CRS - Earnings call transcript Q3 2018 | Carpenter Technology Corporation

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Operator

Good morning and welcome to the Carpenter Technology Corporation Third Quarter Fiscal Year 2018 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I now would like to turn the conference over to Brad Edwards, Investor Relations. ahead. go Please

Brad Edwards

President Internet forward-looking Damon Good you and excluding Tony is When that sales based that are conference the operator. President to XX, Chief Audia, or on EID. deferrals or over Thene, and pension to excluding will management pension cause discusses made SEC to earnings, Form in and Senior materially to Form year the you Carpenter's unless Speakers December the I the and including filings. management expectations. over welcome discussion, company's margins, the filings presentation call This note Vice income, reference sales XX, in based actual Financial the movement. XXXX, the for slides. this when that XX-Q June discussing Thank and call those noted, today be slide on experience report for excludes differ XX, for revenue, morning, a that surcharge. could current operating from ended the to earnings note interest, by the excludes ended now and in quarters of Chief most XXXX the referring found Please broadcast Executive income Tony. being operating call reference and is those factors attached otherwise Statements by EID. September March with operating statements following Officer. and the earnings Officer; third turn for XX, forward-looking that surcharge those recent exhibits XX-K also XXXX, Carpenter's on presentation call Please can results Risk phone, you, listening also during everyone, along may that quarter on are XXXX. are delay ended statements time When

Tony R. Thene

and today. good everyone on morning Thank you, Brad, to the call

safety of slide and performance. a on X review start our Let's

for X.X XXXX. rate is case total the at year year-to-date Our incident fiscal

We to-date work Carpenter's toward extensive safety, quarter, our diligently year eliminate achieve manufacturing. goal our zero history. that reaching is us performance of the path program keeps fiscal and practices, to This reduce in focused to performance task a and in I errors our best continue reinforces on employee and performance methods quality, Last or injury workplace, on level. program to the mentioned human at our engaging tools,

employees activity they stop that For X,XXX ensure encouraged cards stop of example, action. concepts is Also, a become to in employees the detailed card one corrected. reduction. been the over error the human have performance is of initiated. completing by but this have issued, closure training the to-date, to of and a This who time seem true around and performance assigned potentially to basic, a to fellow is employees environment This action I'm fact principles now plan are by certification empower train engagement by in may empowered a is activity tracked issuing human is stop multiple observed, advocates process, stop is the activity safety them, Every when a to observe unsafe card.

workplace, While commitment we our value, to and this there progress be to is zero done, a have much more made work encouraging injury core not to-date, will waver.

third slide let's review our of to quarter a Now, highlights. turn and X

over strong marked several and financial have The performance last third quarter the the delivered operating quarters. a we continuation of

an and sequential transportation. teams. solutions. defense, We our our positive for is manufacturing drove by our and energy This executing are commercial effort in sales trends customer on indicated each market commercial capitalizing We double-digit of growing and our gains across markets team high-value growth both strategy end-use by as including demand outstanding and aerospace

complex additional our materials capacity has safety Our to strict, environmental, team standards. volumes quality, the of unlock while to maintaining higher manufacturing worked needed and produce

addition In the up consistently and basis every backlog, quarter higher while our our transitioning margin gains, prior defense which Total including mix total to XX% steadily year. up third XX% volume we XX% growth over applications sequential also on expanding by which our sequentially, to during a product are is to posting of driven were aerospace up one compared engines, increased sales last across quarter. XX% sub-markets the and

marked in third sales aerospace addition, quarter quarter In fifth year-over-year growth and consecutive the defense. of the

the of strong. year At X% in demand revenue again quarter of growth count. gas sub-market up XX%. expect increase quarter, market fifth speaks defense market energy this our XXXX year-over-year in the seventh aerospace our consecutive horizontal on in SAO business ,marking since operating XX% basis. up rig to customer having, We we of quarter American gaining performance fiscal the the segment and third for directional success oil consecutive In the and the a best backlog third performance the levels and remain This market, was share. quarter growth once sequentially to end and the end-use and its a perspective, margins and North are deepening outpaced above From delivered relationships,

a drive managing product also mix stronger SAO through our while operating costs. actively to continue We

Our quarter, consecutive increased Amega and profitability oil the the of PEP turndown. beginning business gas West, at another third which solid quarter paced delivered of by sales delivered since its

view well capacity aggressive noted chain. supply the Operating the continued expand for submitted become the call, packages we VAP OEMs has I it that Unlocking with Model. ramp-up materials. billet nickel the had fiscal of qualification last high-demand as as the extended. remained quarter's our directly and focus for Operating corresponds On Model XXXX. times incremental engine critical this and for to specifically, lead year disc tight environment aero facility the to Athens quarter, we for More in the Carpenter During major timed We engine quality ring this Carpenter

continue expedited from grow. aerospace see demand levels as increase request continues to we to OEMs. and earlier, capitalize in backlog seen XX% And sequential on sales, in mentioned increase aerospace major our As continued engine and our to order

I quarter's we progress encouraged on For make continue am qualifications. update, Athens the with this to

During VAP grades OEMs. specific we approvals received the on from quarter, key three two

steps associated smaller that they volumes, progress as meaningful are important are approvals the recent volumes. towards with approvals support more While we

have elevated critical are our We value a the customers deliver to and partner their significantly we success. enabling to

industry see However, and their future. in significant change know needs, will our the we

As know position customers. such, we and invest that strengthen a our chain supply our strategically as partner for we future the and must critical solutions provider for

have we space with the direct aerospace, market make manufacturing production disruptive entry position auxiliary part consumer our free segment expanding us offering capabilities these into increasing recent potential the we and solutions important flow the market the through us the of are acquisition in Our provides and business strengthened rapidly quarter, CalRAM. tremendous strong strategic strategically soft of CalRAM making additive The is This markets in solid our discussed critical the value of generation enable from and the leadership magnetics financial I us our additive electric and vehicles. additive This manufacturing high-value And capacity. given an powder customers enables to will Last manufacturing to investments. to closer of of electronics penetration units in us chain. power offering our part. deliver for moves end-use across to cash now, each investment

and the in an titanium I development the titanium license a recent proposition talk more process. in value maximize to agreement manufacturing innovative in powder efficiencies meltless an manufacturing exclusive entire by for potential about Carpenter additive for manufacturing produce our will our market This asset addition, was production low-cost and powder across with In strengthened minutes. a provides strategy chain. this few

across and record with and to XX% avionics, distribution. the aerospace defense begin quarter. where and of market each led Let's We'll and end-use a increased sub-markets slide aerospace XX% this sequentially sequentially by and Also Sales our level reached update. backlog our move sales increased X defense engines, year-over-year.

submarket quarter's eclipsed XX%. record While bookings engine last our by level

third remain on compared last the sequentially sub-market we increased sales the new During sub-market. in and XX% platforms, participation and expect engine this well-positioned continued engine growth We given quarter, year. solid to XX% our

as Moving chain slightly shows The on adjust to supply of sequentially to platform last fastener the to fastener demand compared remains challenging sales X% forecasting current the were our year. but down where continues but demand, ramps. market long-term pockets sub-market to up

are OEMs restocking increases. of when underlying distribution inventory showing indicator are the driven channels the OEMs price for the manufactured benefits strong our programs of in major the of expanding the at we offerings of continues a and sub-market number where by sub-market, at materials additive time growth increased strong on of Looking potential Performance the despite given interest yet our structural and over is demand expanding additive our to the including the solutions, aircraft. as aerospace market given backlog opportunities a be This key an critical structural sub-market another XXX. XX,XXX is This remains our AXXX in see aero capabilities our used breadth components.

program-specific sub-market demand. sales year-over-year both Finally, sequentially and defense to in increased our due

Moving gas submarkets. offset Total our energy increased increase replacement higher X% generation generation XX% review as a power was than oil oil energy West. gas to and market energy power Amega a sales On due sales activity to a rental XX% primarily the and at basis, year-over-year sales. sales sequentially by declined of and and more in and lower

North submarket American gas market count, share our capturing the horizontal is activity levels consistently and sales Amega oil West mentioned, rise. outpacing directional previously As as and are and incremental rig

and Basin, working which horizontal and increase Today, success service the include Permian activity deep to seeing position West including signs of those tools by we have certain with our risen the more our surprising break to the replacement drilling our gas additive Amega remains service of concentrated our in strong tools bottlenecks and of solutions. are heavily we in innovative oil sign contributors our providers, weighted and Basin. critical Permian solutions, and It's activity relationships the overall the solutions a the major the that bottlenecks improving is in positive for drilling market. at customers artificial manufactured activity production on by While sell life we rent rental not disc strength are an given closely side, of the in developing with providers. Key the business

American historic a us North our that increased in Last and transportation of Looking the only X%. conditions remain materials. light other customers low to increased across industry-wide the Basin, due rose has as expected encountered North American strengthen. largely industry IGT. net generation truck oil last sales. supportive aging continues is be light to Compared more sub-market basis, impacting as in increases North of the fleet are North at product outpaced seeing prior-year remain outside levels budgets delayed, product gas of need to remains to Global America, sales generation sales remain in well support the market we as challenges XXXX the participants. sequentially turbine higher for sustained keep On which below prices quarter recovery industrial subdued turbines X% total the Transportation the activity in the in vehicle prices, demand mind favorable mix activity where in regions. cycle year-over-year positioned other Permian while power conditions shift key our heavy vehicle rising year, The levels. accelerates. our accounts we lower-value replacement sales crude high-temp same for remain meaningfully remains products applications been submarket healthy. have oil and to production year or current multiple for as currently expectation XX% before The America power for Outside week, spending clearly But a

products we offer corrosion, addressing heat as a broad well-positioned remains key of OEM lightweighting. as resistance, challenges suite Carpenter and such However,

penetration in are sales at share the are the in market of we also and and the Europe where Outside work, sedans. China. remain light truck passenger U.S., U.S. expected hard market well-positioned key our segment outpace regions to including increasing We

Moving sequential on last sales to on XX% the X% were compared year. up medical basis and market, to a

at related fire Our was of Dynamet facilities. one our short-term by sequential disruption impacted performance the to the

impact the estimate medical sequentially. of Dynamet XX% Excluding been we would the fire, have up sales

up maintain gains making progress strong as year-over-year the impact growth are cardiology captured further our by lower Our our demand consumer key X% we and product strong portfolio. connections level select increases industrial our by industrial a offset and were at applications, ongoing in in noble of well as deepening relationships In and solutions basis. distributors the consumer X% The the and share with driven sub-markets. OEM on sales. sequential the partially medical end-use for our sales were reflects higher given orthopedic have sequentially titanium year-over-year and We diverse demand for market,

Now, to financial it Damon the for I over will review. turn

Damon J. Audia

Thank Good you, everyone. Tony. morning,

The of execution quarter. improving as the the fiscal Turning third market third through driving year-over-year five We quarter quarter of to well statement generated Operating four We income slide marked commercial operating successful growth as since performance end-use in revenue best our in Model. results X and year improvements our with significant operating income the the our XXXX. summary. delivered fiscal our from benefited on conditions in coupled We Carpenter focus markets. improvement our our strategy

or Although increased business quarter led the corresponding a customers increase SG&A and increased relationships basis, a revenue the reflects with as value X% the medical. offer. million trends among volume, Sales energy XX% year-over-year to in and a solely excluding sales million increased growth certain were we're all XX% on timing basis of gas sub-market. generation share the reflecting new current adverse the in in building excluding power multiple surcharge. a end-use impact strong surcharge XX% favorable surcharge industry through $XXX aerospace a creating on industrial This a as markets, mix. well sequential end-use across proposition recognize companies our $XXX increase while we increase a third $XX.X gain by on sequential million demand expenses. million in basis sales that million, the unique excluding is Net by increased related $XX gain down, it was on On and on in $X.X on turbine capitalizing expenses markets Overall, defense XX% at volume. across

the quarter expense was effectively This of the million. the Operating as For the pension to flat to $XX a of EID. percent be we fourth sales million compared excluding expect with in was income at income quarter, to in $XX our X.X% down X.X% SG&A range associated XXXX. January. third in quarter Operating and facility of quarter was XX% fiscal the quarter the Dynamet the in from negatively impacted second the year the slightly in in fire cost by

up a year-over-year been these percent well have approximately as over $X both sequentially. sales would income costs and operating as as of Excluding million, of XX%

headwinds surcharge In the related certain to addition, customers. raw certain increase the given in for material cost, continued commodity the lag

Our rate $X.X of the effective enacted U.S. includes from continued benefit reported quarter million was the assessment an in impact of the third for tax in XXXX. of rate of tax reform tax XX.X%. that was resulting December income quarter, our The

in Excluding the the would tax special item, rate been our third quarter tax XX.X%. have

For be $XX.X We $X.XX tax quarter, per the XX% reported we in net the income third the of to XX%. expect fourth to rate or in our million range of quarter share.

of have from been in impact $X.XX adjusted of diluted and would the quarter, the was in for Excluding year. share special the quarter earnings fiscal item, $X.XX the year which quarter of tax $X.XX per last up XXXX third the second

to generated third $XX the representing negative $XX second quarter the cash XXXX. million a turning free Now, in flow compared slide the notable of in to of X. We improvement quarter, million

$XX is Our our revenue a a reduction million by shipment the work free quarter. drove performance inventory and the strong flow quarter operations performance. in cash result in The of team volume for ongoing the

$XX levels quarter, a versus which effectively in around Within of reduce ongoing SAO's by XX, we total basis inventory on company inventory the that expect from million efficiencies currently a inventory the June Operating flat as the reduction for would year a on keep basis. further full-year XXXX guidance, a to Carpenter Regarding inventory, demand in and we a Model. expect fourth levels full result increasing our gained

quarters few impact will and our reduction. increase inventory its given the the we Amega offset on expect inventory, this over the However, business in last strengthening demand SAO West the correlating largely

in touch see free up $XX markets. Tony past, million a which on the in in cash we align quarter, part growth million As trends of we Finishing our across opportunities the acquired during said as Also, CalRAM our on inventory capital for with our in we've million and flow, moment. will the expenditures continue during manufacturing, second $XX of XXXX. plans approximately year the in with fiscal $XX line will we end-use quarter, levels quarter spent in spent the to we additive the essentially

to in invest increasingly core our and growth magnetics customers. manufacturing we as our soft look profile to strengthen solutions including an areas and provider continued additive We critical to become growth long-term

to year, $XXX capital the be million of range the expect we to For million. in $XXX expenditures

XX Turning a review balance maintaining our committed capital now slide a remain strong sheet. and brief to of healthy liquidity position to We and structure.

$XXX XX, of total cash million As $XXX we and including March liquidity availability $XX had of our of of credit facility. million million under

$XX have the We million expect that upcoming with cash. to we of debt in maturing repay fourth long-term quarter currently

obligations no debt that we Beyond XXXX. year have maturity, fiscal until

pension plan fiscal no also significant required until year have XXXX. contributions We

Our financial position remains solid.

We sheet next-generation in are generation investing flow and areas. free leveraging focused on growth while cash our balance

operations, on strategically while conditions, and right the future returning to manufacturing our back our our capitalize improve still to current have capital our We directly capacity, in increase invest shareholders. strategy

sequential SAO million slide results. to XX% $XX.X and excluding an of our successful supported $XX basis. on SAO and year-over-year a XX%. net was by strategy representing increase excluding quarter surcharge our turning sales surcharge, million XX sequential Now, $XXX.X delivered of of across On The solid end-use sales $XXX.X solutions-focused million with or or or demand segment increased a execution were the our markets. basis, another increase up million

As both million $XX basis. Operating and second a increased up quarter a Tony sequential up income year-over-year. $X.X our compared was to highlighted, backlog million $X.X and the million, on year-over-year

XX.X% was commodity surcharge the the based into persist performance expenses quarter the quarter. as current quarter. material which, timing continued operating impacted marked fiscal quarter quarter in from year's XX.X% performance down XXXX. and margin year second margin the third quarter in SAO's the This last the fourth compared on in well operating income was of will Operating by since best third lag, to prices, as certain margin of Operating XX% raw

and Carpenter improvements is identified Model Operating important as We capacity, and capture increasingly conditions Carpenter to benefit customer pathways unlock requirements. to which manufacturing given continue The market Model increasing Operating we from to QX SAO most the much we ship fiscal the year solutions mix offer. but focus XXXX those on who customers tons more a and as with complex the value allowed of richer since we

quarter, most backlog. to as fourth our continue Looking growth markets trends across notable in in our to reflected we see of end-use the demand healthy the

income As basis. benefits SAO and we the Model, currently up continue solutions-driven to a to Operating extend share strategy on we increase our Carpenter sequential commercial operating of expect the execute and XX% build to

income Operating On Dynamet The million Now, sixth quarter. performance or West profitable PEP's was net profitable turning rose a overview. On businesses the its the surcharge to increased basis, facilities This in $XXX.X $X to million XX impact for million. strong $X consecutive PEP the approximately the approximately PEP $X coupled one while consecutive sales underlying sequential segment quarter. of for fire quarter cost $X.X related slide million. our $X.X excluding million. quarter, basis, PEP and year-over-year the with X% third sales achieved a the net was the at operating million to of of reflects the Amega

several the job last months, customers an the the process. restoration and exceptional minimizing beginning in impact done Over team both Carpenter our to while the has to

been who see major times everyone team our to well incidents. It's passion. as and you More played has without as to types has in of commitment thank associates. importantly, I want our this in these true for the event safety-related tasks these that people's able the helping challenging minimize any accomplish of a role impact customers

levels West. Looking and a to strong demand at fourth activity quarter, our in products at the for increase we further Amega titanium see expect

of of to while work the customers some continue facility. on however, will, restoration the with our of with increased we the associated deal servicing Dynamet We cost

million growth solutions-focused fourth products. QX. quarter, the broadening in is expect and of our to to execution strong For our markets PEP areas revenue increase our new XX% across the XX% application for summary, versus driving approximately In $X.X approach the income operating we

the back Tony. turn I'll to Now, over call

Tony R. Thene

manufacturing. our and We going to Thank customers firmly that across some you, future believe by Damon. of end-use additive the impacted of in our every industry be is market form

performance change. strategy our meet exploring solutions they as position irreplaceable end-use chain A high grades characteristics Carpenter to markets ability stress, low-oxygen of on evolve design seek of disruptive best to Puris and such provider a the elevate powder all manufacturing is Customers and applications. leading partner our world's and requirements to product's their Our products to additive forefront and ever we be supply first engineered powder resistance, solution. lightweighting, the are placed an actively a at for of manufacturing across mission-critical increasing and high-strength, the specifically X+, withstand we that on temperature, produced premium many ability titanium including Today, for growing being have thermal corrosion variation. additive as relies

Puris qualified better improved have significantly X standard on an fact, designs. currently developing In additive Grade exceeds their and and additive in flexibility focused giving center processes strength parts by goal We XX%, that manufacturing with alloys new more R&D nearly designers levels for manufacturing XD part X+ and of customers. is the our creating exploring additive

process. This a of positions broad CalRAM, the for feedstock provider additive potential addition, of expanding we application a as platforms are leader quarter, February, center manufacturing we the enhanced all who where the of expertise and production part manufacturing hearing of manufacturing after our integration of powder production. acquisition Immediately announced began manufacturing from with capability printing CalRAM, to parts our space capabilities additive significantly an clearly go combining grade will bed customers build from end-use and the by focused allow turnkey to capabilities fusion a a emerging starting metallurgical to customers additive existing through and will our solutions additive vertical to in our the we leader metal In CalRAM we manufacturing Carpenter additive to part. to brings we with markets providing create existing us in offering including powder acquisition of in technology services. customers. recognize processing in additive rapidly growth industry-leading capabilities requirements as our plans the total manufacturing on In each roof, customers' finalizing last range have a key step one under solutions at

an has in recently additive innovative that innovative This strengthened we an it titanium multiple addition, for believe for with entered We other license the additive to the by application number powder titanium report into manufacturing areas. end-use In in position potential process capability markets. applications our of also additive exclusive to cost process. unlock opportunities manufacturing manufacturing the along is tailor will powder an meltless exciting titanium uniquely capability high-performance for substantial agreement that manufacture reductions of across help and that expanding this is

Although as additive evolution prospects commercialization focused total a take industry critical advantage process are of to feedstock crucial a advance on This leader this positioning development and strategy. ability commercialization can final in manufacturing manufacturing. will adoption Carpenter supply. our major in be to we about excited at We approach part position. stage additive some long-term and is its from and leadership growth an its the parts of design time, this and position competitive a further solutions Building component of our remain competitive

Now, let's and comments. closing my slide turn to XX

is During in and the bearing environment performance years execution. operational given third fruit ago quarter, The timed demand markets. we well built the initiated upon through a end-use transformation our is fiscal commercial year-to-date several key robust and strong

are well and are and our (XX:XX:XX) focused share build Our recent solutions our and the overall to and and continuing is Carpenter in as revenue engine and gains. is the relationships, growing approach accelerates. expanding sub-market gas diverse the defense of as aerospace market Activity positioned we across our oil ramp market levels continues on increasing, our benefits cycle upon capture growth is participation our share, backlog. consistently The in market aerospace end-use clear, we customer driving

maximizing the across Operating allow implementation our increasingly This are we environment, overall experiencing capacity Model our execution Carpenter capitalize facilities. and commercial end-use of will the high demand tailwinds our us strong markets. the to on all focused Given across our is on

at quarter, grades key build OEMs extended the robust VAP with received time aerospace rates on a two critical for lead specific we During three approvals industry from the and times.

powder Investing will needed the Puris of into entry for facility acquisition, year, soft incremental our investment immediate provide presence chain technology significantly center, technology the for and our additive of that magnetic transform announced remain through in will acquisition value we secured our strategy. emerging with the our a the and has secured innovative future enhanced titanium element the an the the much manufacturing critical industry. plans that high-growth, state-of-the-art additive launched center, industry in the capacity for technology last to In production have its its manufacturing Athens meltless market space, capabilities, Our high-value the major state-of-the-art license exclusive and a new first the additive industry. announced in titanium CalRAM powder potential a

are the making in significantly ourselves sustainable long-term We investments increasing areas in to a Carpenter strategic and growth growth stronger shareholders. way. every is core for company for value today position

view the to of the value I Thank customers recognize will a it chain as our and Our turn supply and questions. field your brand to attention, us for critical partner. you your back operator

Operator

you. Yes. Thank

begin with question-answer-session. comes today's now will We the And question first from Josh Sullivan Seaport Global.

Josh Ward Sullivan

Good morning.

Damon J. Audia

Good morning, Josh.

Josh Ward Sullivan

quarter here. Nice

on the there XXXs. Airbus the pressure comments taking about has indicated is AXXX. on side, some has on Boeing aerospace making the rates up Just been upward

some is levels even meet How the the those facilities? at particular on or comments in is However, of Carpenter's elevated any SAO there engine suggesting fastener elevated potentially grade out that either with other rates. challenges getting there were PEP to to chain supply capacity those

Tony R. Thene

Tony. last and the the coming the line. have on expedited That's couple two, biggest received on Number orders over over of Well, our we one. that one, increased Number capacity good This Athens couple of we've step is the morning, have our supply A to is up Josh. opportunity that quarters. months, there. legacy across been points so demand last able we've assets we XX especially number

facilities specifically received the Dynamet, And of both for and as two then on short we grades you in for in So, That know, term. our are OEMs. Florida. we've three will capacity in qualifications, specific investing Washington, PA in open Clearwater, enormous up

Josh Ward Sullivan

Great.

we wouldn't to issues. levels, be of if go did your one So, the those capacity

Tony R. Thene

and look why market, think you on line alloys, perfect when that's I I coming specialty right tight Athens is now timing. is Well, a think that at that

our anticipate ability demand. we So, to that meet

Josh Ward Sullivan

going Great. long quarter? the Okay. think demand fire And quarters side, to back take to that expect on should the it's by over then held of to that here? we release medical do couple next How the was this the demand for just one see you

Damon J. Audia

Josh. Yeah,

in mentioned, the right we process were the as midst restoration So, of they now.

normal to As supply with Carpenter going these quarter, volume up what (XX:XX:XX) to in rate. I But we've back be the two process at so next either these the other quarters to of doing running think to two volume. to looked But of over us somewhat elevated alternative to things two come get over alternative start customers, you're working passes and at we're facilities in to that recover sort sources least take but next one mentioned of working last I is interim, quarters, three probably back will potentially sort its service is outsourcing. quarters. going cost again, the to the The another the restoration see for customers to run the to

Josh Ward Sullivan

the of any there Okay. we then what's one Great. look how just last just about qualification thinking or And Is time that period soft should investment? should that one, investment? be timeline the we magnetics at

Tony R. Thene

to to be qualification it online. will sooner. like cycle about two-and-a-half It us minimal. years do bring The that will take We'd

Josh Ward Sullivan

queue. Okay. get Thanks. the I'll back in

Operator

And the Research. comes question from next Longbow Chris you. Thank Olin with

Chris D. Olin

morning. Good Hey.

Tony R. Thene

Good morning.

Damon J. Audia

Good morning, Chris.

Chris D. Olin

patient at been approvals by process, I off start getting know so it's Athens. job. congratulating a those you good just me long Let on

Tony R. Thene

you. Thank

Chris D. Olin

today, the was timeline Athens, can or what is changed of perhaps update terms where EBIT now? quarter of guidance give you rate perhaps your update get these the in how the impact and on operating terms an any we approvals Just in on can

Tony R. Thene

expected our do these Yeah, all we approvals them. at because timeline not change

smaller grade. come by that on reported. thought That's the on we are call end that we Keep last year. progression couple mind in have would those couple the those I we said as of the I fiscal A of as XX%, And from the a our volume incremental say Athens, normal remember is the that, move in You have you as qualification last it standpoint, can which we incremental at and to you that as I field. utilization, the which down cycle what's tell well. about the quarter when is was important about now, speak an utilization it's think a

Chris D. Olin

terms what should I is EBIT terms of about asset And then for of in how right the now? in that think headwind

Damon J. Audia

million call $XX was saying at incremental, was without $XX of cash we've were that that none year, at really rates cost of sort XXs, incremental. running million per the what of that were any cost, (XX:XX:XX), [Chris] million and about (sic) about while we XX. was was low Josh $XX cited, XX, it the of depreciation it and of utilization We that

can you up sort utilization gives of Tony XX in as back around the you So, now. rates being

is You what can delta that into of be. that sort or of what component sort incremental would back

Chris D. Olin

I was into Okay. were if number, seems could more know what maybe the specific And the that impact little be you back of bit some when I early then still terms in and wondering like there. light, referenced you it costs. a I margins was

Tony R. Thene

I'll take one. that

expansion. I I our Athens think not margin overall on Athens it's fair at even to drag these anything is really expansion. say for mean, is margin contributing that rates a

So, something a But to a good it it's date. quite on. of and margins spent talk not positive you this SAO is question we about when a the time bit

back. step a just noted it's already, important I take as you've to to remember, think

Damon as In fact, fiscal But margin. since said we the there best upside that the delivered quarter had segment year the of SAO mentioned a certainly, material is the (XX:XX:XX), lot surcharge lag. raw XXXX. on I just

has complexity customer. to those every mix we year. if got our that of year-over-year and richer, on efforts be one has range. haven't also when of and reduction our of get end increasing about tougher, capacity talk We we know XXX so primarily increase XX% we that timing to get the supplying as about the our basis to-date from been We orders we that where puts And margins focus in the the eliminate a That we those just the that you would expedited your cost want points. two, X% them had you fiscal because by put would gotten certain expenses

it So, that we another product when out are going ways they can't to in sacrifice from to get some our we get source. customers door they the make because for sure cost need it

path So, and on to quickly. if you above fairly Athens take XX% see that as a comes in can line, consideration and you

Chris D. Olin

Airbus. company question the place guess, very about slower been just Dynamet had has in the That's or and how side Okay. Boeing Europe? that especially to the was And looks think specifically, like or what helpful. I'm affected looking mix demand destocking leverage not sure by last fastener on the I between at I taking

Tony R. Thene

normal we patterns the business. Remember on see and We nickel. the fastener produce titanium

been Dynamet, several segment one real as why of any difference. PEP well. is fact, main So, has the the see quarters, not reasons there in over you numbers, the in so last doing the is

see As on now, next we're right out and serve and couple I the to Washington we good over the said, facility the numbers of the medical market, increasing rise coming is primarily capacity the Dynamet them in facility both but quarters. Clearwater

Chris D. Olin

very much. Thank you

Operator

Cowen Thank Company. Khanna from you. question and with comes next And the Gautam

Gautam Khanna

results, Great Thanks. Yeah. guys.

Tony R. Thene

you. Thank

Gautam Khanna

A couple questions.

you your wondering do I seeing why orders, product what I opening in you expand you're think expedited and those were Tony, areas that are other upon up if remarks mentioned, it think these product seeing demand are you pace seeing is suppliers and you and could it Is is in short that just and them. manufacture because of what because products quickening coming the of you or the areas? some was

Tony R. Thene

And do across Good to the and morning, Gautam. times, the that in required. We're of aerospace suppliers market seeing some right? it yes, are many with are supplying lead quality, the has there that extending sub-markets, as not with

to As as said them of on one every calls, right requests. every we're I I those question, manipulate take get and the those process now up our step the some one earlier And of on willing into we to sacrifice costs we said, queue. flow

Gautam Khanna

Okay.

parts, you fasteners mean say to you some (XX:XX:XX) airframe, everything? areas, sub the jet it's to engines all So, structural across when to

Tony R. Thene

Yes. primarily... (XX:XX:XX) But it's

Tony R. Thene

and aero Yeah, side. aero primarily on engine structural the engine,

Gautam Khanna

that quarters. over aerospace it's it is up you the And then much? up to is in the suggesting response you out in And next to market? sort sure, that Okay. about market, fastener what Chris's said going a make follow seeing were quantify Could you on like sequentially. fasteners fastener or of I how want accelerate comments question, it you sounded Dynamet are was that to two medical to the of your like product

Tony R. Thene

going down when Dynamet specifically, And question, to the were medical forward, your Yeah. primarily sequentially. we X% talk up We about see us, in year-over-year. and fasteners side. is business I we're we of for fastener Good about but were second aero majority why question. capital On about part a X% Dynamet on aerospace growth solid of is that the to obviously, investing your the X%

Gautam Khanna

for Any year-on-year that why Okay. business basis a with on can is the a aero subdued? come explanation you fastener little more bit

Tony R. Thene

the I anything for as don't think there specific as us, is year-over-year. Gautam, there far

Gautam Khanna

up Okay. for or And was clarify, related you've normally, we comment but company June a being sequential, then opening quarter, backlog think and the a industry. pretty pattern usually backlog entire that to I was SAO? And seasonally to that in due by September we How reduction your the in at followed enter September in kind about the to you your given portend seasonal remarks it another the which to, wanted might like of X% seems it sharp made then it's that, strong seasonality guided normal about quarters? quarter year should a this December in comments less

Tony R. Thene

about Yeah, quarter. I this talked briefly last

might during are there I there there capacity. quarter, it's I where that right? continually shutdowns, days but the is as in up months. as working can. we're is be to in open running we a summer quarters understand to be that certain We're fast going standpoint, seasonality all think that understand many from how about I seasonality Europe

As orders. expedited I continue get said, we to

any many the us, how there how and for quarter is that are quarter. means seasonality So, in days other different from

Gautam Khanna

but – the associated the remember line and the that say will decline (XX:XX:XX) margin. terms year different, impacts number versus to ability a in Carpenter's safe Is September sequentially number, then, times that typically, don't at XX% of less decline? dramatically produce. mean, September June in be of days are the of it Because of this is I on then with terms around I And top exact to

step-down historically. than wondering going be to a that lot what we see is less just if I'm So,

Damon J. Audia

Tony for us, quarter, quarter a maintenance some into impact we during year-over-year go fiscal I sort that of as that the operational, our go impacts fourth in have market to we as talked through. talked from our has preventative we past we we do reduced QX some And think, about Remember, see and first QX. the

holiday, through of summer go period asset. not So, time through we're as go we we that really utilizing the a

period did seen and thus, what we differences, on may stronger we traditional a though holidays, be which has quarters here, nothing there other even do of impact have there's a our unique than increases market last to downtime the demand we've first margin. But quarter first year. negative So, beyond (XX:XX:XX) costs the really than

Gautam Khanna

please last one go And one. Yeah, Tony. ahead,

Tony R. Thene

the question before The And aerospace, what is sequential total I that. omitted sequentially. Carpenter. of the your X% on total mentioned is I that. want backlog Carpenter is up growth just XX% I to backlog answer

Gautam Khanna

Oh.

it for in Last the out When XX% you there. bogey way that. progressing like you (XX:XX:XX) Thank you're possible, I because quarter? think the realistically what alluded you Okay. is soonest to of mean, one, SAO kind do well. seems that's

achievable. not without is You've – eight kind curious of you I'm to think I'm away it. quarters you is cooperating. four best just just turned Demand wonder to are do the going quarters away? hold guess we I what What's obviously your corner. from that,

Tony R. Thene

Yeah, today reasonable even against bumping drag. believe the the we're this a running XX% think I XX%. end think then to get year, if you'd right level up doable I calendar I depends can That's I it Athens on the now. range the by Athens, right? be of Athens So, with we in mean,

get to Athens it's a get get not a track let's point on the So, X% that reduction. margin. variable and on back let's negative that And cost

at think right I you're XX%.

Gautam Khanna

Okay. appreciate really Thanks, Great guys, news. it.

Operator

from the next Capital. you. Phil And Thank question Gibbs KeyBanc with comes

Philip N. Gibbs

Good Hey. morning.

Tony R. Thene

Good morning.

Damon J. Audia

Good Phil. morning,

Philip N. Gibbs

on a engine question Had jet specifically. the business

pretty on year-over-year? comparison was Tony, you but think mentioned I that it was strongly any quarter-on-quarter, up color, what

Tony R. Thene

XX% you so up year-over-year. can sequentially, I XX% year-over-year, was XX% it that tell

Philip N. Gibbs

I specifically lot where on you that? the of qualified of and Perfect. contract. most know probably And on products a seeing under then Okay. you're your to expedites, Because that also are likely commentary some the you're

fact would lot the in terms be your and you under a expedites seeing business of program-based agreements. level under of given So, help that why contract of understand me the is

Tony R. Thene

When as all customers, we you don't to have Phil, of XXX% always know, sell, we those share.

effectively they when those in today shortfall we're in share areas. it's products have those Whether our producing a to the to times, we're lead or So, step and due in quality market increase market. able

Philip N. Gibbs

of fastener in the of that color outside how the of any faring Okay. structural year-over-year? on terms then is business And Perfect. business aerospace side

Tony R. Thene

I you take the think year-over-year, On together them numbers combine avionics XX%. I and year-over-year – looking we – structural at the just structural are fasteners – quick if side, real up mean, and I'm

Philip N. Gibbs

Perfect. a is deeper say do XX% the when of side, Athens the Okay. you mean do to the to little XX% XX% And XX% Athens, then on or you incremental you of XX% capacity? just dig mean bit capacity

Tony R. Thene

mean, of I the XX% XX%.

Philip N. Gibbs

from a coming know incremental the to to of gas, mix Because but first ramped starting are the here? of most right lot up, is I that were that Where and you now? you getting tailored Okay. when texturize was oil

Tony R. Thene

down now required, aerospace Yeah, there VAP VAP aren't some specific move materials we're approvals so are to we'll that not or on Athens. down that making

As Athens move we continue to pick up approvals, to well. we will as

there So, being today. is Athens aerospace at material run

Philip N. Gibbs

Thanks. about basically, gen, entire seeing look color U.S. And your comment a and me I'm I I less international, strength and last the little appreciate a here bit terms not are oil gas just side. when here pickup question you're the gas the the positioning in itself. for And is so the and abroad of and rig a power count maybe customers. and domestically. maybe then seeing on business that. just between there Clearly you some basket. you be what on general more Okay. strength balanced seeing talking what know see at component out oil perhaps and we inventory where can your from in

Tony R. Thene

Amega Thank is the specifically Phil. sales I American for basin. North Yeah, mean, you, Okay. us, Permian West primarily a business

is lagging really The the I my are bit. growth. what's think comments, have said that in So, might as side, driving I been a international

supplying you just of stay there. have now, the can staying price I oil let see we're consistent North see American bit Damon question. think a to I'll tell right activity to busy awfully take you're market. I the But any the inventory going type more to

Damon J. Audia

field correct? do what see the inventory customers' for Is think levels. I the is we in question So, your more that

Philip N. Gibbs

Yes, correct.

Damon J. Audia

we've more being versus us at as sales they're So, side last their West But West inventory you rebuild heard manufacturing Amega would what some the quarters, you've the we couple of Amega again, I of of starting activity talk tell at a seen from from cautious. hear slow over rental the the customers side levels and to is side. on pace. that least the are house,

quarter Over seeing West is have my alluded inventory, service demand in we in to to tools ultimately, the rental so, on but Amega side, building sell plus comment the for sales the I into manufacturing on that more coming or do side, not marketplace. what about which they the as are you more last the only as the

getting be but stronger So, of appears to market cautious at more a pace.

Philip N. Gibbs

lot I (XX:XX:XX) industrial Thanks, titanium. headlines you're certain that guys. seeing but point be concerns and chain we're into have pretty of some any know or do some know the broad these point But I there would to up, negative, from a you're titanium from that. anything But disruptions have Is from that have that geopolitical or anything of supply impact, in you or I helpful heard you the they gone positive Russian maybe prices can probably anything can just .Thanks. some aerospace to customer seeing? situation? off-contract guys hedged that terms

Damon J. Audia

contingency are have and situation actively, again, questions, If we've plans a as talked don't out with you Phil. place and to the most to ask of our already us. side. lot they mean, the material there, Carpenter. disruption. to I things no report on we Yeah, obviously, to and there Nothing a we monitor And feel impact our going suppliers, be said from but reviewed direct have in do, real they

far. So, we okay we here sit so feel as again, today,

Philip N. Gibbs

Thank you.

Operator

And you. Josh with Sullivan follow-up from Global. we have Seaport next, a Thank

Josh Ward Sullivan

a seen supply even inspections testing, any given manufacturing And level? (XX:XX:XX) increased engines? CFMXX next-generation I the or the requirements nondestructive at had chain question the you with or increased just engine on ultrasonic have happened any seen what just have recently the on, with you on

Tony R. Thene

we But not any that requirements come seen out additional Well, specific the today. Josh, very of incident. industry obviously, is strict have

very I early think it's still days.

Josh Ward Sullivan

you. Thank Okay.

Operator

present I are like for turn comments. Edwards closing there Thank no the Brad as any call time, more would the at to questions to And you.

Brad Edwards

all quarter Thanks, call. again day. earnings call. conference forward third Keith, to Have and great you on a with thanks, everyone, for fourth joining look quarter We us our speaking on our

Operator

presentation. you. now has for you attending concluded. today's Thank conference The Thank

You disconnect. now may

Carpenter Technology (CRS) 26 Apr 182018 Q3 Earnings call transcript