10-QPeriod: Q3 FY2015

CARPENTER TECHNOLOGY CORP Quarterly Report for Q3 Ended Mar 31, 2015

Filed May 7, 2015For Securities:CRS

Summary

Carpenter Technology Corporation (CRS) reported a net loss of $1.4 million for the third quarter of fiscal year 2015, a significant downturn from the $30.6 million net income reported in the same period last year. This decline was largely driven by substantial restructuring charges amounting to $25.3 million, which included workforce reductions and the exit of a development program. Despite the net loss, excluding these charges, the adjusted earnings per share were $0.32. Total net sales saw a modest 1% increase to $570.6 million, primarily supported by growth in the aerospace and defense sector, which offset declines in other markets, particularly energy. The company is actively managing its operational costs and inventory levels as part of a restructuring plan aimed at achieving approximately $30.0 million in annual overhead cost savings. Looking at the nine-month period, net sales increased by 6% to $1,668.8 million, though net income decreased significantly year-over-year to $36.2 million from $94.7 million. This decrease was also influenced by restructuring charges and a less favorable cost absorption due to inventory reduction. The company's liquidity remains robust, with $29.4 million in cash and cash equivalents and significant availability under its credit agreement. Carpenter Technology is also progressing with its share repurchase program, having bought back approximately $60.3 million in shares during the nine-month period.

Financial Highlights

49 data points
Beta

Revenue

$570.60M

13.3% Gross Margin

Net Income

-$1.40M

-0.2% Net Margin

EPS (Diluted)

$-0.03

Total Assets

$2.97B

Cash & Equivalents

$29.40M

Free Cash Flow

$120.90M

Financial Statements
Beta
Revenue$570.60M
Cost of Revenue$494.80M
Gross Profit$75.80M
SG&A Expenses$45.70M
Operating Income$4.80M
Interest Expense$7.10M
Net Income-$1.40M
EPS (Basic)$-0.03
EPS (Diluted)$-0.03
Shares Outstanding (Basic)52.60M
Shares Outstanding (Diluted)52.60M

Key Highlights

  • 1Reported a net loss of $1.4 million for Q3 FY15, compared to a net income of $30.6 million in Q3 FY14.
  • 2Incurred $25.3 million in restructuring charges in Q3 FY15, impacting profitability significantly.
  • 3Net sales increased by 1% to $570.6 million for Q3 FY15, with aerospace and defense being a key growth driver.
  • 4For the nine months ended March 31, 2015, net sales grew 6% to $1,668.8 million, but net income declined to $36.2 million from $94.7 million in the prior year.
  • 5The company initiated a restructuring plan expected to yield $30.0 million in annual overhead cost savings.
  • 6Cash flow from operations remained strong at $148.4 million for the nine months ended March 31, 2015.
  • 7The company repurchased $60.3 million of its common stock during the nine-month period under its $500 million share repurchase program.

Frequently Asked Questions

The net loss of $1.4 million in the third quarter of fiscal year 2015 was primarily due to significant restructuring charges totaling $25.3 million. These charges included costs associated with workforce reductions and exiting a development program. Excluding these charges, the company reported an adjusted earnings per share of $0.32.

Overall net sales increased slightly by 1% to $570.6 million in the third quarter. The Specialty Alloys Operations (SAO) segment saw a 4% increase in net sales, driven by the aerospace and defense market. The Performance Engineered Products (PEP) segment experienced a 7% decrease in net sales, impacted by weakness in the oil and gas sector. Key end-markets like aerospace and defense showed growth, while the energy market experienced a notable decline.

Carpenter Technology initiated a restructuring plan in March 2015 aimed at reducing overhead costs and driving long-term growth. This plan is expected to yield approximately $30.0 million in annual overhead cost savings. The charges incurred in Q3 FY15 relate to workforce reductions and exiting a development program, with the overall restructuring activities expected to be substantially completed by the end of fiscal year 2016.

The company maintained a strong liquidity position, with $29.4 million in cash and cash equivalents as of March 31, 2015. Additionally, it had approximately $491.8 million in available borrowing capacity under its credit agreement, totaling over $521 million in liquidity. For the nine months ended March 31, 2015, cash flow from operations was $148.4 million. The company also repurchased $60.3 million of its stock during this period under its $500 million share repurchase program.