Exhibit 99
Carpenter Technology Reports First Quarter Results
WYOMISSING, Pa.--(BUSINESS WIRE)--Oct. 25, 2004--Carpenter
Technology Corporation (NYSE:CRS) today reported record first quarter
sales and net income, which reflected strong broad based demand and
continued improvement in its operating performance.
Net sales for the first fiscal quarter ended September 30, 2004
were $297.6 million, compared with $213.3 million for the same period
a year ago.
Net income in the first quarter was $19.8 million or $.80 per
diluted share, compared to net income of $0.5 million or $.00 per
diluted share a year ago.
Net income in the first quarter a year ago included non-cash
pension and retiree medical expenses of $4.4 million or $.12 per
diluted share. In the recent first quarter, Carpenter's net pension
expense was less than $.01 per diluted share.
Free cash flow in the recent first quarter was $27.3 million,
compared with free cash flow of $22.2 million in the first quarter a
year ago.
At the end of the recent first quarter, total debt net of cash was
$203.8 million. Carpenter's net debt amount was $45.9 million lower
than at the end of the previous quarter and $129.5 million lower than
a year ago.
First Quarter - Operating Summary
"Profitable sales growth combined with our continued focus on lean
and variation reduction allowed us to achieve record first quarter
earnings," said Robert J. Torcolini, chairman, president and chief
executive officer. "During the quarter, we experienced strong demand
across all of our major markets, including aerospace, which appears to
be gaining momentum in its recovery.
"The sales increase also reflected a better product mix as a
result of stronger demand in key markets and selective volume
increases, partially offset by our initiative to eliminate less
profitable products.
"Our operating results continued to illustrate the benefits gained
from our lean and variation reduction work, which resulted in
increased yields and productivity while reducing costs."
Carpenter's sales increased 40 percent in the first quarter from a
year ago, reflecting strong demand, selective market share gains,
increased base selling prices and raw material surcharges to help
recover escalating raw material and energy costs. Excluding surcharge
revenue, sales increased approximately 30% from the first quarter a
year ago.
All major end-use markets experienced year-over-year sales
increases during the first quarter. Industrial markets sales increased
34 percent; aerospace market sales 47 percent; consumer market sales,
47 percent; automotive market sales, 28 percent; power generation
market sales 61 percent; and medical market sales, 23 percent.
Geographically, sales outside the United States increased 39
percent from a year ago and represented 28 percent of first quarter
sales. Sales outside the United States benefited from the effects of a
weaker U.S. dollar, selective market share gains and stronger demand
from most end-use markets.
Carpenter's gross profit in the first quarter increased to $63.4
million or 21.3 percent of sales from $34.0 million or 15.9 percent of
sales a year ago.
The gross profit in the recent first quarter also included
non-cash pension and retiree medical expenses of $0.2 million. The
gross profit as a percentage of sales also reflected the negative
effect from the dilution caused by the pass through of increased raw
material prices.
In the first quarter a year ago, the gross profit reflected
non-cash pension expense of $3.1 million or 1.5 percent of sales.
Strong sales growth, a better product mix, base price increases
and Carpenter's continued focus on lean and variation reduction were
the primary contributors to the gross profit improvement.
Carpenter's first quarter operating income increased to $35.7
million or 12.0 percent of sales from $5.3 million or 2.5 percent of
sales a year ago. The increase reflects the improvement in gross
profit and a reduction in selling and administrative expenses.
Outlook
"We continue to work diligently to further improve our operating
performance through lean and variation reduction. We are complementing
these actions by our strategy to price products and services
commensurate with the value delivered," Torcolini said. "Based on
current market conditions, we expect that demand for our materials
will remain strong across all end-use markets at least through the
balance of the fiscal year. Additionally, we are seeing further
momentum in the recovery of the aerospace market and a moderate
improvement in the power generation market."
Accordingly, Carpenter expects that its operating performance will
show year-over-year quarterly improvements throughout the remainder of
the current fiscal year ending June 30, 2005.
The company now expects to generate free cash flow in excess of
$80 million for fiscal 2005. Carpenter had previously estimated that
free cash flow would be in excess of $60 million.
Segment Results - First Quarter
Specialty Metals
Net sales for the quarter ended September 30, 2004 for the
Specialty Metals segment, which includes the Specialty Alloys
Operations (SAO), Dynamet, and Carpenter Powder Products (CPP)
business units increased 41 percent to $267.0 million from $189.7
million in the same quarter a year ago.
SAO sales increased 41 percent from the same quarter a year ago
due to strong demand across all markets, selective market share gains
and pricing actions, including surcharges for raw material and energy
costs. In addition, SAO volume increased 11 percent.
Dynamet's sales increased 37 percent in the first quarter versus a
year ago, largely related to stronger demand from the aerospace and
medical markets and increased selling prices. CPP's sales were 37
percent higher than a year ago due to increased demand from the
automotive, industrial and aerospace markets and increased selling
prices.
Operating income for the Specialty Metals segment was $32.8
million, compared to $7.0 million a year ago. The increase in income
reflected the effects of higher sales, pricing actions, a better
product mix and realized operating efficiencies, including better
yields and improved productivity.
Engineered Products Segment
Net sales for this segment, which includes sales of fabricated
metal and ceramic components increased 29 percent to $31.2 million
from $24.1 million a year ago. Strong sales growth was experienced
across all businesses within the Engineered Products segment. The
growth was driven by increased demand from the automotive, power
generation, consumer and aerospace markets.
Operating income for the Engineered Products segment increased to
$4.6 million in the first quarter from $2.3 million a year ago. The
increase reflected stronger overall demand and selling price
increases. These factors, in combination with better operating
efficiencies from lean and variation reduction initiatives, resulted
in the improvement in operating income.
Net Pension Expense
In the first quarter of fiscal 2005, Carpenter had net non-cash
pension and retiree medical expenses of $0.6 million, which was offset
by the favorable tax effects of Medicare Part D. As a result,
Carpenter's net pension expense did not have a measurable impact on
earnings per share in the recent first quarter. This compares to
non-cash pension and retiree medical expenses of $4.4 million or $.12
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.
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.
Other Items
In the first quarter of fiscal 2005, selling and administrative
expenses of $27.7 million were 9.3 percent of sales versus $28.7
million or 13.5 percent of sales in the same quarter a year ago.
Selling and administrative expenses included net non-cash pension and
retiree medical expenses of $0.4 million in the current first quarter
versus $1.3 million in the quarter a year ago. The decrease in selling
and administrative expenses reflected a reduction in depreciation and
lower net non-cash pension and retiree medical expenses from a year
ago.
Interest expense for the quarter was $5.8 million as compared to
$6.3 million in the quarter a year ago due to reduced debt levels.
Other income for the first quarter was $0.6 million, compared to
$1.6 million a year ago. In the quarter a year ago, other income
benefited from foreign currency gains.
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 first quarter was $27.3 million, compared
to $22.2 million 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 first quarter, Carpenter had
approximately $180 million available under its credit facilities.
Labor Relations
On September 28, 2004, the United Steel Workers of America (USWA)
filed a petition with the National Labor Relations Board (NLRB)
seeking an election to determine if the USWA should represent, for
collective bargaining, certain production and maintenance employees
located at Carpenter's Specialty Alloy Operations in Reading,
Pennsylvania. The election is currently scheduled for November 11,
2004.
Carpenter's Reading facility has had previous union organizing
activities that were not successful, the most recent in October 2002.
Carpenter intends to oppose the union organizing attempt by the USWA
in accordance with the rules and procedures of the NLRB.
Conference Call
Carpenter will host a conference call and webcast today, October
25, at 1:30 p.m., Eastern Time, to discuss the results of 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 (www.ccbn.com). A replay of the
call will be made available at www.cartech.com or by calling
888-286-8010. The passcode for the replay is 83317616.
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 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,
2004 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, 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
anticipated by management; 3) the ability to recoup 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; and 9)
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 Ended
September 30
----------------------
2004 2003
-------- --------
NET SALES $297.6 $213.3
Cost of sales 234.2 179.3
-------- --------
Gross profit 63.4 34.0
Selling and administrative expenses 27.7 28.7
-------- --------
Operating income 35.7 5.3
Interest expense 5.8 6.3
Other income, net (0.6) (1.6)
-------- --------
Income before income taxes 30.5 0.6
Income taxes 10.7 0.1
-------- --------
NET INCOME $19.8 $0.5
======== ========
EARNINGS PER COMMON SHARE:
Basic $0.83 $0.00
======== ========
Diluted $0.80 $0.00
======== ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic 23.5 22.3
======== ========
Diluted 24.5 22.3
======== ========
Cash dividends per common share $0.0825 $0.0825
======== ========
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)
Three months
ended
September 30
------------
2004 2003
----- -----
OPERATIONS:
Net income $19.8 $0.5
Adjustments to reconcile net income to
net cash provided from operations:
Depreciation 11.7 12.8
Amortization 0.9 2.4
Deferred income taxes 6.4 (1.4)
Net pension expense 0.6 4.4
Net loss (gain) on asset disposals 0.1 (0.1)
Changes in working capital and other:
Receivables 3.4 (1.7)
Inventories (17.8) (6.9)
Other current assets (2.1) (2.6)
Accounts payable 6.6 10.9
Accrued current liabilities 1.1 6.8
Income tax refund 0.4 0.3
Other, net 1.0 0.7
----- -----
Net cash provided from operations 32.1 26.1
----- -----
INVESTING ACTIVITIES:
Purchases of plant, equipment and software (2.5) (1.6)
Proceeds from disposals of plant and equipment -- 0.1
Purchases of marketable securities (37.3) --
Sales of marketable securities 8.1 --
----- -----
Net cash used for investing activities (31.7) (1.5)
----- -----
FINANCING ACTIVITIES:
Net change in short-term debt (0.5) (0.4)
Checks not cleared -- (3.7)
Dividends paid (2.3) (2.4)
Proceeds from issuance of common stock 21.1 --
----- -----
Net cash provided from (used for) financing activities 18.3 (6.5)
----- -----
Effect of exchange rate changes on cash and cash
equivalents (0.7) 0.8
----- -----
INCREASE IN CASH AND CASH EQUIVALENTS 18.0 18.9
Cash and cash equivalents at beginning of period 76.6 53.5
----- -----
Cash and cash equivalents at end of period $94.6 $72.4
===== =====
Certain reclassifications of prior year's amounts have been made to
conform with current year's presentation.
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in Millions)
Sept. 30 June 30
2004 2004
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $94.6 $76.6
Marketable securities 58.0 28.8
Accounts receivable, net 162.3 165.2
Inventories 203.1 185.0
Other current assets 42.2 36.2
-------- --------
Total current assets 560.2 491.8
Property, plant and equipment, net 599.6 608.7
Prepaid pension cost 247.9 247.0
Goodwill 46.4 46.4
Trademarks and trade names, net 24.0 24.3
Other assets 35.9 38.0
-------- --------
Total assets $1,514.0 $1,456.2
======== ========
LIABILITIES
Current liabilities:
Short-term debt $1.7 $2.2
Accounts payable 115.7 109.0
Accrued compensation 17.3 26.1
Accrued income taxes 13.6 10.3
Accrued liabilities 58.7 51.4
Deferred income taxes 12.2 10.9
Current portion of long-term debt 20.2 20.2
-------- --------
Total current liabilities 239.4 230.1
Long-term debt, net of current portion 334.5 332.7
Accrued postretirement benefits 140.9 143.5
Deferred income taxes 181.7 175.6
Other liabilities 36.1 36.3
-------- --------
Total liabilities 932.6 918.2
-------- --------
STOCKHOLDERS' EQUITY
Convertible preferred stock 20.8 20.8
Common stock 124.8 120.7
Capital in excess of par value - common stock 232.3 215.1
Reinvested earnings 247.9 230.4
Common stock in treasury, at cost (38.3) (38.0)
Deferred compensation (8.6) (9.5)
Accumulated other comprehensive income (loss) 2.5 (1.5)
-------- --------
Total stockholders' equity 581.4 538.0
-------- --------
Total liabilities and stockholders' equity $1,514.0 $1,456.2
======== ========
Certain reclassifications of prior year's amounts have been made to
conform with current year's presentation.
PRELIMINARY
SEGMENT FINANCIAL DATA
(in Millions)
Three Months
Ended
September 30
--------------
2004 2003
------ ------
Net sales:
Specialty Metals $267.0 $189.7
Engineered Products 31.2 24.1
Intersegment (0.6) (0.5)
------ ------
Consolidated net sales $297.6 $213.3
====== ======
Operating income:
Specialty Metals $32.8 $7.0
Engineered Products 4.6 2.3
Corporate costs (5.1) (4.4)
Pension earnings, interest & deferrals 3.7 0.4
Intersegment (0.3) --
------ ------
Consolidated operating income $35.7 $5.3
====== ======
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.
The service cost component of net pension expense is included in the
operating results of the business segments. The residual net pension
expense, which is comprised of expected return on plan assets,
interest costs on the projected benefit obligations of the plans, and
amortization of actuarial gains and losses and prior service costs, is
included in "Pension earnings, interest & deferrals."
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
September 30
----------------
FREE CASH FLOW 2004 2003
------ ------
Net cash provided from operations $32.1 $26.1
Purchases of plant, equipment and software (2.5) (1.6)
Proceeds from disposals of plant and
equipment -- 0.1
Dividends paid (2.3) (2.4)
------ ------
Free cash flow $27.3 $22.2
====== ======
Free cash flow is a measure of cash generated which management
evaluates for alternative uses and has chosen to apply to debt
repayment.
Sept. 30 June 30 Sept. 30
NET DEBT 2004 2004 2003
------- ------- -------
Accounts receivable purchase facility $--- $--- $10.0
Short-term debt 1.7 2.2 17.0
Current portion of long-term debt 20.2 20.2 0.1
Long-term debt, net of current portion 334.5 332.7 378.6
------- ------- -------
Total Debt 356.4 355.1 405.7
Cash (94.6) (76.6) (72.4)
Marketable securities (58.0) (28.8) --
------- ------- -------
Net Debt $203.8 $249.7 $333.3
======= ======= =======
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
September 30
----------------
NET PENSION EXPENSE 2004 2003
------ ------
Pension plan expense (income) ($0.6) $2.2
Other postretirement benefit expense 1.2 2.2
------ ------
0.6 4.4
Income tax benefit (0.5) (1.8)
------ ------
Net pension expense $0.1 $2.6
====== ======
Pension expense per share $0.00 $0.12
====== ======
Weighted average diluted common shares 24.5 22.3
====== ======
CONTACT: Carpenter Technology Corporation
Investor and Media Inquiries:
Jaime Vasquez, 610-208-2165
jvasquez@cartech.com