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What changed in CARPENTER TECHNOLOGY CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of CARPENTER TECHNOLOGY CORP's 2024 and 2025 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 2025 report.

+233 added−221 removedSource: 10-K (2025-08-12) vs 10-K (2024-08-13)

Top changes in CARPENTER TECHNOLOGY CORP's 2025 10-K

233 paragraphs added · 221 removed · 184 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur worldwide staff of expert metallurgists, research and development scientists, engineers and service professionals work closely with our customers to identify and provide innovative solutions to specific product requirements.
Biggest changeOur worldwide staff of expert metallurgists, research and development scientists, engineers and service professionals work closely with our customers to identify and provide innovative solutions to specific product requirements. 3 Table of Contents (8) Environmental Regulations: We are subject to various stringent federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health.
Our website and the content contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. The SEC maintains an Internet site that contains reports, proxy and other information regarding issuers that file electronically. Such information can be accessed through the Internet at www.sec.gov.
Our website and the content contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. The SEC maintains an Internet site that contains reports, proxy and other information regarding issuers that file electronically. Such information can be accessed through the Internet at https://www.sec.gov.
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.
Due to the possibility of future regulatory developments, the amount of future capital expenditures may vary from these estimates. 4 Table of Contents (9) Human Capital Resources: We maintain a high-performance work environment that supports our vision to be the preferred solutions provider in specialty materials.
"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.
"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 2025.
(b) Financial Information About Segments: We are organized in two reportable business segments: Specialty Alloys Operations ("SAO") and Performance Engineered Products ("PEP"). See Note 19 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" for additional segment reporting information.
(b) Financial Information About Segments: We are organized in two reportable business segments: Specialty Alloys Operations ("SAO") and Performance Engineered Products ("PEP"). See Note 20 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" for additional segment reporting information.
The Code of Ethics and any information regarding any waivers of the Code of Ethics are disclosed on Carpenter's website at www.carpentertechnology.com.
The Code of Ethics and any information regarding any waivers of the Code of Ethics are disclosed on Carpenter's website at https://www.carpentertechnology.com.
Governance: Our policy is to comply with the letter and spirit of all laws that govern our operations and to adhere to the highest standards of business ethics. We implemented general legal and ethical guidelines in our "Code of Conduct." The guidelines apply to all employees and majority-owned affiliates, including subsidiaries, both in the United States and other countries.
Governance: Our policy is to comply with the letter and spirit of all laws that govern our operations and to adhere to the highest standards of business ethics. Our "Code of Conduct" includes general legal and ethical guidelines. The guidelines apply to all employees and majority-owned affiliates, including subsidiaries, both in the United States and other countries.
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.
No single customer accounted for 10 percent or more of total net sales for the years ended June 30, 2025, June 30, 2024 and June 30, 2023. No single customer accounted for 10 percent or more of the accounts receivable outstanding at June 30, 2025 or June 30, 2024.
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.
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.
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.
Long-lived assets held outside of the United States were $5.0 million and $5.2 million as of June 30, 2025 and 2024, respectively. For further information on domestic and international sales, see Note 4 to our consolidated financial statements included in Item 8.
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.
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 $1,177.2 million, $1,136.7 million and $994.1 million in fiscal years 2025, 2024 and 2023, respectively.
We use pricing surcharges, indexing mechanisms, base price adjustments and raw material forward contracts to reduce the impact on our business of changing prices for the most significant of these materials.
Purchase prices of certain raw materials have historically been volatile, including the impact of tariffs. We use pricing surcharges, indexing mechanisms, base price adjustments and raw material forward contracts to reduce the impact on our business of changing prices for the most significant of these materials.
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.
As of June 30, 2025, our total workforce consisted of approximately 4,500 employees. This included 179 production employees in Washington, Pennsylvania, who are covered under a collective bargaining agreement which expires on August 31, 2025. Negotiations with union representatives are currently in process.
We accrue amounts for environmental remediation costs representing management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. For further information on environmental remediation, see the Contingencies section included in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the notes to our consolidated financial statements included in Item 8.
Management evaluates the liability for future environmental remediation costs on a quarterly basis. We accrue amounts for environmental remediation costs representing management's best estimate of the probable and reasonably estimable costs relating to environmental remediation. For further information on environmental remediation, see the Contingencies section included in Item 7.
"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.
"Management's Discussion and Analysis of Financial Condition and Results of Operations" and the notes to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data." Our costs of maintaining and operating environmental control equipment were $18.0 million, $17.4 million and $15.7 million for fiscal years 2025, 2024 and 2023, respectively.
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.
The capital expenditures for environmental control equipment were $1.1 million, $0.7 million and $0.3 million for fiscal years 2025, 2024 and 2023, respectively. We anticipate spending approximately $0.8 million on environmental capital projects over the next five fiscal years. This includes approximately $0.4 million in fiscal year 2026.
Additionally, numerous foreign companies produce various specialty metal products similar to those produced by us.
Additionally, numerous foreign companies produce various specialty metal products similar to those produced by us. Furthermore, a number of different products may, in certain instances, be substituted for our finished products.
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.
(7) Research, Product and Process Development: Our expenditures for Company-sponsored research and development were $26.1 million, $25.6 million and $24.4 million in fiscal years 2025 , 2024 and 2023 , respectively.
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.
See Note 20 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data" for additional information. (6) Competition: We are leaders in specialty materials for critical applications with over 135 years of metallurgical and manufacturing expertise. Our business is highly competitive.
Removed
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.
Added
This also included 461 production employees in Latrobe, Pennsylvania, who are covered under a collective bargaining agreement which expires on July 31, 2027.
Removed
(9) Environmental Regulations: We are subject to various stringent federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Management evaluates the liability for future environmental remediation costs on a quarterly basis.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeApproximately 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.
Biggest changeAs of June 30, 2025, there were 461 production employees at our Latrobe business unit located in Latrobe, Pennsylvania are covered by a collective bargaining agreement which expires on July 31, 2027.
As such, our results of operations, financial condition, cash flows and availability of credit could fluctuate significantly from period to period. A significant portion of our sales represents products sold to customers in the commercial aerospace and defense and energy markets. The cyclicality of those markets can adversely affect our current business and our expansion objectives.
As such, our results of operations, financial condition, cash flows and availability of credit could fluctuate significantly from period to period. A significant portion of our sales represents products sold to customers in the commercial aerospace, defense and energy markets. The cyclicality of those markets can adversely affect our current business and our expansion objectives.
A downturn in the commercial aerospace and defense industry would adversely affect the demand for our products and/or the prices at which we are able to sell our products; our results of operations and financial condition could be materially adversely affected.
A downturn in the commercial aerospace or defense industry would adversely affect the demand for our products and/or the prices at which we are able to sell our products; our results of operations and financial condition could be materially adversely affected.
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.
War (such as the current war in Ukraine, the war between Israel and HAMAS, the war between Israel and Hezbollah 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.
Such risks include difficulties in integrating the operations, technologies, products and personnel of the acquired companies, diversion of management's attention from existing operations, difficulties in entering markets in which we have limited or no direct prior experience, dependence on unfamiliar supply chains, insufficient revenues to offset increased expenses associated with acquisitions, loss of key employees of the acquired companies, inaccurate assessment of undisclosed liabilities, difficulties in realizing projected efficiencies, synergies and cost savings, and increases in our debt or limitation on our ability to access additional capital when needed.
Such risks include difficulties in integrating the operations, technologies, products and personnel of the acquired companies, diversion of management's attention from existing operations, difficulties in entering markets in which we have limited or no direct prior experience, dependence on unfamiliar supply chains, insufficient revenue to offset increased expenses associated with acquisitions, loss of key employees of the acquired companies, inaccurate assessment of undisclosed liabilities, difficulties in realizing projected efficiencies, synergies and cost savings, and increases in our debt or limitation on our ability to access additional capital when needed.
The commercial aerospace and defense market is historically cyclical due to both external and internal market factors. These factors include general economic conditions, airline profitability, consumer demand for air travel, varying fuel and labor costs, price competition and international and domestic political conditions such as military conflict and the threat of terrorism.
The commercial aerospace and defense markets are historically cyclical due to both external and internal market factors. These factors include general economic conditions, airline profitability, consumer demand for air travel, varying fuel and labor costs, price competition and international and domestic political conditions such as military conflict and the threat of terrorism.
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.
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 19, 2025.
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.
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, 2025, if the FIFO method of inventory had been used instead of the LIFO method, our inventories would have been approximately $344.5 million higher.
Added
As of June 30, 2025, there were 179 production employees at our Dynamet business unit located in Washington, Pennsylvania are covered by a collective bargaining agreement which expires on August 31, 2025. Negotiations with union representatives are currently in process.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe CISO holds multiple certifications including CISSP, CISA, GCIH, GCIA and PMP. Pursuant to our formal CIRP, suspected cybersecurity incidents are first evaluated by the Carpenter Technology Cybersecurity Team Leader who follows the guidance as outlined in the CIRP to respond to cybersecurity incidents and escalate as necessary based on a defined severity matrix.
Biggest changeThe CISO holds multiple certifications including CISSP, GCIH, GCIA and PMP. Pursuant to our formal CIRP, suspected cybersecurity incidents are first evaluated by the Carpenter Technology Cybersecurity Team Leader who follows the guidance as outlined in the CIRP to respond to cybersecurity incidents and escalate as necessary based on a defined severity matrix.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Clearwater facility is owned, but the land is leased. We also own or lease manufacturing facilities, distribution centers, service centers and sales offices in a number of foreign countries, including Belgium, Canada, China, Mexico, Singapore, Sweden, Taiwan and the United Kingdom. Our corporate offices, located in Philadelphia, Pennsylvania, and Raleigh, North Carolina, are leased.
Biggest changeThe Clearwater facility is owned, but the land is leased. We also own or lease manufacturing facilities, distribution centers, service centers and sales offices in a number of foreign countries, including Belgium, Canada, China, Mexico, Singapore, Sweden and Taiwan. Our corporate offices, located in Philadelphia, Pennsylvania, and Raleigh, North Carolina, are leased.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeInformation 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.
Biggest changeThe following table contains information about purchases by us of our common stock during the quarter ended June 30, 2025: Period Total number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (in millions) April 1-30, 2025 — $ — — $ 322.2 May 1-31, 2025 50,000 233.11 50,000 310.5 June 1-30, 2025 50,000 248.32 50,000 298.1 Quarter ended June 30, 2025 100,000 $ 240.72 100,000 $ 298.1 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 (as defined below) for fiscal year ended June 30, 2025, 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. * $100.00 invested on June 30, 2019 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, 2020, in stock or index, including reinvestment of dividends. Fiscal years ending June 30.
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.
The closing price of the common stock was $248.74 on August 8, 2025. 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 2025 and 2024, respectively. As of August 8, 2025, there were 1,389 common stockholders of record.
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.
The cumulative total return assumes an investment of $100.00 on Jun e 30, 2020, and the reinvestment of any dividends during the period. Our Peer Group consists of the companies in the Russell Small Cap Completeness Growth Index - Basic Materials ("Russell Index"), formerly named Russell RSCC Materials & Processing Growth Index.
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.
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 2025 Fiscal Year 2024 Period Ended: High Low High Low September 30, $ 166.51 $ 103.37 $ 71.19 $ 51.94 December 31, $ 198.24 $ 144.76 $ 74.06 $ 60.38 March 31, $ 213.66 $ 165.14 $ 71.65 $ 58.87 June 30, $ 279.51 $ 138.61 $ 112.75 $ 70.19 Annual June 30, $ 279.51 $ 103.37 $ 112.75 $ 51.94 The range of our common stock price on the NYSE from July 1, 2025, to August 8, 2025, was $238.49 to $290.84.
Data 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.
Data sourced from Nasdaq Copyright © 2025 S&P Dow Jones Indices LLC, a division of S&P Global Copyright © 2025 Russell Investments 2020 2021 2022 2023 2024 2025 Carpenter Technology Corporation $ 100.00 $ 171.00 $ 121.60 $ 249.30 $ 492.70 $ 1,248.60 S&P Midcap 400 $ 100.00 $ 153.20 $ 130.80 $ 153.80 $ 174.70 $ 187.90 Russell Index $ 100.00 $ 138.40 $ 109.90 $ 123.30 $ 126.40 $ 139.40 Issuer Purchases of Equity Securities During the fourth quarter of fiscal year 2025, employees surrendered 6,668 shares to the Company, at an average purchase price of $230.62, for the payment of the minimum tax liability withholding obligations upon the vesting of shares of restricted stock.
We recently announced that our Board of Directors approved a share repurchase program up to $400.0 million of our outstanding common stock.
In July 2024, the Company's Board of Directors authorized a share repurchase program of up to $400.0 million of the Company's outstanding common stock. There is no stated expiration for the share repurchase program.
Added
The shares may be repurchased from time to time at our discretion based on capital needs of the business, general market conditions and market price of the stock. The timing or amount of the shares to be repurchased cannot be assured. The share repurchase program may be discontinued at any time.
Added
As of June 30, 2025, $298.1 million of the $400.0 million remained available for future purchases. During the quarter ended June 30, 2025, the Company purchased 100,000 shares pursuant to the terms of the share repurchase program.

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeThe 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 % 33 Table of Contents The following presents our operating margin excluding the impact of surcharge revenue on net sales for our SAO segment: Specialty Alloys Operations Fiscal Year ($ in millions) 2024 2023 Net Sales $ 2,443.8 $ 2,213.6 Less: surcharge revenue 567.8 673.0 Net sales excluding surcharge revenue $ 1,876.0 $ 1,540.6 Operating income $ 408.5 $ 179.1 Operating margin 16.7 % 8.1 % Adjusted operating margin excluding surcharge revenue 21.8 % 11.6 % The following presents our operating margin excluding the impact of surcharge revenue on net sales for our PEP segment: Performance Engineered Products Fiscal Year ($ in millions) 2024 2023 Net Sales $ 411.0 $ 433.7 Less: surcharge revenue 33.2 36.6 Net sales excluding surcharge revenue $ 377.8 $ 397.1 Operating income $ 36.0 $ 31.8 Operating margin 8.8 % 7.3 % Adjusted operating margin excluding surcharge revenue 9.5 % 8.0 % 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.
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.
This combined with market headwinds due to general industrial macroeconomic conditions including rising interest rates has contributed to lower sales and profit margins compared to the established annual operation plan for fiscal year 2024. Despite our efforts to mitigate the market challenges, results did not improve for the Latrobe Distribution reporting unit during fiscal year 2024.
This combined with market headwinds due to general industrial macroeconomic conditions including rising interest rates contributed to lower sales and profit margins compared to the established annual operation plan for fiscal year 2024. Despite our efforts to mitigate the market challenges, results did not improve for the Latrobe Distribution reporting unit during fiscal year 2024.
Special items included in fiscal year 2024 operating income include a noncash goodwill impairment charge of $14.1 million related to the Latrobe Distribution reporting unit in the PEP segment and restructuring and asset impairment charges of $16.9 million as a result of actions taken to streamline operations in the Carpenter Additive business.
Special items included in fiscal year 2024 operating income include a $14.1 million noncash goodwill impairment charge related to the Latrobe Distribution reporting unit in the PEP segment and restructuring and asset impairment charges of $16.9 million as a result of actions taken to streamline operations in the Carpenter Additive business during fiscal year 2024.
Pension and Other Postretirement Benefits The amount of net pension expense (income), which is determined annually, or upon remeasurement, is based upon the value of the assets in the pension trusts at the beginning of the fiscal year as well as actuarial assumptions, such as the discount rate and the expected long-term rate of return on plan assets.
Pension and Other Postretirement Benefits The amount of net pension expense, which is determined annually, or upon remeasurement, is based upon the value of the assets in the pension trusts at the beginning of the fiscal year as well as actuarial assumptions, such as the discount rate and the expected long-term rate of return on plan assets.
We are a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels and tool steels. We are a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, medical, transportation, energy, industrial and consumer markets.
We are a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels and tool steels. We are a recognized leader in high-performance specialty alloy materials and process solutions for critical applications in the aerospace and defense, medical, energy, transportation and industrial and consumer markets.
Adjusted Operating Income (Loss) and Adjusted Operating Margin Excluding Surcharge Revenue and Special Items This report includes discussions of operating income (loss) and operating margin as adjusted to exclude the impact of raw material surcharge revenue and special items which represent financial measures that have not been determined in accordance with U.S. GAAP.
Adjusted Operating Income and Adjusted Operating Margin Excluding Surcharge Revenue and Special Items This report includes discussions of operating income and operating margin as adjusted to exclude the impact of raw material surcharge revenue and special items which represent financial measures that have not been determined in accordance with U.S. GAAP.
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) 2024 2023 Aerospace and Defense $ 1,538.8 $ 1,290.7 $ 248.1 19 % Medical 375.6 301.6 74.0 25 % Transportation 149.1 185.0 (35.9) (19) % Energy 185.8 163.3 22.5 14 % Industrial and Consumer 415.3 487.2 (71.9) (15) % Distribution 95.1 122.5 (27.4) (22) % Total net sales $ 2,759.7 $ 2,550.3 $ 209.4 8 % 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) 2024 2023 Aerospace and Defense $ 1,199.2 $ 919.5 $ 279.7 30 % Medical 315.4 241.3 74.1 31 % Transportation 108.9 121.8 (12.9) (11) % Energy 130.4 104.3 26.1 25 % Industrial and Consumer 319.4 339.4 (20.0) (6) % Distribution 94.4 121.7 (27.3) (22) % Total net sales excluding surcharge revenue $ 2,167.7 $ 1,848.0 $ 319.7 17 % Sales to the Aerospace and Defense end-use market increased 19 percent from fiscal year 2023 to $1,538.8 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) 2024 2023 Aerospace and Defense $ 1,538.8 $ 1,290.7 $ 248.1 19 % Medical 375.6 301.6 74.0 25 % Energy 185.8 163.3 22.5 14 % Transportation 149.1 185.0 (35.9) (19) % Industrial and Consumer 415.3 487.2 (71.9) (15) % Distribution 95.1 122.5 (27.4) (22) % Total net sales $ 2,759.7 $ 2,550.3 $ 209.4 8 % 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) 2024 2023 Aerospace and Defense $ 1,199.2 $ 919.5 $ 279.7 30 % Medical 315.4 241.3 74.1 31 % Energy 130.4 104.3 26.1 25 % Transportation 108.9 121.8 (12.9) (11) % Industrial and Consumer 319.4 339.4 (20.0) (6) % Distribution 94.4 121.7 (27.3) (22) % Total net sales excluding surcharge revenue $ 2,167.7 $ 1,848.0 $ 319.7 17 % 29 Table of Contents Sales to the Aerospace and Defense end-use market increased 19 percent from fiscal year 2023 to $1,538.8 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. 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.
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. 43 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.
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.
See our earlier discussion of operating income for a reconciliation of adjusted operating income and adjusted operating margin excluding special items to operating income and operating margin determined in accordance with U.S. GAAP. Adjusted operating income and adjusted operating margin excluding surcharge revenue and special items are not U.S.
Net periodic expense (income) is recorded in accounts that are included in both the cost of sales and selling, general and administrative expenses based on the function of the associated employees and in other expense (income), net.
Net periodic expense is recorded in accounts that are included in both the cost of sales and selling, general and administrative expenses based on the function of the associated employees and in other expense, net.
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.
Changes in estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment. 39 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 surcharge mechanism protects our net income on such sales except for the lag effect discussed above. However, surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report. Approximately 45 percent of our net sales are sales to customers under firm price sales arrangements.
The surcharge mechanism protects our net income on such sales except for the lag effect discussed above. However, surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report. Approximately 40 percent of our net sales are sales to customers under firm price sales arrangements.
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.
Quantitative and Qualitative Disclosures About Market Risk" for discussion of market sensitive instruments and associated market risk for Carpenter Technology Corporation. 42 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.
We recorded restructuring and asset impairment charges of $16.9 million as a result of actions taken to streamline operations in the Carpenter Additive business. $15.8 million of this amount represent noncash asset impairment charges. We also recorded a noncash pension settlement charge of $51.9 million as a result of executing de-risking actions to annuitize certain pension plan obligations.
We recorded restructuring and asset impairment charges of $16.9 million as a result of actions taken to streamline operations in the Carpenter Additive business. $15.8 million of this amount represents noncash asset impairment charges. We also recorded a noncash pension settlement charge of $51.9 million as a result of executing de-risking actions to annuitize certain pension plan obligations.
"Financial Statements and Supplementary Data" for a full reconciliation of the statutory federal tax rate to the effective tax rates. Business Segment Results Summary information about our operating results on a segment basis is set forth below. For more detailed segment information, see Note 19 to the consolidated financial statements included in Item 8.
"Financial Statements and Supplementary Data" for a full reconciliation of the statutory federal tax rate to the effective tax rates. Business Segment Results Summary information about our operating results on a segment basis is set forth below. For more detailed segment information, see Note 20 to the consolidated financial statements included in Item 8.
The Credit Facility is a secured revolving credit facility with a commitment of $350.0 million subject to our right, from time to time, to request an increase of the commitment by the greater of (i) $300.0 million or (ii) an amount equal to our consolidated EBITDA; and provides for the issuance of letters of credit subject to a $40.0 million sub-limit.
The Credit Facility is a secured revolving credit facility with a commitme nt of $350.0 million subject to our right, from time to time, to request an increase of the commitment by the greater of (i) $300.0 million or (ii) an amount equal to our consolidated EBITDA; and provides for the issuance of letters of credit subject to a $40.0 million sub-limit.
The restrictions of these covenants (other than the financial ratio covenants) are subject to certain exceptions or threshold triggering amounts or events specified in the Credit Facility, and in some cases the restrictions may be waived by the lenders. As of June 30, 2024, we were in compliance with all of the covenants of the Credit Facility.
The restrictions of these covenants (other than the financial ratio covenants) are subject to certain exceptions or threshold triggering amounts or events specified in the Credit Facility, and in some cases the restrictions may be waived by the lenders. As of June 30, 2025, we were in compliance with all of the covenants of the Credit Facility.
We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements. 41 Table of Contents
We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-K or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements. 44 Table of Contents
GAAP financial measure: ($ in millions, except per share data) Earnings Before Income Taxes Income Tax Expense Net Income Earnings Per Diluted Share* Year ended June 30, 2024, as reported $ 211.6 $ (25.1) $ 186.5 $ 3.70 Special items: Goodwill impairment charge 14.1 — 14.1 0.28 Restructuring and asset impairment charges 16.9 (0.1) 16.8 0.33 Pension settlement charge 51.9 (12.4) 39.5 0.79 U.S.
($ in millions, except per share data) Earnings Before Income Taxes Income Tax Expense Net Income Earnings Per Diluted Share* Year ended June 30, 2024, as reported $ 211.6 $ (25.1) $ 186.5 $ 3.70 Special items: Goodwill impairment charge 14.1 — 14.1 0.28 Restructuring and asset impairment charges 16.9 (0.1) 16.8 0.33 Pension settlement charge 51.9 (12.4) 39.5 0.79 U.S.
Critical Accounting Policies and Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Critical Accounting Policies and Estimates The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Environmental Expenditures Environmental expenditures that pertain to current operations or to future revenues are expensed or capitalized consistent with the Company's capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenues are expensed.
Environmental Expenditures Environmental expenditures that pertain to current operations or to future revenue are expensed or capitalized consistent with the Company's capitalization policy for property, plant and equipment. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to current or future revenue are expensed.
Fiscal Year ($ in millions) 2024 2023 Net sales $ 2,759.7 $ 2,550.3 Less: surcharge revenue 592.0 702.3 Net sales excluding surcharge revenue $ 2,167.7 $ 1,848.0 Gross profit $ 584.3 $ 337.3 Gross margin 21.2 % 13.2 % Gross margin excluding surcharge revenue 27.0 % 18.3 % Selling, General and Administrative Expenses Selling, general and administrative expenses in fiscal year 2024 were $230.2 million, or 8.3 percent of net sales (10.6 percent of net sales excluding surcharge revenue), compared to $204.2 million , or 8.0 percent of net sales ( 11.0 percent of net sales excluding surcharge revenue), in fiscal year 2023 .
Fiscal Year ($ in millions) 2024 2023 Net sales $ 2,759.7 $ 2,550.3 Less: surcharge revenue 592.0 702.3 Net sales excluding surcharge revenue $ 2,167.7 $ 1,848.0 Gross profit $ 584.3 $ 337.3 Gross margin 21.2 % 13.2 % Gross margin excluding surcharge revenue 27.0 % 18.3 % 30 Table of Contents Selling, General and Administrative Expenses Selling, general and administrative expenses in fiscal year 2024 were $230.2 million, or 8.3 percent of net sales (10.6 percent of net sales excluding surcharge revenue), compared to $204.2 million, or 8.0 percent of net sales (11.0 percent of net sales excluding surcharge revenue), in fiscal year 2023.
Operating income for the SAO segment in fiscal year 2024 was $408.5 million, or 16.7 percent of net sales (21.8 percent of net sales excluding surcharge revenue), compared to operati ng income of $179.1 million , or 8.1 percent of net sales ( 11.6 percent of net sales excluding surcharge revenue), for fiscal year 2023 .
Operating income for the SAO segment in fiscal year 2024 was $408.5 million, or 16.7 percent of net sales (21.8 percent of net sales excluding surcharge revenue), compared to operating income of $179.1 million, or 8.1 percent of net sales (11.6 percent of net sales excluding surcharge revenue), for fiscal year 2023.
Because we value most of our inventory under the LIFO costing methodology, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period attempting to match the most recently incurred costs with revenues.
Because we value most of our inventory under the LIFO costing methodology, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period attempting to match the most recently incurred costs with revenue.
The potential tax implications from the distribution of these earnings are expected to be limited to withholding taxes in certain foreign jurisdictions and are not expected to materially impact the consolidated financial statements. See Note 17 to the consolidated financial statements in Item 8.
The potential tax implications from the distribution of these earnings are expected to be limited to withholding taxes in certain foreign jurisdictions and are not expected to materially impact the consolidated financial statements. See Note 18 to the consolidated financial statements in Item 8.
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.
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.
It is management's current intention to use excess cash to fund investments in capital equipment, acquisition opportunities and consistent dividend payments. Additionally, we will discretionarily use excess cash for a recently approved share repurchase program up to $400.0 million of our outstanding common stock. The primary use of this program will be to offset dilution.
It is management's current intention to use excess cash to fund investments in capital equipment, acquisition opportunities and consistent dividend payments. Additionally, we will discretionarily use excess cash for an approved share repurchase program up to $400.0 million of our outstanding common stock. The primary use of this program will be to offset dilution.
Excluding surcharge revenue and special items, adjusted operating income was $354.1 million or adjusted operating margin of 16.3 percent for fiscal year 2024 and 7.2 percent for fiscal year 2023 . Results for fiscal year 2024 reflect ongoing improvement in product mix, higher realized prices, as well as expanded operating efficienc ies compared to fiscal year 2023.
Excluding surcharge revenue and special items, adjusted operating income was $354.1 million or adjusted operating margin of 16.3 percent for fiscal year 2024 and 7.2 percent for fiscal year 2023. Results for fiscal year 2024 reflect ongoing improvement in product mix, higher realized prices, as well as expanded operating efficiencies compared to fiscal year 2023.
Excluding surcharge revenue, sales outside the United States increased 21 percent, reflecting stronger demand in the end-use markets of Aerospace and Defense, Medical and Energy in the European and Asia Pacific regions compared to fiscal year 2023. A p ortion of our sales outside the United States are denominated in foreign currencies.
Excluding surcharge revenue, sales outside the United States increased 21 percent, reflecting stronger demand in the end-use markets of Aerospace and Defense, Medical and Energy in the European and Asia Pacific regions compared to fiscal year 2023. A portion of our sales outside the United States are denominated in foreign currencies.
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.
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. The estimate of fair value requires significant judgment.
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.
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, energy, transportation, 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 and interest rates; (6) the effect of government trade actions, including tariffs; (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; (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, the war between Israel and Hezbollah, 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; (21) challenges affecting the commercial aviation industry or key participants including, but not limited to production and other challenges at The Boeing Company; and (22) the consequences of the announcement, maintenance or use of Carpenter Technology’s share repurchase program.
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.
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. 40 Table of Contents Goodwill associated with the PEP segment is tested at the Dynamet reporting unit level.
Operating income for the PEP segment for fiscal year 2024 was $36.0 million, or 8.8 percent of net sales (9.5 percent of net sales excluding surcharge revenue), as compared with operating income of $31.8 million , or 7.3 percent of net sales (8.0 percent of net sales excluding surcharge revenue) for fiscal year 2023 .
Operating income for the PE P segment for fiscal year 2024 was $36.0 million, or 8.8 percent of net sales (9.5 percent of net sales excluding surcharge revenue), as compared with operating income of $31.8 million, or 7.3 percent of net sales (8.0 percent of net sales excluding surcharge revenue), for fiscal year 2023.
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.
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 2025 were $40.3 million, as compared to $40.0 million in the prior year period. In fiscal years 2025, 2024 and 2023 we declared and paid quarterly cash dividends of $0.20 per share.
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.
If the assumed long-term rate of return on plan assets was changed by 0.25 percent, the net pension expense would change by $1.5 million. If the discount rate was changed by 0.25 percent, the net pension expense would change by $0.4 million.
Fiscal Year ($ in millions) 2024 2023 Net sales $ 2,759.7 $ 2,550.3 Less: surcharge revenue 592.0 702.3 Net sales excluding surcharge revenue $ 2,167.7 $ 1,848.0 Operating income $ 323.1 $ 133.1 Spe cia l items: Goodwill impairment charge 14.1 — Restructuring and asset impairment charges 16.9 — Adjusted operating income excluding special items $ 354.1 $ 133.1 Operating margin 11.7 % 5.2 % Adjusted operating margin excluding surcharge revenue and special items 16.3 % 7.2 % Interest Expense, Net Fiscal year 2024 interest expense, net was $51.0 million compared to $54.1 million in fiscal year 2023.
Fiscal Year ($ in millions) 2024 2023 Net sales $ 2,759.7 $ 2,550.3 Less: surcharge revenue 592.0 702.3 Net sales excluding surcharge revenue $ 2,167.7 $ 1,848.0 Operating income $ 323.1 $ 133.1 Special items: Goodwill impairment 14.1 — Restructuring and asset impairment charges 16.9 — Adjusted operating income excluding special items $ 354.1 $ 133.1 Operating margin 11.7 % 5.2 % Adjusted operating margin excluding surcharge revenue and special items 16.3 % 7.2 % Interest Expense, Net Fiscal ye ar 2024 interest expense, net was $51.0 million compared to $54.1 million in fiscal year 2023.
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.
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, 2025 and 2024, $145.2 million and $152.2 million of inventory, respectively, was accounted for using a method other than the LIFO method.
On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework expected by calendar year 2024.
On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework.
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.
GAAP financial measures and should not be considered in isolation of, or as a substitute for, operating income and operating margin calculated in accordance with U.S. GAAP. 36 Table of Contents Adjusted Earnings Per Dilutive Share The following provides a reconciliation of adjusted earnings per dilutive share, to its most directly comparable U.S.
The impact of fluctuations in foreign currency exchange rates resulted in a $1.9 million increase in sa les during fiscal year 2024 compared to fiscal year 2023.
The impact of fluctuations in foreign currency exchange rates resulted in a $1.9 million increase in sales during fiscal year 2024 compared to fiscal year 2023.
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.
Over the next five years, current estimates indicate that we will be required to make approximately $115.2 million of cash contributions to our domestic qualified defined benefit pension plans, based on the laws in effect for pension funding as of June 30, 2025, and subject to market returns and interest rate assumptions.
Net sales and gross margin excluding surcharge revenue is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, net sales and gross margin calculated in accordance with U.S. GAAP.
Net sales and gross margin excluding surcharge revenue are not U.S. GAAP financial measures and should not be considered in isolation of, or as a substitute for, net sales and gross margin calculated in accordance with U.S. GAAP.
Potential impairment is identified by comparing the fair value of a reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value, any impairment loss is measured by the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.
If the carrying value of the reporting unit exceeds its fair value, any impairment loss is measured by the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.
The following is a summary of the net pension expense (income) for the years ended June 30, 2024, 2023 and 2022 : Years Ended June 30, ($ 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.
The following is a summary of the net pension expense for the years ended June 30, 2025 , 2024 and 2023: Years Ended June 30, ($ in millions) 2025 2024 2023 Pension plans $ 26.3 $ 78.0 $ 20.6 Other postretirement plans (1.5) (2.0) (0.7) Net pension expense $ 24.8 $ 76.0 $ 19.9 The service cost component of net pension expense represents the estimated cost of future pension liabilities earned associated with active employees.
Excluding surcharge revenue, sales were 17 percent higher than fiscal year 2023 on 4 percent lower volume. The results reflect double-digit sales growth across Aerospace and Defense, Medical and Energy end-use markets versus the prior year period driven by realized price increases and improved product mix. Geographically, domestic net sales increased 4 percent from fiscal year 2023.
Excluding surcharge revenue, sales were 17 percent higher t han fiscal year 2023 on 4 percent lower volume. The results reflect double-digit sales growth across Aerospace and Defense, Medical and Energy end-use markets versus the prior year period driven by realized price increases and improved product mix. Geographically, domestic net sales increas ed 4 p ercent from fiscal year 2023.
We, and others in our industry, generally have been able to pass cost increases on major raw materials through to our customers using surcharges that are structured to recover increases in raw material costs.
We, and others in our industry, generally have been able to pass cost increases on major raw materials through to our customers using surcharges that are structured to recover increases in raw material costs including the impact of tariffs.
Excluding surcharge revenue, domestic sales increased 15 percent driven by stronger demand in the end-use markets of Aerospace and Defense, Medical and Energy Net sales outside the United States increased 14 percent from fiscal year 2023 to $1,136.7 million for fiscal year 2024.
Excluding surcharge revenue, domestic sales increased 15 percent driven by stronger demand in the end-use markets of Aerospace and Defense, Medical and Energy. Net sales outside the United States incr eased 14 pe rcent fro m fiscal year 2023 to $1,136.7 million for fiscal year 2024.
During fiscal year 2024, we also reduced income tax expense by $18.4 million related to a U.S. tax benefit that was generated as a result of the Carpenter Additive restructuring actions. Net Sales Net sales for fiscal year 2024 wer e $2,759.7 million, which represents an 8 percent increase from fiscal year 2023.
During fiscal year 2024, we also reduced income tax expense by $18.4 million related to a U.S. tax benefit that was generated as a result of the Carpenter Additive restructuring actions. Net Sales Net sales for fiscal year 2024 were $2,759.7 million , which represents a n 8 percen t increase from fiscal year 2023 .
Excluding surcharge revenue, sales increased 53 percent on 34 percent higher shipment volume. The fiscal year 2023 results reflect increases across all Aerospace end-use sub-markets. This was driven by ramping activity levels across the aerospace supply chain due to higher aircraft build rates to replace aging fleets and meet increasing passenger travel demand.
Excluding surcharge revenue, sales increas ed 30 percent on 11 percent higher shipment volume. The fiscal year 2024 results reflect increases across all Aerospace end-use sub-markets. This was driven by ramping activity levels across the aerospace supply chain due to higher aircraft build rates to replace aging fleets and meet increasing passenger travel demand.
We have the right to voluntarily prepay and re-borrow loans, to terminate or reduce the commitments under the Credit Facility, and, subject to certain lender approvals, to join subsidiaries as subsidiary borrowers. As of June 30, 2024, the borrowing rate for the Credit Facility was 7.09%, however we had no short-term borrowings.
We have the right to voluntarily prepay and re-borrow loans, to terminate or reduce the commitments under the C redit Facility, and, subject to certain lender approvals, to join subsidiaries as subsidiary borrowers. As of June 30, 2025, the borrowing rate for the Credit Facility was 6.18%, however we had no short-term borrowings.
The critical strategies include: (1) the use of commodity forward contracts to fix the price of a portion of anticipated future purchases of certain raw materials and energy to offset the effects of changes in the costs of those commodities; and (2) the use of foreign currency forward contracts to hedge a portion of anticipated future sales denominated in foreign currencies, principally the Euro and Pound Sterling, in order to offset the effect of changes in exchange rates.
The critical strategies include: (1) the use of commodity forward contracts to fix the price of a portion of anticipated future purchases of certain raw materials and energy to offset the effects of changes in the costs of those commodities; and (2) the use of foreign currency forward contracts to hedge a portion of anticipated future purchase commitments for property, plant and equipment denominated in foreign currencies, principally the Euro, in order to offset the effect of changes in exchange rates.
This compares to adjusted gross margin of 18.3 percent in fiscal year 2023 . Our surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect as discussed above.
Excluding the impact of surcharge revenue, our adjusted gross margin in fiscal year 2024 was 27.0 percent. This compares to adjusted gross margin of 18.3 percent in fiscal year 2023. Our surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect as discussed above.
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.
The table below summarizes our sales by end-use market over the past three fiscal years: Years Ended June 30, 2025 2024 2023 ($ in millions) Dollars % of Total Dollars % of Total Dollars % of Total Aerospace and Defense $ 1,768.6 62 % $ 1,538.8 56 % $ 1,290.7 51 % Medical 351.2 12 % 375.6 14 % 301.6 12 % Energy 200.3 7 % 185.8 7 % 163.3 6 % Transportation 113.3 4 % 149.1 5 % 185.0 7 % Industrial and Consumer 359.5 12 % 415.3 15 % 487.2 19 % Distribution 84.2 3 % 95.1 3 % 122.5 5 % Total net sales $ 2,877.1 100 % $ 2,759.7 100 % $ 2,550.3 100 % 19 Table of Contents Impact of Raw Material Prices and Product Mix We value most of our inventory utilizing the LIFO inventory costing methodology.
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.
GAAP financial measure: Years Ended June 30, ($ in millions) 2025 2024 2023 Net cash provided from operating activities $ 440.4 $ 274.9 $ 14.7 Purchases of property, plant, equipment and software (154.3) (96.6) (82.3) Proceeds from disposals of property, plant and equipment and assets held for sale 1.4 0.7 — Adjusted free cash flow $ 287.5 $ 179.0 $ (67.6) 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.
The higher sales excluding surcharge revenue in the SAO segment reflect double-digit percentage growth in the end-use markets of Aerospace and Defense, Medical and Energy driven by productivity gains, stronger product mix and pricing actions compared to fiscal year 2023.
Excluding surcharge revenue, net sales increased 22 percent on 2 percent lower shipment volume as compared to fiscal year 2023. The higher sales excluding surcharge revenue in the SAO segment reflect double-digit percentage growth in the end-use markets of Aerospace and Defense, Medical and Energy driven by productivity gains, stronger product mix and pricing actions compared to fiscal year 2023.
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.
If the FIFO method of inventory had been used instead of the LIFO method, inventories would have been $344.5 million and $371.0 million higher as of June 30, 2025 and 2024, respectively. 38 Table of Contents Costs include direct materials, direct labor, applicable manufacturing overhead and other direct costs.
Our adjusted free cash flow, which we define under "Non-GAAP Financial Measures" below, was positive $179.0 million as compared to negative $67.6 million for fiscal year 2023.
Our adjusted free cash flow, which we define under "Non-GAAP Financial Measures" below, was positive $287.5 million as compared to positive $179.0 million for fiscal year 2024.
The fiscal year 2024 results reflect lower demand in both Industrial and Consumer end-use markets partially offset by realized price increases compared to fiscal year 2023. Gross Profit Gross profit in fiscal year 2024 increased to $584.3 million, or 21.2 percent of net sales, from $337.3 million, or 13.2 percent of net sales for fiscal year 2023.
The fiscal year 2025 results reflect lower demand in both Industrial and Consumer end-use markets partially offset by realized price increases compared to fiscal year 2024. 23 Table of Contents Gross Profit Gross profit in fiscal year 2025 increased to $768.6 million, or 26.7 percent of net sales, from $584.3 million, or 21.2 percent of net sales for fiscal year 2024.
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.
International sales as a percentage of our total net sales represe nted 41 percent and 41 pe rcent for fiscal year 2025 and 2024 , respectively. 22 Table of Contents Sales by End-Use Markets We sell to customers across diversified end-use markets.
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.
The following table shows our actual ratio performance with respect to the financial covenants, as of June 30, 2025: Covenant Covenant Requirement Actual Ratio Consolidated interest coverage ratio 3.00 to 1.00 (minimum) 14.37 to 1.00 Consolidated net leverage ratio 4.00 to 1.00 (maximum) 0.86 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.
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.
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) 2025 2024 2023 Net sales $ 2,877.1 $ 2,759.7 $ 2,550.3 Net sales excluding surcharge revenue (1) $ 2,346.1 $ 2,167.7 $ 1,848.0 Operating income $ 521.8 $ 323.1 $ 133.1 Adjusted operating income (1) $ 525.4 $ 354.1 $ 133.1 Net income $ 376.0 $ 186.5 $ 56.4 Diluted earnings per share $ 7.42 $ 3.70 $ 1.14 Adjusted diluted earnings per share (1) $ 7.48 $ 4.74 $ 1.14 Purchases of property, plant, equipment and software $ 154.3 $ 96.6 $ 82.3 Adjusted free cash flow (1) $ 287.5 $ 179.0 $ (67.6) Pounds sold (in thousands) (2) 192,980 206,302 214,122 (1) See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
This was driven by ramping activity levels across the aerospace supply chain due to higher aircraft build rates to replace aging fleets and to meet increasing passenger travel demand. Sales to the Medical end-use market increased 25 percent to $375.6 million from fiscal year 2023. Excluding surcharge revenue, sales increased 31 percent on 14 percent higher shipment volume.
The fiscal year 2023 results reflected increases across all Aerospace end-use sub-markets. This was driven by ramping activity levels across the aerospace supply chain due to higher aircraft build rates to replace aging fleets and to meet increasing passenger travel demand. Sales to the Medical end-use market increased 25 percent to $375.6 million from fiscal year 2023 .
For those tax positions which should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
For those tax positions which should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Interest and penalties on estimated liabilities for uncertain tax positions are recorded as components of the provision for income taxes.
The following is a summary of the classification of net pension expense (income) for the years ended June 30, 2024, 2023 and 2022 : Years Ended June 30, ($ 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 $354.1 million in adjusted operating income.
The following is a summary of the classification of net pension expense for the years ended June 30, 2025 , 2024 and 2023: Years Ended June 30, ($ in millions) 2025 2024 2023 Service cost included in Cost of sales $ 8.1 $ 8.4 $ 8.6 Service cost included in Selling, general and administrative expenses 1.2 1.3 1.3 Pension earnings, interest and deferrals included in Other expense, net 15.5 14.4 10.0 Settlement charge included in Other expense, net — 51.9 — Net pension expense $ 24.8 $ 76.0 $ 19.9 As of June 30, 2025 and 2024, amounts capitalized in gross inventory were $1.6 million and $1.6 million, respectively.
During the fiscal year ended June 30, 2024, we repatriated cash of $4.3 million from foreign jurisdictions. From time to time, we may make short-term intercompany borrowings against our cash held outside the United States in order to reduce or eliminate any required borrowing under our Credit Facility.
From time to time, we may make short-term intercompany borrowings against our cash held outside the United States in order to reduce or eliminate any required borrowing under our Credit Facility.
This combined with market headwinds due to general industrial macroeconomic conditions including rising interest rates has contributed to lower sales and profit margins compared to the established annual operation plan for fiscal year 2024.
This combined with market headwinds due to general industrial macroeconomic conditions including rising interest rates contributed to lower sales and profit margins compared to the established annual operation plan for fiscal year 2024. Despite our efforts to mitigate the market challenges, results did not improve for the Latrobe Distribution reporting unit during fiscal year 2024.
The fiscal year 2024 results reflect increasing global oil consumption benefiting the oil and gas sub-market and higher demand for power generation materials compared to fiscal year 2023. Industrial and Consumer end-use market sales of $415.3 million decreased 15 percent from fiscal year 2023. Excluding surcharge revenue, sales decreased 6 percent on 26 percent lower shipment volume.
The fiscal year 2024 results reflect increasing oil consumption benefiting the oil and gas sub-market and higher demand for power generation materials compared to fiscal year 2023. Transportation end-use m arket sales of $149.1 million reflected a 19 percent decrease from fiscal year 2023. Excluding surcharge revenue, sales decreased 11 percent on 23 percent lower shipment volume.
The following presents our operating income (loss) and operating margin, in each case excluding the impact of surcharge on net sales and special items. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period.
The following represents a summary of the dilutive impact of the surcharge on gross margin. 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 lower interest expense, net in fiscal year 2024 is largely due to less short-term borrowings under our Credit Facility compared to fiscal year 2023. 25 Table of Contents Other Expense, Net Other expense, net for fiscal year 2024 was $60.5 million compared with other expense, net of $6.5 million in fiscal year 2023 .
Capitalized interest reduced interest expense, net by $1.6 million in fiscal year 2024 and by $1.5 million in fiscal year 2023. The lower interest expense, net in fiscal year 2024 is largely due to less short-term borrowings under our Credit Facility compared to fiscal year 2023.
Excluding surcharge revenue, net sales decreased 5 percent from fiscal year 2023 on 15 percent lower shipment volume. The results reflec t higher sales in Aerospace and Defense and Medical end-use markets, in particular Medical end-use market sales excluding surcharge increased 17 percent compared to fiscal year 2023.
The results reflect higher sales in Aerospace and Defense and Medical end-use markets, in particular Medical end-use market sales excluding surcharge increased 17 percent compared to fiscal year 2023.
The results reflect lower demand across light, medium and heavy-duty vehicle applications offset partially by higher demand in specialty transportation applications compared to fiscal year 2023.
The results reflect lower demand across light, medium and heavy-duty vehicle applications offset partially by higher demand in specialty transportation applications compared to fiscal year 2023. The fiscal year 2024 results also reflect the negative impact of employee union strikes in North America which did not occur in fiscal year 2023.
Fiscal year 2024 reflects stronger product mix and improved operational efficiencies, partially offset by inflationary cost increases compared to fiscal year 2023 . Performance Engineered Products Segment Net sales for fiscal year 2024 for the PEP segment were $411.0 million as compared with $433.7 million for fiscal year 2023.
Fiscal year 2024 reflects stronger product mix and improved operational efficiencies, compared to fiscal year 2023. Performance Engineered Products Segment Net sales for fiscal year 2024 for the PEP segment were $411.0 million as compared with $433.7 million for fiscal year 2023. Excluding surcharge revenue, net sales decreased 5 percent from fiscal year 2023 on 15 percent lower shipment volume.
Results of Operations — Fiscal Year 2024 Compared to Fiscal Year 2023 For fiscal year 2024, we reported net incom e of $186.5 million, or $3.70 earnings per diluted share. This com pares with net income of $56.4 million, or $1.14 earnings per diluted share, in fiscal year 2023 .
Fiscal year 2025 results were flat compared to fiscal year 2024. Results of Operations — Fiscal Year 2024 Compared to Fiscal Year 2023 For fiscal year 2024 , we reported net income of $186.5 million , or $3.70 earnings per diluted share.
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.
The fair value was estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques. 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.
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.
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.
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 .
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.
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.
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. During the fiscal year ended June 30, 2025, we repatriated cash of $3.8 million from foreign jurisdictions.
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.
As of June 30, 2025, we had $1.1 million of issued letters of credit under the Credit Facility and the balance of the Credit Facility, $348.9 million, remains available to us.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest change"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
Biggest change"Financial Statements and Supplementary Data." Assuming on June 30, 2025, (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. 45 Table of Contents
Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. As discussed in Note 16 to the consolidated financial statements included in Part II, Item 8.
Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. As discussed in Note 17 to the consolidated financial statements included in Part II, Item 8.
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.
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, 2025, we had approximately $1.9 million of net deferred losses related to commodity forward contracts to purchase certain raw materials.
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.
The status of our financial instruments as of June 30, 2025, is provided in Note 17 to the consolidated financial statements included in Item 8.

Other CRS 10-K year-over-year comparisons