Carpenter Technology Reports Fourth Quarter and Fiscal Year 2022 Results

Carpenter Technology Corporation

PHILADELPHIA, PA — Carpenter Technology Corporation (NYSE: CRS) recently announced financial results for the fiscal fourth quarter and year ended June 30, 2022. For the quarter, the Company reported net income of $2.6 million, or $0.05 earnings per diluted share. Excluding special items, adjusted earnings per share was $0.00 for the fourth quarter.

“Our fourth quarter results marked a successful end to the year and place us on strong ground to deliver accelerated growth in fiscal year 2023,” said Tony Thene, Carpenter Technology’s President and CEO. “The quarter saw us return to a positive EPS as both the Specialty Alloy Operations (“SAO”) and Performance Engineered Products (“PEP”) segments outperformed our expectations. We also continued to expand our backlog across our end-use markets and secured another price increase on our transactional business as overall demand conditions across our end-use markets remain strong.”

“In the fourth quarter, our backlog grew by 29 percent on a sequential basis and 191 percent year-over-year. We also generated positive free cash flow of $65 million and finished the fiscal year with total liquidity of $448 million. The fourth quarter’s operating income results were driven by double digit sequential revenue growth in the Aerospace and Defense and Medical end-use markets.”

“Fiscal year 2022 proved to be a challenging but successful year. We navigated through an unforeseen outage of our Reading Press, continued COVID-19 isolations, a difficult hiring environment, and other supply chain challenges. But in addressing each of them, I believe we are emerging from it stronger and well-positioned for growth.”

“Looking ahead, we expect to see continued growth across our end-use markets, especially in Aerospace, Defense and Medical applications, where customers are still ramping to pre-pandemic levels. To capitalize on the demand in our core business, we are focused on achieving additional productivity and capacity gains through the Carpenter Operating Model. Further, our strong position in our core business is supported by our capabilities in key emerging areas including electrification and additive manufacturing that further support our long-term growth profile. We believe the continued execution of our strategy will drive sustainable long-term value creation for our customers and shareholders.”

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Financial Highlights

Q4 Q4 YTD YTD
($ in millions except per share amounts) FY2022 FY2021 FY2022 FY2021
Net sales $ 563.8 $ 421.6 $ 1,836.3 $ 1,475.6
Net sales excluding surcharge (a) $ 403.2 $ 348.1 $ 1,400.0 $ 1,252.8
Operating income (loss) $ 24.6 $ (70.7 ) $ (24.9 ) $ (248.6 )
Adjusted operating income (loss) excluding special items (a) $ 14.9 $ (12.5 ) $ (34.0 ) $ (105.5 )
Net income (loss) $ 2.6 $ (57.1 ) $ (49.1 ) $ (229.6 )
Earnings (loss) per share $ 0.05 $ (1.18 ) $ (1.01 ) $ (4.76 )
Adjusted earnings (loss) per share (a) $ 0.00 $ (0.28 ) $ (1.06 ) $ (2.01 )
Net cash provided from operating activities $ 106.9 $ 74.5 $ 6.0 $ 250.0
Free cash flow (a) $ 64.6 $ 42.6 $ (122.3 ) $ 132.0
(a) non-GAAP financial measures explained in the attached tables
Net sales for the fourth quarter of fiscal year 2022 were $563.8 million compared with $421.6 million in the fourth quarter of fiscal year 2021, an increase of $142.2 million (or 34 percent), on 8 percent higher volume. Net sales excluding surcharge were $403.2 million, an increase of $55.1 million (or 16 percent) from the same period a year ago.

Operating income for the fourth quarter of fiscal year 2022 was $24.6 million compared to operating loss of $70.7 million in the prior year period. Adjusted to exclude special items, operating income was $14.9 million in the recent fourth quarter compared to adjusted operating loss of $12.5 million in the same period a year ago. The improvement in operating income is primarily the result of increased shipments as activity levels continued to ramp to meet improving market conditions in key end-use markets compared to the prior year period.

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Earnings per share for the fourth quarter of fiscal year 2022 was $0.05 per share, or $0.00 per share when excluding special items, compared to a loss of $1.18 per share, or loss of $0.28 per share when excluding special items, in the prior year fourth quarter. The increase in adjusted earnings per share is the result of higher operating income partially offset by higher interest costs.

The special items in the current quarter include $0.6 million of COVID-19 costs, a $2.4 million charge related to a historical environmental obligation, and $6.0 million of debt extinguishment costs related to the Company’s recent bond refinancing, offset by a $12.7 million benefit related to employee retention credits to be claimed against certain employment taxes. Both the COVID-19 costs and the employment tax credits are included in the reported segment results with $10.0 million of net benefit included in the current quarter’s SAO segment operating income and $2.1 million net benefit included in the current quarter’s PEP segment operating income.

Cash provided from operating activities in the fourth quarter of fiscal year 2022 was $106.9 million, compared to $74.5 million in the same quarter last year. The increase in operating cash flow primarily reflects higher earnings and certain income tax refunds received related to prior years. These benefits were partially offset by increased accounts receivable as a result of higher sales during the quarter. Free cash flow in the fourth quarter of fiscal year 2022 was $64.6 million, compared to $42.6 million in the same quarter last year. The increase in free cash flow was primarily due to higher cash from operating activities in the current quarter. Capital expenditures were $32.8 million in the fourth quarter of fiscal year 2022 compared to $22.1 million in the same quarter last year.

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Total liquidity, including cash and available revolver balance, was $448.3 million at the end of fiscal year 2022. This consisted of $154.2 million of cash and $294.1 million of available borrowings under the Company’s credit facility.

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