Exhibit 99
Carpenter Technology Reports Fourth Quarter & Full Year 2005 Results
WYOMISSING, Pa.--(BUSINESS WIRE)--July 25, 2005--Carpenter
Technology Corporation (NYSE:CRS) today reported record sales and net
income for the fourth quarter and fiscal year ended June 30, 2005. The
results reflected favorable market conditions and the benefits from
the company's continued focus on lean and variation reduction.
Net sales for the fourth fiscal quarter ended June 30, 2005 were
$362.4 million, compared with $296.8 million for the same quarter a
year ago.
Net income in the recent fourth quarter was $47.8 million, or
$1.86 per diluted share, compared to net income of $17.7 million, or
$0.73 per diluted share, a year ago.
Carpenter's recent fourth quarter included a gain of $0.21 per
diluted share from the sale of its Carpenter Special Products
Corporation (CSPC) subsidiary. Also in the recent fourth quarter, net
income was favorably impacted by $.23 per diluted share, as a result
of favorable tax adjustments.
Free cash flow in the recent fourth quarter was $45.1 million,
compared with free cash flow of $9.4 million in the quarter a year
ago. Free cash flow in the recent fourth quarter included $15.4
million in net cash proceeds from the sale of CSPC. Also in the
quarter, free cash flow was reduced by $25 million as a result of the
company's voluntary contribution to a VEBA trust that funds
post-retirement medical expenses. Carpenter also made a $25 million
voluntary contribution to the VEBA trust in last year's fourth
quarter.
At June 30, 2005, net debt was $63.5 million. Carpenter's net debt
amount was $53.3 million lower than at the end of the previous quarter
and $186.2 million lower than a year ago.
Fiscal Year Results
Net sales for fiscal 2005 were $1.3 billion, compared with $1.0
billion for the previous fiscal year.
Net income for fiscal 2005 was $135.5 million, or $5.37 per
diluted share, compared with net income of $36.0 million, or $1.49 per
diluted share a year ago.
For fiscal 2005, the company generated $133.8 million of free cash
flow, compared to free cash flow of $88.4 million a year ago.
Fourth Quarter - Operating Summary
"Record results for the quarter and fiscal 2005 were driven by
strong demand for our higher value materials, especially from the
aerospace market, and our continued focus on lean and variation
reduction," said Robert J. Torcolini, chairman, president and chief
executive officer. "The operating improvements made during the past
few years significantly enhanced the operating leverage in our
business model and has positioned the company to create additional
value for shareholders."
Carpenter's sales increased 22 percent in the fourth quarter from
a year ago, which reflected a better product mix, higher base selling
prices and surcharges. Excluding surcharge revenue, sales increased 17
percent from the fourth quarter a year ago.
Sales increased in most major end-use markets during the fourth
quarter versus the same quarter a year ago. Aerospace market sales
increased 52 percent; medical market sales 43 percent; automotive
market sales 19 percent; consumer market sales 12 percent; and
industrial market sales 7 percent. Sales to the power generation
market declined 1 percent.
Geographically, sales outside the United States increased 32
percent from a year ago and represented 29 percent of fourth quarter
sales. In the recent fourth quarter, sales outside the United States
benefited from strong demand for materials sold to the European
aerospace and medical markets, and growth in Asia.
Carpenter's gross profit in the fourth quarter increased to $92.9
million, or 25.6 percent of sales, from $62.5 million, or 21.1 percent
of sales, in the quarter a year ago.
The gross profit improvement reflected a better product mix due to
increased demand for higher value materials from key markets, notably
aerospace and medical, higher base prices and the benefits from lean
initiatives and variation reduction.
Carpenter's fourth quarter operating income increased to $66.9
million, or 18.5 percent of sales, from $31.3 million, or 10.5 percent
of sales, a year ago. Excluding the gain on the sale of CSPC,
Carpenter's fourth quarter operating income reached a record level.
The increase from a year ago reflects the improvement in gross profit
and a continued focus on managing selling and administrative expenses.
Outlook
"We believe that market conditions will remain favorable in fiscal
2006, particularly for our specialty alloy, titanium and ceramic
materials sold into the aerospace market. These favorable conditions
combined with our focus to reduce product complexity through the
elimination of marginally profitable products and efforts in lean and
variation reduction will continue to drive our performance in 2006,"
Torcolini said. "Although we are pleased with our recent
accomplishments, we see opportunity for continued improvement in our
operating results."
Accordingly, the company expects that free cash flow will be in
excess of $100 million in fiscal 2006.
Segment Results - Fourth Quarter
Specialty Metals
Net sales for the quarter ended June 30, 2005 for the Specialty
Metals segment, which includes the Specialty Alloys Operations (SAO),
Dynamet, and Carpenter Powder Products (CPP) business units, were
$329.7 million, compared to $268.3 million in the same quarter a year
ago.
SAO sales increased 19 percent from the same quarter a year ago.
The increase was due primarily to a better product mix as a result of
strong demand from the U.S. and European aerospace markets, pricing
actions and surcharges. SAO volume decreased 16 percent from the
quarter a year ago primarily reflecting the strategy to reduce the
sale of marginally profitable products, and lower demand from the
automotive and industrial markets.
Dynamet's sales increased 69 percent in the fourth quarter versus
a year ago, also as a result of strong demand from the aerospace
markets, continued growth in the domestic and foreign medical markets,
and higher base selling prices. The sales increase also reflected the
impact of a significant rise in titanium costs.
CPP's sales were 46 percent higher than a year ago due to higher
selling prices, stronger demand from the industrial and automotive
markets and a better product mix.
Operating income for the Specialty Metals segment was $58.4
million, compared to $32.6 million a year ago. The increase in
operating income reflected the effects of a better product mix, higher
base prices and continued operational improvements.
Engineered Products Segment
Net sales for this segment, which includes sales of fabricated
metal and ceramic components, were $33.4 million, compared to $29.0
million a year ago. Strong demand from most end use markets and higher
base prices were the primary drivers of the sales increase.
Operating income for the Engineered Products segment increased to
$5.8 million from $3.8 million a year ago. Operating income benefited
from higher sales, increased base selling prices and better operating
efficiencies from lean and variation reduction.
Segment Results - Fiscal Year
Specialty Metals
Fiscal 2005 net sales for the Specialty Metals segment were $1.2
billion, compared to $909.1 million for the previous fiscal year.
SAO sales increased 28 percent from a year ago, due to an improved
product mix, base pricing actions and surcharges. SAO volume was 4
percent lower than a year ago as strong demand for higher value
materials was offset primarily by SAO's intentional reduction in the
sale of marginally profitable products and lower volumes to the
industrial and automotive markets.
For fiscal 2005, Dynamet's sales increased 61 percent from a year
ago. The increase is due primarily to stronger demand from the
aerospace and medical markets and increased prices. CPP's sales were
40 percent higher than a year ago as a result of strong demand from
the industrial, automotive and aerospace markets and higher base
selling prices.
Fiscal 2005 operating income for the Specialty Metals segment was
$183.9 million, compared to $71.5 million a year ago. The increase
reflected higher base selling prices, a better product mix and
continued operational improvements.
Engineered Products Segment
Net sales for this segment in fiscal 2005 were $129.1 million
compared to $110.0 million for fiscal 2004. This group of companies
benefited from strong demand across most major markets including
automotive, aerospace, industrial and power generation and higher base
selling prices.
Operating income for the Engineered Products segment for fiscal
2005 was $22.2 million versus $14.4 million a year ago. The increase
in operating income was largely associated with stronger demand,
better pricing and a continued focus on lean and variation reduction.
Net Pension Expense
In the fourth quarter of 2005, Carpenter had pre-tax net pension
expense of $0.6 million, which was offset by the favorable tax effects
of Medicare Part D and, therefore, did not have a measurable impact on
earnings per share. This compares to pre-tax net pension expense of
$3.6 million, or $0.09 per diluted share, for the same quarter a year
ago.
For fiscal 2005, the company's pre-tax net pension expense was
$2.4 million. This amount was mostly offset by the favorable tax
effects of Medicare Part D, which resulted in a net pension expense
equivalent to $0.01 per diluted share. In fiscal 2004, Carpenter's
pre-tax net pension expense was $16.1 million, or $0.42 per diluted
share.
The net pension amount is actuarially determined as of each June
30 and typically held constant throughout the fiscal year. In fiscal
2006, Carpenter expects that it will have a pre-tax net pension
expense of $11.5 million, or the equivalent of $0.24 per diluted
share. The increase in the net pension expense from fiscal 2005
primarily reflects a decrease in the discount rate to 5.00% from 6.25%
as a result of a lower interest rate environment.
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 fourth quarter of fiscal 2005, selling and administrative
expenses of $34.7 million were 9.6 percent of sales compared to $31.2
million, or 10.5 percent of sales, in the same quarter a year ago. The
increase primarily reflects a $4.2 million increase of a reserve
related to ongoing cleanup costs at a location that was closed in
1987.
For fiscal 2005, selling and administrative expenses of $120.6
million were 9.2 percent of sales compared to $117.1 million, or 11.5
percent of sales, in fiscal 2004.
Interest expense for the quarter decreased to $5.4 million from
$5.6 million in the fourth quarter a year ago due to reduced debt
levels, which was partially offset by higher interest rates.
For fiscal 2005, interest expense was $23.0 million or $0.7
million lower than a year ago.
In fiscal 2004, Carpenter incurred a loss on the early retirement
of debt of $2.3 million, or $.06 per diluted share.
Other income for the fourth quarter was $1.1 million as compared
to $0.6 million in the fourth quarter a year ago. In the recent fourth
quarter, increased interest income from invested cash was partially
offset by foreign exchange losses. For fiscal 2005, other income of
$8.8 million compared to other income of $7.6 million in fiscal 2004.
In the recent fourth quarter, net income was favorably impacted by
$0.23 per diluted share as a result of a $3.0 million benefit from a
partial reversal of state tax net operating loss carry forward
valuation allowances and a $2.8 million benefit due to an adjustment
of the state effective deferred tax rate.
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 in the recent fourth quarter was $45.1 million,
compared with free cash flow of $9.4 million in the fourth quarter a
year ago. Free cash flow in the recent fourth quarter included $15.4
million in net cash proceeds from the sale of CSPC. Also in the
quarter, free cash flow was reduced by $25 million as a result of the
company's decision to make a voluntary contribution to a VEBA trust
that funds post-retirement medical expenses. Carpenter also made a $25
million voluntary contribution to the VEBA trust in last year's fourth
quarter.
For fiscal 2005, the company generated $133.8 million of free cash
flow, compared to free cash flow of $88.4 million in fiscal 2004.
Carpenter believes that its current financial resources, both from
internal and external sources, will be more than adequate to meet its
foreseeable needs.
Conference Call
Carpenter will host a conference call and webcast today, July 25,
at 10:00 a.m., Eastern Time, to discuss the results of operations for
the fourth quarter and fiscal 2005.
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 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 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, its subsequent Forms 10-Q and the exhibits attached to those
filings. 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; 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 Year Ended
June 30 June 30
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
NET SALES $362.4 $296.8 $1,314.2 $1,016.7
Cost of sales 269.5 234.3 998.1 831.5
--------- -------- --------- ---------
Gross profit 92.9 62.5 316.1 185.2
Selling and administrative
expenses 34.7 31.2 120.6 117.1
Gain on sale of business (8.7) -- (8.7) --
--------- -------- --------- ---------
Operating income 66.9 31.3 204.2 68.1
Interest expense 5.4 5.6 23.0 23.7
Loss on early retirement of debt -- -- -- 2.3
Other income, net (1.1) (0.6) (8.8) (7.6)
--------- -------- --------- ---------
Income before income taxes 62.6 26.3 190.0 49.7
Income taxes 14.8 8.6 54.5 13.7
--------- -------- --------- ---------
NET INCOME $47.8 $17.7 $135.5 $36.0
========= ======== ========= =========
EARNINGS PER COMMON SHARE:
Basic $1.92 $0.75 $5.54 $1.51
========= ======== ========= =========
Diluted $1.86 $0.73 $5.37 $1.49
========= ======== ========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 24.7 22.8 24.2 22.5
========= ======== ========= =========
Diluted 25.6 23.7 25.1 23.4
========= ======== ========= =========
Cash dividends per common share $0.125 $0.0825 $0.4075 $0.3300
========= ======== ========= =========
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)
Year ended
June 30
--------------------
2005 2004
---------- ---------
OPERATIONS:
Net income $135.5 $36.0
Adjustments to reconcile net income to
net cash provided from operations:
Depreciation 46.8 49.2
Amortization 3.4 7.9
Deferred income taxes 7.7 6.5
Net pension expense 2.4 16.1
Net loss on asset disposals 1.2 0.1
Gain on sale of business (8.7) --
Changes in working capital and other:
Receivables (31.8) (40.5)
Net change in accounts receivable purchase
facility -- (10.0)
Inventories (49.8) (4.3)
Other current assets (9.2) (0.1)
Accounts payable 26.2 44.5
Accrued current liabilities 42.7 28.2
Income tax refund 3.4 0.6
Contribution to VEBA (25.0) (25.0)
Other, net (2.3) (15.1)
---------- ---------
Net cash provided from operations 142.5 94.1
---------- ---------
INVESTING ACTIVITIES:
Purchases of plant, equipment and software (13.8) (8.0)
Proceeds from disposals of plant and equipment 1.1 1.6
Proceeds from sale of business 15.4 --
Purchases of marketable securities (172.4) (70.0)
Sales of marketable securities 94.6 41.2
---------- ---------
Net cash used for investing activities (75.1) (35.2)
---------- ---------
FINANCING ACTIVITIES:
Net change in short-term debt (2.3) (15.7)
Payments on long-term debt (20.2) (20.2)
Checks not cleared -- (3.7)
Dividends paid (11.4) (9.3)
Proceeds from issuance of common stock 54.2 12.8
---------- ---------
Net cash provided from (used for) financing
activities 20.3 (36.1)
---------- ---------
Effect of exchange rate changes on cash and cash
equivalents (0.5) 0.3
---------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 87.2 23.1
Cash and cash equivalents at beginning of period 76.6 53.5
---------- ---------
Cash and cash equivalents at end of period $163.8 $76.6
========== =========
Certain reclassifications of prior year's amounts have been made
to conform with current year's presentation.
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in millions)
June 30 June 30
2005 2004
--------- ---------
ASSETS
Current Assets:
Cash and cash equivalents $163.8 $76.6
Marketable securities 106.6 28.8
Accounts receivable, net 193.4 165.2
Inventories 228.6 185.0
Deferred income taxes 7.4 --
Other current assets 31.8 36.2
--------- ---------
Total current assets 731.6 491.8
Property, plant and equipment, net 569.2 608.7
Prepaid pension cost 250.8 247.0
Goodwill 46.4 46.4
Trademarks and trade names, net 21.1 24.3
Other assets 34.3 38.0
--------- ---------
Total assets $1,653.4 $1,456.2
========= =========
LIABILITIES
Current liabilities:
Short-term debt $-- $2.2
Accounts payable 133.4 109.0
Accrued compensation 39.6 26.1
Accrued income taxes 18.4 10.3
Accrued liabilities 57.5 51.4
Deferred income taxes -- 10.9
Current portion of long-term debt 0.2 20.2
--------- ---------
Total current liabilities 249.1 230.1
Long-term debt, net of current portion 333.7 332.7
Accrued postretirement benefits 108.5 143.5
Deferred income taxes 192.5 175.6
Other liabilities 45.4 36.3
--------- ---------
Total liabilities 929.2 918.2
--------- ---------
STOCKHOLDERS' EQUITY
Convertible preferred stock 19.7 20.8
Common stock 129.7 120.7
Capital in excess of par value - common stock 278.1 215.1
Reinvested earnings 354.5 230.4
Common stock in treasury, at cost (35.8) (38.0)
Deferred compensation (9.2) (9.5)
Accumulated other comprehensive loss (12.8) (1.5)
--------- ---------
Total stockholders' equity 724.2 538.0
--------- ---------
Total liabilities and stockholders' equity $1,653.4 $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 Year Ended
June 30 June 30
------------------- -------------------
2005 2004 2005 2004
---------- -------- --------- ---------
Net sales:
Specialty Metals $329.7 $268.3 $1,188.3 $909.1
Engineered Products 33.4 29.0 129.1 110.0
Intersegment (0.7) (0.5) (3.2) (2.4)
---------- -------- --------- ---------
Consolidated net sales $362.4 $296.8 $1,314.2 $1,016.7
========== ======== ========= =========
Operating income:
Specialty Metals $58.4 $32.6 $183.9 $71.5
Engineered Products 5.8 3.8 22.2 14.4
Gain on sale of business 8.7 -- 8.7 --
Corporate costs (9.9) (6.3) (25.2) (20.9)
Pension earnings, interest &
deferrals 3.7 1.2 14.7 3.1
Intersegment 0.2 -- (0.1) --
---------- -------- --------- ---------
Consolidated operating
income $66.9 $31.3 $204.2 $68.1
========== ======== ========= =========
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, which represents
the estimated cost of future pension liabilities earned associated
with active employees, is included in the operating results of the
business segments. The residual net pension expense, which is
comprised of the 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 under
the heading "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, Except Per Share Data)
Three Months Ended Year Ended
June 30 June 30
------------------ ---------------
FREE CASH FLOW 2005 2004 2005 2004
--------- -------- ------- -------
Net cash provided from operations $37.7 $4.4 $142.5 $94.1
Net change in accounts receivable
purchase facility -- 10.0 -- 10.0
Purchases of plant, equipment and
software (5.0) (2.8) (13.8) (8.0)
Proceeds from disposals of plant and
equipment 0.5 0.2 1.1 1.6
Proceeds from sale of business 15.4 -- 15.4 --
Dividends paid (3.5) (2.4) (11.4) (9.3)
--------- -------- ------- -------
Free cash flow $45.1 $9.4 $133.8 $88.4
========= ======== ======= =======
Free cash flow is a measure of cash generated which management
evaluates for alternative uses.
March
June 30 31 June 30
NET DEBT 2005 2005 2004
-------- ------- -------
Short-term debt $--- $1.0 $2.2
Current portion of long-term debt 0.2 20.2 20.2
Long-term debt, net of current
portion 333.7 332.1 332.7
-------- ------- -------
Total debt 333.9 353.3 355.1
Cash (163.8) (148.2) (76.6)
Marketable securities (106.6) (88.3) (28.8)
-------- ------- -------
Net debt $63.5 $116.8 $249.7
======== ======= =======
Accumulated cash and marketable securities are expected to be used
for debt repayment when economically feasible until a targeted debt to
capital ratio is achieved.
Three Months Ended Year Ended
June 30 June 30
------------------ ---------------
NET PENSION EXPENSE 2005 2004 2005 2004
--------- -------- ------- -------
Pension plan (income) expense ($0.6) $2.2 ($2.4) $8.8
Other postretirement benefits
expense 1.2 1.4 4.8 7.3
--------- -------- ------- -------
Pre-tax net pension expense 0.6 3.6 2.4 16.1
Income tax benefit (0.5) (1.5) (2.2) (6.3)
--------- -------- ------- -------
Net pension expense $0.1 $2.1 $0.2 $9.8
========= ======== ======= =======
Net pension expense per share $0.00 $0.09 $0.01 $0.42
========= ======== ======= =======
Weighted average diluted common
shares 25.6 23.7 25.1 23.4
========= ======== ======= =======
CONTACT: Carpenter Technology Corporation
Investor and Media Inquiries:
Jaime Vasquez, 610-208-2165
jvasquez@cartech.com