Business Segments

3 Months Ended

Sep. 30, 2013

Business Segments

Business Segments

14. Business Segments

The Company changed its reportable segments beginning with fiscal year 2014 first quarter results.  The change reflects the completion of the integration of the Latrobe Specialty Metals, Inc. (“Latrobe”) businesses acquired by the Company in February 2012.  Prior to this change, the Latrobe businesses were reported as a separate segment to provide management with the focus and visibility into the business of the acquired operations. The previously reported Latrobe segment also included the results of the Company’s distribution business in Mexico.  Since the Latrobe businesses are now fully integrated, the previously reported Latrobe segment has been merged into the Company’s operating model, in which the Company’s integrated steel mill operations are managed distinctly from the collection of other differentiated operations. Beginning the first quarter of fiscal year 2014, the Company has two reportable segments, Specialty Alloys Operations (“SAO”) and Performance Engineered Products (“PEP”).

The SAO segment is comprised of the Company’s major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading and Latrobe and surrounding areas in Pennsylvania, South Carolina, and the new premium products manufacturing facility being built in Limestone County, Alabama. The combined assets of the SAO operations are being managed in an integrated manner to optimize efficiency and profitability across the total system.

The PEP segment is comprised of the Company’s differentiated operations. This segment includes the Dynamet titanium business, the Carpenter Powder Products business, the Amega West business, the Specialty Steel Supply business and the Latrobe and Mexico distribution businesses. 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 Company’s executive management evaluates the performance of these operating segments based on sales, operating income and cash flow generation. Segment operating profit excludes general corporate costs, which include executive and director compensation, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that management considers not representative of ongoing operations, such as restructuring related charges, transaction costs associated with acquisitions, and other specifically-identified income or expense items.

The service cost component of the Company’s net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating income of the business segments.  The residual net pension expense, which 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.”

On a consolidated basis, there were no significant individual customers that accounted for more than 10 percent of the total net sales during the three months ended September 30, 2013 and 2012, respectively.

The historical segment information for the three months ended September 30, 2012, which is set forth below, was recast to conform to the fiscal year 2014 presentation.

	Three Months Ended
Segment Data	September 30,
($ in millions)	2013			2012
Net Sales:
Specialty Alloys Operations	$	394.9		$	431.0
Performance Engineered Products	118.5			134.9
Intersegment	(14.8		)	(21.0		)
Consolidated net sales	$	498.6		$	544.9
Operating Income:
Specialty Alloys Operations	$	63.7		$	67.2
Performance Engineered Products	11.6			14.5
Corporate costs	(12.9		)	(10.4		)
Pension earnings, interest & deferrals	(6.0		)	(8.0		)
Intersegment	(0.6		)	(1.7		)
Consolidated operating income	$	55.8		$	61.6
Depreciation and Amortization:
Specialty Alloys Operations	$	19.5		$	18.6
Performance Engineered Products	5.8			5.4
Corporate	1.4			1.5
Consolidated depreciation and amortization	$	26.7		$	25.5
Capital Expenditures:
Specialty Alloys Operations	$	108.5		$	46.7
Performance Engineered Products	6.0			8.7
Corporate	0.6			1.5
Intersegment	(0.2		)	(0.5		)
Consolidated capital expenditures	$	114.9		$	56.4
	September 30, 2013			June 30, 2013
Total Assets:
Specialty Alloys Operations	$	2,282.3		$	2,192.7
Performance Engineered Products	516.6			498.5
Corporate	169.8			233.7
Intersegment	(43.2		)	(42.0		)
Consolidated total assets	$	2,925.5		$	2,882.9