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What changed in CARPENTER TECHNOLOGY CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CARPENTER TECHNOLOGY CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+285 added−295 removedSource: 10-K (2023-08-11) vs 10-K (2022-08-15)

Top changes in CARPENTER TECHNOLOGY CORP's 2023 10-K

285 paragraphs added · 295 removed · 228 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe chart below summarizes the percent of net sales by quarter for the past three fiscal years: Quarter Ended 2022 2021 2020 September 30, 21 % 24 % 27 % December 31, 23 % 23 % 26 % March 31, 28 % 24 % 27 % June 30, 28 % 29 % 20 % 100 % 100 % 100 % 3 Table of Contents ( 5) Customers: On a consolidated basis, we are not dependent upon a single customer, or very few customers, such that the loss of any one or more particular customers would have a materially adverse effect on our consolidated statement of operations.
Biggest change( 5) Customers: On a consolidated basis, we are not dependent upon a single customer, or very few customers, such that the loss of any one or more particular customers would have a materially adverse effect on our consolidated statement of operations.
Due to the possibility of future regulatory developments, the amount of future capital expenditures may vary from these estimates. 5 Table of Contents (10) Human Capital Resources: We maintain a high-performance work environment that is required to deliver mission-critical materials to our customers and an organizational culture that is devoted to exceptional customer service.
Due to the possibility of future regulatory developments, the amount of future capital expenditures may vary from these estimates. 4 Table of Contents (10) Human Capital Resources: We maintain a high-performance work environment that is required to deliver mission-critical materials to our customers and an organizational culture that is devoted to exceptional customer service.
(b) Financial Information About Segments: We are organized in two reportable business segments: Specialty Alloys Operations ("SAO") and Performance Engineered Products ("PEP"). See Note 20 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" for additional segment reporting information.
(b) Financial Information About Segments: We are organized in two reportable business segments: Specialty Alloys Operations ("SAO") and Performance Engineered Products ("PEP"). See Note 19 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" for additional segment reporting information.
"Financial Statements and Supplementary Data". 6 Table of Contents (e) Available Information: Our Board of Directors has adopted a Code of Ethics for the Chief Executive Officer and Chief Financial Officer of Carpenter Technology Corporation, which is also applicable to our other executive officers. There were no waivers of the Code of Ethics in fiscal year 2022.
"Financial Statements and Supplementary Data." 5 Table of Contents (e) Available Information: Our Board of Directors has adopted a Code of Ethics for the Chief Executive Officer and Chief Financial Officer of Carpenter Technology Corporation, which is also applicable to our other executive officers. There were no waivers of the Code of Ethics in fiscal year 2023.
Furthermore, a number of different products may, in certain instances, be substituted for our finished products. (8) Research, Product and Process Development: Our expenditures for Company-sponsored research and development were $20.4 million, $19.7 million and $28.0 million in fiscal years 2022, 2021 and 2020, respectively.
Furthermore, a number of different products may, in certain instances, be substituted for our finished products. 3 Table of Contents (8) Research, Product and Process Development: Our expenditures for Company-sponsored research and development were $24.4 million, $20.4 million and $19.7 million in fiscal years 2023, 2022 and 2021, respectively.
These potential interruptions could cause material shortages and affect availability and price. We have arrangements with certain vendors to provide consigned materials at our manufacturing facilities available for our consumption as necessary. We have long-term relationships with major suppliers who provide availability of material at competitive prices. Purchase prices of certain raw materials have historically been volatile.
We have arrangements with certain vendors to provide consigned materials at our manufacturing facilities available for our consumption as necessary. We have long-term relationships with major suppliers who provide availability of material at competitive prices. Purchase prices of certain raw materials have historically been volatile.
Although these patents and licenses are believed to be of value, we do not consider our business to be materially dependent upon any single such item or related group of such items. (4) Seasonality of Business: Our sales are normally influenced by seasonal factors.
Although these patents and licenses are believed to be of value, we do not consider our business to be materially dependent upon any single such item or related group of such items.
See Note 20 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" for additional information. (6) Backlog: As of June 30, 2022, we had a sales backlog of orders excluding surcharge, believed to be firm, of approximately $1,539.3 million, the majority of which is expected to be shipped within fiscal year 2023.
See Note 19 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" for additional information. (6) Backlog: As of June 30, 2023, we had a sales backlog of orders excluding surcharge, believed to be firm, of approximately $2,123.3 million, significantly all of which is expected to be shipped within fiscal years 2024 and 2025.
(c) Narrative Description of Business: (1) General: We are a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, medical, transportation, energy, industrial and consumer end-use markets.
(c) Narrative Description of Business: (1) General: We are a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels. We are a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, medical, transportation, energy, industrial and consumer markets.
As of June 30, 2022, our total workforce consisted of approximately 4,100 employees, which included 159 production employees in Washington, Pennsylvania, who are covered under a collective bargaining agreement which expires on August 31, 2022, and 401 employees in Latrobe, Pennsylvania who are covered under a collective bargaining agreement which expires on August 1, 2023.
As of June 30, 2023, our total workforce consisted of approximately 4,500 employees, which included 182 production employees in Washington, Pennsylvania, who are covered under a collective bargaining agreement which expires on August 31, 2025, and 393 employees in Latrobe, Pennsylvania who are covered under a collective bargaining agreement which has been extended to August 14, 2023.
The businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics. 2 Table of Contents (2) Raw Materials: Our business depends on continued receipt of critical raw materials for our day to day operations.
The businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics. (2) Raw Materials: Our business depends on continued receipt of critical raw materials for our day to day operations. These raw materials include nickel, cobalt, chromium, manganese, molybdenum, titanium, iron and scrap containing the named alloys.
There can be delays between the time of the increase in the price of raw materials and the realization of the benefits of such mechanisms or actions that could have a short-term impact on our results and could affect the comparability of our results from period to period.
There can be delays between the time of the increase in the price of raw materials and the realization of the benefits of such mechanisms or actions that could have a short-term impact on our results and could affect the comparability of our results from period to period. 2 Table of Contents (3) Patents and Licenses: We own a number of United States and international patents and have granted licenses under some of them.
Our questions cover a wide variety of topics, including safety, culture, diversity, inclusion and belonging, leadership and career development. Professional Development: Our employees enjoy a wide variety of rewards that assist with engagement and development. From traditional items such as compensation to less traditional aspects such as work-life balance, hybrid and remote work arrangements, future career opportunities, and innovative work.
Our questions cover a wide variety of topics, including safety, culture, diversity, inclusion and belonging, work/life balance and leadership and career development. Professional Development: Our employees enjoy a wide variety of rewards that assist with engagement and development.
We implemented general legal and ethical guidelines in our "Code of Conduct". The guidelines apply to all employees and majority-owned affiliates, including subsidiaries, both in the United States and other countries.
Governance: Our policy is to comply with the letter and spirit of all laws that govern our operations and to adhere to the highest standards of business ethics. We implemented general legal and ethical guidelines in our "Code of Conduct." The guidelines apply to all employees and majority-owned affiliates, including subsidiaries, both in the United States and other countries.
These raw materials include nickel, cobalt, chromium, manganese, molybdenum, titanium, iron and scrap containing the named alloys. Some of the sources of these raw materials, many of which are international, could be subject to potential interruptions of supply as a result of political events, labor unrest or other reasons.
Some of the sources of these raw materials, many of which are international, could be subject to potential interruptions of supply as a result of political events, labor unrest or other reasons. These potential interruptions could cause material shortages and affect availability and price.
Management evaluates the liability for future environmental remediation costs on a quarterly basis. We accrue amounts for environmental remediation costs representing management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. For further information on environmental remediation, see the Contingencies section included in Item 7.
We accrue amounts for environmental remediation costs representing management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. For further information on environmental remediation, see the Contingencies section included in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the notes to our consolidated financial statements included in Item 8.
A significant portion of the products we produce are highly engineered materials for demanding applications. There are less than ten companies producing one or more similar products that we consider our major competitors for our high-value products used in demanding applications, particularly in our Aerospace and Defense and Energy end-use markets.
There are less than ten companies producing one or more similar products that we consider our major competitors for our high-value products used in demanding applications, particularly in our Aerospace and Defense and Energy end-use markets. These products are generally required to meet complex customer product specifications and often require the materials to be qualified prior to supplying the customer.
The duration of a patent issued in the United States is between 14 and 20 years from the date of filing a patent application or issuance of the patent. The duration of a patent issued outside of the United States varies from country to country. Generally, patent licenses are structured to match the duration of the underlying patent.
The duration of a patent issued outside of the United States varies from country to country. Generally, patent licenses are structured to match the duration of the underlying patent.
No single customer accounted for 10 percent or more of total net sales for the years ended June 30, 2022 and June 30, 2021. One customer, Howmet Aerospace Inc. (formerly Arconic Inc.), accounted for approximately 10 percent of net sales for the year ended June 30, 2020.
No single customer accounted for 10 percent or more of total net sales for the years ended June 30, 2023, June 30, 2022 and June 30, 2021. No single customer accounted for 10 percent or more of the accounts receivable outstanding at June 30, 2023 or June 30, 2022.
The combined assets of the SAO segment are 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 Additive business and the Latrobe and Mexico distribution businesses.
This includes operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama. The combined assets of the SAO segment are 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.
The capital expenditures for environmental control equipment were $1.1 million, $1.3 million and $0.1 million for fiscal years 2022, 2021 and 2020, respectively. We anticipate spending approximately $2.8 million on domestic environmental capital projects over the next five fiscal years. This includes approximately $1.4 million in fiscal year 2023.
We anticipate spending approximately $3.3 million on domestic environmental capital projects over the next five fiscal years. This includes approximately $2.2 million in fiscal year 2024.
(3) Patents and Licenses: We own a number of United States and international patents and have granted licenses under some of them. In addition, certain products that we produce are covered by patents held or owned by other companies from whom licenses have been obtained.
In addition, certain products that we produce are covered by patents held or owned by other companies from whom licenses have been obtained. The duration of a patent issued in the United States is between 14 and 20 years from the date of filing a patent application or issuance of the patent.
For other products, there are several dozen smaller producing companies and converting companies that are also competitors, as well as several hundred independent distributors of products similar to those distributed by us. Additionally, numerous foreign companies produce various specialty metal products similar to those produced by us.
Our experience, technical capabilities, product offerings and research and development efforts represent barriers to existing and potential competitors. For other products, there are several dozen smaller producing companies and converting companies that are also competitors, as well as several hundred independent distributors of products similar to those distributed by us.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" and the notes to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data". Our costs of maintaining and operating environmental control equipment were $14.8 million, $14.9 million and $15.4 million for fiscal years 2022, 2021 and 2020, respectively.
"Financial Statements and Supplementary Data." Our costs of maintaining and operating environmental control equipment were $15.7 million, $14.8 million and $14.9 million for fiscal years 2023, 2022 and 2021, respectively. The capital expenditures for environmental control equipment were $0.3 million, $1.1 million and $1.3 million for fiscal years 2023, 2022 and 2021, respectively.
(7) Competition: We are leaders in specialty materials for critical applications with over 130 years of metallurgical and manufacturing expertise. Our business is highly competitive. We manufacture and supply materials to a variety of end-use market sectors and compete with various companies depending on the end-use market, product or geography.
We manufacture and supply materials to a variety of end-use market sectors and compete with various companies depending on the end-use market, product or geography. A significant portion of the products we produce are highly engineered materials for demanding applications.
Effective July 1, 2020, the Company's Carpenter Powder Products business was merged into the Carpenter Additive business. The Amega West business was also part of the PEP segment however, it was divested during the first quarter of fiscal year 2021.
This segment includes the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses. The Amega West business was also part of the PEP segment, however, it was divested during the first quarter of fiscal year 2021.
We have evolved to become a pioneer in premium specialty alloys, including titanium, nickel, and cobalt, as well as alloys specifically engineered for additive manufacturing processes and soft magnetics applications. We have expanded our additive manufacturing capabilities to provide a complete "end-to-end" solution to accelerate materials innovation and streamline parts production.
We have evolved to become a pioneer in premium specialty alloys, including titanium, nickel, and cobalt, as well as alloys specifically engineered for additive manufacturing ("AM") processes and soft magnetics applications. Reportable Segments The SAO segment is comprised of the Company's major premium alloy and stainless steel manufacturing operations.
(d) Financial information about foreign and domestic operations and export sales: Sales outside of the United States, including export sales, were $656.4 million, $549.0 million and $787.7 million in fiscal years 2022, 2021 and 2020, respectively. Long-lived assets held outside of the United States were $15.7 million and $18.3 million as of June 30, 2022 and 2021, respectively.
Negotiations with union representatives are currently in process. We believe our relations with our employees are generally good. (d) Financial information about foreign and domestic operations and export sales: Sales outside of the United States, including export sales, were $994.1 million, $656.4 million and $549.0 million in fiscal years 2023, 2022 and 2021, respectively.
For further information on domestic and international sales, see Note 20 to our consolidated financial statements included in Item 8.
Long-lived assets held outside of the United States were $15.7 million and $15.7 million as of June 30, 2023 and 2022, respectively. For further information on domestic and international sales, see Note 4 to our consolidated financial statements included in Item 8.
Our worldwide staff of expert metallurgists, research and development scientists, engineers and service professionals work closely with our customers to identify and provide innovative solutions to specific product requirements. 4 Table of Contents (9) Environmental Regulations: We are subject to various stringent federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health.
Our worldwide staff of expert metallurgists, research and development scientists, engineers and service professionals work closely with our customers to identify and provide innovative solutions to specific product requirements.
However, the timing of major changes in the general economy or the markets for certain products can alter this historical pattern, such as the widespread economic impact of the global COVID-19 pandemic during fiscal years 2022 and 2021 and the third and fourth quarters of fiscal year 2020.
However, the timing of major changes in the general economy or the markets for certain products can alter this pattern.
Historically, our sales in the first two fiscal quarters (the respective three months ending September 30 and December 31) are typically the lowest, principally because of annual plant vacation and maintenance shutdowns by us, as well as by many of our customers.
(4) Seasonality of Business: Our sales can be influenced by seasonal factors with the first six months of the fiscal year typically being lower, principally because of annual plant vacation and maintenance shutdowns by us, as well as by many of our customers.
Diversity and Inclusion: We have a culture that blends our different backgrounds, experiences and perspectives from all employees. Our commitment to diversity, inclusion, and belonging is real. We want all to feel welcomed. Everyone is treated equally with dignity and respect regardless of their race, age, gender identity, or sexual orientation.
Everyone is treated equally with dignity and respect regardless of their race, age, gender identity, or sexual orientation. Our Diversity, Inclusion and Belonging Committee plays a critical role in advancing us to the next level of awareness and engagement.
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Reportable Segments 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, Pennsylvania and surrounding areas as well as South Carolina and Alabama.
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Our backlog of orders excluding surcharge as of June 30, 2022, was approximately $1,539.3 million. (7) Competition: We are leaders in specialty materials for critical applications with over 130 years of metallurgical and manufacturing expertise. Our business is highly competitive.
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For the year ended June 30, 2020, 90 percent of sales to Howmet Aerospace Inc. were reported by the SAO segment and 10 percent were reported by the PEP segment, respectively. No single customer accounted for 10 percent or more of the accounts receivable outstanding at June 30, 2022 or June 30, 2021.
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Additionally, numerous foreign companies produce various specialty metal products similar to those produced by us.
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Our backlog of orders excluding surcharge as of June 30, 2021, was approximately $529.3 million. This growing backlog is a result of the strong demand growth in all of our key end-use markets as recovery continues to ramp from the impacts of the COVID-19 pandemic.
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(9) Environmental Regulations: We are subject to various stringent federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Management evaluates the liability for future environmental remediation costs on a quarterly basis.
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These products are generally required to meet complex customer product specifications and often require the materials to be qualified prior to supplying the customer. Our experience, technical capabilities, product offerings and research and development efforts represent barriers to existing and potential competitors.
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From traditional items such as compensation to less traditional aspects such as work-life balance, hybrid and remote work arrangements, future career opportunities, and innovative work. Diversity and Inclusion: We have a culture that blends our different backgrounds, experiences and perspectives from all employees. Our commitment to diversity, inclusion, and belonging is real. We want all to feel welcomed.
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Our Diversity, Inclusion and Belonging Committee plays a critical role in advancing us to the next level of awareness and engagement. Governance: Our policy is to comply with the letter and spirit of all laws that govern our operations and to adhere to the highest standards of business ethics.
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In July 2020, a union election was held involving 62 employees at our Franklin, Pennsylvania location and a majority of the employees voted for union representation. Negotiations with union representatives for an initial agreement are currently underway for this facility. We believe our relations with our employees are generally good.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWar, civil conflict, terrorism, natural disasters and public health issues including domestic or international pandemics have caused and could cause damage or disruption to domestic or international commerce by creating economic or political uncertainties. Additionally, the volatility in the financial markets could negatively impact our business.
Biggest changeWar (such as the current war in Ukraine), civil conflict, terrorism, other geopolitical and diplomatic tensions, natural disasters, climate change and public health issues including domestic or international pandemics, other outbreaks of contagious diseases (such as the COVID-19 pandemic) and other adverse public health developments have caused or could cause damage or disruption to domestic or international commerce by creating economic or political uncertainties.
To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations, financial condition and cash flows. 11 Table of Contents We consider acquisitions, joint ventures and other business combination opportunities, as well as possible business unit dispositions, as part of our overall business strategy, that involve uncertainties and potential risks that we cannot predict or anticipate fully.
To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations, financial condition and cash flows. 9 Table of Contents We consider acquisitions, joint ventures and other business combination opportunities, as well as possible business unit dispositions, as part of our overall business strategy, that involve uncertainties and potential risks that we cannot predict or anticipate fully.
The impacts of product liability and quality claims could have a material adverse impact on our results of operations, financial condition and cash flows. 10 Table of Contents Our business subjects us to risks of litigation claims, as a routine matter, and this risk increases the potential for a loss that might not be covered by insurance.
The impacts of product liability and quality claims could have a material adverse impact on our results of operations, financial condition and cash flows. 8 Table of Contents Our business subjects us to risks of litigation claims, as a routine matter, and this risk increases the potential for a loss that might not be covered by insurance.
A requirement to accelerate or increase pension contributions in the future could have a material adverse effect on our results of operations, cash flows and financial condition. 9 Table of Contents The extensive environmental, health and safety regulatory regimes applicable to our manufacturing operations create potential exposure to significant liabilities.
A requirement to accelerate or increase pension contributions in the future could have a material adverse effect on our results of operations, cash flows and financial condition. 7 Table of Contents The extensive environmental, health and safety regulatory regimes applicable to our manufacturing operations create potential exposure to significant liabilities.
Such breaches may also harm our reputation, result in financial losses or subject us to litigation or other costs or penalties. 13 Table of Contents The carrying value of goodwill and other long-lived assets may not be recoverable.
Such breaches may also harm our reputation, result in financial losses or subject us to litigation or other costs or penalties. 11 Table of Contents The carrying value of goodwill and other long-lived assets may not be recoverable.
As such, our results of operations, financial condition, cash flows and availability of credit could fluctuate significantly from period to period. 7 Table of Contents A significant portion of our sales represents products sold to customers in the commercial aerospace and defense and energy markets. The cyclicality of those markets can adversely affect our current business and our expansion objectives.
As such, our results of operations, financial condition, cash flows and availability of credit could fluctuate significantly from period to period. A significant portion of our sales represents products sold to customers in the commercial aerospace and defense and energy markets. The cyclicality of those markets can adversely affect our current business and our expansion objectives.
According to these proposals, generally taxpayers that currently use the LIFO method would be required to revalue their LIFO inventory to its First-In, First-Out ("FIFO") value. As of June 30, 2022, if the FIFO method of inventory had been used instead of the LIFO method, our inventories would have been approximately $427.2 million higher.
According to these proposals, generally taxpayers that currently use the LIFO method would be required to revalue their LIFO inventory to its First-In, First-Out ("FIFO") value. As of June 30, 2023, if the FIFO method of inventory had been used instead of the LIFO method, our inventories would have been approximately $517.2 million higher.
These rules require due diligence to determine whether such minerals originated from the Democratic Republic of the Congo (the "DRC") or an adjoining country and whether such minerals helped finance the armed conflict in the DRC. The Company timely filed its latest annual conflict minerals report required by the rules on May 27, 2022.
These rules require due diligence to determine whether such minerals originated from the Democratic Republic of the Congo (the "DRC") or an adjoining country and whether such minerals helped finance the armed conflict in the DRC. The Company timely filed its latest annual conflict minerals report required by the rules on May 26, 2023.
There can be no assurance that we will succeed in concluding collective bargaining agreements with the unions to replace those that expire which could result in work interruptions and stoppages. From time to time, the employees at our manufacturing facility in Reading, Pennsylvania, participate in election campaigns or union organizing attempts.
Negotiations with union representatives are currently in process. There can be no assurance that we will succeed in concluding collective bargaining agreements with the unions to replace those that expire which could result in work interruptions and stoppages. From time to time, the employees at our manufacturing facility in Reading, Pennsylvania, participate in election campaigns or union organizing attempts.
This increase in inventory would result in a one-time increase in taxable income which may be taken into account over the following several taxable years. The repeal of the LIFO method could result in a substantial tax liability which could adversely impact our cash flows and financial condition. We depend on the retention of key personnel.
This increase in inventory would result in a one-time increase in taxable income which may be taken into account over the following several taxable years. The repeal of the LIFO method could result in a substantial tax liability which could adversely impact our cash flows and financial condition.
These changes could materially adversely impact our business or require us to make changes to our current business practices or supply chain. 12 Table of Contents We value most of our inventory using the LIFO method, which could be repealed resulting in adverse effects on our cash flows and financial condition.
These changes, including any implementation of or changes in trade sanctions, tariffs and embargoes, could materially adversely impact our business or require us to make changes to our current business practices or supply chain. 10 Table of Contents We value most of our inventory using the LIFO method, which could be repealed resulting in adverse effects on our cash flows and financial condition.
Approximately 159 production employees at our Dynamet business unit located in Washington, Pennsylvania are covered by a collective bargaining agreement. This agreement expires August 31, 2022. Approximately 401 production employees at our Latrobe business unit located in Latrobe, Pennsylvania are covered by a collective bargaining agreement which expires August 1, 2023.
Approximately 182 production employees at our Dynamet business unit located in Washington, Pennsylvania are covered by a collective bargaining agreement. This agreement expires August 31, 2025. Approximately 393 production employees at our Latrobe business unit located in Latrobe, Pennsylvania are covered by a collective bargaining agreement which has been extended to August 14, 2023.
There is no guarantee that the pricing actions we implement will be effective in maintaining the Company's profit margin levels. 8 Table of Contents We rely on third parties to supply certain raw materials and supplies that are critical to the manufacture of our products and we may not be able to access alternative sources of these raw materials if the suppliers are unwilling or unable to meet our demand.
We rely on third parties to supply certain raw materials and supplies that are critical to the manufacture of our products and we may not be able to access alternative sources of these raw materials if the suppliers are unwilling or unable to meet our demand.
Much of our future success depends on the continued service and availability of skilled personnel, including members of our executive management team, management, metallurgists and production positions. The loss of key personnel could adversely affect our ability to perform until suitable replacements are found.
We depend on the ability to hire and retain a qualified workforce and key personnel. Much of our future success depends on the continued service and availability of skilled personnel, including members of our executive management team, management, metallurgists and production positions.
Periods of reduced demand and excess supply as well as the availability of substitute lower cost materials can adversely affect our ability to price and sell our products at the profitability levels we require to be successful.
If we are not able to achieve the anticipated results from our capital expansion projects, or if we incur unanticipated delays, or excess costs, our results of operations and financial position may be materially adversely affected. 6 Table of Contents Periods of reduced demand and excess supply as well as the availability of substitute lower cost materials can adversely affect our ability to price and sell our products at the profitability levels we require to be successful.
Demand in our end-use markets can be cyclical in nature and sensitive to general economic conditions, competitive influences and fluctuations in inventory levels throughout the supply chain.
Certain risks are associated specifically with our business, industry or customer base, while others have a broader effect. The demand for certain products we produce may be cyclical. Demand in our end-use markets can be cyclical in nature and sensitive to general economic conditions, competitive influences and fluctuations in inventory levels throughout the supply chain.
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Certain risks are associated specifically with our business, industry or customer base, while others have a broader effect. Our results of operations have been adversely affected and could in the future be materially adversely impacted by the global COVID-19 pandemic. The global spread of the COVID-19 pandemic has created significant economic volatility, uncertainty and disruption.
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There is no guarantee that the pricing actions we implement will be effective in maintaining the Company's profit margin levels.
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The extent to which the COVID-19 pandemic will continue to impact our business, operations, financial results and financial position will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; our continued efforts and the continued efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter in place orders and business closures, and the related impact on resource allocations and manufacturing and supply chains; the continued impact of the pandemic on economic activity and actions taken in response; the ongoing effect on our customers' demand for our goods and services and our vendors ability to supply us with raw materials; the continued impact of providing a safe working environment to our employees, our ability to sell and provide our goods and services, which may continue to be limited as a result of travel restrictions and people working from home; the ability of our customers to pay for our goods and services; and any further closures of our offices and facilities and our customers' offices and facilities.
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Additionally, the volatility in the financial markets could negatively impact our business.
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Customers may also slow down decision-making, delay planned work or seek to terminate existing agreements. Cyber-attacks and other malicious internet-based activity continue to increase generally, and cloud-based platform providers of software and services have been targeted. Due to the COVID-19 pandemic, many of our employees have been working remotely, which may pose additional data security risks.
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Failure to attract, hire, develop, motivate, and retain highly qualified employee talent, or failure to develop and implement an adequate succession plan for the management team, could disrupt our operations and adversely affect our business and our future success.
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Management is actively monitoring the impact of the global situation on our financial condition, liquidity, operations, suppliers, industry, and workforce.
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Given the evolution of the COVID-19 pandemic and the global responses to curb its spread, we are not able to fully and precisely estimate the effects of the COVID-19 pandemic on our results of operations, financial condition, or liquidity in a particular future quarter or year.
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Any of these events could cause or contribute to the risks and uncertainties and could materially adversely affect our business, financial condition, results of operations and/or stock price. The demand for certain products we produce may be cyclical.
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If we are not able to achieve the anticipated results from our capital expansion projects, or if we incur unanticipated delays, including those caused by COVID-19 disruptions, or excess costs, our results of operations and financial position may be materially adversely affected.
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In July 2020, a union election was held involving 62 employees at our Franklin, Pennsylvania location and a majority of the employees voted for union representation. Negotiations with union representatives for an initial agreement are currently in process for this facility.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur corporate offices, located in Philadelphia, Pennsylvania, and Raleigh, North Carolina, are leased. Our plants, customer service centers and distribution centers were acquired or leased at various times over several years. There is an active maintenance program to ensure a safe operating environment and to keep facilities in good condition.
Biggest changeOur plants, customer service centers and distribution centers were acquired or leased at various times over numerous years. There is an active maintenance program to ensure a safe operating environment and to keep facilities in good condition. In addition, we have an active capital spending program to replace equipment as needed to keep it technologically competitive on a worldwide basis.
The Reading, Hartsville, Washington, Orwigsburg, Elyria, Latrobe, and Athens facilities are owned. The Clearwater facility is owned, but the land is leased. We also own or lease manufacturing facilities, distribution centers, service centers and sales offices in a number of foreign countries, including Belgium, Canada, China, Mexico, Singapore, Sweden, Taiwan and the United Kingdom.
The Clearwater facility is owned, but the land is leased. We also own or lease manufacturing facilities, distribution centers, service centers and sales offices in a number of foreign countries, including Belgium, Canada, China, Mexico, Singapore, Sweden, Taiwan and the United Kingdom. Our corporate offices, located in Philadelphia, Pennsylvania, and Raleigh, North Carolina, are leased.
The principal locations for the PEP businesses include titanium alloy production facilities located in Washington, Pennsylvania and Clearwater, Florida and a powder products manufacturing facility in Athens, Alabama. The PEP segment includes one owned service center in White House, Tennessee. Properties also include domestic leased warehouses and service centers located in Washington, Pennsylvania; Vienna, Ohio and Chicago, Illinois.
The principal locations for the PEP businesses include titanium alloy production facilities located in Washington, Pennsylvania and Clearwater, Florida and a powder products manufacturing facility in Athens, Alabama. The PEP segment includes domestic leased warehouses and service centers located in Washington, Pennsylvania and Vienna, Ohio. The Reading, Hartsville, Washington, Orwigsburg, Elyria, Latrobe, and Athens facilities are owned.
In addition, we have an active capital spending program to replace equipment as needed to keep it technologically competitive on a worldwide basis. We believe our facilities are in good condition and suitable for our business needs. 14 Table of Contents
We believe our facilities are in good condition and suitable for our business needs. 12 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed7 unchanged
Biggest change"Management's Discussion and Analysis of Financial Condition and Results of Operation", and the "Contingencies and Commitments" section included in Note 13 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data", included in this Form 10-K, the contents of which are incorporated by reference to this Item 3.
Biggest change"Management's Discussion and Analysis of Financial Condition and Results of Operation," and the "Contingencies and Commitments" section included in Note 12 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data," included in this Form 10-K, the contents of which are incorporated by reference to this Item 3.
Based on information currently available, the ultimate resolution of our known contingencies, individually or in the aggregate and including the matters described in Note 13 to the consolidated financial statements in this Form 10-K, is not expected to have a material adverse effect on our financial position, cash flows or results of operations.
Based on information currently available, the ultimate resolution of our known contingencies, individually or in the aggregate and including the matters described in Note 12 to the consolidated financial statements in this Form 10-K, is not expected to have a material adverse effect on our financial position, cash flows or results of operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−1 removed1 unchanged
Biggest changeThe following table sets forth, for the periods indicated, the high and low prices for our common stock as reported by the NYSE: Fiscal Year 2022 Fiscal Year 2021 Period Ended: High Low High Low September 30, $ 41.29 $ 30.22 $ 25.44 $ 17.60 December 31, $ 35.14 $ 26.93 $ 29.97 $ 15.90 March 31, $ 43.20 $ 27.56 $ 48.06 $ 27.92 June 30, $ 44.96 $ 26.62 $ 49.20 $ 37.30 Annual June 30, $ 44.96 $ 26.62 $ 49.20 $ 15.90 The range of our common stock price on the NYSE from July 1, 2022 to August 9, 2022 was $24.76 to $35.17.
Biggest changeMarket for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange ("NYSE") and traded under the symbol "CRS." The following table sets forth, for the periods indicated, the high and low prices for our common stock as reported by the NYSE: Fiscal Year 2023 Fiscal Year 2022 Period Ended: High Low High Low September 30, $ 39.43 $ 24.76 $ 41.29 $ 30.22 December 31, $ 43.32 $ 31.81 $ 35.14 $ 26.93 March 31, $ 52.50 $ 35.72 $ 43.20 $ 27.56 June 30, $ 56.34 $ 40.57 $ 44.96 $ 26.62 Annual June 30, $ 56.34 $ 24.76 $ 44.96 $ 26.62 The range of our common stock price on the NYSE from July 1, 2023 to August 8, 2023 was $51.94 to $61.02.
Information regarding Securities Authorized for Issuance under Equity Compensation Plans is set forth in Item 12 hereto "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters". 17 Table of Contents Cumulative Total Stockholder Return The graph below compares the cumulative total stockholder return on our common stock to the cumulative total return of the S&P MidCap 400 Index, the most widely used index for mid-sized companies, and our Peer Group for fiscal year ended June 30, 2022, and prior four fiscal years.
Information regarding Securities Authorized for Issuance under Equity Compensation Plans is set forth in Item 12 hereto "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." 15 Table of Contents Cumulative Total Stockholder Return The graph below compares the cumulative total stockholder return on our common stock to the cumulative total return of the S&P MidCap 400 Index, the most widely used index for mid-sized companies, and our Peer Group for fiscal year ended June 30, 2023, and prior four fiscal years.
The cumulative total return assumes an investment of $100 on June 30, 2017 and the reinvestment of any dividends during the period. Our Peer Group consists of the companies in the Russell RSCC Materials & Processing Growth Index.
The cumulative total return assumes an investment of $100 on June 30, 2018 and the reinvestment of any dividends during the period. Our Peer Group consists of the companies in the Russell RSCC Materials & Processing Growth Index.
The total stockholder return for the peer group is weighted according to the respective issuer's stock market capitalization at the beginning of each period. * $100 invested on June 30, 2017 in stock or index, including reinvestment of dividends. Fiscal years ending June 30.
The total stockholder return for our Peer Group is weighted according to the respective issuer's stock market capitalization at the beginning of each period. * $100 invested on June 30, 2018 in stock or index, including reinvestment of dividends. Fiscal years ending June 30.
We do not consider this a share buyback program. 18 Table of Contents
We do not consider this a share buyback program. 16 Table of Contents
The closing price of the common stock was $33.67 on August 9, 2022. We have paid quarterly cash dividends on our common stock since 1906. We paid a quarterly dividend of $0.20 per share of common stock during each quarter of fiscal years 2022 and 2021, respectively. As of August 9, 2022, there were 1,722 common stockholders of record.
The closing price of the common stock was $58.68 on August 8, 2023. We have paid quarterly cash dividends on our common stock since 1906. We paid a quarterly dividend of $0.20 per share of common stock during each quarter of fiscal years 2023 and 2022, respectively. As of August 8, 2023, there were 1,633 common stockholders of record.
Data Sourced from Bloomberg Copyright © 2022 S&P Dow Jones Indices LLC, a division of S&P Global Copyright © 2022 Russell Investments 2017 2018 2019 2020 2021 2022 Carpenter Technology Corporation $ 100.00 $ 142.70 $ 132.20 $ 68.50 $ 117.10 $ 83.30 S&P Midcap 400 $ 100.00 $ 111.70 $ 111.40 $ 102.10 $ 154.40 $ 129.90 Russell Materials & Processing Growth $ 100.00 $ 117.30 $ 132.40 $ 147.10 $ 210.40 $ 147.20 Issuer Purchases of Equity Securities During the fourth quarter of fiscal year 2022, employees surrendered 4,053 shares to the Company, at an average purchase price of $38.15, for the payment of the minimum tax liability withholding obligations upon the vesting of shares of restricted stock.
Data sourced from Nasdaq Copyright © 2023 S&P Dow Jones Indices LLC, a division of S&P Global Copyright © 2023 Russell Investments 2018 2019 2020 2021 2022 2023 Carpenter Technology Corporation $ 100.00 $ 92.70 $ 48.00 $ 82.10 $ 58.40 $ 119.60 S&P Midcap 400 $ 100.00 $ 99.70 $ 91.40 $ 138.10 $ 116.30 $ 134.40 Russell Materials & Processing Growth $ 100.00 $ 112.90 $ 125.40 $ 179.40 $ 125.50 $ 153.30 Issuer Purchases of Equity Securities During the fourth quarter of fiscal year 2023, employees surrendered 6,771 shares to the Company, at an average purchase price of $45.27, for the payment of the minimum tax liability withholding obligations upon the vesting of shares of restricted stock and the exercise of options.
Removed
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange ("NYSE") and traded under the symbol "CRS".

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

160 edited+50 added−50 removed93 unchanged
Biggest changeGAAP financial measures: ($ in millions, except per share data) Loss Before Income Taxes Income Tax Benefit Net Loss Loss Per Diluted Share* Year ended June 30, 2022, as reported $ (63.1) $ 14.0 $ (49.1) $ (1.01) Special items: COVID-19 costs 5.9 (1.3) 4.6 0.08 COVID-19 employee retention credits (12.7) 2.8 (9.9) (0.20) Acquisition-related contingent liability release (4.7) 1.1 (3.6) (0.07) Environmental site charge 2.4 (0.5) 1.9 0.04 Debt extinguishment losses, net 6.0 (1.3) 4.7 0.10 Total impact of special items (3.1) 0.8 (2.3) (0.05) Year ended June 30, 2022, as adjusted $ (66.2) $ 14.8 $ (51.4) $ (1.06) * Impact per diluted share calculated using weighted average common shares outstanding of 48.5 million for the fiscal year ended June 30, 2022. 38 Table of Contents ($ in millions, except per share data) Loss Before Income Taxes Income Tax Benefit Net Loss Loss Per Diluted Share* Year ended June 30, 2021, as reported $ (297.9) $ 68.3 $ (229.6) $ (4.76) Special items: LIFO decrement 52.2 (14.9) 37.3 0.77 COVID-19 costs 17.3 (5.0) 12.3 0.25 Inventory write-downs from restructuring 4.2 (1.0) 3.2 0.07 Restructuring and asset impairment charges 16.6 (4.0) 12.6 0.26 Goodwill impairment 52.8 (0.1) 52.7 1.09 Debt extinguishment losses, net 8.2 (2.0) 6.2 0.13 Pension settlement charges 11.4 (2.8) 8.6 0.18 Total impact of special items 162.7 (29.8) 132.9 2.75 Year ended June 30, 2021, as adjusted $ (135.2) $ 38.5 $ (96.7) $ (2.01) * Impact per diluted share calculated using weighted average common shares outstanding of 48.3 million for the fiscal year ended June 30, 2021.
Biggest change($ in millions, except per share data) Loss Before Income Taxes Income Tax Benefit Net Loss Loss Per Diluted Share* Year ended June 30, 2022, as reported $ (63.1) $ 14.0 $ (49.1) $ (1.01) Special items: COVID-19 costs 5.9 (1.3) 4.6 0.08 COVID-19 employee retention credits (12.7) 2.8 (9.9) (0.20) Acquisition-related contingent liability release (4.7) 1.1 (3.6) (0.07) Environmental site charge 2.4 (0.5) 1.9 0.04 Debt extinguishment losses, net 6.0 (1.3) 4.7 0.10 Total impact of special items (3.1) 0.8 (2.3) (0.05) Year ended June 30, 2022, as adjusted $ (66.2) $ 14.8 $ (51.4) $ (1.06) * Impact per diluted share calculated using weighted average common shares outstanding of 48.5 million for the fiscal year ended June 30, 2022.
We determined that the lump-sum payments exceeded the threshold of service cost and interest cost components and settlement accounting was required. We recorded settlement charges of $11.4 million in the year ended June 30, 2021, within other (income) expense, net.
We determined that the lump-sum payments exceeded the threshold of service cost and interest cost components and settlement accounting was required. We recorded settlement charges of $11.4 million in the year ended June 30, 2021, within other expense (income), net.
Net periodic (income) expense is recorded in accounts that are included in both the cost of sales and selling, general and administrative expenses based on the function of the associated employees and in other (income) expense, net.
Net periodic expense (income) is recorded in accounts that are included in both the cost of sales and selling, general and administrative expenses based on the function of the associated employees and in other expense (income), net.
Negatively impacting results for fiscal year 2022 were near-term operational challenges resulting from the Reading press outage, labor shortages and supply chain disruptions as well as the ongoing inflationary pressures on operating costs related to critical production supplies, freight and labor.
Negatively impacting results for fiscal year 2022 were near-term operational challenges resulting from Reading press outage, labor shortages and supply chain disruptions as well as the ongoing inflationary pressures on operating costs related to critical production supplies, freight and labor.
We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
GAAP financial measure and should not be considered in isolation of, or as a substitute for, net sales and gross margin calculated in accordance with U.S.
GAAP financial measure and should not be considered in isolation of, or as a substitute for, net sales and gross margin calculated in accordance with U.S. GAAP.
See our earlier discussion of operating loss for a reconciliation of adjusted operating (loss) income and adjusted operating margin excluding special items to operating (loss) income and operating margin determined in accordance with U.S. GAAP. Adjusted operating (loss) income and adjusted operating margin excluding surcharge revenue and special items is not a U.S.
See our earlier discussion of operating income (loss) for a reconciliation of adjusted operating income (loss) and adjusted operating margin excluding special items to operating income (loss) and operating margin determined in accordance with U.S. GAAP. Adjusted operating income (loss) and adjusted operating margin excluding surcharge revenue and special items is not a U.S.
This reporting unit has experienced slower than expected growth due to customers shifting their near-term focus away from this emerging area as a result of the continuing impacts of the COVID-19 pandemic. During the quarter ended December 31, 2020 we also made strategic decisions to reduce resources allocated to the Additive reporting unit to concentrate on the essential manufacturing business.
This reporting unit has experienced slower than expected growth due to customers shifting their near-term focus away from this emerging area as a result of the impacts of the COVID-19 pandemic. During the quarter ended December 31, 2020 we also made strategic decisions to reduce resources allocated to the Additive reporting unit to concentrate on the essential manufacturing business.
Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company's board of directors and others. Our definitions and calculations of these items may not necessarily be the same as those used by other companies. Adjusted loss per share is not a U.S.
Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company's board of directors and others. Our definitions and calculations of these items may not necessarily be the same as those used by other companies. Adjusted earnings (loss) per share is not a U.S.
The following presents our operating income and operating margin, in each case excluding the impact of surcharge on net sales and excluding special items. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period.
The following presents our operating income (loss) and operating margin, in each case excluding the impact of surcharge on net sales and special items. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period.
Fiscal year 2022 results reflect higher sales in all end-use markets and cost savings in the current fiscal year from the restructuring actions taken in fiscal year 2021. The current year also includes a benefit of $2.1 million related to COVID-19 employee retention credits. Fiscal year 2021 included LIFO decrement charges of $4.3 million.
Fiscal year 2022 results reflect higher sales in all end-use markets and cost savings in the current fiscal year from the restructuring actions taken in fiscal year 2021. Fiscal year 2022 also included a benefit of $2.1 million related to COVID-19 employee retention credits. Fiscal year 2021 included LIFO decrement charges of $4.3 million.
It is management's current intention to use excess cash to fund investments in capital equipment, acquisition opportunities and consistent dividend payments. Free cash flow is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, cash flows calculated in accordance with U.S.
It is management's current intention to use excess cash to fund investments in capital equipment, acquisition opportunities and consistent dividend payments. Adjusted free cash flow is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, cash flows calculated in accordance with U.S. GAAP.
Fiscal Year ($ in millions) 2022 2021 Net sales $ 1,836.3 $ 1,475.6 Less: surcharge revenue 436.3 222.8 Net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 Operating loss $ (24.9) $ (248.6) Special items: LIFO decrement — 52.2 COVID-19 costs 5.9 17.3 COVID-19 employee retention credits (12.7) — Inventory write-downs from restructuring — 4.2 Acquisition-related contingent liability release (4.7) — Environmental site charge 2.4 — Restructuring and asset impairment charges — 16.6 Goodwill impairment — 52.8 Adjusted operating loss excluding special items $ (34.0) $ (105.5) Operating margin (1.4) % (16.8) % Adjusted operating margin excluding surcharge revenue and special items (2.4) % (8.4) % 27 Table of Contents Interest Expense, Net and Debt Extinguishment Losses, Net Fiscal year 2022 interest expense, net was $44.9 million compared to $32.7 million in fiscal year 2021.
Fiscal Year ($ in millions) 2022 2021 Net sales $ 1,836.3 $ 1,475.6 Less: surcharge revenue 436.3 222.8 Net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 Operating loss $ (24.9) $ (248.6) Special items: LIFO decrement — 52.2 COVID-19 costs 5.9 17.3 COVID-19 employee retention credits (12.7) — Inventory write-downs from restructuring — 4.2 Acquisition-related contingent liability release (4.7) — Environmental site charge 2.4 — Restructuring and asset impairment charges — 16.6 Goodwill impairment — 52.8 Adjusted operating loss excluding special items $ (34.0) $ (105.5) Operating margin (1.4) % (16.8) % Adjusted operating margin excluding surcharge revenue and special items (2.4) % (8.4) % 30 Table of Contents Interest Expense, Net and Debt Extinguishment Losses, Net Fiscal year 2022 interest expense, net was $44.9 million compared to $32.7 million in fiscal year 2021.
The following table includes comparative information for net sales by business segment: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2022 2021 Specialty Alloys Operations $ 1,565.6 $ 1,262.2 $ 303.4 24 % Performance Engineered Products 344.5 259.8 84.7 33 % Intersegment (73.8) (46.4) (27.4) (59) % Total net sales $ 1,836.3 $ 1,475.6 $ 360.7 24 % The following table includes comparative information for our net sales by business segment, but excluding surcharge revenue: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2022 2021 Specialty Alloys Operations $ 1,137.1 $ 1,042.8 $ 94.3 9 % Performance Engineered Products 336.7 255.9 80.8 32 % Intersegment (73.8) (45.9) (27.9) (61) % Total net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 $ 147.2 12 % Specialty Alloys Operations Segment Net sales in fiscal year 2022 for the SAO segment increased 24 percent to $1,565.6 million, as compared with $1,262.2 million in fiscal year 2021.
The following table includes comparative information for net sales by business segment: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2022 2021 Specialty Alloys Operations $ 1,565.6 $ 1,262.2 $ 303.4 24 % Performance Engineered Products 344.5 259.8 84.7 33 % Intersegment (73.8) (46.4) (27.4) (59) % Total net sales $ 1,836.3 $ 1,475.6 $ 360.7 24 % The following table includes comparative information for our net sales by business segment, but excluding surcharge revenue: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2022 2021 Specialty Alloys Operations $ 1,137.1 $ 1,042.8 $ 94.3 9 % Performance Engineered Products 336.7 255.9 80.8 32 % Intersegment (73.8) (45.9) (27.9) (61) % Total net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 $ 147.2 12 % 32 Table of Contents Specialty Alloys Operations Segment Net sales in fiscal year 2022 for the SAO segment increased 24 percent to $1,565.6 million, as compared with $1,262.2 million in fiscal year 2021.
Debt extinguishment losses, net in fiscal year 2021 totaled $8.2 million and included $10.5 million of debt prepayment costs on the notes due July 2021 partially offset by gains of $2.3 million on the related interest rate swaps that were terminated in connection with the prepayment.
Debt extinguishment losses, net in fiscal year 2021 totaled $8.2 million and included $10.5 million of debt prepayment costs on the notes due July 2021 partially offset by gains of $2.3 million on the related interest rate swaps that were terminated in connection with the prepayments.
Other We are defending various routine claims and legal actions that are incidental to our business, and that are common to our operations, including those pertaining to product claims, commercial disputes, patent infringement, employment actions, employee benefits, compliance with domestic and foreign laws, personal injury claims and tax issues.
Other We are defending various routine claims and legal actions that are incidental to our business, and that are common to our operations, including those pertaining to product claims, commercial disputes, patent infringement, employment actions, employee benefits, compliance with domestic and foreign laws and regulations, personal injury claims and tax issues.
The fiscal year 2021 expense is primarily due to pension settlement charges of $11.4 million. Income Taxes Our effective tax rate (income tax (benefit) expense as a percent of (loss) income before taxes) for fiscal year 2022 was 22.2 percent as compared to 22.9 percent for fiscal year 2021.
The fiscal year 2021 expense was primarily due to pension settlement charges of $11.4 million. Income Taxes Our effective tax rate (income tax (benefit) expense as a percent of (loss) income before taxes) for fiscal year 2022 was 22.2 percent as compared to 22.9 percent for fiscal year 2021.
Additionally, the anticipated benefit for the carryback of the fiscal year 2021 net operating loss to fiscal years with higher tax rates was included in fiscal year 2021. Also included was a tax charge of $1.4 million attributable to employee share-based compensation.
Additionally, the anticipated benefit for the carryback of the fiscal year 2021 net operating loss to fiscal years with higher tax rates was included in fiscal year 2021. Also included is a tax charge of $1.4 million attributable to employee share-based compensation.
Fiscal Year $ Increase % Increase ($ in millions) 2022 2021 Aerospace and Defense $ 790.2 $ 710.9 $ 79.3 11 % Medical 212.3 143.5 68.8 48 % Transportation 178.3 144.5 33.8 23 % Energy 113.0 87.8 25.2 29 % Industrial and Consumer 417.2 292.1 125.1 43 % Distribution 125.3 96.8 28.5 29 % Total net sales $ 1,836.3 $ 1,475.6 $ 360.7 24 % The following table includes comparative information for our net sales by the same principal end-use markets, but excluding surcharge revenue: Fiscal Year $ Increase % Increase ($ in millions) 2022 2021 Aerospace and Defense $ 599.6 $ 598.8 $ 0.8 — % Medical 177.2 128.2 49.0 38 % Transportation 125.2 115.9 9.3 8 % Energy 76.3 70.5 5.8 8 % Industrial and Consumer 297.2 243.1 54.1 22 % Distribution 124.5 96.3 28.2 29 % Total net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 $ 147.2 12 % Sales to the Aerospace and Defense market increased 11 percent from fiscal year 2021 to $790.2 million.
Fiscal Year $ Increase % Increase ($ in millions) 2022 2021 Aerospace and Defense $ 790.2 $ 710.9 $ 79.3 11 % Medical 212.3 143.5 68.8 48 % Transportation 178.3 144.5 33.8 23 % Energy 113.0 87.8 25.2 29 % Industrial and Consumer 417.2 292.1 125.1 43 % Distribution 125.3 96.8 28.5 29 % Total net sales $ 1,836.3 $ 1,475.6 $ 360.7 24 % The following table includes comparative information for our net sales by the same principal end-use markets, but excluding surcharge revenue: Fiscal Year $ Increase % Increase ($ in millions) 2022 2021 Aerospace and Defense $ 599.6 $ 598.8 $ 0.8 — % Medical 177.2 128.2 49.0 38 % Transportation 125.2 115.9 9.3 8 % Energy 76.3 70.5 5.8 8 % Industrial and Consumer 297.2 243.1 54.1 22 % Distribution 124.5 96.3 28.2 29 % Total net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 $ 147.2 12 % 27 Table of Contents Sales to the Aerospace and Defense end-use market increased 11 percent from fiscal year 2021 to $790.2 million.
Management believes that the presentation of loss per share adjusted to exclude the impact of special items is helpful in analyzing the operating performance of the Company, as these items are not indicative of ongoing operating performance.
Management believes that the presentation of earnings (loss) per share adjusted to exclude the impact of special items is helpful in analyzing the operating performance of the Company, as these items are not indicative of ongoing operating performance.
The net operating loss provision provided incremental tax benefits of approximately $7.0 million, which were recognized in fiscal year 2021, due to the higher tax rates in the expanded carryback period. The other provisions in the CARES Act are not expected to have a significant impact on our financial position, results of operations or cash flows.
The net operating loss provision provided incremental tax benefits of approximately $7.0 million, which were recognized in fiscal year 2021, due to higher tax rates in the expanded carryback period. The other provisions in the CARES Act are not expected to have a significant impact on our financial position, results of operation or cash flows.
The remaining goodwill is associated with the PEP segment, which includes two reporting units, Dynamet and Latrobe Distribution, with goodwill recorded as of June 30, 2022, of $31.9 million and $14.0 million, respectively. The fair value for all three reporting units is estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques.
The remaining goodwill is associated with the PEP segment, which includes two reporting units, Dynamet and Latrobe Distribution, with goodwill recorded as of June 30, 2023, of $31.9 million and $14.0 million, respectively. The fair value for all three reporting units is estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques.
The results reflect higher demand from the ongoing recovery in elective surgeries, with our customers focused on increasing stock levels to meet demand. Transportation market sales of $178.3 million reflected a 23 percent increase from fiscal year 2021. Excluding surcharge revenue, sales increased 8 percent on 9 percent higher shipment volume.
The results reflect higher demand from the ongoing recovery in elective surgeries, with our customers focused on increasing stock levels to meet demand. Transportation end-use market sales of 178.3 million reflected a 23 percent increase from fiscal year 2021. Excluding surcharge revenue, sales increased 8 percent on 9 percent higher shipment volume.
Fiscal Year ($ in millions) 2022 2021 Net sales $ 1,836.3 $ 1,475.6 Less: surcharge revenue 436.3 222.8 Net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 Gross profit $ 149.8 $ 1.0 LIFO decrement — 52.2 Inventory write-downs from restructuring — 4.2 COVID-19 employee retention credits (11.9) — Gross profit excluding special items $ 137.9 $ 57.4 Gross margin 8.2 % 0.1 % Gross margin excluding surcharge revenue and special items 9.9 % 4.6 % Selling, General and Administrative Expenses Selling, general and administrative expenses in fiscal year 2022 were $174.7 million, or 9.5 percent of net sales (12.5 percent of net sales excluding surcharge revenue), compared to $180.2 million, or 12.2 percent of net sales (14.4 percent of net sales excluding surcharge revenue), in fiscal year 2021.
Fiscal Year ($ in millions) 2022 2021 Net sales $ 1,836.3 $ 1,475.6 Less: surcharge revenue 436.3 222.8 Net sales excluding surcharge revenue $ 1,400.0 $ 1,252.8 Gross profit: $ 149.8 $ 1.0 LIFO decrement — 52.2 Inventory write-downs from restructuring — 4.2 COVID-19 employee retention credits (11.9) — Gross profit excluding special items $ 137.9 $ 57.4 Gross margin 8.2 % 0.1 % Gross margin excluding surcharge revenue and special items 9.9 % 4.6 % 28 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses in fiscal year 2022 were $174.7 million, or 9.5 percent of net sales (12.5 percent of net sales excluding surcharge revenue), compared to $180.2 million, or 12.2 percent of net sales (14.4 percent of net sales excluding surcharge revenue), in fiscal year 2021.
The surcharge mechanism protects our net income on such sales except for the lag effect discussed above. However, surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report. Approximately 40 percent of our net sales are sales to customers under firm price sales arrangements.
The surcharge mechanism protects our net income on such sales except for the lag effect discussed above. However, surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report. Approximately 45 percent of our net sales are sales to customers under firm price sales arrangements.
Excluding surcharge revenue, sales were flat on 4 percent higher shipment volume. The results reflect higher year-over-year demand as COVID-19 travel restrictions eased and the aircraft OEM build rates increased. Sales to the Medical market increased 48 percent to $212.3 million from fiscal year 2021. Excluding surcharge revenue, sales increased 38 percent on 35 percent higher shipment volume.
Excluding surcharge revenue, sales were flat on 4 percent higher shipment volume. The results reflect higher year-over-year demand as COVID-19 travel restrictions eased and the aircraft OEM build rates increased. Sales to the Medical end-use market increased 48 percent to 212.3 million from fiscal year 2021. Excluding surcharge revenue, sales increased 38 percent on 35 percent higher shipment volume.
No goodwill impairment charges were recognized during the fiscal year ended June 30, 2022. 26 Table of Contents Operating Loss Our operating loss in fiscal year 2022 was $24.9 million, or negative 1.4 percent of net sales, as compared with $248.6 million of operating loss, or negative 16.8 percent of net sales, in fiscal year 2021.
No goodwill impairment charges were recognized during the fiscal year ended June 30, 2022. 29 Table of Contents Operating Loss Our operating loss in fiscal year 2022 was $24.9 million, or negative 1.4 percent of net sales as compared with $248.6 million of operating loss, or negative 16.8 percent of net sales in fiscal year 2021.
We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements. 45 Table of Contents
We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements. 43 Table of Contents
We determined the goodwill associated with this reporting unit was impaired and recorded an impairment charge of $52.8 million during the quarter ended December 31, 2020, which represents the entire balance of goodwill for this reporting unit. No other asset impairment was identified at the impairment testing date.
We determined the goodwill associated with this reporting unit was impaired and recorded an impairment charge of $52.8 million during the quarter ended December 31, 2020, which represented the entire balance of goodwill for this reporting unit. No other asset impairment was identified at the impairment testing date.
Environmental Expenditures Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with Carpenter's capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed.
Environmental Expenditures Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with the Company's capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed.
If a customer fails to meet the volume commitments (or the consumption schedule deviates from the agreed-upon terms of the firm price sales arrangements), the Company may need to absorb the gains or losses associated with the commodity forward contracts on a temporary basis.
If a customer fails to meet the volume commitments (or the consumption schedule deviates from the agreed-upon terms of the firm price sales arrangements), we may need to absorb the gains or losses associated with the commodity forward contracts on a temporary basis.
During the fiscal year ended June 30, 2021, we evaluated the need for settlement accounting under Accounting Standards Codification ("ASC') 715-30-35-82 based on the higher than normal lump-sum payments made during fiscal year 2021 in our largest defined benefit plan.
During the fiscal year ended June 30, 2021, we evaluated the need for settlement accounting under Accounting Standards Codification ("ASC") 715-30-35-82 based on the higher than normal lump-sum payments made during fiscal year 2021 in our largest defined benefit plan.
Interest expense, net for fiscal year 2022 includes no net gains or losses from interest rate swaps compared with $0.4 million of net gains from interest rate swaps for fiscal year 2021. Debt extinguishment losses, net in fiscal year 2022 were $6.0 million of debt prepayment costs made in connection with the prepayment of notes due March 2023.
Interest expense, net for fiscal year 2022 included no net gains or losses from interest rate swaps compared with $0.4 million of net gains from interest rate swaps for fiscal year 2021. Debt extinguishment losses, net in fiscal year 2022 were $6.0 million of debt prepayment costs made in connection with the prepayment of notes due March 2023.
Fiscal year 2022 reflects higher volume in all end-use markets partially offset by the near-term operational challenges resulting from labor shortages, supply chain disruptions and the unplanned Reading press outage which was returned to service in the third quarter. The current year also includes a benefit of $10.6 million related to COVID-19 employee retention credits.
Fiscal year 2022 reflects higher volume in all end-use markets partially offset by the near-term operational challenges resulting from labor shortages, supply chain disruptions and the unplanned Reading press outage which was returned to service in the third quarter. Fiscal year 2022 also included a benefit of $10.6 million related to COVID-19 employee retention credits.
We used the net proceeds from the issuance of the 2030 Notes to repay, in April 2022, in full $300.0 million in principal of its 4.45% senior unsecured notes due March 2023, including any interest and premium due thereon.
We used the net proceeds from the issuance of the 2030 Notes to repay, in April 2022, in full $300.0 million in principal of our 4.45% senior unsecured notes due March 2023, including any interest and premium due thereon.
Results for fiscal year 2022 reflect higher sales in all end-use markets compared to the prior year period as well as the full recognition of various cost saving actions taken in fiscal year 2021 and the fourth quarter of fiscal year 2020.
The results for fiscal year 2022 reflect higher sales in all end-use markets compared to fiscal year 2021 as well as the full recognition of various cost saving actions taken in fiscal year 2021 and the fourth quarter of fiscal year 2020.
The potential tax implications from the distribution of these earnings are expected to be limited to withholding taxes in certain foreign jurisdictions and are not expected to materially impact the consolidated financial statements. See Note 18 to the consolidated financial statements in Item 8.
The potential tax implications from the distribution of these earnings are expected to be limited to withholding taxes in certain foreign jurisdictions and are not expected to materially impact the consolidated financial statements. See Note 17 to the consolidated financial statements in Item 8.
We also recognized $0.4 million for facility shut-down costs and various personnel costs for severance payments, medical coverage and related items. In fiscal year 2021, we recorded $2.0 million of non-cash impairment pre-tax charges as a result of the Amega West business exit primarily related to accounts receivable determined to be uncollectible.
We also recognized $0.4 million for facility shut-down costs and various personnel costs for severance payments, medical coverage and related items. In fiscal year 2021, we recorded $2.0 million of noncash impairment pre-tax charges as a result of the Amega West business exit primarily related to accounts receivable determined to be uncollectible.
Changes in estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment. Goodwill Goodwill is not amortized but instead is tested at least annually for impairment as of June 1, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.
Changes in estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment. 38 Table of Contents Goodwill Goodwill is not amortized but instead is tested at least annually for impairment as of June 1, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired.
In light of these decisions and market conditions, the pace of growth in the future projections for the Additive reporting unit were lowered. As a result, during the year ended June 30, 2021, we recorded an impairment charge of $52.8 million, which represented the entire balance of goodwill for this reporting unit.
In light of these decisions and market conditions at that time, the pace of growth in the future projections for the Additive reporting unit were lowered. As a result, during the year ended June 30, 2021, we recorded an impairment charge of $52.8 million, which represented the entire balance of goodwill for this reporting unit.
For purposes of the discounted cash flow analysis for Latrobe Distribution's fair value, a weighted average cost capital of 11.0 percent and a terminal growth rate assumption of 2.5 percent were used.
For purposes of the discounted cash flow analysis for Latrobe Distribution's fair value, a weighted average cost capital of 13.0 percent and a terminal growth rate assumption of 2.5 percent were used.
Our fiscal year 2021 results were impacted by a goodwill impairment charge totaling $52.8 million, LIFO decrement charges of $52.2 million, COVID-19 charges of $17.3 million, restructuring and asset impairment charges of $16.6 million, pension settlement charges of $11.4 million, debt extinguishment losses, net of $8.2 million and inventory write-downs from restructuring of $4.2 million.
Our fiscal year 2021 results were negatively impacted by a goodwill impairment charge of $52.8 million, LIFO decrement charges of $52.2 million, inventory write-downs from restructuring of $4.2 million, COVID-19 charges of $17.3 million, noncash restructuring and asset impairment charges of $16.6 million, pension settlement charges of $11.4 million, and debt extinguishment losses, net of $8.2 million.
While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin and special items.
While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin excluding the impact of the special items.
The lower selling, general and administrative expenses in fiscal year 2022 include a non-cash benefit of $4.7 million from the reversal of a contingent liability associated with a historical acquisition for which the time period expired and lower variable compensation charges compared to the same period a year ago.
The lower selling, general and administrative expenses in fiscal year 2022 include a noncash benefit of $4.7 million from the reversal of a contingent liability associated with a historical acquisition for which the time period expired and lower variable compensation charges compared to the same period a year ago.
Excluding surcharge revenue, net sales increased 9 percent from a year ago. The fiscal year 2022 net sales reflected 12 percent higher shipment volume as compared to fiscal year 2021. The SAO segment results reflect higher sales in all end-use markets except Aerospace and Defense which were flat compared to the prior year.
Excluding surcharge revenue, net sales increased 9 percent from fiscal year 2021. The fiscal year 2022 net sales reflected 12 percent higher shipment volume as compared to fiscal year 2021. The SAO segment results reflect higher sales in all end-use markets except Aerospace and Defense which were flat compared to fiscal year 2021.
GAAP. 37 Table of Contents Adjusted Operating (Loss) Income and Adjusted Operating Margin Excluding Surcharge Revenue and Special Items This report includes discussions of operating (loss) income and operating margin as adjusted to exclude the impact of raw material surcharge revenue and special items which represent financial measures that have not been determined in accordance with U.S. GAAP.
Adjusted Operating Income (Loss) and Adjusted Operating Margin Excluding Surcharge Revenue and Special Items This report includes discussions of operating income (loss) and operating margin as adjusted to exclude the impact of raw material surcharge revenue and special items which represent financial measures that have not been determined in accordance with U.S. GAAP.
The following table includes comparative information for volumes by business segment: Fiscal Year Increase (Decrease) % Increase (Decrease) (Pounds sold, in thousands) 2022 2021 Specialty Alloys Operations 187,754 166,942 20,812 12 % Performance Engineered Products * 10,662 7,936 2,726 34 % Intersegment (10,304) (5,172) (5,132) (99) % Consolidated pounds sold 188,112 169,706 18,406 11 % * Pounds sold data for PEP segment includes Dynamet and Additive businesses only.
"Financial Statements and Supplementary Data." The following table includes comparative information for volumes by business segment: Fiscal Year Increase (Decrease) % Increase (Decrease) (Pounds sold, in thousands) 2022 2021 Specialty Alloys Operations 187,754 166,942 20,812 12 % Performance Engineered Products * 10,662 7,936 2,726 34 % Intersegment (10,304) (5,172) (5,132) (99) % Total pounds sold 188,112 169,706 18,406 11 % * Pounds sold data for PEP segment includes Dynamet and Additive businesses only.
This included $14.2 million of non-cash pre-tax impairment charges consisting of $8.2 million of property, plant and equipment, $4.3 million associated with certain definite lived intangible assets, $1.3 million related to a lease right of use asset and $0.4 million of other non-cash charges.
This included $14.2 million of noncash pre-tax impairment charges consisting of $8.2 million of property, plant and equipment, $4.3 million associated with certain definite lived intangible assets, $1.3 million related to a lease right of use asset and $0.4 million of other noncash charges.
Our fiscal year 2021 results were negatively impacted by a goodwill impairment charge of $52.8 million, LIFO decrement charges of $52.2 million, inventory write-downs from restructuring of $4.2 million, COVID-19 charges of $17.3 million and non-cash restructuring and asset impairment charges of $16.6 million.
Our fiscal year 2021 results were negatively impacted by a goodwill impairment charge of $52.8 million, LIFO decrement charges of $52.2 million, inventory write-downs from restructuring of $4.2 million, COVID-19 charges of $17.3 million and noncash restructuring and asset impairment charges of $16.6 million.
The plan discount rate is determined by reference to the Bond:Link interest rate model based upon a portfolio of highly rated U.S. corporate bonds with individual bonds that are theoretically purchased to settle the plan's anticipated cash outflows.
The plan discount rate is determined by reference to the BondLink interest rate model based upon a portfolio of highly rated U.S. corporate bonds with individual bonds that are theoretically purchased to settle the plan's anticipated cash outflows.
The results reflect increasing global rig counts and higher oil prices benefiting the oil and gas sub-market. This was partially offset by lower sales for power generation materials compared to the prior year period. The prior year results also include one quarter of the Amega West business, which was divested on September 30, 2020.
The results reflect increasing global rig counts and higher oil prices benefiting the oil and gas sub-market. This was partially offset by lower sales for power generation materials compared to fiscal year 2021. Fiscal year 2021 results also include one quarter of the Amega West business, which was divested on September 30, 2020.
"Financial Statements and Supplementary Data" for a full reconciliation of the statutory federal tax rate to the effective tax rates. 28 Table of Contents Business Segment Results Summary information about our operating results on a segment basis is set forth below. For more detailed segment information, see Note 20 to the consolidated financial statements included in Item 8.
"Financial Statements and Supplementary Data" for a full reconciliation of the statutory federal tax rate to the effective tax rates. 31 Table of Contents Business Segment Results Summary information about our operating results on a segment basis is set forth below. For more detailed segment information, see Note 19 to the consolidated financial statements included in Item 8.
If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2022, the SAO reporting unit would have a fair value that exceeded the carrying value by approximately 34.5 percent. Goodwill associated with the PEP segment is tested at the Dynamet and Latrobe Distribution reporting unit level.
If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2023, the SAO reporting unit would have a fair value that exceeded the carrying value by approximately 57 percent. Goodwill associated with the PEP segment is tested at the Dynamet and Latrobe Distribution reporting unit level.
Partially offsetting these benefits in fiscal year 2022 is an environmental charge of $2.4 million which represents a prior period charge related to a third party Superfund waste-disposal site. 25 Table of Contents Restructuring and Asset Impairment Charges During fiscal year 2022, we had no restructuring and asset impairment charges compared to $16.6 million in fiscal year 2021.
Partially offsetting these benefits in fiscal year 2022 is an environmental charge of $2.4 million which represents a prior period liability related to a third party Superfund waste-disposal site. Restructuring and Asset Impairment Charges During fiscal year 2022, we had no restructuring and asset impairment charges compared to $16.6 million in fiscal year 2021.
In addition, management believes that excluding special items from gross profit and gross margin is helpful in analyzing our operating performance as the inventory write-downs from restructuring are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, our board of directors and others.
In addition, management believes that excluding special items from gross profit and gross margin is helpful in analyzing our operating performance as the special items are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, our board of directors and others.
Excluding special items, loss per diluted share would have been $1.06 for fiscal year 2022. This compares with net loss of $229.6 million, or $4.76 loss per diluted share, a year earlier. Excluding special items, loss per share would have been $2.01 per diluted share for fiscal year 2021.
Excluding special items, loss per diluted share would have been $1.06 for fiscal year 2022. This compares with net loss of $229.6 million, or $4.76 loss per diluted share in fiscal year 2021. Excluding special items, loss per share would have been $2.01 per diluted share for fiscal year 2021.
The fiscal year 2022 tax benefit includes the unfavorable impacts of losses in certain foreign jurisdictions for which no tax benefit can be recognized.
The fiscal year 2022 tax benefit included the unfavorable impacts of losses in certain foreign jurisdictions for which no tax benefit can be recognized.
The results reflect higher demand in all sub-markets but was muted from the continuing chip shortage compared to the prior year period. Sales to the Energy market of $113.0 million reflected a 29 percent increase from fiscal year 2021. Excluding surcharge revenue, sales increased 8 percent.
The results reflect higher demand in all sub-markets but was muted from the continuing chip shortage compared to fiscal year 2021. Sales to the Energy end-use market of 113.0 million reflected a 29 percent increase from fiscal year 2021. Excluding surcharge revenue, sales increased 8 percent.
In light of these decisions and market conditions, the pace of growth in the future projections for the Additive reporting unit were lowered.
In light of these decisions and market conditions at the time, the pace of growth in the future projections for the Additive reporting unit were lowered.
Gains and/or losses on the commodity forward contracts are reclassified from other comprehensive loss together with the actual purchase price of the underlying commodities when the underlying commodities are purchased and recorded in inventory.
Gains and/or losses on the commodity forward contracts are reclassified from accumulated other comprehensive income (loss) ("AOCI") together with the actual purchase price of the underlying commodities when the underlying commodities are purchased and recorded in inventory.
GAAP financial measure and should not be considered in isolation of, or as a substitute for, operating (loss) income and operating margin calculated in accordance with U.S. GAAP. Adjusted Loss Per Share The following provides a reconciliation of adjusted loss per share, to its most directly comparable U.S.
GAAP financial measure and should not be considered in isolation of, or as a substitute for, operating income (loss) and operating margin calculated in accordance with U.S. GAAP. 35 Table of Contents Adjusted Earnings (Loss) Per Share The following provides a reconciliation of adjusted earnings (loss) per share, to its most directly comparable U.S.
GAAP. 39 Table of Contents Critical Accounting Policies and Estimates The preparation of the consolidated 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.
Critical Accounting Policies and Estimates The preparation of the consolidated 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.
For purposes of the discounted cash flow analysis for SAO's fair value, a weighted average cost capital of 9.5 percent and a terminal growth rate assumption of 2.5 percent were used.
For purposes of the discounted cash flow analysis for SAO's fair value, a weighted average cost capital of 11.0 percent and a terminal growth rate assumption of 2.5 percent were used.
Debt extinguishment losses, net for the fiscal year ended June 30, 2022 were $6.0 million as compared with $8.2 million of debt extinguishment losses, net for the fiscal year ended June 30, 2021 which included $10.5 million of debt prepayment costs on notes due July 2021, offset by gains of $2.3 million on related interest rate swaps that were terminated in connection with the prepayment.
For the fiscal year ended June 30, 2021 debt extinguishment losses net, were $8.2 million which included $10.5 million of debt prepayment costs on notes due July 2021, offset by gains of $2.3 million on related interest rate swaps that were terminated in connection with the prepayment.
The LIFO decrement charges were non-cash charges associated with reducing inventory and liquidating LIFO layers that had historical costs in excess of the fiscal year 2021 inventory costs. Net Sales Net sales for fiscal year 2022 were $1,836.3 million, which represents a 24 percent increase from fiscal year 2021.
The LIFO decrement charges were noncash charges associated with reducing inventory and liquidating LIFO layers that had historical costs in excess of the fiscal year 2021 inventory costs. Net Sales Net sales for fiscal year 2022 were $1,836.3 million, which was a 24 percent increase from fiscal year 2021.
The LIFO decrement charges are non-cash charges associated with reducing inventory and liquidating LIFO layers that had historical costs in excess of the fiscal year 2021 inventory costs. The fiscal year 2022 results also include $0.7 million of COVID-19 related costs compared to $2.7 million in fiscal year 2021.
The LIFO decrement charges are noncash charges associated with reducing inventory and liquidating LIFO layers that had historical costs in excess of the fiscal year 2021 inventory costs. The fiscal year 2022 results also included $0.7 million of COVID-19 related costs compared to $2.7 million in fiscal year 2021.
If, by November 30, 2022, our outstanding $300.0 million 4.45% Senior Notes due in March 2023 were not redeemed, repurchased or refinanced with indebtedness having a maturity date of October 1, 2024 or later, all indebtedness under the Credit Facility would be due.
If, by November 30, 2022, our outstanding $300.0 million 4.45% Senior Notes due in March 2023 were not redeemed, repurchased or refinanced with indebtedness having a maturity date of October 1, 2024 or later, all indebtedness under the Prior Credit Agreement would have been due.
International sales as a percentage of our total net sales represented 36 percent and 37 percent for fiscal year 2022 and fiscal year 2021, respectively. 23 Table of Contents Sales by End-Use Markets We sell to customers across diversified end-use markets. The following table includes comparative information for our net sales, which includes surcharge revenue, by principal end-use markets.
International sales as a percentage of our total net sales represented 39 percent and 36 percent for fiscal year 2023 and fiscal year 2022, respectively. 21 Table of Contents Sales by End-Use Markets We sell to customers across diversified end-use markets. The following table includes comparative information for our net sales, which includes surcharge revenue, by principal end-use markets.
If the assumed long-term rate of return on plan assets was changed by 0.25 percent, the net pension (income) expense would change by $2.2 million. If the discount rate was changed by 0.25 percent, the net pension (income) expense would change by $0.3 million.
If the assumed long-term rate of return on plan assets was changed by 0.25 percent, the net pension expense (income) would change by $1.9 million. If the discount rate was changed by 0.25 percent, the net pension expense (income) would change by $0.1 million.
The prior year period included negative impacts from targeted inventory reductions and LIFO decrement charges of $47.9 million. The LIFO decrement charges are non-cash charges associated with reducing inventory and liquidating LIFO layers that had historical costs in excess of the fiscal year 2021 inventory costs.
Fiscal year 2021 included negative impacts from targeted inventory reductions and LIFO decrement charges of $47.9 million. The LIFO decrement charges are noncash charges associated with reducing inventory and liquidating LIFO layers that had historical costs in excess of the fiscal year 2021 inventory costs.
As of June 1, 2022, the fair value of the Dynamet reporting unit exceeded the carrying value by approximately 54.1 percent. For purposes of the discounted cash flow analysis for Dynamet's fair value, a weighted average cost capital of 13.0 percent and a terminal growth rate assumption of 2.5 percent were used.
As of June 1, 2023, the fair value of the Dynamet reporting unit exceeded the carrying value by approximately 106 percent. For purposes of the discounted cash flow analysis for Dynamet's fair value, a weighted average cost capital of 14.0 percent and a terminal growth rate assumption of 2.5 percent were used.
If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2022, the Dynamet reporting unit would have a fair value that exceeded the carrying value by approximately 52.0 percent. As of June 1, 2022, the fair value of the Latrobe Distribution reporting unit exceeded the carrying value by approximately 34.5 percent.
If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2023, the Dynamet reporting unit would have a fair value that exceeded the carrying value by approximately 104 percent. As of June 1, 2023, the fair value of the Latrobe Distribution reporting unit exceeded the carrying value by approximately 11 percent.
The following is a summary of the net pension (income) expense for the years ended June 30, 2022, 2021 and 2020: Years Ended June 30, ($ in millions) 2022 2021 2020 Pension plans $ (4.2) $ 21.3 $ 12.2 Other postretirement plans (3.1) 3.3 3.1 Net pension (income) expense $ (7.3) $ 24.6 $ 15.3 The service cost component of net pension (income) expense represents the estimated cost of future pension liabilities earned associated with active employees.
The following is a summary of the net pension expense (income) for the years ended June 30, 2023, 2022 and 2021: Years Ended June 30, ($ in millions) 2023 2022 2021 Pension plans $ 20.6 $ (4.2) $ 21.3 Other postretirement plans (0.7) (3.1) 3.3 Net pension expense (income) $ 19.9 $ (7.3) $ 24.6 The service cost component of net pension expense (income) represents the estimated cost of future pension liabilities earned associated with active employees.
Other (Income) Expense, Net Other income for fiscal year 2022 was $12.7 million compared with other expense of $8.4 million a year ago. The current fiscal year reflects income from pension earnings, interest and deferrals from favorable returns on plan assets compared to expense in the prior year.
Other (Income) Expense, Net Other income, net for fiscal year 2022 was $12.7 million compared with other expense, net of $8.4 million in fiscal year 2021. Fiscal year 2022 reflects income from pension earnings, interest and deferrals from favorable returns on plan assets compared to expense in in fiscal year 2021.
The current year results reflect the impact of higher volumes across all end-use markets, an improving product mix and increased pricing, partially offset by the ongoing inflationary pressures on operating costs related to critical production supplies, freight and labor compared to the same period a year ago.
Fiscal year 2022 results reflect the impact of higher volumes across all end-use markets, an improving product mix and increased pricing, partially offset by the ongoing inflationary pressures on operating costs related to critical production supplies, freight and labor compared to fiscal year 2021.
Goodwill associated with the SAO reporting unit is tested at the SAO segment level. As of June 1, 2022, the fair value of the SAO reporting unit exceeded the carrying value by approximately 38.2 percent.
Goodwill associated with the SAO reporting unit is tested at the SAO segment level. As of June 1, 2023, the fair value of the SAO reporting unit exceeded the carrying value by approximately 60 percent.
For the fiscal years ended June 30, 2022, 2021 and 2020, interest costs totaled $45.7 million, $40.8 million and $28.8 million, respectively, of which $0.8 million, $8.1 million and $9.0 million, respectively, were capitalized as part of the cost of property, plant, equipment and software.
For the fiscal years ended June 30, 2023, 2022 and 2021, interest costs totaled $55.6 million, $45.7 million and $40.8 million, respectively, of which $1.5 million, $0.8 million and $8.1 million, respectively, were capitalized as part of the cost of property, plant, equipment and software.
The Amendment revised the restricted period under the Credit Facility, during which the Company is prohibited from incurring any secured debt other than purchase money financing for new equipment and is subject to additional restrictions on its ability to make dividends or distributions or to make certain investments, to expire on September 30, 2022.
The Amendment revised the restricted period under the Prior Credit Agreement to expire on September 30, 2022, during which we were prohibited from incurring any secured debt other than purchase money financing for new equipment and were subject to additional restrictions on our ability to make dividends or distributions or to make certain investments.
The 2030 Notes will mature on March 15, 2030. The 2030 Notes are senior unsecured indebtedness, ranking equally in right of payment with all its existing and future senior unsecured indebtedness and senior to its future subordinated indebtedness.
The 2030 Notes are senior unsecured indebtedness, ranking equally in right of payment with all its existing and future senior unsecured indebtedness and senior to its future subordinated indebtedness.
The impact of fluctuations in foreign currency exchange rates resulted in a $3.8 million increase in sales during fiscal year 2021 compared to fiscal year 2020. International sales as a percentage of our total net sales represented 37 percent and 36 percent for fiscal year 2021 and fiscal year 2020, respectively.
The impact of fluctuations in foreign currency exchange rates resulted in a $0.7 million decrease in sales during fiscal year 2022 compared to fiscal year 2021. International sales as a percentage of our total net sales represented 36 percent and 37 percent for fiscal year 2022 and fiscal year 2021, respectively.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−2 removed7 unchanged
Biggest changeA large portion of this balance is related to commodity forward contracts to support firm price sales arrangements associated with many customers.
Biggest changeA large portion of this balance is related to commodity forward contracts to support firm price sales arrangements associated with many customers in addition to credit already extended to these customers in connection with outstanding trade receivables. Our customers have historically performed under these arrangements and we believe that they will honor such obligations in the future.
Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. As discussed in Note 17 to the consolidated financial statements included in Part II, Item 8.
Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. As discussed in Note 16 to the consolidated financial statements included in Part II, Item 8.
Assuming on June 30, 2022, (a) an instantaneous 10 percent decrease in the price of raw materials and energy for which we have commodity forward contracts, and (b) a 10 percent strengthening of the U.S. dollar versus foreign currencies for which foreign exchange forward contracts existed, our results of operations would not have been materially affected in either scenario. 46 Table of Contents
"Financial Statements and Supplementary Data." Assuming on June 30, 2023, (a) an instantaneous 10 percent decrease in the price of raw materials and energy for which we have commodity forward contracts, and (b) a 10 percent strengthening of the U.S. dollar versus foreign currencies for which foreign exchange forward contracts existed, our results of operations would not have been materially affected in either scenario. 44 Table of Contents
If a customer fails to perform its obligations under the firm price sales arrangements, we may realize losses as a result of the related commodity forward contracts. As of June 30, 2022, we had approximately $8.6 million of net deferred gains related to commodity forward contracts to purchase certain raw materials.
If a customer fails to perform its obligations under the firm price sales arrangements, we may realize losses as a result of the related commodity forward contracts. As of June 30, 2023, we had approximately $2.5 million of net deferred losses related to commodity forward contracts to purchase certain raw materials.
Risk containment strategies include interaction with primary and secondary energy suppliers as well as obtaining adequate insurance coverage to compensate us for potential business interruption related to lack of availability of energy resources.
We are actively involved in managing risks associated with energy resources. Risk containment strategies include interaction with primary and secondary energy suppliers as well as obtaining adequate insurance coverage to compensate us for potential business interruption related to lack of availability of energy resources.
The status of our financial instruments as of June 30, 2022, is provided in Note 17 to the consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data".
The status of our financial instruments as of June 30, 2023, is provided in Note 16 to the consolidated financial statements included in Item 8.
Removed
However, approximately 14 percent of these net deferred gains relate to commodity forward contracts entered into to support sales under firm price sales arrangements with one customer in addition to credit already extended to this customer in connection with outstanding trade receivables.
Removed
Our customers have historically performed under these arrangements and we believe that they will honor such obligations in the future. We are actively involved in managing risks associated with energy resources.

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