Exhibit 99
Carpenter Technology Reports Record Quarterly Results
WYOMISSING, Pa.--(BUSINESS WIRE)--April 24, 2006--Carpenter
Technology Corporation (NYSE:CRS):
-- Record net income of $60.8 million - up 72% from a year ago
-- Record revenues of $426.0 million - up 25% from a year ago
-- Aerospace market sales increased 80% to a record high
-- Record international sales accounted for 33% of total sales
Carpenter Technology Corporation (NYSE:CRS) today reported record
quarterly sales and net income. Results were led by strong demand for
aerospace materials and by the Company's continued focus on cost
through lean and variation reduction.
Net sales for the third quarter ended March 31, 2006 were $426.0
million, compared with $342.1 million for the same quarter a year ago.
Net income in the third quarter was $60.8 million, or $2.32 per
diluted share, compared to net income of $35.3 million, or $1.38 per
diluted share, a year ago.
Free cash flow in the third quarter was $53.3 million, compared
with $46.1 million in the quarter a year ago.
Year-to-Date Results
Net sales for the first nine months of the current fiscal year
were $1.1 billion, compared with $951.8 million for the same period a
year ago.
Net income for the first nine months of the current fiscal year
was $143.8 million, or $5.51 per diluted share, compared with net
income of $87.6 million, or $3.48 per diluted share, for the same
period a year ago.
Free cash flow for the first nine months of fiscal 2006 was $95.8
million, compared to free cash flow of $88.7 million for the same
period a year ago.
Third Quarter - Operating Summary
"Record quarterly results were achieved primarily due to robust
demand from the aerospace market for our specialty alloy and titanium
materials, and our ongoing focus on operational excellence," said
Robert J. Torcolini, chairman, president and chief executive officer.
"Our growth in the aerospace and other key markets reflects our
strategy to develop and produce materials that are valued for their
performance characteristics.
"For the quarter, aerospace sales reached a record level and
accounted for 43 percent of total sales. Sales of our higher value
materials also benefited from favorable market conditions in the
medical and power generation markets.
"I am pleased that a continuous refinement of our business
operating model has proven effective in enabling us to generate
returns above our cost of capital. We will continue to improve upon
our operating model so that we can build shareholder value through all
phases of a business cycle."
For the third quarter, Carpenter's sales increased 25 percent
compared to a year ago. Sales in the most recent quarter benefited
from increased sales of higher value materials, especially to the
aerospace, medical and power generation markets, and higher base
selling prices. Adjusted for surcharges, sales increased 26 percent
from the third quarter a year ago.
Sales increased in several key end-use markets during the third
quarter versus the same quarter a year ago.
Aerospace market sales increased 80 percent, which reflected
strong demand for specialty alloys and ceramics used in the
manufacture of jet engines, and titanium used in the manufacture of
structural components. Demand for aerospace materials was particularly
strong due to the number and models of aircraft being built. The new,
wide-body aircraft typically require a greater use of lighter-weight
materials such as titanium.
Medical market sales increased 40 percent primarily as a result of
a richer product mix, growth in international markets, and increased
selling prices.
Sales to the power generation market increased 10 percent.
Adjusted for sales of a divested business, sales to this market
increased 30 percent in the third quarter compared to the same quarter
a year ago. The increase reflected solid demand as a result of
industrial gas turbine new build and maintenance activity.
Sales to the consumer market were up 6 percent compared to a year
ago. An increase in sales to the electronics, sporting goods and
housing markets was tempered by the intentional reduction in sales of
marginally profitable products.
Sales to the automotive and truck markets decreased 7 percent. An
increase in sales of higher value materials for the heavy duty truck
market was more than offset by lower sales of materials used in engine
components and in general applications.
Industrial market sales decreased 10 percent as higher sales to
the energy market were offset by reduced sales of materials to capital
equipment manufacturers.
Geographically, sales outside the United States increased 48
percent from a year ago and represented 33 percent of third quarter
sales. International sales reflected strong demand for higher value
materials, particularly in the aerospace and power generation markets.
Carpenter's third quarter gross profit increased 46 percent to
$124.1 million, or 29.1 percent of sales, from $85.2 million, or 24.9
percent of sales, in the same quarter a year ago.
The 420 basis point increase in the gross profit margin reflected
a richer product mix, driven primarily by demand for higher value
materials from the aerospace, power generation and medical markets,
reduced sales of marginally profitable products, and higher base
selling prices. Margins also benefited from the ongoing lean and
variation reduction initiatives.
Carpenter's third quarter operating income increased 63 percent to
$92.3 million, or 21.7 percent of sales, from $56.6 million, or 16.5
percent of sales, a year ago. The increase resulted from improved
gross margins and diligent management of selling and administrative
expenses.
Outlook
"Our operating performance through the balance of this fiscal year
should benefit from the momentum in the aerospace market, as well as
from the strength in other key markets," Torcolini said. "We are
focused on leveraging these opportunities through our continuous
efforts in lean and variation reduction in order to further enhance
margins.
"In the past quarter, J. Michael Fitzpatrick joined the company as
vice chairman from the Board of Directors. Mike is leading a team of
dedicated internal and external resources focused on developing
alternative market and business strategies to further improve
long-term shareholder value."
Despite volatility in order patterns characteristic of a tight
supply chain, Carpenter expects that its current fourth quarter
operating performance will show year-over-year improvement.
Also, Carpenter continues to estimate that its free cash flow will
exceed $150 million for fiscal 2006. The estimate was confirmed
despite increased working capital requirements caused by a higher
value mix and by additions to inventory needed to support higher
sales.
Segment Results - Third Quarter
Specialty Metals
Net sales for the quarter ended March 31, 2006 for the Specialty
Metals segment, which includes Specialty Alloys Operations (SAO),
Dynamet, and Carpenter Powder Products (CPP) business units, were
$400.3 million, compared to $311.1 million in the same quarter a year
ago.
SAO sales increased 28 percent from the same quarter a year ago.
The increase was due primarily to increased demand for higher value
materials from the aerospace, power generation and consumer markets,
and higher base prices. SAO volume was flat with the same quarter a
year ago. Increased volumes across several key end-use markets were
offset by lower shipments to the automotive and industrial markets and
the reduction in the sale of marginally profitable products.
Dynamet's sales increased 65 percent in the third quarter versus a
year ago. Robust demand from the aerospace market for materials used
in structural fasteners, continued growth in the domestic and
international medical markets, and higher base selling prices were
principally responsible for the sales growth. The sales increase also
reflected significantly higher titanium costs.
CPP's sales were 8 percent lower than a year ago. Increased sales
to the industrial market were more than offset by reduced sales to the
automotive market and the reduction in the sale of marginally
profitable products.
Operating income for the Specialty Metals segment was $93.1
million, compared to $52.6 million a year ago. The increase in
operating income reflected increased sales of higher value materials,
higher base prices and a continued focus on operational improvements.
Engineered Products Segment
Net sales for this segment, which includes sales of fabricated
metal and ceramic components, were $26.3 million, compared to $31.9
million a year ago. Last year's third quarter included $6.2 million in
sales from a business that was divested in the fourth quarter of
fiscal 2005. Higher sales to the automotive, aerospace and consumer
markets were the primary contributors to the increased sales.
In the third quarter, operating income for the Engineered Products
segment was $4.3 million compared to $5.6 million in the third quarter
of 2005. The decrease is primarily attributable to lower operating
income in the ceramics business and the absence of operating income
from the divested business.
Segment Results - Year-to-Date
Specialty Metals
Net sales for the first nine months of fiscal 2006 for the
Specialty Metals segment were $1.0 billion, compared to $858.6 million
for the same period a year ago.
SAO sales increased 19 percent from the same period a year ago due
to solid demand for higher value materials from the aerospace, power
generation and medical markets, and pricing actions. SAO volume
decreased 12 percent from the same period a year ago due to the
intentional reduction in the sale of marginally profitable products
and lower shipments primarily to the industrial, consumer and
automotive markets.
Dynamet's sales increased 61 percent during the first nine months
of fiscal 2006 compared to the same period a year ago. Robust demand
from the aerospace market, continued growth in the domestic and
international medical markets, and higher base selling prices were
principally responsible for sales growth.
CPP's sales were 13 percent higher than a year ago due to higher
selling prices, stronger demand from the industrial market, and a
better product mix.
Operating income for the Specialty Metals segment was $217.4
million for the first nine months of fiscal 2006 as compared to $125.5
million for the same period a year ago. The increase in operating
income reflected increased sales of higher value materials, higher
base prices, and continued operational improvements.
Engineered Products Segment
Net sales for the Engineered Products segment through the first
nine months of fiscal 2006 were $76.6 million as compared to $95.6
million for the same period a year ago. Sales in the first nine months
of fiscal 2005 included $23.1 million from the business that was
subsequently divested. This group of companies experienced increased
sales to the automotive, aerospace, and power generation markets, and
higher base selling prices.
Operating income for the Engineered Products segment was $13.7
million compared to $16.4 million during the first nine months of
fiscal 2005. The decrease is primarily attributable to operating
income from the divested business included in the first nine months of
fiscal 2005.
Net Pension Expense
In the third quarter of 2006, Carpenter had pre-tax net pension
expense of $2.7 million. This was partially offset by the favorable
tax effects of Medicare Part D, which resulted in net pension expense
of $0.06 per diluted share. This compares to pre-tax net pension
expense of $0.6 million, or less than $0.01 per diluted share, for the
same quarter a year ago.
The increase in the net pension expense in the third quarter of
fiscal 2006 primarily reflects a decrease in the discount rate from
6.25% to 5.00%.
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 third quarter of fiscal 2006, selling and administrative
expenses were $31.8 million, or 7.5 percent of sales, compared to
$28.6 million, or 8.4 percent of sales, in the same quarter a year
ago.
For the first nine months of fiscal 2006, selling and
administrative expenses were $89.7 million, or 8.0 percent of sales,
compared to $85.9 million, or 9.0 percent of sales, for the first nine
months of fiscal 2005.
Interest expense for the quarter of $5.9 million was unchanged
from the third quarter a year ago. For the first nine months of fiscal
2006, interest expense was $17.8 million compared to $17.6 million in
the same period a year ago.
Other income in the quarter was $4.0 million compared to $2.4
million in last year's third quarter. The increase in other income is
primarily due to increased interest income from higher balances of
invested cash. For fiscal 2006 year to date, other income rose to
$15.8 million from $7.7 million for the comparable year ago period.
The increase in other income is due primarily to increases in interest
income from higher balances of invested cash and foreign exchange
gains.
Carpenter's income tax provision in the recent third quarter was
$29.6 million, or 32.7 percent of pre-tax income, versus $17.8
million, or 33.5 percent, in the same quarter a year ago. For the
first nine months of fiscal 2006, Carpenter's income tax provision was
$74.0 million, or 34.0 percent of pre-tax income, versus $39.8
million, or 31.2 percent, for the same period a year ago. For the
first nine months of fiscal 2005, Carpenter's income tax provision
benefited from a $4.5 million favorable settlement of an outstanding
tax matter.
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 third quarter was $53.3 million,
compared with free cash flow of $46.1 million in the third quarter a
year ago. Through the first nine months of fiscal 2006, free cash flow
was $95.8 million, compared to $88.7 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.
Conference Call
Carpenter will host a conference call and webcast today, April 24,
at 10:00 AM, Eastern Time, to discuss the results of operations for
the third quarter of fiscal 2006.
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,
2005, its subsequent Form 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, industrial, automotive, consumer, medical and
power generation, 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 Nine Months Ended
March 31 March 31
--------------- ------------------
2006 2005 2006 2005
------- ------- --------- --------
NET SALES $426.0 $342.1 $1,117.7 $951.8
Cost of sales 301.9 256.9 808.2 728.6
------- ------- --------- --------
Gross profit 124.1 85.2 309.5 223.2
Selling and administrative expenses 31.8 28.6 89.7 85.9
------- ------- --------- --------
Operating income 92.3 56.6 219.8 137.3
Interest expense 5.9 5.9 17.8 17.6
Other income, net (4.0) (2.4) (15.8) (7.7)
------- ------- --------- --------
Income before income taxes 90.4 53.1 217.8 127.4
Income taxes 29.6 17.8 74.0 39.8
------- ------- --------- --------
NET INCOME $60.8 $35.3 $143.8 $87.6
======= ======= ========= ========
EARNINGS PER COMMON SHARE:
Basic $2.39 $1.43 $5.67 $3.60
======= ======= ========= ========
Diluted $2.32 $1.38 $5.51 $3.48
======= ======= ========= ========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 25.3 24.4 25.2 24.0
======= ======= ========= ========
Diluted 26.1 25.4 25.9 25.0
======= ======= ========= ========
Cash dividends per common share $0.15 $0.10 $0.45 $0.2825
======= ======= ========= ========
PRELIMINARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Nine Months Ended
March 31
-------------------
2006 2005
--------- ---------
OPERATIONS:
Net income $143.8 $87.6
Adjustments to reconcile net income to
net cash provided from operations:
Depreciation 34.1 35.0
Amortization 1.4 2.8
Deferred income taxes (3.0) 17.7
Net pension expense 8.1 1.8
Net loss on asset disposals 0.3 0.3
Changes in working capital and other:
Receivables (40.2) (30.3)
Inventories (34.0) (38.7)
Other current assets 7.2 (4.0)
Accounts payable 7.8 15.3
Accrued current liabilities 4.3 21.5
Other, net (8.2) (4.2)
--------- ---------
Net cash provided from operations 121.6 104.8
--------- ---------
INVESTING ACTIVITIES:
Purchases of plant, equipment and software (13.7) (8.8)
Proceeds from disposals of plant and equipment 0.3 0.6
Purchases of marketable securities (271.1) (138.8)
Sales of marketable securities 312.7 69.1
--------- ---------
Net cash provided from (used for) investing
activities 28.2 (77.9)
--------- ---------
FINANCING ACTIVITIES:
Net change in short-term debt -- (1.3)
Payments on long-term debt (0.2) --
Dividends paid (12.4) (7.9)
Proceeds from issuance of common stock 12.4 46.1
--------- ---------
Net cash (used for) provided from financing
activities (0.2) 36.9
--------- ---------
Effect of exchange rate changes on cash and cash
equivalents 1.1 (2.3)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 150.7 61.5
Cash and cash equivalents at beginning of period 163.8 76.6
--------- ---------
Cash and cash equivalents at end of period $314.5 $138.1
========= =========
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
2006 2005
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $314.5 $163.8
Marketable securities 65.0 106.6
Accounts receivable, net 232.7 193.4
Inventories 262.1 228.6
Deferred income taxes 8.5 7.4
Other current assets 22.6 31.8
----------- ----------
Total current assets 905.4 731.6
Property, plant and equipment, net 548.0 569.2
Prepaid pension cost 248.0 250.8
Goodwill 46.4 46.4
Trademarks and trade names, net 20.4 21.1
Other assets 33.5 34.3
----------- ----------
Total assets $1,801.7 $1,653.4
=========== ==========
LIABILITIES
Current liabilities:
Accounts payable $141.0 $133.4
Accrued liabilities 119.9 115.5
Current portion of long-term debt 0.2 0.2
----------- ----------
Total current liabilities 261.1 249.1
Long-term debt, net of current portion 333.2 333.7
Accrued postretirement benefits 102.9 108.5
Deferred income taxes 189.3 192.5
Other liabilities 46.1 45.4
----------- ----------
Total liabilities 932.6 929.2
----------- ----------
STOCKHOLDERS' EQUITY
Convertible preferred stock 18.3 19.7
Common stock 132.1 129.7
Capital in excess of par value - common stock 290.2 278.1
Reinvested earnings 485.9 354.5
Common stock in treasury, at cost (36.0) (35.8)
Deferred compensation (5.7) (9.2)
Accumulated other comprehensive loss (15.7) (12.8)
----------- ----------
Total stockholders' equity 869.1 724.2
----------- ----------
Total liabilities and stockholders' equity $1,801.7 $1,653.4
=========== ==========
PRELIMINARY
SEGMENT FINANCIAL DATA
(in millions)
Three Months
Ended Nine Months Ended
March 31 March 31
--------------- -----------------
2006 2005 2006 2005
------- ------- --------- -------
Net sales:
Specialty Metals $400.3 $311.1 $1,042.5 $858.6
Engineered Products 26.3 31.9 76.6 95.6
Intersegment (0.6) (0.9) (1.4) (2.4)
------- ------- --------- -------
Consolidated net sales $426.0 $342.1 $1,117.7 $951.8
======= ======= ========= =======
Operating income:
Specialty Metals $93.1 $52.6 $217.4 $125.5
Engineered Products 4.3 5.6 13.7 16.4
Corporate costs (7.2) (5.3) (18.7) (15.3)
Pension earnings, interest &
deferrals 2.6 3.7 7.8 11.1
Intersegment (0.5) --- (0.4) (0.4)
------- ------- --------- -------
Consolidated operating income $92.3 $56.6 $219.8 $137.3
======= ======= ========= =======
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, 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."
PRELIMINARY
SELECTED FINANCIAL MEASURES
(in millions, except per share data)
Three Months Nine Months
Ended Ended
March 31 March 31
------------- ---------------
FREE CASH FLOW 2006 2005 2006 2005
------ ------ ------- -------
Net cash provided from operations $60.7 $52.4 $121.6 $104.8
Purchases of plant, equipment and
software (3.5) (4.0) (13.7) (8.8)
Proceeds from disposals of plant and
equipment 0.3 0.4 0.3 0.6
Dividends paid (4.2) (2.7) (12.4) (7.9)
------ ------ ------- -------
Free cash flow $53.3 $46.1 $95.8 $88.7
====== ====== ======= =======
Free cash flow is a measure of cash generated which management
evaluates for alternative uses.
Three Months Nine Months
Ended Ended
March 31 March 31
------------- ---------------
NET PENSION EXPENSE 2006 2005 2006 2005
------ ------ ------- -------
Pension plan expense (income) $1.5 ($0.6) $4.5 ($1.8)
Other postretirement benefits expense 1.2 1.2 3.6 3.6
------ ------ ------- -------
Pre-tax net pension expense 2.7 0.6 8.1 1.8
Income tax benefit (1.3) (0.5) (3.8) (1.6)
------ ------ ------- -------
Net pension expense $1.4 $0.1 $4.3 $0.2
====== ====== ======= =======
Net pension expense per share $0.06 $0.00 $0.17 $0.01
====== ====== ======= =======
Weighted average diluted common shares 26.1 25.4 25.9 25.0
====== ====== ======= =======
Grouping these retirement benefits together, and discussing
changes in this volatile net expense is helpful in analyzing the
operational performance of the company.
CONTACT: Carpenter Technology Corporation
Investor and Media Inquiries:
Jaime Vasquez, 610-208-2165
jvasquez@cartech.com