CRS - Earnings call transcript Q3 2020 | Carpenter Technology Corporation

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Operator

Good day, and welcome to the Carpenter Technology Corporation Third Quarter Fiscal 2020 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Brad Edwards, Investor Relations. sir. ahead go Please

Brad Edwards

broadcast Good Conference and third Call XXXX. also March operator. presentation along Carpenter slides. quarter to Technology XX, being is call Earnings for This the morning, you, Internet welcome with everyone, the ended over Thank the fiscal

those Chief listening Executive Tony are and note, Vice Officer. time and you Chief a and by Thene, may Tim President today for Please in the slide call phone, experience Officer; Lain, delay Financial movement. of you Speakers on President

for Statements Risk earnings in statements found the ended forward-looking XX-Q XXXX those made recent to presentation that XXXX, Form ended XX, quarters are and the based those management during to year be by and SEC this could Carpenter results are the the Form Technology's filings including December for June filings. on factors actual XX, from can company's September forward-looking XXXX report attached current XX, cause most materially expectations. exhibits differ XX-K on statements that

also otherwise operating sales surcharge. noted, following reference margins, when discussion and to that on excluding note income unless is excludes operating sales discusses revenue that based or the management that Please When surcharge. referring in

turn I over will the to now Tony. call

Tony Thene

today. morning everyone good and are Brad you, Thank you on I the and and to call safe. hope well families your

slide Let's performance. begin X, on a review safety of our

to and our were focus With the across able extremely cornerstone our employees The over with X.X an protecting third we a immediate quarter the that mindset, company hard culture. workplace dropped five their the of make in case XXXX. total goal injury to or a year pandemic, We've is rate locations. embedded our Our of facilities. worked families TCIR COVID-XX incident zero years to of our quickly respond fiscal on clean of all safety last to

essential material viable know solutions sole our more period. proven fully in Technology manufacture it and continue iron making more the important cases of Let's some an the is talk products. and turn business challenging we applications, and slide as source during to role production actions. whether We in to this about Carpenter operate next with us continued essential molybdenum, especially to understand our critical for

remote and actions access as to personal hygiene, total social deeper took our We working, response facilities. But immediate enhanced is such limiting and distancing our pandemic complex. much

pillars, on terms have We which facilities of game manufacturing four and in focused safely changers are during the operating pandemic.

during rapid in safely the The is response on to of of disciplines spend operating first our up the multiple facilities XXX% focused crisis. made COVID-XX employees their time, team

and self-isolation of The team second any paid they to a is deemed if self isolation. meet the necessary, they are medical report criteria, to employees placed robust all a on self-reporting detailed if XX-day program. require our We self

employees, to contractors a fourth that working consists between fundamental of everyone acts separation guys. boundaries on is department defined and transmission zone modularized within strict and within settlement for The third site, a a circuit is two and shifts screening shift. area principles. full two, or shift. a provide pod breaker as delivery temperature The The pod One,

of to able implemented employees. have we while keep safety providing Extensive work our related operating, safety our each been for unparalleled protocols instructions the deep culture, Because has and Technology's Carpenter been pillars. of facilities for protections four

review Now the performance. to of third a and X quarter let's slide turn

and strategic safely apart work reliable Carpenter Our during It significant sets global and reinforces for pandemic other as a from a was advantage a our resilient ability supplier. position Technology. to act quickly and us companies

a third share the earnings commercial challenging manufacturing quarter, Those and were strong results $X.XX. achieved For driven of in we per by execution environment.

with of included of a XX.X%, Despite operating the delivered COVID-XX. a consecutive above for alloy headwinds $XX.X of approximately $X.X income the margin operating quarter specialty from million quarter margin million operating impact negative the XX%. Our fifth

In In submarket we quarter. aerospace end-use as increased during and obtained VAP customer In market the meaningful markets the Defense another regarding increased our addition, sequentially. XX%. end-use approval consistent the year-over-year, at Aerospace engine while remains sales medical approvals facilities sales XX% Athens engagement increased X%

year-over-year close first to highs, still time X%. quarters Although historical down backlog XX for decreased the in

of Our ability helped offset the orders in to pull halt XXX and impact MAX production the COVID-XX.

to COVID-XX impacted. patterns end-use forward However, demand the all as progressed, be pandemic across markets began

Tim initiatives and we end, on financial portfolio more details cost portfolio our to no we continue order reduction mistake, our environment strong implemented we balance remarks. that during To maintain liquidity strong in by and and challenging as the the navigate COVID-XX. liquidity preserve enhance targeted Make moves will sheet. restructuring our will to position his have caused provide flexibility

X market to explaining as which end-use discussion brief discuss I I details quarter third focus let's move of the the primary update. in minute. today's on the be will a slide will Now forward outlook is market in market

of Looking market, solid the which compared XXX year increased our to X% the were soft our the at in sales and was end-use quarter, sequentially. and in slowdown quarter supply MAX. and up aerospace to XX% the X% first related given Aerospace sales accounts for last Overall, Defense performance chain

North and to market, Medical light and Transportation down in the end-use the impacted for sales the sales year-over-year truck up accounts as end-use only the of total well XX% our market. both the in which flattening by lower on sequentially. and sales of quarter, sales up accounts around of were heavily American Moving as X% vehicle heavy-duty market Activity the were sequentially. XX% for quarter sales globe X% year-over-year The

quarter, and COVID-XX sales consumer consumer gas end-use semiconductor just in the but The X% rapidly oil X% accelerated the demand strength the moving year-over-year, and and continued of total in account third to market, year-over-year. a in to volumes. quarter industrial sequentially due the Now Energy downturn which end-use In higher and were X% XX% to due oversupplied down revenues market, combination electronic. by increased the the sales declined for of

Tim over financial to it turn for I'll review. the Now,

Tim Lain

on statement everyone. third the lower X% sales volumes. in a to the $XXX.X X% Thanks, excluding quarter X% ago, volume. slide Compared sequentially third I'll Net million Sales summary. Good totaled higher $XXX sales X% were surcharge sales morning, excluding on year Tony. quarter surcharge start and decreased income X, on the increased million.

As strong in in of as related out enhanced shut our is performance markets, given forced quarter challenges Europe review covered their shipments in to reflected aerospace to This offset were faced the and COVID-XX. unable measures in get due pandemic. certain customers we his results down both particularly, of growth facilities of in markets. the weakening impacted by on demand they ability operations, deliveries late a sales end-use in result The Tony year-over-year impact were the our mills the to safety Energy the to Transportation as the significant as implemented as who well our the to that accept

impacted transition details. Our but work levels our way about affected in clearly production adjusted for teams centers. also with I'll more of talk the this The have had extremely the working to additional deal that at to key shortly safety measures segment results new teams on self-isolation well staffing measures, the productivity. the certain impacts

up, year certain quarter-to-quarter. to period. the The was quarter timing in year ago from million from were $XX.X million SG&A a same expenses the sequential down third sequentially. $XX.X Operating of million million million compared and $XX.X prior income $X.X quarter period in roughly reflects in $X expenses change the the the

As about results. third segment's million insurance Last $XX.X PEP related impacts. COVID-XX in that Tony quarter our current Dynamet facility to an results $X.X recovery income include included operating quarter's of mentioned million related the benefit included our year's was

compared sales XX to environment. of year percentage of a as the the which representing impressive year-over-year of was the income When the and operating about QX insurance recovery, is quarter points, fiscal considering contraction margin Adjusted points XX.X% down basis basis XXXX. came as excluding challenging in margin impact XXX

for While equity quarter, not this certain in on to decline include totaling the March. assets specifically a The investments losses results of the income in especially, result in losses and current mark-to-market values we slide, $X.X our during these other benefit million for significant included plans. mark-to-market related of are shown are the loss underlying quarter hold

year quarter income quarter XX%. tax expectation diluted million to share. $X.XX $XX.X third the was per current versus was favorable the the during prior quarter. for The was favorable that finalized rate a tax to or taxes rate Net effective due related for adjustment Our our were

turning our to markets, results. Sales Net $XXX.X excluding million The and surcharge slide by for results in or offset partially the Defense Energy million SAO Medical $XXX.X and segment markets. end-use X% XX and surcharge. were Now year-over-year reflect demand weakness sales the increased lower the and excluding Transportation volumes. quarter Aerospace in strong XX% on

the given X% XXX We The chain increased headwinds base applications on halt. the supply performance Defense and recently our results MAX and solutions the Aerospace in production higher The sales to broad speaks offer underlying the position customers. strengths the facing of surcharge chain. excluding especially Sequentially, related across X% are multiple significant platforms, volumes. of a supply to ongoing

SAO the quarter by income it's Again, disruption million margin to was SAO's that The with COVID-XX year operating adjusted late despite the $XX.X same operating $XX.X a million. quarter XX.X%. income third satisfy significant that operating the The performance could delayed expenses due worthy at was for ago, note caused ensured for including to income operating current customer in reflects $X both quarter, quarter's shipments safely the COVID-XX. needs. incremental approximately and impacts continue of teams million SAO our to operating facilities

as cash. compared expecting operating our the in income fourth will be Looking driven QX in to of approximately to significant decline reduction results. quarter, inventory ahead when recent be the QX income impacts the manage in are to to the Most XX% by we look SAO in operating of we down

to associated our starts quarter will new inventory in time declining targeting we in raw further in last a we inventory. negative now a and profitability. reduce Although, material planned fourth we significant in fourth in year, of prices reductions The materials already are on have impact upcoming demonstrated had the reductions reduction significant quarter's the as

as We by to be the caused sales expecting global also down for the adjusts economy sequentially pandemic. the disruption current ongoing are

Forward impact visibility vary. the each is will to market individual and limited

demand will In individual situation. on adjustments vary reactions depending or their addition, customer individual

main strengthen understand to key and Our to customers, is needs further position. our objective our to stay close their

each we of emphasize with volumes, changing this maintenance production lower workforce environment as deal schedules of In plans, the positions impacts facilities. our rapidly in importance we of To model. implemented operating to the furloughs our of and we needs and to certain continue Carpenter have requirements the production for match

continue have will on work waste model we operating significant these and taken lean the operating solving. believe continue and The to implement expected leverage We Carpenter actions conditions. dividends standard are to challenging will as problem elimination provide such navigate further areas leader to heavily pay as we we

results. more our up to excluding Net from down year-over-year $XX.X were which XX million QX slightly sales turning $XXX.X XXXX and Now sequentially. PEP The were sales, gas slide economic and million FY segment submarket surcharge the conditions. of sales the in distribution energy in global in specifically to more decline oil that weakness as reflects weaker ongoing business as is well and sensitive

continue see sequentially In On to market sales. the side, growth increased in year-over-year. XX% medical year-over-year we and the sequential positive XX% PEP, medical to sales and

operating current quarter, loss the $X.X PEP In million. of reported an

quarter benefit million income at year's The facilities operating results our it PEP goes safety whatever of time. keep insurance operational an the For third situation. are to employees the to took last influenced to critical $XX.X who and recovery. by $XX.X from this ensure an modestly credit clarity, the were teams doing million included COVID-XX Again, for

to expect markets related see the headwinds look ahead COVID XX. we of across the quarter, we to most to As fourth

actions business, the key we positions the production facilities. Similar preserving on Given to furloughs the have of reducing focused we've initiated for costs initiated with associated PEP SAO, across several uncertainty maintenance and liquidity. most and on our COVID-XX

recently decisions key we several strategic addition, segment. also affecting the made In have PEP

since parties and West underway including decided in market, worsened weakness the with has end we completed of anticipated be quarter. the third fourth oil discussions quarter, business. have the Actions exit ongoing exit strategic this of upcoming to by the Amega the to which our the Given end to business are

preserve idle cash We it two a powder save close necessary We near domestic to consider metal have these two committed also flow decided to cost in metal to term. but the remain facilities to production, powder and facilities. production

expect Action initiated those have facilities be to and the plans we quarter. during fourth been closed

generate to these rates We $XX and estimated of will expect $XX the million facilities for West to that current Amega two exit based the annual on idle the million actions businesses. savings business run the powder

look of to ahead million fourth expect loss $X in operating an PEP report quarter. we to As $X the million we

of review third turning in Now cash to positive Free quarter XX a and flow was slide $XX cash million. flow. the

Within million. we the inventory quarter, decreased $XX by

expenditures. quarter, fourth the As we spent third on expect inventory I to to In $XX mentioned million earlier, continue capital reduce in we the quarter.

to expect fiscal million with year capital the $XXX spend we We provided. XXXX on consistent guidance expenditures previously for

there projects. million, large several $XXX are multiyear the Within

This million and Reading $XXX hot magnetics increase be soft portfolio PA being investment our constructed enhance on and First, year campus. will strip our completed mill will fiscal next the capacity.

completed substantially capture the Dynamet in allowing medical the projects emerging for have high-value for we titanium growth expansion our market. business, us Second, solutions capacity titanium to

we and of Finally, demonstrates which drives completed emerging the our growth supporting technology the new center, technologies programs. company's commercialization

future about slide. the our next I'll CapEx plans well talk liquidity a bit on as our little as

As we slide position remains today's critical move liquidity to our environment. is solid, XX which in

As of close of cash. total of of the $XXX.X we million quarter, the including had current $XX million liquidity,

issues credit our should our as million preventative our third uncertainty significant quarter, with in the event note during situation facility potential to facility we that a measure as drew were as $XX the needed. access I unfolded, ability COVID-XX given the any the there from credit

as and in a we remain banking this contact group We regular did precaution participants. our purely with

confident our We ability meet to under credit banking commitments our the in facility. group's funding are

important is the compliance well requirements It covenants we with to that also within are the note facility. for credit under

As clearly the by created has pandemic. to I numerous the liquidity focus our in to mentioned response preserving uncertainty shifted already, times

our we to plans $XXX at execute current are to Although increase cash continuing is strong flow. million, liquidity

production First, We with inventory aligned a ensure over inventory to evaluating customer quarters. I several are our we mentioned, cash needs. the us our as are rigorously believe and flow schedule related we for lever next significant levels represents

cost we our are managing Second, actively structure.

we freeze. with $XX furloughs taken bulk or reduce XX% are to XXXX the capital to given expect and on million. growth have workforce our hiring of by such global We spending finished fiscal be million production a that already projects, we Also, for $XX actions, able as XX% maintenance to to and year expenditures

to In the these our are mentioned, to $XX initiated identified event idle Again, addition, taken to current in portfolio. as and West two million steps save based annually situation facilities. exit business to strategic We've available and plans run rates. Amega I we've facilities million the anticipated rationalize to levers powder worsens. We've on $XX actions additional us strategic

various period have for believe have ample where scenarios even time, depressed meaningfully demand evaluated we of in We an is and liquidity. scenarios extended

no disciplined options to maturities, necessary have near-term strength continue we evaluate markets allocation will our the philosophy. and continue Although execute access we as against sheet actively to ensure to the capital our capital of to balance

strength have last we have put years we actions The several the balance footing even our taken sheet over solid us position and the face to on financial ensure of uncertainty. as the current

now call Tony. I'll back that, turn the to With over

Tony Thene

Thanks, Tim.

XX slide outlook. Let's to move more a detailed market in

the and quarter next profile be. and you Let we one see for the quarter quarter. end-use markets the as on our me will give year Aerospace mid-term our changed our and demand XXXX. has bit into the pause we a near understands and fiscal and coming no more yet color what see reset demand Clearly profile Defense final In market, a how we

our strengthen regions updates with resilience time were they this use share than disruptions. our we struggle to competitors directly COVID-related seeing to them believe as customers operating few our large processing maximize as We are COVID going We're to show with we daily. and will more a the to our work relationship almost with

up we and and and turn return could ramp begin are our its year fiscal in higher Assuming quarter into could future. projecting, needs. in some now to confidence firming and allow macro up have XXXX normalcy our the That us industry the visibility some first customers

end to surgery, customers destocking restrictions the end-use in on we user at Turning the fourth demand the both as in to the adjusts although in efforts market supporting change the quarter efforts These do well to our OEM distributors states market as quarter. reduce third beginning initiated markets. to continue to market, currently to expect are medical Medical dental elective expected and destocking are affect orthopedic as continue device our

in year orthopedic the surgeries return expect XXXX We the continue mostly to our elective fiscal of quarter of first markets. to

We begin levels stocking new distributors from and expect will OEMs to and customers. attract end previous replan the user

market a supply success we sales, solutions. enjoyed Transportation our represent in where end-use they high-value some we small the Although, percentage total of have

year month America, have challenged XXXX South For this will Europe and been be closed extremely in expect April. of America quarter, fiscal North fourth the as we effectively market

As at stabilization, move level. some we fiscal expect much we do but XXXX, lower year into a

For slowdown see Energy continuation our a of in historic we a the end-use market, North and gas America with oil reducing count in to rig lows.

XXX supported to further We scale back disruption at around resulting gas West expect outlook and decision oil with U.S. the This our end with level calendar what Amega COVID-XX the the of exit continued business. year to at forward coupled remain is XXXX. from current the in the will

In several have a subdued quarters. we surprise next summary, no the is outlook it over

Carpenter supported and trend. For of in and fact and markets our macro markets the originated approximately Technology by advantage Defense is is Aerospace Medical total end-use in in XX% in both sales are long-term that

as we changes technologies addition, invested pandemic. manufacturing and could to caused due this In soft magnetics by have accelerated that be emerging in additive such

slide to and comments. closing our XX move Let's

the priority employees level I As opening another and commitment who said my first dedication to protect demonstrated during the in comments, challenging our have of is times.

and safeguarding are on customer and our to employees position. working our our manage material financial supply to cost facilities strengthen structure We is needs, decisive diligently our and ensure taking actions chain functional delivering

strong We know, Today both COVID-XX. we due of and executed per suffice quarterly liquidity. million commercial you performance from well with includes manufacturing $X.X are And certainly to a impact to negative share. a and $X.XX perspective deliver as that

caused near-term forward COVID-XX. Technology, we Carpenter the have path to a At by successfully navigate disruption

highly customers are require. specialized innovative that on includes match. of that a an products have world capable our assets producing several system solutions only produce products in few focused that that manufacturing proprietary impressive unique We We can the

relationships growing. are strong and customer Our

share resulted the relationships several meaningful in Over gain. have those last years

our customers and has times, demonstrated resiliency we these have won that relationship. During challenging our

Our in and strong may our be to now balance the sheet shareholders. past is underappreciated customers critical

And cash-generation will to reductions a the cash us downturn. allow that as have Tim available us actions cost positive mentioned, multiple we remain extreme position even in market and to in

Medical in position Aerospace Defense our In high-value offerings approximately of and our market addition, XX% product in sales. total leading for and our account

exit $XX West just $XX of in the income the business, we the sales an a energy our of preserve total market million operating annual induce estimated With in period. to to volatile Amega million presence and upcoming X%

consistently also that have enhance magnetics soft delivered several We've long-term emerging including Over technologies sustainable years, critical will manufacturing the we quarter-over-quarter investments and growth additive growth. earnings in last our made profile.

led with difficult market and record to we and Technology safety, has Like experience. supporting value our Carpenter the will of delivering we navigate have advantages crisis in the shareholders. a unified approach many our plus to they foundation this XXX environment serving operating faced, as previous our years challenges, customers, business

looking markets to the once We to look are we envision recover. what's our already eventually COVID-XX defeat normal new future like and the will

goal We working potential. are opportunities on growth to our on strategic and long-term build capture

We from stronger crisis will culture, to business well-positioned and our this excel even new customers stronger in emerge relationships economy. normal safety with a with an

turn Thank I'll back you your field the questions. and to operator it your to interest, for

Operator

Thank you.

We question will Cowen. of now [Operator begin come Gautam Please first the ahead. question-and-answer Khanna And our from go Instructions] session. will

Gautam Khanna

Good guys. morning, Hi.

Tony Thene

Good morning, Gautam.

Gautam Khanna

facilities are to any two to are associated on West explore the, there shut Amega -- just to that powder onetime Wanted and costs exit decision cash down nature? in what the

Tony Thene

property will receiving, be the of write-downs. have majority pay charge in be the that's And asset in cash non-cash. shipments on are and obligations It will portfolio. that around so some we the costs, There the lease primarily Gautam the we would

Gautam Khanna

related in much the Any for how that sense cash is Okay. costs? aggregate,

Tony Thene

on the is I side, can that. non-cash say The majority

Gautam Khanna

year. move at curious, at if, is XX% announced around it Okay. in mentioned? rates, just reflect you of you get and I'm I'm worse that decline sequentially sort the calendar new build already SAO visibility the orders -- what back the received that. Boeing is the Airbus Have And we sequentially then, as anticipated half of shouldn't And the this, wondering into

to rates? I versus then what But orders that's expecting production half So to actually normal half. take OEM to what year, wonder ongoing Normally -- reflect see the long calendar like a much deal, top actually is step of it transitioning those QX? of rates. how second sequentially bigger down there's in Carpenter first you on than to the you're in half lower we're a be seasonality get does do to second the going the down calendar also

Tony Thene

And maybe in it past, It's far very used or one cyclicality because as anymore, business old and that as we've be I our in think the the industry number major Gautam. question, see right the shifts. seasonality Aerospace we not useful such models might

the to level now. pattern just change in as seeing see half, could because little have a So, in -- such a the you maybe opposed first some OEM low downturn ordering you

can a So first get to I We with our in every market certainly moving with don't let's you as we've as we done get target. is answer past. around use the if method, comfortable customers. the same -- your To know moving can our are guidance, feel it's comfortable the it leads talking question, as day

we that, out do strong of not sheet, the really say inventory piece that. a more time mean We're would. the normally to take to that on is other decision going and some will we carry step than now balance is had The back inventory. guidance a we to we made I take

up substantial a operating some next of to pick sacrificing quarter, cash. really amount income we're So

And right just look raw a reducing the prices hope material time think, best that's to we'll are question. But income the I inventory be that here at decision on think side that. we to the again, probably answers And to bit cash make. the not focus operating lower. on side. the It's your I should do because be

Gautam Khanna

and the out year trying XX%, I'm single months than I and this year Boeing probably out to just guess, after. much slow rates more down Airbus wide-body almost had perhaps now maybe aisles at following this down three slightly from announcements I a Airbus year's, at ago. for had and ramping near we've we X/X mean, somewhere for hoped less the trying over to frame year. No. Carpenter fiscal I'm and Yeah. frame

do that stays down, income does -- things... think the XXXX production So, follow SAO that thinking the blended, that, how Is in sort profit in of terms maybe you environment, of what arrives? to it that kind XX% operating relative sort -- at where is right of about of you're operating of calendar kind

Tony Thene

absolutely needed. tough as forward is But take going I it's high Listen, where And that assumptions, different. answer. know, from And because it's an honestly every right is to day-to-day. the have mean, very are you vision level they changing we customer

quarter, Now that's thing going bit first the normal, this for we're aggressively be right than very us more because subdued will a do. one think on it, the we to

would a what. and we know if step you have income back reduction, the on taken be more So conservative so

Let's just would better. a kind we do see of manage be that way usually, materially the you'd quarter

valued The this is effect significantly flip inventory -- the in quarter. of

So the to because a difficult, way significant we're go we some bit little quarter-to-quarter making to be do business. for really us Gautam kind of in changes it's going

I -- do economy. think of to going the all we'll for have work same to and be the kind together

Gautam Khanna

pricing capture in one be to last downturns me, in how the demand the share a in the existing have with get may share or to responded just some more flexibility for with is contracts, if on it's what where there Tony, past, then, emerging one competitors these And customers band? as just

do price do kind coming like -- asking going to customers anticipate those, of, happens on you downturns? you just have back based cyclical normal think to Carpenter are concessions? What customers And and be for

Tony Thene

extra safely a there. shutdown my because we plants wasn't about outbreak early areas industry. talk of They they keep our in because they out necessarily demand I why lot their limited inside to shut It's across had our to had and there's running to have took little to employees work. to presentation seen that of on really that not that That's a And might the good an operations many a It's detailed question there time that not have the actions could often them. in safely. industries have took we had put

values company did I temporary opposed it that the number That's more still with important SAO in a as they're of that take importantly going a to those of for want say shaping time. short that's their they to decrease working results. really for know they workers customers. the long-term price the than our safety go record to one, productivities And that quarter would we we're third that the company And with period had price a

they share fact, operate of to had because their want that with just us business increase and our customers do we've in because to increase of environment. In come the this or to ability just us

So some did price. which there thoroughly are trade-offs that can, not

If you're long-term that's a want you you think market be pass, to had going a going be partnered with demand be will that to is always in to which to there, and resilient one company reliable supply. macro positive and

Gautam Khanna

time. good it appreciate and for the Thanks I healthy, and be luck

Tony Thene

Gautam. Thank you,

Operator

Benchmark. Our Sullivan come with Please will go Josh next question ahead. from

Josh Sullivan

good Hi, morning.

Tony Thene

Good morning.

Josh Sullivan

how it previous have of think any of place way XXXX there trying operationally quantify If how years. we would the put just you a Just maybe XXXX years, about model, perspective in helped from to what's or the Carpenter Carpenter the been overall? couple over has last understand versus evolved as in different couple downturns that's to operating put just in is place comparison last

Tony Thene

to a I this still It's in or times many believe early more there's would model. not easy innings. we're lot workforce think Hard moving I do Josh, operating blessed many there's question. have we parts it. right even to though because I model, think as a everyone now. a do always can as Good and so But I it have this because Carpenter become still quantify -- operating company said we're with

quickly absolute that do became in worse, have leaders lot I tank. having operating of in DNA go to can have that. that this systems worse they Carpenter in still modularized to lot way tell not there's the locations superstars there's as massive. you a doing and pod been a my grounding that But to is type believe And I more we the move the pandemic so So left most site of moved as in

quarter I be would put still space in five that, operating exact the but we back to their Comparing it in great you in baked model leader question. us is to provide to to quickly practiced standard have right DNA critical new significant they to so ability tell in communication. time. an give to we number, is leaned on able tough be the respond able to I quickly, that And years did our to this tell they're work, To the last that we It's Carpenter because that you a having past, have now. that you it's flow, would

Josh Sullivan

areas can to I about you on balance almost Reading want And was at you that as the reduced talk Aerospace. shift cost of of but is heavily that know system, qualified structure work just legacy it's the point Athens But one to operating redlined about because there a have demand, more in facilities, work which way facility? lower one the thinking a newer may then it between and just the overall Athens, certain just balance with a given

Tony Thene

I volume. as flex that going have go those We're understand the workforce believe to we say to time think we're need Athens. very to a understand we and our I'm press labor. for I Reading we We moment, to great happy locations, with to in we lower we need very have through come -- and it's are the me

because some is as care we've layoffs, invested can shorten Carpenter permanent they employees keep to opposed we doing that about to rolling Technology. we're them, having What want furloughs workweeks in those

whatever off for benefits work on a them have them. they weeks. three on So available We'll help we'll furlough have to two to individuals go

employees We're another this two, that to they're and on take rolling away furlough. back We in going off. set to three when not And bring of medical benefits. them continue weeks have go we'll can we them supply

it family. a more working, week to rolling beneficial from time. plants, might be So if go an Everybody that's better involved this a week. is various opportunity everybody we to us And insured. And some XX-hour we everyone in XX-hour keep has their a support furloughs to everybody just to in for tough a keep keep way

move So all viable let's employees want approach a our not approach. It's it dark We have to as to go team. many that's down as XXX% keep about, Athens. balanced and a to

Josh Sullivan

recovery. we'll we recovery vertical eventual place think side What for do recovery red the What keeping the for takes think Are as in herring And hold? a it Got going be it. to to that of related going distribution to you? you see you an do first see structure in just kind the eventual for is auto?

Tony Thene

I question. heard standpoint percent now, adding electronics, Medical in couple the then industrial semiconductor our high-end is XX% in and Aerospace And then add and is Defense business. our mean you good and times a Defense. it's mean XX-plus consumers That's you I that consumer add by of up in our on – from of a you

from a now about verticals really X% to our that's less volatility going you when focus. going the market be – not energy that impact in is going other than So the talk Carpenter energy we're market like to that And energy forward. in Technology

going a we X% good share X% and And customers or done high in in again job of we've level markets. great after have of Transportation gaining our really and it's but

primary Defense, verticals. So those shift Medical, when market are to in our you you look focus, forward at Aerospace, while have

Josh Sullivan

All right. the Thanks time. for

Tony Thene

Thank you.

Operator

will from come [Operator next question Please ahead. KeyBanc. go Phil with Instructions] Gibbs Our

Phil Gibbs

Tony and morning, Tim. Good

Tony Thene

Good morning, Phil.

Phil Gibbs

First powder growth standpoint that in of or you question some your lot from the end going? market of plans is additives? given application that where some – into you just side, be idle why of guess that need facilities those standpoint may that a to an And did going some on of I feel future

Tony Thene

an not not start is like Island no facility utilize money-making a Rhode objection, facility Yes. us. Island. Great. for We for Rhode with – it then itemizer. uneven us. small is large private us. able I'll a very little to our a market no market and to be a These not primarily It's for get things order new

a go our interest they on at stay of to us gives are through that's period just us this producers just And space for in time looking applicable focus we It's strategy. offshore cost. it to as low having because market. definitely And that not very

thinking at point market [Indiscernible]. time about and the the we've at So same to this move been it trying

little a is powder facility. So different. titanium to is what a the with That do facility

market in So position online we titanium is going still that brought powder an strategic the West so right powder is now. additive titanium that were to we capacity, for there brought when many oversupply on going forward. Unfortunately be the our Virginia believe others extremely facility

still in source facility would customers portfolio that. idle I that period some a come can we that on from we'll will can full of side the that in to would be So offer back assume titanium – areas. we And active a powder time. that

that hopefully going something that's back bring mature. So in that the we would to future market if the continue

I cost, measured happen that ones ideas R&D, – cut. they have this emerge critical a this to innovative important, cut and very like the that some cut what of but associated better will our of are when cut the are companies stronger because in And we think event what's

spend additive They their R&D going be those. is critical still I and look there they to and two think at on soft money magnetic of projects,

companies than question. that before looking those is within we we that have the huge what we're want now and we time see forward-thinking did areas So saying Hope because at that. answers couple we faster a your numbers go of very still to

Phil Gibbs

drew capital Tim, And say then allocation dividend? intention now Yes. And do you every the you caution? maintain to standpoint from the wanted a just revolver as and secondarily, that have of to just I clarify out a out company of you right did liquidity

Tony Thene

Okay.

to take very turn first things, Carpenter it fortunate. two Tim. second I'll – the I'll Technology at then We and That's So is the from good things over question a dividend. two

have have and Board. very Board, We a we experienced very a detail-oriented

of mean? deal XX% the other after very dividend through course, really that our Board down, the time right? key going last as with What levers down, spent – all different we detailed analysis all XX% to payout. majority so that are Board areas, the the we things What have, down. was this saying XX% of things that with to So, there's many we comfortable Board at are of our can meeting, we have looking does do. the approve -- And We at cost higher

the With on the approved quarterly is regards pandemic, basis. a dividend to

that. Board very that of at our speaks positive we felt downturn, strong those a at think based They I dividend on and Tim, plan positively that very it and that looks just out stay just question. to to every being position the to every sensible I'll at the a homework quarter. looked I the extreme have to But look Board time. will we do the turn discuss go that continue cost don't over without this all to it you pretty So And did quarter cash want laid out pay none active with inputs. a scenarios take of two first lot

Tim Lain

of I the in quarter. about down million Phil drew we mentioned, $XX Yeah. comments, to my the level in

in days don't this So group, sheet, a of comfortable than the a on I just a generally unfolded you as really at given our see but little balance That with when more have. sheet we've facility. got we'll that purely we precaution accessing banking to have cash the early typically issues bit balance any we're preventative and measure, our it believe credit was

Phil Gibbs

That million March the or saying you quarter, is $XX after quarter the are you sorry? that went in I'm

Tim Lain

March in Yeah the quarter.

Phil Gibbs

that terms us Okay. lastly, business standpoint? what read that in Got the a engine a just from year-on-year did? you. Tony, on it. growth what Thank And business. is give was of from thoughts on me Any jet typically you then

Tony Thene

X% and XX% was sequentially. year-over-year Aero up Yeah.

long building you this there have pretty still a very demand, some – obviously strong of have good very of a quarter we even though So, backlog.

So and it's that think you working first in order for I to our like saw the decrease a record. backlog of do up. quarters hard to That that was backlog in still putting historic still some X%. we're customers XX But would that X% there's about to very pull time,

to able product some are decrease we and the in the So demand. put

Phil Gibbs

Appreciate it.

Operator

to This remarks. for I Please any go turn sir. would ahead concludes Edwards conference session. to our closing back like over question-and-answer Brad the

Brad Edwards

look quarter the for you third Thank great conference our today you, of your forward year-end day. operator, and a and to with on during of for care thanks speaking summer. our everyone Take us call all have we joining call. rest And

Operator

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

You disconnect. may now

Carpenter Technology (CRS) 2 May 202020 Q3 Earnings call transcript