Carpenter Technology (CRS) Q4 2016 earnings summary

Executive summary

• FY16 net income fell to $11.3M from $58.7M; lower volumes in Energy, Industrial and Consumer, and Aerospace and Defense, plus PEP oil-and-gas impairments, outweighed operating-cost improvements.

• Carpenter Operating Model, commercial-team reorganization and a solutions-provider strategy focused on manufacturing efficiency, customer relationships, working capital and disciplined capital spending.

Financial highlights

• Net sales were $1,813.4M, down 19% YoY; excluding surcharge revenue, sales fell 13% on 13% lower volume.

• Operating income was $51.6M vs. $111.5M; gross profit was $255.9M vs. $318.3M.

• Diluted EPS was $0.23 vs. $1.11; adjusted diluted EPS was $1.16 vs. adjusted $1.51 in FY15.

• Operating cash flow was $256.9M; free cash flow was $138.6M vs. $74.4M, reflecting lower capital spending.

• Nonrecurring FY16 charges included $22.5M excess inventory write-down, $12.5M goodwill impairment, $7.6M long-lived asset impairment and $10.4M restructuring.

Outlook and guidance

• FY17 capital expenditures expected at approximately $120M; $0.7M of pension contributions required in FY17.

• Approximately $306M of firm backlog excluding surcharge at June 30, 2016, substantially all expected to ship in FY17.

• Estimated cash contributions to pension plans over the next five years total $216.6M, subject to market returns and interest-rate assumptions.

• Approximately $3M of major domestic environmental capital projects anticipated over the next five fiscal years, including approximately $1M in FY17.