Carpenter Technology Reports Record First Quarter Results.* Record first quarter net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $475 million * Record first quarter net income of $58 million or $2.24 per share * Repurchased $158 million of common stock WYOMISSING, Pa. -- Carpenter Technology Corporation Carpenter Technology Corporation (NYSE:CRS) is a leading manufacturer and distributor of specialty alloys, including stainless steel and titanium, and various engineered products made from metallic and ceramic materials. (NYSE NYSE See: New York Stock Exchange :CRS CRS Course CRS Certified Residential Specialist (real estate certification) CRS Central Reservation System CRS Can't Remember Stuff (polite form) CRS Cost Reduction Strategy CRS Consumer Relations Specialist ) today reported record first quarter results. Net income of $57.7 million or $2.24 per diluted share reflected a richer product mix, growth in the energy market, and a continued focus on margin enhancement. Financial highlights from the first quarter include: (millions except E.P.S. & pounds) < < Q1-2008 Q1-2007 Sales < < $475.0 $404.5 Sales excluding surcharge (a) < < $337.5 $326.5 Operating Income < < $85.7 $73.1 Net Income < < $57.7 $51.2 Diluted E.P.S. < < $2.24 $1.94 Free Cash Flow (a) < < $24.1 $50.8 Pounds Sold (000) (b) < < 49,216 54,168 (a) non-GAAP financial measures that are explained in the attached tables (b) includes specialty and titanium alloys Titanium alloys are metallic materials which contain a mixture of titanium and other chemical elements. Such alloys have very high tensile strength and toughness (even at extreme temperatures), light weight, extraordinary corrosion resistance, and ability to withstand extreme , stainless steel stainless steel: see steel. stainless steel Any of a family of alloy steels usually containing 10–30% chromium. The presence of chromium, together with low carbon content, gives remarkable resistance to corrosion and heat. , and powder materials First Quarter - Operating Summary "Our focus on higher value materials and growth in energy market sales contributed to record first quarter results," said Anne Stevens, chairman, president and chief executive officer. "We are pleased with our results and see opportunity to further improve our performance through an enhanced focus on operational excellence. "We expect the energy market to remain favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. and are confident about the outlook for our aerospace business in the second half of our fiscal year," Stevens said. Carpenter's sales of $475 million were a first quarter record and 17 percent more than a year ago. Adjusted for surcharges, sales gained 3 percent. A 27 percent increase in pounds shipped by the Company's Premium Alloys Operation, which benefited from strong demand from the energy market, contributed to the increase. Total volume declined during the quarter due primarily to a reduction in the shipment of lower priced stainless material. Sales to the energy market, which includes oil and gas and power generation, increased 94 percent from a year ago to $56 million. Excluding surcharge An overcharge or additional cost. A surcharge is an added liability imposed on something that is already due, such as a tax on tax. It also refers to the penalty a court can impose on a fiduciary for breaching a duty. revenue, sales increased 89 percent. Within the energy market, sales to the power generation sector, excluding surcharge revenue, surged 140 percent to $22 million, due to increased demand for industrial gas turbines, particularly from the Middle East. Sales to the oil and gas sector, excluding surcharge revenue, increased 56 percent from a year ago to $22 million. The Company's broad product portfolio of high strength and corrosion resistant materials has allowed it to gain strong acceptance among customers. Growth with key customers and strong international demand helped drive the increase in energy sales. Automotive and truck market sales grew 19 percent from the first quarter a year ago to $59 million. Excluding surcharge revenue, sales gained 3 percent from a year ago. The year-over-year sales increase primarily reflected demand for higher value materials to support technology changes in engines and exhaust systems Noun 1. exhaust system - system consisting of the parts of an engine through which burned gases or steam are discharged exhaust automobile engine - the engine that propels an automobile . This increase was partially offset by a reduction in pounds shipped due to lower automotive production levels and a decision not to participate in certain marginally profitable business. Medical market sales increased to $32 million, up 16 percent from last year's first quarter. Adjusted for surcharge revenue, sales increased 5 percent. The gain reflected a pick-up in demand relative to last year's comparatively low shipment levels. Sales to the industrial market improved by 14 percent to $109 million. Adjusted for surcharge revenue, sales decreased approximately 3 percent. During the quarter, the Company benefited from increased sales of higher value materials used in capital equipment and in the manufacture of valves and fittings. This increase was more than offset by reduced shipments of lower value materials sold through distributors. Sales to the aerospace market increased 9 percent to $174 million in the first quarter compared to a year ago. Excluding surcharge revenue, sales declined approximately 6 percent from the record first quarter a year ago. Increased sales of nickel-based alloys used in jet engine components was more than offset by planned inventory adjustments at certain key customers and by a decline in shipments to a customer who is now procuring some of its aerospace material needs from a recently acquired subsidiary. The Company expects that beginning in the second half of its fiscal year, aerospace sales will more closely reflect the increase in growth rate of commercial jet deliveries projected for 2008. Consumer market sales increased 4 percent from the first quarter a year ago to $44 million. Adjusted for surcharge revenue, sales decreased 7 percent. Lower shipments of materials used in the housing market more than offset increased sales to the sporting goods Noun 1. sporting goods - sports equipment sold as a commodity commodity, trade good, good - articles of commerce sports equipment - equipment needed to participate in a particular sport and electronics markets. Geographically, sales outside the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. increased 28 percent from the same quarter a year ago to $157 million. International sales, which represented 33 percent of total sales, benefited from increased sales to the energy, industrial and medical markets. Record first quarter gross profit of $121.4 million compared to $103.9 million in the same quarter a year ago. The higher gross profit reflected the increased sales of higher value materials, pricing, cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. , and the lag effect in the Company's surcharge mechanism. Gross profit in the recent first quarter was negatively impacted by a $4.6 million reserve for duty drawback DRAWBACK, com. law. An allowance made by the government to merchants on the reexportation of certain imported goods liable to duties, which, in some cases, consists of the whole; in others, of a part of the duties which had been paid upon the importation. claims filed by the Company's licensed broker. Carpenter was notified by U.S. Customs that its licensed broker may have filed claims with inadequate documentation over the past four years. Carpenter is cooperating with U.S. Customs to review all individual claims and working with its suppliers and a new licensed broker to assemble the appropriate documentation where available. In the recent first quarter, the Company had LIFO (Last In-First Out) A queueing method in which the next item to be retrieved is the item most recently placed in the queue. Contrast with FIFO. LIFO - stack income of $14.5 million due partly to declining nickel prices during the quarter relative to its previous fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. . In the first quarter a year ago, the Company had LIFO expense of $26.2 million. The LIFO income or expense is mostly offset by changes in surcharge revenue and, therefore, has little impact on gross profit. Gross profit as a percent of sales in the recent first quarter was 25.6 percent, compared to 25.7 percent in the same quarter a year ago. The Company estimated that the lag effect in its surcharge mechanism positively impacted the gross margin by approximately 115 basis points during the recent first quarter. Reported gross margin is also adversely impacted by the amount that the surcharge increases the Company's revenue. Adjusted for the lag effect in the Company's surcharge mechanism, the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of surcharge revenue, and the duty drawback reserve, gross profit as a percent of sales would have been an estimated 35.7 percent in the recent first quarter versus an estimated 33.6 percent a year ago. The underlying improvement was largely driven by a richer product mix and the Company's continued focus on cost. Record first quarter operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $85.7 million compared to $73.1 million a year ago. The record level of operating income was achieved primarily as a result of a richer product mix, pricing, a continued focus on cost, and the benefit from the lag effect in the Company's surcharge mechanism. These benefits were partially offset by a $4.9 million increase in selling and administrative expenses. The increase primarily related to higher variable compensation accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. and costs associated with driving the Company's future growth initiatives. Adjusted for the lag effect, the increase in surcharge revenue, and the duty drawback claims reserve, operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. as a percent of sales would have been an estimated 25.2 percent in the recent first quarter versus an estimated 24.1 percent a year ago. Net income of $57.7 million or $2.24 per diluted share in the first quarter compared with net income of $51.2 million or $1.94 per diluted share a year ago. In the recent first quarter, net income included an income tax provision of 33.3 percent of pre-tax income versus 30.1 percent in the same quarter a year ago. The tax provision in the first quarter a year ago was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. impacted by the reversal of certain deferred tax valuation allowances. Share Repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. Program During the quarter, Carpenter repurchased $157.7 million or 1,341,579 shares of its common stock on the open market. As of September 30, 2007, Carpenter had repurchased a total of $186.5 million or 1,576,651 shares of its common stock under the program established in September 2006. At September 30, 2007, the Company had 24,779,521 shares of common stock outstanding. Carpenter plans to repurchase, under certain conditions, a total of $250 million of its common stock as currently authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: by its Board of Directors. Segment Reporting segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four As announced on October 12, the Company realigned its reportable business segments in order to allow it to focus more effectively on customers, end-use markets and operational excellence goals. As a result, the Company now has three reportable business segments: Premiums Alloys Operations, Advanced Metals Operations, and Engineered Products Operations. Financial information on the business segments is provided in the attached tables. Conference Call Carpenter will host a conference call and webcast today, October 31, at 10:00 a.m., ET, to discuss financial results and operations for the first quarter. Please call 610-208-2800 for details of the conference call. Access to the call will also be made available at Carpenter's web site (www.cartech.com) and through CCBN CCBN Central Coast Bancorp CCBN Charles County Business Network (www.ccbn.com). A replay of the call will be made available at www.cartech.com or at www.ccbn.com. Carpenter produces and distributes specialty alloys, including stainless steels, titanium alloys, and superalloys, and various engineered products. Information about Carpenter can be found on the Internet at www.cartech.com. Except for historical information, all other information in this news release consists of forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. The most significant of these uncertainties are described in Carpenter's filings with the Securities and Exchange Commission including its annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended June 30, 2007 and the exhibits attached to those filings. They include but are not limited to: 1) the cyclical cyclical Of or relating to a variable, such as housing starts, car sales, or the price of a certain stock, that is subject to regular or irregular up-and-down movements. nature of the specialty materials business and certain end-use markets, including aerospace, industrial, automotive, consumer, medical, and energy including power generation, or other influences on Carpenter's business such as new competitors, the consolidation of customers, and suppliers or the transfer of manufacturing capacity from the United States to foreign countries; 2) the ability of Carpenter to achieve cost savings, productivity improvements or process changes; 3) the ability to recoup recoup To sell an asset at a price sufficient to recover the original outlay or to offset a previous loss. increases in the cost of energy and raw materials or other factors; 4) domestic and foreign excess manufacturing capacity for certain metals; 5) fluctuations in currency exchange rates; 6) the degree of success of government trade actions; 7) the valuation of the assets and liabilities in Carpenter's pension trusts and the accounting for pension plans; 8) possible labor disputes or work stoppages; 9) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products; 10) the ability to successfully acquire and integrate acquisitions; and 11) the ability of Carpenter to implement and manage material capital expansion projects in a timely and efficient manner. Any of these factors could have an adverse and/or fluctuating effect on Carpenter's results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Carpenter undertakes no obligation to update or revise any forward-looking statements. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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