-----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, DxEIlfhHPefjc5QToXTK1yLtO9r2r7NwK3yep+r1LKfy0MMAoneBhvQHAWNdVZUg 0//wbgtvgBaVOjdswpitzQ== 0000017843-97-000019.txt : 19971113 0000017843-97-000019.hdr.sgml : 19971113 ACCESSION NUMBER: 0000017843-97-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 001-05828 FILM NUMBER: 97716391 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 SEPT 30, 1997 10Q 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 September 30, 1997 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 September 30, 1997. Common stock, $5 par value 19,520,924 Class Number of shares outstanding The Exhibit Index appears on page E-1. Carpenter Technology Corporation FORM 10-Q INDEX Page ---- Part I FINANCIAL INFORMATION Consolidated Balance Sheet as of September 30, 1997 (Unaudited) and June 30, 1997......................... 3 & 4 Consolidated Statement of Income (Unaudited) for the Three Months Ended September 30, 1997 and 1996........ 5 Consolidated Statement of Cash Flows (Unaudited) for the Three Months Ended September 30, 1997 and 1996........ 6 Notes to Consolidated Financial Statements.............. 7 - 11 Management's Discussion and Analysis of Financial Condition and Results of Operations...................12 & 13 Forward-looking Statements.............................. 14 Part II OTHER INFORMATION................................15 & 16 Exhibit Index............................................. E-1 PART I - ------ Carpenter Technology Corporation Consolidated Balance Sheet (Page 1 of 2) September 30, 1997 and June 30, 1997 (in thousands, except share data) September 30 June 30 1997 1997 ------------ --------- (Unaudited) ASSETS - ------ Current assets: Cash and cash equivalents $ 15,639 $ 18,620 Accounts receivable, net 145,614 159,863 Inventories 238,235 211,483 Other current assets 16,257 12,247 ---------- ---------- Total current assets 415,745 402,213 Property, plant and equipment, at cost 964,001 936,456 Less accumulated depreciation and amortization 431,494 422,820 ---------- ---------- 532,507 513,636 Prepaid pension cost 105,270 99,748 Goodwill, net 108,219 104,610 Other assets 104,397 102,794 __________ __________ Total assets $1,266,138 $1,223,001 ========== ========== See accompanying notes to consolidated financial statements. Carpenter Technology Corporation Consolidated Balance Sheet (Page 2 of 2) September 30, 1997 and June 30, 1997 (in thousands, except share data) September 30 June 30 LIABILITIES 1997 1997 - ----------- ------------ ---------- (Unaudited) Current liabilities: Short-term debt $ 82,217 $ 82,540 Accounts payable 80,833 78,962 Accrued compensation 18,922 26,932 Accrued income taxes 19,062 19,263 Deferred income taxes 7,137 5,601 Other accrued liabilities 40,558 41,375 Current portion of long-term debt 3,245 3,372 ---------- ---------- Total current liabilities 251,974 258,045 Long-term debt, net of current portion 284,734 244,726 Accrued postretirement benefits 134,693 135,903 Deferred income taxes 110,689 110,780 Other liabilities 23,314 24,240 SHAREHOLDERS' EQUITY - -------------------- Preferred stock - $5 par value, authorized 2,000,000 shares; issued 445.7 shares at September 30, 1997 and 447.3 shares at June 30, 1997 28,128 28,224 Common stock at $5 par value - authorized 50,000,000 shares; issued 19,689,576 shares at September 30, 1997 and 19,642,920 shares at June 30, 1997 98,448 98,215 Capital in excess of par value - common stock 55,548 54,338 Reinvested earnings 313,837 303,566 Common stock in treasury, at cost - 168,652 shares at September 30, 1997 and 160,605 shares at June 30, 1997 (3,959) (3,539) Deferred compensation (19,701) (20,299) Foreign currency translation adjustments (11,567) (11,198) ---------- ---------- Total shareholders' equity 460,734 449,307 __________ __________ Total liabilities and shareholders' equity $1,266,138 $1,223,001 ========== ========== See accompanying notes to consolidated financial statements. Carpenter Technology Corporation Consolidated Statement of Income (Unaudited) for the three months ended September 30, 1997 and 1996 (in thousands, except per share data) 1997 1996 ---- ---- Net sales $249,495 $194,746 -------- -------- Costs and expenses: Cost of sales 179,419 148,318 Selling and administrative expenses 36,209 29,555 Interest expense 5,848 4,426 Other expense, net 78 72 -------- -------- 221,554 182,371 -------- -------- Income before income taxes 27,941 12,375 Income taxes 10,857 4,300 -------- -------- Net income $ 17,084 $ 8,075 ======== ======== Earnings per common share: Primary $ .85 $ .46 ======== ======== Fully diluted $ .82 $ .45 ======== ======== Weighted average common shares outstanding 19,737 16,712 ======== ======== Dividends per common share $ .33 $ .33 ======== ======== See accompanying notes to consolidated financial statements. Carpenter Technology Corporation Consolidated Statement of Cash Flows (Unaudited) for the three months ended September 30, 1997 and 1996 (in thousands) 1997 1996 ---- ---- OPERATIONS Net income $ 17,084 $ 8,075 Adjustments to reconcile net income to net cash provided from operations: Depreciation and amortization 12,180 9,190 Deferred income taxes 1,445 1,502 Pension credits (5,522) (2,727) Changes in working capital and other, net of acquisitions: Receivables 17,039 23,902 Inventories (21,490) (4,316) Accounts payable (473) (16,544) Accrued current liabilities (10,195) (17,646) Other, net (7,354) (557) -------- -------- Net cash provided from operations 2,714 879 -------- -------- INVESTING ACTIVITIES Purchases of plant and equipment (22,345) (20,252) Disposals of plant and equipment 629 104 Acquisitions of businesses, net of cash received (18,071) - -------- -------- Net cash used for investing activities (39,787) (20,148) -------- -------- FINANCING ACTIVITIES Provided by (payments on) short-term debt (323) 26,544 Proceeds from issuance of long-term debt 40,000 - Payments on long-term debt (119) (152) Dividends paid (6,813) (5,854) Proceeds from issuance of common stock 1,347 - -------- -------- Net cash provided from financing activities 34,092 20,538 -------- -------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS - 16 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,981) 1,285 Cash and cash equivalents at beginning of period 18,620 13,159 -------- -------- Cash and cash equivalents at end of period $ 15,639 $ 14,444 ======== ======== 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 three months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending June 30, 1998. The June 30, 1997 condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. For further information, refer to the consolidated financial statements and footnotes included in Carpenter's 1997 Annual Report on Form 10-K. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain reclassifications of prior years' amounts have been made to conform with the current year's presentation. 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. Notes to Consolidated Financial Statements (continued) 3. Inventories ----------- September 30 June 30 1997 1997 -------- -------- (in thousands) Finished and purchased products $124,115 $121,532 Work in process 203,127 177,650 Raw materials and supplies 49,844 51,152 -------- -------- Total at current cost 377,086 350,334 Less excess of current cost over LIFO values 138,851 138,851 -------- -------- Inventory per Balance Sheet $238,235 $211,483 ======== ======== The current cost of LIFO-valued inventories was $336.5 million at September 30, 1997 and $317.6 million at June 30, 1997. 4. Acquisitions of Businesses -------------------------- On September 30, 1997, Carpenter acquired four of the operating units of ICI Australia, Ltd. in exchange for $16.5 million of cash, including acquisition costs. These four operating units manufacture structural ceramic components and powder products, and had sales of about $21 million for the year ended September 30, 1997. Based upon a preliminary valuation, $4.6 million of the purchase price was allocated to goodwill, which will be amortized on a straight-line basis over 20 years. On July 9, 1997, Carpenter acquired all of the outstanding common shares of Aceromex Atlas S.A. de C.V., a specialty metals distributor in Mexico, for $2.6 million in cash. Aceromex had sales of about $4.2 million for calendar year 1996. Based upon a preliminary valuation, $1.4 million of the purchase price was allocated to goodwill, which is being amortized on a straight-line basis over 20 years. The acquisitions described above were accounted for using the purchase method of accounting and accordingly, 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 an unaudited pro forma consolidation of the results of operations as if the acquisitions in fiscal 1998 and 1997 had taken place at the beginning of fiscal 1997, consolidated net sales would have been $254.9 million for the three months ended September 30, 1997 and $228.6 million for the three months ended September 30, 1996. Unaudited consolidated pro forma net income and primary earnings per share would have been $16.5 million and $.82 for the three months ended September 30, 1997, and $10.3 million and $.51 for the three months ended September 30, 1996, respectively. Such pro forma amounts are not necessarily indicative of what the actual consolidated results of operations might have been if the acquisitions had been effective at the beginning of fiscal 1997. Notes to Consolidated Financial Statements (continued) 5. Commitments and Contingencies - Environmental ----------------------------- ------------- Carpenter accrues amounts for environmental remediation costs which represent management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. For the quarter ended September 30, 1997, $2.3 million was charged to operations for environmental remediation costs. The liability for environmental remediation costs at September 30, 1997 was $13.1 million. Estimates of the amount and timing of future costs of environmental remediation requirements are necessarily imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology and the identification of presently unknown remediation sites and the allocation of costs among the potentially responsible parties. Based upon information presently available, such future costs are not expected to have a material effect on Carpenter's competitive or financial position. However, such costs could be material to results of operations in a particular future quarter or year. Notes to Consolidated Financial Statements (continued) 6. Potential Acquisition of Businesses ----------------------------------- On September 25, 1997, Carpenter entered into an agreement to acquire Talley Industries, Inc. by initiating an all-cash tender offer for all outstanding shares of common and preferred stock of Talley. The offer prices are $12.00 per share of common stock, $11.70 per share of Series A convertible preferred stock and $16.00 per share of Series B convertible preferred stock. The offer is conditioned upon shares representing a majority of the voting power of Talley stock being tendered by December 4, 1997 and upon other customary contingencies, including Justice Department approval. Following completion of the tender offer, Carpenter intends to acquire the balance of Talley stock in a merger. The aggregate value of the transaction will be approximately $312 million, representing $185 million to acquire Talley's 15.4 million outstanding common and preferred shares and the assumption of debt. The acquisition would initially be financed by issuance of debt under a recently expanded revolving credit agreement and/or issuance of other short-term debt. Carpenter has announced plans to issue $100 million of common stock in a public offering after the acquisition of Talley and expects to use the proceeds to pay down debt. Talley Industries, Inc. is a diversified manufacturer composed of a stainless steel products segment, a government products and services segment and an industrial products segment. Talley had revenues of $502.7 million and net income of $18.7 million in calendar 1996. The stainless steel products segment had sales and operating income, before income taxes and corporate expenses, of $136.3 million and $11.0 million in calendar 1996, respectively. Carpenter intends to retain the companies in the stainless steel products segment but divest the companies in the government products and services and industrial products segments. This transaction will be accounted for using the purchase method of accounting. The segments which will be sold will be accounted for as assets held for sale and, accordingly, the operating results of these segments will be excluded from Carpenter's consolidated statement of income. Notes to Consolidated Financial Statements (continued) 7. Subsequent Events ----------------- In October 1997, Carpenter amended its existing financing arrangements with a number of banks to increase the revolving credit agreement from $150 million to $400 million. The expanded credit agreement will be used to: finance the acquisition of Talley Industries, Inc., back up Carpenter's outstanding commercial paper, fund future acquisitions and meet other short-term cash requirements. It is planned that prior to September 30, 1998, the revolving credit commitment will be reduced from $400 million to $200 million. Interest is based on short-term market rates and competitive bids. Carpenter has also retained the availability of $50 million under lines of credit agreements with two banks. Carpenter announced in January 1997 that it planned to acquire Global Technology, Inc., including its two primary businesses: Shalmet Corporation and Hetran, Inc. On October 31, 1997, Carpenter acquired the net assets of Shalmet Corporation and its affiliates for approximately $7.4 million of cash, $1.0 million of treasury common stock and the assumption of Shalmet's debt of approximately $3.9 million. The cash required for the acquisition of Shalmet was funded from short-term debt. The acquisition will be accounted for using the purchase method of accounting. Shalmet converts "black" coil and bar to "bright" round bar and coil products made of stainless steel, superalloys, titanium and carbon steel. Shalmet's sales for calendar 1996 were approximately $12 million. Carpenter has retained an exclusive option to purchase Hetran, which designs and manufactures a broad range of coil and bar processing equipment. Management's Discussion and Analysis of Financial ------------------------------------------------- Condition and Results of Operations ----------------------------------- Results of Operations: - --------------------- Net income for the quarter ended September 30, 1997 was $17.1 million, up 112 percent compared to $8.1 million for the same period a year ago. Primary earnings per share increased to $.85 in the first quarter, compared with $.46 for the quarter ended September 30, 1996. The improved results were primarily a result of higher sales and operating levels of the Specialty Alloys Operations unit and the inclusion of the results of Dynamet Incorporated, which was acquired in February 1997. The impact of higher net income on primary earnings per share for the quarter ended September 30, 1997 was partially offset by an increase in the number of common shares outstanding because Carpenter issued 2.8 million shares of treasury common stock for the purchase of Dynamet Incorporated. Sales were $249.5 million, up 28% from $194.7 million in the same period last year. The increase in sales was primarily the result of a 9 percent improvement in Specialty Alloys Operations unit volume, the inclusion of Dynamet Incorporated and Rathbone Precision Metals, Inc. which were acquired subsequent to September 30, 1996, and increased sales of the Mexican steel distribution operations. Rathbone Precision Metals, Inc. was acquired in June 1997. Cost of sales as a percent of net sales decreased to 72 percent from 76 percent in last year's first quarter. The effect on this ratio of increased environmental remediation charges was more than offset by lower raw material costs and higher sales. The September 1996 quarter was adversely affected by an extended maintenance shutdown which resulted in lower manufacturing levels and higher repair spending. Selling and administrative costs were higher by $6.7 million, primarily as a result of the inclusion of newly acquired companies, increased depreciation and amortization and increased costs of the Mexican steel distribution operations. The effective income tax rate for the first quarter was higher than the same period a year ago primarily due to federal tax law changes. Financial Condition: - ------------------- During the quarter ended September 30, 1997, Carpenter's cash and cash equivalents decreased by $3.0 million to a level of $15.6 million, as shown in the Consolidated Statement of Cash Flows. Net cash provided from operations for the September 1997 quarter was $2.7 million. Accounts receivable decreased $17.0 million, accrued current liabilities decreased $10.2 million and inventories increased $21.5 million primarily as a result of normal seasonal trends. Financial Condition: (continued) - ------------------- Cash used for investing activities during the quarter totaled $39.8 million: $21.7 million for plant and equipment and $18.1 million for the acquisitions of Aceromex Atlas S.A. de C.V. and ICI Australia Ltd.'s ceramics operations (See note 4). Total debt increased by $39.6 million since June 30, 1997 to a level of $370.2 million or 39.0% of total capital employed versus 36.9% at June 30, 1997. The borrowings were in the form of short-term debt which was classified as long- term debt in the Consolidated Balance Sheet because Carpenter has the intent and ability to refinance this debt on a long-term basis through existing credit facilities. As described in Note 6, Carpenter has initiated an all-cash tender offer for the acquisition of Talley Industries, Inc. for $185 million plus the assumption of $127 million of Talley debt. Existing revolving credit agreements were expanded in October 1997 from $150 million to $400 million to provide the financing for the proposed Talley acquisition. In addition, Carpenter has announced that it plans to issue approximately $100 million of common stock in a public offering subsequent to the acquisition of Talley with the proceeds to be used to retire debt. Carpenter believes that its present financial resources, both from internal and external resources, will be adequate to meet its foreseeable short-term and long-term liquidity needs. Forward-looking Statements -------------------------- This Form 10-Q contains various "Forward-looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations regarding future events that involve a number of risks and uncertainties which could cause actual results to differ from those of such forward-looking statements. Such risks and uncertainties include those set forth in other filings made by the Company under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and also include the following factors: environmental expenses may exceed those currently projected and recoveries from other parties may be less than expected; the liquidity of the Company is dependent in part upon collections from numerous customers and the solvency of the Company's lending institutions; the planned public offering of Carpenter common stock and sales of two business segments of Talley are subject to various uncertainties including general economic and financial market conditions and completion of the Talley acquisition. 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, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 and there are no such proceedings which, to the knowledge of the Company, are contemplated by governmental authorities. 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, capital expenditures, deferred charges or charges to income exceeding ten percent of the current assets of the Company and its subsidiaries on a consolidated basis or (3) includes a governmental authority as a party and which the Company reasonably believes 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 Computations of Per Share Earnings. 12. Statement regarding Computations of Ratios of Earnings to Fixed Charges. 27. Financial Data Schedule. b. The Company filed one (1) Current Report on Form 8-K for events occurring during the quarter of the fiscal year covered by this report. The report, dated September 25, 1997, related to the Company's execution of an Agreement and Plan of Merger with respect to the Company's proposed acquisition of Talley Industries, Inc. Items 2, 3 and 4 are omitted as the answer is negative or the items are 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: November 13, 1997 s/G. Walton Cottrell - ----------------------- -------------------------------- G. Walton Cottrell Senior Vice President - Finance and Chief Financial Officer EX-99 2 EXHIBIT INDEX EXHIBIT INDEX ------------- Exhibit No. Title Page - ----------- ----- ---- 11. Statement regarding Computations of E-2 & Per Share Earnings. E-3 12. Statement regarding Computations of Ratios of Earnings to Fixed Charges. E-4 27. Financial Data Schedule. E-5 EX-11 3 EARNINGS PER SHARE Exhibit 11 Carpenter Technology Corporation Primary Earnings Per Common Share Computations (unaudited) For the Three Months Ended September 30, 1997 and 1996 (in thousands, except per share data) 1997 1996 ---- ---- Net Income for Primary Earnings - ------------------------------- Per Common Share ---------------- Net income $ 17,084 $ 8,075 Dividends accrued on convertible preferred stock, net of tax benefits (390) (391) -------- -------- Net income for primary earnings per common share $ 16,694 $ 7,684 ======== ======== Weighted Average Common Shares - ------------------------------ Weighted average number of common shares outstanding 19,496 16,617 Effect of shares issuable under stock option plans 241 95 -------- -------- Weighted average common shares 19,737 16,712 ======== ======== Primary Earnings Per - -------------------- Common Share $ .85 $ .46 ------------ ======== ======== Exhibit 11 Carpenter Technology Corporation Fully Diluted Earnings per Common Share Computations (unaudited) For the Three Months Ended September 30, 1997 and 1996 (in thousands, except per share data) 1997 1996 ---- ---- Net Income for Fully - -------------------- Diluted Earnings Per -------------------- Common Share ------------ Net income $ 17,084 $ 8,075 Assumed shortfall between common and preferred dividend (179) (222) -------- -------- Net income for fully diluted earnings per common share $ 16,905 $ 7,853 ======== ======== Weighted Average Common - ----------------------- Shares ------ Weighted average number of common shares outstanding 19,496 16,617 Assumed conversion of preferred shares 893 905 Effect of shares issuable under stock option plans 295 122 -------- -------- Weighted average common shares 20,684 17,644 ======== ======== Fully Diluted Earnings - ---------------------- Per Common Share $ .82 $ .45 ---------------- ======== ======== EX-12 4 RATIO OF EARNINGS TO FIXED CHARGES Exhibit 12 Carpenter Technology Corporation Computation of Ratios of Earnings to Fixed Charges (unaudited) Five Years Ended June 30 and Three Months Ended September 30, 1997 (dollars in thousands) Three Months Year Ended June 30 Ended ------------------------------------------- 09/30/97 1997 1996 1995 1994 1993 -------- ---- ---- ---- ---- ---- Fixed charges Interest costs (a) $ 6,378 $ 22,330 $ 19,275 $ 17,797 $ 19,651 $ 21,759 Interest component of non-capitalized lease rental expense (b) 630 2,419 2,074 2,452 2,522 2,532 -------- -------- -------- -------- -------- -------- Total fixed charges $ 7,008 $ 24,749 $ 21,349 $ 20,249 $ 22,173 $ 24,291 ======== ======== ======== ======== ======== ======== Earnings as defined: Income before income taxes, extraordinary charge and cumulative effect of changes in accounting principles $ 27,941 $ 97,871 $ 95,170 $ 74,571 $ 62,728 $ 42,799 Add: Loss in less-than- fifty-percent-owned persons 296 1,188 7,025 3,000 910 - Less: Gain on sale of partial interest in less-than-fifty- percent-owned persons - - (2,650) - - - Fixed charges less interest capitalized 6,478 22,349 21,009 16,994 18,043 23,126 Amortization of capitalized interest 482 1,879 2,074 1,952 1,788 1,725 -------- -------- -------- -------- -------- -------- Earnings as defined $ 35,197 $123,287 $122,628 $ 96,517 $ 83,469 $ 67,650 ======== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges 5.0x 5.0x 5.7x 4.8x 3.8x 2.8x ======== ======== ======== ======== ======== ======== (a) Includes interest capitalized relating to significant construction projects and amortization of debt discount and debt expense. (b) One-third of rental expense which approximates the interest component of non-capitalized leases. EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS JUN-30-1998 SEP-30-1997 $15,639 $0 $145,614 $0 $238,235 $415,745 $964,001 $431,494 $1,266,138 $251,974 $284,734 $0 $28,128 $98,448 $334,158 $1,266,138 $249,495 $249,495 $179,419 $179,419 $78 $0 $5,848 $27,941 $10,857 $17,084 $0 $0 $0 $17,084 $.85 $.82
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