01—Abstract
Summary
Summary of the 10-Q filed October 28, 2021. Cited figures are marked; the original filing is the authoritative source.
Carpenter Technology Corporation (CRS) reported its first fiscal quarter results ending September 30, 2021, showing a net loss of $14.8 milliona, an improvement from a net loss of $47.1 million in the prior year's comparable quarter.
This narrowing of losses was driven by a 10% increase in net sales, reaching $387.6 millionb, primarily due to recovering demand in key markets like Medical, Transportation, and Industrial/Consumer, coupled with effective cost management and the completion of certain restructuring actions. Despite the sales growth, the company continues to face challenges, including ongoing supply chain disruptions and labor market tightness, which led to a temporary build-up in inventory and a negative $47.0 million in cash flow from operations.
However, the company maintained a strong liquidity position with $507.8 millionc in total liquidity as of quarter-end, comprising cash and cash equivalents and available credit facilities. Management expressed confidence in a broad-based recovery, particularly in the aerospace sector, and its strategic positioning for future growth in its core business as well as in emerging areas like additive manufacturing.
02—Key points
Key Highlights
- Net sales increased by 10% year-over-year to $387.6 million, indicating a recovery in demand across several key end-use markets.
- Net loss narrowed significantly to $14.8 million from $47.1 million in the prior year's comparable quarter.
- Gross profit improved to $25.2 million (6.5% of net sales) from $3.5 million (1.0% of net sales) in the prior year, with adjusted gross margin excluding surcharges also showing improvement.
- Operating loss improved to $19.1 million from $48.8 million in the prior year, with adjusted operating margin excluding surcharges and special items showing a positive trend.
- The company experienced a significant inventory build-up ($66.5 million increase), negatively impacting operating cash flow, attributed to supply chain and operational delays.
- Total liquidity remained strong at $507.8 million, comprising $213.2 million in cash and cash equivalents and $294.6 million in available credit facilities.
- Capital expenditures decreased to $14.4 million from $33.3 million year-over-year, with full-year fiscal 2022 capital expenditure expectations around $125 million.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2022, Carpenter Technology Corp lost $0.04.
- Revenue$387.6M100.0%
- Cost of revenue−$362.4M93.5%
- Gross profit$25.2M6.5%
- Operating costs−$44.3M11.4%
- Operating income−$19.1M4.9%
- Interest, other & tax$4.3M1.1%
- Net income−$14.8M3.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2022filed October 28, 2021Financial Statements
Q1 FY2022 against Q1 FY2021
| Line item | Q1 FY2022Q1 FY2021 | Change |
|---|---|---|
| Revenue | $387.60M$353.30M | +9.7% |
| Gross Profit | $25.20M$3.50M | +620.0% |
| SG&A Expenses | $44.30M$42.30M | +4.7% |
| Operating Income | -$19.10M-$48.80M | +60.9% |
| Interest Expense | $10.20M$6.70M | +52.2% |
| Net Income | -$14.80M-$47.10M | +68.6% |
| EPS (Basic) | $-0.31$-0.98 | +68.4% |
| EPS (Diluted) | $-0.31$-0.98 | +68.4% |
| Shares Outstanding (Basic) | 48.50M48.30M | +0.4% |
| Shares Outstanding (Diluted) | 48.50M48.30M | +0.4% |
05—Questions
Frequently Asked Questions
What was the primary driver for the improved financial results in the quarter?
The primary driver for the improved financial results was a 10% increase in net sales to $387.6 million, supported by recovering demand in markets such as Medical, Transportation, and Industrial & Consumer. Additionally, the company benefited from cost-saving initiatives and the absence of significant restructuring charges seen in the prior year.
Why did operating cash flow turn negative despite sales growth?
Operating cash flow was negatively impacted by a significant build-up in inventories, totaling $66.5 million for the quarter. Management attributes this temporary inventory increase to supply chain disruptions and short-term operational delays, including COVID-19 related issues.
What is the company's current liquidity position, and is it considered adequate?
The company reported strong total liquidity of $507.8 million as of September 30, 2021. This includes $213.2 million in cash and cash equivalents and $294.6 million in available borrowing capacity under its credit facility. Management believes this liquidity will be sufficient to meet its cash needs for the foreseeable future.
How is the Aerospace and Defense market performing, and what are the future expectations?
Sales to the Aerospace and Defense market saw a slight decrease of 3% year-over-year on a reported basis, and a 9% decrease excluding surcharge revenue. Despite this, the company sees signs of a broad-based recovery in the aerospace supply chain and expects acceleration of demand conditions in calendar year 2022.
06—Continue