Carpenter Technology Reports Third Quarter Financial Results.Business Editors WYOMISSING, Pa.--(BUSINESS WIRE)--April 19, 2001 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 that 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 for the third fiscal quarter ended March 31, 2001, rose 3.0 percent to $312 million, compared with $302 million for last year's third quarter. Net income was $11.6 million, compared with $11.9 million for the year-ago quarter. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the quarter were $.50, at the higher end Coordinates: For other places with the same name, see Billinge. Higher End or Billinge Higher End is a district of the Metropolitan Borough of Wigan, in Greater Manchester, England. of the Company's most recent earnings estimate of $.45 to $.50 per share, compared with last year's $.52 per share. The increase in sales for the quarter was led by Dynamet, with a 21 percent advance, and the Engineered Products Group (EPG (Electronic Program Guide) An online listing of TV or other programs. Periodically, EPGs are downloaded into set-top boxes so that viewers can preview offerings by time or category and set reminders. ), with an 11 percent increase on the strength of higher shipments to the aerospace and power generation markets. Sales for Specialty Alloys This is a list of alloys for which an article exists in Wikipedia (or is proposed but not yet written). They are grouped by base metal, in order of increasing atomic number. Within these headings they are in no particular order. Operations (SAO Sa´o n. 1. (Zool.) Any marine annelid of the genus Hyalinæcia, especially H. tubicola of Europe, which inhabits a transparent movable tube resembling a quill in color and texture. ) were similar to last year's quarter, with higher aerospace and power generation sales offset by lower 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. shipments. Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. W. Cardy, chairman and chief executive officer, said, "As we reported in March, the Company's results for the quarter ended March 31, 2001, continue to be impacted by reduced shipments of stainless steel products to the automotive market, as well as the effect of higher imports of stainless bar and rod products, higher energy costs, the general economic slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. in the U.S. and the associated lower operating levels in our SAO group." Overall, Carpenter's gross margin of 21.9 percent for the third quarter was slightly higher than last year's 21.6 percent. This reflects the benefit of an improved sales mix sales mix See product mix. and lower raw material costs, partially offset by the effect of lower stainless shipments, higher energy costs and lower production volume in SAO. Selling and administrative expenses as a percent of sales declined to 12.3 percent from 13.1 percent last year as a result of reduced staff levels and lower annual compensation expense. Short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. was reduced during the quarter by $15 million. However, interest expense increased by $1.2 million, or $.03 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with the prior year because of lower capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. resulting from reduced capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. . Other income was less favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. in this year's quarter primarily because of higher gains on the sales of warehouses last year. The effective tax rate of 42.1 percent was higher in this year's quarter in order to bring the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. effective rate in line with a revised forecasted rate for the year of 38 percent. Nine Months Financial Performance Net sales for the first nine months of the current fiscal year were $878 million or 10 percent above last year's level of $797 million. Net income was $36.0 million compared with $34.8 million last year. Earnings per diluted share were $1.55 compared with $1.51 per diluted share last year. For the nine-month period, the Company generated $15 million of free cash flow and reduced its debt to total capital ratio to 39.8 percent from 41.6 percent at the beginning of the fiscal year. Future Outlook SAO's sales backlogs for aerospace and power generation products continue at historically high levels, and manufacturing facilities for these products are operating at near full capacity. At the same time, the demand for stainless bar and rod for the automotive and fastener markets has declined sharply due to the U.S. economic slowdown and the effect of increased imports. In addition, higher energy prices and the effect of lower operating levels to reduce inventories will continue to negatively impact margins. Carpenter now believes that earnings per share for the fourth fiscal quarter will be in the range of $.55 to $.60 per diluted share and for the full fiscal year ending June June: see month. 30, 2001, will be in the range of $2.10 to $2.15 per diluted share. Dennis Dennis is a male first name derived from the Greco-Roman name Dionysius meaning "servant of Dionysus", the Thracian god of wine, which is ultimately derived from the Greek Dios (Διος, "of Zeus") combined with Nysos or Nysa (Νυσα), where the M. Draeger, president and chief operating officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , said, "We are managing a shift in our complex product mix in this challenging economic environment. While optimum operating efficiencies are hampered by stainless volume declines, Carpenter remains focused on cash generation through cost control and inventory reduction. Our improved year-over-year operating performance and cash flow reflect the success we have had in achieving those objectives. Accordingly, we continue to expect to generate in excess of $50 million of free cash flow this fiscal year. "We continue to press for import duties on stainless steel bar being illegally dumped dump v. dumped, dump·ing, dumps v.tr. 1. To release or throw down in a large mass. 2. a. by six countries into the U.S. market. Preliminary duties are expected to be set by the U.S. Department of Commerce in July July: see month. , at which time bonds must be posted by importers." Future Accounting Changes and Earnings Impacts 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. Trial has commenced in Carpenter Technology Corporation v. City of Bridgeport Bridgeport, city (1990 pop. 141,686), Fairfield co., SW Conn., on Long Island Sound; inc. 1836. Long a chief industrial city in Connecticut, it makes electrical appliances, transportation equipment, clothing, ammunition, metal products, wiring devices, machinery, , Bridgeport Port Authority, et.al, concerning the $2.5 million offered Carpenter as a result of the Port Authority's taking of the Company's former steel plant site in Bridgeport, Connecticut “Bridgeport” redirects here. For other uses, see Bridgeport (disambiguation). Bridgeport is the most populous city in the U.S. state of Connecticut, and the fifth-largest city in New England. and the Port Authority's pursuit of additional site remediation costs. In the event a settlement is reached, it is possible that the cash received could be considerably less than the $14.5 million carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. , resulting in a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. to earnings. SAB SAB Spontaneous abortion. See Abortion. 101 Adoption Beginning in the fourth fiscal quarter ending June 30, 2001, Carpenter is required to adopt a new Securities and Exchange Commission Staff Accounting Bulletin (SAB) 101 regarding revenue recognition. This will require a retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a , one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. non-cash charge to earnings, estimated to be $.62 per diluted share, as the cumulative effect of this change in accounting on Carpenter's results for the first fiscal quarter ended September September: see month. 30, 2000. Each of the first three quarters of fiscal year 2001 ending June 30, 2001, will be re-stated in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with SAB 101. On April 1, 2001, Carpenter changed its terms and conditions of sale CONDITIONS OF SALE, contracts. The terms upon which the vendor of property by auction pro poses to sell it; the instrument containing these terms, when reduced to writing or printing, is also called the conditions of sale. 2. so that revenue can be recognized when product is shipped, in accordance with its historical practice. This will have the effect of increasing fourth quarter sales and earnings beyond a normal quarter's level. The net effect of the change in terms and conditions of sales in the fourth quarter and the re-statement of the first three quarters under SAB 101 on full-year fiscal year 2001 earnings per share is estimated to be minimal. Fiscal 2002 Pension Credit Under present accounting rules, Carpenter's after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. pension credit of $1.25 per diluted share for fiscal year 2001 and after-tax post-retirement medical cost of $.14 per diluted share for fiscal year 2001 are largely non-cash effects for the fiscal year, which are based on valuations of the preceding year. These now must be re-calculated for fiscal year 2002, based on pension trust asset values and other actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin assumptions as of June 30, 2001. Given the decline in the equity markets from June 30, 2000, to March 31, 2001, it is likely this pension income will decline and the post-retirement medical cost will increase for fiscal year 2002. To illustrate the impact that the current market volatility could have on the Company's earnings in the next fiscal year, pro-forma estimates of a range of impact using interim market values have been made. For example, if the calculation of these non-cash items was made using pension asset values at December December: see month. 31, 2000, and March 31, 2001, and no other actuarial changes were made, the earnings effect of the pension income would decline to $.67 and $.37 per share, respectively, and the postretirement medical cost would increase to $.25 and $.31 per share, respectively. The actual calculation and related earnings impact of these non-cash items for fiscal 2002 cannot be made until the pension assets are valued at June 30, 2001, and all actuarial assumptions are reevaluated. Goodwill Accounting The Financial Accounting Standards Board Financial Accounting Standards Board (FASB) Board composed of independent members who create and interpret Generally Accepted Accounting Principles (GAAP). has issued an exposure draft on accounting for goodwill and intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . The current draft requires that goodwill and certain intangible assets no longer be amortized. Should this exposure draft be finalized See finalization. in its present form, the elimination of amortization would increase Carpenter's earnings by an estimated $.30 per share on a non-cash basis annually. The effective date of this proposed standard has not yet been set. Carpenter plans to broadcast a live conference call and webcast on Thursday, April 19, at 10 a.m., EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT , to discuss its results of operations for the quarter ended March 31 and current business conditions. The live webcast is available at www.vcall.com. Please call 610/208-2024 for the conference call telephone number and passcode. A replay of the conference call will be available at www.vcall.com and by calling 800/308-3945 (international call 402/220-3829). The passcode for the replay is "0331." The telephone replay will be available until 8 p.m., EDT, Friday, May 4. Carpenter Technology (NYSE:CRS) produces and distributes specialty metals, including stainless steels, 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 , superalloys and various engineered products. Information about Carpenter can be found on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.cartech.com, www.dynamet.com and www.carpenterepg.com, with selected products sold online at www.carpenterdirect.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 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 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. and Form 10-Q Form 10-Q See 10-Q. reports and exhibits to those reports, and 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, but not limited to, aerospace, automotive and consumer durables Consumer durables Consumer products that are expected to last three years or more, such as an automobile or a home appliance. consumer durables See durable goods. , all of which are subject to changes in general economic and financial market conditions; 2) the ability of Carpenter to recoup recoup To sell an asset at a price sufficient to recover the original outlay or to offset a previous loss. increased costs of fuel, such as natural gas, and raw materials, such as nickel nickel, metallic chemical element; symbol Ni; at. no. 28; at. wt. 58.69; m.p. about 1,453°C;; b.p. about 2,732°C;; sp. gr. 8.902 at 25°C;; valence 0, +1, +2, +3, or +4. , through increased prices and surcharges; 3) worldwide excess capacity for certain alloys that Carpenter produces and fluctuations in currency exchange rates, resulting in increased competition and downward pricing pressure on Carpenter products; and 4) fluctuations in stock markets which could impact the valuation of the assets in Carpenter's pension trusts and the accounting for pension assets. Carpenter undertakes no obligation to update or revise any forward-looking statements.
CONSOLIDATED STATEMENT OF INCOME
(in Millions, Except per Share Data)
Three Months Ended Nine Months Ended
March 31 March 31
------------------ -------------------
2001 2000 2001 2000
-------- -------- -------- --------
NET SALES $ 311.8 $ 301.5 $ 878.2 $ 797.2
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales 243.5 236.5 678.2 619.5
Selling and
administrative
expenses 38.4 39.4 114.7 109.2
Interest expense 9.9 8.7 31.2 23.7
Other income, net -- (2.3) (3.0) (8.0)
-------- -------- -------- --------
291.8 282.3 821.1 744.4
-------- -------- -------- --------
INCOME BEFORE
INCOME TAXES 20.0 19.2 57.1 52.8
Income tax expense 8.4 7.3 21.1 18.0
-------- -------- -------- --------
NET INCOME $ 11.6 $ 11.9 $ 36.0 $ 34.8
======== ======== ======== ========
EARNINGS PER COMMON
SHARE:
Basic $ .51 $ .53 $ 1.58 $ 1.54
======== ======== ======== ========
Diluted $ .50 $ .52 $ 1.55 $ 1.51
======== ======== ======== ========
Weighted average
common shares
outstanding
(diluted) 23.0 22.8 23.0 22.8
======== ======== ======== ========
Cash dividends per
common share $ .33 $ .33 $ .99 $ .99
======== ======== ======== ========
Certain amounts for the three and nine months ended March 31,
2000, have been reclassified due to the adoption of a new accounting
standard relating to shipping and handling revenues and costs,
effective July 1, 2000.
PRELIMINARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in Millions)
Nine Months Ended
March 31
-------------------
2001 2000
------- -------
OPERATIONS
Net income $ 36.0 $ 34.8
Adjustments to reconcile net
income to net cash provided
from operations:
Depreciation 41.6 38.5
Amortization of intangible
assets 12.3 11.2
Deferred income taxes 17.2 11.8
Pension and postretirement
costs, net (31.1) (28.7)
Net gain on asset disposals (2.4) (2.1)
Changes in working capital
and other, net of
acquisitions:
Receivables 2.1 (28.1)
Inventories .1 (23.4)
Accounts payable (16.0) 35.9
Accrued current liabilities (2.1) (4.7)
Other, net 11.5 (9.1)
----- -----
Net cash provided from
operations 69.2 36.1
----- -----
INVESTING ACTIVITIES
Purchases of plant,
equipment and software (39.6) (75.1)
Proceeds from disposals of
plant and equipment 8.7 7.8
Acquisitions of businesses,
net of cash received -- (6.7)
----- -----
Net cash used for investing
activities (30.9) (74.0)
----- -----
NET CASH PROVIDED (USED)
BEFORE FINANCING
ACTIVITIES 38.3 (37.9)
----- -----
FINANCING ACTIVITIES
Net change in short-term
debt (10.9) 71.0
Payments on long-term debt (10.5) (15.4)
Proceeds from issuance of
long-term debt -- 7.6
Dividends paid (23.0) (22.7)
Proceeds from issuance of
common stock 2.5 .3
----- -----
Net cash provided from (used
for) financing activities (41.9) 40.8
----- -----
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (3.6) 2.9
Cash and cash equivalents at
beginning of period 9.5 5.5
----- -----
Cash and cash equivalents at
end of period $ 5.9 $ 8.4
===== =====
For comparative purposes, certain amounts for the nine months
ended March 31, 2000, have been reclassified.
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in Millions)
March 31 June 30
2001 2000
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 5.9 $ 9.5
Accounts receivable, net 184.9 187.0
Inventories 270.1 270.2
Other current assets 18.4 16.3
---------- ----------
Total current assets 479.3 483.0
Property, plant and equipment, net 770.7 789.9
Prepaid pension cost 221.1 185.2
Goodwill, net 167.5 172.3
Other assets 106.5 115.5
---------- ----------
Total assets $ 1,745.1 $ 1,745.9
========== ==========
LIABILITIES
Current liabilities:
Short-term debt $ 209.0 $ 219.9
Accounts payable 81.3 97.3
Accrued liabilities 63.7 61.2
Deferred income taxes 8.4 5.6
Current portion of long-term
debt 15.2 10.4
---------- ----------
Total current liabilities 377.6 394.4
Long-term debt, net of current
portion 337.0 352.3
Accrued postretirement benefits 156.1 152.3
Deferred income taxes 172.4 158.0
Other liabilities 35.0 35.3
SHAREHOLDERS' EQUITY
Preferred stock 25.6 26.0
Common stock 115.8 115.4
Capital in excess of par value 194.2 192.2
Reinvested earnings 401.0 388.0
Common stock in treasury, at
cost (38.4) (38.4)
Deferred compensation (12.6) (14.1)
Accumulated other comprehensive
income (18.6) (15.5)
---------- ----------
Total shareholders' equity 667.0 653.6
---------- ----------
Total liabilities and
shareholders' equity $ 1,745.1 $ 1,745.9
========== ==========
SEGMENT FINANCIAL DATA
(in Millions)
Three Months Ended Nine Months Ended
March 31 March 31
------------------ ------------------
2001 2000 2001 2000
-------- -------- -------- --------
Net sales:
Specialty Metals $ 276.1 $ 270.2 $ 771.8 $ 706.3
Engineered
Products 36.0 32.3 107.7 93.2
Intersegment (.3) (1.0) (1.3) (2.3)
-------- -------- -------- --------
Consolidated net
sales $ 311.8 $ 301.5 $ 878.2 $ 797.2
======== ======== ======== ========
Income before income
taxes:
Specialty Metals $ 22.1 $ 23.1 $ 64.0 $ 55.9
Engineered
Products 2.7 1.4 8.6 3.8
Pension Credit 12.0 11.5 36.0 34.3
Corporate Costs (7.3) (8.7) (22.4) (19.4)
-------- -------- -------- --------
Consolidated
EBIT 29.5 27.3 86.2 74.6
Interest expense (9.9) (8.7) (31.2) (23.7)
Interest income .4 .6 2.1 1.9
-------- -------- -------- --------
Consolidated
income before income
taxes $ 20.0 $ 19.2 $ 57.1 $ 52.8
======== ======== ======== ========
The sales amounts for the three and nine months ended March 31,
2000, have been reclassified due to the adoption of a new accounting
standard relating to shipping and handling revenues and costs,
effective July 1, 2000.
Carpenter is organized on a product basis and managed in three
segments: Specialty Alloys Operations (SAO), Titanium Alloys (Dynamet)
and Engineered Products (EPG). For segment reporting purposes, the
Specialty Alloys and Titanium Alloys segments are aggregated into one
reportable segment called Specialty Metals because of the similarities
in products, processes, customers and distribution methods.
SUPPLEMENTAL INFORMATION
(Dollars in Millions, Except per Share Data)
Nine Months Year
Ended Ended
March 31 June 30
2001 2000
----------- -----------
Financial information:
Cash flow from operations $ 69.2 $ 62.4
Working capital $ 101.7 $ 88.6
Total debt $ 561.2 $ 582.6
EBITDA(1) $ 142.2 $ 181.7
Financial ratios:
Cash flow from operations per
diluted share $ 3.01 $ 2.74
Shareholders' equity per share $ 30.28 $ 29.76
Return on sales 4.1% 4.8%
EBITDA(1) as a percent of sales 16.2% 16.4%
Return on average capital
employed(2)(3) 3.9% 5.7%
Return on average equity(3) 8.3% 8.3%
Debt to capital employed(2) 39.8% 41.6%
Accounts receivable days sales
outstanding 51 52
Inventory turns (before LIFO)(3) 2.3x 2.3x
Common dividends as a percent of
net income (basic earnings per
share) 62.7% 56.2%
Common dividends as a percent of
cash flow from operations 32.9% 48.2%
Number of employees 5,870 5,910
(1) Earnings before interest expense, taxes, depreciation and
amortization.
(2) Capital employed is defined as deferred taxes, total debt and
shareholders' equity.
(3) Twelve-month moving average.
Certain amounts for the year ended June 30, 2000, have been
reclassified due to the adoption of a new accounting standard relating
to shipping and handling revenues and costs, effective July 1, 2000.
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