Carpenter Technology Reports Second Quarter Results

Thu Jan 31, 2013 8:00am EST

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* Earnings per share of $0.62, up 19% versus prior year. 
* Second quarter net sales of $533.5 million. Net sales excluding raw material
surcharge up 30% from a year earlier on 28% higher volume. 
* Latrobe contributed $13.2 million of operating income in the second quarter,
or $0.05 per share accretion.

WYOMISSING, Pa.--(Business Wire)--
Carpenter Technology Corporation (NYSE:CRS) today reported net income of $33.0
million or $0.62 per diluted share for the quarter ended December 31, 2012,
which was up from $23.6 million or $0.52 per share in the prior year second
quarter. 

"We are continuing to see strong end market demand for our Premium and
Ultra-Premium products, improving overall product mix, and delivering higher
than expected Latrobe synergies," said William A. Wulfsohn, President and Chief
Executive Officer. "At the same time, we see weaker demand for lower value mill
product lines and destocking in the titanium medical supply chain. We currently
expect a full year operating income improvement of 20 to 30 percent versus our
last fiscal year, with strong second half revenue and earnings. We continue to
believe that our sustained investment in aerospace and energy markets will
continue to drive profitable growth over the next several years." 

Fiscal 2013 operating income growth projections exclude:

* Any impacts from the previously announced potential sale of the distribution
businesses. 
* Expected one-time impacts of about $3 million for various restructuring
opportunities - mainly Latrobe-related ($0.3 million already expensed in YTD
results). 
* Up to $3 million for system inventory consulting fees communicated as part of
the Latrobe deal economics ($1.6 million already expensed in YTD results).

Second Quarter Results

Financial highlights for the second quarter of fiscal year 2013 include:

 (in millions, except per share amounts                                                                                    2Q          2Q          YTD         YTD       
 & pounds sold)                                                                                                            FY 2013     FY 2012     FY 2013     FY 2012   
 Net Sales                                                                                                                 $533.5      $431.1      $1,078.5    $845.2    
 Net Sales Excluding Surcharge (a)                                                                                         $430.7      $330.3      $871.5      $643.9    
 Operating Income Excluding Pension Earnings, Interest and Deferrals and Acquisition Related Cost (from transaction)(a)    $60.7       $49.9       $130.3      $98.9     
 Net Income Attributable to Carpenter                                                                                      $33.0       $23.6       $72.2       $47.4     
 Diluted Earnings per Share                                                                                                $0.62       $0.52       $1.35       $1.05     
 Net Pension Expense per Diluted Share (a)                                                                                 ($0.21)     ($0.13)     ($0.42)     ($0.27)   
 Free Cash Flow (a)                                                                                                        ($51.6)     $3.7        ($154.2)    ($105.5)  
 Pounds Sold (000) (b)                                                                                                     62,582      49,042      126,596     96,066    


(a) non-GAAP financial measure that is explained in the attached tables 

(b) excludes pounds sold through the distribution businesses 

Net sales for the second quarter were $533.5 million, up 24 percent from the
prior year. Excluding surcharge revenue, net sales were $430.7 million, up 30
percent from a year ago on 28 percent higher volume, due largely to the
acquisition of Latrobe. Excluding the Latrobe impact, second quarter net sales
excluding surcharge revenue were up 5 percent on 2 percent higher volume. 

Specialty Alloy Operations (SAO) segment net sales excluding surcharge revenue
increased 7 percent on 1 percent higher volume compared with the fiscal year
2012 second quarter. Most of this growth occurred in high value Ultra-Premium
and Premium products. SAO operating income was $49.6 million, with a 17.9
percent operating margin on net sales excluding surcharge revenue. 

The Latrobe segment, which currently includes the Latrobe and Mexico
distribution businesses that are potentially going to be divested, contributed
$13.2 million of operating income in the quarter, with a 13.0 percent operating
margin. Latrobe continues to perform ahead of pace on announced deal economics
due to strong progress on operational synergies. 

Performance Engineered Products (PEP) segment sales increased 13 percent in the
same period, due largely to the inclusion of the Specialty Steel Supply (SSS)
energy distribution business acquired in connection with Latrobe. PEP operating
income was $8.9 million, with a 9.7 percent operating margin. 

Gross profit was $102.6 million compared with $84.3 million in the fiscal year
2012 second quarter. The higher gross profit was driven by the addition of
Latrobe, and improvement in SAO due to a higher profit per pound from a richer
product mix and higher prices. 

SG&A in the current quarter was $49.9 million or 11.6 percent of net sales
excluding surcharge revenue, compared with $38.0 million or 11.5 percent of
revenue excluding surcharge for the second quarter of fiscal year 2012. The
increase in spending primarily reflects the addition of Latrobe-related overhead
costs. 

Operating income for the second quarter was $52.7 million compared with $43.9
million a year earlier. Excluding surcharge revenue and pension earnings,
interest and deferrals (EID), operating margin was 14.1 percent compared to 14.4
percent in the fiscal year 2012 second quarter. 

Interest expense in the quarter was $4.4 million compared to $5.8 million in the
year-ago period due to the inclusion of capitalized interest as part of the
Athens facility construction project. 

Other income was $1.3 million compared to $0.4 million in the fiscal year 2012
second quarter due principally to the gain recorded from unwinding the Sandvik
powder joint ventures. 

The provision for income tax was $16.4 million or 33.1 percent of pre-tax income
compared to $14.7 million or 38.2 percent of pre-tax income in the second
quarter of fiscal year 2012. The second half tax rate is projected to be 33.5
percent. 

Net income attributable to Carpenter was $33.0 million or $0.62 per diluted
share. Net income attributable to Carpenter in the same quarter a year ago was
$23.6 million or $0.52 per diluted share. 

Free cash flow, defined as cash from operations less capital expenditures,
dividends, and the net impact from the purchase and sale of businesses, was
negative $51.6 million in the current quarter. Strong net income was offset by
higher capital spending, largely related to the Athens facility construction,
pension contributions, and increased working capital levels. 

The Company continues to plan for a debt refinancing transaction in the third
fiscal quarter that would replace the $100 million May 2013 debt maturity and
could provide the opportunity to make a discretionary pension contribution of up
to $165 million that would eliminate similar required cash contributions over
the next several years. As a result of the net positive impact of these actions,
the proceeds from the anticipated distribution business sale, and inventory
reduction versus the original planned level, the Company expects to end the
fiscal year with a cash and liquidity position that is near its beginning fiscal
year position, despite $350 million of capex investment for Athens and other
projects. 

The debt refinancing and discretionary pension contribution will drive a
one-time negative earnings impact in the current year, which is expected to be
approximately $0.13 per share from related higher interest and income tax
expense. Beginning in fiscal year 2014, and continuing for the next several
years, these actions are expected to drive an annual earnings improvement of
approximately $0.08 per share and increase free cash flow by about $17 million
per year. 

Markets:

Aerospace & Defense market sales were $250.3 million in the second quarter, up
30 percent compared with the same period a year ago. Excluding surcharge
revenue, aerospace & defense sales were up 36 percent on 83 percent higher
volume (or up 10 percent on 8 percent higher volume without Latrobe). Demand for
Carpenter`s and Latrobe`s Premium and Ultra-Premium aerospace products remains
strong. Demand for super-alloy engine materials remains strong due to higher
build rates and initial pull through for new engine programs. Demand for nickel
and stainless fastener material increased year-over-year for the tenth
consecutive quarter - while shipments of titanium fastener material set a new
second quarter record, up slightly from the very strong year-ago period. The
addition of Latrobe`s structural, bearing and other complementary products also
contributed to the year-to-year growth rate. 

Energy market sales of $79.5 million increased 30 percent compared to the same
period a year ago. Excluding surcharge revenue, energy market sales increased 33
percent (or up 6 percent without Latrobe and SSS). Demand growth for material
used in oil & gas applications outpaced weaker demand for power generation
materials. Despite lower North American rig activity, demand for Carpenter
materials used in oil & gas drilling increased as Amega West remained strong by
expanding its footprint and gaining share. In addition, there are a significant
number of wells that have been drilled and still require completion, which is
leading to growth of Ultra-Premium products. Build schedules at major industrial
gas turbine manufacturers are pointing toward anticipated stronger second half
growth in that sector after temporary slowness in this area. 

Medical market sales were $26.6 million in the second quarter, down 16 percent
from a year ago. Excluding surcharge revenue, medical market sales decreased 14
percent on 21 percent lower volume. Uncertainty surrounding pending legislative
impacts and economic sentiment continues to affect short-term demand for medical
materials. In addition, as largely seen in the PEP segment results, continued
inventory destocking within the titanium supply chain is being influenced by
falling titanium prices. Longer-term, Carpenter remains well positioned to
support the anticipated positive demand trend for medical market materials. 

Transportation market sales were $31.8 million, an increase of 1 percent from a
year earlier. Excluding surcharge revenue, transportation sales increased 8
percent on 1 percent lower volume (or up 5 percent on 3 percent lower volume
without Latrobe). Increasing fuel efficiency standards require automobiles to
become lighter and engines to operate at higher temperatures. These design
specifications continue to create demand for higher-value materials used for
turbo-charger, gasket, valve and fuel system applications. This has led to
revenue growth outpacing volume growth. The recent announcement with United
States Steel to develop additional high volume transportation applications from
Carpenter`s proprietary high-strength, low-weight alloy, Temper ToughTM, further
demonstrates Carpenter`s strong growth opportunities within this end-market. 

Industrial & Consumer market sales were $111.6 million in the second quarter, up
6 percent compared with the same period a year ago. Excluding surcharge revenue,
sales increased 13 percent on 8 percent higher volume (or up 4 percent on 1
percent lower volume without Latrobe). This market remains more sensitive to
economic uncertainty which is reflected in the powder metal portion of the PEP
segment and Value products within Latrobe. Carpenter`s strategy to focus on
specialized, high value niche applications with strategically important
customers has offset overall demand softness in more commodity type products and
distributor channels. 

International sales in the second quarter were $158.1 million, an increase of 11
percent compared with the same quarter a year earlier - driven by a 30 percent
increase in Asia/Pacific sales, a 49 percent increase in sales to Canada and a 3
percent increase in European sales. Growth in Asia/Pacific was led by strong
demand from the aerospace end market as the supply chain grows in that
geography. Growth in Europe and Canada was led by demand for materials used for
aerospace and oil & gas applications. 

Pension Effects

During the second quarter, the Company recorded expense associated with its
pension and other post-retirement benefit plans of $17.1 million or $0.21 per
diluted share. Pension expense in the prior year second quarter was $9.8 million
or $0.13 per diluted share. The Company made cash contributions of $9.8 million
during the second quarter of fiscal year 2013, and expects to make additional
minimum cash contributions of approximately $24 million over the balance of
fiscal year 2013. As previously mentioned, the Company continues to evaluate an
additional discretionary pension contribution of up to $165 million. 

Non-GAAP Financial Measures

This press release includes discussions of financial measures that have not been
determined in accordance with U.S. generally accepted accounting principles
("GAAP"). A reconciliation of the non-GAAP financial measures to their most
directly comparable financial measures prepared in accordance with GAAP,
accompanied by reasons why the Company believes the measures are important, are
included in the attached schedules. 

Conference Call

Carpenter will host a conference call and webcast today, January 31, at 10:00
a.m., ET, to discuss financial results and operations for the fiscal second
quarter. Please call 610-208-2222 for details of the conference call. Access to
the call will also be made available at Carpenter's web site
(http://www.cartech.com) and through CCBN (http://www.ccbn.com). A replay of the
call will be made available at http://www.cartech.com or at http://www.ccbn.com.


About Carpenter Technology

Carpenter produces and distributes premium alloys, including special alloys,
titanium alloys and powder metals, as well as stainless steels, and alloy and
tool steels. Information about Carpenter can be found on the Internet at
http://www.cartech.com. 

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Act of 1995. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
from those projected, anticipated or implied. The most significant of these
uncertainties are described in Carpenter`s filings with the Securities and
Exchange Commission including its annual report on Form 10-K for the year ended
June 30, 2012, the 10Q for the quarter ending September 30, 2012 and the
exhibits attached to those filings. They include but are not limited to: (1)
expectations with respect to the synergies, costs and other anticipated
financial impacts of the Latrobe acquisition transaction could differ from
actual synergies realized, costs incurred and financial impacts experienced as a
result of the transaction; (2) the cyclical nature of the specialty materials
business and certain end-use markets, including aerospace, defense, industrial,
transportation, consumer, medical, and energy, or other influences on
Carpenter`s business such as new competitors, the consolidation of competitors,
customers, and suppliers or the transfer of manufacturing capacity from the
United States to foreign countries;(3) the ability of Carpenter to achieve cost
savings, productivity improvements or process changes; (4) the ability to recoup
increases in the cost of energy, raw materials, freight or other factors; (5)
domestic and foreign excess manufacturing capacity for certain metals; (6)
fluctuations in currency exchange rates; (7) the degree of success of government
trade actions; (8) the valuation of the assets and liabilities in Carpenter`s
pension trusts and the accounting for pension plans; (9) possible labor disputes
or work stoppages; (10) the potential that our customers may substitute
alternate materials or adopt different manufacturing practices that replace or
limit the suitability of our products; (11) the ability to successfully acquire
and integrate acquisitions, including the Latrobe acquisition; (12) the
availability of credit facilities to Carpenter, its customers or other members
of the supply chain; (13) the ability to obtain energy or raw materials,
especially from suppliers located in countries that may be subject to unstable
political or economic conditions; (14) Carpenter`s manufacturing processes are
dependent upon highly specialized equipment located primarily in facilities in
Reading and Latrobe, Pennsylvania for which there may be limited alternatives if
there are significant equipment failures or catastrophic event; and (15)
Carpenter`s future success depends on the continued service and availability of
key personnel, including members of our executive management team, management,
metallurgists and other skilled personnel and the loss of these key personnel
could affect our ability to perform until suitable replacements are found. Any
of these factors could have an adverse and/or fluctuating effect on Carpenter`s
results of operations. The forward-looking statements in this document are
intended to be subject to the safe harbor protection provided by Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Carpenter undertakes no obligation to update
or revise any forward-looking statements.

                                                                                                        
 PRELIMINARY                                                                                            
 CONSOLIDATED BALANCE SHEETS                                                                            
 (in millions)                                                                                          
 (Unaudited)                                                                                            
                                                                                                        
                                                            December 31,             June 30,           
                                                            2012                     2012               
                                                                                                        
 ASSETS                                                                                                 
 Current assets:                                                                                        
 Cash and cash equivalents                                  $      63.1              $    211.0         
 Accounts receivable, net                                          286.5                  354.2         
 Inventories                                                       733.6                  642.0         
 Deferred income taxes                                             5.9                    10.6          
 Other current assets                                              38.8                   31.9          
 Total current assets                                              1,127.9                1,249.7       
                                                                                                        
 Property, plant and equipment, net                                1,017.6                924.6         
 Goodwill                                                          256.7                  260.5         
 Other intangibles, net                                            102.1                  109.9         
 Other assets                                                      77.9                   83.1          
 Total assets                                               $      2,582.2           $    2,627.8       
                                                                                                        
 LIABILITIES                                                                                            
 Current liabilities:                                                                                   
 Accounts payable                                           $      188.4             $    236.1         
 Accrued liabilities                                               186.6                  217.1         
 Current portion of long-term debt                                 101.0                  101.0         
 Total current liabilities                                         476.0                  554.2         
                                                                                                        
 Long-term debt, net of current portion                            305.2                  305.9         
 Accrued pension liabilities                                       336.3                  377.3         
 Accrued postretirement benefits                                   178.1                  179.8         
 Deferred income taxes                                             31.5                   31.4          
 Other liabilities                                                 67.8                   66.1          
 Total liabilities                                                 1,394.9                1,514.7       
                                                                                                        
 STOCKHOLDERS' EQUITY                                                                                   
 Carpenter stockholders' equity:                                                                        
 Common stock                                                      274.5                  274.0         
 Capital in excess of par value                                    253.8                  252.7         
 Reinvested earnings                                               1,162.7                1,109.6       
 Common stock in treasury, at cost                                 (111.6   )             (120.0   )    
 Accumulated other comprehensive loss                              (392.1   )             (412.5   )    
 Total Carpenter stockholders' equity                              1,187.3                1,103.8       
 Noncontrolling interest                                           -                      9.3           
 Total equity                                                      1,187.3                1,113.1       
 Total liabilities and equity                               $      2,582.2           $    2,627.8       
                                                                                                        


                                                                                                                                                         
 PRELIMINARY                                                                                                                                             
 CONSOLIDATED STATEMENTS OF INCOME                                                                                                                       
 (in millions, except per share data)                                                                                                                    
 (Unaudited)                                                                                                                                             
                                                                                                                                                         
                                                                       Three Months Ended                       Six Months Ended                         
                                                                       December 31,                             December 31,                             
                                                                                                                                                         
                                                                       2012                  2011               2012                    2011             
                                                                                                                                                         
 NET SALES                                                             $    533.5            $    431.1         $    1,078.5            $    845.2       
 Cost of sales                                                              430.9                 346.8              866.5                   679.7       
 Gross profit                                                               102.6                 84.3               212.0                   165.5       
                                                                                                                                                         
 Selling, general and administrative expenses                               49.9                  38.0               97.7                    73.8        
 Acquisition-related costs                                                  -                     2.4                -                       3.8         
 Operating income                                                           52.7                  43.9               114.3                   87.9        
                                                                                                                                                         
 Interest expense                                                           (4.4   )              (5.8   )           (9.6     )              (12.7  )    
 Other income (expense), net                                                1.3                   0.4                3.9                     (0.4   )    
                                                                                                                                                         
 Income before income taxes                                                 49.6                  38.5               108.6                   74.8        
 Income tax expense                                                         16.4                  14.7               35.9                    27.2        
                                                                                                                                                         
 Net income                                                                 33.2                  23.8               72.7                    47.6        
                                                                                                                                                         
 Less: Net income attributable to noncontrolling interest                   0.2                   0.2                0.5                     0.2         
                                                                                                                                                         
 NET INCOME ATTRIBUTABLE TO CARPENTER                                  $    33.0             $    23.6          $    72.2               $    47.4        
                                                                                                                                                         
 EARNINGS PER SHARE:                                                                                                                                     
 Basic                                                                 $    0.62             $    0.53          $    1.36               $    1.06        
 Diluted                                                               $    0.62             $    0.52          $    1.35               $    1.05        
                                                                                                                                                         
 WEIGHTED AVERAGE SHARES                                                                                                                                 
 OUTSTANDING:                                                                                                                                            
 Basic                                                                      52.9                  44.4               52.8                    44.4        
 Diluted                                                                    53.5                  45.1               53.4                    45.1        
                                                                                                                                                         
 Cash dividends per common share                                       $    0.18             $    0.18          $    0.36               $    0.36        
                                                                                                                                                         


                                                                                                                          
 PRELIMINARY                                                                                                              
 CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                    
 (in millions)                                                                                                            
 (Unaudited)                                                                                                              
                                                                                                                          
                                                                                 Six Months Ended                         
                                                                                 December 31,                             
                                                                                                                          
                                                                                 2012                   2011              
                                                                                                                          
 OPERATING ACTIVITIES:                                                                                                    
 Net income                                                                      $    72.7              $    47.6         
 Adjustments to reconcile net income to net cash                                                                          
 provided from (used for) operating activities:                                                                           
 Depreciation and amortization                                                        51.1                   37.2         
 Deferred income taxes                                                                (0.3    )              13.6         
 Net pension expense                                                                  34.3                   19.7         
 Net loss on disposal of property and equipment                                       0.5                    0.4          
 Changes in working capital and other:                                                                                    
 Accounts receivable                                                                  69.8                   22.5         
 Inventories                                                                          (88.8   )              (110.3  )    
 Other current assets                                                                 (8.3    )              1.9          
 Accounts payable                                                                     (48.0   )              (21.5   )    
 Accrued liabilities                                                                  (20.4   )              (4.1    )    
 Pension plan contributions                                                           (57.9   )              (15.4   )    
 Boarhead Farms settlement                                                            -                      (21.8   )    
 Other, net                                                                           (2.5    )              2.4          
 Net cash provided from (used for) operating activities                               2.2                    (27.8   )    
                                                                                                                          
 INVESTING ACTIVITIES:                                                                                                    
 Purchases of property, equipment and software                                        (136.9  )              (60.3   )    
 Proceeds from disposals of property and equipment                                    0.1                    0.2          
 Acquisition of business, net of cash acquired                                        -                      (1.4    )    
 Proceeds from sale of equity method investment                                       7.9                    -            
 Proceeds from sales and maturities of marketable securities                          -                      30.4         
 Net cash used for investing activities                                               (128.9  )              (31.1   )    
                                                                                                                          
 FINANCING ACTIVITIES:                                                                                                    
 Payments on long-term debt                                                           -                      (100.0  )    
 Dividends paid                                                                       (19.1   )              (16.2   )    
 Purchase of subsidiary shares from noncontrolling interest                           (8.4    )              -            
 Tax benefits on share-based compensation                                             3.3                    0.8          
 Proceeds from stock options exercised                                                1.9                    1.5          
 Net cash used for financing activities                                               (22.3   )              (113.9  )    
                                                                                                                          
 Effect of exchange rate changes on cash and cash equivalents                         1.1                    (0.9    )    
                                                                                                                          
 DECREASE IN CASH AND CASH EQUIVALENTS                                                (147.9  )              (173.7  )    
 Cash and cash equivalents at beginning of period                                     211.0                  492.5        
                                                                                                                          
 Cash and cash equivalents at end of period                                      $    63.1              $    318.8        
                                                                                                                          


                                                                                                                                                          
 PRELIMINARY                                                                                                                                              
 SEGMENT FINANCIAL DATA                                                                                                                                   
 (in millions, except pounds sold)                                                                                                                        
 (Unaudited)                                                                                                                                              
                                                                                                                                                          
                                                                    Three Months Ended                          Six Months Ended                          
                                                                    December 31,                                December 31,                              
                                                                    2012                   2011                 2012                    2011              
 Pounds sold* (000):                                                                                                                                      
 Specialty Alloys Operations                                             47,572                 47,078               94,784                  91,288       
 Performance Engineered Products                                         3,228                  3,434                6,612                   6,872        
 Latrobe                                                                 14,464                 -                    30,570                  -            
 Intersegment                                                            (2,682  )              (1,470  )            (5,370   )              (2,094  )    
                                                                                                                                                          
 Consolidated pounds sold                                                62,582                 49,042               126,596                 96,066       
                                                                                                                                                          
 Net sales:                                                                                                                                               
 Specialty Alloys Operations                                                                                                                              
                 Net sales excluding surcharge                      $    277.1             $    258.1           $    550.0              $    492.6        
                 Surcharge                                               91.2                   102.4                180.0                   203.7        
                                                                                                                                                          
 Specialty Alloys Operations net sales                                   368.3                  360.5           $    730.0              $    696.3        
                                                                                                                                                          
 Performance Engineered Products                                                                                                                          
                 Net sales excluding surcharge                           91.7                   81.2            $    189.3              $    164.2        
                 Surcharge                                               1.2                    1.1                  2.3                     2.3          
                                                                                                                                                          
 Performance Engineered Products net sales                               92.9                   82.3            $    191.6              $    166.5        
                                                                                                                                                          
 Latrobe                                                                                                                                                  
                 Net sales excluding surcharge                           101.4                  9.5             $    207.6                   19.6         
                 Surcharge                                               12.5                   -                    28.2                    -            
                                                                                                                                                          
 Latrobe net sales                                                       113.9                  9.5             $    235.8                   19.6         
                                                                                                                                                          
 Intersegment                                                                                                                                             
                 Net sales excluding surcharge                           (39.5   )              (18.5   )            (75.4    )              (32.5   )    
                 Surcharge                                               (2.1    )              (2.7    )            (3.5     )              (4.7    )    
 Intersegment net sales                                                  (41.6   )              (21.2   )            (78.9    )              (37.2   )    
                                                                                                                                                          
                                                                                                                                                          
 Consolidated net sales                                             $    533.5             $    431.1           $    1,078.5            $    845.2        
                                                                                                                                                          
 Operating income:                                                                                                                                        
 Specialty Alloys Operations                                        $    49.6              $    50.9            $    104.1              $    97.2         
 Performance Engineered Products                                         8.9                    10.4                 20.4                    22.2         
 Latrobe                                                                 13.2                   0.7                  28.9                    1.2          
 Corporate costs (including acquisition-related costs)                   (10.6   )              (12.6   )            (20.9    )              (22.8   )    
 Pension earnings, interest & deferrals                                  (8.0    )              (3.6    )            (16.0    )              (7.2    )    
 Intersegment                                                            (0.4    )              (1.9    )            (2.2     )              (2.7    )    
                                                                                                                                                          
 Consolidated operating income                                      $    52.7              $    43.9            $    114.3              $    87.9         
                                                                                                                                                          


 In January 2012, the Company announced it had made changes to its reportable segments. The Company now has three reportable business segments, Specialty Alloys Operations (SAO), Performance Engineered Products (PEP) and Latrobe. Previously, the Company's reportable segments consisted of Premium Alloys Operations (PAO), Advanced Metals Operations (AMO) and Emerging Ventures.                                                                                                                                        
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 The SAO segment is comprised of Carpenter's major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading, Pennsylvania and the surrounding area, South Carolina, and the new premium products manufacturing facility being built in Limestone County, Alabama.                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 The PEP segment is comprised of Carpenter's differentiated operations. This includes Dynamet titanium business, the Carpenter Powder Products (CPP) business, the Amega West business and the SSS distribution business that was acquired in connection with the Latrobe Acquisition. The businesses in the PEP segment are managed with an entrepreneurial structure to promote speed and flexibility and drive overall revenue and profit growth. The pounds sold data above for the PEP segment includes only the Dynamet and 
 CPP businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 The Latrobe segment is comprised of the operations of the Latrobe business acquired effective February 29, 2012. The Latrobe segment provides management with the focus and visibility into the business performance of these newly acquired operations. The Latrobe segment also includes the results of Carpenter`s distribution business in Mexico, which is being managed together with the Latrobe's distribution business. As the Latrobe business becomes integrated with Carpenter, its results will likely be reported 
 within the SAO business segment sometime in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 The service cost component of net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating results of the business segments. The residual net pension expense, or pension earning, interest and deferrals (pension EID), is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs, is       
 included under the heading "Pension earnings, interest & deferrals."                                                                                                                                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
 * Pounds sold excludes sales associated with the distribution businesses.                                                                                                                                                                                                                                                                                                                                                                                                                                                       


                                                                                                                                                         
 PRELIMINARY                                                                                                                                             
 NON-GAAP FINANCIAL MEASURES                                                                                                                             
 (in millions, except per share data)                                                                                                                    
 (Unaudited)                                                                                                                                             
                                                                                                                                                         
                                                                                                                                                         
                                                                       Three Months Ended                       Six Months Ended                         
                                                                       December 31,                             December 31,                             
 FREE CASH FLOW                                                        2012                  2011               2012                   2011              
 Net cash provided from (used for) operating activities                $    38.9             $    46.2          $    2.2               $    (27.8   )    
 Purchases of property, equipment and software                              (80.5  )              (33.0  )           (136.9  )              (60.3   )    
 Proceeds from disposals of property and equipment                          0.1                   -                  0.1                    0.2          
 Purchase of subsidiary shares from noncontrolling interest                 (8.4   )              -                  (8.4    )              -            
 Proceeds from sale of equity method investment                             7.9                   -                  7.9                    -            
 Dividends paid                                                             (9.6   )              (8.1   )           (19.1   )              (16.2   )    
 Acquisition of business, net of cash acquired                              -                     (1.4   )           -                      (1.4    )    
                                                                                                                                                         
 Free cash flow                                                        $    (51.6  )         $    3.7           $    (154.2  )         $    (105.5  )    
                                                                                                                                                         


 Management believes that the free cash flow measure provides useful information to investors regarding our financial condition because it is a measure of cash generated which management evaluates for alternative uses.  


                                                   Three Months Ended                     Six Months Ended                      
                                                   December 31,                           December 31,                          
 NET PENSION EXPENSE PER DILUTED SHARE             2012                 2011              2012                  2011            
                                                                                                                                
 Pension plans expense                             $    14.8            $    9.3          $    29.6             $    18.8       
 Other postretirement benefits expense                  2.3                  0.5               4.7                   0.9        
 Net pension expense                                    17.1                 9.8               34.3                  19.7       
 Income tax benefit                                     (6.0  )              (3.8  )           (12.0  )              (7.5  )    
 Net pension expense, net of tax                   $    11.1            $    6.0          $    22.3             $    12.2       
                                                                                                                                
 Net pension expense per diluted share             $    0.21            $    0.13         $    0.42             $    0.27       
                                                                                                                                
 Weighted average diluted common shares                 53.5                 45.1              53.4                  45.1       


 Management believes that net pension expense per diluted share is helpful in analyzing the operating performance of the Company, as net pension expense may be volatile due to changes in the financial markets, which may result in significant fluctuations in operating results from period to period.  


 OPERATING MARGIN EXCLUDING SURCHARGE AND                                                                                                                        
 PENSION EARNINGS, INTEREST AND DEFERRALS                                      Three Months Ended                       Six Months Ended                         
 AND ACQUISITION-RELATED COSTS                                                 December 31,                             December 31,                             
                                                                               2012                  2011               2012                    2011             
                                                                                                                                                                 
 Net sales                                                                     $    533.5            $    431.1         $    1,078.5            $    845.2       
 Less: surcharge revenue                                                            102.8                 100.8              207.0                   201.3       
 Consolidated net sales excluding surcharge                                    $    430.7            $    330.3         $    871.5              $    643.9       
                                                                                                                                                                 
 Operating income                                                              $    52.7             $    43.9          $    114.3              $    87.9        
 Pension earnings, interest & deferrals                                             8.0                   3.6                16.0                    7.2         
 Operating income excluding pension earnings, interest                                                                                                           
 and deferrals                                                                 $    60.7             $    47.5          $    130.3              $    95.1        
                                                                                                                                                                 
 Acquisition-related costs                                                          -                     2.4                -                       3.8         
                                                                                                                                                                 
 Operating income excluding pension earnings, interest                                                                                                           
 and deferrals and acquisition-related costs                                   $    60.7             $    49.9          $    130.3              $    98.9        
                                                                                                                                                                 
 Operating margin excluding surcharge and pension earnings, interest                                                                                             
 and deferrals                                                                      14.1   %              14.4   %           15.0     %              14.8   %    
                                                                                                                                                                 
 Operating margin excluding pension earnings, interest                                                                                                           
 and deferrals and acquisition-related costs                                        14.1   %              15.1   %           15.0     %              15.4   %    


 Management believes that removing the impacts of raw material surcharges and acquisition-related costs from operating margin provides a more consistent basis for comparing results of operations from period to period. In addition, management believes that excluding the impact of pension earnings, interest and deferrals, which may be volatile due to changes in the financial markets, is helpful in analyzing the true operating performance of the Company.  


                                                                                                                                                              
 PRELIMINARY                                                                                                                                                  
 NON-GAAP FINANCIAL MEASURES                                                                                                                                  
 (in millions, except per share data)                                                                                                                         
 (Unaudited)                                                                                                                                                  
                                                                                                                                                              
                                                                                Three Months Ended                      Six Months Ended                      
                                                                                December 31,                            December 31,                          
 ADJUSTED LATROBE OPERATING RESULTS                                             2012                  2011              2012                  2011            
                                                                                                                                                              
 Latrobe segment operating income                                               $    13.2             $    0.7          $    28.9             $    1.2        
 Specialty Steel Supply operating income included in Performance Engineered          0.8                   -                 2.7                   -          
 
Products segment results                                                                                                                                    
 Carpenter distribution business operating income in Mexico included                 (0.2   )              (0.7  )           (0.9   )              (1.2  )    
 
in Latrobe segment results                                                                                                                                  
 Latrobe pension EID included in pension EID expense                                 (0.6   )              -                 (1.2   )              -          
 Adjusted Latrobe operating results before income taxes                              13.2                  -                 29.5                  -          
 Income taxes                                                                        (4.6   )              -                 (10.3  )              -          
 Adjusted Latrobe operating results                                             $    8.6              $    -            $    19.2             $    -          
                                                                                                                                                              
 Adjusted Latrobe operating results per diluted share                           $    0.16             $    -            $    0.36             $    -          
 Dilutive impact of shares issued in connection with Latrobe acquisition*            (0.11  )              -                 (0.24  )              -          
                                                                                                                                                              
 Net accretion from Latrobe's operating results                                 $    0.05             $    -            $    0.12             $    -          
                                                                                                                                                              
 Weighted average shares outstanding                                                 53.5                  45.1              53.4                  45.1       
                                                                                                                                                              


 * In connection with the Latrobe Acquisition, Carpenter issued shares of common stock to the former owners which resulted in an   
 additional 8.1 million weighted average shares during the three and six months ended December 31, 2012.                           


 IMPACTS OF FACILITY START-UP, MANUFACTURING FOOTPRINT                               Three Months Ended                       Six Months Ended                       
 OPTIMIZATION AND INVENTORY REDUCTION INITIATIVE COSTS                               December 31,                             December 31,                           
                                                                                     2012                  2011               2012                  2011             
                                                                                                                                                                     
 Facility start-up costs                                                             $    1.3              $    -             $    2.2              $    -           
 Manufacturing footprint optimization costs                                               0.2                   -                  0.3                   -           
 Inventory reduction initiative costs                                                     1.0                   -                  1.6                   -           
 Operating income impact                                                             $    2.5              $    -             $    4.1              $    -           
                                                                                                                                                                     
 Consolidated net sales excluding surcharges                                         $    430.7            $    330.3         $    871.5            $    643.9       
                                                                                                                                                                     
 Impact of facility start-up, manufacturing footprint optimization and inventory          0.6    %              0.0    %           0.5    %              0.0    %    
 reduction initiative costs on operating margin excluding surcharges                                                                                                 
                                                                                                                                                                     
 Operating income impact                                                             $    2.5              $    -             $    4.1              $    -           
 Income tax benefit                                                                       (0.9   )              -                  (1.4   )              -           
 Net income impact                                                                   $    1.6              $    -             $    2.7              $    -           
                                                                                                                                                                     
 Impact per diluted share                                                            $    0.03             $    -             $    0.05             $    -           
                                                                                                                                                                     
 Weighted average shares outstanding                                                      53.5                  45.1               53.4                  45.1        


 Management believes that removing the impacts of costs associated with (i.) start-up of our Athens, AL facility, (ii.) manufacturing footprint optimization associated with evaluating and executing opportunities primarily as a result of the Latrobe acquisition to optimize manufacturing efficiencies, and (iii.) an inventory reduction initiative aimed at identifying opportunities reduce inventory levels and improve inventory turnover across the mill operations are helpful in analyzing the operating performance 
 of the Company, as these costs are expected to be nonrecurring in nature and may result in significant fluctuations in operating results from period to period during fiscal years 2013 and 2014.                                                                                                                                                                                                                                                                                                                               


 PRELIMINARY                                                                                                                   
 SUPPLEMENTAL SCHEDULES                                                                                                        
 (in millions)                                                                                                                 
 (Unaudited)                                                                                                                   
                                                                                                                               
                                                           Three Months Ended                Six Months Ended                  
                                                           December 31,                      December 31,                      
 NET SALES BY END USE MARKET                               2012               2011           2012                 2011         
                                                                                                                               
 End Use Market Excluding Surcharge:                                                                                           
 Aerospace and defense                                     $     194.6        $     142.6    $     389.9          $     271.0  
 Industrial and consumer                                         85.4               75.8           172.0                149.3  
 Energy                                                          69.0               51.7           138.4                102.1  
 Transportation                                                  24.2               22.5           50.3                 44.5   
 Medical                                                         24.2               28.2           52.0                 57.4   
 Distribution                                                    33.3               9.5            68.9                 19.6   
                                                                                                                               
 Consolidated net sales excluding surcharge                      430.7              330.3          871.5                643.9  
                                                                                                                               
 Surcharge revenue                                               102.8              100.8          207.0                201.3  
                                                                                                                               
 Consolidated net sales                                    $     533.5        $     431.1    $     1,078.5        $     845.2  
                                                                                                                               
                                                                                                                               
                                                                                                                               
                                                           Three Months Ended                Six Months Ended                  
                                                           December 31,                      December 31,                      
 NET SALES BY MAJOR PRODUCT CLASS                                2012               2011           2012                 2011   
                                                                                                                               
 Net Sales by Product Class Excluding Surcharge:                                                                               
 Special alloys                                            $     157.5        $     136.3    $     326.4          $     264.3  
 Stainless steel                                                 139.3              120.4          260.2                232.2  
 Titanium products                                               36.5               36.7           76.2                 75.4   
 Powder metals                                                   12.2               15.2           27.0                 29.0   
 Alloy and tool steel                                            46.2               4.1            100.2                9.3    
 Distribution and other                                          39.0               17.6           81.5                 33.7   
                                                                                                                               
 Consolidated net sales excluding surcharge                      430.7              330.3          871.5                643.9  
                                                                                                                               
 Surcharge revenue                                               102.8              100.8          207.0                201.3  
                                                                                                                               
 Consolidated net sales                                    $     533.5        $     431.1    $     1,078.5        $     845.2  


Carpenter Technology Corporation
Media Inquiries:
William J. Rudolph, Jr., 610-208-3892
wrudolph@cartech.com
or
Investor Inquiries:
Michael A. Hajost, 610-208-3476
mhajost@cartech.com

Copyright Business Wire 2013