Carpenter Technology (CRS) Q4 2020 earnings summary

Executive summary

• FY20 results weakened sharply in H2 as COVID-19 disruption and the Boeing 737 MAX production halt reduced demand; cost actions and portfolio restructuring supported positive operating cash flow and stronger liquidity.

• Reported diluted EPS was $0.02; Adjusted diluted EPS excluding special items was $2.21.

Financial highlights

• FY20 net sales were $2,181.1M, down 8% YoY; excluding surcharges, sales fell 6% on 13% lower volume.

• Gross profit was $329.4M, or 15.1% of sales, versus $444.8M and 18.7% in FY19; excluding surcharges and inventory write-downs, gross margin was 19.6% versus 22.9%.

• Operating income was $25.3M versus $241.4M; Adjusted operating margin excluding surcharges and special items was 8.6% versus 12.5%.

• Net income was $1.5M versus $167.0M; FY20 included $34.6M goodwill impairment and $97.8M inventory write-downs, restructuring and asset impairment charges.

• Operating cash flow was $231.8M; free cash flow was $21.8M versus negative $53.7M in FY19.

Outlook and guidance

• FY21 capital expenditures expected at approximately $120M; backlog excluding surcharge was $539M at June 30, 2020, substantially all expected to ship in FY21.

• Required cash contributions to qualified pension plans expected to be $19.3M in FY21; estimated five-year contributions were $186.8M, subject to market returns and interest-rate assumptions.

• Restructuring actions were expected to be substantially complete in Q1 FY21.