-----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, UEDiEhoPNu6ISN5YoHnAKiqtD3MClf2qcjmD0KW9Pxao9BMaYKmbu08w7FJ/JLlZ XsFnjwTElrBWWLCqZtF4uw== 0000017843-96-000002.txt : 19960201 0000017843-96-000002.hdr.sgml : 19960201 ACCESSION NUMBER: 0000017843-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960131 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: 96509388 BUSINESS ADDRESS: STREET 1: 101 W BERN ST CITY: READING STATE: PA ZIP: 19612 BUSINESS PHONE: 2152082000 MAIL ADDRESS: STREET 1: P O BOX 14662 CITY: READING STATE: PA ZIP: 19612-4662 10-Q 1 DEC 31, 1995 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 December 31, 1995 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 December 31, 1995. Common stock, $5 par value 16,602,336 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 December 31, 1995 (Unaudited) and June 30, 1995..................................... 3 & 4 Consolidated Statement of Income (Unaudited) for the Three and Six Months Ended December 31, 1995 & 1994... 5 Consolidated Statement of Cash Flows (Unaudited) for the Six Months Ended December 31, 1995 and 1994........... 6 Notes to Consolidated Financial Statements.............. 7 & 8 Management's Discussion and Analysis of Results of Operations......................................... 9 & 10 Part II OTHER INFORMATION................................11 - 13 Exhibit Index............................................. E-1 PART I - ------ CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Page 1 of 2) December 31, 1995 and June 30, 1995 (in thousands, except share data) December 31 June 30 1995 1995 ----------- ---------- (Unaudited) ASSETS - ------ Current assets: Cash and cash equivalents $ 10,590 $ 20,120 Accounts receivable, net 119,129 118,848 Inventories 134,262 91,383 Deferred income taxes 772 1,827 Other current assets 11,449 8,251 -------- -------- Total current assets 276,202 240,429 Property, plant and equipment, at cost 779,707 763,755 Less accumulated depreciation and amortization 375,866 360,175 -------- -------- 403,841 403,580 Prepaid pension cost 86,258 81,182 Investment in joint venture 44,408 49,085 Goodwill, net 18,748 15,701 Other assets 42,654 41,798 ________ ________ Total assets $872,111 $831,775 ======== ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (Page 2 of 2) December 31, 1995 and June 30, 1995 (in thousands, except share data) December 31 June 30 LIABILITIES 1995 1995 - ----------- ________ ________ (Unaudited) Current liabilities: Short-term debt $ 41,570 $ 20,145 Accounts payable 56,928 51,162 Accrued compensation 15,441 21,457 Accrued income taxes 3,994 5,442 Other accrued liabilities 31,143 28,684 Current portion of long-term debt 7,198 7,286 ________ ________ Total current liabilities 156,274 134,176 Long-term debt, net of current portion 191,210 194,762 Accrued postretirement benefits 141,490 140,855 Deferred income taxes 80,171 78,415 Other liabilities and deferred income 20,814 19,622 SHAREHOLDERS' EQUITY - -------------------- Preferred stock - $5 par value, authorized 2,000,000 shares; issued 454.5 shares at December 31, 1995 and 456.7 shares at June 30, 1995 28,675 28,825 Common stock at $5 par value - authorized 50,000,000 shares; issued 19,528,056 shares at December 31, 1995 and 19,337,964 shares at June 30, 1995 97,640 96,690 Capital in excess of par value - common stock 12,064 6,801 Reinvested earnings 243,698 231,114 Common stock in treasury, at cost - 2,925,720 shares at December 31, 1995 and 3,046,208 shares at June 30, 1995 (64,354) (67,002) Deferred compensation (24,201) (25,461) Foreign currency translation adjustments (11,370) (7,022) Total shareholders' equity 282,152 263,945 ________ ________ Total liabilities and shareholders' equity $872,111 $831,775 ======== ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (Unaudited) for the three and six months ended December 31, 1995 and 1994 (in thousands, except per share data) Three Months Six Months ------------------ ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- Net sales $210,126 $172,400 $394,595 $328,484 -------- -------- -------- -------- Costs and expenses: Cost of sales 157,229 127,917 293,434 249,485 Selling and administrative expenses 27,933 25,239 52,725 49,193 Interest expense 4,821 3,064 9,403 5,762 Equity in loss of joint venture 2,140 860 2,365 1,100 Other income, net (21) (274) (224) (785) -------- -------- -------- -------- 192,102 156,806 357,703 304,755 -------- -------- -------- -------- Income before income taxes 18,024 15,594 36,892 23,729 Income taxes 5,731 5,767 12,693 8,970 -------- -------- -------- -------- Net income $ 12,293 $ 9,827 $ 24,199 $ 14,759 ======== ======== ======== ======== Earnings per common share: Primary $ .71 $ .58 $ 1.41 $ .86 ======== ======== ======== ======== Fully diluted $ .69 $ .56 $ 1.36 $ .83 ======== ======== ======== ======== Weighted average common shares outstanding 16,698 16,322 16,619 16,364 ======== ======== ======== ======== Dividends per common share $ .33 $ .30 $ .66 $ .60 ======== ======== ======== ======== See accompanying notes to consolidated financial statements. CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) for the six months ended December 31, 1995 and 1994 (in thousands) 1995 1994 OPERATIONS ---- ---- Net income $ 24,199 $ 14,759 Adjustments to reconcile net income to net cash provided from operations: Depreciation and amortization 17,366 15,916 Deferred income taxes 2,444 1,922 Prepaid pension cost (5,076) (3,927) Equity in loss of joint venture 2,365 1,100 Changes in working capital and other: Receivables 2,600 6,163 Inventories (34,389) (22,732) Accounts payable 2,608 10,856 Accrued current liabilities (5,189) 415 Other, net 783 (5,685) -------- -------- Net cash provided from operations 7,711 18,787 INVESTING ACTIVITIES Purchases of plant and equipment (13,938) (19,948) Disposals of plant and equipment 378 600 Acquisitions of businesses, net of cash received (10,584) (13,055) Investment in joint venture - (2,060) -------- -------- Net cash used for investing activities (24,144) (34,463) FINANCING ACTIVITIES -------- -------- Provided by short-term debt 20,724 31,265 Proceeds from issuance of long-term debt - 50,000 Payments on long-term debt (5,899) (52,140) Dividends paid (11,615) (10,552) Proceeds from issuance of common stock 3,884 663 Payments to acquire treasury stock - (3,002) -------- -------- Net cash provided from financing activities 7,094 16,234 EFFECT OF EXCHANGE RATE CHANGES ON CASH -------- -------- AND CASH EQUIVALENTS (191) (471) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (9,530) 87 Cash and cash equivalents at beginning of period 20,120 5,404 -------- -------- Cash and cash equivalents at end of period $ 10,590 $ 5,491 Supplemental Data: ======== ======== Cash Paid During the Year For: Interest payments, net of amounts capitalized $ 8,383 $ 4,562 Income tax payments, net of refunds $ 11,461 $ 3,941 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 six months ended December 31, 1995 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 ----------- December 31 June 30 1995 1995 -------- -------- (in thousands) Finished $114,492 $ 92,930 Work in process 127,803 110,468 Raw materials and supplies 45,584 41,602 -------- -------- Total at current cost 287,879 245,000 Excess of current cost over LIFO values 153,617 153,617 -------- -------- Inventory per Balance Sheet $134,262 $ 91,383 ======== ======== The current cost of LIFO-valued inventories was $253.1 million at December 31, 1995 and $219.7 million at June 30, 1995. 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 sales performance for the year ending June 30, 1996 is achieved. 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 $212 million and $404 million for the three and six months ended December 31, 1995, and $178 million and $340 million for the three and six months ended December 31, 1994, 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. MANAGEMENT'S DISCUSSION & ANALYSIS OF RESULTS OF OPERATIONS ----------------------------------------------------------- Second Quarter Results: - ---------------------- Net income for the quarter ended December 31, 1995 was $12.3 million versus $9.8 million in the same quarter last year. Primary earnings per share were $.71 compared with $.58 for the same period a year ago. The improved results were primarily due to increased sales volume and selling prices in the Steel Division, combined with a lower effective tax rate because of reduced state income tax estimates. Sales revenues were $210.1 million, a 22 percent increase over the $172.4 million last year. The increase in sales was primarily a result of higher shipment levels of automotive, aerospace, and power generation related products, and increased international sales. Sales were also higher by $3.1 million due to the inclusion of the sales of Parmatech Corporation, acquired in October 1995, and Green Bay Supply Co., Inc., acquired during November 1995. Cost of sales as a percent of net sales was 75 percent for the second quarter of this year compared to 74 percent last year, while selling and administrative expenses were reduced to 13 percent of sales from 15 percent a year ago. Second quarter results were negatively impacted by increased Steel Division maintenance spending in preparation for higher equipment utilization rates during the balance of the fiscal year in order to ship the high customer backlog currently being experienced. The Company's 19 percent interest in Walsin-CarTech, a joint venture in Taiwan, resulted in a loss of $2.1 million versus a $.9 million loss in the same quarter last year. Results of operations this year have been adversely impacted by a deterioration in mix, weak pricing and production inefficiencies. Last year, pre-operating expenses were capitalized through December 31, 1994. Interest costs increased by $1.8 million compared to the same quarter last year, principally as a result of lower capitalized interest relating to the Company's investment in Walsin-CarTech. Six Month Results: - ----------------- Net income for the six months ended December 31, 1995 was $24.2 million, compared with $14.8 million for the same period last year. Primary earnings per share were $1.41 compared with $.86 for the same period a year ago. The improved results were primarily due to higher sales volume, improved profit margins, and a lower effective tax rate. Sales were $394.6 million, a 20 percent increase from $328.5 million last year. This increase was a result of a 4 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 OF OPERATIONS (continued) Six Months Results, continued: - ------------------ Cost of sales decreased to 74 percent of net sales in the current fiscal year compared to 76 percent for the same period last year. This improvement was primarily the result of the selling price increases to recover raw material and other cost increases and to restore profit margins which had eroded in prior years. Selling and administrative expenses fell to 13 percent of net sales versus 15 percent a year ago, primarily because these costs tend to change less rapidly than sales. The Company's 19 percent share of Walsin-CarTech's results was a loss of $2.4 million for the six months this year versus a loss of $1.1 million for the same period last year. Lower volumes, reduced selling prices and lower production levels were the primary reasons for the increased loss. Last year, pre-operating expenses were capitalized through December 31, 1994. Interest costs increased by $3.6 million versus the same period last year, principally due to last year's capitalization of $2.1 million of interest relating to the Company's joint venture investment in Walsin-CarTech. 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 or any of its subsidiaries is a party or to which any of their properties is subject. There are no material proceedings to which any Director, Officer, or affiliate of the Company, or any owner 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 adverse to the Company or has a material interest adverse to the interest of the Company or its subsidiaries. There is no administrative or judicial proceeding arising under any Federal, State or local provisions 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 4. Submission of Matters to a Vote of Security Holders. ----------------------------------------------------------- a. The Annual Meeting of Stockholders of the Company was held on October 23, 1995. b. Information required by this paragraph is omitted since (i) proxies for the Annual Meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act, (ii) there was no solicitation in opposition to the management's nominees as listed in the Proxy Statement and (iii) all of such nominees were elected. c. Set forth below is a description of the matters voted upon at the Annual Meeting and the number of votes cast for, against or withheld, as well as the number of abstentions and broker nonvotes, as applicable to each such matter. 1. Election Of Directors. The following five directors --------------------- were elected to the Board of Directors of the Company. There were no other nominees for director. A. Robert W. Cardy Shares voted for: 6,984,037 Shares voted against or withheld: 96,139 Abstentions: N/A Broker nonvotes: N/A B. Arthur E. Humphrey Shares voted for: 6,983,751 Shares voted against or withheld: 98,710 Abstentions: N/A Broker nonvotes: N/A Item 4. Submission of Matters to a Vote of Security Holders, continued - ---------------------------------------------------------------------- C. Edward W. Kay Shares voted for: 6,937,680 Shares voted against or withheld: 190,853 Abstentions: N/A Broker nonvotes: N/A D. Frederick C. Langenberg Shares voted for: 6,985,026 Shares voted against or withheld: 96,161 Abstentions: N/A Broker nonvotes: N/A E. Kathryn C. Turner Shares voted for: 6,932,341 Shares voted against or withheld: 201,529 Abstentions: N/A Broker nonvotes: N/A 2. The accounting firm of Coopers & Lybrand was elected independent accountants for the year ending June 30, 1996. Shares voted for: 6,998,501 Shares voted against or withheld: 53,180.5 Abstentions: 28,022.5 Broker nonvotes: N/A 3. An amendment to the Non-Qualified Stock Plan for Non- Employee Directors as described in the Proxy Statement was approved. Shares voted for: 6,459,003.5 Shares voted against or withheld: 513,353 Abstentions: 107,347.5 Broker nonvotes: N/A 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 no Reports on Form 8-K for events occurring during the quarter of the fiscal year covered by this report. Items 2, 3 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: January 31, 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 E-2 per share earnings. & E-3 27. Financial data schedule. E-4 E-1 EX-11 3 EPS EXHIBIT Exhibit 11 CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES PRIMARY EARNINGS PER COMMON SHARE COMPUTATIONS For the Three and Six Months Ended December 31, 1995 and 1994 (in thousands, except per share data) Three Months Six Months ------------------ ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- Net Income for Primary Earnings - ------------------------------- Per Common Share ---------------- Net income $ 12,293 $ 9,827 $ 24,199 $ 14,759 Dividends accrued on convertible preferred stock, net of tax benefits (390) (400) (790) (800) -------- -------- -------- -------- Net income for primary earnings per common share $ 11,903 $ 9,427 $ 23,409 $ 13,959 ======== ======== ======== ======== Weighted Average Common Shares - ------------------------------ Weighted average number of common shares outstanding 16,547 16,252 16,464 16,264 Effect of shares issuable under stock option plans 151 70 155 100 -------- -------- -------- -------- Weighted average common shares 16,698 16,322 16,619 16,364 ======== ======== ======== ======== Primary Earnings Per Common Share $ .71 $ .58 $ 1.41 $ .86 ======== ======== ======== ======== All share and per share data for the three and six months ended December 31, 1994, 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 Six Months Ended December 31, 1995 and 1994 (in thousands, except per share data) Three Months Six Months ------------------ ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- Net Income for Fully Diluted - ---------------------------- Earnings Per Common Share ------------------------- Net income $ 12,293 $ 9,827 $ 24,199 $ 14,759 Assumed shortfall between common and preferred dividend (143) (199) (326) (397) -------- -------- -------- -------- Net income for fully diluted earnings per common share $ 12,150 $ 9,628 $ 23,873 $ 14,362 ======== ======== ======== ======== Weighted Average Common Shares - ------------------------------ Weighted average number of common shares outstanding 16,547 16,252 16,464 16,264 Assumed conversion of preferred shares 912 918 912 918 Effect of shares issuable under stock option plans 189 64 202 102 -------- -------- -------- -------- Weighted average common shares 17,648 17,234 17,578 17,284 ======== ======== ======== ======== Fully Diluted Earnings Per Common Share $ .69 $ .56 $ 1.36 $ .83 ======== ======== ======== ======== All share and per share data for the three and six months ended December 31, 1994, 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 6-MOS JUN-30-1996 DEC-31-1995 $10,590 0 $119,129 0 $134,262 $276,202 $779,707 $375,866 $872,111 $156,274 $191,210 $97,640 0 $28,675 $155,837 $872,111 $394,595 $394,595 $293,434 $293,434 $2,141 0 $9,403 $36,892 $12,693 $24,199 0 0 0 $24,199 $1.41 $1.36
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