Net sales for the third quarter of fiscal year 2023 were $690.1 million, compared with $489.0 million in the third quarter of fiscal year 2022, an increase of $201.1 million (or 41 percent), on a 15 percent increase in shipment volume. Net sales excluding surcharge were $491.5 million, an increase of $122.5 million (or 33 percent) from the same period a year ago.
Operating income was $39.3 million in the current quarter compared to operating income of $1.1 million in the prior year period. Earnings per share in the third quarter of fiscal year 2023 was $0.38 compared to loss of $0.16 per share in the prior year quarter. Excluding special items, adjusted loss per share in the third quarter of fiscal year 2022 was $0.20. The improvement in operating income and earnings per share is primarily the result of increased shipments as activity levels continued to increase to meet improving market conditions in key end-use markets compared to the prior year period.
Cash provided from operating activities in the third quarter of fiscal year 2023 was $4.3 million compared to cash provided from operating activities of $35.3 million in the same quarter last year. Adjusted free cash flow in the third quarter of fiscal year 2023 was negative $26.0 million, compared to positive $0.4 million in the same quarter last year. The operating cash flow and adjusted free cash flow in the third quarter of fiscal year 2023 compared to the prior year period reflect improved earnings offset by higher cash used for working capital needs to meet growing demand. Capital expenditures in the third quarter of fiscal year 2023 were $20.5 million, compared to $25.1 million in the same quarter last fiscal year.
Total liquidity, including cash and available revolver balance, was $211.9 million at the end of the third quarter of fiscal year 2023. This consisted of $22.3 million of cash and $189.6 million of available borrowing under the Company’s credit facility.
Conference Call and Webcast Presentation
Carpenter Technology will host a conference call and webcast presentation today, April 27, 2023, at 10:00 a.m. ET, to discuss the financial results of operations for the third quarter of fiscal year 2023. Please dial +1 412-317-9259 for access to the live conference call. Access to the live webcast will be available at Carpenter Technology’s website ( http://www.carpentertechnology.com), and a replay will soon be made available at http://www.carpentertechnology.com. Presentation materials used during this conference call will be available for viewing and download at http://www.carpentertechnology.com.
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 non-GAAP measures are important, are included in the schedules below.
About Carpenter Technology
Carpenter Technology Corporation is a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, medical, transportation, energy, industrial and consumer electronics markets. Founded in 1889, Carpenter Technology has evolved to become a pioneer in premium specialty alloys, including titanium, nickel, and cobalt, as well as alloys specifically engineered for additive manufacturing (AM) processes and soft magnetics applications. Carpenter Technology has expanded its AM capabilities to provide a complete “end-to-end” solution to accelerate materials innovation and streamline parts production. More information about Carpenter Technology can be found at www.carpentertechnology.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 Technology’s filings with the Securities and Exchange Commission, including its report on Form 10-K for the fiscal year ended June 30, 2022, Form 10-Q for the fiscal quarters ended September 30, 2022, and December 31, 2022, and the exhibits attached to those filings. They include but are not limited to: (1) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, defense, medical, transportation, energy, industrial and consumer, or other influences on Carpenter Technology'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; (2) the ability of Carpenter Technology to achieve cash generation, growth, earnings, profitability, operating income, cost savings and reductions, qualifications, productivity improvements or process changes; (3) the ability to recoup increases in the cost of energy, raw materials, freight or other factors; (4) domestic and foreign excess manufacturing capacity for certain metals; (5) fluctuations in currency exchange rates; (6) the effect of government trade actions; (7) the valuation of the assets and liabilities in Carpenter Technology's pension trusts and the accounting for pension plans; (8) possible labor disputes or work stoppages; (9) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products; (10) the ability to successfully acquire and integrate acquisitions; (11) the availability of credit facilities to Carpenter Technology, its customers or other members of the supply chain; (12) the ability to obtain energy or raw materials, especially from suppliers located in countries that may be subject to unstable political or economic conditions; (13) Carpenter Technology's manufacturing processes are dependent upon highly specialized equipment located primarily in facilities in Reading and Latrobe, Pennsylvania and Athens, Alabama for which there may be limited alternatives if there are significant equipment failures or a catastrophic event; (14) the ability to hire and retain key personnel, including members of the executive management team, management, metallurgists and other skilled personnel; (15) fluctuations in oil and gas prices and production; (16) uncertainty regarding the return to service of the Boeing 737 MAX aircraft and the related supply chain disruption; (17) potential impacts of the COVID-19 pandemic on our operations, financial results and financial position; (18) our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter in place orders and business closures, and the related impact on resource allocations and manufacturing and supply chains; (19) our ability to execute our business continuity, operational, budget and fiscal plans in light of the COVID-19 pandemic; and (20) our ability to successfully carry out restructuring and business exit activities on the expected terms and timelines. Any of these factors could have an adverse and/or fluctuating effect on Carpenter Technology'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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this press release or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements.
PRELIMINARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||
| March 31, | March 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||
| NET SALES | $ | 690.1 | $ | 489.0 | $ | 1,792.1 | $ | 1,272.6 | ||||||
| Cost of sales | 596.6 | 449.5 | 1,573.9 | 1,194.8 | ||||||||||
| Gross profit | 93.5 | 39.5 | 218.2 | 77.8 | ||||||||||
| Selling, general and administrative expenses | 54.2 | 38.4 | 148.0 | 127.3 | ||||||||||
| Operating income (loss) | 39.3 | 1.1 | 70.2 | (49.5 | ) | |||||||||
| Interest expense, net | 14.5 | 11.2 | 40.1 | 31.5 | ||||||||||
| Other expense (income), net | 0.8 | (1.8 | ) | 6.2 | (12.5 | ) | ||||||||
| Income (loss) before income taxes | 24.0 | (8.3 | ) | 23.9 | (68.5 | ) | ||||||||
| Income tax expense (benefit) | 5.4 | (0.8 | ) | 5.9 | (16.8 | ) | ||||||||
| NET INCOME (LOSS) | $ | 18.6 | $ | (7.5 | ) | $ | 18.0 | $ | (51.7 | ) | ||||
| EARNINGS (LOSS) PER COMMON SHARE: | ||||||||||||||
| Basic | $ | 0.38 | $ | (0.16 | ) | $ | 0.36 | $ | (1.07 | ) | ||||
| Diluted | $ | 0.38 | $ | (0.16 | ) | $ | 0.36 | $ | (1.07 | ) | ||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||
| Basic | 48.8 | 48.6 | 48.7 | 48.5 | ||||||||||
| Diluted | 49.2 | 48.6 | 49.0 | 48.5 | ||||||||||
