Carpenter Technology (CRS) Q4 2021 earnings summary

Executive summary

• FY2021 net sales fell 32% to $1,475.6M; net loss was $229.6M, or $4.76 diluted loss/share. Adjusted diluted loss/share was $2.01.

• Liquidity reached $582.0M, including $287.4M cash; free cash flow was $132.0M as inventory reductions and cost actions supported liquidity.

• Fiscal year ended with market conditions showing signs of recovery; management saw a broad-based recovery taking shape and cited attractive long-term end-market prospects.

Financial highlights

• FY2021 revenue was $1,475.6M, down 32% YoY; excluding surcharge revenue, sales declined 31% on 27% lower volume.

• GAAP gross profit was $1.0M, or 0.1% of sales, versus $329.4M and 15.1% in FY2020; adjusted gross margin excluding surcharges and specified items was 4.6% vs. 19.7%.

• Operating loss was $248.6M vs. operating income of $25.3M in FY2020; adjusted operating margin excluding surcharges and special items was 8.4% vs. 9.1%.

• Net loss was $229.6M vs. net income of $1.5M in FY2020; adjusted loss/share was $2.01 vs. adjusted earnings/share of $2.36.

• Operating cash flow was $250.0M; free cash flow was $132.0M vs. $21.8M in FY2020. Inventory reductions generated $238.5M cash.

Outlook and guidance

• FY2022 capital expenditures expected at approximately $125M; current market recovery and demand strengthening underpin management’s outlook.

• June 30, 2021 backlog excluding surcharge was $529.3M, substantially all expected to ship in FY2022.

• No required cash contributions to qualified defined-benefit pension plans expected in FY2022; estimated contributions over the next five years are $5.7M, subject to market returns and interest-rate assumptions.