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What changed in CARPENTER TECHNOLOGY CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CARPENTER TECHNOLOGY CORP's 2023 and 2024 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 2024 report.

+216 added−238 removedSource: 10-K (2024-08-13) vs 10-K (2023-08-11)

Top changes in CARPENTER TECHNOLOGY CORP's 2024 10-K

216 paragraphs added · 238 removed · 172 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe 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.
Biggest changeThis segment includes the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses. 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.
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.
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. Reportable Segments The SAO segment is comprised of the Company's major premium alloy and stainless steel manufacturing operations.
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.
No single customer accounted for 10 percent or more of total net sales for the years ended June 30, 2024, June 30, 2023 and June 30, 2022 . No single customer accounted for 10 percent or more of the accounts receivable outstanding at June 30, 2024 or June 30, 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.
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, 2024 , we had a sales backlog of orders excluding surcharge, believed to be firm, of approximately $2,256.6 million, significantly all of which is expected to be shipped within fiscal years 2025 and 2026.
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.
Long-lived assets held outside of the United States were $5.2 million and $15.7 million as of June 30, 2024 and 2023, respectively. For further information on domestic and international sales, see Note 4 to our consolidated financial statements included in Item 8.
"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.
"Financial Statements and Supplementary Data." (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 2024.
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.
We anticipate spending approximately $2.3 million on domestic environmental capital projects over the next five fiscal years. This includes approximately $2.0 million in fiscal year 2025.
"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.
"Financial Statements and Supplementary Data." Our costs of maintaining and operating environmental control equipment were $17.4 million, $15.7 million and $14.8 million for fiscal years 2024, 2023 and 2022, respectively . The capital expenditures for environmental control equipment were $0.7 million, $0.3 million and $1.1 million for fiscal years 2024, 2023 and 2022, 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.
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 $25.6 million, $24.4 million and $20.4 million in fiscal years 2024, 2023 and 2022, respectively.
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.
Our backlog of orders excluding surcharge as of June 30, 2023, was approximately $2,123.3 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.
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.
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. Many of our products are generally required to meet complex customer product specifications and often require the materials to be qualified prior to supplying the customer.
We also have Structured Individual Development Plans to assist managers in effectively setting targeted development activities for their direct reports and aligning those activities with business priorities. Engagement: We regularly conduct a company-wide Employee Engagement Survey to collect tangible data to make our Company even better.
We also have Structured Individual Development Plans to assist managers in effectively setting targeted development activities for their direct reports and aligning those activities with business priorities. Engagement: We regularly conduct a company-wide Employee Engagement Survey to collect tangible data to make our Company even better. The survey is conducted across the organization to seek input from all employees.
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.
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.
Talent Acquisition: We are always looking for nimble, smart, growth-minded people – regardless of background – to help our organization continue to succeed. We are an employer of choice.
Talent Acquisition: We are always looking for nimble, smart, growth-minded people – regardless of background – to help our organization continue to succeed. We strive to be an employer of choice in the communities that we operate.
We strive for our culture to be transparent, supportive of work/life balance, welcoming of diverse viewpoints, treating all with dignity and respect and supporting each individuals' needs for professional growth and development.
We have built an organizational culture that seeks to be transparent, supportive of work/life balance, welcoming of diverse viewpoints, treating all with dignity and respect and supporting each individuals' needs for professional growth and development.
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.
We believe our relations with our employees are generally good. 5 Table of Contents (d) Financial information about foreign and domestic operations and export sales: Sales outside of the United States, including export sales, were $1,136.7 million, $994.1 million and $656.4 million in fiscal years 2024, 2023 and 2022, respectively.
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.
We seek to ensure that all our employees feel welcomed. Our values underlie our goal to ensure all employees are 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.
We believe that a Zero Injury workplace is achievable and relentlessly pursue measures to increase safety and accountability for our employees. We are proactive in our approach to safety, working to eliminate hazards before causing injury or harm. We invest in our employees, supervisors and managers and engage them in finding workable solutions to achieve a Zero Injury Workplace.
We believe that a Zero Injury workplace is achievable and relentlessly pursue measures to increase safety and accountability for our employees. We are proactive in our approach to safety, working to eliminate hazards before causing injury or harm. We invest in our employees by providing appropriate tools, resources and education necessary to achieve a Zero Injury workplace.
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.
As of June 30, 2024, our total workforce consisted of approximately 4,600 employees, which included 184 production employees in Washington, Pennsylvania, who are covered under a collective bargaining agreement which expires on August 31, 2025, and 450 employees in Latrobe, Pennsylvania who are covered under a collective bargaining agreement which expires on July 31, 2027.
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.
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. Diversity and Inclusion: We have a culture that blends our different backgrounds, experiences and perspectives from all employees.
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.
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.
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.
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 supports our vision to be the preferred solutions provider in specialty materials.
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.
The survey questions are updated regularly and cover a wide variety of topics, including safety, culture, diversity, inclusion and belonging, work/life balance and leadership and career development. Using the feedback provided by the Employee Engagement Survey, specific action plans are developed to address areas of concern or opportunities for improvement across the organization.
Removed
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.
Removed
To ensure anonymity, we partner with an outside firm to collect and analyze the results. We make the survey available electronically and in hard copy format to make it as easy as possible for all our employees to participate, particularly our manufacturing teams.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeTo 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.
Biggest changeWe 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. From time to time, management holds discussions with management of other companies to explore such aforementioned opportunities.
Goodwill and other long-lived assets including property, plant and equipment, software and other intangible assets are recorded at fair value on the date of acquisition. We review these assets at least annually for impairment. Impairment may result from, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other factors.
Goodwill and other long-lived assets including property, plant, equipment and software and other intangible assets are recorded at fair value on the date of acquisition. We review these assets at least annually for impairment. Impairment may result from, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other factors.
This could cause us to lose sales, incur additional costs, delay new product introductions or suffer harm to our reputation. We provide benefits to active and retired employees throughout most of our Company, most of which are not covered by insurance; and thus, our financial condition can be adversely affected if our investment returns are insufficient to meet these obligations.
This could cause us to lose sales, incur additional costs, delay new product introductions or suffer harm to our reputation. 7 Table of Contents We provide benefits to active and retired employees throughout most of our Company, most of which are not covered by insurance; and thus, our financial condition can be adversely affected if our investment returns are insufficient to meet these obligations.
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.
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. 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.
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.
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. The extensive environmental, health and safety regulatory regimes applicable to our manufacturing operations create potential exposure to significant liabilities.
As a result, our business, financial condition and results of operations could be materially adversely affected. Our international operations and global sales expose us to various risks including the impact of tariffs, which may adversely affect our business.
As a result, our business, financial condition and results of operations could be materially adversely affected. 10 Table of Contents Our international operations and global sales expose us to various risks including the impact of tariffs, which may adversely affect our business.
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.
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 28, 2024.
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.
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.
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.
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, 2024 , if the FIFO method of inventory had been used instead of the LIFO method, our inventories would have been approximately $371.0 million higher.
War (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.
War (such as the current war in Ukraine, the war between Israel and HAMAS, and the Houthi attacks on commercial shipping vessels and other naval vessels), 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 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.
From time to time, management holds discussions with management of other companies to explore such aforementioned opportunities. As a result, the relative makeup of the businesses comprising our Company is subject to change. Acquisitions, joint ventures and other business combinations involve various inherent risks.
As a result, the relative makeup of the businesses comprising our Company is subject to change. Acquisitions, joint ventures and other business combinations involve various inherent risks.
As a result, we may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered. Our financial condition, cash flows and results of operations could be materially adversely affected.
As a result, we may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered.
The volatility of oil prices and other factors that contribute to the cyclicality of the energy market will impact our ability to expand successfully in this area and may adversely affect our results of operations and financial condition.
The volatility of oil prices and other factors that contribute to the cyclicality of the energy market will impact our ability to expand successfully in this area and may adversely affect our results of operations and financial condition. 6 Table of Contents Any significant delay or inability to successfully expand our operations in a timely and cost-effective manner could materially adversely affect our business, financial condition and results of operations.
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.
Approximately 184 production employees at our Dynamet business unit located in Washington, Pennsylvania are covered by a collective bargaining agreement which expires on August 31, 2025. Approximately 450 production employees at our Latrobe business unit located in Latrobe, Pennsylvania are covered by a collective bargaining agreement which expires on July 31, 2027.
We rely on third parties to supply energy consumed at each of our energy-intensive production facilities. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control.
Our financial condition, cash flows and results of operations could be materially adversely affected. 9 Table of Contents We rely on third parties to supply energy consumed at each of our energy-intensive production facilities. The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions.
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.
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.
If we fail to meet the customer specifications for their products, we may be subject to product quality costs and claims. These costs are generally not insured.
If we fail to meet the customer specifications for their products, we may be subject to product quality costs and claims. These costs are generally not insured. The impacts of product liability and quality claims could have a material adverse impact on our results of operations, financial condition and cash flows.
As a specialty alloy manufacturer, we will be affected, both directly and indirectly, if climate change legislation, such as use of a "cap and trade" system, is enacted and implemented. Such legislation could have a material adverse impact on our results of operations, financial condition and cash flows. Product liability and product quality claims could adversely affect our operating results.
As a specialty alloy manufacturer, we will be affected, both directly and indirectly, if climate change legislation, such as use of a "cap and trade" system, is enacted and implemented.
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.
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.
Any significant delay or inability to successfully expand our operations in a timely and cost-effective manner could materially adversely affect our business, financial condition and results of operations. Over the last few years, we have undertaken capital projects associated with expanding our production capacity and capability. These projects place a significant demand on management and operational resources.
Over the last few years, we have undertaken capital projects associated with expanding our production capacity and capability. These projects place a significant demand on management and operational resources.
Disruptions or lack of availability in the supply of energy resources could temporarily impair the ability to operate our production facilities. Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, have affected and may continue to adversely affect our profitability.
These market conditions often are affected by political and economic factors beyond our control. Disruptions or lack of availability in the supply of energy resources could temporarily impair the ability to operate our production facilities.
Added
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.
Added
Such legislation could have a material adverse impact on our results of operations, financial condition and cash flows. 8 Table of Contents Product liability and product quality claims could adversely affect our operating results.
Added
Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, have affected and may continue to adversely affect our profitability. 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.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our facilities are in good condition and suitable for our business needs. 12 Table of Contents
Biggest changeWe believe our facilities are in good condition and suitable for our business needs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeData 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.
Biggest changeData sourced from Nasdaq Copyright © 2024 S&P Dow Jones Indices LLC, a division of S&P Global Copyright © 2024 Russell Investments 2019 2020 2021 2022 2023 2024 Carpenter Technology Corporation $ 100.00 $ 51.80 $ 88.50 $ 63.00 $ 129.00 $ 255.10 S&P Midcap 400 $ 100.00 $ 91.70 $ 138.60 $ 116.60 $ 134.80 $ 150.60 Russell Materials & Processing Growth $ 100.00 $ 111.10 $ 158.90 $ 111.20 $ 135.80 $ 155.10 Issuer Purchases of Equity Securities During the fourth quarter of fiscal year 2024, employees surrendered 7,571 shares to the Company, at an average purchase price of $98.49, for the payment of the minimum tax liability withholding obligations upon the vesting of shares of restricted stock.
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.
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." 16 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, 2024 , and prior four fiscal years.
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.
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. * $100.00 invested on June 30, 2019 in stock or index, including reinvestment of dividends. Fiscal years ending June 30.
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 cumulative total return assumes an investment of $100.00 on June 30, 2019 and the reinvestment of any dividends during the period. Our Peer Group consists of the companies in the Russell RSCC Materials & Processing Growth Index.
We do not consider this a share buyback program. 16 Table of Contents
We do not consider this a share buyback program. 17 Table of Contents
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.
The closing price of the common stock was $139.31 on August 9, 2024. 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 2024 and 2023, respectively. As of August 9, 2024, there were 1,516 common stockholders of record.
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." 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.
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." 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 2024 Fiscal Year 2023 Period Ended: High Low High Low September 30, $ 71.19 $ 51.94 $ 39.43 $ 24.76 December 31, $ 74.06 $ 60.38 $ 43.32 $ 31.81 March 31, $ 71.65 $ 58.87 $ 52.50 $ 35.72 June 30, $ 112.75 $ 70.19 $ 56.34 $ 40.57 Annual June 30, $ 112.75 $ 51.94 $ 56.34 $ 24.76 The range of our common stock price on the NYSE from July 1, 2024 to August 9, 2024 was $103.37 to $148.94.
Added
We recently announced that our Board of Directors approved a share repurchase program up to $400.0 million of our outstanding common stock.

Item 7. Management's Discussion & Analysis

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

116 edited+40 added−64 removed123 unchanged
Biggest changeThe 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.
Biggest change"Financial Statements and Supplementary Data." The following table includes comparative information for our volumes by business segment: Pounds sold Fiscal Year Decrease % Decrease (in thousands) 2024 2023 Specialty Alloys Operations 208,154 212,050 (3,896) (2) % Performance Engineered Products * 10,094 11,864 (1,770) (15) % Intersegment (11,946) (9,792) (2,154) (22) % Total pounds sold 206,302 214,122 (7,820) (4) % * Pounds sold data for PEP segment includes Dynamet and Additive businesses only. 26 Table of Contents The following table includes comparative information for our net sales by business segment: Net sales Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2024 2023 Specialty Alloys Operations $ 2,443.8 $ 2,213.6 $ 230.2 10 % Performance Engineered Products 411.0 433.7 (22.7) (5) % Intersegment (95.1) (97.0) 1.9 2 % Total net sales $ 2,759.7 $ 2,550.3 $ 209.4 8 % The following table includes comparative information for our net sales by business segment, but excluding surcharge revenue: Net sales excluding surcharge revenue Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2024 2023 Specialty Alloys Operations $ 1,876.0 $ 1,540.6 $ 335.4 22 % Performance Engineered Products 377.8 397.1 (19.3) (5) % Intersegment (86.1) (89.7) 3.6 4 % Total net sales excluding surcharge revenue $ 2,167.7 $ 1,848.0 $ 319.7 17 % Specialty Alloys Operations Segment Net sales in fiscal year 2024 for the SAO segment increased 10 percent to $2,443.8 million, as compared with $2,213.6 million in fiscal year 2023.
This compares with net loss of $49.1 million, or $1.01 loss per diluted share, in fiscal year 2022. There were no reported special items for fiscal year 2023. Excluding special items for fiscal year 2022, loss per diluted share would have been $1.06.
This compares with net loss of $49.1 million, or $1.01 loss per diluted share in fiscal year 2022. There were no reported special items for fiscal year 2023. Excluding special items for fiscal year 2022, loss per share would have been $1.06.
Capitalized interest reduced interest expense by $1.5 million for fiscal year 2023 and by $0.8 million in fiscal year 2022. Debt extinguishment losses, net in fiscal year 2023 were $0.0 million. Debt extinguishment losses, net in fiscal year 2022 were $6.0 million due to debt prepayment costs made in connection with the notes due March 2023.
Capitalized interest reduced interest expense by $1.5 million for fiscal year 2023 and by $0.8 million in fiscal year 2022. Debt extinguishment losses, net in fiscal year 2023 were $0.0 million. Debt extinguishment losses, net in fiscal year 2022 were $6.0 million due to debt prepayment costs made in connection with the notes due in March 2023.
Excluding surcharge revenue, net sales increased 35 percent from fiscal year 2022 on 13 percent higher shipment volume as compared to fiscal year 2022. The SAO segment results reflect higher sales in all end-use markets except Transportation compared to fiscal year 2022. In particular, Aerospace and Defense sales excluding surcharge increased 54 percent as compared to fiscal year 2022.
Excluding surcharge revenue, net sales increased 35 percent from fiscal year 2022 on 13 percent higher shipment volume. The SAO segment results reflect higher sales in all end-use markets except Transportation compared to fiscal year 2022. In particular, Aerospace and Defense sales excluding surcharge increased 54 percent as compared to fiscal year 2022.
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.
See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
ROU assets are recognized at commencement date at the value of the lease liability and are adjusted for any prepayments, lease incentives received, and initial direct costs incurred. Lease liabilities are recognized at lease commencement date based on the present value of remaining lease payments over the lease term.
ROU assets are recognized at the commencement date at the value of the lease liability and are adjusted for any prepayments, lease incentives received and initial direct costs incurred. Lease liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term.
We also use foreign currency forward contracts to protect certain short-term asset or liability positions denominated in foreign currencies against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other income and expense.
We also use foreign currency forward contracts to protect certain short-term asset or liability positions denominated in foreign currencies against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other expense (income), net.
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.
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 per share is not a U.S.
Net Pension Expense (Benefit) Net pension expense (benefit), as we define it below, includes the net periodic benefit costs related to both our pension and other postretirement plans. The net periodic benefit costs are determined annually based on beginning of year balances and are recorded ratably throughout the fiscal year, unless a significant re-measurement event occurs.
Net Pension Expense (Income) Net pension expense (income), as we define it below, includes the net periodic benefit costs related to both our pension and other postretirement plans. The net periodic benefit costs are determined annually based on beginning of year balances and are recorded ratably throughout the fiscal year, unless a significant re-measurement event occurs.
GAAP"). We present and discuss these financial measures because management believes removing the impact of raw material surcharge from net sales provides a more consistent basis for comparing results of operations from period to period for the reasons discussed earlier in this report.
We present and discuss these financial measures because management believes removing the impact of raw material surcharge from net sales provides a more consistent basis for comparing results of operations from period to period for the reasons discussed earlier in this report.
Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2023 2022 Aerospace and Defense $ 1,290.7 $ 790.2 $ 500.5 63 % Medical 301.6 212.3 89.3 42 % Transportation 185.0 178.3 6.7 4 % Energy 163.3 113.0 50.3 45 % Industrial and Consumer 487.2 417.2 70.0 17 % Distribution 122.5 125.3 (2.8) (2) % Total net sales $ 2,550.3 $ 1,836.3 $ 714.0 39 % The following table includes comparative information for our net sales by the same principal end-use markets, but excluding surcharge revenue: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2023 2022 Aerospace and Defense $ 919.5 $ 599.6 $ 319.9 53 % Medical 241.3 177.2 64.1 36 % Transportation 121.8 125.2 (3.4) (3) % Energy 104.3 76.3 28.0 37 % Industrial and Consumer 339.4 297.2 42.2 14 % Distribution 121.7 124.5 (2.8) (2) % Total net sales excluding surcharge revenue $ 1,848.0 $ 1,400.0 $ 448.0 32 % Sales to the Aerospace and Defense end-use market increased 63 percent from fiscal year 2022 to $1,290.7 million.
The following table includes comparative information for our net sales, which includes surcharge revenue, by principal end-use markets: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2023 2022 Aerospace and Defense $ 1,290.7 $ 790.2 $ 500.5 63 % Medical 301.6 212.3 89.3 42 % Transportation 185.0 178.3 6.7 4 % Energy 163.3 113.0 50.3 45 % Industrial and Consumer 487.2 417.2 70.0 17 % Distribution 122.5 125.3 (2.8) (2) % Total net sales $ 2,550.3 $ 1,836.3 $ 714.0 39 % The following table includes comparative information for our net sales by the same principal end-use markets, but excluding surcharge revenue: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2023 2022 Aerospace and Defense $ 919.5 $ 599.6 $ 319.9 53 % Medical 241.3 177.2 64.1 36 % Transportation 121.8 125.2 (3.4) (3) % Energy 104.3 76.3 28.0 37 % Industrial and Consumer 339.4 297.2 42.2 14 % Distribution 121.7 124.5 (2.8) (2) % Total net sales excluding surcharge revenue $ 1,848.0 $ 1,400.0 $ 448.0 32 % 28 Table of Contents Sales to the Aerospace and Defense end-use market increased 63 percent from fiscal year 2022 to $1,290.7 million.
However, there can be no assurance that an increase in the scope of pending matters or that any future lawsuits, claims, proceedings or investigations will not be material to our financial position, results of operations or cash flows in a particular future quarter or year. 42 Table of Contents Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995.
However, there can be no assurance that an increase in the scope of pending matters or that any future lawsuits, claims, proceedings or investigations will not be material to our financial position, results of operations or cash flows in a particular future quarter or year. 40 Table of Contents Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995.
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.
Management believes that the presentation of earnings 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.
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.
Changes in estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment. 36 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.
The following presents our operating 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.
The following presents our operating income 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.
The fiscal year 2023 tax expense includes the unfavorable impacts of losses in certain foreign jurisdictions for which no tax benefit can be recognized as well as tax charges of $0.3 million for the impact of a state tax legislative change and $0.4 million resulting from changes in our prior year tax positions.
The fiscal year 2023 tax expense included the unfavorable impacts of losses in certain foreign jurisdictions for which no tax benefit can be recognized as well as tax charges of $0.3 million for the impact of a state tax legislative change and $0.4 million resulting from changes in our prior year tax positions.
We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements. 43 Table of Contents
We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements. 41 Table of Contents
Fiscal Year ($ in millions) 2023 2022 Net sales $ 2,550.3 $ 1,836.3 Less: surcharge revenue 702.3 436.3 Net sales excluding surcharge revenue $ 1,848.0 $ 1,400.0 Gross profit: $ 337.3 $ 149.8 COVID-19 employee retention credits — (11.9) Gross profit excluding special item $ 337.3 $ 137.9 Gross margin 13.2 % 8.2 % Gross margin excluding surcharge revenue and special item 18.3 % 9.9 % Selling, General and Administrative Expenses Selling, general and administrative expenses in fiscal year 2023 were $204.2 million, or 8.0 percent of net sales (11.0 percent of net sales excluding surcharge revenue), compared to $174.7 million, or 9.5 percent of net sales (12.5 percent of net sales excluding surcharge revenue), in fiscal year 2022.
Fiscal Year ($ in millions) 2023 2022 Net sales $ 2,550.3 $ 1,836.3 Less: surcharge revenue 702.3 436.3 Net sales excluding surcharge revenue $ 1,848.0 $ 1,400.0 Gross profit: $ 337.3 $ 149.8 COVID-19 employee retention credits — (11.9) Gross profit excluding special item $ 337.3 $ 137.9 Gross margin 13.2 % 8.2 % Gross margin excluding surcharge revenue and special item 18.3 % 9.9 % 29 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses in fiscal year 2023 were $204.2 million, or 8.0 percent of net sales (11.0 percent of net sales excluding surcharge revenue), compared to $174.7 million, or 9.5 percent of net sales (12.5 percent of net sales excluding surcharge revenue), in fiscal year 2022.
They include but are not limited to: (1) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, defense, medical, transportation, energy, industrial and consumer, or other influences on Carpenter Technology's business such as new competitors, the consolidation of competitors, customers, and suppliers or the transfer of manufacturing capacity from the United States to foreign countries; (2) the ability of Carpenter Technology to achieve cash generation, growth, earnings, profitability, operating income, cost savings and reductions, qualifications, productivity improvements or process changes; (3) the ability to recoup increases in the cost of energy, raw materials, freight or other factors; (4) domestic and foreign excess manufacturing capacity for certain metals; (5) fluctuations in currency exchange rates; (6) the effect of government trade actions; (7) the valuation of the assets and liabilities in Carpenter Technology's pension trusts and the accounting for pension plans; (8) possible labor disputes or work stoppages; (9) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products; (10) the ability to successfully acquire and integrate acquisitions; (11) the availability of credit facilities to Carpenter Technology, its customers or other members of the supply chain; (12) the ability to obtain energy or raw materials, especially from suppliers located in countries that may be subject to unstable political or economic conditions; (13) Carpenter Technology's manufacturing processes are dependent upon highly specialized equipment located primarily in facilities in Reading and Latrobe, Pennsylvania and Athens, Alabama for which there may be limited alternatives if there are significant equipment failures or a catastrophic event; (14) the ability to hire and retain a qualified workforce and key personnel, including members of the executive management team, management, metallurgists and other skilled personnel; (15) fluctuations in oil and gas prices and production; (16) the impact of potential cyber attacks and information technology or data security breaches; (17) inability of suppliers to meet obligations due to supply chain disruptions or otherwise; (18) inability to meet increased demand, production targets or commitments; (19) the ability to manage the impacts of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as the COVID-19 pandemic; and (20) geopolitical, economic, and regulatory risks relating to our global business, including geopolitical and diplomatic tensions, instabilities and conflicts, such as the war in Ukraine, as well as compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations.
They include but are not limited to: (1) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, defense, medical, transportation, energy, industrial and consumer, or other influences on Carpenter Technology's business such as new competitors, the consolidation of competitors, customers, and suppliers or the transfer of manufacturing capacity from the United States to foreign countries; (2) the ability of Carpenter Technology to achieve cash generation, growth, earnings, profitability, operating income, cost savings and reductions, qualifications, productivity i mprovements or process changes; (3) the ability to recoup increases in the cost of energy, raw materials, freight or other factors; (4) domestic and foreign excess manufacturing capacity for certain metals; (5) fluctuations in currency exchange and interest rates; (6) the effect of government trade actions; (7) the valuation of the assets and liabilities in Carpenter Technology's pension trusts and the accounting for pension plans; (8) possible labor disputes or work stoppages; (9) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products; (10) the ability to successfully acquire and integrate acquisitions; (11) the availability of credit facilities to Carpenter Technology, its customers or other members of the supply chain; (12) the ability to obtain energy or raw materials, especially from suppliers located in countries that may be subject to unstable political or economic conditions; (13) Carpenter Technology's manufacturing processes are dependent upon highly specialized equipment located primarily in facilities in Reading and Latrobe, Pennsylvania and Athens, Alabama for which there may be limited alternatives if there are significant equipment failures or a catastrophic event; (14) the ability to hire and retain a qualified workforce and key personnel, including members of the executive management team, management, metallurgists and other skilled personnel; (15) fluctuations in oil and gas prices and production; (16) the impact of potential cyber attacks and information technology or data security breaches; (17) the ability of suppliers to meet obligations due to supply chain disruptions or otherwise; (18) the ability to meet increased demand, production targets or commitments; (19) the ability to manage the impacts of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments; and (20) geopolitical, economic, and regulatory risks relating to our global business, including geopolitical and diplomatic tensions, instabilities and conflicts, such as the war in Ukraine, the war between Israel and HAMAS, and Houthi attacks on commercial shipping vessels and other naval vessels as well as compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations.
Net Sales and Gross Margin Excluding Surcharge Revenue and Special Items This report includes discussions of net sales as adjusted to exclude the impact of raw material surcharge and special items and the resulting impact on gross margins, which represent financial measures that have not been determined in accordance with accounting principles generally accepted in the United States of America ("U.S.
Net Sales and Gross Margin Excluding Surcharge Revenue This report includes discussions of net sales as adjusted to exclude the impact of raw material surcharge and the resulting impact on gross margins, which represent financial measures that have not been determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP").
We perform ongoing credit evaluations of our customers and monitor their payment patterns. Should the financial condition of our customers deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Inventories Inventories are valued at the lower of cost or market for those inventories determined by the LIFO method.
We perform ongoing credit evaluations of our customers and monitor their payment patterns. Should 35 Table of Contents the financial condition of our customers deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Inventories Inventories are valued at the lower of cost or market for those inventories determined by the LIFO method.
These disruptions have resulted in increased direct costs and certain inefficiencies in our operations. 19 Table of Contents We have taken steps that we believe are necessary to mitigate inflationary pressures and supply chain disruptions.
These disruptions have resulted in increased direct costs and certain inefficiencies in our operations. 20 Table of Contents We have taken steps that we believe are necessary to mitigate inflationary pressures and supply chain disruptions.
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.
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 are not U.S.
Partially offsetting this benefit in fiscal year 2022 was an environmental charge of $2.4 million which represents a historical environmental site liability. 23 Table of Contents Operating Income (Loss) Our operating income in fiscal year 2023 was $133.1 million, or 5.2 percent of net sales, as compared with $24.9 million of operating loss, or negative 1.4 percent of net sales, in fiscal year 2022.
Partially offsetting this benefit in fiscal year 2022 was an environmental charge of $2.4 million which represents a historical environmental site liability. Operating Income (Loss) Our operating income in fiscal year 2023 was $133.1 million, or 5.2 percent of net sales, as compared with $24.9 million of operating loss, or negative 1.4 percent of net sales in fiscal year 2022.
The higher interest expense in fiscal year 2023 is largely due to higher interest rates on debt that was refinanced and short-term borrowings under our Credit Facility. Other Expense (Income), Net Other expense, net for fiscal year 2023 was $6.5 million compared with other income, net of $12.7 million in fiscal year 2022.
The higher interest expense in fiscal year 2023 is largely due to higher interest rates on debt that was refinanced and short-term borrowings under our Credit Facility. 30 Table of Contents Other Expense (Income), Net Other expense, net for fiscal year 2023 was $6.5 million compared with other income, net of $12.7 million in fiscal year 2022.
The liabilities recorded for environmental remediation costs at Superfund sites, other third party-owned sites and Carpenter-owned current or former operating facilities remaining at June 30, 2023 and 2022 were $16.5 million and $18.3 million, respectively. In December 1997, we were named as a party in a Landfill Settlement Agreement related to a third-party Superfund waste-disposal site.
The liabilities recorded for environmental remediation costs at Superfund sites, other third party-owned sites and Carpenter-owned current or former operating facilities remaining at June 30, 2024 and 2023 were $17.3 million and $16.5 million , respectively. In December 1997, we were named as a party in a Landfill Settlement Agreement related to a third-party Superfund waste-disposal site.
Quantitative and Qualitative Disclosures About Market Risk" for discussion of market sensitive instruments and associated market risk for Carpenter. 41 Table of Contents Contingencies Environmental We are subject to various 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.
Quantitative and Qualitative Disclosures About Market Risk" for discussion of market sensitive instruments and associated market risk for Carpenter Technology Corporation. 39 Table of Contents Contingencies Environmental We are subject to various 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.
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.
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 e xcluding the impact of the special items.
As a result, we are experiencing higher labor rates, extended lead times for supplies, as well as delayed capital expenditures due to the availability of equipment and outside contractors.
As a result, we are experiencing higher labor rates, extended lead times for certain supplies, as well as delay of certain capital expenditures due to the availability of equipment and outside contractors.
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.
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 $1.4 million. If the discount rate was changed by 0.25 percent, the net pension expense (income) would change by $0.3 million.
For purposes of the discounted cash flow analysis for SAO's fair value, a weighted average cost capital of 11.0 percent and a terminal growth rate assumption of 2.5 percent were used.
For purposes of the discounted cash flow analysis for SAO's fair value, a weighted average cost capital of 9.5 percent and a terminal growth rate assumption of 2.5 percent were used.
While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin excluding the impact of the special items.
While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin.
The following is a summary of the net pension expense (income) for the years ended June 30, 2023, 2022 and 2021: Years Ended June 30, ($ 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.
The following is a summary of the net pension expense (income) for the years ended June 30, 2024, 2023 and 2022 : Years Ended June 30, ($ in millions) 2024 2023 2022 Pension plans $ 78.0 $ 20.6 $ (4.2) Other postretirement plans (2.0) (0.7) (3.1) Net pension expense (income) $ 76.0 $ 19.9 $ (7.3) The service cost component of net pension expense (income) represents the estimated cost of future pension liabilities earned associated with active employees.
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 financial measures 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. Adjusted Earnings Per Share The following provides a reconciliation of adjusted earnings per share, to its most directly comparable U.S.
We value other inventory at the lower of cost or net realizable value, determined by the FIFO and average cost methods. As of June 30, 2023 and 2022, $133.2 million and $122.9 million of inventory, respectively, was accounted for using a method other than the LIFO method.
We value other inventory at the lower of cost or net realizable value, determined by the FIFO and average cost methods. As of June 30, 2024 and 2023 , $152.2 million and $133.2 million of inventory, respectively, was accounted for using a method other than the LIFO method.
GAAP financial measure and should not be considered in isolation of, or as a substitute for, net sales and gross margin calculated in accordance with U.S. GAAP.
Net sales and gross margin excluding surcharge revenue is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, net sales and gross margin calculated in accordance with U.S. GAAP.
If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2023, the SAO reporting unit would have a fair value that exceeded the carrying value by approximately 57 percent. Goodwill associated with the PEP segment is tested at the Dynamet and Latrobe Distribution reporting unit level.
If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2024, the SAO reporting unit would have a fair value that exceeded the carrying value by approximately 196 percent. Goodwill associated with the PEP segment is tested at the Dynamet reporting unit level.
As of June 1, 2023, the fair value of the Dynamet reporting unit exceeded the carrying value by approximately 106 percent. For purposes of the discounted cash flow analysis for Dynamet's fair value, a weighted average cost capital of 14.0 percent and a terminal growth rate assumption of 2.5 percent were used.
As of June 1, 2024, the fair value of the Dynamet reporting unit exceeded the carrying value by 144 percent. For purposes of the discounted cash flow analysis for Dynamet's fair value, a weighted average cost capital of 11.0 percent and a terminal growth rate assumption of 2.5 percent were used.
GAAP financial measures: Fiscal Year ($ in millions) 2023 2022 2021 Net cash provided from operating activities $ 14.7 $ 6.0 $ 250.0 Purchases of property, plant, equipment and software (82.3) (91.3) (100.5) Proceeds from disposals of property, plant and equipment and assets held for sale — 2.2 1.6 Proceeds from divestiture of business — — 20.0 Adjusted free cash flow $ (67.6) $ (83.1) $ 171.1 Management believes that the presentation of adjusted free cash flow provides useful information to investors regarding our financial condition because it is a measure of cash generated which management evaluates for alternative uses.
GAAP financial measure: Fiscal Year ($ in millions) 2024 2023 2022 Net cash provided from operating activities $ 274.9 $ 14.7 $ 6.0 Purchases of property, plant, equipment and software (96.6) (82.3) (91.3) Proceeds from disposals of property, plant and equipment and assets held for sale 0.7 — 2.2 Adjusted free cash flow $ 179.0 $ (67.6) $ (83.1) Management believes that the presentation of adjusted free cash flow provides useful information to investors regarding our financial condition because it is a measure of cash generated which management evaluates for alternative uses.
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.
Goodwill associated with the SAO reporting unit is tested at the SAO segment level. As of June 1, 2024, the fair value of the SAO reporting unit exceeded the carrying value by 203 percent.
If the FIFO method of inventory had been used instead of the LIFO method, inventories would have been $517.2 million and $427.2 million higher as of June 30, 2023 and 2022, respectively. 37 Table of Contents Costs include direct materials, direct labor, applicable manufacturing overhead and other direct costs.
If the FIFO method of inventory had been used instead of the LIFO method, inventories would have been $371.0 million and $517.2 million higher as of June 30, 2024 and 2023, respectively. Costs include direct materials, direct labor, applicable manufacturing overhead and other direct costs.
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.
The impact of fluctuations in foreign currency exchange rates resulted in a $5.8 million decrease in sales during fiscal year 2023 compared to fiscal year 2022. International sales as a percentage of our total net sales represented 39 percent and 36 percent for fiscal year 2023 and fiscal year 2022, respectively.
In light of these decisions and market conditions at the time, the pace of growth in the future projections for the Additive reporting unit were lowered.
In light of these market conditions at the time, the pace of growth in the future projections for the Latrobe Distribution reporting unit were lowered.
The table below summarizes our sales by end-use market over the past three fiscal years: Years Ended June 30, 2023 2022 2021 ($ in millions) Dollars % of Total Dollars % of Total Dollars % of Total Aerospace and Defense $ 1,290.7 51 % $ 790.2 43 % $ 710.9 48 % Medical 301.6 12 % 212.3 12 % 143.5 10 % Transportation 185.0 7 % 178.3 10 % 144.5 10 % Energy 163.3 6 % 113.0 6 % 87.8 6 % Industrial and Consumer 487.2 19 % 417.2 23 % 292.1 20 % Distribution 122.5 5 % 125.3 6 % 96.8 6 % Total net sales $ 2,550.3 100 % $ 1,836.3 100 % $ 1,475.6 100 % 18 Table of Contents Impact of Raw Material Prices and Product Mix We value most of our inventory utilizing the LIFO inventory costing methodology.
The table below summarizes our sales by end-use market over the past three fiscal years: Years Ended June 30, 2024 2023 2022 ($ in millions) Dollars % of Total Dollars % of Total Dollars % of Total Aerospace and Defense $ 1,538.8 56 % $ 1,290.7 51 % $ 790.2 43 % Medical 375.6 14 % 301.6 12 % 212.3 12 % Transportation 149.1 5 % 185.0 7 % 178.3 10 % Energy 185.8 7 % 163.3 6 % 113.0 6 % Industrial and Consumer 415.3 15 % 487.2 19 % 417.2 23 % Distribution 95.1 3 % 122.5 5 % 125.3 6 % Total net sales $ 2,759.7 100 % $ 2,550.3 100 % $ 1,836.3 100 % 19 Table of Contents Impact of Raw Material Prices and Product Mix We value most of our inventory utilizing the LIFO inventory costing methodology.
As of June 30, 2023, we have three reporting units with goodwill recorded. Goodwill associated with the SAO reporting unit as of June 30, 2023, was $195.5 million and represents approximately 81 percent of total goodwill as of June 30, 2023.
As of June 30, 2024, we have two reporting units with goodwill recorded. Goodwill associated with the SAO reporting unit as of June 30, 2024, was $195.5 million and represents 86 percent of total goodwill as of June 30, 2024.
GAAP financial measures. 17 Table of Contents Business Trends Selected financial results for the past three fiscal years are summarized below: Years Ended June 30, ($ in millions, except per share data) 2023 2022 2021 Net sales $ 2,550.3 $ 1,836.3 $ 1,475.6 Net sales excluding surcharge revenue (1) $ 1,848.0 $ 1,400.0 $ 1,252.8 Operating income (loss) $ 133.1 $ (24.9) $ (248.6) Adjusted operating income (loss) (1) $ 133.1 $ (34.0) $ (105.5) Net income (loss) $ 56.4 $ (49.1) $ (229.6) Diluted earnings (loss) per share $ 1.14 $ (1.01) $ (4.76) Adjusted diluted earnings (loss) per share (1) $ 1.14 $ (1.06) $ (2.01) Purchases of property, plant, equipment and software $ 82.3 $ 91.3 $ 100.5 Adjusted free cash flow (1) $ (67.6) $ (83.1) $ 171.1 Pounds sold (in thousands) (2) 214,122 188,112 169,706 (1) See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
GAAP financial measures. 18 Table of Contents Business Trends Selected financial results for the past three fiscal years are summarized below: Years Ended June 30, ($ in millions, except per share data) 2024 2023 2022 Net sales $ 2,759.7 $ 2,550.3 $ 1,836.3 Net sales excluding surcharge revenue (1) $ 2,167.7 $ 1,848.0 $ 1,400.0 Operating income (loss) $ 323.1 $ 133.1 $ (24.9) Adjusted operating income (loss) (1) $ 354.1 $ 133.1 $ (34.0) Net income (loss) $ 186.5 $ 56.4 $ (49.1) Diluted earnings (loss) per share $ 3.70 $ 1.14 $ (1.01) Adjusted diluted earnings (loss) per share (1) $ 4.74 $ 1.14 $ (1.06) Purchases of property, plant, equipment and software $ 96.6 $ 82.3 $ 91.3 Adjusted free cash flow (1) $ 179.0 $ (67.6) $ (83.1) Pounds sold (in thousands) (2) 206,302 214,122 188,112 (1) See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
As of June 30, 2023, we had $1.7 million of issued letters of credit and no short-term borrowings under the Credit Facility. The balance of the Credit Facility, $348.3 million, remains available to us. From time to time during the fiscal year ended June 30, 2023, we borrowed under our Credit Facility.
As of June 30, 2024, we had $1.2 million of issued letters of credit under the Credit Facility and the balance of the Credit Facility, $348.8 million, remains available to us. From time to time during the fiscal year ended June 30, 2024, we borrowed under our Credit Facility.
Gross Profit Gross profit in fiscal year 2022 increased to $149.8 million, or 8.2 percent of net sales, from $1.0 million, or 0.1 percent of net sales for fiscal year 2021.
Gross Profit Gross profit in fiscal year 2023 increased to $337.3 million, or 13.2 percent of net sales, from $149.8 million, or 8.2 percent of net sales for fiscal year 2022.
The change in operating cash flow primarily reflects the impact of higher earnings after noncash adjustments to net income in fiscal year 2023 offset by higher cash used for inventory compared to a year ago. The current year reflects cash used to build inventory of $140.3 million compared to $71.9 million in fiscal year 2022.
The change in operating cash flow and adjusted free cash flow in fiscal year 2024 primarily reflects the impact of higher earnings after noncash adjustments to net income and lower cash used for inventory compared to a year ago. The current year reflects cash used to build inventory of $96.7 million compared to $140.3 million in fiscal year 2023.
The adjusted free cash flow results reflect lower capital spending levels in the current period as compared to the prior year period. Capital expenditures for property, plant, equipment and software were $82.3 million for fiscal year 2023 as compared to $91.3 million for fiscal year 2022.
The adjusted free cash flow results also reflect lower capital spending levels in the current period as compared to the prior year period. Capital expenditures for property, plant, equipment and software were $96.6 million for fiscal year 2024 as compared to $82.3 million for fiscal year 2023. In fiscal year 2025, we expect capital expenditures to be approximately $125 million.
The following table shows our actual ratio performance with respect to the financial covenants, as of June 30, 2023: Covenant Covenant Requirement Actual Ratio Consolidated interest coverage ratio 3.00 to 1.00 (minimum) 5.35 to 1.00 Consolidated net leverage ratio 4.00 to 1.00 (maximum) 2.25 to 1.00 To the extent that we do not comply with the current or modified covenants under the Credit Facility, this could reduce our liquidity and flexibility due to potential restrictions on borrowings available to us unless we are able to obtain waivers or modifications of the covenants.
The following table shows our actual ratio performance with respect to the financial covenants, as of June 30, 2024: Covenant Covenant Requirement Actual Ratio Consolidated interest coverage ratio 3.00 to 1.00 (minimum) 10.14 to 1.00 Consolidated net leverage ratio 4.00 to 1.00 (maximum) 0.96 to 1.00 To the extent that we do not comply with the current or modified covenants under the Credit Facility, this could reduce our liquidity and flexibility due to potential restrictions on borrowings available to us unless we are able to obtain waivers or modifications of the covenants. 33 Table of Contents Non-GAAP Financial Measures The following provides additional information regarding certain non-GAAP financial measures that we use in this report.
For those tax positions which should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Interest and penalties on estimated liabilities for uncertain tax positions are recorded as components of the provision for income taxes.
For those tax positions which should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
"Financial Statements and Supplementary Data." The following table includes comparative information for volumes by business segment: Fiscal Year Increase % Increase (Pounds sold, in thousands) 2023 2022 Specialty Alloys Operations 212,050 187,754 24,296 13 % Performance Engineered Products * 11,864 10,662 1,202 11 % Intersegment (9,792) (10,304) 512 5 % Total pounds sold 214,122 188,112 26,010 14 % * Pounds sold data for PEP segment includes Dynamet and Additive businesses only. 25 Table of Contents The following table includes comparative information for net sales by business segment: Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2023 2022 Specialty Alloys Operations $ 2,213.6 $ 1,565.6 $ 648.0 41 % Performance Engineered Products 433.7 344.5 89.2 26 % Intersegment (97.0) (73.8) (23.2) (31) % Total net sales $ 2,550.3 $ 1,836.3 $ 714.0 39 % 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) 2023 2022 Specialty Alloys Operations $ 1,540.6 $ 1,137.1 $ 403.5 35 % Performance Engineered Products 397.1 336.7 60.4 18 % Intersegment (89.7) (73.8) (15.9) (22) % Total net sales excluding surcharge revenue $ 1,848.0 $ 1,400.0 $ 448.0 32 % Specialty Alloys Operations Segment Net sales in fiscal year 2023 for the SAO segment increased 41 percent to $2,213.6 million, as compared with $1,565.6 million in fiscal year 2022.
The following table includes comparative information for our net sales by business segment: Net sales Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2023 2022 Specialty Alloys Operations $ 2,213.6 $ 1,565.6 $ 648.0 41 % Performance Engineered Products 433.7 344.5 89.2 26 % Intersegment (97.0) (73.8) (23.2) (31) % Total net sales $ 2,550.3 $ 1,836.3 $ 714.0 39 % 31 Table of Contents The following table includes comparative information for our net sales by business segment, but excluding surcharge revenue: Net sales excluding surcharge revenue Fiscal Year $ Increase (Decrease) % Increase (Decrease) ($ in millions) 2023 2022 Specialty Alloys Operations $ 1,540.6 $ 1,137.1 $ 403.5 35 % Performance Engineered Products 397.1 336.7 60.4 18 % Intersegment (89.7) (73.8) (15.9) (22) % Total net sales excluding surcharge revenue $ 1,848.0 $ 1,400.0 $ 448.0 32 % Specialty Alloys Operations Segment Net sales in fiscal year 2023 for the SAO segment increased 41 percent to $2,213.6 million, as compared with $1,565.6 million in fiscal year 2022.
Sales by End-Use Markets We sell to customers across diversified end-use markets. The following table includes comparative information for our net sales, which includes surcharge revenue, by principal end-use markets. We believe this is helpful supplemental information in analyzing performance of the business from period to period.
Sales by End-Use Markets We sell to customers across diversified end-use markets. We believe this is helpful supplemental information in analyzing performance of the business from period to period.
GAAP financial measures: ($ in millions, except per share data) Earnings Before Income Taxes Income Tax Expense Net Income Earnings Per Diluted Share* Year ended June 30, 2023, as reported $ 72.5 $ (16.1) $ 56.4 $ 1.14 Special item: None reported — — — — Total impact of special item — — — — Year ended June 30, 2023, as adjusted $ 72.5 $ (16.1) $ 56.4 $ 1.14 * Impact per diluted share calculated using weighted average common shares outstanding of 49.2 million for the fiscal year ended June 30, 2023.
Tax benefit related to restructuring activities — (18.4) (18.4) (0.36) Year ended June 30, 2024, as adjusted $ 294.5 $ (56.0) $ 238.5 $ 4.74 * Impact per diluted share calculated using weighted average common shares outstanding of 50.3 million for the fiscal year ended June 30, 2024 . 34 Table of Contents ($ in millions, except per share data) Earnings Before Income Taxes Income Tax Expense Net Income Earnings Per Diluted Share* Year ended June 30, 2023, as reported $ 72.5 $ (16.1) $ 56.4 $ 1.14 Special item: None reported — — — — Year ended June 30, 2023, as adjusted $ 72.5 $ (16.1) $ 56.4 $ 1.14 * Impact per diluted share calculated using weighted average common shares outstanding of 49.2 million for the fiscal year ended June 30, 2023 .
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.
If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2024, the Dynamet reporting unit would have a fair value that exceeded the carrying value by approximately 140 percent. 37 Table of Contents The estimate of fair value requires significant judgment.
GAAP financial measure and should not be considered in isolation of, or as a substitute for, earnings (loss) per share calculated in accordance with U.S.
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.
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.
Income Taxes Our effective tax rate (income tax expense (benefit) as a percent of income (loss) before taxes) for fiscal year 2024 was 11.9 percent as compared to 22.2 percent for fiscal year 2023.
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 remaining goodwill recorded as of June 30, 2024 of $31.8 million is associated with the Dynamet reporting unit in the PEP segment. The fair value for both reporting units is estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques.
The results reflect double-digit sales growth across Aerospace and Defense, Medical, Energy and Industrial and Consumer end-use markets versus the prior year period. Geographically, sales outside the United States increased 51 percent from fiscal year 2022 to $994.1 million. The increase was due to higher product demand in all regions and in all end-use markets except Distribution.
Excluding surcharge revenue, sales were 32 percent higher than fiscal year 2022 on 14 percent higher volume. The results reflect double-digit sales growth across Aerospace and Defense, Medical, Energy and Industrial and Consumer end-use markets versus the prior year period. Geographically, sales outside the United States increased 51 percent from fiscal year 2022 to $994.1 million.
Special items included in our fiscal year 2022 results included negative impacts from COVID-19 charges of $5.9 million, a historical environmental site charge of $2.4 million and debt extinguishment losses, net of $6.0 million. These charges were offset by benefits related to COVID-19 employee retention credits of $12.7 million and an acquisition-related contingent liability release of $4.7 million.
Special items included in our fiscal year 2022 results included negative impacts from COVID-19 charges of $5.9 million, a historical environmental site charge of $2.4 million and debt extinguishment losses, net of $6.0 million.
We believe this is helpful supplemental information in analyzing the performance of the business from period to period.
We believe that net sales by end-use markets is helpful supplemental information in analyzing the performance of the business from period to period.
We are subject to certain financial and restrictive covenants under the Credit Facility, which, among other things, require the maintenance of a minimum interest coverage ratio and a maximum consolidated net leverage ratio.
We are subject to certain financial and restrictive covenants under the Credit Facility which requires the maintenance of a minimum interest coverage ratio of 3.00 to 1.00 and a consolidated net leverage ratio of no more than 4.00 to 1.00.
In fiscal year 2024, we expect capital expenditures to be approximately $125 million to $130 million. We evaluate liquidity needs for alternative uses including funding external growth opportunities, share repurchases as well as funding consistent dividend payments to stockholders. Dividends for fiscal year 2023 were $39.4 million, as compared to $39.2 million in the prior year period.
We evaluate liquidity needs for alternative uses including funding external growth opportunities, share repurchases as well as funding consistent dividend payments to stockholders. Dividends for fiscal year 2024 were $40.0 million, as compared to $39.4 million in the prior year period. In fiscal years 2024, 2023 and 2022 we declared and paid quarterly cash dividends of $0.20 per share.
The increase was primarily due to higher product demand in the Medical end-use markets in all regions, higher sales in Aerospace and Defense in the South America region, and stronger demand in the Energy end-use market in the Asia Pacific and Canada regions. A portion of our sales outside the United States are denominated in foreign currencies.
The increase was due to higher product demand in all regions and in all end-use markets except Distribution. In particular, Aerospace and Defense outside the United States increased 89 percent. A portion of our sales outside the United States are denominated in foreign currencies.
Any of these factors could have an adverse and/or fluctuating effect on Carpenter Technology's results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended.
The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Sec urities Exchange Act of 1934, as amended.
The following is a summary of the classification of net pension expense (income) for the years ended June 30, 2023, 2022 and 2021: Years Ended June 30, ($ in millions) 2023 2022 2021 Service cost included in Cost of sales $ 8.6 $ 9.6 $ 10.8 Service cost included in Selling, general and administrative expenses 1.3 1.4 1.5 Pension earnings, interest and deferrals included in Other expense (income), net 10.0 (18.3) 0.9 Settlement charge included in Other expense (income), net — — 11.4 Net pension expense (income) $ 19.9 $ (7.3) $ 24.6 As of June 30, 2023 and 2022, amounts capitalized in gross inventory were $2.8 million and $1.7 million, respectively. 20 Table of Contents Operating Performance Overview More than a year ago, we set the goal to return to pre-pandemic (fiscal year 2019) profitability on a run-rate basis by the end of fiscal year 2023.
The following is a summary of the classification of net pension expense (income) for the years ended June 30, 2024, 2023 and 2022 : Years Ended June 30, ($ in millions) 2024 2023 2022 Service cost included in Cost of sales $ 8.4 $ 8.6 $ 9.6 Service cost included in Selling, general and administrative expenses 1.3 1.3 1.4 Pension earnings, interest and deferrals included in Other expense (income), net 14.4 10.0 (18.3) Settlement charge included in Other expense (income), net 51.9 — — Net pension expense (income) $ 76.0 $ 19.9 $ (7.3) As of June 30, 2024 and 2023 , amounts capitalized in gross inventory were $1.6 million and $2.8 million , respectively. 21 Table of Contents Operating Performance Overview Fiscal year 2024 was the most profitable year in Carpenter Technology’s history, achieving $354.1 million in adjusted operating income.
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.
International sales as a percentage of our total net sales represente d 41 percent and 39 percent for fiscal year 2024 and fiscal year 2023, respectively. 22 Table of Contents Sales by End-Use Markets We sell to customers across diversified end-use markets.
The weighted average daily borrowing under the Credit Facility during the fiscal year ended June 30, 2023 was approximately $61.9 million with daily outstanding borrowings ranging from $0.0 million to $166.0 million. As of June 30, 2023, the borrowing rate for the Credit Facility was 7.64%.
The weighted average daily borrowing under the Credit Facility during the fiscal year ended June 30, 2024 was approximately $19.1 million with daily outstanding borrowings ranging from $0.0 million to $67.8 million.
Over the next five years, current estimates indicate that we will be required to make approximately $153.5 million of cash contributions to our domestic qualified defined benefit pension plans, based on the laws in effect for pension funding as of June 30, 2023, and subject to market returns and interest rate assumptions. 33 Table of Contents We have demonstrated the ability to generate cash to meet our needs through cash flows from operations, management of working capital and the ability to access capital markets to supplement internally generated funds.
Over the next five years, current estimates indicate that we will be required to make approximately $128.7 million of cash contributions to our domestic qualified defined benefit pension plans, based on the laws in effect for pension funding as of June 30, 2024, and subject to market returns and interest rate assumptions.
The Credit facility amended and restated our existing Amended and Restated Credit Agreement dated as of March 26, 2021 (the "Prior Credit Agreement") which had been set to expire on March 31, 2024.
The Credit Facility amended and restated ou r then exi sting Amended and Restated Credit Agreement dated as of March 26, 2021 which had been set to expire on March 31, 2024. The Credit Facility extends the maturity to April 12, 20 28.
Capitalized interest reduced interest expense by $0.8 million for fiscal year 2022 and by $8.1 million in fiscal year 2021.
Capitalized interest reduced interest expense by $1.6 million for fiscal year 2024 and by $1.5 million in fiscal year 2023.
Our global cash deployment considers, among other things, the geographic location of our subsidiaries' cash balances, the locations of our anticipated liquidity needs and the cost to access international cash balances, as necessary. During the fiscal year ended June 30, 2023, we repatriated cash of $8.3 million from foreign jurisdictions.
As of June 30, 2024, we had cash and cash equivalents of $22.0 million held at various foreign subsidiaries. Our global cash deployment considers, among other things, the geographic and institutional location of our subsidiaries' cash balances, the locations of our anticipated liquidity needs and the cost to access international cash balances, as necessary.
Industrial and Consumer end-use market sales of $487.2 million increased 17 percent from 2022. Excluding surcharge revenue, sales increased 14 percent on 1 percent lower shipment volume.
Industrial and Consumer end-use market sales of $487.2 million increased 17 percent from fiscal year 2022. Excluding surcharge revenue, sales increased 14 percent on 1 percent lower shipment volume. The fiscal year 2023 results reflect stronger product mix, higher demand for semiconductor materials and increased sales in the electronic sub-market.
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 fiscal year 2023 reflects expense from pension earnings, interest and deferrals compared to income from pension earnings, interest and deferrals from favorable returns on plan assets in fiscal year 2022.
The fiscal year 2023 reflects expense from pension earnings, interest and deferrals compared to income from pension earnings, interest and deferrals from favorable returns on plan assets in fiscal year 2022. 24 Table of Contents Income Taxes Our effective tax rate (income tax expense (benefit) as a percent of income (loss) before taxes) for fiscal year 2023 was 22.2 percent which was the same as 22.2 percent for fiscal year 2022.
Income Taxes Our effective tax rate (income tax expense (benefit) as a percent of income (loss) before taxes) for fiscal year 2023 was 22.2 percent which was the same as 22.2 percent for fiscal year 2022.
We believe that our total liquidity of $392.8 million, as of June 30, 2023, which includes cash and cash equivalents of $44.5 million and available borrowing capacity of $348.3 million under the Credit Facility, will be sufficient to fund our cash needs over the foreseeable future. 34 Table of Contents As of June 30, 2023, we had cash and cash equivalents of approximately $21.2 million held at various foreign subsidiaries.
We believe that our total liquidity of $547.9 million , as of June 30, 2024, which includes cash and cash equivalents of $199.1 million and available borrowing capac ity of $348.8 million under the Credit Facility, will be sufficient to fund our cash needs over the foreseeable future.
See our earlier discussion of "Gross Profit" for a reconciliation of net sales and gross margin, excluding surcharge revenue and special items, to net sales as determined in accordance with U.S. GAAP. Net sales and gross margin excluding surcharge revenue and special items 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, our Board of Directors and others. See our earlier discussion of "Gross Profit" for a reconciliation of net sales and gross margin, excluding surcharge revenue, to net sales as determined in accordance with U.S. GAAP.
"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.
"Financial Statements and Supplementary Data." The following table includes comparative information for our volumes by business segment: Pounds sold Fiscal Year Increase % Increase (in thousands) 2023 2022 Specialty Alloys Operations 212,050 187,754 24,296 13 % Performance Engineered Products * 11,864 10,662 1,202 11 % Intersegment (9,792) (10,304) 512 5 % Total pounds sold 214,122 188,112 26,010 14 % * Pounds sold data for PEP segment includes Dynamet and Additive businesses only.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed9 unchanged
Biggest changeFluctuations in foreign currency exchange rates could subject us to risk of losses on anticipated future cash flows from our international operations or customers. Foreign currency forward contracts are used to hedge certain foreign exchange risk. We use interest rate swaps to achieve a level of floating rate debt relative to fixed rate debt where appropriate.
Biggest changeFluctuations in foreign currency exchange rates could subject us to risk of losses on anticipated future cash flows from our international operations or customers. Foreign currency forward contracts are used to hedge certain foreign exchange risk. From time-to time we use interest rate swaps to achieve a level of floating rate debt relative to fixed rate debt where appropriate.
"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
"Financial Statements and Supplementary Data." Assuming on June 30, 2024, (a) an instantaneous 10 percent decrease in the price of raw materials and energy for which we have commodity forward contracts, or (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. 42 Table of Contents
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.
The status of our financial instruments as of June 30, 2024, is provided in Note 16 to the consolidated financial statements included in Item 8.
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.
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, 2024, we had approximately $2.6 million of net deferred losses related to commodity forward contracts to purchase certain raw materials.

Other CRS 10-K year-over-year comparisons