Strong Sequential Earnings Improvement
Carpenter Technology Corporation (NYSE:CRS) (the “Company”) today
announced financial results for the quarter ended December 31,
2016. The Company reported net income of $7.0 million or
$0.15 earnings per share. Net sales for the second quarter of
fiscal year 2017 were $427.4 million. Net sales excluding surcharge
were $366.7 million for the second quarter of fiscal year 2017.
“We generated a notable sequential increase in our results
during the second quarter driven by strong execution of our
strategy, a stronger product mix and an improving environment
across most of our end-use markets, most notably Aerospace, where
we are benefitting from solid demand from the new engine platforms
coupled with our strong market position in other key sub-markets
including fasteners and structural,” said Tony Thene, Carpenter’s
President & CEO.
“The Energy market is continuing to show signs of recovery, and
we remain focused on strengthening our competitive position to
fully capitalize on our market position as industry volume
increases. Our progress to date is reflected in the positive
operating income we achieved at our Performance Engineered Products
(PEP) segment, the first time in six quarters. As market demand
improves, we expect to further benefit from operating margin
leverage at PEP driven by the efficiency gains we have generated
over the past several years as well as our strengthened customer
relationships and improved product offerings.”
“Looking ahead, we remain committed to actively managing our
business, including further implementing the Carpenter Operating
Model across all our operations as we seek additional cost
efficiencies and productivity enhancements. Our realigned
commercial group is executing our market focused strategy and
expanding the applications for our high-value products, deepening
our customer relationships and introducing our advanced
capabilities and solutions, as evidenced by our backlog
growth. Through these initiatives, we believe we are well
positioned to deliver market share, revenue and profitability
growth as our end-use markets continue to recover and we further
expand our product offerings in areas such as titanium powder.”
Financial Highlights
($ in
millions) |
|
Q2 |
|
Q2 |
|
Q1 |
|
|
FY2017 |
|
FY2016 |
|
FY2017 |
Net
Sales |
$ |
427.4 |
|
|
$ |
443.8 |
|
|
$ |
389.0 |
|
|
Net Sales
Excluding Surcharge (a) |
$ |
366.7 |
|
|
$ |
379.4 |
|
|
$ |
339.8 |
|
|
Operating
Income |
$ |
15.4 |
|
|
$ |
21.8 |
|
|
$ |
1.4 |
|
|
Operating
Income Excluding Pension EID and Special Items (a) |
$ |
21.0 |
|
|
$ |
29.2 |
|
|
$ |
9.0 |
|
|
Net Income
(Loss) |
$ |
7.0 |
|
|
$ |
11.5 |
|
|
$ |
(6.2 |
) |
|
Cash (Used
For) Provided from Operating Activities |
$ |
(29.7 |
) |
|
$ |
30.1 |
|
|
$ |
3.9 |
|
|
Free Cash
Flow (a) |
$ |
(56.7 |
) |
|
$ |
1.8 |
|
|
$ |
(31.2 |
) |
|
(a) Non-GAAP financial measure explained in the attached
schedules |
|
Net sales for the second quarter of fiscal year 2017 were $427.4
million compared with $443.8 million in the second quarter of
fiscal year 2016, a decrease of $16.4 million (or 3.7 percent), on
6 percent lower volume. Net sales excluding surcharge were
$366.7 million, a decrease of $12.7 million (or 3.3 percent) from
the same period a year ago.
Operating income was $15.4 million, a decrease of $6.4 million
from the second quarter of the prior year. Operating
income—excluding pension earnings, interest and deferrals (EID) and
special items—was $21.0 million, compared to $29.2 million in the
prior year period. These results primarily reflect lower
volume offset in part by stronger product mix in the current second
quarter as compared to the same quarter a year ago as well as the
positive impact of the Carpenter Operating Model.
Cash used for operating activities in the second quarter of
fiscal 2017 was $29.7 million, compared to cash provided from
operating activities of $30.1 million in the same quarter last
year. The decrease in operating cash flow was primarily
related to the Company’s decision to voluntarily contribute $100
million to its largest defined benefit pension plan in October, as
previously announced. Free cash flow in the second quarter of
fiscal year 2017 was negative $56.7 million, compared to positive
free cash flow of $1.8 million in the same quarter last year.
Capital expenditures were $18.5 million in the second quarter of
fiscal year 2017 compared to $19.6 million in the same quarter last
year.
Total liquidity, including cash and available revolver balance,
was $491.7 million at the end of the second quarter of fiscal 2017.
This consisted of $22.5 million of cash and $469.2 million of
available borrowing under the Company’s credit facility.
Conference Call and Webcast Presentation
Carpenter will host a conference call and webcast presentation
today, February 2nd at 10:00 a.m. ET, to discuss the financial
results and operations for the second quarter of fiscal year 2017.
Please dial +1 412-317-9259 for access to the live conference
call. Access to the live webcast will be available at
Carpenter’s website (http://www.cartech.com), and a replay will
soon be made available at http://www.cartech.com. Presentation
materials used during this conference call will be available for
viewing and download at http://www.cartech.com. An audio replay of
the conference call can be accessed by dialing +1 412-317-0088 and
using passcode 10098902. The audio replay will be available for one
week.
Non-GAAP Financial Measures
This press release includes discussions of financial measures
that have not been determined in accordance with U.S. Generally
Accepted Accounting Principles (GAAP). A reconciliation of
the non-GAAP financial measures to their most directly comparable
financial measures prepared in accordance with GAAP, accompanied by
reasons why the Company believes the non-GAAP measures are
important, are included in the attached schedules.
About Carpenter Technology
Carpenter Technology Corporation is a leading producer and
distributor of premium specialty alloys, including titanium alloys,
powder metals, stainless steels, alloy steels and tool
steels. Carpenter’s high-performance materials and advanced
process solutions are an integral part of critical applications
used within the aerospace, transportation, medical and energy
markets, among other markets. Building on its history of
innovation, Carpenter’s superalloy powder technologies support a
range of next-generation products and manufacturing techniques,
including additive manufacturing or 3D Printing. Information
about Carpenter can be found at www.cartech.com.
Forward-Looking Statements
This presentation contains 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 filings with the Securities and
Exchange Commission, including its annual report on Form 10-K for
the year ended June 30, 2016, Form 10-Q for the quarter ended
September 30, 2016 and the exhibits attached to those filings. They
include but are not limited to: (1) the cyclical nature of the
specialty materials business and certain end-use markets, including
aerospace, defense, industrial, transportation, consumer, medical
and energy, or other influences on Carpenter’s business such as new
competitors, the consolidation of competitors, customers and
suppliers, or the transfer of manufacturing capacity from the
United States to foreign countries; (2) the ability of Carpenter to
achieve cash generation, growth, earnings, profitability, operating
income, cost savings and reductions, qualifications, productivity
improvements or process changes; (3) the ability to recoup
increases in the cost of energy, raw materials, freight or other
factors; (4) domestic and foreign excess manufacturing capacity for
certain metals; (5) fluctuations in currency exchange rates; (6)
the degree of success of government trade actions; (7) the
valuation of the assets and liabilities in Carpenter’s pension
trusts and the accounting for pension plans; (8) possible labor
disputes or work stoppages; (9) the potential that our customers
may substitute alternate materials or adopt different manufacturing
practices that replace or limit the suitability of our products;
(10) the ability to successfully acquire and integrate
acquisitions; (11) the availability of credit facilities to
Carpenter, its customers or other members of the supply chain; (12)
the ability to obtain energy or raw materials, especially from
suppliers located in countries that may be subject to unstable
political or economic conditions; (13) Carpenter’s manufacturing
processes are dependent upon highly specialized equipment located
primarily in facilities in Reading and Latrobe, Pennsylvania and
Athens, Alabama for which there may be limited alternatives if
there are significant equipment failures or a catastrophic event;
(14) the ability to hire and retain key personnel, including
members of the executive management team, management, metallurgists
and other skilled personnel; (15) fluctuations in oil and gas
prices and production; and (16) the success of actions taken to
reduce costs associated with retirement and pension plans. Any of
these factors could have an adverse and/or fluctuating effect on
Carpenter’s results of operations. The forward-looking statements
in this document are intended to be subject to the safe harbor
protection provided by Section 27A of the Securities Act of 1933,
as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended. Carpenter undertakes
no obligation to update or revise any forward-looking
statements.
PRELIMINARYCONSOLIDATED
STATEMENTS OF INCOME(in millions, except per share
data)(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
NET SALES |
|
$ |
427.4 |
|
|
$ |
443.8 |
|
|
$ |
816.3 |
|
|
$ |
899.4 |
|
Cost of sales |
|
364.9 |
|
|
377.5 |
|
|
707.8 |
|
|
764.5 |
|
Gross profit |
|
62.5 |
|
|
66.3 |
|
|
108.5 |
|
|
134.9 |
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
47.1 |
|
|
44.5 |
|
|
91.7 |
|
|
87.8 |
|
Restructuring
charges |
|
— |
|
|
— |
|
|
— |
|
|
0.4 |
|
Operating income |
|
15.4 |
|
|
21.8 |
|
|
16.8 |
|
|
46.7 |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(7.4 |
) |
|
(7.0 |
) |
|
(14.8 |
) |
|
(13.6 |
) |
Other income (expense),
net |
|
0.3 |
|
|
0.3 |
|
|
1.0 |
|
|
(1.9 |
) |
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
8.3 |
|
|
15.1 |
|
|
3.0 |
|
|
31.2 |
|
Income tax expense |
|
1.3 |
|
|
3.6 |
|
|
2.2 |
|
|
10.8 |
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
$ |
7.0 |
|
|
$ |
11.5 |
|
|
$ |
0.8 |
|
|
$ |
20.4 |
|
|
|
|
|
|
|
|
|
|
EARNINGS PER COMMON
SHARE: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.15 |
|
|
$ |
0.23 |
|
|
$ |
0.01 |
|
|
$ |
0.41 |
|
Diluted |
|
$ |
0.15 |
|
|
$ |
0.23 |
|
|
$ |
0.01 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
Basic |
|
47.0 |
|
|
48.8 |
|
|
47.0 |
|
|
49.3 |
|
Diluted |
|
47.1 |
|
|
48.9 |
|
|
47.1 |
|
|
49.4 |
|
|
|
|
|
|
|
|
|
|
Cash dividends per
common share |
|
$ |
0.18 |
|
|
$ |
0.18 |
|
|
$ |
0.36 |
|
|
$ |
0.36 |
|
PRELIMINARYCONSOLIDATED
STATEMENTS OF CASH FLOWS(in millions)(Unaudited) |
|
|
|
|
|
Six Months Ended |
|
|
December 31, |
|
|
2016 |
|
2015 |
OPERATING
ACTIVITIES: |
|
|
|
|
Net income |
|
$ |
0.8 |
|
|
$ |
20.4 |
|
Adjustments to
reconcile net income to net cash (used for) provided from operating
activities: |
|
|
|
|
Depreciation and amortization |
|
58.7 |
|
|
60.3 |
|
Deferred
income taxes |
|
39.1 |
|
|
2.5 |
|
Net
pension expense |
|
31.0 |
|
|
26.9 |
|
Share-based compensation expense |
|
6.5 |
|
|
4.9 |
|
Net loss
on disposals of property and equipment |
|
0.3 |
|
|
0.1 |
|
Changes in working
capital and other: |
|
|
|
|
Accounts
receivable |
|
0.8 |
|
|
33.4 |
|
Inventories |
|
(74.2 |
) |
|
(34.8 |
) |
Other
current assets |
|
(5.6 |
) |
|
(8.2 |
) |
Accounts
payable |
|
17.2 |
|
|
(17.6 |
) |
Accrued
liabilities |
|
3.6 |
|
|
(11.3 |
) |
Pension
plan contributions |
|
(100.0 |
) |
|
— |
|
Other
postretirement plan contributions |
|
(1.8 |
) |
|
(6.1 |
) |
Other,
net |
|
(2.2 |
) |
|
1.1 |
|
Net cash
(used for) provided from operating activities |
|
(25.8 |
) |
|
71.6 |
|
|
|
|
|
|
INVESTING
ACTIVITIES: |
|
|
|
|
Purchases of property,
equipment and software |
|
(45.1 |
) |
|
(49.5 |
) |
Proceeds from disposals
of property and equipment |
|
— |
|
|
0.3 |
|
Other |
|
— |
|
|
4.0 |
|
Net cash
used for investing activities |
|
(45.1 |
) |
|
(45.2 |
) |
|
|
|
|
|
FINANCING
ACTIVITIES: |
|
|
|
|
Net change in
short-term debt |
|
25.0 |
|
|
39.5 |
|
Dividends paid |
|
(17.0 |
) |
|
(17.9 |
) |
Purchases of treasury
stock |
|
— |
|
|
(96.3 |
) |
Payments on seller
financed debt related to purchase of software |
|
— |
|
|
(2.5 |
) |
Tax benefits on
share-based compensation |
|
0.3 |
|
|
— |
|
Proceeds from stock
options exercised |
|
1.8 |
|
|
0.2 |
|
Net cash
provided from (used for) financing activities |
|
10.1 |
|
|
(77.0 |
) |
|
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
|
1.3 |
|
|
1.7 |
|
|
|
|
|
|
DECREASE IN CASH AND
CASH EQUIVALENTS |
|
(59.5 |
) |
|
(48.9 |
) |
Cash and cash
equivalents at beginning of period |
|
82.0 |
|
|
70.0 |
|
|
|
|
|
|
Cash and cash
equivalents at end of period |
|
$ |
22.5 |
|
|
$ |
21.1 |
|
PRELIMINARYCONSOLIDATED
BALANCE SHEETS(in millions)(Unaudited) |
|
|
|
|
|
|
|
December 31, |
|
June 30, |
|
|
2016 |
|
2016 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash equivalents |
|
$ |
22.5 |
|
|
$ |
82.0 |
|
Accounts
receivable, net |
|
250.0 |
|
|
253.6 |
|
Inventories |
|
700.7 |
|
|
628.7 |
|
Other
current assets |
|
53.0 |
|
|
46.4 |
|
Total
current assets |
|
1,026.2 |
|
|
1,010.7 |
|
Property, plant and
equipment, net |
|
1,322.7 |
|
|
1,351.4 |
|
Goodwill |
|
244.8 |
|
|
244.8 |
|
Other intangibles,
net |
|
59.9 |
|
|
63.2 |
|
Deferred income
taxes |
|
7.3 |
|
|
8.2 |
|
Other assets |
|
116.5 |
|
|
116.0 |
|
Total
assets |
|
$ |
2,777.4 |
|
|
$ |
2,794.3 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
Current
liabilities: |
|
|
|
|
Short-term debt |
|
$ |
25.0 |
|
|
$ |
— |
|
Accounts
payable |
|
167.7 |
|
|
159.6 |
|
Accrued
liabilities |
|
119.4 |
|
|
139.2 |
|
Total
current liabilities |
|
312.1 |
|
|
298.8 |
|
Long-term debt |
|
604.0 |
|
|
611.3 |
|
Accrued pension
liabilities |
|
405.3 |
|
|
509.3 |
|
Accrued postretirement
benefits |
|
117.8 |
|
|
116.6 |
|
Deferred income
taxes |
|
164.1 |
|
|
102.4 |
|
Other liabilities |
|
43.8 |
|
|
51.0 |
|
Total
liabilities |
|
1,647.1 |
|
|
1,689.4 |
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY |
|
|
|
|
Common stock |
|
276.7 |
|
|
276.3 |
|
Capital in excess of
par value |
|
280.2 |
|
|
273.5 |
|
Reinvested
earnings |
|
1,292.7 |
|
|
1,308.9 |
|
Common stock in
treasury, at cost |
|
(342.4 |
) |
|
(343.9 |
) |
Accumulated other
comprehensive loss |
|
(376.9 |
) |
|
(409.9 |
) |
Total
stockholders' equity |
|
1,130.3 |
|
|
1,104.9 |
|
Total
liabilities and stockholders' equity |
|
$ |
2,777.4 |
|
|
$ |
2,794.3 |
|
PRELIMINARYSEGMENT FINANCIAL
DATA(in millions, except pounds sold)(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
December 31, |
|
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Pounds sold (000): |
|
|
|
|
|
|
|
Specialty
Alloys Operations |
51,314 |
|
|
54,794 |
|
|
103,674 |
|
|
111,606 |
|
Performance Engineered Products |
2,350 |
|
|
2,800 |
|
|
4,764 |
|
|
5,756 |
|
Intersegment |
(378 |
) |
|
(666 |
) |
|
(972 |
) |
|
(2,010 |
) |
Consolidated pounds sold |
53,286 |
|
|
56,928 |
|
|
107,466 |
|
|
115,352 |
|
|
|
|
|
|
|
|
|
Net sales: |
|
|
|
|
|
|
|
Specialty
Alloys Operations |
|
|
|
|
|
|
|
Net sales
excluding surcharge |
$ |
288.1 |
|
|
$ |
299.2 |
|
|
$ |
554.0 |
|
|
$ |
600.8 |
|
Surcharge |
60.5 |
|
|
64.4 |
|
|
109.7 |
|
|
135.4 |
|
Specialty
Alloys Operations net sales |
348.6 |
|
|
363.6 |
|
|
663.7 |
|
|
736.2 |
|
|
|
|
|
|
|
|
|
Performance Engineered Products |
|
|
|
|
|
|
|
Net sales
excluding surcharge |
83.0 |
|
|
85.2 |
|
|
161.3 |
|
|
176.6 |
|
Surcharge |
0.2 |
|
|
0.2 |
|
|
0.4 |
|
|
0.4 |
|
Performance Engineered Products net sales |
83.2 |
|
|
85.4 |
|
|
161.7 |
|
|
177.0 |
|
|
|
|
|
|
|
|
|
Intersegment |
|
|
|
|
|
|
|
Net sales
excluding surcharge |
(4.4 |
) |
|
(5.0 |
) |
|
(8.7 |
) |
|
(12.8 |
) |
Surcharge |
— |
|
|
(0.2 |
) |
|
(0.4 |
) |
|
(1.0 |
) |
Intersegment net sales |
(4.4 |
) |
|
(5.2 |
) |
|
(9.1 |
) |
|
(13.8 |
) |
|
|
|
|
|
|
|
|
Consolidated net sales |
$ |
427.4 |
|
|
$ |
443.8 |
|
|
$ |
816.3 |
|
|
$ |
899.4 |
|
|
|
|
|
|
|
|
|
Operating income
(loss): |
|
|
|
|
|
|
|
Specialty
Alloys Operations |
$ |
35.6 |
|
|
$ |
41.5 |
|
|
$ |
60.6 |
|
|
$ |
82.7 |
|
Performance Engineered Products |
0.8 |
|
|
(2.9 |
) |
|
(2.0 |
) |
|
(3.3 |
) |
Corporate
costs |
(16.0 |
) |
|
(12.7 |
) |
|
(29.8 |
) |
|
(24.8 |
) |
Pension
earnings, interest and deferrals |
(5.6 |
) |
|
(4.8 |
) |
|
(12.7 |
) |
|
(9.6 |
) |
Intersegment |
0.6 |
|
|
0.7 |
|
|
0.7 |
|
|
1.7 |
|
Consolidated operating income |
$ |
15.4 |
|
|
$ |
21.8 |
|
|
$ |
16.8 |
|
|
$ |
46.7 |
|
The Company has two reportable segments, Specialty Alloys
Operations (“SAO”) and Performance Engineered Products (“PEP”).
The SAO segment is comprised of Carpenter's major premium alloy
and stainless steel manufacturing operations. This includes
operations performed at mills primarily in Reading and Latrobe,
Pennsylvania and surrounding areas, as well as South Carolina and
Alabama.
The PEP segment is comprised of the Company’s differentiated
operations. This segment includes the Dynamet titanium business,
the Carpenter Powder Products (CPP) business, the Amega West
business, the Specialty Steel Supply business, and the Latrobe and
Mexico distribution businesses. The businesses in the PEP segment
are managed with an entrepreneurial structure to promote
flexibility and agility to quickly respond to market
dynamics. It is our belief this model will ultimately drive
overall revenue and profit growth. The pounds sold data above
for the PEP segment includes only the Dynamet and CPP
businesses.
The corporate costs are comprised of executive and director
compensation, and other corporate facilities and administrative
expenses not allocated to the segments. Also included are items
that management considers not representative of ongoing operations,
such as restructuring and asset impairment charges, goodwill
impairment and other specifically-identified income or expense
items.
The service cost component of net pension expense, which
represents the estimated cost of future pension liabilities earned
associated with active employees, is included in the operating
results of the business segments. The residual net pension
expense, or pension earnings, interest and deferrals (pension EID),
is comprised of the expected return on plan assets, interest costs
on the projected benefit obligations of the plans, and amortization
of actuarial gains and losses and prior service costs and is
included under the heading "Pension earnings, interest and
deferrals".
PRELIMINARYNON-GAAP FINANCIAL
MEASURES(in millions, except per share
data)(Unaudited) |
|
|
|
|
|
|
|
|
|
OPERATING MARGIN
EXCLUDING SURCHARGE, |
|
|
|
|
|
|
|
|
PENSION EARNINGS,
INTEREST AND DEFERRALS |
|
Three Months Ended |
|
Six Months Ended |
AND SPECIAL ITEMS |
|
December 31, |
|
December 31, |
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
427.4 |
|
|
$ |
443.8 |
|
|
$ |
816.3 |
|
|
$ |
899.4 |
|
Less: surcharge |
|
60.7 |
|
|
64.4 |
|
|
109.7 |
|
|
134.8 |
|
Consolidated net sales
excluding surcharge |
|
$ |
366.7 |
|
|
$ |
379.4 |
|
|
$ |
706.6 |
|
|
$ |
764.6 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
15.4 |
|
|
$ |
21.8 |
|
|
$ |
16.8 |
|
|
$ |
46.7 |
|
Pension earnings,
interest and deferrals |
|
5.6 |
|
|
4.8 |
|
|
12.7 |
|
|
9.6 |
|
Operating income
excluding pension earnings, interest and deferrals |
|
21.0 |
|
|
26.6 |
|
|
29.5 |
|
|
56.3 |
|
|
|
|
|
|
|
|
|
|
Special items: |
|
|
|
|
|
|
|
|
Pension
curtailment charge |
|
— |
|
|
— |
|
|
0.5 |
|
|
— |
|
Restructuring charges |
|
— |
|
|
— |
|
|
— |
|
|
0.4 |
|
Consulting costs |
|
— |
|
|
2.6 |
|
|
— |
|
|
5.1 |
|
Operating income
excluding pension earnings, interest and deferrals and special
items |
|
$ |
21.0 |
|
|
$ |
29.2 |
|
|
$ |
30.0 |
|
|
$ |
61.8 |
|
|
|
|
|
|
|
|
|
|
Operating margin |
|
3.6 |
% |
|
4.9 |
% |
|
2.1 |
% |
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
Operating margin
excluding surcharge, pension earnings, interest and deferrals and
special items |
|
5.7 |
% |
|
7.7 |
% |
|
4.2 |
% |
|
8.1 |
% |
Management believes that removing the impacts of raw material
surcharge from operating margin provides a more consistent basis
for comparing results of operations from period to period, thereby
permitting management to evaluate performance and investors to make
decisions based on the ongoing operations of the Company. In
addition, management believes that excluding the impact of pension
earnings, interest and deferrals, which may be volatile due to
changes in the financial markets, is helpful in analyzing the true
operating performance of the Company. Management also believes that
removing the impact of restructuring charges and other special
items is helpful in analyzing the operating performance of the
Company, as these costs are not indicative of ongoing operating
performance. Management uses its results excluding these amounts to
evaluate its operating performance and to discuss its business with
investment institutions, the Company’s board of directors and
others.
ADJUSTED EARNINGS PER
SHARE EXCLUDING SPECIAL ITEMS |
|
Income Before Income Taxes |
|
Income Tax Expense |
|
Net Income |
|
Earnings Per Diluted Share |
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2016, as reported |
|
$ |
8.3 |
|
|
$ |
(1.3 |
) |
|
$ |
7.0 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
Special items: |
|
|
|
|
|
|
|
|
None
reported |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2016, as adjusted |
|
$ |
8.3 |
|
|
$ |
(1.3 |
) |
|
$ |
7.0 |
|
|
$ |
0.15 |
|
ADJUSTED EARNINGS PER
SHARE EXCLUDING SPECIAL ITEMS |
|
Income Before Income Taxes |
|
Income Tax Expense |
|
Net Income |
|
Earnings Per Diluted Share* |
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2015, as reported |
|
$ |
15.1 |
|
|
$ |
(3.6 |
) |
|
$ |
11.5 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
Special items: |
|
|
|
|
|
|
|
|
Consulting costs |
|
2.6 |
|
|
(0.9 |
) |
|
1.7 |
|
|
0.03 |
|
Impact of
tax law change |
|
— |
|
|
(0.8 |
) |
|
(0.8 |
) |
|
(0.02 |
) |
Total impact of special
items |
|
2.6 |
|
|
(1.7 |
) |
|
0.9 |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
Three months ended
December 31, 2015, as adjusted |
|
$ |
17.7 |
|
|
$ |
(5.3 |
) |
|
$ |
12.4 |
|
|
$ |
0.24 |
|
|
|
|
|
|
|
|
|
|
* Impact
per diluted share calculated using weighted average common shares
outstanding of 48.9 million for the three months ended December 31,
2015. |
ADJUSTED EARNINGS PER
SHARE EXCLUDING SPECIAL ITEMS |
|
Income Before Income Taxes |
|
Income Tax (Expense) Benefit |
|
Net Income |
|
Earnings Per Diluted Share** |
|
|
|
|
|
|
|
|
|
Six months ended
December 31, 2016, as reported |
|
$ |
3.0 |
|
|
$ |
(2.2 |
) |
|
$ |
0.8 |
|
|
$ |
0.01 |
|
Special items: |
|
|
|
|
|
|
|
|
Pension
curtailment charge |
|
0.5 |
|
|
(0.1 |
) |
|
0.4 |
|
|
0.01 |
|
Income
tax item |
|
— |
|
|
2.1 |
|
|
2.1 |
|
|
0.04 |
|
Total impact of special
items |
|
0.5 |
|
|
2.0 |
|
|
2.5 |
|
|
0.05 |
|
|
|
|
|
|
|
|
|
|
Six months ended
December 31, 2016, as adjusted |
|
$ |
3.5 |
|
|
$ |
(0.2 |
) |
|
$ |
3.3 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
** Impact
per diluted share calculated using weighted average common shares
outstanding of 47.1 million for the six months ended December 31,
2016. |
ADJUSTED EARNINGS PER
SHARE EXCLUDING SPECIAL ITEMS |
|
Income Before Income Taxes |
|
Income Tax (Expense) Benefit |
|
Net Income |
|
Earnings Per Diluted Share** |
|
|
|
|
|
|
|
|
|
Six months ended
December 31, 2015, as reported |
|
$ |
31.2 |
|
|
$ |
(10.8 |
) |
|
$ |
20.4 |
|
|
$ |
0.41 |
|
|
|
|
|
|
|
|
|
|
Special items: |
|
|
|
|
|
|
|
|
Restructuring charges |
|
0.4 |
|
|
(0.1 |
) |
|
0.3 |
|
|
0.01 |
|
Consulting costs |
|
5.1 |
|
|
(1.8 |
) |
|
3.3 |
|
|
0.07 |
|
Income
tax item* |
|
— |
|
|
2.0 |
|
|
2.0 |
|
|
0.04 |
|
Impact of
tax law change |
|
— |
|
|
(0.8 |
) |
|
(0.8 |
) |
|
(0.02 |
) |
Total impact of
restructuring charges and special items |
|
5.5 |
|
|
(0.7 |
) |
|
4.8 |
|
|
0.10 |
|
|
|
|
|
|
|
|
|
|
Six months ended
December 31, 2015, as adjusted |
|
$ |
36.7 |
|
|
$ |
(11.5 |
) |
|
$ |
25.2 |
|
|
$ |
0.51 |
|
|
|
|
|
|
|
|
|
|
* As a
result of a decision to sell our equity method investment in India,
we changed our intent with regard to the indefinite reinvestment of
the foreign earnings from one of our subsidiaries.
Accordingly, we recorded a discrete income tax charge during the
six months ended December 31, 2015. |
|
** Impact
per diluted share calculated using weighted average common shares
outstanding of 49.4 million for the six months ended December 31,
2015. |
Management believes that earnings per share adjusted to exclude
the impact of restructuring charges and special items is helpful in
analyzing the operating performance of the Company, as these costs
are not indicative of ongoing operating performance. Management
uses its results excluding these amounts to evaluate its operating
performance and to discuss its business with investment
institutions, the Company’s board of directors and others.
|
|
Three Months Ended |
|
Six Months Ended |
|
|
December 31, |
|
December 31, |
FREE CASH FLOW |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
Net cash (used for)
provided from operating activities |
|
$ |
(29.7 |
) |
|
$ |
30.1 |
|
|
$ |
(25.8 |
) |
|
$ |
71.6 |
|
Purchases of property,
equipment and software |
|
(18.5 |
) |
|
(19.6 |
) |
|
(45.1 |
) |
|
(49.5 |
) |
Proceeds from disposals
of property and equipment |
|
— |
|
|
0.2 |
|
|
— |
|
|
0.3 |
|
Other |
|
— |
|
|
— |
|
|
— |
|
|
4.0 |
|
Dividends paid |
|
(8.5 |
) |
|
(8.9 |
) |
|
(17.0 |
) |
|
(17.9 |
) |
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
(56.7 |
) |
|
$ |
1.8 |
|
|
$ |
(87.9 |
) |
|
$ |
8.5 |
|
Management believes that the free cash flow measure provides
useful information to investors regarding our financial condition
because it is a measure of cash generated which management
evaluates for alternative uses.
PRELIMINARYSUPPLEMENTAL
SCHEDULES(in millions)(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
December 31, |
|
December 31, |
NET SALES BY END-USE
MARKET |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
End-Use Market
Excluding Surcharge: |
|
|
|
|
|
|
|
|
Aerospace
and Defense |
|
$ |
199.0 |
|
|
$ |
201.4 |
|
|
$ |
372.5 |
|
|
$ |
395.5 |
|
Energy |
|
27.1 |
|
|
25.9 |
|
|
52.8 |
|
|
58.5 |
|
Transportation |
|
28.7 |
|
|
33.3 |
|
|
59.2 |
|
|
69.0 |
|
Medical |
|
25.1 |
|
|
27.7 |
|
|
48.1 |
|
|
54.1 |
|
Industrial and Consumer |
|
59.2 |
|
|
62.9 |
|
|
118.5 |
|
|
129.5 |
|
Distribution |
|
27.6 |
|
|
28.2 |
|
|
55.5 |
|
|
58.0 |
|
|
|
|
|
|
|
|
|
|
Consolidated net sales
excluding surcharge |
|
366.7 |
|
|
379.4 |
|
|
706.6 |
|
|
764.6 |
|
|
|
|
|
|
|
|
|
|
Surcharge |
|
60.7 |
|
|
64.4 |
|
|
109.7 |
|
|
134.8 |
|
|
|
|
|
|
|
|
|
|
Consolidated net
sales |
|
$ |
427.4 |
|
|
$ |
443.8 |
|
|
$ |
816.3 |
|
|
$ |
899.4 |
|
In fiscal year 2016 in connection with our commercial
organization realignment, we changed the manner in which sales are
classified by end-use market so that we could better evaluate our
sales results from period to period. All prior period amounts have
been reclassified to conform to the current presentation.
Media Inquiries:
William J. Rudolph, Jr.
+1 610-208-3892
wrudolph@cartech.com
Investor Inquiries:
Brad Edwards
Brainerd Communicators
+1 212-986-6667
edwards@braincomm.com
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