Carpenter Technology Reports First Quarter Financial Results
WYOMISSING, Pa.--Oct. 18, 2001--Carpenter Technology Corporation today reported that net sales for the first fiscal quarter ended September 30, 2001, decreased 10 percent to $251 million from $278 million for last year's first quarter.The comparisons to the prior year are before the effects from the adoption of the Securities and Exchange Commission's Staff Accounting Bulletin, Revenue Recognition in Financial Statements (SAB 101), which was adopted effective July 1, 2000.
Net income for the first quarter was $5.9 million or $.24 per diluted share, compared with $11.1 million or $.48 per diluted share for the year-ago quarter, before the SAB 101 effects. Carpenter had previously provided guidance of $.10 to $.15 per diluted share for the first quarter of 2002.
The first quarter of fiscal 2001 includes $1.6 million of goodwill amortization. There is no goodwill amortization in fiscal 2002, because Carpenter adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," effective July 1, 2001.
Dennis M. Draeger, chairman, president and chief executive officer, said, "The U.S. manufacturing sector continued to be challenged by weakened economic conditions during the quarter. Sluggish demand in many consumer and industrial sectors particularly impacted our stainless steel long product shipments."
Lower volumes at Carpenter were partially offset by a richer sales mix, reflecting the Company's ongoing success in growing sales of higher value special alloy products. Carpenter's titanium, powder and ceramic products benefited from strong demand in key markets including aerospace, power generation and medical.
"We will continue to maximize Carpenter's cash flow during this economic downturn," Draeger said. Since the beginning of the manufacturing slowdown that began more than 10 months ago, Carpenter has reduced debt by nearly $60 million, and remains committed to its previously stated goal of achieving $40 million in free cash flow in fiscal 2002. "We expect to achieve this goal through a greater focus on working capital management, curtailment of discretionary capital expenditures as dictated by business levels and further cost savings initiatives," Draeger said.
Although the Company is taking steps to sustain its cash flow, short-term sales and earnings are expected to be suppressed. The economic uncertainty since September 11, along with increases in unemployment, a decline in consumer confidence and a more cautious approach to capital investments, will further dampen demand in many of its end-use markets over the next few quarters.
One of Carpenter's key markets, aerospace, is particularly uncertain due to the expected decline in aircraft deliveries. Boeing and Airbus recently announced an expected decline of approximately 20 percent in deliveries for 2002, although this number will depend on the recovery in passenger traffic and the financial condition of airlines. The Company anticipates that it will partially offset reduced volumes associated with lower aircraft deliveries through sales growth in the power generation market.
Although Carpenter exceeded its first quarter earnings expectations, the Company now expects that earnings will be below its previous guidance of $2.05 for fiscal year 2002. Earnings in the second quarter are expected to be in the range of $.15 to $.25 per diluted share. In the second quarter a year ago, Carpenter had earnings of $.57 per diluted share before the SAB 101 effects.
The lack of visibility regarding the timing of any meaningful decline in demand for commercial aircraft deliveries, coupled with the uncertainty of a deepened economic downturn, makes it difficult to estimate earnings beyond the second quarter with any degree of accuracy.
"Although our short-term expectations have changed," Draeger said, "we've rebounded from and withstood downturns before. We'll take the actions necessary to position the Company for future growth."
Carpenter plans to broadcast a live conference call and webcast on Thursday, October 18, at 10 a.m., EDT, to discuss its results of operations for the quarter ended September 30 and current business conditions. The webcast is available at www.vcall.com. Please call 610/208-2024 for the conference call telephone number and passcode. A replay of the conference call will be available at www.vcall.com and by calling 800/759-1637 (international call 402/998-0469). The passcode for the replay is "9001." The telephone replay will be available until October 23, 2001.
Carpenter Technology produces and distributes specialty metals, including stainless steels, titanium alloys, superalloys, powder and various engineered products. Information about Carpenter can be found on the Internet at www.cartech.com, www.dynamet.com and www.carpenterepg.com, with selected products sold online at www.carpenterdirect.com.
Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. The most significant of these uncertainties are described in Carpenter's Form 10-K and exhibits to that report, and include (but are not limited to): 1) the cyclical nature of the specialty materials business and certain end-use markets, including, but not limited to, aerospace, automotive and consumer durables, all of which are subject to changes in general economic and financial market conditions; 2) the ability of Carpenter to recoup increased costs of fuel, such as natural gas, and raw materials, such as nickel, through increased prices and surcharges; 3) worldwide excess capacity for certain alloys that Carpenter produces and fluctuations in currency exchange rates, resulting in increased competition and downward pricing pressure on Carpenter products; and 4) fluctuations in stock markets which could impact the valuation of the assets in Carpenter's pension trusts and the accounting for pension assets. Carpenter undertakes no obligation to update or revise any forward-looking statements.
CONSOLIDATED STATEMENT OF INCOME
(in Millions, Except per Share Data)
Three Months Ended
Sept. 30
--------------------------------
As
Previously
Reported
2001 2000(1) 2000(2)
--------- --------- ----------
NET SALES $ 251.1 $ 293.1 $ 277.7
--------- --------- ---------
COSTS AND EXPENSES:
Cost of sales 198.8 221.2 212.8
Selling and
administrative expenses 36.1 38.2 38.2
Interest expense 8.9 10.7 10.7
Other income, net (1.7) (2.2) (2.2)
--------- --------- ---------
242.1 267.9 259.5
--------- --------- ---------
Income before income taxes
and cumulative
effect of accounting
change 9.0 25.2 18.2
Income taxes 3.1 9.9 7.1
--------- --------- ---------
Income before cumulative
effect of accounting
change 5.9 15.3 11.1
Cumulative effect of
accounting change -- (14.1) --
--------- --------- ---------
NET INCOME $ 5.9 $ 1.2 $ 11.1
========= ========= =========
EARNINGS PER COMMON
SHARE:
Basic:
Income before
cumulative effect of
accounting change $ .24 $ .68 $ .49
Cumulative effect of
accounting change -- (.64) --
--------- --------- ---------
Net income $ .24 $ .04 $ .49
========= ========= =========
Diluted:
Income before
cumulative effect of
accounting change $ .24 $ .66 $ .48
Cumulative effect of
accounting change -- (.62) --
--------- --------- ---------
Net income $ .24 $ .04 $ .48
========= ========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic 22.2 22.0 22.0
========= ========= =========
Diluted 23.0 22.9 22.9
========= ========= =========
Cash dividends per common
share $ .33 $ .33 $ .33
========= ========= =========
(1) Restated to reflect the adoption of SAB 101, effective July 1,
2000.
(2) Excludes the impact of adopting SAB 101. This column also
represents our financial results pursuant to SAB 101 on a pro
forma basis as if our current terms of sale (title transfers upon
shipment) were in effect during that period. Prior to April 1,
2001, although risk of loss transferred upon shipment, our terms
of sale provided that legal title transferred only upon payment.
Certain reclassifications of prior years' amounts have been made
to conform with current year's presentation.
PRELIMINARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in Millions)
Three Months Ended
Sept. 30
-----------------
2001 2000(1)
------- --------
OPERATIONS:
Net income $ 5.9 $ 1.2
Cumulative effect of
accounting change -- 14.1
Adjustments to reconcile
net income to net cash
provided from operations:
Depreciation 14.1 13.5
Amortization of
intangible assets 3.3 3.7
Deferred income taxes 2.2 8.7
Net pension credit (4.3) (10.1)
Net gain on asset
disposals (0.2) (.8)
Changes in working capital
and other:
Receivables 24.1 3.5
Inventories (17.9) (5.0)
Accounts payable 2.6 (4.9)
Accrued current
liabilities (1.6) 3.1
Other, net (4.5) (1.4)
----- -----
Net cash provided from
operations 23.7 25.6
----- -----
INVESTING ACTIVITIES:
Purchases of plant,
equipment and software (9.8) (14.4)
Proceeds from disposals
of plant and equipment 0.2 5.0
----- -----
Net cash used for investing
activities (9.6) (9.4)
----- -----
NET CASH PROVIDED BEFORE
FINANCING ACTIVITIES 14.1 16.2
----- -----
FINANCING ACTIVITIES:
Change in short-term debt (90.2) (0.2)
Proceeds from issuance of
long-term debt 98.8 --
Payments on long-term debt (15.0) (10.1)
Dividends paid (7.8) (7.6)
Proceeds from issuance of
common stock 0.4 1.6
----- -----
Net cash used for financing
activities (13.8) (16.3)
----- -----
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 0.3 (0.1)
Cash and cash equivalents at
beginning of period 7.8 9.5
----- -----
Cash and cash equivalents at
end of period $ 8.1 $ 9.4
===== =====
(1) Restated to reflect the adoption of SAB 101, effective July 1,
2000.
Certain reclassifications of prior years' amounts have been made
to conform with current year's presentation.
PRELIMINARY
CONSOLIDATED BALANCE SHEET
(in Millions)
Sept. 30 June 30
2001 2001
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 8.1 $ 7.8
Accounts receivable, net 169.7 193.8
Inventories 259.0 241.1
Deferred income taxes 2.3 --
Other current assets 16.5 16.4
---------- ----------
Total current assets 455.6 459.1
Property, plant and
equipment, net 746.5 752.2
Prepaid pension cost 232.9 225.6
Goodwill, net 161.7 161.7
Other assets 93.8 92.9
---------- ----------
Total assets $ 1,690.5 $ 1,691.5
========== ==========
LIABILITIES
Current liabilities:
Short-term debt $ 80.3 $ 170.6
Accounts payable 84.9 82.3
Accrued liabilities 67.5 63.9
Deferred income taxes -- 2.1
Current portion of
long-term debt 10.2 25.2
---------- ----------
Total current
liabilities 242.9 344.1
Long-term debt, net of
current portion 426.3 326.9
Accrued postretirement
benefits 160.2 157.8
Deferred income taxes 182.3 177.8
Other liabilities 35.9 36.3
STOCKHOLDERS' EQUITY
Convertible preferred
stock 25.1 25.4
Common stock 116.4 116.3
Capital in excess of
par value 197.0 196.7
Reinvested earnings 376.5 378.4
Common stock in treasury,
at cost (38.4) (38.4)
Deferred compensation (12.6) (13.1)
Accumulated other
comprehensive income
(loss) (21.1) (16.7)
---------- ----------
Total stockholders'
equity 642.9 648.6
---------- ----------
Total liabilities and
stockholders' equity $ 1,690.5 $ 1,691.5
========== ==========
PRELIMINARY
SEGMENT FINANCIAL DATA
(in Millions)
Three Months Ended
Sept. 30
------------------
2001 2000(1)
-------- --------
Net sales:
Specialty Metals $ 215.7 $ 255.8
Engineered Products 35.7 37.6
Intersegment (.3) (.3)
-------- --------
Consolidated net sales $ 251.1 $ 293.1
======== ========
Income before income taxes:
Specialty Metals $ 12.8 $ 25.2
Engineered Products 3.9 5.0
Net pension credit 4.3 10.1
Corporate costs (3.9) (5.0)
-------- --------
Consolidated EBIT 17.1 35.3
Interest expense (8.9) (10.7)
Interest income .8 .6
-------- --------
Consolidated income before
income taxes and
cumulative effect of
accounting change $ 9.0 $ 25.2
======== ========
Carpenter is organized on a product basis: Specialty Alloys
Operations, Titanium, Carpenter Powder Products and Engineered
Products Group. For segment reporting purposes, Specialty Alloys
Operations, Titanium and Carpenter Powder Products are aggregated into
one reportable segment called Specialty Metals because of the
similarities in products, processes, customers and distribution
methods.
(1) Restated to reflect the adoption of SAB 101, effective July 1,
2000.
Certain reclassifications of prior years' amounts have been made
to conform with current year's presentation.