Exceeded Third Quarter Operating Income Guidance
Increasing Fourth Quarter Operating Income Outlook
Generated Positive Free Cash Flow
Third Quarter Fiscal Year 2024 Highlights
- Delivered
$90.0 million of adjusted operating income, up 29 percent sequentially and a record quarterly result - Realized adjusted earnings per diluted share of
$1.19 - Increased net sales excluding surcharge 14 percent sequentially, driven by increasing sales in Aerospace and Defense and Medical end-use markets
- Exceeded expectations in Specialty Alloys Operations (“SAO”) segment with operating income of
$103.5 million , up 24 percent sequentially - Delivered adjusted operating margin of 21.4 percent in the SAO segment, up from 20.0 percent in the previous quarter
- Generated
$83.4 million of cash from operating activities, or$61.9 million of adjusted free cash flow
Fourth Quarter and Fiscal Year 2024 Outlook
- Increasing guidance for the fourth quarter to
$110 million to$115 million of operating income - Expecting to generate over
$100 million in adjusted free cash flow in the fourth quarter of fiscal year 2024 - Estimating
$339 million to$344 million in adjusted operating income for fiscal year 2024; would achieve the most profitable year on record
Longer Term Fiscal Year 2027 Outlook
- Pulling forward goal to achieve
$460 million to$500 million in operating income from fiscal year 2027 to fiscal year 2026 - Anticipate nearly 60 percent of growth towards this goal to be realized in fiscal year 2024
- Strong market demand outlook for our broad portfolio of specialized solutions
- Leading capabilities and capacity in place to achieve goal
- Expanding capacity via higher throughput while optimizing product mix
“In the third quarter of fiscal year 2024 we beat our previous guidance, generating
“Building on our operating momentum, we are raising our guidance for the fourth quarter of fiscal year 2024 and expect operating income in the range of
“Our fiscal year 2024 projection represents a meaningful step towards our fiscal year 2027 operating income goal, realizing nearly 60 percent of the total opportunity in the first year. And with accelerating earnings growth due to improving productivity and expanding margins, we are pulling forward our fiscal year 2027 goal and expect to achieve this in fiscal year 2026.”
Financial Highlights
Q3 | Q2 | Q3 | |||||||||
($ in millions, except per share amounts) | FY2024 | FY2024 | FY2023 | ||||||||
Net sales | $ | 684.9 | $ | 624.2 | $ | 690.1 | |||||
Net sales excluding surcharge (a) | $ | 553.8 | $ | 485.3 | $ | 491.5 | |||||
Operating income | $ | 75.9 | $ | 69.8 | $ | 39.3 | |||||
Adjusted operating income excluding special item (a) | $ | 90.0 | $ | 69.8 | $ | 39.3 | |||||
Net income | $ | 6.3 | $ | 42.7 | $ | 18.6 | |||||
Earnings per diluted share | $ | 0.12 | $ | 0.85 | $ | 0.38 | |||||
Adjusted earnings per diluted share (a) | $ | 1.19 | $ | 0.85 | $ | 0.38 | |||||
Net cash provided from operating activities | $ | 83.4 | $ | 14.6 | $ | 4.3 | |||||
Adjusted free cash flow (a) | $ | 61.9 | $ | (10.7 | ) | $ | (16.2 | ) | |||
(a) Non-GAAP financial measures explained in the attached tables | |||||||||||
Net sales for the third quarter of fiscal year 2024 were
Operating income was
Cash provided from operating activities in the third quarter of fiscal year 2024 was
Total liquidity, including cash and available revolver balance, was
Special Items
During the quarter ended
Conference Call and Webcast Presentation
Non-GAAP Financial Measures
This press release includes discussions of financial measures that have not been determined in accordance with
About
Forward-Looking Statements
This press release 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
PRELIMINARY CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) (Unaudited) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
$ | 684.9 | $ | 690.1 | $ | 1,961.1 | $ | 1,792.1 | |||||
Cost of sales | 537.9 | 596.6 | 1,567.4 | 1,573.9 | ||||||||
Gross profit | 147.0 | 93.5 | 393.7 | 218.2 | ||||||||
Selling, general and administrative expenses | 57.0 | 54.2 | 164.8 | 148.0 | ||||||||
14.1 | — | 14.1 | — | |||||||||
Operating income | 75.9 | 39.3 | 214.8 | 70.2 | ||||||||
Interest expense, net | 12.9 | 14.5 | 38.6 | 40.1 | ||||||||
Other expense, net | 52.9 | 0.8 | 58.5 | 6.2 | ||||||||
Income before income taxes | 10.1 | 24.0 | 117.7 | 23.9 | ||||||||
Income tax expense | 3.8 | 5.4 | 24.8 | 5.9 | ||||||||
NET INCOME | $ | 6.3 | $ | 18.6 | $ | 92.9 | $ | 18.0 | ||||
EARNINGS PER COMMON SHARE: | ||||||||||||
Basic | $ | 0.12 | $ | 0.38 | $ | 1.87 | $ | 0.36 | ||||
Diluted | $ | 0.12 | $ | 0.38 | $ | 1.85 | $ | 0.36 | ||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||
Basic | 49.7 | 48.8 | 49.5 | 48.7 | ||||||||
Diluted | 50.3 | 49.2 | 50.1 | 49.0 |
PRELIMINARY CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (Unaudited) | ||||||||
Nine Months Ended | ||||||||
2024 | 2023 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 92.9 | $ | 18.0 | ||||
Adjustments to reconcile net income to net cash provided from (used for) operating activities: | ||||||||
Depreciation and amortization | 100.8 | 97.5 | ||||||
14.1 | — | |||||||
Deferred income taxes | (11.3 | ) | — | |||||
Net pension expense | 69.8 | 14.9 | ||||||
Share-based compensation expense | 13.7 | 10.4 | ||||||
Net loss on disposals of property, plant and equipment | 3.5 | 0.7 | ||||||
Changes in working capital and other: | ||||||||
Accounts receivable | 9.3 | (130.6 | ) | |||||
Inventories | (155.6 | ) | (213.5 | ) | ||||
Other current assets | (19.2 | ) | (0.3 | ) | ||||
Accounts payable | (1.0 | ) | 42.0 | |||||
Accrued liabilities | (5.2 | ) | 8.4 | |||||
Pension plan contributions | (4.9 | ) | — | |||||
Other postretirement plan contributions | (1.8 | ) | (2.6 | ) | ||||
Other, net | 0.3 | (5.1 | ) | |||||
Net cash provided from (used for) operating activities | 105.4 | (160.2 | ) | |||||
INVESTING ACTIVITIES | ||||||||
Purchases of property, plant, equipment and software | (68.9 | ) | (51.5 | ) | ||||
Proceeds from disposals of property, plant and equipment | 0.1 | — | ||||||
Net cash used for investing activities | (68.8 | ) | (51.5 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Short-term credit agreement borrowings, net change | — | 3.6 | ||||||
Credit agreement borrowings | 62.5 | 183.7 | ||||||
Credit agreement repayments | (62.5 | ) | (78.7 | ) | ||||
Dividends paid | (29.9 | ) | (29.5 | ) | ||||
Proceeds from stock options exercised | 19.8 | 1.5 | ||||||
Withholding tax payments on share-based compensation awards | (18.2 | ) | (3.5 | ) | ||||
Net cash (used for) provided from financing activities | (28.3 | ) | 77.1 | |||||
Effect of exchange rate changes on cash and cash equivalents | 0.7 | 2.7 | ||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 9.0 | (131.9 | ) | |||||
Cash and cash equivalents at beginning of year | 44.5 | 154.2 | ||||||
Cash and cash equivalents at end of period | $ | 53.5 | $ | 22.3 |
PRELIMINARY CONSOLIDATED BALANCE SHEETS (in millions) (Unaudited) | ||||||||
2024 | 2023 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 53.5 | $ | 44.5 | ||||
Accounts receivable, net | 521.2 | 531.3 | ||||||
Inventories | 796.1 | 639.7 | ||||||
Other current assets | 82.2 | 66.4 | ||||||
Total current assets | 1,453.0 | 1,281.9 | ||||||
Property, plant, equipment and software, net | 1,351.4 | 1,383.8 | ||||||
227.3 | 241.4 | |||||||
Other intangibles, net | 23.8 | 28.7 | ||||||
Deferred income taxes | 6.7 | 6.6 | ||||||
Other assets | 114.0 | 111.5 | ||||||
Total assets | $ | 3,176.2 | $ | 3,053.9 | ||||
LIABILITIES | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 275.2 | $ | 278.1 | ||||
Accrued liabilities | 178.2 | 181.3 | ||||||
Total current liabilities | 453.4 | 459.4 | ||||||
Long-term debt | 693.9 | 693.0 | ||||||
Accrued pension liabilities | 212.2 | 190.1 | ||||||
Accrued postretirement benefits | 47.2 | 45.8 | ||||||
Deferred income taxes | 167.6 | 170.3 | ||||||
Other liabilities | 99.3 | 99.2 | ||||||
Total liabilities | 1,673.6 | 1,657.8 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Common stock | 283.2 | 280.7 | ||||||
Capital in excess of par value | 333.2 | 328.4 | ||||||
Reinvested earnings | 1,291.0 | 1,228.0 | ||||||
Common stock in treasury, at cost | (289.5 | ) | (298.0 | ) | ||||
Accumulated other comprehensive loss | (115.3 | ) | (143.0 | ) | ||||
Total stockholders' equity | 1,502.6 | 1,396.1 | ||||||
Total liabilities and stockholders' equity | $ | 3,176.2 | $ | 3,053.9 |
PRELIMINARY SEGMENT FINANCIAL DATA (in millions, except pounds sold) (Unaudited) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||
Pounds sold (000): | |||||||||||||||
Specialty Alloys Operations | 50,846 | 56,516 | 150,952 | 150,522 | |||||||||||
Performance Engineered Products | 2,618 | 3,232 | 7,238 | 8,536 | |||||||||||
Intersegment | (3,256 | ) | (2,446 | ) | (8,672 | ) | (6,366 | ) | |||||||
Consolidated pounds sold | 50,208 | 57,302 | 149,518 | 152,692 | |||||||||||
Net sales: | |||||||||||||||
Specialty Alloys Operations | |||||||||||||||
Net sales excluding surcharge | $ | 483.0 | $ | 411.5 | $ | 1,316.5 | $ | 1,063.3 | |||||||
Surcharge | 125.5 | 191.9 | 411.5 | 483.3 | |||||||||||
Specialty Alloys Operations net sales | 608.5 | 603.4 | 1,728.0 | 1,546.6 | |||||||||||
Performance Engineered Products | |||||||||||||||
Net sales excluding surcharge | 94.6 | 103.8 | 275.6 | 289.5 | |||||||||||
Surcharge | 7.8 | 11.3 | 24.3 | 25.6 | |||||||||||
Performance Engineered Products net sales | 102.4 | 115.1 | 299.9 | 315.1 | |||||||||||
Intersegment | |||||||||||||||
Net sales excluding surcharge | (23.8 | ) | (23.8 | ) | (60.2 | ) | (64.8 | ) | |||||||
Surcharge | (2.2 | ) | (4.6 | ) | (6.6 | ) | (4.8 | ) | |||||||
Intersegment net sales | (26.0 | ) | (28.4 | ) | (66.8 | ) | (69.6 | ) | |||||||
Consolidated net sales | $ | 684.9 | $ | 690.1 | $ | 1,961.1 | $ | 1,792.1 | |||||||
Operating income (loss): | |||||||||||||||
Specialty Alloys Operations | $ | 103.5 | $ | 49.0 | $ | 267.6 | $ | 99.1 | |||||||
Performance Engineered Products | 9.2 | 10.2 | 25.4 | 25.9 | |||||||||||
Corporate | (37.1 | ) | (19.6 | ) | (79.1 | ) | (53.1 | ) | |||||||
Intersegment | 0.3 | (0.3 | ) | 0.9 | (1.7 | ) | |||||||||
Consolidated operating income | $ | 75.9 | $ | 39.3 | $ | 214.8 | $ | 70.2 | |||||||
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
The PEP segment is comprised of the Company’s differentiated operations. This segment includes 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 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 is included in other expense, net, and is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, amortization of actuarial gains and losses and prior service costs, and pension settlement charges.
PRELIMINARY NON-GAAP FINANCIAL MEASURES (in millions, except per share data) (Unaudited) | ||||||||||||||||
ADJUSTED OPERATING MARGIN EXCLUDING SURCHARGE REVENUE AND SPECIAL ITEM | Three Months Ended | Nine Months Ended | ||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Net sales | $ | 684.9 | $ | 690.1 | $ | 1,961.1 | $ | 1,792.1 | ||||||||
Less: surcharge revenue | 131.1 | 198.6 | 429.2 | 504.1 | ||||||||||||
Net sales excluding surcharge revenue | $ | 553.8 | $ | 491.5 | $ | 1,531.9 | $ | 1,288.0 | ||||||||
Operating income | $ | 75.9 | $ | 39.3 | $ | 214.8 | $ | 70.2 | ||||||||
Special item: | ||||||||||||||||
14.1 | — | 14.1 | — | |||||||||||||
Adjusted operating income | $ | 90.0 | $ | 39.3 | $ | 228.9 | $ | 70.2 | ||||||||
Operating margin | 11.1 | % | 5.7 | % | 11.0 | % | 3.9 | % | ||||||||
Adjusted operating margin excluding surcharge revenue and special item | 16.3 | % | 8.0 | % | 14.9 | % | 5.5 | % |
ADJUSTED SEGMENT OPERATING MARGIN EXCLUDING SURCHARGE REVENUE | Three Months Ended | Nine Months Ended | ||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Specialty Alloys Operations | ||||||||||||||||
Net sales | $ | 608.5 | $ | 603.4 | $ | 1,728.0 | $ | 1,546.6 | ||||||||
Less: surcharge revenue | 125.5 | 191.9 | 411.5 | 483.3 | ||||||||||||
Net sales excluding surcharge revenue | $ | 483.0 | $ | 411.5 | $ | 1,316.5 | $ | 1,063.3 | ||||||||
Operating income | $ | 103.5 | $ | 49.0 | $ | 267.6 | $ | 99.1 | ||||||||
Operating margin | 17.0 | % | 8.1 | % | 15.5 | % | 6.4 | % | ||||||||
Adjusted operating margin excluding surcharge revenue | 21.4 | % | 11.9 | % | 20.3 | % | 9.3 | % |
ADJUSTED SEGMENT OPERATING MARGIN EXCLUDING SURCHARGE REVENUE | Three Months Ended | Nine Months Ended | ||||||||||||||
2024 | 2023 | 2024 | 2023 | |||||||||||||
Performance Engineered Products | ||||||||||||||||
Net sales | $ | 102.4 | $ | 115.1 | $ | 299.9 | $ | 315.1 | ||||||||
Less: surcharge revenue | 7.8 | 11.3 | 24.3 | 25.6 | ||||||||||||
Net sales excluding surcharge revenue | $ | 94.6 | $ | 103.8 | $ | 275.6 | $ | 289.5 | ||||||||
Operating income | $ | 9.2 | $ | 10.2 | $ | 25.4 | $ | 25.9 | ||||||||
Operating margin | 9.0 | % | 8.9 | % | 8.5 | % | 8.2 | % | ||||||||
Adjusted operating margin excluding surcharge revenue | 9.7 | % | 9.8 | % | 9.2 | % | 8.9 | % | ||||||||
Management believes that removing the impact 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 special items from operating margin is helpful in analyzing the operating performance of the Company, as these items 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 | $ | 10.1 | $ | (3.8 | ) | $ | 6.3 | $ | 0.12 | ||||
Special items: | |||||||||||||
14.1 | — | 14.1 | 0.28 | ||||||||||
Pension settlement charge | 51.9 | (12.4 | ) | 39.5 | 0.79 | ||||||||
Three Months Ended | $ | 76.1 | $ | (16.2 | ) | $ | 59.9 | $ | 1.19 | ||||
* Impact per diluted share calculated using weighted average common shares outstanding of 50.3 million for the three months ended |
ADJUSTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEM | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | |||||||||
Three Months Ended | $ | 24.0 | $ | (5.4 | ) | $ | 18.6 | $ | 0.38 | ||||
Special item: | |||||||||||||
None reported | — | — | — | — | |||||||||
Three Months Ended | $ | 24.0 | $ | (5.4 | ) | $ | 18.6 | $ | 0.38 | ||||
* Impact per diluted share calculated using weighted average common shares outstanding of 49.2 million for the three months ended |
ADJUSTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEMS | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | |||||||||
Nine Months Ended | $ | 117.7 | $ | (24.8 | ) | $ | 92.9 | $ | 1.85 | ||||
Special items: | |||||||||||||
14.1 | — | 14.1 | 0.28 | ||||||||||
Pension settlement charge | 51.9 | (12.4 | ) | 39.5 | 0.79 | ||||||||
Nine Months Ended | $ | 183.7 | $ | (37.2 | ) | $ | 146.5 | $ | 2.92 | ||||
* Impact per diluted share calculated using weighted average common shares outstanding of 50.1 million for the nine months ended |
ADJUSTED EARNINGS PER SHARE EXCLUDING SPECIAL ITEM | Income Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | |||||||||
Nine Months Ended | $ | 23.9 | $ | (5.9 | ) | $ | 18.0 | $ | 0.36 | ||||
Special item: | |||||||||||||
None reported | — | — | — | — | |||||||||
Nine Months Ended | $ | 23.9 | $ | (5.9 | ) | $ | 18.0 | $ | 0.36 | ||||
* Impact per diluted share calculated using weighted average common shares outstanding of 49.0 million for the nine months ended | |||||||||||||
Management believes that earnings per share adjusted to exclude the impact of the special items is helpful in analyzing the operating performance of the Company, as these items 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 | Nine Months Ended | |||||||||||||||
ADJUSTED FREE CASH FLOW | 2024 | 2023 | 2024 | 2023 | ||||||||||||
Net cash provided from (used for) operating activities | $ | 83.4 | $ | 4.3 | $ | 105.4 | $ | (160.2 | ) | |||||||
Purchases of property, plant, equipment and software | (21.6 | ) | (20.5 | ) | (68.9 | ) | (51.5 | ) | ||||||||
Proceeds from disposals of property, plant and equipment | 0.1 | — | 0.1 | — | ||||||||||||
Adjusted free cash flow | $ | 61.9 | $ | (16.2 | ) | $ | 36.6 | $ | (211.7 | ) | ||||||
Management believes that the adjusted free cash flow measure provides useful information to investors regarding the Company's financial condition because it is a measure of cash generated which management evaluates for alternative uses. Historically, this non-GAAP financial measure included cash used for dividends paid on outstanding common stock and participating securities. Management believes that excluding cash dividends paid from adjusted free cash flow will provide a more direct comparison to operating cash flow, a GAAP-defined financial measure. Fiscal year 2023 has been reclassified to conform to the current presentation.
PRELIMINARY SUPPLEMENTAL SCHEDULE (in millions) (Unaudited) | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
NET SALES BY END-USE MARKET | 2024 | 2023 | 2024 | 2023 | ||||||||
End-Use Market Excluding Surcharge Revenue: | ||||||||||||
Aerospace and Defense | $ | 315.1 | $ | 241.5 | $ | 823.0 | $ | 625.4 | ||||
Medical | 84.2 | 62.2 | 223.7 | 174.7 | ||||||||
Transportation | 26.3 | 34.0 | 82.2 | 85.0 | ||||||||
Energy | 27.8 | 28.6 | 93.8 | 69.5 | ||||||||
Industrial and Consumer | 77.1 | 95.7 | 236.7 | 242.7 | ||||||||
Distribution | 23.3 | 29.5 | 72.5 | 90.7 | ||||||||
Total net sales excluding surcharge revenue | 553.8 | 491.5 | 1,531.9 | 1,288.0 | ||||||||
Surcharge revenue | 131.1 | 198.6 | 429.2 | 504.1 | ||||||||
Total net sales | $ | 684.9 | $ | 690.1 | $ | 1,961.1 | $ | 1,792.1 |
Investor Inquiries: +1 610-208-2061 jhuyette@cartech.com | Media Inquiries: +1 610-208-2278 hbeardsley@cartech.com |
Source:
2024 GlobeNewswire, Inc., source