UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission File Number 1-5828
CARPENTER TECHNOLOGY CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 23-0458500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
101 West Bern Street, Reading, Pennsylvania 19612-4662
(Address of principal executive offices) (Zip Code)
610-208-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of September 30, 1995.
Common stock, $5 par value 16,441,040
Class Number of shares outstanding
The Exhibit Index appears on page E-1.
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
FORM 10-Q
INDEX
Page
----
Part I FINANCIAL INFORMATION
Consolidated Balance Sheet September 30, 1995 (Unaudited)
and June 30, 1995........................................... 3 & 4
Consolidated Statement of Income (Unaudited) for the
Three Months Ended September 30, 1995 and 1994.............. 5
Consolidated Statement of Cash Flows (Unaudited) for the
Three Months Ended September 30, 1995 and 1994.............. 6
Notes to Consolidated Financial Statements.................... 7 & 8
Management's Discussion and Analysis of Results
of Operations............................................... 9
Part II OTHER INFORMATION......................................10 & 11
Exhibit Index................................................... E-1
PART I
- ------
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Page 1 of 2)
September 30, 1995 and June 30, 1995
(in thousands, except share data)
September 30 June 30
1995 1995
------------ -------
(Unaudited)
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 10,614 $ 20,120
Accounts receivable, net 105,765 118,848
Inventories 114,023 91,383
Deferred income taxes 1,163 1,827
Other current assets 9,427 8,251
-------- --------
Total current assets 240,992 240,429
Property, plant and equipment,
at cost 768,986 763,755
Less accumulated depreciation
and amortization 367,494 360,175
-------- --------
401,492 403,580
Prepaid pension cost 83,749 81,182
Investment in joint venture 46,967 49,085
Goodwill, net 15,483 15,701
Other assets 41,532 41,798
-------- --------
Total assets $830,215 $831,775
======== ========
See accompanying notes to consolidated financial statements.
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Page 2 of 2)
September 30, 1995 and June 30, 1995
(in thousands, except share data)
September 30 June 30
LIABILITIES 1995 1995
- ----------- ------------ -------
(Unaudited)
Current liabilities:
Short-term debt $ 13,647 $ 20,145
Accounts payable 54,720 51,162
Accrued compensation 12,406 21,457
Accrued income taxes 10,316 5,442
Other accrued liabilities 24,608 28,684
Current portion of long-term debt 7,182 7,286
-------- --------
Total current liabilities 122,879 134,176
Long-term debt, net of current portion 194,727 194,762
Accrued postretirement benefits 141,217 140,855
Deferred income taxes 79,302 78,415
Other liabilities and deferred income 20,316 19,622
SHAREHOLDERS' EQUITY
- --------------------
Preferred stock, $5 par value -
authorized 2,000,000 shares; issued
456.1 shares at September 30, 1995
and 456.7 shares at June 30, 1995 28,781 28,825
Common stock, $5 par value -
authorized 50,000,000 shares; issued
19,487,320 shares at September 30,
1995 and 19,337,964 shares at June 30,
1995 97,437 96,690
Capital in excess of par value 9,387 6,801
Reinvested earnings 237,235 231,114
Common stock in treasury, at cost -
3,046,280 shares at September 30, 1995
and 3,046,208 shares at June 30, 1995 (67,004) (67,002)
Deferred compensation (24,833) (25,461)
Foreign currency translation
adjustments (9,229) (7,022)
-------- --------
Total shareholders' equity 271,774 263,945
-------- --------
Total liabilities and
shareholders' equity $830,215 $831,775
======== ========
See accompanying notes to consolidated financial statements.
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
for the three months ended September 30, 1995 and 1994
(in thousands, except per share data)
1995 1994
---- ----
Net sales $184,469 $156,084
-------- --------
Costs and expenses:
Cost of sales 136,205 121,568
Selling & administrative
expenses 24,792 23,954
Interest expense 4,582 2,698
Equity in loss of
joint venture 225 240
Other income, net (203) (511)
-------- --------
165,601 147,949
-------- --------
Income before income taxes 18,868 8,135
Income taxes 6,962 3,203
-------- --------
Net income $ 11,906 $ 4,932
======== ========
Earnings per common share:
Primary $ .70 $ .28
======== ========
Fully Diluted $ .67 $ .27
======== ========
Weighted average common
shares outstanding 16,538 16,402
======== ========
Dividends per common
share $ .33 $ .30
======== ========
See accompanying notes to consolidated financial statements.
CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
for the three months ended September 30, 1995 and 1994
(in thousands)
1995 1994
OPERATIONS ---- ----
Net income $ 11,906 $ 4,932
Adjustments to reconcile net income
to net cash provided from operations:
Depreciation and amortization 8,482 7,737
Deferred income taxes 1,619 302
Prepaid pension cost (2,567) (1,982)
Equity in loss of joint venture 225 240
Changes in working capital and other:
Receivables 13,027 11,694
Inventories (22,807) (4,818)
Accounts payable 3,569 5,181
Accrued current liabilities (8,229) (6,770)
Other, net 547 (4,045)
-------- --------
Net cash provided from operations 5,772 12,471
-------- --------
INVESTING ACTIVITIES
Purchases of plant and equipment (6,498) (11,012)
Disposals of plant and equipment 387 47
Investment in joint venture - (1,020)
Acquisition of businesses,
net of cash received - (13,005)
-------- --------
Net cash used for investing activities (6,111) (24,990)
-------- --------
FINANCING ACTIVITIES
Provided by (payments on) short-term debt (6,507) 19,850
Proceeds from issuance of long-term debt - 40,000
Payments on long-term debt (139) (38,309)
Dividends paid (5,785) (5,274)
Proceeds from issuance of common stock 3,287 604
-------- --------
Net cash provided from (used for)
financing activities (9,144) 16,871
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (23) (4)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,506) 4,348
Cash and cash equivalents at
beginning of period 20,120 5,404
-------- --------
Cash and cash equivalents at
end of period $ 10,614 $ 9,752
======== ========
Supplemental Data:
Interest payments, net of amounts capitalized $ 6,829 $ 4,411
Income tax payments, net of refunds $ 457 $ (411)
See accompanying notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. Basis of Presentation
---------------------
The accompanying unaudited consolidated financial
statements have been prepared in accordance with the
instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only
of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for
the three months ended September 30, 1995 are not
necessarily indicative of the results that may be expected
for the year ending June 30, 1996. For further information,
refer to the consolidated financial statements and footnotes
included in the Company's 1995 Annual Report on Form 10-K.
The June 30, 1995 condensed balance sheet data was
derived from audited financial statements, but does not
include all disclosures required by generally accepted
accounting principles.
2. Earnings Per Common Share
-------------------------
Primary earnings per common share are computed by
dividing net income (less preferred dividends net of tax
benefits) by the weighted average number of common shares
and common share equivalents outstanding during the period.
On a fully-diluted basis, both net earnings and shares
outstanding are adjusted to assume the conversion of the
convertible preferred stock.
3. Inventories
-----------
September 30 June 30
1995 1995
---- ----
(in thousands)
Finished $ 96,299 $ 92,930
Work in process 131,303 110,468
Raw materials and supplies 40,038 41,602
-------- --------
Total at current cost 267,640 245,000
Excess of current cost
over LIFO values 153,617 153,617
-------- --------
Inventory per Balance Sheet $114,023 $ 91,383
======== ========
The current cost of LIFO-valued inventories was $241.8
million at September 30, 1995 and $219.7 million at June 30,
1995.
4. Two-For-One Common Stock Split
------------------------------
On August 10, 1995, the Board of Directors of the
Company declared a two-for-one common stock split which was
distributed on September 15, 1995, to shareholders of record
on September 1, 1995. The par value of common shares
remained at $5 per share. All share and per share data for
the prior year have been restated for the effect of this
two-for-one common stock split. The Board also declared a
ten percent increase in the common stock dividend, effective
with the quarterly dividend to shareholders of record on
August 22, 1995.
5. Subsequent Events
-----------------
On October 26, 1995, the Company purchased all of the
stock of Parmatech Corporation in exchange for $4.5 million
of Company stock and assumed $2.7 million of Parmatech's debt.
An additional $1.5 million of Company stock will be paid if
certain future performance is achieved. Parmatech manufactures
complex, net or near-net shape parts from a powder metal slurry
using an injection molding process. Parmatech had sales of
$6.5 million in calendar year 1994.
On November 9, 1995, the Company acquired Green Bay Supply
Co., Inc. for approximately $11 million. Green Bay is a master
distributor that purchases specialty metal products globally and
resells them to independent distributors in the United States.
Green Bay was profitable on sales of $16 million in calendar year
1994.
MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS
-----------------------------------------------------------
Net income for the quarter was $11.9 million or $.70 per share versus
$4.9 million or $.28 per share in the same quarter last year. The
increase in earnings was primarily a result of improved sales volume
and profit margins in the Steel Division.
Sales were $184.5 million, an 18 percent increase over the $156.1
million in the same period last year. The increase in sales was primarily
the result of selling price increases for steel products to recover higher
raw material and other costs and to restore profit margins which had eroded
in prior years. In addition, Steel Division unit volume shipments were up
by 6 percent compared to the year earlier period.
Cost of sales as a percent of net sales decreased to 74 percent in the
current year's first fiscal quarter from 78 percent in the last year's first
quarter. This improvement was primarily the result of the selling price
increases and a higher plant utilization rate in the Steel Division.
Interest costs increased by $1.9 million versus the same period last
year. The increase was the result of higher debt levels during the
September 1995 quarter and a lower level of capitalized interest. The
September 1994 quarter included $1.0 million of capitalized interest
related to the investment in Walsin-CarTech Specialty Steel Corporation, a
joint venture with Walsin Lihwa Corporation, during its pre-operating period
which ended in December 1994.
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings.
-------------------------
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
the Company or any of its subsidiaries is a party or to which any
of their properties is subject. There are no material
proceedings to which any Director, Officer, or affiliate of the
Company, or any owner of more than five percent of any class of
voting securities of the Company, or any associate of any
Director, Officer, affiliate, or security holder of the Company,
is a party adverse to the Company or has a material interest
adverse to the interest of the Company or its subsidiaries.
There is no administrative or judicial proceeding arising under
any Federal, State or local provisions regulating the discharge
of materials into the environment or primarily for the purpose of
protecting the environment that (1) is material to the business
or financial condition of the Company, (2) involves a claim for
damages, potential sanctions or capital expenditures exceeding
ten percent of the current assets of the Company or (3) includes
a governmental authority as a party and involves potential
monetary sanctions in excess of $100,000.
Item 5. Other Information.
-------------------------
On October 26, 1995, the Company purchased all of the stock
of Parmatech Corporation in exchange for $4.5 million of Company
stock and assumed $2.7 million of Parmatech's debt. An additional
$1.5 million of Company stock will be paid if certain future
performance is achieved. Parmatech manufactures complex, net or
near-net shape parts from a powder metal slurry using an
injection molding process. Parmatech had sales of $6.5 million
in calendar year 1994.
On November 9, 1995, the Company acquired Green Bay Supply Co.,
Inc. for approximately $11 million. Green Bay is a master distributor
that purchases specialty metal products globally and resells them to
independent distributors in the United States. Green Bay was profit-
able on sales of $16 million in calendar year 1994.
Item 6. Exhibits and Reports on Form 8-K.
----------------------------------------
a. The following documents are filed as exhibits:
11. Statement regarding computation of per share
earnings.
27. Financial Data Schedule.
99a. Press release dated October 26, 1995.
99b. Press release dated November 10, 1995.
b. The Company filed no Reports on Form 8-K for
events occurring during the quarter of the fiscal
year covered by this report.
Items 2, 3 and 4 are omitted as the answer is negative or the
items are not applicable.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CARPENTER TECHNOLOGY CORPORATION
--------------------------------
(Registrant)
Date: November 13, 1995 s/ G. Walton Cottrell
------------------- --------------------------------
G. Walton Cottrell
Sr. Vice President - Finance
and Chief Financial Officer