Carpenter Technology Corp. reported record net income of $47.8 million on record sales of $362.4 million for the fourth quarter, and record net income of $135.5 million on record net sales of $1.3 billion for the fiscal year ended June 30, 2005. Results reflected favorable market conditions and benefits from the company's continued focus on lean and variation reduction.

Fourth Quarter Results—The $47.8 million net income ($1.86 per diluted share) compares to net income of $17.7 million ($0.73 per diluted share) a year ago. Net sales of $362.4 million compare with $296.8 million for the same quarter a year ago.

Results included a gain of $0.21 per diluted share from the sale of its Carpenter Special Products Corp. (CSPC) subsidiary. Fourth quarter net income was also favorably impacted by $.23 per diluted share, as a result of favorable tax adjustments.

Free cash flow was $45.1 million, compared with free cash flow of $9.4 million in the year-ago quarter. Free cash flow included $15.4 million in net cash proceeds from the sale of CSPC. Free cash flow was reduced by $25 million as a result of the company's voluntary contribution to a VEBA trust that funds post-retirement medical expenses. Carpenter also made a $25 million voluntary contribution to the VEBA trust in last year's fourth quarter.

At June 30, 2005, net debt was $63.5 million. Carpenter's net debt amount was $53.3 million lower than at the end of the previous quarter and $186.2 million lower than a year ago.

Fiscal Year Results—Net income of $135.5 million ($5.37 per diluted share) compares with net income of $36.0 million ($1.49 per diluted share) a year ago. Net sales of $1.3 billion compare with $1.0 billion for the previous fiscal year. The company generated $133.8 million of free cash flow, compared to free cash flow of $88.4 million a year ago.

Fourth Quarter Operating Summary—"Record results for the quarter and fiscal 2005 were driven by strong demand for our higher value materials, especially from the aerospace market, and our continued focus on lean and variation reduction," said Robert J. Torcolini, Chairman, President and CEO. "The operating improvements made during the past few years significantly enhanced the operating leverage in our business model and has positioned the company to create additional value for shareholders."

Carpenter's sales increased 22% in the fourth quarter from a year ago, which reflected a better product mix, higher base selling prices and surcharges. Excluding surcharge revenue, sales increased 17% from the year-ago fourth quarter.

Sales increased in most major end-use markets during the fourth quarter versus the same quarter a year ago. Aerospace market sales increased 52%; medical market sales 43%; automotive market sales 19%; consumer market sales 12%; and industrial market sales 7%. Sales to the power generation market declined 1%.

Geographically, sales outside the United States increased 32% from a year ago and represented 29% of fourth quarter sales. In the recent fourth quarter, sales outside the United States benefited from strong demand for materials sold to the European aerospace and medical markets, and growth in Asia.

Carpenter's gross profit in the fourth quarter increased to $92.9 million, or 25.6% of sales, from $62.5 million, or 21.1% of sales, in the year-ago quarter. The improvement reflected a better product mix due to increased demand for higher-value materials from key markets, notably aerospace and medical, higher base prices and the benefits from lean initiatives and variation reduction.

Carpenter's fourth quarter operating income increased to $66.9 million (18.5% of sales) from $31.3 million (10.5% of sales) a year ago. Excluding the gain on the sale of CSPC, Carpenter's fourth quarter operating income reached a record level. The increase from a year ago reflects the improvement in gross profit and a continued focus on managing selling and administrative expenses.

Outlook—"We believe that market conditions will remain favorable in fiscal 2006, particularly for our specialty alloy, titanium and ceramic materials sold into the aerospace market. These favorable conditions combined with our focus to reduce product complexity through the elimination of marginally profitable products and efforts in lean and variation reduction will continue to drive our performance in 2006," Torcolini said. "Although we are pleased with our recent accomplishments, we see opportunity for continued improvement in our operating results."

Accordingly, the company expects that free cash flow will be in excess of $100 million in fiscal 2006.

Carpenter produces and distributes specialty alloys, including stainless steels, titanium alloys and superalloys, and various engineered products.