10-QPeriod: Q3 FY2022

CARPENTER TECHNOLOGY CORP Quarterly Report for Q3 Ended Mar 31, 2022

Filed April 28, 2022For Securities:CRS

Summary

Carpenter Technology Corporation (CRS) reported a net loss of $7.5 million, or $0.16 per diluted share, for the third quarter of fiscal year 2022, a significant improvement from the $40.5 million net loss reported in the same period last year. This improvement was driven by a 39% increase in net sales, reaching $489.0 million, compared to $351.9 million in the prior year's quarter. The company experienced strong demand across most end-use markets, particularly in Aerospace & Defense, Medical, and Industrial & Consumer sectors. Despite operational challenges such as the Reading press outage and labor shortages, the company saw improved gross margins and a reduction in operating losses year-over-year. Financially, the company generated $106.5 million in cash from operating activities during the quarter, contributing to an increase in cash and cash equivalents to $393.9 million. Long-term debt saw an increase due to the issuance of $300.0 million in Senior Notes due 2030, which were used to repay maturing debt. The company's liquidity remains robust, with $393.9 million in cash and cash equivalents and $294.2 million available under its credit facility. Management is optimistic about continued growth driven by strong demand tailwinds and realized pricing gains.

Financial Highlights

50 data points
Beta

Revenue

$489.00M

8.1% Gross Margin

Net Income

-$7.50M

-1.5% Net Margin

EPS (Diluted)

$-0.16

Total Assets

$3.23B

Cash & Equivalents

$393.90M

Free Cash Flow

$35.30M

Financial Statements
Beta
Revenue$489.00M
Gross Profit$39.50M
SG&A Expenses$38.40M
Operating Income$1.10M
Interest Expense$11.20M
Net Income-$7.50M
EPS (Basic)$-0.16
EPS (Diluted)$-0.16
Shares Outstanding (Basic)48.60M
Shares Outstanding (Diluted)48.60M

Key Highlights

  • 1Net sales increased by 39% to $489.0 million in Q3 FY2022, up from $351.9 million in Q3 FY2021.
  • 2Net loss narrowed significantly to $7.5 million ($0.16/share) in Q3 FY2022, compared to a loss of $40.5 million ($0.84/share) in Q3 FY2021.
  • 3Aerospace & Defense sales grew 26% year-over-year, indicating a recovery in this key market.
  • 4Gross margin improved to 8.1% from 3.6% in the prior year quarter, excluding certain items.
  • 5Operating income turned positive at $1.1 million, a significant improvement from an operating loss of $40.0 million in the prior year quarter.
  • 6Cash and cash equivalents increased to $393.9 million at the end of the quarter.
  • 7The company issued $300.0 million in 7.625% Senior Notes due 2030, utilizing the proceeds to repay existing debt.

Frequently Asked Questions

In the third quarter of fiscal year 2022, Carpenter Technology reported a net loss of $7.5 million, or $0.16 per diluted share, which is a substantial improvement from a net loss of $40.5 million, or $0.84 per diluted share, in the same period of the prior year. Net sales increased by 39% to $489.0 million. The company also saw an improvement in gross margin and a move from an operating loss to a modest operating income.

The increase in sales was primarily driven by a 39% rise in net sales to $489.0 million, fueled by growing demand across most end-use markets. Key contributors included strong performance in Aerospace & Defense, Medical, and Industrial & Consumer sectors. Shipment volumes also increased by 32% compared to the prior year quarter.

Carpenter Technology raised $300.0 million through the issuance of 7.625% Senior Notes due 2030, which were used to repay maturing debt. The company's liquidity remains strong, with $393.9 million in cash and cash equivalents and $294.2 million available under its revolving credit facility, totaling over $688 million. This was deemed sufficient to cover near-term obligations, including the repayment of $300 million in notes in April 2022.

Despite the positive financial results, the company faced near-term operational challenges, including an outage of the Reading press, labor shortages, and ongoing inflationary pressures on operating costs such as production supplies, freight, and labor. These factors partially offset the gains from improved demand and pricing.