31, 2014.
- Total assets slightly decreased to $3,055.0 million from $3,057.5 million at June 30, 2014, while total liabilities increased to $1,579.0 million from $1,553.2 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2015, Carpenter Technology Corp kept $0.04.
- Revenue$548.4M100.0%
- Cost of revenue−$463.4M84.5%
- Gross profit$85.0M15.5%
- Operating costs−$40.0M7.3%
- Operating income$45.0M8.2%
- Interest, other & tax−$20.9M3.8%
- Net income$24.1M4.4%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2015filed February 9, 2015Financial Statements
Q2 FY2015 against Q2 FY2014
| Line item | Q2 FY2015Q2 FY2014 | Change |
|---|---|---|
| Revenue | $548.40M$503.50M | +8.9% |
| Cost of Revenue | $463.40M$408.10M | +13.6% |
| Gross Profit | $85.00M$95.40M | −10.9% |
| SG&A Expenses | $40.00M$47.90M | −16.5% |
| Operating Income | $45.00M$47.50M | −5.3% |
| Interest Expense | $6.80M$3.70M | +83.8% |
| Net Income | $24.10M$29.50M | −18.3% |
| EPS (Basic) | $0.45$0.55 | −18.2% |
| EPS (Diluted) | $0.45$0.55 | −18.2% |
| Shares Outstanding (Basic) | 53.40M53.20M | +0.4% |
| Shares Outstanding (Diluted) | 53.60M53.60M | 0.0% |
05—Questions
Frequently Asked Questions
What is the company's financial performance for the quarter ended December 31, 2014, compared to the prior year?
For the quarter ended December 31, 2014, Carpenter Technology Corporation reported a 9% increase in net sales to $548.4 million, driven by higher volumes and a better product mix across most end-use markets. However, net income decreased to $24.1 million ($0.45 per diluted share) from $29.5 million ($0.55 per diluted share) in the same period last year. This decline was attributed to higher operating costs, increased depreciation, and the impact of a press outage.
How is the company managing the impact of falling oil prices on its business?
The company noted a slowdown in demand for oil and gas materials, including cancellations and deferrals, due to falling oil prices. Carpenter Technology is taking proactive measures to align its cost structure with this reduced demand, particularly in its oil and gas-focused businesses like the down-hole tool and distribution segments.
What is the company's liquidity position and debt management status?
As of December 31, 2014, Carpenter Technology had $28.8 million in cash and cash equivalents and $454.8 million in available borrowing capacity under its credit agreement, providing total liquidity of approximately $483.6 million. The company remains in compliance with its debt covenants, maintaining a consolidated interest coverage ratio of 15.7 to 1.00 and a debt-to-capital ratio of 31%, well within the required limits.
Has the company initiated any shareholder return programs?
Yes, in October 2014, Carpenter Technology's Board of Directors authorized a share repurchase program of up to $500.0 million of the Company's outstanding common stock. During the quarter ended December 31, 2014, the company repurchased 200,400 shares for $10.0 million under this program.
06—Continue