Carpenter Technology Corporation · NYSE:CRS
Carpenter Technology — Credit Suisse Global Industrials Conference 2014
25 slides from Carpenter Technology's conference presentation, Dec 3, 2014
Slide 1: Credit Suisse Global Industrials Conference
Credit Suisse Global Industrials Conference Tony Thene Senior Vice President and Chief Financial Officer December 3, 2014 New York, NY
Slide 2: Cautionary Statement
2 Cautionary Statement Forward-Looking Statements This presentation 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 pr
Slide 3: Carpenter – A Leader in Specialty Metals
3 Carpenter – A Leader in Specialty Metals Over 125 years of metallurgical and manufacturing expertise Focused on high value, differentiated, products used in demanding, niche applications Attractive end-use markets and strong customer relationships Transformational growth period enabled by premium
Slide 4: Carpenter Targets High End of Specialty Steel Market
4 Carpenter Targets High End of Specialty Steel Market Carpenter Focus Global Steel Production (volume) Other Alloy Steels 69% Stainless Flat 20% Bearing 5% Stainless Long 4% Special Alloy <2% Ni 0.2% Specialty Steel Market 9% Source: SMR GmbH, 2012 (Note: Excludes Ti and Powder Metal) Increasing Vo
Slide 5: Carpenter Has Two Distinct Operating Segments - SAO
5 Carpenter Has Two Distinct Operating Segments - SAO Specialty Alloys Operations (SAO) Major ultra-premium alloy and stainless steel manufacturing system Reading Operations Latrobe Operations Athens Operations Shalmet Carpenter Specialty Wire Products Hartsville Operations SAO Net Sales - FY2014 $1
Slide 6: Carpenter Has Two Distinct Operating Segments - PEP
6 Carpenter Has Two Distinct Operating Segments - PEP Performance Engineered Products (PEP) Differentiated operations Amega West Carpenter Powder Products Specialty Steel Supply Dynamet Latrobe Specialty Distribution PEP Net Sales - FY2014 $0.50B
Slide 7: Carpenter Participates in Attractive End Markets
Carpenter Participates in Attractive End Markets FY2014 Net Sales of $2.2B 7
Slide 8: Key End Market Review – Aerospace & Defense
8 Key End Market Review – Aerospace & Defense CURRENT STATE Engine and fastener demand strengthening Aerospace distribution is improving New platform launches represent broader opportunities in this segment Weaker demand for defense products impacting margins; however some signs that trend is revers
Slide 9: Key End Market Review – Energy
9 Key End Market Review – Energy CURRENT STATE Strong growth in oil & gas drilling/exploration products as well as completions Directional rig count continues to grow year over year New drilling technologies are utilizing more specialty steels with differentiated attributes Dropping crude prices cou
Slide 10: Key End Market Review – Transportation
10 Key End Market Review – Transportation CURRENT STATE Mix strengthening with a shift to higher value components for more demanding applications North America vehicle production up year over year and remains at high levels Next generation technologies favorable for growth - mainstream turbocharger
Slide 11: Key End Market Review – Medical
11 Key End Market Review – Medical CURRENT STATE OEMs have resumed more normalized buying patterns as supply chain inventories have stabilized Sales are increasing year over year but at a weaker mix – stainless vs. titanium cobalt Environment is very competitive reacting to changes in health care an
Slide 12: Current Market Indicators Improving: Backlog
Backlog Revenue Backlog Mix Lead Times Takeaways Backlog Revenue – Higher level of orders and improved mix Backlog Mix – Profitability in backlog has grown since July Lead Times – Increasing for high temp forge products 12 Current Market Indicators Improving
Slide 13: Athens Facility Expected to be an Industry Game-Changer
13 Athens Facility Expected to be an Industry Game-Changer 27K tons of incremental premium capacity Latest technology and automation permits straight-through processing and reduced cost per ton Enables shorter customer lead times and efficient inventory management Low break-even volumes for cash and
Slide 14: Athens Facility – Key Metrics Update
Capital Expenditures Annual Capacity 93% of spending complete through Q1-FY15 Approximately $30 million remaining in FY15 (Q2-Q4) All included in the $160-175 million FY15 total company capital expenditure target 27K tons of premium capacity Practical capacity expected to be utilized within approxim
Slide 15: Athens Qualification Process
PROCESS VALIDATE & DEVELOP PRODUCT VALIDATE & QUALIFY PRODUCT QUALIFY Athens Qualification Process Phase I Data Requirements Press ESR, VAR Phase II Phase III INTERNAL EXTERNAL 15
Slide 16: Athens Qualification Process On-Track
Athens Qualification Process On-Track Current Commercially operational and providing some capacity relief at Reading and Latrobe Supporting some aerospace applications that require base industry specifications Producing stainless directional drilling products for oil and gas exploration and corrosio
Slide 17: Heavy Investment Phase Nearly Complete: Capital Expenditures
17 Estimated Range ($160 - $175) Athens ($67) Heavy Investment Phase Nearly Complete Target of Approximately $120M per Year Capital Expenditures Millions
Slide 18: Working Capital Identified as an Opportunity
18 Working Capital Identified as an Opportunity * See appendix for details of calculation. Days Working Capital*
Slide 19: Strong Liquidity Position and Solid Capital Structure
Strong Liquidity Position and Solid Capital Structure Aggregate Debt Level Revolver 7.02% 5.20% 4.45% 19
Slide 20: Strong Free Cash Flow Potential
20 Strong Free Cash Flow Potential * See appendix for details of calculation. Focus on productivity improvements Heavy capital expenditure phase nearly complete Targeting working capital reductions Minimal required pension contributions anticipated in the near-term Minimal debt maturities in the nea
Slide 21: Share Repurchase Authorization Reaffirms Confidence
Share Repurchase Authorization Reaffirms Confidence 21
Slide 22: Why Carpenter is a Good Investment
22 Why Carpenter is a Good Investment Athens capacity is an enabler to meet growing demand for high value products Well positioned to increase margins and profitability Beginning strong cash flow generation phase Solid liquidity position and capital structure Stock repurchase program prioritized as
Slide 23: Appendix of Supplemental Schedules
Appendix of Supplemental Schedules
Slide 24: Days Working Capital Calculations
24 Days Working Capital Calculations FY08 FY09 FY10 FY11 FY12 FY13 FY14 ($ in millions) Accounts receivable, net $ 285.1 $ 130.8 $ 188.5 $ 259.4 $ 354.2 $ 342.0 $ 339.6 Inventory, net 209.0 185.4 203.6 328.6 642.0 659.2 699.2 LIFO reserve 448.0 305.8 331.8 355.4 279.8 222.4 195.7 Gross inventory 657
Slide 25: Free Cash Flow
25 Free Cash Flow FY 14 Net cash provided from operating activities $ 239.6 Purchases of property, equipment and software (349.2) Dividends paid (38.5) Proceeds from disposals of plant and equipment 0.3 Free cash flow $ (147.8) Management believes that the presentation of free cash flow provides use
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