-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WEe5BoaJX5GaehkccZDnt0ECdhQL3GEW87uF56E1bK6hEUtRhG99YHRhF6X1ygbs q6psBzoLhs9IY65RWvBV/g== 0000017843-96-000011.txt : 19960515 0000017843-96-000011.hdr.sgml : 19960515 ACCESSION NUMBER: 0000017843-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARPENTER TECHNOLOGY CORP CENTRAL INDEX KEY: 0000017843 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 230458500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05828 FILM NUMBER: 96562783 BUSINESS ADDRESS: STREET 1: PO BOX 14662 CITY: READING STATE: PA ZIP: 19612-4662 BUSINESS PHONE: 2152082000 MAIL ADDRESS: STREET 1: P O BOX 14662 CITY: READING STATE: PA ZIP: 19612-4662 10-Q 1 MARCH 1996 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 Commission File Number 1-5828 CARPENTER TECHNOLOGY CORPORATION (Exact name of Registrant as specified in its Charter) Delaware 23-0458500 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 West Bern Street, Reading, Pennsylvania 19612-4662 (Address of principal executive offices) (Zip Code) 610-208-2000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of March 31, 1996. Common stock, $5 par value 16,609,762 Class Number of shares outstanding The Exhibit Index appears on page E-1. CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES FORM 10-Q INDEX Page Part I FINANCIAL INFORMATION Consolidated Balance Sheet as of March 31, 1996 (Unaudited) and June 30, 1995.......................................... 3 & 4 Consolidated Statement of Income (Unaudited) for the Three and Nine Months Ended March 31, 1996 and 1995........ 5 Consolidated Statement of Cash Flows (Unaudited) for the Nine Months Ended March 31, 1996 and 1995.................. 6 Notes to Consolidated Financial Statements................... 7 - 9 Management's Discussion and Analysis of Results of Operations.............................................. 10 & 11 Part II OTHER INFORMATION..................................... 12 & 13 Exhibit Index.................................................. E-1 PART I - ------ CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Page 1 of 2) March 31, 1996 and June 30, 1995 (in thousands, except share data) March 31 June 30 1996 1995 --------- --------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 37,936 $ 20,120 Accounts receivable, net 131,231 118,848 Inventories 143,895 91,383 Deferred income taxes 127 1,827 Other current assets 11,994 8,251 -------- -------- Total current assets 325,183 240,429 Property, plant and equipment, at cost 789,072 763,755 Less accumulated depreciation and amortization 383,257 360,175 -------- -------- 405,815 403,580 Prepaid pension cost 88,992 81,182 Investment in joint venture 10,566 49,085 Goodwill, net 18,488 15,701 Other assets 44,119 41,798 ________ ________ Total assets $893,163 $831,775 ======== ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Page 2 of 2) March 31, 1996 and June 30, 1995 (in thousands, except share data) March 31 June 30 LIABILITIES 1996 1995 - ----------- --------- --------- (Unaudited) Current liabilities: Short-term debt $ 44,674 $ 20,145 Accounts payable 58,575 51,162 Accrued compensation 18,940 21,457 Accrued income taxes 9,424 5,442 Other accrued liabilities 26,222 28,684 Current portion of long-term debt 7,136 7,286 -------- -------- Total current liabilities 164,971 134,176 Long-term debt, net of current portion 191,059 194,762 Accrued postretirement benefits 142,050 140,855 Deferred income taxes 81,725 78,415 Other liabilities and deferred income 21,230 19,622 SHAREHOLDERS' EQUITY - -------------------- Preferred stock - $5 par value, authorized 2,000,000 shares; issued 454.3 shares at March 31, 1996 and 456.7 shares at June 30, 1995 28,603 28,825 Common stock at $5 par value - authorized 50,000,000 shares; issued 19,539,326 shares at March 31, 1996 and 19,337,964 shares at June 30, 1995 97,697 96,690 Capital in excess of par value - common stock 12,299 6,801 Reinvested earnings 252,582 231,114 Common stock in treasury, at cost - 2,929,564 shares at March 31, 1996 and 3,046,208 shares at June 30, 1995 (64,354) (67,002) Deferred compensation (23,657) (25,461) Foreign currency translation adjustments (11,042) (7,022) -------- -------- Total shareholders' equity 292,128 263,945 ________ ________ Total liabilities and shareholders' equity $893,163 $831,775 ======== ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Unaudited) for the three and nine months ended March 31, 1996 and 1995 (in thousands, except per share data) Three Months Nine Months ------------------ ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $233,274 $211,636 $627,869 $540,120 -------- -------- -------- -------- Costs and expenses: Cost of sales 175,410 154,101 468,844 403,586 Selling and administrative expenses 28,379 25,929 81,675 75,095 Interest expense 5,010 4,315 14,413 10,077 Equity in loss of joint venture 3,955 1,880 6,320 2,980 Other (income) expense, net (3,650) 619 (4,445) (139) -------- -------- -------- -------- 209,104 186,844 566,807 491,599 -------- -------- -------- -------- Income before income taxes 24,170 24,792 61,062 48,521 Income taxes 9,444 9,429 22,137 18,399 -------- -------- -------- -------- Net income $ 14,726 $ 15,363 $ 38,925 $ 30,122 ======== ======== ======== ======== Earnings per common share: Primary $ .86 $ .91 $ 2.27 $ 1.77 ======== ======== ======== ======== Fully diluted $ .83 $ .89 $ 2.19 $ 1.72 ======== ======== ======== ======== Weighted average common shares outstanding 16,735 16,284 16,657 16,328 ======== ======== ======== ======== Dividends per common share $ .33 $ .30 $ .99 $ .90 ======== ======== ======== ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) for the nine months ended March 31, 1996 and 1995 (in thousands) 1996 1995 OPERATIONS ---- ---- Net income $ 38,925 $ 30,122 Adjustments to reconcile net income to net cash provided from operations: Depreciation and amortization 26,407 24,103 Deferred income taxes 4,596 2,607 Prepaid pension cost (7,810) (6,046) Equity in loss of joint venture 6,320 2,980 Gain on sale of partial interest in joint venture (2,650) - Changes in working capital and other: Receivables (9,464) (15,023) Inventories (43,913) (34,214) Accounts payable 4,248 15,445 Accrued current liabilities (1,190) 2,984 Other, net 161 (2,595) -------- -------- Net cash provided from operations 15,630 20,363 -------- -------- INVESTING ACTIVITIES Purchases of plant and equipment (25,269) (28,604) Disposals of plant and equipment 1,185 866 Acquisitions of businesses, net of cash received (10,584) (13,025) Proceeds from sale of partial interest in joint venture 32,672 - Investment in joint venture - (2,060) -------- -------- Net cash used for investing activities (1,996) (42,823) -------- -------- FINANCING ACTIVITIES Provided by short-term debt 23,824 44,875 Proceeds from issuance of long-term debt - 50,000 Payments on long-term debt (6,112) (52,568) Dividends paid (17,457) (15,798) Proceeds from issuance of common stock 4,104 660 Payments to acquire treasury stock - (3,001) -------- -------- Net cash provided from financing activities 4,359 24,168 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (177) (773) -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS 17,816 935 Cash and cash equivalents at beginning of period 20,120 5,404 -------- -------- Cash and cash equivalents at end of period $ 37,936 $ 6,339 Supplemental Data: ======== ======== - ----------------- Cash Paid During the Year For: Interest payments, net of amounts capitalized $ 16,409 $ 10,877 Income tax payments, net of refunds $ 12,335 $ 7,524 Non-Cash Investing Activities: Acquisitions of businesses with treasury stock $ 4,500 $ 3,200 See accompanying notes to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 1. Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended March 31, 1996 are not necessarily indicative of the results that may be expected for the year ending June 30, 1996. For further information, refer to the consolidated financial statements and footnotes included in the Company's 1995 Annual Report on Form 10-K. The June 30, 1995 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. 2. Earnings Per Common Share ------------------------- Primary earnings per common share are computed by dividing net income (less preferred dividends net of tax benefits) by the weighted average number of common shares and common share equivalents outstanding during the period. On a fully-diluted basis, both net earnings and shares outstanding are adjusted to assume the conversion of the convertible preferred stock. 3. Inventories ----------- March 31 June 30 1996 1995 -------- -------- (in thousands) Finished $120,186 $ 92,930 Work in process 131,551 110,468 Raw materials and supplies 45,775 41,602 -------- -------- Total at current cost 297,512 245,000 Excess of current cost over LIFO values 153,617 153,617 -------- -------- Inventory per Balance Sheet $143,895 $ 91,383 ======== ======== The current cost of LIFO-valued inventories was $272.6 million at March 31, 1996 and $219.7 million at June 30, 1995. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (continued) 4. Two-For-One Common Stock Split ------------------------------ On August 10, 1995, the Board of Directors of the Company declared a two-for-one common stock split which was distributed on September 15, 1995, to shareholders of record on September 1, 1995. The par value of common shares remained at $5 per share. All share and per share data for the prior year have been restated for the effect of this two-for-one common stock split. 5. Acquisitions of Businesses -------------------------- On October 26, 1995, the Company purchased all of the common stock of Parmatech Corporation in exchange for 120,786 shares of treasury common stock with a fair market value of $4.5 million and assumed $2.7 million of Parmatech's debt. An additional $1.5 million of Company common stock will be paid if certain performance criteria are achieved for the year ending June 30, 1996. Parmatech manufactures complex, net or near-net shape parts from a powder metal slurry using an injection molding process. On November 9, 1995, the Company acquired Green Bay Supply Co., Inc. for approximately $11 million in cash. Green Bay is a master distributor which purchases specialty metal products globally and resells them to independent distributors in the United States. The acquisitions have been accounted for using the purchase method of accounting and, accordingly, the purchase prices have been allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the dates of acquisition. The excess of purchase price over the preliminary estimated fair values of the net assets acquired was approximately $3.5 million and has been recorded as goodwill. The operating results of these acquired businesses have been included in the Consolidated Statement of Income from the dates of acquisition. On the basis of a pro forma combination of the results of operations as if the acquisitions had taken place at the beginning of fiscal 1995, combined net sales would have been approximately $638 million for the nine months ended March 31, 1996, and $219 million and $559 million for the three and nine months ended March 31, 1995, respectively. Combined pro forma net income and earnings per share would not have been materially different from the reported amounts for both periods. Such pro forma amounts are not necessarily indicative of what the actual combined results of operations might have been if the acquisitions had been effective at the beginning of fiscal 1995. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ (continued) 6. Sale of Partial Interest in Joint Venture ----------------------------------------- On March 19, 1996, the Company sold a portion of its interest in Walsin-CarTech Specialty Steel Corporation, a corporate joint venture in Taiwan with Walsin Lihwa Corporation, reducing its ownership interest to 5% from 19%. The Company received $32.7 million in cash from the sale which resulted in a $2.7 million pre-tax gain. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS ----------------------------------------------------------- Third Quarter Results: - --------------------- Net income for the quarter ended March 31, 1996 was $14.7 million versus $15.4 million in the same quarter last year. Primary earnings per share were $.86 compared with $.91 for the same period a year ago. The decrease in results is primarily due to increased costs and reduced sales volume, partly due to record snowfalls that resulted in two lost workdays at the Reading plant and disruptions in material flow throughout the East Coast. Results were also affected by one-time costs to assimilate recently acquired businesses and other actions to improve business performance. Sales revenues were $233.3 million, a 10 percent increase over the $211.6 million last year. The increase in sales was primarily a result of selling price actions and improved product mix. Sales were also higher by $5.4 million due to the inclusion of the sales of Parmatech Corporation and Green Bay Supply Co., Inc. which were acquired in fiscal 1996. Cost of sales as a percent of net sales was 75 percent for the third quarter of this year compared to 73 percent last year, while selling and administrative expenses were 12 percent of sales in both years. Raw material costs rose at a faster rate than sales revenues, causing most of the deterioration in cost of sales as a percent of sales. Also, cost of sales were adversely affected by the harsh winter weather and capacity constraints. Interest costs increased by $.7 million compared to the same quarter last year, principally as a result of lower capitalized interest and a higher level of debt. The Company's interest in Walsin-CarTech, a joint venture in Taiwan, resulted in a loss of $4.0 million versus a $1.9 million loss in the same quarter last year. The current year loss was partially offset by a gain of $2.7 million from the sale of most of its interest in the joint venture. The gain is included in Other Income on the Consolidated Statement of Income. Nine Month Results: - ------------------ Net income for the nine months ended March 31, 1996 was $38.9 million, compared with $30.1 million for the same period last year. Primary earnings per share were $2.27 compared with $1.77 for the same period a year ago. The improved results were primarily due to higher sales volume and improved profit margins. Sales were $627.9 million, a 16 percent increase from $540.1 million last year. This increase was a result of a 2 percent increase in Steel Division unit volume shipments, increased selling prices, and the inclusion of sales of Parmatech Corporation and Green Bay Supply Co., Inc. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS IN OPERATIONS ----------------------------------------------------------- (continued) Nine Month Results, continued: - ------------------ Cost of sales was 75 percent of net sales in both periods. Higher raw material, labor and other costs were offset by increased selling prices. Selling and administrative expenses fell to 13 percent of net sales versus 14 percent a year ago, primarily because these costs tend to change less rapidly than sales. Interest costs increased by $4.3 million versus the same period last year, principally as a result of lower capitalized interest and a higher level of debt. The Company's share of Walsin-CarTech's results was a loss of $6.3 million for the nine months this year versus a loss of $3.0 million for the same period last year. Lower volumes, reduced selling prices and lower production levels were the primary reasons for the increased loss. The current year loss was somewhat offset by a gain of $2.7 million on the sale of the Company's partial interest in the joint venture. The gain is included in Other Income on the Consolidated Statement of Income. PART II - OTHER INFORMATION - --------------------------- Item 1. Legal Proceedings. ------------------------- There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the Company is a party or of which its property is subject. There are no material proceedings to which any Director, Officer, or affiliate of the Company, or any owner of record or beneficially of more than five percent of any class of voting securities of the Company, or any associate of any Director, Officer, affiliate, or security holder of the Company, is a party or has a material interest adverse to the Company's interest. There is no administrative or judicial proceeding arising under any Federal, State or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment that (1) is material to the business or financial condition of the Company, (2) involves a claim for damages, potential sanctions or capital expenditures exceeding ten percent of the current assets of the Company or (3) includes a governmental authority as a party and involves potential monetary sanctions in excess of $100,000. Item 6. Exhibits and Reports on Form 8-K. ---------------------------------------- a. The following documents are filed as exhibits: 11. Statement regarding computation of per share earnings. 27. Financial data schedule. b. The Company filed one (1) Report on Form 8-K for an event occurring during the quarter of the fiscal year covered by this report. The report, dated March 19, 1996, was filed on March 28, 1996, with respect to the Company's exercise of a portion of its option to reduce its investment in Walsin-CarTech Specialty Steel Corporation. Items 2, 3, 4 and 5 are omitted as the answer is negative or the item is not applicable. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARPENTER TECHNOLOGY CORPORATION -------------------------------- (Registrant) Date: May 14, 1996 s/G. Walton Cottrell ---------------- -------------------------------- G. Walton Cottrell Sr. Vice President - Finance and Chief Financial Officer EX-99 2 EXHIBIT INDEX EXHIBIT INDEX ------------- Exhibit No. Title Page - ----------- ----- ---- 11. Statement regarding computation of per share earnings. E-2 & E-3 27. Financial data schedule. E-4 E-1 EX-11 3 EARNINGS PER SHARE EXHIBITS Exhibit 11 CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES PRIMARY EARNINGS PER COMMON SHARE COMPUTATIONS For the Three and Nine Months Ended March 31, 1996 and 1995 (in thousands, except per share data) Three Months Nine Months ------------------ ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Net Income for Primary - ---------------------- Earnings Per Common ------------------- Share ----- Net income $ 14,726 $ 15,363 $ 38,925 $ 30,122 Dividends accrued on convertible preferred stock, net of tax benefits (391) (472) (1,181) (1,271) -------- -------- -------- -------- Net income for primary earnings per common share $ 14,335 $ 14,891 $ 37,744 $ 28,851 ======== ======== ======== ======== Weighted Average Common - ----------------------- Shares ------ Weighted average number of common shares outstanding 16,605 16,210 16,511 16,246 Effect of shares issuable under stock option plans 130 74 146 82 -------- -------- -------- -------- Weighted average common shares 16,735 16,284 16,657 16,328 ======== ======== ======== ======== Primary Earnings Per - -------------------- Common Share $ .86 $ .91 $ 2.27 $ 1.77 ------------ ======== ======== ======== ======== All share and per share data for the three and nine months ended March 31, 1995, have been restated for the effect of a two-for-one common stock split that was distributed on September 15, 1995 to shareholders of record on September 1, 1995. E-2 Exhibit 11 CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES FULLY DILUTED EARNINGS PER COMMON SHARE COMPUTATIONS For the Three and Nine Months Ended March 31, 1996 and 1995 (in thousands, except per share data) Three Months Nine Months ------------------ ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Net Income for Fully - -------------------- Diluted Earnings Per -------------------- Common Share ------------ Net income $ 14,726 $ 15,363 $ 38,925 $ 30,122 Assumed shortfall between common and preferred dividend (161) (134) (486) (531) -------- -------- -------- -------- Net income for fully diluted earnings per common share $ 14,565 $ 15,229 $ 38,439 $ 29,591 ======== ======== ======== ======== Weighted Average Common - ----------------------- Shares ------ Weighted average number of common shares outstanding 16,605 16,210 16,511 16,246 Assumed conversion of preferred shares 910 918 910 918 Effect of shares issuable under stock option plans 152 76 166 82 -------- -------- -------- -------- Weighted average common shares 17,667 17,204 17,587 17,246 ======== ======== ======== ======== Fully Diluted Earnings - ---------------------- Per Common Share $ .83 $ .89 $ 2.19 $ 1.72 ---------------- ======== ======== ======== ======== All share and per share data for the three and nine months ended March 31, 1995, have been restated for the effect of a two-for-one common stock split that was distributed on September 15, 1995 to shareholders of record on September 1, 1995. E-3 EX-27 4 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS JUN-30-1996 MAR-31-1996 $37,936 $0 $131,231 $0 $143,895 $325,183 $789,072 $383,257 $893,163 $164,971 $191,059 $97,697 $0 $28,603 $165,828 $893,163 $627,869 $627,869 $468,844 $468,844 $1,875 $0 $14,413 $61,062 $22,137 $38,925 $0 $0 $0 $38,925 $2.27 $2.19
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