Carpenter Technology Corp. (NYSE:CRS) Q2 2015 Earnings Conference Call - Final Transcript

Jan 28, 2015 • 09:30 am ET

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Carpenter Technology Corp. (NYSE:CRS) Q2 2015 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Good morning, and welcome to Carpenter Technology's Second Quarter Earnings Conference Call. My name is Allison and I'm your coordinator for today. At this time, all participants will be in a listen-only mode. After the speakers' remarks you will be invited to participate in the question-and-answer session towards the end of the presentation.

I would now like to turn the call over to your host for today, Mr. Mike Hajost, Vice President of Investor Relations and Treasurer. Please proceed, sir.

Executive
Michael Hajost

Thank you, Allison. Good morning, everyone, and welcome to Carpenter's earnings conference call for the second quarter ended December 31, 2014. This call is also being broadcast over the Internet along with presentation slides. Please note, for those of you listening by phone, you may experience a time delay in slide movement

Speakers on the call today are Greg Pratt, Chairman, President and Chief Executive Officer; Tony Thene, Senior Vice President and Chief Financial Officer; Andy Ziolkowski, Senior Vice President, Commercial for Specialty Alloys Operations or SAO, as we call it; Gary Heasley, Senior Vice President, Performance Engineered Products or PEP, as we call it; and also in the room is Dave Strobel, Senior Vice President of Global Operations.

(Forward-Looking Cautionary Statements)

Executive
Michael Hajost

(Forward-Looking Cautionary Statements)

Please also note in the following discussion, unless otherwise noted, when management discusses sales or revenue, that reference excludes surcharge. When discussing operating income, that reference excludes pension, earnings, interest and deferrals, or EID. When referring to operating margins, that is based on sales excluding surcharge and operating income excluding pension EID.

I will now turn the call over to Greg.

Executive
Gregory Pratt

Thank you, Mike and good morning everyone. It's good to be with you today. As I turn to Slide 4 of our presentation, you will note that this is a new slide showing our safety performance trend. Safety is one of our key principles and we take our responsibility to protect our employees very seriously. We are very proud of the improvements we have made in the safety area over the last six years and are committed to getting even better.

Turing to Slide 5, I want to provide some highlights on our recently completed second quarter and provide some perspective and how we see the business positioned going forward. We certainly had an operationally smoother quarter down the first fiscal quarter, so explaining the significant sequential improvement and earnings is not necessarily that meaningful. We drove SAO revenues up year-over-year in all end markets and achieved a portion of the richer sales mix that we previously described was building in a backlog as we exited the first quarter.

Having said that, we are not able to show improved margins year-over-year. The sales growth and richer mix were more than offset by higher SAO cost in the current quarter as we work through the integration of our mill operating system. We expect to see SAO cost performance improve as we further increased Athens, production capabilities, and qualifications. I will speak more about our progress on