Exhibit 99
Carpenter Technology Reports Third Quarter Results
WYOMISSING, Pa.--(BUSINESS WIRE)--April 23, 2004--Carpenter
Technology Corporation (NYSE:CRS) today reported strong sales growth
worldwide, continued improvement in operating performance and
significant free cash flow generation for the third fiscal quarter
ended March 31, 2004.
Results improved despite steep increases in the cost of raw
materials and energy, the engineered materials company said.
Net sales for the recent third quarter were $280.4 million
compared to $234.6 million for the same period a year ago.
Net income in the third quarter was $9.5 million or $.39 per
diluted share, compared to $1.7 million or $.06 per diluted share a
year ago. This year's third quarter included $4.4 million or $.12 per
diluted share of non-cash pension and retiree medical expenses. The
quarter a year ago benefited from non-cash net pension income of $0.8
million or $.02 per diluted share.
Free cash flow, defined as net cash provided before financing
activities but after dividends and excluding the effects of marketable
securities, was $47.4 million in the third quarter versus $22.6
million a year ago.
Carpenter's total debt, net of cash and marketable securities and
including amounts outstanding under its receivables purchase facility,
was $265.7 million at the end of the recent third quarter. This net
debt level is $55.6 million lower than at the end of the previous
quarter and $113.7 million lower than a year ago.
Year-to-Date Results
Net sales for the first nine months of the current fiscal year
were $719.9 million, compared with last year's level of $658.7
million. For the nine-month period a year ago, sales included $12.9
million from companies that were subsequently divested.
Net income for the first nine months of the current fiscal year
was $17.5 million or $.72 per diluted share, compared to a net loss of
$16.4 million or $.79 per diluted share for the same period a year
ago. For the nine month period, non-cash pension and retiree medical
expenses were $13.2 million or $.36 per diluted share. For the same
period a year ago, Carpenter had non-cash net pension income of $2.6
million or $.07 per diluted share.
Through the first nine months of the current fiscal year,
Carpenter had other income of $8.2 million. Other income primarily
reflected the receipt of funds under the "Continued Dumping and
Subsidy Offset Act of 2000" and payment from a litigation matter. In
the same period a year ago, the company had other income of $4.4
million primarily as a result of the receipt of funds under this
program.
Earlier this fiscal year Carpenter had a special charge of $2.3
million or $.06 per diluted share associated with the early repayment
of debt. For the nine-month period a year ago, the company had special
charges of $27.0 million or $.73 per diluted share, associated with
cost reduction initiatives.
For the first nine months of this fiscal year, the company
generated $79.0 million of free cash flow versus $48.5 million for the
same period a year ago.
Third Quarter - Operating Summary
"During the quarter, we experienced a strong increase in sales due
to improved demand across most markets and the effect of recent
pricing actions, including the pass through of escalating raw material
and energy costs. In addition, our sales benefited from a weaker U.S.
dollar," said Robert J. Torcolini, chairman, president and chief
executive officer.
Third quarter sales improved for virtually all end-use markets
compared to a year ago. Automotive market sales increased 34 percent;
medical market sales, 34 percent; industrial market sales, 21 percent;
aerospace and power generation market sales, 12 percent; and consumer
market sales, 15 percent in the quarter from a year ago.
Geographically, sales outside the United States increased 36
percent from a year ago and represented 29 percent of third quarter
sales.
Carpenter's gross profit in the third quarter improved to $48.7
million or 17.4 percent of sales from $35.9 million or 15.3 percent of
sales a year ago. The gross profit in the recent third quarter
included non-cash pension and retiree medical expenses of $3.1 million
or 1.1 percent of sales. In the third quarter a year ago, the gross
profit reflected non-cash pension income of $1.0 million or 0.4
percent of sales.
The improvement in gross profit reflects lower costs realized
through lean and variation reduction initiatives and a better product
mix. This improvement occurred despite steep increases in raw
materials and energy costs.
As a result of the improvement in gross profit, Carpenter's third
quarter income before other income and expense (net sales less cost of
sales and selling and administrative expenses) increased to $18.9
million or 6.7 percent of sales from $7.8 million or 3.3 percent of
sales a year ago. The improvement more than offset the change in the
non-cash pension and retiree medical expense to $4.4 million from
non-cash income of $0.8 million in the third quarter a year ago.
Outlook
"We expect that Carpenter's results will increasingly reflect our
efforts to align product pricing with the value delivered and to focus
on those products in which the company can most profitably compete
globally," Torcolini said. "We are encouraged by the cost reductions
and operating improvements made during the past several quarters and
believe that there is substantial opportunity for further improvement
through a continuous focus on lean and variation reduction
initiatives."
Carpenter said that it now expects its free cash flow to exceed
$100 million for the current fiscal year before a potential $25
million contribution to fund future post-retirement medical expenses.
Segment Results - Third Quarter
Specialty Metals
Net sales for the quarter ended March 31, 2004 for the Specialty
Metals segment, which includes the Specialty Alloys Operations (SAO),
Dynamet, and Carpenter Powder Products (CPP) business units, were
$253.2 million or $48.9 million higher than in the same quarter a year
ago.
SAO sales increased 25 percent from the same quarter a year ago
due to a better product mix and pricing actions, including the pass
through of escalating raw material and energy costs. In addition, SAO
volume increased 8 percent.
Dynamet's sales increased 13 percent in the third quarter versus a
year ago, largely related to stronger demand, share gains in the
medical market and pricing actions. CPP's sales were 11 percent higher
than a year ago due also to increased volume and pricing actions.
Income for the Specialty Metals segment was $24.0 million,
compared to $8.1 million a year ago. The increase in income reflects
lower costs through realized operating efficiencies, including better
yields and improved productivity, and reduced selling and
administrative expenses.
Engineered Products Segment
Net sales for this segment, which includes sales of fabricated
metal and ceramic components, were $28.0 million, compared to $31.1
million a year ago. Last year's third quarter included $1.4 million in
sales from businesses that were subsequently divested. Sales in this
segment reflected increased demand by the medical, automotive and
industrial markets, which was offset by lower sales to the nuclear
power market.
Income for the Engineered Products segment increased to $4.2
million in the third quarter from $2.8 million a year ago. The
increase primarily reflected improved operating efficiencies and the
benefit of lean and variation reduction initiatives.
Segment Results - Year-to-Date
Specialty Metals
Net sales for the first nine months of fiscal 2004 for the
Specialty Metals segment were $640.8 million, compared to $569.2
million for the same period a year ago.
SAO sales increased 13 percent from a year ago, due to stronger
demand from key markets. SAO volume was 3 percent lower than last
year, due to an intentional reduction in the sale of marginally
profitable products.
Dynamet's sales increased 17 percent during the first nine months
versus the same period a year ago. The increase is due primarily to
higher volumes sold to the medical market and pricing actions. CPP's
sales were 9 percent higher than a year ago due also to increased
volume and pricing actions.
Income for the Specialty Metals segment was $50.3 million for the
first nine months in fiscal 2004 or $34.5 million higher than the same
period a year ago. The increase in income reflects lower costs through
realized operating efficiencies, including better yields and improved
productivity, and reduced selling and administrative expenses.
Engineered Products Segment
Net sales for this segment year to date in fiscal 2004 were $81.0
million, compared to $91.2 million for the same period a year ago.
This group of companies benefited from stronger demand from the
medical, automotive and aerospace markets. The period a year ago
included $12.9 million from businesses that were subsequently
divested.
Income for the Engineered Products segment for the first nine
months of fiscal 2004 was $11.2 million versus $9.4 million for the
same period a year ago. Income in the period a year ago included $0.8
million from businesses that were subsequently divested. The increase
in income was primarily associated with cost savings from lean and
variation reduction initiatives.
Net Pension Credit
In the third quarter of fiscal 2004, Carpenter had non-cash
pension and retiree medical expenses of $4.4 million or $.12 per
diluted share. This compares to non-cash net pension income of $0.8
million or $.02 per diluted share for the same quarter a year ago. The
net pension amount is actuarially determined as of each June 30 and
typically held constant throughout the fiscal year.
For the nine months of the current fiscal year, non-cash pension
and retiree medical expenses were $13.2 million or $.36 per diluted
share. For the same period a year ago, Carpenter had non-cash net
pension income of $2.6 million or $.07 per diluted share.
The pension expense is a non-cash item, as the company's defined
benefit pension plan remains well funded and, as in prior years, the
company is not required to make a cash contribution to the plan.
Special Charges
Earlier this fiscal year, Carpenter incurred a special charge of
$2.3 million or $.06 per diluted share. The charge was incurred as a
result of a $20 million open market purchase of medium-term notes
previously issued by the company and the unwinding of interest rate
swaps associated with the partial repayment of foreign currency loans.
In the first nine months a year ago, Carpenter incurred special
charges of $27.0 million or $.73 per diluted share. The charges were
primarily related to the company's cost reduction initiatives.
Other Items
In the third quarter of fiscal 2004, selling and administrative
expenses of $29.8 million were 10.6 percent of sales versus $28.1
million or 12.0 percent of sales in the quarter a year ago. Selling
and administrative expenses included non-cash pension and retiree
medical expenses of $1.3 million in the current third quarter versus
$0.3 million in the quarter a year ago. The increase in selling and
administrative expenses reflected higher employee variable
compensation costs and the increased non-cash pension and retiree
medical expenses from a year ago, partially offset by lower
depreciation and reduced professional fees.
For the nine months of fiscal 2004, selling and administrative
expenses of $87.8 million were 12.2 percent of sales compared to $90.3
million or 13.7 percent of sales in the same period a year ago. For
the nine months of the current fiscal year, non-cash pension and
retiree medical expenses included in selling and administrative
expenses were $3.9 million versus $0.8 million a year ago.
The favorable impacts of lower depreciation and professional fees
were the primary reasons for the decline.
Interest expense for the quarter was $5.6 million as compared to
$7.7 million a year ago, due to reduced debt levels and lower interest
rates. For the nine months of fiscal 2004, interest expense was $18.0
million or $5.5 million lower than the same period a year ago.
Other income for the quarter was $0.5 million, compared to $1.1
million a year ago. Last year's third quarter included $0.9 million
from a gain on the sale of a business. Other income for the nine
months of fiscal 2004 was $8.2 million versus $4.4 million for the
same period a year ago.
Cash Flow and Liquidity
Carpenter has maintained the ability to provide cash to meet its
needs through cash flow from operations, management of working capital
and the flexibility to use outside sources of financing to supplement
internally generated funds.
Free cash flow for the third quarter was $47.4 million, compared
to $22.6 million a year ago. For the nine-month period ended March 31,
2004, free cash flow was $79.0 million, compared to $48.5 million for
the same period a year ago.
Carpenter believes that its current financial resources, both from
internal and external sources, will be more than adequate to meet its
foreseeable needs. At the end of the third quarter, Carpenter had
approximately $170 million available under its credit facilities.
Conference Call
Carpenter will host a conference call and webcast on Friday, April
23, at 10 a.m., Eastern Time, to discuss the results of operations for
the third quarter.
Please call 610-208-2800 for details of the conference call. The
call will also be made available through www.vcall.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, 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 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 filings with the Securities and Exchange Commission
including its annual report on Form 10-K for the year ended June 30,
2003, its Form 10-Q for the second quarter and its most recent
registration statement on Form S-4, filed on September 16, 2003, as
amended on October 3, 2003. They include but are not limited to: 1)
the cyclical nature of the specialty materials business and certain
end-use markets, including aerospace, power generation, automotive,
industrial and consumer, all of which are subject to changes in
general economic and financial market conditions; 2) the ability of
Carpenter to ensure adequate supplies of raw materials and to recoup
increased costs of electricity, natural gas, and raw materials, such
as nickel, through increased prices and surcharges; 3) domestic and
foreign excess manufacturing capacity for certain metals that
Carpenter produces; 4) fluctuations in currency exchange rates,
resulting in increased competition and downward pricing pressure on
certain Carpenter products; 5) the degree of success of government
trade actions; 6) fluctuations in capital markets that could impact
the valuation of the assets and liabilities in Carpenter's pension
trusts and the accounting for pension plans; 7) the potential cost
advantages that new competitors or competitors who have reorganized
through bankruptcy may have; 8) the transfer of manufacturing capacity
from the United States to foreign countries; 9) the consolidation of
customers and suppliers; and 10) the potential that our customers may
substitute alternate materials or adopt different manufacturing
practices that replace or limit the suitability of our products. 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 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.
CONSOLIDATED STATEMENT OF INCOME
(in Millions, Except per Share Data)
Three Months Nine Months
Ended Ended
March 31 March 31
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
NET SALES $280.4 $234.6 $719.9 $658.7
Cost of sales 231.7 198.7 597.3 553.3
-------- -------- -------- --------
Gross profit 48.7 35.9 122.6 105.4
Selling and administrative
expenses 29.8 28.1 87.8 90.3
Special charge -- -- 2.3 27.0
Interest expense 5.6 7.7 18.0 23.5
Other income, net (0.5) (1.1) (8.2) (4.4)
-------- -------- -------- --------
Income (loss) before income taxes 13.8 1.2 22.7 (31.0)
Income tax expense (benefit) 4.3 (0.5) 5.2 (14.6)
-------- -------- -------- --------
NET INCOME (LOSS) $9.5 $1.7 $17.5 ($16.4)
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Basic $0.40 $0.06 $0.72 ($0.79)
======== ======== ======== ========
Diluted $0.39 $0.06 $0.72 ($0.79)
======== ======== ======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic 22.6 22.4 22.4 22.3
======== ======== ======== ========
Diluted 23.6 22.4 23.3 22.3
======== ======== ======== ========
Cash dividends per common share $0.0825 $0.0825 $0.2475 $0.4950
======== ======== ======== ========
Certain reclassifications of prior year's amounts have been made to
conform with current year's presentation.
PRELIMINARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in Millions)
Nine Months Ended
March 31
-----------------
2004 2003
-------- --------
OPERATIONS:
Net income (loss) $17.5 ($16.4)
Adjustments to reconcile net income (loss) to
net cash provided from operations:
Depreciation 36.9 40.5
Amortization 6.4 7.6
Deferred income taxes (7.1) (5.2)
Net pension expense (income) 13.2 (2.6)
Net loss on asset disposals 0.3 (0.4)
Special charge -- 23.9
Changes in working capital and other:
Receivables (31.8) 3.9
Inventories (1.9) 13.0
Other current assets 0.6 (1.5)
Accounts payable 34.3 (5.2)
Accrued current liabilities 19.3 (3.6)
Income tax refund 0.4 11.2
Other, net 0.7 (8.5)
-------- --------
Net cash provided from operations 88.8 56.7
-------- --------
INVESTING ACTIVITIES:
Purchases of plant, equipment and software (5.2) (6.8)
Proceeds from sale of business -- 8.5
Proceeds from disposals of plant and equipment 2.3 2.3
Purchases of marketable securities (45.4) --
Sales of marketable securities 26.2 --
-------- --------
Net cash (used for) provided from investing
activities (22.1) 4.0
-------- --------
FINANCING ACTIVITIES:
Net change in short-term debt (15.1) (1.8)
Payments on long-term debt (20.1) (11.1)
Checks not cleared (3.7) --
Dividends paid (6.9) (12.2)
Proceeds from issuance of common stock 11.0 --
-------- --------
Net cash used for financing activities (34.8) (25.1)
-------- --------
Effect of exchange rate changes on cash and cash
equivalents (0.1) 0.1
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 31.8 35.7
Cash and cash equivalents at beginning of period 53.5 18.7
-------- --------
Cash and cash equivalents at end of period $85.3 $54.4
======== ========
Certain reclassifications of prior year's amounts have been made to
conform with current year's presentation.
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in Millions)
March 31 June 30
2004 2003
-------- -------
ASSETS
Current Assets:
Cash and cash equivalents $85.3 $53.5
Marketable securities 19.2 --
Accounts receivable, net 146.9 113.8
Inventories 183.0 180.9
Other current assets 30.9 21.1
--------- ---------
Total current assets 465.3 369.3
Property, plant and equipment, net 619.1 651.7
Prepaid pension cost 248.6 253.7
Goodwill 46.3 46.3
Trademarks and trade names, net 24.6 25.4
Other assets 44.4 53.5
--------- ---------
Total assets $1,448.3 $1,399.9
========= =========
LIABILITIES
Current liabilities:
Short-term debt $2.6 $17.1
Accounts payable 98.9 68.2
Accrued compensation 25.8 13.5
Accrued income taxes 17.0 6.1
Accrued liabilities 37.2 40.6
Deferred income taxes 8.4 4.3
Current portion of long-term debt 0.1 0.1
--------- ---------
Total current liabilities 190.0 149.9
Long-term debt, net of current portion 357.5 378.9
Accrued postretirement benefits 185.9 182.4
Deferred income taxes 161.9 166.7
Other liabilities 37.3 47.4
--------- ---------
Total liabilities 932.6 925.3
--------- ---------
STOCKHOLDERS' EQUITY
Convertible preferred stock 21.3 10.2
Common stock 119.5 117.3
Capital in excess of par value - common stock 208.6 199.8
Reinvested earnings 214.3 203.7
Common stock in treasury, at cost (37.7) (38.3)
Deferred compensation (6.1) (3.8)
Accumulated other comprehensive income (loss) (4.2) (14.3)
--------- ---------
Total stockholders' equity 515.7 474.6
--------- ---------
Total liabilities and stockholders' equity $1,448.3 $1,399.9
========= =========
PRELIMINARY
SEGMENT FINANCIAL DATA
(in Millions)
Three Months Nine Months
Ended Ended
March 31 March 31
--------------- ---------------
2004 2003 2004 2003
------- ------- ------- -------
Net sales:
Specialty Metals $253.2 $204.3 $640.8 $569.2
Engineered Products 28.0 31.1 81.0 91.2
Intersegment (0.8) (0.8) (1.9) (1.7)
------- ------- ------- -------
Consolidated net sales $280.4 $234.6 $719.9 $658.7
======= ======= ======= =======
Operating results:
Specialty Metals $24.0 $8.1 $50.3 $15.8
Engineered Products 4.2 2.8 11.2 9.4
Net pension (expense) income (4.4) 0.8 (13.2) 2.6
Corporate costs (4.9) (3.9) (13.5) (12.7)
Special charge --- --- (2.3) (27.0)
Interest expense (5.6) (7.7) (18.0) (23.5)
Other income, net 0.5 1.1 8.2 4.4
------- ------- ------- -------
Consolidated income (loss) before
income taxes $13.8 $1.2 $22.7 ($31.0)
======= ======= ======= =======
Carpenter is organized in the following business units: Specialty
Alloys Operations, Dynamet, Carpenter Powder Products and Engineered
Products. For segment reporting, the Specialty Alloys Operations,
Dynamet and Carpenter Powder Products operating segments have been
aggregated into one reportable segment, Specialty Metals, because of
the similarities in products, processes, customers, distribution
methods and economic characteristics.
Certain reclassifications of prior year's amounts have been made to
conform with current year's presentation.
PRELIMINARY
SELECTED FINANCIAL MEASURES
(in Millions)
Three Months Ended Nine Months Ended
March 31 March 31
---------------------- ---------------------
FREE CASH FLOW 2004 2003 2004 2003
---------- ----------- ---------- ----------
Net cash provided from
operations $50.1 $16.2 $88.8 $56.7
Purchases of plant,
equipment and software (2.0) (1.5) (5.2) (6.8)
Proceeds from sale of
business --- 8.5 --- 8.5
Proceeds from disposals
of plant and
equipment 1.7 1.6 2.3 2.3
Dividends paid (2.4) (2.2) (6.9) (12.2)
---------- ----------- ---------- ----------
Free cash flow $47.4 $22.6 $79.0 $48.5
========== =========== ========== ==========
Free cash flow is a measure of cash generated which management
evaluates for alternative uses and has chosen to apply to debt
repayment.
March 31 December 31 March 31
NET DEBT 2004 2003 2003
---------- ----------- ----------
Accounts receivable
purchase facility $10.0 $10.0 $10.0
Short-term debt 2.6 8.6 16.2
Current portion of long-
term debt 0.1 0.1 50.1
Long-term debt, net of
current portion 357.5 355.6 357.5
---------- ----------- ----------
Total Debt 370.2 374.3 433.8
Cash (85.3) (34.3) (54.4)
Marketable securities (19.2) (18.7) --
---------- ----------- ----------
Net Debt $265.7 $321.3 $379.4
========== =========== ==========
Accumulated cash and marketable securities are expected to be used for
debt repayment until a targeted debt to capital ratio is achieved.
Three Months Ended Nine Months Ended
March 31 March 31
---------------------- ---------------------
NET SALES ADJUSTED FOR
DIVESTED COMPANIES 2004 2003 2004 2003
---------- ----------- ---------- ----------
Net sales $280.4 $234.6 $719.9 $658.7
Divested companies -- (1.4) -- (12.9)
---------- ----------- ---------- ----------
Net sales adjusted for
divested companies $280.4 $233.2 $719.9 $645.8
========== =========== ========== ==========
PRELIMINARY
SELECTED FINANCIAL MEASURES
(in Millions, Except per Share Data)
Three Months Nine Months
Ended Ended
March 31 March 31
--------------- ---------------
NET PENSION EXPENSE (INCOME) 2004 2003 2004 2003
------- ------- ------- -------
Pension plan expense (income) $2.2 ($4.1) $6.6 ($12.3)
Other postretirement benefit expense 2.2 3.3 6.6 9.7
------- ------- ------- -------
4.4 (0.8) 13.2 (2.6)
Income tax (benefit) expense (1.6) 0.3 (4.9) 1.0
------- ------- ------- -------
Net pension expense (income) $2.8 ($0.5) $8.3 ($1.6)
======= ======= ======= =======
Pension expense (income) per share $0.12 ($0.02) $0.36 ($0.07)
======= ======= ======= =======
Weighted average diluted common shares 23.6 22.4 23.3 22.3
======= ======= ======= =======
Three Months Nine Months
Ended Ended
March 31 March 31
--------------- ---------------
SPECIAL CHARGE 2004 2003 2004 2003
------- ------- ------- -------
Premium on early retirement of debt -- -- $2.3 $ --
Reductions in workforce -- -- -- 17.4
Pension plan curtailment loss -- -- -- 6.7
Writedown of certain assets -- -- -- 2.9
------- ------- ------- -------
Special charge -- -- 2.3 27.0
Income tax benefit -- -- (0.8) (10.8)
------- ------- ------- -------
Special charge, net of income taxes -- -- $1.5 $16.2
======= ======= ======= =======
Special charge per share -- -- $0.06 $0.73
======= ======= ======= =======
Weighted average diluted common shares 23.6 22.4 23.3 22.3
======= ======= ======= =======
Three Months Nine Months
Ended Ended
March 31 March 31
--------------- ---------------
INCOME BEFORE OTHER INCOME 2004 2003 2004 2003
AND EXPENSE ------- ------- ------- -------
Net sales $280.4 $234.6 $719.9 $658.7
Cost of sales (231.7) (198.7) (597.3) (553.3)
Selling and administrative expenses (29.8) (28.1) (87.8) (90.3)
------- ------- ------- -------
Income before other income and expense $18.9 $7.8 $34.8 $15.1
======= ======= ======= =======
CONTACT: Carpenter Technology Corporation
Investors:
Jaime Vasquez, 610-208-2165
jvasquez@cartech.com
or
Media:
Katharine B. Marshall, 610-208-3034
kmarshall@cartech.com