Business Segments

3 Months Ended

Sep. 30, 2014

Business Segments

Business Segments

14.Business Segments

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 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, the Latrobe Special Metals Distribution business and Aceros Fortuna based in Mexico. The businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics.  It is our belief this model will ultimately 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 and deferrals expense.”

On a consolidated basis, there were no significant individual customers that accounted for 10 percent or more of the Company’s net sales for the three months ended September 30, 2014 and 2013, respectively.

	Three Months Ended
Segment Data	September 30,
($ in millions)	2014			2013
Net Sales:
Specialty Alloys Operations	$	436.0		$	394.9
Performance Engineered Products	129.9			118.5
Intersegment	(16.1		)	(14.8		)
Consolidated net sales	$	549.8		$	498.6
Operating Income:
Specialty Alloys Operations	$	24.6		$	63.7
Performance Engineered Products	9.7			11.6
Corporate costs	(10.3		)	(12.9		)
Pension earnings, interest and deferrals	(2.4		)	(6.0		)
Intersegment	0.5			(0.6		)
Consolidated operating income	$	22.1		$	55.8
Depreciation and Amortization:
Specialty Alloys Operations	$	23.5		$	19.5
Performance Engineered Products	6.0			5.8
Corporate	1.1			1.4
Intersegment	(0.3		)	—
Consolidated depreciation and amortization	$	30.3		$	26.7
Capital Expenditures:
Specialty Alloys Operations	$	51.6		$	83.0
Performance Engineered Products	6.8			7.0
Corporate	1.0			0.6
Intersegment	(0.4		)	(0.2		)
Consolidated capital expenditures	$	59.0		$	90.4

	September 30, 2014			June 30, 2014
Total Assets:
Specialty Alloys Operations	$	2,466.1		$	2,454.8
Performance Engineered Products	499.0			491.7
Corporate	80.6			144.9
Intersegment	(33.5		)	(33.9		)
Consolidated total assets	$	3,012.2		$	3,057.5