01—Abstract
Summary
Summary of the 10-Q filed April 27, 2023. Cited figures are marked; the original filing is the authoritative source.
Carpenter Technology Corporation (CRS) reported a significant turnaround in the third quarter of fiscal year 2023 compared to the same period in the prior year.
Net sales surged by 41% to $690.1 milliona, driven by robust demand across key end-use markets, particularly Aerospace and Defense, which saw a 67% increase. This top-line growth, coupled with improved operational efficiencies, higher pricing, and a more favorable product mix, led to a substantial improvement in profitability. The company returned to profitability with a net income of $18.6 million ($0.38 per diluted share) in the quarter, a stark contrast to a net loss of $7.5 million ($0.16 loss per diluted share) in the prior year.
Excluding specific items and the impact of raw material surcharges, the adjusted gross margin improved significantly to 19.0%b from 10.7%, and the adjusted operating margin turned positive at 8.0% from -0.4% in the prior year. Management expects this positive trajectory to continue, aiming for a return to pre-pandemic profitability levels in the fourth quarter of fiscal year 2023.
02—Key points
Key Highlights
- Net sales increased by 41% year-over-year to $690.1 million, driven by strong demand across multiple end-use markets.
- Significant improvement in profitability, with net income of $18.6 million ($0.38/diluted share) compared to a net loss of $7.5 million ($0.16 loss/diluted share) in the prior year period.
- Aerospace and Defense segment was a key growth driver, with net sales up 67% year-over-year.
- Adjusted gross margin excluding surcharges improved substantially to 19.0% from 10.7% in the prior year.
- Company's operating income turned positive at $39.3 million from $1.1 million in the prior year.
- Management expresses confidence in continued growth, expecting to return to pre-pandemic profitability levels by Q4 FY23.
- Inventories increased significantly to $710.4 million from $496.1 million, reflecting increased demand and production.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2023, Carpenter Technology Corp kept $0.03.
- Revenue$690.1M100.0%
- Cost of revenue−$596.6M86.5%
- Gross profit$93.5M13.5%
- Operating costs−$54.2M7.9%
- Operating income$39.3M5.7%
- Interest, other & tax−$20.7M3.0%
- Net income$18.6M2.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2023filed April 27, 2023Financial Statements
Q3 FY2023 against Q3 FY2022
| Line item | Q3 FY2023Q3 FY2022 | Change |
|---|---|---|
| Revenue | $690.10M$489.00M | +41.1% |
| Gross Profit | $93.50M$39.50M | +136.7% |
| SG&A Expenses | $54.20M$38.40M | +41.1% |
| Operating Income | $39.30M$1.10M | +3472.7% |
| Interest Expense | $14.50M$11.20M | +29.5% |
| Net Income | $18.60M-$7.50M | +348.0% |
| EPS (Basic) | $0.38$-0.16 | +337.5% |
| EPS (Diluted) | $0.38$-0.16 | +337.5% |
| Shares Outstanding (Basic) | 48.80M48.60M | +0.4% |
| Shares Outstanding (Diluted) | 49.20M48.60M | +1.2% |
05—Questions
Frequently Asked Questions
What were the primary drivers for the significant increase in net sales?
The primary drivers for the 41% increase in net sales were strong demand across key end-use markets, particularly Aerospace and Defense, which saw a 67% increase. Higher pricing, improved operational efficiencies, and a more favorable product mix also contributed to the robust top-line performance.
How has the company's profitability changed compared to the prior year?
Carpenter Technology has seen a significant improvement in profitability. The company reported a net income of $18.6 million for the quarter, a substantial turnaround from a net loss of $7.5 million in the same period last year. This improvement is attributed to higher sales, better margins, and operational efficiencies.
What is the company's outlook for the remainder of the fiscal year?
Management is optimistic about the company's growth trajectory. They expect to realize accelerating sales momentum and improved margins with higher volumes, better product mix, and increased prices. The company is on track to return to pre-pandemic levels of profitability in the fourth quarter of fiscal year 2023.
What is the status of the company's liquidity and debt?
As of March 31, 2023, Carpenter Technology had total liquidity of $211.9 million, comprising $22.3 million in cash and cash equivalents and $189.6 million in available borrowing capacity under its Credit Facility. The company reported compliance with all covenants under its Credit Facility. Subsequent to the quarter, the Credit Facility was amended to increase the commitment and modify covenants.
06—Continue