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Carpenter Technology Reports 2nd Quarter Results

01/28/2010 - Carpenter Technology announced net income of $3.5 million ($0.08 per diluted share) for the second quarter ended December 31, 2009. This compares with net income of $29.8 million ($0.68 per diluted share) for the year-ago second quarter.

Carpenter Technology Corp. announced net income of $3.5 million ($0.08 per diluted share) for the second quarter ended December 31, 2009. This compares with net income of $29.8 million ($0.68 per diluted share) for the year-ago second quarter.
 
Second quarter results included non-cash net pension expense of $0.21 per diluted share vs. $0.06 per diluted share in the same quarter last year. The company had $6.9 million in positive free cash flow for the quarter, compared to negative $84.8 million in the fiscal 2009 second quarter—most of the difference due to changes in inventory and other working capital.
 
“Results for the second quarter were as expected—below the same quarter last year but higher than our September quarter,” said Gregory A. Pratt, Chairman and Interim President and Chief Executive Officer. “We are encouraged by the early signs of momentum we are seeing in certain segments of our business. This strengthens our conviction that volume, revenue, and margin will continue to grow as the second half of our fiscal year progresses.”
 
Second Quarter Results— Net sales for the second quarter were $263.8 million, down 27% from the prior year. Excluding surcharge revenue, net sales were $207.3 million, 24% lower than last year. The 36,448 pounds sold in the second quarter were 19% lower than last year’s 44,840 pounds.
 
Gross profit was $35.6 million in the second quarter compared with $75.9 million in Q2 2009. Excluding surcharge revenue, gross margin was 17.2%, compared with 27.8% last year. Carpenter Technology notes that the gross margin continues to be negatively impacted by reduced demand levels and correspondingly higher volume-related costs as well as the portion of higher pension expense within cost of sales.
 
SG&A expenses were $33.6 million, a decrease of 7% from the 2009 second quarter. Excluding the impact of changes in net pension expense, SG&A improved by 14% over last year.
 
Operating income for the second quarter was $2.0 million compared with $39.7 million a year earlier. Excluding surcharge revenue and pension earnings, interest and deferrals (EID), operating margin was 5.5%, down from 14.5% last year.
 
Other income was relatively flat at $6.7 million for the second quarter compared to $6.5 million last year. The income tax provision for the second quarter was $0.7 million, or 16.7%, compared with an income tax provision of $12.6 million, or 29.7%, a year ago. The company expects its effective tax rate for the second half of the fiscal year to be approximately 30%.
 
Sales outside the United States in the second quarter were $85.6 million, a decrease of 34% compared with the second quarter of fiscal 2009. Compared to the first quarter of fiscal 2010, sales increased 19%. International sales represented 32% of total sales in the second quarter of fiscal 2010, compared to 36% in the prior year. The year-over-year reduction reflects declines in energy, aerospace, and automotive demand, especially in Europe and Mexico.
 
Outlook— “In the second quarter, we saw the first steps along the road to business recovery,” said Pratt. “Higher volumes, improved mix, and cost savings drove improvement in our operating margin, excluding surcharge and pension EID, to nearly 6% after being negative in each of the last two quarters.”
 
“Given our current progress, we are on track to meet our fiscal 2010 financial goals,” said Pratt. “While our business is beginning to show good momentum, we recognize the pace of economic recovery this calendar year could vary. We will remain focused on cost reduction and operational excellence, while pursuing growth opportunities.”
 
Carpenter produces and distributes specialty alloys, including stainless steels, titanium alloys, and superalloys.