Carpenter Technology Reports First Quarter Results
11/01/2011 - Carpenter Technology Corp. reported net income attributable to Carpenter of $23.8 million ($0.53 per share) on net sales of $414.1 million for the quarter ended September 30, 2011.
Carpenter Technology Corp. reported net income attributable to Carpenter of $23.8 million ($0.53 per share) on net sales of $414.1 million for the quarter ended September 30, 2011.
The $23.8 million net income compares to net income of $7.6 million ($0.17 per share) in the year-ago first quarter. Results include $1.4 million ($0.03 per diluted share) in costs related to the Latrobe Specialty Metals transaction. Excluding these costs, net income attributable to Carpenter was $0.56 per diluted share.
"We continue to see good results on overall profitability and profit per pound improvement from our pricing, mix management and operational efficiency efforts," said William A. Wulfsohn, President and CEO. "We remain on track to achieve our fiscal year financial goal of a 50 percent increase in operating income, excluding pension earnings, interest and deferrals, versus last year, including strong double-digit revenue growth.
"We are also making good progress on our growth strategy. We are optimistic that the Latrobe acquisition will close by the end of the second quarter - and we have made good progress on our major new greenfield capacity expansion project which will provide increased capacity to meet customer demand and strengthen Carpenter's leadership position in the production of premium melted alloys."
Net sales of $414.1 million reflect an 18% increase from the prior year. Excluding surcharge revenue, net sales were $313.6 million, up 19% from a year ago. The Amega West acquisition accounted for six percentage points of the year-to-year revenue growth.
Total pounds sold in the first quarter were 2% lower than in the year-ago first quarter, with the Premium Alloys Operations (PAO) segment up 8% and the Advanced Metals Operations (AMO) segment down 5%. The company said the positive spread between revenue and volume growth rates in the quarter is due to mix optimization efforts.
First-quarter gross profit of $81.1 million compares with gross profit of $49.8 million in the year-ago first quarter. The company said that the higher gross was driven by an improved product mix, higher prices, strong operating performance, higher profit contributions from its Titanium and Amega West businesses, and positive LIFO and other benefits from the combination of increased inventories and lower raw material prices.
SG&A expense as a percentage of revenue (excluding surcharge) was 2.1% lower than the prior year as revenue growth outpaced overhead cost increases. SG&A expense was $35.7 million (11.4% of revenue excluding surcharge), compared with $35.7 million (13.5% of revenue excluding surcharge) for the year-ago first quarter. The company said the flat spending level results from an offset between lower net pension expense and the inclusion of Amega West overhead costs.
Operating income was $44.0 million compared with $14.1 million a year earlier. Excluding surcharge revenue and pension earnings, interest and deferrals (EID), operating margin was 15.2% for the quarter compared to 8.7% in the year-ago first quarter.
Interest expense was $7.0 million compared to $4.2 million in the year-ago period due to the impact of the company’s recent financing actions. This mainly represents the net impact of a higher debt level at a lower average interest rate. A portion of the incremental debt was reduced mid-quarter as a $100 million note matured and was repaid. Other expense was $0.7 million compared to other income of $1.6 million in the year-ago first quarter due almost entirely to the reduction in market value of assets supporting certain non-qualified retirement plans.
The provision for income tax was $12.6 million (34.7% of pre-tax income) compared to $3.9 million (33.9% of pre-tax income) in the year-ago first quarter.
Free cash flow, defined as cash from operations less capital expenditures, dividends, and the net impact from the purchase and sale of businesses, was negative $109.2 million in the current quarter. This was driven by increased inventory, the $21.8 million Boarhead Farms litigation settlement payment, and $11.6 million of required cash contributions to the pension plan. The company said the higher inventory level, which will support strong demand for premium products over the balance of the year, is a result of higher inventory value per pound due to improved product mix.
Carpenter produces and distributes specialty alloys, including stainless steels, titanium alloys, and superalloys.
