Carpenter Technology (CRS) Q4 2018 earnings summary

Executive summary

• FY18 delivered the strongest operating income in four years as stronger demand, improved mix and Carpenter Operating Model efficiencies lifted results across markets.

• Backlog excluding surcharges was $568 million at June 30, 2018, up from $438 million a year earlier; substantially all was expected to ship in FY19.

• Q4 net sales were $618.0 million, operating income $59.4 million and net income $42.8 million.

Financial highlights

• Net sales rose 20% YoY to $2,157.7 million; excluding surcharge revenue, sales increased 15% on 12% higher volume.

• Operating income was $187.1 million vs. $97.2 million; net income was $188.5 million and diluted EPS $3.92 vs. $47.0 million and $0.99.

• Adjusted diluted EPS was $2.50, excluding $68.3 million of discrete tax benefits; FY17 adjusted diluted EPS was $1.08.

• Gross profit was $382.2 million, or 17.7% of sales; gross margin excluding surcharges was 21.3% vs. 18.2%.

Outlook and guidance

• FY19 capital expenditures were expected to be approximately $190 million, following $135.0 million in FY18.

• FY19 required cash pension contributions were estimated at $5.5 million; current estimates indicated $92.4 million over five years, subject to market returns and interest rates.

• Substantially all of the $568 million FY18 year-end backlog, excluding surcharges, was expected to ship during FY19.

• The U.S. federal statutory tax rate for FY19 was 21%, following a blended 28.1% rate in FY18.