[10-K] Carpenter Technology Corp Files Annual Report
Filing Impact
Filing Sentiment
Form Type
10-K
Rhea-AI Filing Summary
Carpenter Technology Corporation is a specialty alloys manufacturer organized into two segments (SAO and PEP) that reported record fiscal 2025 results. Net sales were $2,877.1 million and net income was $376.0 million, or $7.42 diluted EPS. Operating income was $521.8 million (adjusted operating income $525.4 million), driven by stronger pricing, product mix and productivity gains, particularly in the Aerospace and Defense end-use market which represented $1,768.6 million of sales (62%). The SAO segment generated $588.6 million of operating income with a 23.0% operating margin (28.6% excluding surcharge revenue).
Cash from operations was $440.4 million with adjusted free cash flow of $287.5 million. The company repurchased 575,000 shares for $101.9 million in fiscal 2025 and has a $400 million repurchase authorization with $298.1 million available at June 30, 2025. Notable disclosures include inventory accounting under LIFO (FIFO would increase inventory by $344.5 million), environmental remediation accrual practices, a workforce of ~4,500, R&D of $26.1 million, and an expiring collective bargaining agreement at Dynamet on August 31, 2025 with negotiations in process.
Carpenter Technology Corporation è un produttore di leghe speciali strutturato in due segmenti (SAO e PEP) che ha riportato risultati record nell'esercizio fiscale 2025. Le vendite nette sono state $2,877.1 million e l'utile netto $376.0 million, pari a $7.42 per azione diluita. L'utile operativo è stato di $521.8 million (utile operativo rettificato $525.4 million), sostenuto da prezzi più alti, un migliore mix di prodotti e aumenti di produttività, in particolare nel mercato Aerospaziale e Difesa che ha rappresentato vendite per $1,768.6 million (62%). Il segmento SAO ha generato un utile operativo di $588.6 million con un margine operativo del 23,0% (28,6% escludendo i ricavi da surcharge).
La liquidità generata dalle attività operative è stata di $440.4 million con un free cash flow rettificato di $287.5 million. La società ha riacquistato 575.000 azioni per $101.9 million nell'esercizio 2025 e dispone di un'autorizzazione al riacquisto di $400 million, con $298.1 million disponibili al 30 giugno 2025. Tra le dichiarazioni rilevanti: valutazione delle rimanenze con metodo LIFO (l'uso del FIFO aumenterebbe le rimanenze di $344.5 million), pratiche di accantonamento per bonifiche ambientali, una forza lavoro di circa 4,500, R&D per $26.1 million e un contratto collettivo in scadenza presso Dynamet il 31 agosto 2025 con trattative in corso.
Carpenter Technology Corporation es un fabricante de aleaciones especiales organizado en dos segmentos (SAO y PEP) que registró resultados récord en el ejercicio fiscal 2025. Las ventas netas fueron de $2,877.1 million y el beneficio neto de $376.0 million, o $7.42 por acción diluida. El resultado operativo fue de $521.8 million (resultado operativo ajustado $525.4 million), impulsado por precios más altos, una mejor mezcla de productos y ganancias de productividad, especialmente en el mercado final Aeroespacial y de Defensa, que representó ventas por $1,768.6 million (62%). El segmento SAO generó $588.6 million de resultado operativo con un margen operativo del 23,0% (28,6% excluyendo ingresos por recargo).
El flujo de caja procedente de las operaciones fue de $440.4 million y el flujo de caja libre ajustado fue de $287.5 million. La compañía recompró 575.000 acciones por $101.9 million en el ejercicio 2025 y tiene una autorización de recompra de $400 million, con $298.1 million disponibles al 30 de junio de 2025. Entre las divulgaciones destacadas figuran la valoración de inventarios bajo LIFO (FIFO aumentaría los inventarios en $344.5 million), prácticas de provisión para la descontaminación ambiental, una plantilla de aproximadamente 4,500, I&D por $26.1 million y un convenio colectivo que vence en Dynamet el 31 de agosto de 2025 con negociaciones en curso.
Carpenter Technology Corporation는 SAO와 PEP 두 개의 사업부로 구성된 특수 합금 제조업체로 2025 회계연도에 사상 최대 실적을 보고했습니다. 순매출은 $2,877.1 million, 당기순이익은 $376.0 million이며 희석 주당순이익은 $7.42입니다. 영업이익은 $521.8 million(조정 영업이익 $525.4 million)으로, 특히 항공우주 및 방위 산업에서의 강한 가격, 제품 믹스 개선 및 생산성 향상이 실적을 견인했으며 해당 분야 매출은 $1,768.6 million(62%)를 차지했습니다. SAO 부문은 $588.6 million의 영업이익을 기록했고 영업이익률은 23.0%였습니다(서차지 수익 제외 시 28.6%).
영업활동으로 인한 현금흐름은 $440.4 million이고, 조정된 잉여현금흐름은 $287.5 million였습니다. 회사는 2025 회계연도에 575,000주를 $101.9 million에 자사주 매입했고, 총 $400 million의 자사주 매입 승인 중 $298.1 million가 2025년 6월 30일 기준으로 남아 있습니다. 주요 공시 사항으로는 LIFO 기준 재고 회계(만약 FIFO를 적용하면 재고가 $344.5 million 증가), 환경 복구 충당금 처리 관행, 약 4,500명의 인력, R&D 비용 $26.1 million, 그리고 Dynamet의 단체협약이 2025년 8월 31일에 만료되며 협상이 진행 중임이 포함됩니다.
Carpenter Technology Corporation est un fabricant d'alliages spéciaux organisé en deux segments (SAO et PEP) qui a enregistré des résultats records pour l'exercice 2025. Les ventes nettes se sont élevées à $2,877.1 million et le résultat net à $376.0 million, soit $7.42 de bénéfice dilué par action. Le résultat d'exploitation s'est élevé à $521.8 million (résultat d'exploitation ajusté $525.4 million), porté par des prix plus élevés, un meilleur mix produits et des gains de productivité, en particulier sur le marché Aérospatial et Défense qui a représenté $1,768.6 million de ventes (62%). Le segment SAO a dégagé $588.6 million de résultat d'exploitation avec une marge opérationnelle de 23,0% (28,6% hors revenus de surcharge).
Les flux de trésorerie provenant des activités opérationnelles se sont élevés à $440.4 million et le free cash flow ajusté à $287.5 million. La société a racheté 575 000 actions pour $101.9 million au cours de l'exercice 2025 et dispose d'une autorisation de rachat de $400 million, dont $298.1 million étaient disponibles au 30 juin 2025. Parmi les informations notables : comptabilisation des stocks en LIFO (l'application de FIFO augmenterait les stocks de $344.5 million), pratiques de provision pour la dépollution environnementale, un effectif d'environ 4,500, R&D de $26.1 million et une convention collective expirant chez Dynamet le 31 août 2025 avec des négociations en cours.
Carpenter Technology Corporation ist ein Hersteller von Speziallegierungen, der in zwei Segmente (SAO und PEP) gegliedert ist und für das Geschäftsjahr 2025 Rekordergebnisse meldete. Der Nettoumsatz belief sich auf $2,877.1 million und der Nettogewinn auf $376.0 million, bzw. $7.42 verwässertes Ergebnis je Aktie. Das operative Ergebnis betrug $521.8 million (bereinigtes operatives Ergebnis $525.4 million), getragen von höheren Preisen, einem verbesserten Produktmix und Produktivitätssteigerungen, insbesondere im Luft- und Raumfahrt- sowie Verteidigungsbereich, der Verkäufe in Höhe von $1,768.6 million (62%) ausmachte. Das SAO-Segment erwirtschaftete ein operatives Ergebnis von $588.6 million bei einer operativen Marge von 23,0% (28,6% ohne Surcharge-Umsatz).
Der Cashflow aus der operativen Tätigkeit betrug $440.4 million, das bereinigte Free Cashflow $287.5 million. Das Unternehmen hat im Geschäftsjahr 2025 575.000 Aktien für $101.9 million zurückgekauft und verfügt über eine Rückkaufgenehmigung von $400 million, wobei am 30. Juni 2025 noch $298.1 million verfügbar waren. Erwähnenswerte Angaben umfassen die Inventarbewertung nach LIFO (FIFO würde die Bestände um $344.5 million erhöhen), Rückstellungspraxis für Umweltbereinigung, eine Belegschaft von rund 4,500, F&E in Höhe von $26.1 million sowie einen zum 31. August 2025 auslaufenden Tarifvertrag bei Dynamet, zu dem Verhandlungen laufen.
Positive
- Record fiscal 2025 operating performance with operating income of $521.8 million and adjusted operating income of $525.4 million.
- Strong net income and EPS: net income $376.0 million and diluted EPS $7.42, up materially from prior year.
- Improved adjusted gross margin excluding surcharge revenue to 32.8% from 27.0% year-over-year.
- Solid cash generation: $440.4 million cash from operations and $287.5 million adjusted free cash flow.
- Active capital return program: $400 million repurchase authorization with $298.1 million remaining and $101.9 million repurchased in FY2025.
- Diversified end markets with strong aerospace/defense exposure: Aerospace and Defense sales of $1,768.6 million (62% of net sales).
- Targeted R&D investment: $26.1 million in company-sponsored research and development in FY2025.
Negative
- Raw material price volatility remains a material risk; surcharge mechanisms can lag and dilute margins as a percentage of sales.
- LIFO inventory accounting exposes the company to potential one-time tax/cash impacts if repeal occurs (FIFO inventory would be ~$344.5 million higher as of June 30, 2025).
- Environmental remediation uncertainties: potential liabilities exist and amounts/timing are imprecise and could be material in a single period.
- Labor/union risk: a collective bargaining agreement at Dynamet expires August 31, 2025 and negotiations are ongoing, posing potential disruption risk.
- Geographic concentration of production (Reading, Latrobe, Athens) increases exposure to local catastrophic events or disruptions.
Insights
TL;DR: Record margins, strong cash flow and EPS growth driven by aerospace/defense demand, pricing and operational improvements.
Carpenter's fiscal 2025 performance shows meaningful margin expansion: gross margin excluding surcharge rose to 32.8% from 27.0% a year earlier, and adjusted operating income improved materially to $525.4 million. Revenue mix shifted toward higher-value aerospace and defense products, raising sales in that end market by 20% excluding surcharges. Operating cash generation of $440.4 million and adjusted free cash flow of $287.5 million provide capacity for the $400 million buyback program (approximately $298.1 million remaining) while funding $154.3 million of capex. These metrics support a materially stronger earnings base compared with fiscal 2024.
TL;DR: Strong financials coexist with operational, regulatory and supply risks that could cause episodic material impacts.
Key risk exposures remain: volatile raw material costs and reliance on surcharge pass-throughs, environmental remediation liabilities with uncertain timing and amounts, concentration of major manufacturing capacity in Reading, Latrobe and Athens which increases disruption risk, and an upcoming collective bargaining expiration at Dynamet (Aug 31, 2025). The company also uses LIFO inventory accounting; a repeal would have a one-time taxable income effect (FIFO inventory would be ~$344.5 million higher). These factors warrant continued monitoring despite the current earnings strength.
Carpenter Technology Corporation è un produttore di leghe speciali strutturato in due segmenti (SAO e PEP) che ha riportato risultati record nell'esercizio fiscale 2025. Le vendite nette sono state $2,877.1 million e l'utile netto $376.0 million, pari a $7.42 per azione diluita. L'utile operativo è stato di $521.8 million (utile operativo rettificato $525.4 million), sostenuto da prezzi più alti, un migliore mix di prodotti e aumenti di produttività, in particolare nel mercato Aerospaziale e Difesa che ha rappresentato vendite per $1,768.6 million (62%). Il segmento SAO ha generato un utile operativo di $588.6 million con un margine operativo del 23,0% (28,6% escludendo i ricavi da surcharge).
La liquidità generata dalle attività operative è stata di $440.4 million con un free cash flow rettificato di $287.5 million. La società ha riacquistato 575.000 azioni per $101.9 million nell'esercizio 2025 e dispone di un'autorizzazione al riacquisto di $400 million, con $298.1 million disponibili al 30 giugno 2025. Tra le dichiarazioni rilevanti: valutazione delle rimanenze con metodo LIFO (l'uso del FIFO aumenterebbe le rimanenze di $344.5 million), pratiche di accantonamento per bonifiche ambientali, una forza lavoro di circa 4,500, R&D per $26.1 million e un contratto collettivo in scadenza presso Dynamet il 31 agosto 2025 con trattative in corso.
Carpenter Technology Corporation es un fabricante de aleaciones especiales organizado en dos segmentos (SAO y PEP) que registró resultados récord en el ejercicio fiscal 2025. Las ventas netas fueron de $2,877.1 million y el beneficio neto de $376.0 million, o $7.42 por acción diluida. El resultado operativo fue de $521.8 million (resultado operativo ajustado $525.4 million), impulsado por precios más altos, una mejor mezcla de productos y ganancias de productividad, especialmente en el mercado final Aeroespacial y de Defensa, que representó ventas por $1,768.6 million (62%). El segmento SAO generó $588.6 million de resultado operativo con un margen operativo del 23,0% (28,6% excluyendo ingresos por recargo).
El flujo de caja procedente de las operaciones fue de $440.4 million y el flujo de caja libre ajustado fue de $287.5 million. La compañía recompró 575.000 acciones por $101.9 million en el ejercicio 2025 y tiene una autorización de recompra de $400 million, con $298.1 million disponibles al 30 de junio de 2025. Entre las divulgaciones destacadas figuran la valoración de inventarios bajo LIFO (FIFO aumentaría los inventarios en $344.5 million), prácticas de provisión para la descontaminación ambiental, una plantilla de aproximadamente 4,500, I&D por $26.1 million y un convenio colectivo que vence en Dynamet el 31 de agosto de 2025 con negociaciones en curso.
Carpenter Technology Corporation는 SAO와 PEP 두 개의 사업부로 구성된 특수 합금 제조업체로 2025 회계연도에 사상 최대 실적을 보고했습니다. 순매출은 $2,877.1 million, 당기순이익은 $376.0 million이며 희석 주당순이익은 $7.42입니다. 영업이익은 $521.8 million(조정 영업이익 $525.4 million)으로, 특히 항공우주 및 방위 산업에서의 강한 가격, 제품 믹스 개선 및 생산성 향상이 실적을 견인했으며 해당 분야 매출은 $1,768.6 million(62%)를 차지했습니다. SAO 부문은 $588.6 million의 영업이익을 기록했고 영업이익률은 23.0%였습니다(서차지 수익 제외 시 28.6%).
영업활동으로 인한 현금흐름은 $440.4 million이고, 조정된 잉여현금흐름은 $287.5 million였습니다. 회사는 2025 회계연도에 575,000주를 $101.9 million에 자사주 매입했고, 총 $400 million의 자사주 매입 승인 중 $298.1 million가 2025년 6월 30일 기준으로 남아 있습니다. 주요 공시 사항으로는 LIFO 기준 재고 회계(만약 FIFO를 적용하면 재고가 $344.5 million 증가), 환경 복구 충당금 처리 관행, 약 4,500명의 인력, R&D 비용 $26.1 million, 그리고 Dynamet의 단체협약이 2025년 8월 31일에 만료되며 협상이 진행 중임이 포함됩니다.
Carpenter Technology Corporation est un fabricant d'alliages spéciaux organisé en deux segments (SAO et PEP) qui a enregistré des résultats records pour l'exercice 2025. Les ventes nettes se sont élevées à $2,877.1 million et le résultat net à $376.0 million, soit $7.42 de bénéfice dilué par action. Le résultat d'exploitation s'est élevé à $521.8 million (résultat d'exploitation ajusté $525.4 million), porté par des prix plus élevés, un meilleur mix produits et des gains de productivité, en particulier sur le marché Aérospatial et Défense qui a représenté $1,768.6 million de ventes (62%). Le segment SAO a dégagé $588.6 million de résultat d'exploitation avec une marge opérationnelle de 23,0% (28,6% hors revenus de surcharge).
Les flux de trésorerie provenant des activités opérationnelles se sont élevés à $440.4 million et le free cash flow ajusté à $287.5 million. La société a racheté 575 000 actions pour $101.9 million au cours de l'exercice 2025 et dispose d'une autorisation de rachat de $400 million, dont $298.1 million étaient disponibles au 30 juin 2025. Parmi les informations notables : comptabilisation des stocks en LIFO (l'application de FIFO augmenterait les stocks de $344.5 million), pratiques de provision pour la dépollution environnementale, un effectif d'environ 4,500, R&D de $26.1 million et une convention collective expirant chez Dynamet le 31 août 2025 avec des négociations en cours.
Carpenter Technology Corporation ist ein Hersteller von Speziallegierungen, der in zwei Segmente (SAO und PEP) gegliedert ist und für das Geschäftsjahr 2025 Rekordergebnisse meldete. Der Nettoumsatz belief sich auf $2,877.1 million und der Nettogewinn auf $376.0 million, bzw. $7.42 verwässertes Ergebnis je Aktie. Das operative Ergebnis betrug $521.8 million (bereinigtes operatives Ergebnis $525.4 million), getragen von höheren Preisen, einem verbesserten Produktmix und Produktivitätssteigerungen, insbesondere im Luft- und Raumfahrt- sowie Verteidigungsbereich, der Verkäufe in Höhe von $1,768.6 million (62%) ausmachte. Das SAO-Segment erwirtschaftete ein operatives Ergebnis von $588.6 million bei einer operativen Marge von 23,0% (28,6% ohne Surcharge-Umsatz).
Der Cashflow aus der operativen Tätigkeit betrug $440.4 million, das bereinigte Free Cashflow $287.5 million. Das Unternehmen hat im Geschäftsjahr 2025 575.000 Aktien für $101.9 million zurückgekauft und verfügt über eine Rückkaufgenehmigung von $400 million, wobei am 30. Juni 2025 noch $298.1 million verfügbar waren. Erwähnenswerte Angaben umfassen die Inventarbewertung nach LIFO (FIFO würde die Bestände um $344.5 million erhöhen), Rückstellungspraxis für Umweltbereinigung, eine Belegschaft von rund 4,500, F&E in Höhe von $26.1 million sowie einen zum 31. August 2025 auslaufenden Tarifvertrag bei Dynamet, zu dem Verhandlungen laufen.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended June 30 , 2025
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number 1-5828
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Securities registered pursuant to 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | (Do not check if a smaller reporting company) | Smaller reporting company | |||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The aggregate market value of the registrant's voting common stock held by non-affiliates at December 31, 2024, was $8,464,305,427 , based on the closing price per share of the registrant's common stock on that date of $169.71 as reported on the New York Stock Exchange.
As of August 8, 2025, 49,850,095 shares of the registrant's common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Selected portions of the Company's fiscal year 2025 definitive Proxy Statement are incorporated by reference into Part III of this Report.
Table of Contents
TABLE OF CONTENTS
| Page Number | |||||||||||
PART I | |||||||||||
Item 1 | Business | 2 | |||||||||
Item 1A | Risk Factors | 6 | |||||||||
Item 1B | Unresolved Staff Comments | 12 | |||||||||
Item 1C | Cybersecurity | 12 | |||||||||
Item 2 | Properties | 14 | |||||||||
Item 3 | Legal Proceedings | 14 | |||||||||
Item 4 | Mine Safety Disclosures | 14 | |||||||||
Item 4A | Executive Officers of the Registrant | 14 | |||||||||
PART II | |||||||||||
Item 5 | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 16 | |||||||||
Item 6 | Reserved | 18 | |||||||||
Item 7 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 18 | |||||||||
Forward-Looking Statements | 44 | ||||||||||
Item 7A | Quantitative and Qualitative Disclosures about Market Risk | 45 | |||||||||
Item 8 | Financial Statements and Supplementary Data | 46 | |||||||||
Item 9 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 94 | |||||||||
Item 9A | Controls and Procedures | 95 | |||||||||
Item 9B | Other Information | 95 | |||||||||
Item 9C | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 95 | |||||||||
PART III | |||||||||||
Item 10 | Directors, Executive Officers and Corporate Governance | 96 | |||||||||
Item 11 | Executive Compensation | 96 | |||||||||
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 96 | |||||||||
Item 13 | Certain Relationships, Related Transactions and Director Independence | 97 | |||||||||
Item 14 | Principal Accounting Fees and Services | 97 | |||||||||
PART IV | Item 15 | Exhibits and Financial Statement Schedules | 97 | ||||||||
Item 16 | Form 10-K Summary | 102 | |||||||||
SIGNATURES | 103 | ||||||||||
SCHEDULE II | Valuation and Qualifying Accounts | 105 | |||||||||
Table of Contents
PART I
Item 1. Business
(a) General Development of Business:
Carpenter Technology Corporation, founded in 1889, is engaged in the manufacturing, fabrication and distribution of specialty metals. As used throughout this report, unless the context requires otherwise, the terms "Carpenter," "Carpenter Technology," "Company," "Registrant," "Issuer," "we" and "our" refer to Carpenter Technology Corporation.
(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.
(c) Narrative Description of Business:
(1) General:
We are a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels. We are a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications in the aerospace, defense, medical, transportation, energy, industrial and consumer markets. We have evolved to become a pioneer in premium specialty alloys, including titanium, nickel, and cobalt, as well as alloys specifically engineered for additive manufacturing processes and soft magnetics applications.
Reportable Segments
The SAO segment is comprised of the Company's major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama. The combined assets of the SAO segment are managed in an integrated manner to optimize efficiency and profitability across the total system.
The PEP segment is comprised of the Company's differentiated operations. This segment includes the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses. The businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics.
(2) Raw Materials:
Our business depends on continued receipt of critical raw materials for our day to day operations. These raw materials include nickel, cobalt, chromium, manganese, molybdenum, titanium, iron and scrap containing the named alloys. Some of the sources of these raw materials, many of which are international, could be subject to potential interruptions of supply as a result of political events, labor unrest or other reasons. 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, 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. There can be delays between the time of the increase in the price of raw materials and the realization of the benefits of such mechanisms or actions that could have a short-term impact on our results and could affect the comparability of our results from period to period.
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(3) Patents and Licenses:
We own a number of United States and international patents and have granted licenses under some of them. In addition, certain products that we produce are covered by patents held or owned by other companies from whom licenses have been obtained. The duration of a patent issued in the United States is between 14 and 20 years from the date of filing a patent application or issuance of the patent. The duration of a patent issued outside of the United States varies from country to country. Generally, patent licenses are structured to match the duration of the underlying patent. Although these patents and licenses are believed to be of value, we do not consider our business to be materially dependent upon any single such item or related group of such items.
(4) Seasonality of Business:
Our sales can be influenced by seasonal factors with the first six months of the fiscal year typically being lower, principally because of annual plant vacation and maintenance shutdowns by us, as well as by many of our customers. However, the timing of major changes in the general economy or the markets for certain products can alter this pattern.
(5) Customers:
On a consolidated basis, we are not dependent upon a single customer, or very few customers, such that the loss of any one or more particular customers would have a materially adverse effect on our consolidated statement of operations. 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. 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. We manufacture and supply materials to a variety of end-use market sectors and compete with various companies depending on the end-use market, product or geography. A significant portion of the products we produce are highly engineered materials for demanding applications. There are less than ten companies producing one or more similar products that we consider our major competitors for our high-value products used in demanding applications. Many of our products are generally required to meet complex customer product specifications and often require the materials to be qualified prior to supplying the customer. Our experience, technical capabilities, product offerings and research and development efforts represent barriers to existing and potential competitors.
For other products, there are several dozen smaller producing companies and converting companies that are also competitors, as well as several hundred independent distributors of products similar to those distributed by us. 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.
(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. We believe that our ability to be an innovator in special material development and manufacturing processes has been and will continue to be an important factor in the success of the Company. Our worldwide staff of expert metallurgists, research and development scientists, engineers and service professionals work closely with our customers to identify and provide innovative solutions to specific product requirements.
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(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. 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. "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. 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. Due to the possibility of future regulatory developments, the amount of future capital expenditures may vary from these estimates.
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(9) Human Capital Resources:
We maintain a high-performance work environment that supports our vision to be the preferred solutions provider in specialty materials. We value our employees and help them build careers that are as resilient, innovative and valuable as our work for our customers. We are committed to increasing employee engagement by leveraging the diversity and drive of our people, maximizing their talents, empowering them and supporting their career aspirations.
Health and Safety: Safety is our number one Core Value. We believe that a Zero Injury workplace is achievable and relentlessly pursue measures to increase safety and accountability for our employees. We are proactive in our approach to safety, working to eliminate hazards before causing injury or harm. We invest in our employees by providing appropriate tools, resources and education necessary to achieve a Zero Injury workplace.
Talent Acquisition: We are always looking for nimble, smart, growth-minded people – regardless of background – to help our organization continue to succeed. We strive to be an employer of choice in the communities that we operate. We have built an organizational culture that seeks to be transparent, supportive of work/life balance, welcoming of diverse viewpoints, treating all with dignity and respect and supporting each individuals' needs for professional growth and development.
Performance Management: Our formalized bi-annual performance review process accelerates employee growth and development at every stage of the process: (1) objectives and goal setting, (2) ongoing performance check-ins and coaching, as well as (3) performance evaluation and review. We also have Structured Individual Development Plans to assist managers in effectively setting targeted development activities for their direct reports and aligning those activities with business priorities.
Engagement: We regularly conduct a company-wide Employee Engagement Survey to collect tangible data to make our Company even better. The survey is conducted across the organization to seek input from all employees. The survey questions are updated regularly and cover a wide variety of topics, including safety, culture, diversity, inclusion and belonging, work/life balance and leadership and career development. Using the feedback provided by the Employee Engagement Survey, specific action plans are developed to address areas of concern or opportunities for improvement across the organization.
Professional Development: Our employees enjoy a wide variety of rewards that assist with engagement and development. From traditional items such as compensation to less traditional aspects such as work-life balance, hybrid and remote work arrangements, future career opportunities, and innovative work.
Diversity and Inclusion: We have a culture that blends our different backgrounds, experiences and perspectives from all employees. We seek to ensure that all our employees feel welcomed. Our values underlie our goal to ensure all employees are treated equally with dignity and respect regardless of their race, age, gender identity, or sexual orientation. Our Diversity, Inclusion and Belonging Committee plays a critical role in advancing us to the next level of awareness and engagement.
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.
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. This also included 461 production employees in Latrobe, Pennsylvania, who are covered under a collective bargaining agreement which expires on July 31, 2027. We believe our relations with our employees are generally good.
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(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. 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. "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. 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. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available free of charge through our website as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission ("SEC"). 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.
Item 1A. Risk Factors
There are inherent risks and uncertainties associated with all businesses that could adversely affect operating performances or financial conditions. The following discussion outlines the risks and uncertainties that management believes are the most material to our business. However, these are not the only risks or uncertainties that could affect our business. Certain risks are associated specifically with our business, industry or customer base, while others have a broader effect.
The demand for certain products we produce may be cyclical.
Demand in our end-use markets can be cyclical in nature and sensitive to general economic conditions, competitive influences and fluctuations in inventory levels throughout the supply chain. 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.
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. The length and degree of cyclical fluctuation can be influenced by any one or combination of these factors and therefore are difficult to predict with certainty. 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.
The energy market has also been historically cyclical, principally as a result of volatile oil prices that impact demand for our products. Our future success requires us to, among other things, expand in key international energy markets by successfully adding to our customer base, distribution channels and product portfolio. The volatility of oil prices and other factors that contribute to the cyclicality of the energy market will impact our ability to expand successfully in this area and may adversely affect our results of operations and financial condition.
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Any significant delay or inability to successfully expand our operations in a timely and cost-effective manner could materially adversely affect our business, financial condition and results of operations.
Over the last few years, we have undertaken capital projects associated with expanding our production capacity and capability. These projects place a significant demand on management and operational resources. Our success in expanding our operations in a cost-effective manner depends upon numerous factors including the ability of management to ensure the necessary resources are in place to properly execute these projects, our ability to obtain the necessary internal and customer qualifications to produce material from the facilities and our ability to operate the facilities to maximize the potential opportunities with minimal impacts to our existing operations. If we are not able to achieve the anticipated results from our capital expansion projects, or if we incur unanticipated delays, or excess costs, our results of operations and financial position may be materially adversely affected.
Periods of reduced demand and excess supply as well as the availability of substitute lower cost materials can adversely affect our ability to price and sell our products at the profitability levels we require to be successful.
Additional worldwide capacity and reduced demand for our products could significantly impact future worldwide pricing which would adversely impact our results of operations and financial condition. In addition, continued availability of lower cost, substitute materials may cause significant fluctuations in future results as our customers opt for a lower cost alternative.
We change prices on our products as we deem necessary. In addition to the above general competitive impact, other market conditions and various economic factors beyond our control can adversely affect the timing of our pricing actions. The effects of any pricing actions may be delayed due to long manufacturing lead times or the terms of existing contracts. There is no guarantee that the pricing actions we implement will be effective in maintaining the Company's profit margin levels.
We rely on third parties to supply certain raw materials and supplies that are critical to the manufacture of our products and we may not be able to access alternative sources of these raw materials if the suppliers are unwilling or unable to meet our demand.
Costs of certain critical raw materials, such as nickel, cobalt, chromium, manganese, molybdenum, titanium, iron and scrap containing these alloys have been volatile due to factors beyond our control. We expect to mitigate most of the adverse impact of rising raw material costs through raw material surcharges, indices to customers and raw material forward contracts, but changes in business conditions could adversely affect our ability to recover rapid increases in raw material costs and may adversely affect our results of operations.
In addition, the availability of critical raw materials and supplies is subject to factors that are not in our control. In some cases, these critical raw materials and supplies are purchased from suppliers operating in countries that may be subject to unstable political and economic conditions. At any given time, we may be unable to obtain an adequate supply of these critical raw materials and supplies on a timely basis, at prices and other terms acceptable to us, or at all.
If suppliers increase the price of critical raw materials or are unwilling or unable to meet our demand, we may not have alternative sources of supply. In addition, to the extent that we have quoted prices to customers and accepted customer orders for products prior to purchasing necessary raw materials, or have existing contracts, we may be unable to raise the price of products to cover all or part of the increased cost of the raw materials to our customers.
The manufacture of some of our products is a complex process and requires long lead times. As a result, we may experience delays or shortages in the supply of raw materials. If unable to obtain adequate and timely receipts of required raw materials, we may be unable to timely manufacture sufficient quantities of products. This could cause us to lose sales, incur additional costs, delay new product introductions or suffer harm to our reputation.
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We provide benefits to active and retired employees throughout most of our Company, most of which are not covered by insurance; and thus, our financial condition can be adversely affected if our investment returns are insufficient to meet these obligations.
We have obligations to provide substantial benefits to active and retired employees, and most of the associated costs are paid by the Company and are not covered by insurance. In addition, certain employees are covered by defined benefit pension plans, with the majority of our plans covering employees in the United States. Benefits accrued to eligible participants of our largest qualified defined benefit pension plan and certain non-qualified pension plans were frozen effective December 31, 2016. Many domestic and international competitors do not provide defined benefit plans and/or retiree health care plans, and other international competitors operate in jurisdictions with government sponsored health care plans that may offer them a cost advantage. A decline in the value of plan investments in the future, an increase in costs or liabilities or unfavorable changes in laws or regulations that govern pension plan funding could materially change the timing and amount of required pension funding. A requirement to accelerate or increase pension contributions in the future could have a material adverse effect on our results of operations, cash flows and financial condition.
The extensive environmental, health and safety regulatory regimes applicable to our manufacturing operations create potential exposure to significant liabilities.
The nature of our manufacturing business subjects our operations to numerous and varied federal, state, local and international laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. We have used, and currently use and manufacture, substantial quantities of substances that are considered hazardous, extremely hazardous or toxic under worker safety and health laws and regulations. Although we implement controls and procedures designed to reduce continuing risk of adverse impacts and health and safety issues, we could incur substantial cleanup costs, fines and civil or criminal sanctions, third party property damage or personal injury claims as a result of violations, non-compliance or liabilities under these regulatory regimes required at our facilities.
We have environmental remediation liabilities at some of our owned operating facilities and have been designated as a potentially responsible party ("PRP") with respect to certain third party Superfund or similar waste disposal sites and other third party owned sites. Additionally, we have been notified that we may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against us. From time to time, we are a party to lawsuits and other proceedings involving alleged violations of, or liabilities arising from, environmental laws.
When our liability is probable and we can reasonably estimate our costs, we record environmental liabilities in our financial statements. However, in many cases, we are not able to determine whether we are liable, or if liability is probable, in order to reasonably estimate the loss or range of loss which could result from such environmental liabilities. Estimates of our liability remain subject to additional uncertainties, including the nature and extent of site contamination, available remediation alternatives, the extent of corrective actions that may be required, and the number and financial condition of other PRPs, as well as the extent of their responsibility for the remediation. We adjust our accruals to reflect new information as appropriate. Future adjustments could have a material adverse effect on our results of operations in a given period, but we cannot reliably predict the amounts of such future adjustments. Future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on our financial condition, cash flows or results of operations.
Our manufacturing processes, and the manufacturing processes of many of our suppliers and customers, are energy intensive and generate carbon dioxide and other "Greenhouse Gases," and pending legislation or regulation of Greenhouse Gases, if enacted or adopted in an onerous form, could have a material adverse impact on our results of operations, financial condition and cash flows.
Political and scientific debates related to the impacts of greenhouse gas emissions on the global climate are prevalent. Regulation or some form of legislation aimed at reducing the greenhouse gas emissions is currently being considered both in the United States and globally. As a specialty alloy manufacturer, we will be affected, both directly and indirectly, if climate change legislation, such as use of a "cap and trade" system, is enacted and implemented. Such legislation could have a material adverse impact on our results of operations, financial condition and cash flows.
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Product liability and product quality claims could adversely affect our operating results.
We produce ultra high strength, high temperature and corrosion-resistant alloys designed for our customers' demanding applications particularly in our Aerospace and Defense, Medical and Energy end-use markets. Failure of the materials that are included in our customers' applications could give rise to substantial product liability claims. There can be no assurance that our insurance coverage will be adequate or continue to be available on terms acceptable to us. We have a complex manufacturing process necessary to meet our customers' stringent product specifications. We are also required to adhere to various third party quality certifications and perform sufficient internal quality reviews to ensure compliance with established standards. If we fail to meet the customer specifications for their products, we may be subject to product quality costs and claims. These costs are generally not insured. The impacts of product liability and quality claims could have a material adverse impact on our results of operations, financial condition and cash flows.
Our business subjects us to risks of litigation claims, as a routine matter, and this risk increases the potential for a loss that might not be covered by insurance.
Litigation claims relate to the conduct of our currently and formerly owned businesses, including claims pertaining to product liability, commercial disputes, employment actions, employee benefits, compliance with domestic and international laws and regulations, personal injury, patent infringement and tax issues. Due to the uncertainties of litigation, we can give no assurance that we will prevail on claims made against us in the lawsuits that we currently face or that additional claims will not be made against us in the future. The outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to us. The resolution in any reporting period of one or more of these matters could have a material adverse effect on our results of operations for that period. We can give no assurance that any other matters brought in the future will not have a material adverse effect on our results of operations, financial condition and cash flows.
A portion of our workforce is covered by collective bargaining agreements and union attempts to organize our other employees may cause work interruptions or stoppages.
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. As 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. There can be no assurance that we will succeed in concluding collective bargaining agreements with the unions to replace those that expire which could result in work interruptions and stoppages. From time to time, the employees at our manufacturing facility in Reading, Pennsylvania, participate in election campaigns or union organizing attempts. There is no guarantee that future organization attempts will not result in union representation.
Our manufacturing processes are complex and depend upon critical, high cost equipment for which there may be only limited or no production alternatives.
It is possible that we could experience prolonged periods of reduced production due to unplanned equipment failures, and we could incur significant repair or replacement costs in the event of those failures. It is also possible that operations could be disrupted due to other unforeseen circumstances such as power outages, explosions, fires, floods, accidents and severe weather conditions. We must make regular, substantial capital investments and changes to our manufacturing processes to lower production costs, improve productivity, manufacture new or improved products and remain competitive. We may not be in a position to take advantage of business opportunities or respond to competitive pressures if we fail to update, replace or make additions to our equipment or our manufacturing processes in a timely manner. The cost to repair or replace much of our equipment or facilities would be significant. We cannot be certain that we will have sufficient internally generated cash or acceptable external financing to make necessary capital expenditures in the future.
A significant portion of our manufacturing and production facilities are located in Reading and Latrobe, Pennsylvania and Athens, Alabama, which increases our exposure to significant disruption to our business as a result of unforeseeable developments in these geographic areas.
It is possible that we could experience prolonged periods of reduced production due to unforeseen catastrophic events occurring in or around our manufacturing facilities in Reading and Latrobe, Pennsylvania and Athens, Alabama. As a result, we may be unable to shift manufacturing capabilities to alternate locations, accept materials from suppliers, meet customer shipment needs or address other severe consequences that may be encountered. Our financial condition, cash flows and results of operations could be materially adversely affected.
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We rely on third parties to supply energy consumed at each of our energy-intensive production facilities.
The prices for and availability of electricity, natural gas, oil and other energy resources are subject to volatile market conditions. These market conditions often are affected by political and economic factors beyond our control. Disruptions or lack of availability in the supply of energy resources could temporarily impair the ability to operate our production facilities. Further, increases in energy costs, or changes in costs relative to energy costs paid by competitors, have affected and may continue to adversely affect our profitability. To the extent that these uncertainties cause suppliers and customers to be more cost sensitive, increased energy prices may have an adverse effect on our results of operations, financial condition and cash flows.
We consider acquisitions, joint ventures and other business combination opportunities, as well as possible business unit dispositions, as part of our overall business strategy, that involve uncertainties and potential risks that we cannot predict or anticipate fully.
From time to time, management holds discussions with management of other companies to explore such aforementioned opportunities. As a result, the relative makeup of the businesses comprising our Company is subject to change. Acquisitions, joint ventures and other business combinations involve various inherent risks. 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.
Regulations related to conflict minerals could adversely impact our business.
The SEC has promulgated final rules mandated by the Dodd-Frank Act regarding disclosure of the use of tin, tantalum, tungsten and gold, known as conflict minerals, in products manufactured by public companies. 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. There are costs associated with complying with these disclosure requirements going forward, including costs to determine the origin of conflict minerals used in our products. In addition, the implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in our products. Also, we may face disqualification as a supplier for customers and reputational challenges if the due diligence procedures we continue to implement do not enable us to verify the origins for all conflict minerals or to determine that such minerals are DRC conflict-free.
Our business may be impacted by external factors that we may not be able to control.
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. Additionally, the volatility in the financial markets could negatively impact our business. These events could result in a decrease in demand for our products, affect the availability of credit facilities to us, our customers or other members of the supply chain necessary to transact business, make it difficult or impossible to deliver orders to customers or receive materials from suppliers, affect the availability or pricing of energy sources or result in other severe consequences that may or may not be predictable. As a result, our business, financial condition and results of operations could be materially adversely affected.
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Our international operations and global sales expose us to various risks including the impact of tariffs, which may adversely affect our business.
Risks associated with international operations include without limitation: political and economic instability, including weak conditions in the world's economies; difficulty in collecting accounts receivable; unstable or unenforced export controls; changes in legal and regulatory requirements; policy changes affecting the markets for our products; changes in duties, quotas, tariffs and taxes; changes in taxation including the ability to repatriate earnings; and exchange rate fluctuations (which may affect sales to international customers and the value of profits earned on international sales when converted into U.S. dollars). In addition, we will need to invest in building our capabilities and infrastructure to meet our international growth goals. Any of these factors could materially adversely affect our results for the period in which they occur.
Significant changes to United States and international trade policies continue to emerge and activity levels have increased with regard to new import and export tariffs, retaliatory tariffs, and quotas; modifications to international trade policy; the withdrawal from or renegotiation of certain trade agreements; and other changes. These changes, including any implementation of or changes in trade sanctions, tariffs and embargoes, could materially adversely impact our business or require us to make changes to our current business practices or supply chain.
We value most of our inventory using the LIFO method, which could be repealed resulting in adverse effects on our cash flows and financial condition.
The cost of our inventories is primarily determined using the Last-In, First-Out ("LIFO") method. Under the LIFO inventory valuation method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials and other costs may have been incurred at significantly different values due to the length of time of our production cycle. Generally, in a period of rising prices, LIFO recognizes higher costs of goods sold, which both reduces current income and assigns a lower value to the year-end inventory. From time to time, there have been proposals aimed at repealing the election to use the LIFO method for income tax purposes. 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. This increase in inventory would result in a one-time increase in taxable income which may be taken into account over the following several taxable years. The repeal of the LIFO method could result in a substantial tax liability which could adversely impact our cash flows and financial condition.
We depend on the ability to hire and retain a qualified workforce and key personnel.
Much of our future success depends on the continued service and availability of skilled personnel, including members of our executive management team, management, metallurgists and production positions. Failure to attract, hire, develop, motivate, and retain highly qualified employee talent, or failure to develop and implement an adequate succession plan for the management team, could disrupt our operations and adversely affect our business and our future success.
Cybersecurity attacks and other security breaches or failures in functionality of our information technology ("IT") and computer systems could adversely impact our financial condition and results of operations and compromise the integrity of confidential data.
Management relies extensively on IT infrastructure, including hardware, networks, software, people and processes, to provide useful information to conduct our business and support assessments and conclusions about operating performance. Our inability to produce relevant and/or reliable measures of operating performance in an efficient, cost-effective and well-controlled fashion may have significant negative impacts on our future operations. In addition, any material failure, interruption of service, or compromised data security could adversely affect our operations. Security breaches in our IT could result in theft, destruction, loss, misappropriation or release of confidential data or intellectual property which could adversely impact our future results.
We are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our IT networks and infrastructure to prevent, detect, address and mitigate the risk of unauthorized access, misuse, computer viruses and other events that could have a security impact. Cybersecurity attacks are evolving in both frequency and sophistication and could be made by both internal and external individuals or groups with an extensive range of motives. If we are unable to prevent cybersecurity attacks and other information security breaches, we may encounter significant disruptions in our operations which could adversely impact our business, financial condition and results of operations or result in the unauthorized disclosure of confidential information. Such breaches may also harm our reputation, result in financial losses or subject us to litigation or other costs or penalties.
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The carrying value of goodwill and other long-lived assets may not be recoverable.
Goodwill and other long-lived assets including property, plant, equipment and software and other intangible assets are recorded at fair value on the date of acquisition. We review these assets at least annually for impairment. Impairment may result from, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations and a variety of other factors. Any future impairment of goodwill or other long-lived assets could have a material adverse effect on our results of operations.
Our ability to produce timely and accurate financial statements may be impacted if we fail to maintain an effective system of disclosure controls and internal control over financial reporting.
We are subject to the reporting requirements of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"). Sarbanes-Oxley requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are also required to make a formal assessment and provide an annual management report on the effectiveness of our internal control over financial reporting, which must be attested to by our independent registered public accounting firm. In order to maintain the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, resources, including accounting-related costs and management oversight.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Carpenter Technology’s cybersecurity team and organizational partnerships are designed to protect our employees, intellectual property and customers from various cyber threats. Our cybersecurity team strives to achieve these protections through obtaining leading certifications and regular engagement with third parties and federal organizations to further protect our information. While we continually work to safeguard the information systems we use, and the proprietary, confidential and personal information residing therein, and mitigate potential risks, there can be no assurance that such actions will be sufficient to prevent cybersecurity incidents or mitigate all potential risks to such systems, networks and data or those of our third party providers. See “Item 1A. Risk Factors” for a discussion of cybersecurity risks.
Risk Management and Strategy
•Increasing Visibility: Improve understanding of what to protect
•Rapid Response: Mitigate the amount of damage that could occur
•Shrink Surface of Attack: Reduce the total resources exposed to cyber threat
•Identity Management: Ensure the right people have correct access
•Supply Chain Risk Management: Manage security risks introduced by vendors and third parties
•Data-Centric Security: Protect data throughout the lifecycle
Carpenter Technology’s multi-faceted cybersecurity program includes implementation of leading technologies to detect evolving cyber threats, recurring regular cybersecurity training to keep employees situationally aware, mock security exercises to prepare for rapid response, penetration tests to continuously improve operations, and internal audits to confirm controls are operating effectively. Carpenter Technology also maintains strong partnerships with law enforcement, leading academic institutions and peers in the manufacturing industry to stay informed of the latest cybersecurity developments and trends in the ever-evolving threat landscape. Employees annually review and acknowledge an information systems Acceptable Use Policy. Information Technology associates participate in comprehensive annual training including DFARS and Sarbanes-Oxley compliance training.
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Carpenter Technology maintains a Cybersecurity Incident Response Plan ("CIRP") which provides specific guidance and documentation for proper incident handling and communication. The CIRP applies to all locations and situations where Carpenter Technology business is conducted. All cybersecurity incidents, regardless of severity, are to be promptly handled according to this plan. The CIRP will invoke Carpenter Technology's business continuity and crisis management processes for the most severe incidents.
Governance
Board of Directors Oversight
The Board of Directors is provided regular updates on the Company's cybersecurity program. The Audit/Finance Committee of the Board of Directors oversees the Company’s risk management program, including cyber and information security. The Board of Directors is also regularly briefed on Carpenter Technology’s cybersecurity risks and mitigation efforts. The oversight of our cybersecurity risk is integrated into our Enterprise Risk Management ("ERM") process owned by management and facilitated by Carpenter Technology's Internal Audit department. The ERM program includes an annual risk prioritization process designed to identify key enterprise risks. Each key enterprise risk is assigned risk owners to establish action plans and implement risk mitigation strategies. The annual risk assessment is presented to the full Board of Directors at least once per year, with regular updates presented quarterly to the Audit/Finance Committee.
Management’s Role in Cybersecurity Risk Management
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. Based on the nature and severity of the incident, the response team may be comprised of representatives from our Information Technology, Human Resources, Safety, Legal, Finance and Communications departments, who jointly determine if the incident may result in a business interruption, require reporting to regulators, employees and/or business partners, have a material financial impact or cause reputational harm and should be escalated to the executive crisis response team, which includes Chief Executive Officer, Chief Financial Officer and General Counsel. For all matters that have been escalated, the responsible team executes specified procedures to contain the incident, implement incident response procedures and implement and document remediation measures.
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Item 2. Properties
The principal locations of our primary domestic integrated mills in our SAO segment are located in Reading and Latrobe, Pennsylvania and Athens, Alabama. In addition, SAO manufactures bar products in Orwigsburg, Pennsylvania and Elyria, Ohio and operates a mini-mill in Hartsville, South Carolina, manufacturing bar and wire products. The principal locations for the PEP businesses include titanium alloy production facilities located in Washington, Pennsylvania and Clearwater, Florida and a powder products manufacturing facility in Athens, Alabama. The PEP segment includes domestic leased warehouses and service centers located in Washington, Pennsylvania and Vienna, Ohio.
The Reading, Hartsville, Washington, Orwigsburg, Elyria, Latrobe, and Athens facilities are owned. The Clearwater facility is owned, but the land is leased.
We also own or lease manufacturing facilities, distribution centers, service centers and sales offices in a number of foreign countries, including Belgium, Canada, China, Mexico, Singapore, Sweden and Taiwan.
Our corporate offices, located in Philadelphia, Pennsylvania, and Raleigh, North Carolina, are leased.
Our plants, customer service centers and distribution centers were acquired or leased at various times over numerous years. There is an active maintenance program to ensure a safe operating environment and to keep facilities in good condition. In addition, we have an active capital spending program to replace equipment as needed to keep it technologically competitive on a worldwide basis. We believe our facilities are in good condition and suitable for our business needs.
Item 3. Legal Proceedings
From time to time, we are a party to lawsuits and other proceedings involving alleged violations of, or liabilities arising from, environmental laws. We have environmental remediation liabilities at some of our owned operating facilities and have been designated as a PRP with respect to certain third party Superfund or similar waste disposal sites and other third party owned sites. Additionally, we have been notified that we may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against us. Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on our financial position, results of operations or cash flows over the long-term. However, such costs could be material to our financial position, results of operations or cash flows in a particular future quarter or year.
In addition, from time to time, we are a party to certain routine claims and legal actions and other contingent liabilities incident to the normal course of business which pertain to litigation, product claims, commercial disputes, employment actions, employee benefits, compliance with domestic and foreign laws and regulations, personal injury claims, patent infringement and tax issues. Based on information currently available, the ultimate resolution of our known contingencies, individually or in the aggregate and including the matters described in Note 12 to the consolidated financial statements in this Form 10-K, is not expected to have a material adverse effect on our financial position, cash flows or results of operations. 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.
See the "Contingencies" section included in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operation," and the "Contingencies and Commitments" section included in Note 12 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data," included in this Form 10-K, the contents of which are incorporated by reference to this Item 3.
Item 4. Mine Safety Disclosures
Not applicable.
Item 4A. Executive Officers of the Registrant
Listed below are the names of our corporate executive officers, including those required to be listed as executive officers for SEC purposes, each of whom assumes office after the annual organization meeting of the Board of Directors which immediately follows the Annual Meeting of Stockholders.
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Tony R. Thene was appointed President and Chief Executive Officer effective July 1, 2015. Mr. Thene joined Carpenter Technology in January 2013 and served as the Senior Vice President and Chief Financial Officer. Prior to joining Carpenter Technology, Mr. Thene was employed for 23 years by Alcoa Inc., a leading producer of primary and fabricated aluminum, holding various management positions.
Timothy Lain was appointed Senior Vice President and Chief Financial Officer effective August 11, 2020. Mr. Lain joined Carpenter Technology in June 2007. From June 2013 to September 2018, he served as the Vice President-Controller and Chief Accounting Officer. He served as the Vice President and Chief Financial Officer from September 2018 until August 2020. Prior to joining the Company, Mr. Lain served as Audit Director at McGladrey & Pullen LLP, a certified public accounting firm.
Brian J. Malloy was appointed Senior Vice President and Chief Operating Officer effective December 4, 2023. Mr. Malloy previously served as the Senior Vice President and Group President of the SAO business segment from April 2022 until December 2023. He also served as Senior Vice President and Group President of the PEP segment from February 2022 until April 2022; Mr. Malloy assumed interim leadership of the PEP business segment in July of 2021, while serving as Senior Vice President and Chief Commercial Officer, the role he held since August of 2020. Mr. Malloy joined Carpenter Technology in August 2015 as Vice President, Sales & Customer Service for SAO. He served as Vice President and Chief Commercial Officer from March 2016 until August 2020. Prior to joining Carpenter Technology, Mr. Malloy worked for Global Precision Tubes where he was the Senior Vice President & Chief Strategy Officer. During Mr. Malloy's two years in this role, he was responsible for business development, strategy and the commercial organizations. Mr. Malloy's previous experience includes key roles at Alcoa, Inc., where his last position was Vice President, Commercial for Industrial Gas Turbines in the Power and Propulsion business unit.
James D. Dee was appointed Senior Vice President, General Counsel and Secretary effective August 11, 2020. Mr. Dee served as Vice President, General Counsel and Secretary from September 2010 until August 2020. Mr. Dee joined Carpenter Technology from C&D Technologies where he last served as Senior Vice President, General Counsel, Secretary and Chief Administrative Officer. Prior to his tenure at C&D Technologies, Mr. Dee was employed by the law firm of Montgomery, McCracken, Walker & Rhodes, LLP. Mr. Dee also worked 16 years at SPS Technologies, Inc., where he last served as Vice President, General Counsel and Secretary.
Marshall D. Akins was appointed Vice President - Chief Commercial Officer effective February 21, 2022. Mr. Akins joined Carpenter Technology in February 2016 and served as Vice President - Aerospace until February 2022. Prior to joining Carpenter Technology, Mr. Akins served as Principal at the Boston Consulting Group, a global management consulting firm. Mr. Akins was responsible for a wide range of strategic and operational engagements within the Industrial Goods practice, primarily focusing on company growth and effectiveness.
| Assumed Present Position | ||||||||||||||||||||
| Name | Age | Position | ||||||||||||||||||
| Tony R. Thene | 64 | President and Chief Executive Officer | July 2015 | |||||||||||||||||
| Timothy Lain | 53 | Senior Vice President and Chief Financial Officer | August 2020 | |||||||||||||||||
| Brian J. Malloy | 58 | Senior Vice President and Chief Operating Officer | December 2023 | |||||||||||||||||
| James D. Dee | 68 | Senior Vice President, General Counsel and Secretary | August 2020 | |||||||||||||||||
| Marshall D. Akins | 42 | Vice President - Chief Commercial Officer | February 2022 | |||||||||||||||||
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the New York Stock Exchange ("NYSE") and traded under the symbol "CRS." 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. 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.
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. 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. 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.
The 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."
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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 cumulative total return assumes an investment of $100.00 on June 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. We believe the companies included in our Peer Group, taken as a whole, provide a more meaningful comparison in terms of product offerings, markets served, competition and other relevant factors. 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. | ||
| 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 do not consider this a share buyback program.
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Item 6.
Reserved.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Background and General
Our discussions below in this Item 7 should be read in conjunction with our consolidated financial statements, including the notes thereto, included in this Annual Report on Form 10-K.
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. Founded in 1889, we have evolved to become a pioneer in premium specialty alloys, including nickel, cobalt, and titanium and material process capabilities that solve our customers' current and future material challenges. We primarily process basic raw materials such as nickel, cobalt, titanium, manganese, chromium, molybdenum, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire and narrow strip in many sizes and finishes. We also produce certain metal powders and parts. Our sales are distributed directly from our production plants and distribution network as well as through independent distributors. Unlike many other specialty steel producers, we operate our own worldwide network of service and distribution centers. These service centers, located in the United States, Canada, Mexico, Europe and Asia allow us to work more closely with customers and to offer various just-in-time stocking programs.
As part of our overall business strategy, we have sought out and considered opportunities related to strategic acquisitions and joint collaborations as well as possible business unit dispositions aimed at broadening our offering to the marketplace. We have participated with other companies to explore potential terms and structures of such opportunities and expect that we will continue to evaluate these opportunities.
While we prepare our financial statements in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), we also utilize and present certain financial measures that are not based on or included in U.S. GAAP (we refer to these as "Non-GAAP financial measures"). Please see the section "Non-GAAP Financial Measures" below for further discussion of these financial measures, including the reasons why we use such financial measures and reconciliations of such financial measures to the nearest U.S. GAAP financial measures.
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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.
(2) Pounds sold data includes Specialty Alloys Operations segment and Dynamet and Additive businesses from the Performance Engineered Products segment.
Our sales are across diverse end-use markets. 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 | % | ||||||||||||||||||||||||||
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Impact of Raw Material Prices and Product Mix
We value most of our inventory utilizing the LIFO inventory costing methodology. Under the LIFO inventory costing method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials may have been acquired at potentially significantly different values due to the length of time from the acquisition of the raw materials to the sale of the processed finished goods to the customers. In a period of rising raw material costs, the LIFO inventory valuation normally results in higher cost of sales. Conversely, in a period of decreasing raw material costs, the LIFO inventory valuation normally results in lower cost of sales.
The volatility of the costs of raw materials has impacted our operations over the past several years. 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. Generally, the formula used to calculate a surcharge is based on published prices of the respective raw materials for the previous month which correlates to the prices we pay for our raw material purchases. However, a portion of our surcharges to customers may be calculated using a different surcharge formula or may be based on the raw material prices at the time of order, which creates a lag between surcharge revenue and corresponding raw material costs recognized in cost of sales. 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. Firm price sales arrangements involve a risk of profit margin fluctuations, particularly when raw material prices are volatile. In order to reduce the risk of fluctuating profit margins on these sales, we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the related products sold. 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. If a customer fails to meet the volume commitments (or the consumption schedule deviates from the agreed-upon terms of the firm price sales arrangements), we may need to absorb the gains or losses associated with the commodity forward contracts on a temporary basis. Gains or losses associated with commodity forward contracts are reclassified to earnings (loss) when earnings are impacted by the hedged transaction. 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. Gains and/or losses on the commodity forward contracts are reclassified from accumulated other comprehensive income (loss) ("AOCI") together with the actual purchase price of the underlying commodities when the underlying commodities are purchased and recorded in inventory. To the extent that the total purchase price of the commodities, inclusive of the gains or losses on the commodity forward contracts, are higher or lower relative to the beginning of year costs, our cost of goods sold reflects such amounts. Accordingly, the gains and/or losses associated with commodity forward contracts may not impact the same period that the firm price sales arrangements revenue is recognized, and comparisons of gross profit from period to period may be impacted. These firm price sales arrangements are expected to continue as we look to strengthen our long-term customer relationships by expanding, renewing and, in certain cases, extending to a longer term, our customer long-term arrangements.
We produce hundreds of grades of materials, with a wide range of pricing and profit levels depending on the grade. In addition, our product mix within a period is subject to the fluctuating order patterns of our customers as well as decisions we may make on participation in certain products based on available capacity including the impacts of capacity commitments we may have under existing customer agreements. While we expect to see positive contribution from a more favorable product mix in our margin performance over time, the impact by period may fluctuate, and period to period comparisons may vary.
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Net Pension Expense
Net pension expense, as we define it below, includes the net periodic benefit costs related to both our pension and other postretirement plans. The net periodic benefit costs are determined annually based on beginning of year balances and are recorded ratably throughout the fiscal year, unless a significant re-measurement event occurs.
During the fiscal year ended June 30, 2024, we executed a buy-out annuity transaction for our largest defined benefit plan. We determined that the annuity settlement and lump-sum payments exceeded the threshold of service cost and interest cost components and therefore settlement accounting was required. We recorded a noncash settlement charge of $51.9 million in the year ended June 30, 2024, within other expense, net.
The following is a summary of the net pension expense for the years ended June 30, 2025, 2024 and 2023:
| Years Ended June 30, | ||||||||||||||||||||
| ($ 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. The pension earnings, interest and deferrals is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans and amortization of actuarial gains and losses and prior service costs and benefits.
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. 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.
Operating Performance Overview
Fiscal year 2025 was the most profitable year in Carpenter Technology’s history with operating income of $521.8 million or adjusted operating income of $525.4 million. This represents an increase in adjusted operating income of $171.3 million, or 48 percent, from the prior fiscal year when excluding the special items as discussed below. We continue to drive earnings momentum through improved productivity, product mix optimization and pricing actions. Notably, the SAO segment exceeded expectations by generating $588.6 million of operating income with an operating margin of 23.0 percent of net sales (28.6 percent of net sales excluding surcharge revenue). We have continued to deliver record results, despite disruptions in the supply chains where we participate. We offer a broad portfolio of highly specialized alloys, serving high value applications in high growth end-use markets.
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In addition to the strong operating performance, we generated $440.4 million of cash from operating activities in fiscal year 2025, as compared with cash generated from operating activities of $274.9 million in fiscal year 2024. Adjusted free cash flow was $287.5 million in fiscal year 2025, as compared with adjusted free cash flow of $179.0 million in fiscal year 2024. With a strong balance sheet and adjusted free cash flow, we will continue to take a balanced approach to capital allocation: sustaining our current asset base to achieve our targets, returning cash to stockholders through our stock buyback and dividend programs and investing in incremental growth initiatives, including the recently announced brownfield expansion project in Athens, Alabama. During fiscal year 2025, we repurchased 575,000 shares of our common stock in the open market for an aggregate $101.9 million and paid dividends of $40.3 million.
Looking over the long term, the same dynamics that are driving our current performance are expected to get stronger. The markets that we serve, specifically Aerospace and Defense, Medical and Energy have a strong, multi-year outlook. Further, our customers rely on our diverse portfolio of advanced material solutions and world class capabilities, and we are investing to accelerate our growth with our recently announced brownfield primary and secondary melt capacity expansion. Altogether, Carpenter Technology is well positioned to achieve our goals and we believe our earnings growth journey will extend far beyond fiscal year 2025.
We continue to closely monitor the evolving tariff news as well as engage with our customers and suppliers to analyze how tariffs could impact our business. We, as well as others in our industry, have established long-standing surcharge mechanisms to pass through changes in raw material prices to our customers. We expect to use these surcharge mechanisms to pass through the impact of any incremental tariffs on our raw material costs to our customers. As such, at this time, based on current information, we believe there will not be a material impact to the Company.
Results of Operations — Fiscal Year 2025 Compared to Fiscal Year 2024
For fiscal year 2025, we reported net income of $376.0 million, or $7.42 earnings per diluted share. This compares with net income of $186.5 million, or $3.70 earnings per diluted share, in fiscal year 2024. Excluding special items, as identified below, adjusted earnings per diluted share was $7.48 in fiscal year 2025, and $4.74 in fiscal year 2024. The results for fiscal year 2025 compared to fiscal year 2024 reflect an ongoing improvement in product mix with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies.
Both periods were impacted by special items. Our fiscal year 2025 results include restructuring and asset impairment charges of $3.6 million as a result of actions taken to streamline operations in the Carpenter Additive business in the PEP segment, as announced in the quarter ended June 30, 2024. Special items included in our fiscal year 2024 results included a noncash goodwill impairment charge of $14.1 million related to the Latrobe Distribution reporting unit in the PEP segment. 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. 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. 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 2025 were $2,877.1 million, which represents a 4 percent increase from fiscal year 2024. Excluding surcharge revenue, sales were 8 percent higher than fiscal year 2024 on 6 percent lower volume. The results reflect the impact of price increases and stronger product demand for materials used in the end-use markets of Aerospace and Defense and Energy compared to fiscal year 2024.
Geographically, domestic net sales increased 5 percent from fiscal year 2024. Excluding surcharge revenue, domestic sales increased 9 percent driven by a 27 percent increase in the Aerospace and Defense end-use market. Net sales outside the United States increased 4 percent from fiscal year 2024 to $1,177.2 million for fiscal year 2025. Excluding surcharge revenue, sales outside the United States increased 8 percent, driven by the Aerospace and Defense end-use market in the European region and Mexico and the Energy end-use market in the European region compared to fiscal year 2024. A portion of our sales outside the United States are denominated in foreign currencies. The impact of fluctuations in foreign currency exchange rates resulted in a $0.5 million decrease in sales during fiscal year 2025 compared to fiscal year 2024. International sales as a percentage of our total net sales represented 41 percent and 41 percent for fiscal year 2025 and 2024, respectively.
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Sales by End-Use Markets
We sell to customers across diversified end-use markets. We believe that net sales by end-use markets is helpful supplemental information in analyzing the performance of the business from period to period. 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) | 2025 | 2024 | ||||||||||||||||||||||||
| Aerospace and Defense | $ | 1,768.6 | $ | 1,538.8 | $ | 229.8 | 15 | % | ||||||||||||||||||
| Medical | 351.2 | 375.6 | (24.4) | (6) | % | |||||||||||||||||||||
| Energy | 200.3 | 185.8 | 14.5 | 8 | % | |||||||||||||||||||||
| Transportation | 113.3 | 149.1 | (35.8) | (24) | % | |||||||||||||||||||||
| Industrial and Consumer | 359.5 | 415.3 | (55.8) | (13) | % | |||||||||||||||||||||
| Distribution | 84.2 | 95.1 | (10.9) | (11) | % | |||||||||||||||||||||
| Total net sales | $ | 2,877.1 | $ | 2,759.7 | $ | 117.4 | 4 | % | ||||||||||||||||||
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) | 2025 | 2024 | ||||||||||||||||||||||||
| Aerospace and Defense | $ | 1,440.7 | $ | 1,199.2 | $ | 241.5 | 20 | % | ||||||||||||||||||
| Medical | 296.1 | 315.4 | (19.3) | (6) | % | |||||||||||||||||||||
| Energy | 151.3 | 130.4 | 20.9 | 16 | % | |||||||||||||||||||||
| Transportation | 86.4 | 108.9 | (22.5) | (21) | % | |||||||||||||||||||||
| Industrial and Consumer | 288.1 | 319.4 | (31.3) | (10) | % | |||||||||||||||||||||
| Distribution | 83.5 | 94.4 | (10.9) | (12) | % | |||||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 2,346.1 | $ | 2,167.7 | $ | 178.4 | 8 | % | ||||||||||||||||||
Sales to the Aerospace and Defense end-use market increased 15 percent from fiscal year 2024 to $1,768.6 million. Excluding surcharge revenue, sales increased 20 percent. The fiscal year 2025 results reflect double-digit increases in the Aerospace engine and fastener sub-markets driven by the need to maintain and replace aging fleets compared to fiscal year 2024. The fiscal year 2025 results also reflect higher sales in the Defense end-use market for program specific applications.
Sales to the Medical end-use market decreased 6 percent to $351.2 million from fiscal year 2024. Excluding surcharge revenue, sales decreased 6 percent. The fiscal year 2025 results reflect lower shipments as a result of the medical supply chain managing inventory levels closely, partially offset by realized price increases particularly in the orthopedic and dental sub-markets compared to fiscal year 2024.
Sales to the Energy end-use market of $200.3 million reflected an 8 percent increase from fiscal year 2024. Excluding surcharge revenue, sales increased 16 percent. The fiscal year 2025 results reflect higher demand in the power generation sub-market for both new and refurbished industrial gas turbines partially offset by decreased rig counts and decreased shipments for material used in the oil and gas sub-market compared to fiscal year 2024.
Transportation end-use market sales of $113.3 million reflected a 24 percent decrease from fiscal year 2024. Excluding surcharge revenue, sales decreased 21 percent. The results reflect lower shipments in light-duty and specialty sub-markets driven by supply chain disruptions compared to fiscal year 2024. The fiscal year 2024 results reflected the negative impact of employee union strikes in North America, which did not occur in fiscal year 2025.
Industrial and Consumer end-use market sales of $359.5 million decreased 13 percent from fiscal year 2024. Excluding surcharge revenue, sales decreased 10 percent. 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.
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Gross Profit
Gross profit in fiscal year 2025 increased to $768.6 million, or 26.7 percent of net sales, from $584.3 million, or 21.2 percent of net sales for fiscal year 2024. The fiscal year 2025 results reflect 4 percent increased sales with an ongoing improvement in product mix with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies compared to fiscal year 2024. Excluding the impact of surcharge revenue, our adjusted gross margin in fiscal year 2025 was 32.8 percent. This compares to adjusted gross margin of 27.0 percent in fiscal year 2024.
Our surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect as discussed above. While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Fiscal Year | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Net sales | $ | 2,877.1 | $ | 2,759.7 | ||||||||||
| Less: surcharge revenue | 531.0 | 592.0 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 2,346.1 | $ | 2,167.7 | ||||||||||
| Gross profit | $ | 768.6 | $ | 584.3 | ||||||||||
| Gross margin | 26.7 | % | 21.2 | % | ||||||||||
| Gross margin excluding surcharge revenue | 32.8 | % | 27.0 | % | ||||||||||
Selling, General and Administrative Expenses
Selling, general and administrative expenses in fiscal year 2025 were $243.2 million, or 8.5 percent of net sales (10.4 percent of net sales excluding surcharge revenue), compared to $230.2 million, or 8.3 percent of net sales (10.6 percent of net sales excluding surcharge revenue), in fiscal year 2024. The higher selling, general and administrative expenses in fiscal year 2025 reflect higher salary, benefit, and variable compensation charges compared to fiscal year 2024.
Restructuring and Asset Impairment Charges
During fiscal year 2025, restructuring and asset impairment charges were $3.6 million, compared to $16.9 million in fiscal year 2024. The restructuring charges in fiscal year 2025 were a result of actions taken to streamline operations in our Carpenter Additive business in the PEP segment, as announced in the quarter ended June 30, 2024. This included $2.5 million of noncash pre-tax inventory impairment charges and $1.1 million of costs related to the decommissioning of property, plant and equipment previously impaired. Restructuring and asset impairment charges in fiscal year 2024 included $15.8 million of noncash pre-tax impairment charges related to $8.8 million of property, plant, equipment and software and $7.0 million associated with a certain definite lived intangible asset. Also included were $1.1 million of various personnel costs for severance payments, medical coverage and related items.
Goodwill Impairment Charge
No goodwill impairment charges were recognized during fiscal year 2025. During fiscal year 2024, we identified an impairment triggering event in the Latrobe Distribution reporting unit within the PEP segment related to a decline in customer ordering patterns. 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. In light of these market conditions at the time, the pace of growth in the future projections for the Latrobe Distribution reporting unit were lowered. We determined the goodwill associated with the Latrobe Distribution reporting unit was impaired and recorded an impairment charge of $14.1 million during the third quarter of fiscal year 2024, which represented the entire balance of goodwill for this reporting unit.
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Operating Income
Our operating income in fiscal year 2025 was $521.8 million, or 18.1 percent of net sales, as compared with $323.1 million of operating income, or 11.7 percent of net sales, in fiscal year 2024. Excluding surcharge revenue and special items, adjusted operating income was $525.4 million or adjusted operating margin of 22.4 percent for fiscal year 2025 compared to $354.1 million, or 16.3 percent for fiscal year 2024. Results for fiscal year 2025 reflect ongoing improvement in product mix, higher realized prices, as well as expanded operating efficiencies compared to fiscal year 2024.
The special item included in operating income in fiscal year 2025 represents $3.6 million of restructuring and asset impairment charges as a result of actions taken to streamline operations in the Carpenter Additive business in the PEP segment, as announced in the quarter ended June 30, 2024. 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 $16.9 million as a result of actions taken to streamline operations in the Carpenter Additive business during fiscal year 2024.
The following presents our operating income and operating margin, in each case excluding the impact of surcharge on net sales and special items. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Fiscal Year | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Net sales | $ | 2,877.1 | $ | 2,759.7 | ||||||||||
| Less: surcharge revenue | 531.0 | 592.0 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 2,346.1 | $ | 2,167.7 | ||||||||||
| Operating income | $ | 521.8 | $ | 323.1 | ||||||||||
Special items: | ||||||||||||||
| Goodwill impairment charge | — | 14.1 | ||||||||||||
| Restructuring and asset impairment charges | 3.6 | 16.9 | ||||||||||||
| Adjusted operating income excluding special items | $ | 525.4 | $ | 354.1 | ||||||||||
| Operating margin | 18.1 | % | 11.7 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue and special items | 22.4 | % | 16.3 | % | ||||||||||
Interest Expense, Net
Fiscal year 2025 interest expense, net was $48.4 million compared to $51.0 million in fiscal year 2024. Capitalized interest reduced interest expense, net by $2.6 million for fiscal year 2025 and by $1.6 million in fiscal year 2024. The lower interest expense, net in fiscal year 2025 is due to less short-term borrowings under our Credit Facility and higher capitalized interest compared to fiscal year 2024.
Other Expense, Net
Other expense, net for fiscal year 2025 was $6.1 million compared with other expense, net of $60.5 million in fiscal year 2024. The results for fiscal year 2024 included a noncash pension settlement charge of $51.9 million. Fiscal year 2025 reflects $15.5 million of expense from pension earnings, interest and deferrals compared to $14.4 million of expense in fiscal year 2024, driven by lower than expected returns on plan assets. Interest income in fiscal year 2025 is $7.5 million, as compared to $1.8 million in fiscal year 2024.
Income Taxes
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Our effective tax rate (income tax expense (benefit) as a percent of income (loss) before taxes) for fiscal year 2025 was 19.5 percent as compared to 11.9 percent for fiscal year 2024. The fiscal year 2025 tax expense includes tax benefits of $14.2 million attributable to employee share-based compensation.
The fiscal year 2024 tax expense included $18.4 million for U.S. tax benefits related to the closure of Carpenter Additive operations in the United Kingdom, $12.4 million associated with the pension settlement charge and $6.8 million attributable to employee share-based compensation. The fiscal year 2024 tax expense also reflected the unfavorable impacts of the $14.1 million non-deductible goodwill impairment charge, $16.9 million non-deductible restructuring charges and losses in certain foreign jurisdictions for which no tax benefit can be recognized. Excluding the tax impact of the pension settlement charge, non-deductible goodwill impairment charge, restructuring charges and tax benefits related to the closure of the Carpenter Additive operations in the United Kingdom, the rate for fiscal year 2024 would have been 19.0 percent.
The One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025. The provisions of the OBBBA have varying effective dates. The OBBBA allows an elective deduction for domestic research and development expenses, a reinstatement of elective 100 percent first-year bonus depreciation and modifies the tax rates on Foreign-Derived Deduction Eligible Income and income from non-U.S. subsidiaries (Net CFC Tested Income), among other provisions. We are currently evaluating the impact of these provisions. A quantitative estimate of the specific financial effects cannot be reasonably determined at this time due to the complexity of the changes in the tax reform. The impact of the provisions in the OBBBA will depend on our facts in each fiscal year and anticipated guidance from the Internal Revenue Service.
On October 8, 2021, the Organization for Economic Co-operation and Development ("OECD") released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. 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. In June 2025, the U.S. and the G-7 countries announced the intention to reach an agreement that would exempt U.S. parented multinationals from certain of the Pillar Two rules. The details of that agreement and its applicability globally have not been finalized. We determined the Pillar Two Framework as it exists today does not have a significant impact on our financial position, results of operations or cash flows.
We assert that substantially all undistributed earnings from foreign subsidiaries are not considered permanently reinvested. 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. "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. "Financial Statements and Supplementary Data."
The following table includes comparative information for our volumes by business segment:
| Pounds sold | Fiscal Year | Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||||||||||||||
| Specialty Alloys Operations | 186,270 | 208,154 | (21,884) | (11) | % | |||||||||||||||||||||
| Performance Engineered Products * | 10,098 | 10,094 | 4 | — | % | |||||||||||||||||||||
| Intersegment | (3,388) | (11,946) | 8,558 | 72 | % | |||||||||||||||||||||
| Total pounds sold | 192,980 | 206,302 | (13,322) | (6) | % | |||||||||||||||||||||
* Pounds sold data for PEP segment includes Dynamet and Additive businesses only.
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The following table includes comparative information for our net sales by business segment:
| Net sales | Fiscal Year | $ Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||||||||||||||
| Specialty Alloys Operations | $ | 2,563.6 | $ | 2,443.8 | $ | 119.8 | 5 | % | ||||||||||||||||||
| Performance Engineered Products | 405.4 | 411.0 | (5.6) | (1) | % | |||||||||||||||||||||
| Intersegment | (91.9) | (95.1) | 3.2 | 3 | % | |||||||||||||||||||||
| Total net sales | $ | 2,877.1 | $ | 2,759.7 | $ | 117.4 | 4 | % | ||||||||||||||||||
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) | 2025 | 2024 | ||||||||||||||||||||||||
| Specialty Alloys Operations | $ | 2,057.9 | $ | 1,876.0 | $ | 181.9 | 10 | % | ||||||||||||||||||
| Performance Engineered Products | 372.4 | 377.8 | (5.4) | (1) | % | |||||||||||||||||||||
| Intersegment | (84.2) | (86.1) | 1.9 | 2 | % | |||||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 2,346.1 | $ | 2,167.7 | $ | 178.4 | 8 | % | ||||||||||||||||||
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) | 2025 | 2024 | ||||||||||||
| Net Sales | $ | 2,563.6 | $ | 2,443.8 | ||||||||||
| Less: surcharge revenue | 505.7 | 567.8 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 2,057.9 | $ | 1,876.0 | ||||||||||
| Operating income | $ | 588.6 | $ | 408.5 | ||||||||||
| Operating margin | 23.0 | % | 16.7 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue | 28.6 | % | 21.8 | % | ||||||||||
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) | 2025 | 2024 | ||||||||||||
| Net Sales | $ | 405.4 | $ | 411.0 | ||||||||||
| Less: surcharge revenue | 33.0 | 33.2 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 372.4 | $ | 377.8 | ||||||||||
| Operating income | $ | 37.0 | $ | 36.0 | ||||||||||
| Operating margin | 9.1 | % | 8.8 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue | 9.9 | % | 9.5 | % | ||||||||||
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Specialty Alloys Operations Segment
Net sales in fiscal year 2025 for the SAO segment increased 5 percent to $2,563.6 million, as compared with $2,443.8 million in fiscal year 2024. Excluding surcharge revenue, net sales increased 10 percent on 11 percent lower shipment volume as compared to fiscal year 2024. The higher sales excluding surcharge revenue in the SAO segment reflect double-digit percentage growth in the end-use markets of Aerospace and Defense and Energy driven by realized price increases and improving product mix compared to fiscal year 2024.
Operating income for the SAO segment in fiscal year 2025 was $588.6 million, or 23.0 percent of net sales (28.6 percent of net sales excluding surcharge revenue), compared to operating income of $408.5 million, or 16.7 percent of net sales (21.8 percent of net sales excluding surcharge revenue), for fiscal year 2024. Fiscal year 2025 results reflects stronger product mix and operational efficiency gains compared to fiscal year 2024.
Performance Engineered Products Segment
Net sales for fiscal year 2025 for the PEP segment were $405.4 million as compared with $411.0 million for fiscal year 2024. Excluding surcharge revenue, net sales decreased 1 percent from fiscal year 2024 on flat shipment volume. The results reflect higher Medical end-use market sales offset by lower demand in the other end-use markets compared to fiscal year 2024.
Operating income for the PEP segment for fiscal year 2025 was $37.0 million, or 9.1 percent of net sales (9.9 percent of net sales excluding surcharge revenue), as compared with operating income of $36.0 million, or 8.8 percent of net sales (9.5 percent of net sales excluding surcharge revenue) for fiscal year 2024. 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. This compares with net income of $56.4 million, or $1.14 earnings per diluted share in fiscal year 2023. Excluding special items, as identified below, adjusted earnings per diluted share was $4.74 in fiscal year 2024. There were no reported special items for fiscal year 2023. The results for fiscal year 2024 compared to fiscal year 2023 were driven by ongoing improvement in product mix, higher realized prices, as well as expanded operating efficiencies.
Special items included in our fiscal year 2024 results include a noncash goodwill impairment charge of $14.1 million related to the Latrobe Distribution reporting unit in the PEP segment. 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. 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 an 8 percent increase from fiscal year 2023. 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, 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, 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. 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. International sales as a percentage of our total net sales represented 41 percent and 39 percent for fiscal year 2024 and fiscal year 2023, respectively.
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Sales by End-Use Markets
We sell to customers across diversified end-use markets. We believe this is helpful supplemental information in analyzing performance of the business from period to period. 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 | % | ||||||||||||||||||
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Sales to the Aerospace and Defense end-use market increased 19 percent from fiscal year 2023 to $1,538.8 million. Excluding surcharge revenue, sales increased 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. 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. Excluding surcharge revenue, sales increased 31 percent on 14 percent higher shipment volume. The fiscal year 2024 results reflect higher demand across all applications as the medical supply chain replenishes inventory levels to meet higher patient demand for elective medical procedures.
Sales to the Energy end-use market of $185.8 million reflected a 14 percent increase from fiscal year 2023. Excluding surcharge revenue, sales increased 25 percent on 12 percent higher 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 market 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 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.
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 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 $337.3 million, or 13.2 percent of net sales for fiscal year 2023. The fiscal year 2024 results reflect 8 percent increased sales with a stronger product mix driven by higher prices and improved operational efficiencies, compared to fiscal year 2023. Excluding the impact of surcharge revenue, our adjusted gross margin in fiscal year 2024 was 27.0 percent. This compares to adjusted gross margin of 18.3 percent in fiscal year 2023.
Our surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect as discussed above. While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Fiscal Year | ||||||||||||||
| ($ 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 | % | ||||||||||
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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. The higher selling, general and administrative expenses in fiscal year 2024 reflect higher variable compensation charges compared to fiscal year 2023.
Restructuring and Asset Impairment Charges
During fiscal year 2024, restructuring and asset impairment charges were $16.9 million, compared to no restructuring and asset impairment charges in fiscal year 2023. Restructuring activities were a result of actions taken to streamline operations in our Carpenter Additive business in the PEP segment during fiscal year 2024. This included $15.8 million of noncash pre-tax impairment charges related to $8.8 million of property, plant, equipment and software and $7.0 million associated with a certain definite lived intangible asset.
Goodwill Impairment Charge
During fiscal year 2024, we identified an impairment triggering event in the Latrobe Distribution reporting unit within the PEP segment related to a decline in customer ordering patterns. 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. In light of these market conditions at the time, the pace of growth in the future projections for the Latrobe Distribution reporting unit were lowered. We determined the goodwill associated with the Latrobe Distribution reporting unit was impaired and recorded an impairment charge of $14.1 million during the third quarter of fiscal year 2024, which represented the entire balance of goodwill for this reporting unit. No goodwill impairment charges were recognized during fiscal year 2023.
Operating Income
Our operating income in fiscal year 2024 was $323.1 million, or 11.7 percent of net sales, as compared with $133.1 million of operating income, or 5.2 percent of net sales in 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. Our fiscal year 2023 operating results reflected higher sales in key end-use markets, increased productivity at our facilities, improved product mix and realized price increases.
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 $16.9 million as a result of actions taken to streamline operations in the Carpenter Additive business.
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The following presents our operating income and operating margin, in each case excluding the impact of surcharge on net sales and special items. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Fiscal Year | ||||||||||||||
| ($ 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 year 2024 interest expense, net was $51.0 million compared to $54.1 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.
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. Fiscal year 2024 reflects $14.4 million of expense from pension earnings, interest and deferrals compared to $10.0 million of expense from pension earnings, interest and deferrals in fiscal year 2023, driven by lower than expected returns on plan assets. The results for fiscal year 2024 also include a noncash pension settlement charge of $51.9 million.
Income Taxes
Our effective tax rate (income tax expense (benefit) as a percent of income (loss) before taxes) for fiscal year 2024 was 11.9 percent as compared to 22.2 percent for fiscal year 2023. The fiscal year 2024 tax expense includes $18.4 million for U.S. tax benefits related to the closure of Carpenter Additive operations in the United Kingdom, $12.4 million associated with the pension settlement charge and $6.8 million attributable to employee share-based compensation. Tax expense also reflects the unfavorable impacts of the $14.1 million non-deductible goodwill impairment charge, $16.9 million non-deductible restructuring charges and losses in certain foreign jurisdictions for which no tax benefit can be recognized. Excluding the tax impact of the pension settlement charge, non-deductible goodwill impairment charge, restructuring charges and tax benefits related to the closure of the Carpenter Additive operations in the United Kingdom, the rate for fiscal year 2024 would have been 19.0 percent.
The fiscal year 2023 tax expense included the unfavorable impacts of losses in certain foreign jurisdictions for which no tax benefit can be recognized as well as tax charges of $0.3 million for the impact of a state tax legislative change and $0.4 million resulting from changes in our prior year tax positions. Also included were tax benefits of $1.0 million for anticipated interest on IRS income tax refund claims and $0.9 million for decreases in state valuation allowances for deferred tax assets resulting from changes in our ability to utilize certain state net operating loss carryforwards.
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On October 8, 2021, the Organization for Economic Co-operation and Development ("OECD") released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. 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. In June 2025, the U.S. and the G-7 countries announced the intention to reach an agreement that would exempt U.S. parented multinationals from certain of the Pillar Two rules. The details of that agreement and its applicability globally have not been finalized. We determined the Pillar Two Framework as it exists today does not have a significant impact on our financial position, results of operations or cash flows.
We assert that substantially all undistributed earnings from foreign subsidiaries are not considered permanently reinvested. 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. "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. "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.
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 | % | ||||||||||||||||||
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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. 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.
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. 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. 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.
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. Fiscal year 2024 results reflect stronger product mix and improved operational efficiencies, compared to fiscal year 2023.
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Liquidity and Financial Resources
During fiscal year 2025, we generated cash from operating activities of $440.4 million as compared with $274.9 million in fiscal year 2024. 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 change in operating cash flow and adjusted free cash flow in fiscal year 2025 resulted from higher earnings after noncash adjustments to net income and less cash used to build inventory partially offset by higher pension contributions and higher capital expenditures. Fiscal year 2025 reflects cash used to build inventory of $60.4 million compared to $96.7 million in fiscal year 2024.
Capital expenditures for property, plant, equipment and software were $154.3 million for fiscal year 2025 as compared to $96.6 million for fiscal year 2024. The increase in capital expenditures in fiscal year 2025 is partially due to the recently announced brownfield expansion in Athens, Alabama. In fiscal year 2026, we expect capital expenditures, including the brownfield expansion, to be in the range of $280.0 million to $300.0 million.
We evaluate liquidity needs for alternative uses including funding external growth opportunities, share repurchases as well as funding consistent dividend payments to stockholders. Dividends for fiscal year 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. Additionally, we will discretionarily use excess cash for a share repurchase program up to $400.0 million of our outstanding common stock. The primary use of this program is to offset dilution. During fiscal year 2025, we repurchased 575,000 shares of our common stock on the open market for an aggregate of $101.9 million. As of June 30, 2025, $298.1 million remains available for future purchases. There were no share repurchases in fiscal year 2024.
During fiscal year 2025, we made $64.8 million of pension contributions to our qualified defined benefit pension plans. 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.
We have demonstrated the ability to generate cash to meet our needs through cash flows from operations, management of working capital and the ability to access capital markets to supplement internally generated funds. We anticipate that we will continue to do so for the next twelve months and thereafter for the foreseeable future. We target minimum liquidity of $150.0 million, consisting of cash and cash equivalents added to available borrowing capacity under our Credit Facility.
On April 14, 2023, we entered into a Second Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer and the other lenders, agents and arrangers party thereto (the "Credit Facility"). The Credit Facility amended and restated our then existing Amended and Restated Credit Agreement dated as of March 26, 2021 which had been set to expire on March 31, 2024. The Credit Facility extends the maturity to April 12, 2028.
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. 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, 2025, the borrowing rate for the Credit Facility was 6.18%, however we had no short-term borrowings. 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.
We believe that our total liquidity of $664.4 million, as of June 30, 2025, which includes cash and cash equivalents of $315.5 million and available borrowing capacity of $348.9 million under the Credit Facility, will be sufficient to fund our cash needs over the foreseeable future.
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As of June 30, 2025, we had cash and cash equivalents of $27.2 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. During the fiscal year ended June 30, 2025, we repatriated cash of $3.8 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.
We are subject to certain financial and restrictive covenants under the Credit Facility which requires the maintenance of a minimum interest coverage ratio of 3.00 to 1.00 and a consolidated net leverage ratio of no more than 4.00 to 1.00. 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.
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.
Non-GAAP Financial Measures
The following provides additional information regarding certain non-GAAP financial measures that we use in this report. Our definitions and calculations of these items may not necessarily be the same as those used by other companies.
Net Sales and Gross Margin Excluding Surcharge Revenue
This report includes discussions of net sales as adjusted to exclude the impact of raw material surcharge and the resulting impact on gross margins, which represent financial measures that have not been determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). We present and discuss these financial measures because management believes removing the impact of raw material surcharge from net sales provides a more consistent basis for comparing results of operations from period to period for the reasons discussed earlier in this report. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, our Board of Directors and others. See our earlier discussion of "Gross Profit" for a reconciliation of net sales and gross margin, excluding surcharge revenue, to net sales as determined in accordance with U.S. GAAP. 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.
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. We present and discuss these financial measures because management believes removing the impact of raw material surcharge from net sales provides a more consistent and meaningful basis for comparing results of operations from period to period for the reasons discussed earlier in this report. In addition, management believes that excluding special items from operating margin is helpful in analyzing our operating performance, as these items are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, our Board of Directors and others. 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. 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.
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Adjusted Earnings Per Dilutive Share
The following provides a reconciliation of adjusted earnings per dilutive share, to its most directly comparable U.S. 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, 2025, as reported | $ | 467.3 | $ | (91.3) | $ | 376.0 | $ | 7.42 | ||||||||||||||||||
| Special item: | ||||||||||||||||||||||||||
| Restructuring and asset impairment charges | 3.6 | (0.9) | 2.7 | 0.06 | ||||||||||||||||||||||
Year ended June 30, 2025, as adjusted | $ | 470.9 | $ | (92.2) | $ | 378.7 | $ | 7.48 | ||||||||||||||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 50.7 million for the fiscal year ended June 30, 2025.
| ($ 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. 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.
Management believes that the presentation of earnings per share adjusted to exclude the impact of special items is helpful in analyzing the operating performance of the Company, as these items are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company's Board of Directors and others. Our definitions and calculations of these items may not necessarily be the same as those used by other companies. Adjusted earnings per share is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, earnings per share calculated in accordance with U.S. GAAP.
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Adjusted Free Cash Flow
This report includes discussions of adjusted free cash flow which is a non-GAAP financial measure and may not be comparable to adjusted free cash flow reported by other companies. The following provides a reconciliation of adjusted free cash flow, as used in this Annual Report, to its most directly comparable U.S. 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. 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. Adjusted free cash flow is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, cash flows calculated in accordance with U.S. GAAP.
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. Actual results could differ from those estimates. On an on-going basis, we evaluate our estimates, including those related to bad debts, customer claims, inventories, pensions and other postretirement benefits, intangible assets, goodwill, leases, environmental liabilities, income taxes, derivative instruments and hedging activities and contingencies and litigation.
We believe the following are the critical accounting policies and areas affected by significant judgments and estimates impacting the preparation of our consolidated financial statements.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts for estimated losses resulting from the failure of our customers to make required payments. We perform ongoing credit evaluations of our customers and monitor their payment patterns. Should the financial condition of our customers deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.
Inventories
Inventories are valued at the lower of cost or market for those inventories determined by the LIFO method. We 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. 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.
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Costs include direct materials, direct labor, applicable manufacturing overhead and other direct costs. Under the LIFO inventory valuation method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials and other costs may have been incurred at significantly different values due to the length of time of our production cycle. The prices for many of the raw materials we use have been volatile. Since we value most of our inventory utilizing the LIFO inventory costing methodology, rapid changes in raw material costs have an impact on our operating results. In a period of rising prices, cost of sales expense recognized under LIFO is generally higher than the cash costs incurred to acquire the inventory sold. Conversely, in a period of declining raw material prices, cost of sales expense recognized under LIFO is generally lower than the cash costs incurred to acquire the inventory sold.
Since the LIFO inventory valuation methodology is designed for annual determination, interim estimates of the annual LIFO valuation are required. We evaluate the effects of the LIFO inventory valuation method on an interim basis by estimating the expected annual LIFO cost based on cost changes to date and recognize effects that are not expected to be replaced by year-end in the interim period in which the liquidation occurs. These projections of annual LIFO inventory valuation reserve changes are updated quarterly and are evaluated based upon material, labor and overhead costs.
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. The assumed long-term rate of return on pension plan assets is reviewed at each year-end based on the plan's investment policies, an analysis of the historical returns of the capital markets and current interest rates. Based on the current funding level, the benchmark allocation policy for the Company's largest pension plan assets is to have approximately 75 percent in return seeking assets and 25 percent in liability-hedging assets. Return seeking assets include global equities, diversified credit and real assets. Liability-hedging assets include bond funds and cash. When the funding level of the plan reaches 95 percent and improves to fully or over-funded status in increments of 5 percent, assets will be shifted from return seeking to liability-hedging assets in accordance with the glidepath policy outlined in the pension plan's Investment Policy Statement. The plan discount rate is determined by reference to the BondLink interest rate model based upon a portfolio of highly rated U.S. corporate bonds with individual bonds that are theoretically purchased to settle the plan's anticipated cash outflows. The fluctuations in stock and bond markets could cause actual investment results to be significantly different from those assumed, and therefore, significantly impact the valuation of the assets in our pension trusts. Changes in actuarial assumptions could significantly impact the accounting for the pension assets and liabilities. 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.
Long-Lived Assets
Long-lived assets are reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through estimated future undiscounted cash flows. The amount of the impairment loss is the excess of the carrying amount of the impaired assets over the fair value of the assets based upon estimated future discounted cash flows. We evaluate long-lived assets for impairment by individual business unit. Changes in estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment.
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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. Goodwill may first be assessed based on qualitative factors (Step 0) to determine whether a quantitative goodwill impairment test is necessary. In fiscal year 2025, we performed the Step 0 qualitative assessment rather than immediately performing the Step 1 quantitative valuation as has been done historically. The qualitative assessment includes, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, reporting unit-specific financial performance and other events, such as strategy and primary customer base.
As of June 30, 2025, we have two reporting units with goodwill recorded. Goodwill associated with the SAO reporting unit as of June 30, 2025, was $195.5 million and represents 86 percent of total goodwill as of June 30, 2025. The remaining goodwill recorded as of June 30, 2025 of $31.8 million is associated with the Dynamet reporting unit in the PEP segment.
For fiscal year 2025, we concluded that the qualitative assessment for each of the reporting units as of June 1, 2025 is appropriate given (a) just one year has passed since we performed a full valuation of the reporting units, (b) the June 1, 2024 valuations of our reporting units, as detailed below, yielded significant cushions between the fair value and carrying value, and (c) there have been no significant adverse changes to the Company since the prior year. Based on the results of the qualitative analysis, and consideration of the totality of the positive and mitigating events and circumstances with adverse factors, we have concluded there is no indication that it is more likely than not that any of our reporting units’ carrying values (with allocated goodwill) exceed their respective fair values as of June 30, 2025.
During fiscal year 2024, the fair value for our reporting units was estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques. When preparing the quantitative impairment test, 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. The discounted cash flow analysis for each reporting unit tested requires significant estimates and assumptions related to cash flow forecasts, discount rates, terminal values and income tax rates. The cash flow forecasts include significant judgments and assumptions related to revenue growth rates, which include perpetual growth rates, gross margin and weighted average cost of capital. The cash flow forecasts are developed based on assumptions about each reporting unit's markets, product offerings, pricing, capital expenditure and working capital requirements as well as cost performance.
The discount rates used in the discounted cash flow are estimated based on a market participant's perspective of each reporting unit's weighted average cost of capital. The terminal value, which represents the value attributed to the reporting unit beyond the forecast period, is estimated using a perpetuity growth rate assumption. The income tax rates used in the discounted cash flow analysis represent estimates of the long-term statutory income tax rates for each reporting unit based on the jurisdictions in which the reporting units operate.
In preparing the financial statements for the quarter ended March 31, 2024, we identified an impairment triggering event in the Latrobe Distribution reporting unit within the PEP segment related to a decline in customer ordering patterns. 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 the efforts we made to mitigate the market challenges, results had not improved for the Latrobe Distribution reporting unit during the quarter ended March 31, 2024. In light of the market conditions at the time, the pace of growth in the future projections for Latrobe Distribution reporting unit were lowered.
We determined the goodwill associated with the Latrobe Distribution reporting unit was impaired and recorded an impairment charge of $14.1 million during the quarter ended March 31, 2024, which represented the entire balance of goodwill. 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 discounted cash flows analysis for the SAO reporting unit includes assumptions related to our ability to increase volume, improve mix, expand product offerings and continue to implement opportunities to reduce costs over the next several years. For purposes of the discounted cash flow analysis for SAO's fair value, a weighted average cost capital of 9.5 percent and a terminal growth rate assumption of 2.5 percent were used. 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.
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Goodwill associated with the PEP segment is tested at the Dynamet reporting unit level. As of June 1, 2024, the fair value of the Dynamet reporting unit exceeded the carrying value by 144 percent. For purposes of the discounted cash flow analysis for Dynamet's fair value, a weighted average cost capital of 11.0 percent and a terminal growth rate assumption of 2.5 percent were used. 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. We based our fair value estimates on assumptions that we believe to be reasonable but that are unpredictable and inherently uncertain, including estimates of future growth rates and operating margins and assumptions about the overall economic climate and the competitive environment for our business units. There can be no assurance that our estimates and assumptions made for purposes of our goodwill and identifiable intangible asset testing as of the time of testing will prove to be accurate predictions of the future. If our assumptions regarding business projections, competitive environments or anticipated growth rates are not correct, we may be required to record goodwill and/or intangible asset impairment charges in future periods, whether in connection with our next annual impairment testing or earlier, if an indicator of an impairment is present before our next annual evaluation. We continuously monitor for events and circumstances that could negatively impact the key assumptions in determining fair value of the reporting units.
Leases
Determination of whether a contract is or contains a lease at contract inception is based on the presence of identified assets and the right to obtain substantially all of the economic benefit from or to direct the use of such assets. When it is determined a lease exists, a right-of-use ("ROU") asset and corresponding lease liability are recorded on the consolidated balance sheets. ROU assets represent the right to use an underlying asset for the lease term. Lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets are recognized at the commencement date at the value of the lease liability and are adjusted for any prepayments, lease incentives received and initial direct costs incurred. Lease liabilities are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term. As the discount rate implicit in the lease is not readily determinable in most leases, an incremental borrowing rate is used. Lease terms include options to extend or terminate the lease when it is reasonably certain that the option will be exercised. Lease contracts with a term of 12 months or less are not recorded in the consolidated balance sheets. Fixed lease expense is recognized for operating leases on a straight-line basis over the lease term. Lease agreements with lease and non-lease components, are accounted for as a single lease component for all underlying asset classes. Accordingly, all costs associated with a lease contract are accounted for as lease costs. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the ROU asset or lease liability.
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. Liabilities are recognized for remedial activities when the remediation is probable and the cost can be reasonably estimated. Most estimated liabilities are not discounted to present value due to the uncertainty as to the timing and duration of expected costs. For one former operating facility site, due to the routine nature of the expected costs, the liability for future costs is discounted to present value over 20 years with a discount rate of approximately 6 percent as of June 30, 2025 and approximately 6 percent as of June 30, 2024.
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Income Taxes
Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, or differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits (assets) or costs (liabilities) to be recognized when those temporary differences reverse. We evaluate on a quarterly basis whether, based on all available evidence, we believe that our deferred income tax assets will be realizable. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax assets will not be realized. The evaluation includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. Future realization of deferred income tax assets ultimately depends upon the existence of sufficient taxable income within the carryback or carryforward period available under tax law.
Management determines whether a tax position should be recognized in the financial statements by evaluating whether it is more likely than not that the tax position will be sustained upon examination by the tax authorities based upon the technical merits of the position. 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.
Derivative Financial Instruments
Our current risk management strategies include the use of derivative instruments to reduce certain risks. 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. The commodity forwards and foreign currency forwards have been designated as cash flow hedges and unrealized net gains and losses are recorded in the accumulated other comprehensive loss component of stockholders' equity. The unrealized gains or losses on commodity forward contracts are reclassified to the statement of operations when the hedged transaction affects earnings or if the anticipated transactions are no longer expected to occur. The unrealized gains or losses on foreign currency forward contracts are reclassified to the cost of property, plant and equipment when the purchase transaction is completed.
We may use foreign currency forward contracts to hedge a portion of anticipated future sales denominated in foreign currencies, principally the Euro, which would be designated as cash flow hedges. We may also use interest rate swaps to maintain a certain level of floating rate debt relative to fixed rate debt. Interest rate swaps have been designated as fair value hedges. Accordingly, the mark-to-market values of both the interest rate swap and the underlying debt obligations are recorded as equal and offsetting gains and losses in the interest expense, net component of the consolidated statement of operations. We have also used forward interest rate swaps to manage the risk of cash flow variability associated with fixed interest debt expected to be issued. We also use foreign currency forward contracts to protect certain short-term asset or liability positions denominated in foreign currencies against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other expense (income), net.
New Accounting Pronouncements
For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 3 to Notes to Consolidated Financial Statements included in Item 8. "Financial Statements and Supplementary Data."
Off Balance Sheet Arrangements
We had no off balance sheet arrangements during the periods presented.
Market Sensitive Instruments and Risk Management
See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for discussion of market sensitive instruments and associated market risk for Carpenter Technology Corporation.
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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. Although compliance with these laws and regulations may affect the costs of our operations, compliance costs to date have not been material. We have environmental remediation liabilities at some of our owned operating facilities and have been designated as a potentially responsible party ("PRP") with respect to certain third party Superfund waste-disposal sites and other third party-owned sites. We accrue amounts for environmental remediation costs that represent our best estimate of the probable and reasonably estimable future costs related to environmental remediation. Additionally, we have been notified that we may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against us. Neither the exact amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites have been determined. Accordingly, at this time, we cannot reasonably estimate expected costs for such matters. The liability for future environmental remediation costs that can be reasonably estimated is evaluated on a quarterly basis. The liabilities recorded for environmental remediation costs at Superfund sites, other third party-owned sites and Carpenter-owned current or former operating facilities remaining at June 30, 2025 and 2024 were $17.4 million and $17.3 million, respectively.
Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on our financial position, results of operations or cash flows over the long-term. However, such costs could be material to our financial position, results of operations or cash flows in a particular future quarter or year.
Other
We are defending various routine claims and legal actions that are incidental to our business, and that are common to our operations, including those pertaining to product claims, commercial disputes, patent infringement, employment actions, employee benefits, compliance with domestic and foreign laws and regulations, personal injury claims and tax issues. Like many other manufacturing companies in recent years we, from time to time, have been named as a defendant in lawsuits alleging personal injury as a result of exposure to chemicals and substances in the workplace such as asbestos. We provide for costs relating to these matters when a loss is probable and the amount of the loss is reasonably estimable. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, we believe that the total liability from these matters will not have a material effect on our financial position, results of operations or cash flows over the long-term. 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.
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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. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. The most significant of these uncertainties are described in this Form 10-K. 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. 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. 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.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
We use derivative financial instruments to reduce certain types of financial risk. Firm price sales arrangements involve a risk of profit margin fluctuations particularly as raw material prices have been volatile. 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. "Financial Statements and Supplementary Data," in order to reduce the risk of fluctuating profit margins on these sales, we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the products sold under the firm price sales arrangements. 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. A large portion of this balance is related to commodity forward contracts to support firm price sales arrangements associated with many customers in addition to credit already extended to these customers in connection with outstanding trade receivables. Our customers have historically performed under these arrangements and we believe that they will honor such obligations in the future.
We are actively involved in managing risks associated with energy resources. Risk containment strategies include interaction with primary and secondary energy suppliers as well as obtaining adequate insurance coverage to compensate us for potential business interruption related to lack of availability of energy resources. In addition, we have used forwards to fix the price of a portion of our anticipated future purchases of certain energy requirements to protect against the impact of significant increases in energy costs. We also use surcharge mechanisms to offset a portion of these charges where appropriate.
Fluctuations in foreign currency exchange rates could subject us to risk of losses on anticipated future cash flows from our international operations or customers. Foreign currency forward contracts are used to hedge certain foreign exchange risk.
From time to time we use interest rate swaps to achieve a level of floating rate debt relative to fixed rate debt where appropriate. Historically, we have entered into forward swap contracts to manage the risk of cash flow variability associated with fixed interest debt expected to be issued.
All hedging strategies are reviewed and approved by senior financial management before being implemented. Senior financial management has established policies regarding the use of derivative instruments that prohibit the use of speculative or leveraged derivatives.
Based on the current funding level, the benchmark allocation policy for the Company's largest pension plan assets is to have approximately 75 percent in return seeking assets and 25 percent in liability-hedging assets. Return seeking assets include global equities, diversified credit and real assets. Liability-hedging assets include bond funds and cash. When the funding level of the plan reaches 95 percent and improves to fully or over-funded status in increments of 5 percent, assets will be shifted from return seeking to liability-hedging assets in accordance with the glidepath policy outlined in the pension plan's Investment Policy Statement.
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. "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.
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Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Data
| Page | |||||
| Consolidated Financial Statements: | |||||
Management's Responsibilities for Financial Reporting | 47 | ||||
Management's Report on Internal Control Over Financial Reporting | 47 | ||||
Report of Independent Registered Public Accounting Firm (PCAOB ID | 48 | ||||
Consolidated Statements of Operations for the Years Ended June 30, 2025, 2024 and 2023 | 50 | ||||
Consolidated Statements of Comprehensive Income for the Years Ended June 30, 2025, 2024 and 2023 | 51 | ||||
Consolidated Statements of Cash Flows for the Years Ended June 30, 2025, 2024 and 2023 | 52 | ||||
Consolidated Balance Sheets as of June 30, 2025 and 2024 | 53 | ||||
Consolidated Statements of Changes in Equity for the Years Ended June 30, 2025, 2024 and 2023 | 54 | ||||
Notes to Consolidated Financial Statements | 56 | ||||
| Supplementary Data: | |||||
Quarterly Financial Data (Unaudited) | 93 | ||||
Schedule II. Valuation and Qualifying Accounts for the Years Ended June 30, 2025, 2024 and 2023 | 105 | ||||
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Management's Responsibilities for Financial Reporting
Management prepared the financial statements included in this Annual Report on Form 10-K and is responsible for their integrity and objectivity. The statements were prepared in conformity with accounting principles generally accepted in the United States of America and, as such, include amounts based on management's best judgments and estimates. Financial information elsewhere in this Annual Report is consistent with that in the financial statements.
Carpenter maintains a system of internal controls, supported by a code of conduct, designed to provide reasonable assurance that assets are safeguarded and transactions are properly executed and recorded for the preparation of financial information. We believe Carpenter's system of internal controls provides this appropriate balance. The system of internal controls and compliance is continually monitored by Carpenter's internal audit staff.
The Audit/Finance Committee of the Board of Directors, composed of independent directors, meets regularly with management, Carpenter's internal auditors and our independent registered public accounting firm to consider audit results and to discuss significant internal control, auditing and financial reporting matters. Both the independent registered public accounting firm and internal auditors have unrestricted access to the Audit/Finance Committee.
Management's Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluations of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of Carpenter's internal control over financial reporting as of June 30, 2025. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).
Based on its assessment, management concluded that, as of June 30, 2025, Carpenter's internal control over financial reporting is effective based on those criteria.
The effectiveness of Carpenter's internal control over financial reporting as of June 30, 2025, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing herein.
| /s/ Tony R. Thene | ||
| Tony R. Thene | ||
| President and Chief Executive Officer | ||
| /s/ Timothy Lain | ||
| Timothy Lain | ||
| Senior Vice President and Chief Financial Officer | ||
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Carpenter Technology Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Carpenter Technology Corporation and its subsidiaries (the "Company") as of June 30, 2025 and 2024, and the related consolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for each of the three years in the period ended June 30, 2025, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended June 30, 2025 appearing under Item 15 (collectively referred to as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - Goods Transferred to the Customer
As described in Notes 1 and 4 to the consolidated financial statements, revenue is recognized when the Company's performance obligations are satisfied. This occurs when control of the goods and services has transferred to the customer, which is generally determined when title, ownership and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product, based on the applicable shipping terms, or when the service is performed. For the year ended June 30, 2025, the Company's net sales were $2.88 billion, a majority of which relates to goods transferred to the customer.
The principal consideration for our determination that performing procedures relating to revenue recognition related to goods transferred to the customer is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company's revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process. These procedures also included, among others (i) testing the issuance and settlement of invoices and credit memos, tracing transactions not settled to a detailed listing of accounts receivable, and testing the completeness and accuracy of certain data provided by management; (ii) testing revenue, on a test basis, by obtaining and inspecting source documents, such as invoices, delivery documents, evidence of customer arrangement, price information, and cash receipts; and (iii) performing confirmation procedures for a sample of outstanding customer invoice balances as of June 30, 2025 and, for confirmations not returned, obtaining and inspecting source documents, such as invoices, delivery documents, evidence of customer arrangement, price information, and subsequent cash receipts.
/s/ PricewaterhouseCoopers LLP
August 12, 2025
We have served as the Company's auditor since 1918.
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CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended June 30, 2025, 2024 and 2023
| ($ in millions, except per share data) | 2025 | 2024 | 2023 | |||||||||||||||||
| Net sales | $ | $ | $ | |||||||||||||||||
| Cost of sales | ||||||||||||||||||||
| Gross profit | ||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||
| Goodwill impairment charge | ||||||||||||||||||||
| Restructuring and asset impairment charges | ||||||||||||||||||||
| Operating income | ||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||
| Other expense, net | ||||||||||||||||||||
| Income before income taxes | ||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||
| EARNINGS PER COMMON SHARE: | ||||||||||||||||||||
| Basic | $ | $ | $ | |||||||||||||||||
| Diluted | $ | $ | $ | |||||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||||||
| Basic | ||||||||||||||||||||
| Diluted | ||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended June 30, 2025, 2024 and 2023
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||
| Other comprehensive income, net of tax: | .6 | |||||||||||||||||||
Net gain (loss) on derivative instruments, net of tax of $( | ( | |||||||||||||||||||
Pension and postretirement benefits, net of tax of $( | ||||||||||||||||||||
| Foreign currency translation | ( | |||||||||||||||||||
| Total other comprehensive income, net of tax | ||||||||||||||||||||
| Comprehensive income, net of tax | $ | $ | $ | |||||||||||||||||
See accompanying notes to consolidated financial statements.
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CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended June 30, 2025, 2024 and 2023
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||
| Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||
| Goodwill impairment charge | ||||||||||||||||||||
| Noncash restructuring and asset impairment charges | ||||||||||||||||||||
| Deferred income taxes | ( | ( | ( | |||||||||||||||||
| Net pension expense | ||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||
| Net loss on disposal of property, plant, and equipment and assets held for sale | ||||||||||||||||||||
| Changes in working capital and other: | ||||||||||||||||||||
| Accounts receivable | ( | ( | ( | |||||||||||||||||
| Inventories | ( | ( | ( | |||||||||||||||||
| Other current assets | ( | |||||||||||||||||||
| Accounts payable | ( | ( | ||||||||||||||||||
| Accrued liabilities | ||||||||||||||||||||
| Pension plan contributions | ( | ( | ||||||||||||||||||
| Other postretirement plan contributions | ( | ( | ( | |||||||||||||||||
| Other, net | ( | ( | ( | |||||||||||||||||
| Net cash provided from operating activities | ||||||||||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||||||||
| Purchases of property, plant, equipment and software | ( | ( | ( | |||||||||||||||||
| Proceeds from disposals of property, plant and equipment and assets held for sale | ||||||||||||||||||||
| Net cash used for investing activities | ( | ( | ( | |||||||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||||||||
| Credit agreement borrowings | ||||||||||||||||||||
| Credit agreement repayments | ( | ( | ||||||||||||||||||
| Payments for debt issue costs | ( | |||||||||||||||||||
| Dividends paid | ( | ( | ( | |||||||||||||||||
| Purchases of treasury stock | ( | |||||||||||||||||||
| Proceeds from stock options exercised | ||||||||||||||||||||
| Withholding tax payments on share-based compensation awards | ( | ( | ( | |||||||||||||||||
| Net cash used for financing activities | ( | ( | ( | |||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | ( | |||||||||||||||||
| INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | ( | |||||||||||||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||||||||||
| Cash and cash equivalents at end of year | $ | $ | $ | |||||||||||||||||
See accompanying notes to consolidated financial statements.
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CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2025 and 2024
| ($ in millions, except share data) | 2025 | 2024 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||||||||
| Inventories | ||||||||||||||
| Other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Property, plant, equipment and software, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Other intangibles, net | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt | ||||||||||||||
| Accrued pension liabilities | ||||||||||||||
| Accrued postretirement benefits | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Contingencies and commitments (see Note 12) | ||||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||
Common stock — authorized | ||||||||||||||
| Capital in excess of par value | ||||||||||||||
| Reinvested earnings | ||||||||||||||
Common stock in treasury ( | ( | ( | ||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total stockholders' equity | ||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
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CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended June 30, 2025, 2024 and 2023
| Common Stock | ||||||||||||||||||||||||||||||||||||||
| ($ in millions, except per share data) | Par Value of $ | Capital in Excess of Par Value | Reinvested Earnings | Common Stock in Treasury | Accumulated Other Comprehensive (Loss) Income | Total Equity | ||||||||||||||||||||||||||||||||
| Balances at June 30, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||
| Net loss on derivative instruments, net of tax | ( | ( | ||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefits, net of tax | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | ||||||||||||||||||||||||||||||||||||||
| Cash dividends: | ||||||||||||||||||||||||||||||||||||||
Common @ $ | ( | ( | ||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | ||||||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2023 | ( | ( | ||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||
| Net gain on derivative instruments, net of tax | ||||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefits, net of tax | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | ( | ( | ||||||||||||||||||||||||||||||||||||
| Cash dividends: | ||||||||||||||||||||||||||||||||||||||
Common @ $ | ( | ( | ||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | ||||||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2024 | ( | ( | ||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||
| Net gain on derivative instruments, net of tax | ||||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefits, net of tax | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | ||||||||||||||||||||||||||||||||||||||
| Cash dividends: | ||||||||||||||||||||||||||||||||||||||
Common @ $ | ( | ( | ||||||||||||||||||||||||||||||||||||
| Purchases of treasury stock | ( | ( | ||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | ( | |||||||||||||||||||||||||||||||||||||
| Stock options exercised | ( | ( | ||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
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CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
For the Years Ended June 30, 2025, 2024 and 2023
| Common Shares | ||||||||||||||||||||
Issued | Treasury | Net Outstanding | ||||||||||||||||||
| Balances at June 30, 2022 | ( | |||||||||||||||||||
| Stock options exercised | — | |||||||||||||||||||
| Share-based compensation plans | — | |||||||||||||||||||
| Balances at June 30, 2023 | ( | |||||||||||||||||||
| Stock options exercised | — | |||||||||||||||||||
| Share-based compensation plans | — | |||||||||||||||||||
| Balances at June 30, 2024 | ( | |||||||||||||||||||
| Purchases of treasury stock | — | ( | ( | |||||||||||||||||
| Stock options exercised | — | |||||||||||||||||||
| Share-based compensation plans | — | |||||||||||||||||||
| Balances at June 30, 2025 | ( | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Revenue Recognition
Revenue, net of related discounts, rebates, returns and allowances is recognized when performance obligations are satisfied under the terms of a customer order or contract. This occurs when control of the goods and services has transferred to the customer, which is generally determined when title, ownership and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product, based on the applicable shipping terms, or when the service is performed. Shipping terms may vary for products shipped outside the United States depending on the mode of transportation, the country where the material is shipped and any agreements made with the customers.
Freight and Handling Fees and Costs
Freight and handling fees and costs billed separately to customers are included as part of net sales, and freight and handling costs expensed are included as part of cost of sales on the consolidated statements of operations.
Research and Development
Cash Equivalents
Cash equivalents consist of highly liquid instruments with original maturities of three months or less. Cash equivalents are stated at cost, which approximates market.
Accounts Receivable
Inventories
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property, Plant and Equipment and Depreciation
Computer Software and Amortization
Goodwill
Goodwill, net of accumulated impairment losses, representing the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses, is stated at cost. 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. Goodwill may first be assessed based on qualitative factors (Step 0) to determine whether a quantitative goodwill impairment test is necessary. In fiscal year 2025, the Company performed the Step 0 qualitative assessment rather than immediately performing the Step 1 quantitative valuation as has been done historically. The qualitative assessment includes, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, reporting unit-specific financial performance and other events, such as strategy and primary customer base.
When preparing the quantitative impairment test, potential impairment is identified by comparing the fair value of a reporting unit to its carrying value, including goodwill. During fiscal year 2024, the fair value was estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques for the SAO reporting unit and the Dynamet reporting unit in the PEP segment.
The discounted cash flow technique requires the use of cash flow forecasts. The cash flow forecasts include significant judgments and assumptions related to revenue growth rates, which include perpetual growth rates, gross margin and weighted average cost of capital. The market multiples valuation technique includes significant judgment in the determination of the market multiples. 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.
Intangible assets
Impairment of Long-Lived Assets
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Leases
Environmental Expenditures
Derivative Financial Instruments
Foreign Currency Translation
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
Deferred income taxes are recognized by applying enacted statutory tax rates, applicable to future years, to temporary differences between the tax basis and financial statement carrying values of the Company's assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets to amounts that are more likely than not to be realized.
Significant judgments, estimates and assumptions are required in determining tax return reporting positions and in calculating provisions for income tax, which are based on interpretations of tax regulations and accounting pronouncements. Liabilities are established for uncertain tax positions when it is more likely than not that such positions, if challenged, would not be sustained upon review by taxing authorities. These liabilities are re-evaluated as tax regulations and facts and circumstances change, such as the closing of a tax audit or the expiration of the statute of limitations for a specific exposure.
Earnings per Share
The Company calculates basic and diluted earnings per share using the two class method. Under the two class method, earnings are allocated to common stock and participating securities (non-vested restricted shares and units that receive non-forfeitable dividends) according to their participation rights in dividends and undistributed earnings. The earnings available to each class of stock are divided by the weighted average number of outstanding shares for the period in each class. Diluted earnings per share assumes the issuance of common stock for all potentially dilutive share equivalents outstanding.
Concentration of Credit Risk
Use of Estimates
The preparation of 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. Actual results could differ from those estimates.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Restructuring and Asset Impairment Charges
Restructuring and asset impairment charges for the years ended June 30, 2025, 2024 and 2023, were $3.6 million, $16.9 million and $0.0 million, respectively. These charges were a result of actions taken to streamline operations in the Carpenter Additive business in the PEP segment, as announced in the quarter ended June 30, 2024.
During fiscal year 2025, the Company recorded restructuring and asset impairment charges of $3.6 million. This included $2.5 million of noncash pre-tax inventory impairment charges and $1.1 million of costs related to the decommissioning of property, plant and equipment previously impaired during the quarter ended June 30, 2024. During fiscal year 2024, the Company recorded restructuring and asset impairment charges of $16.9 million. This included $15.8 million of noncash pre-tax impairment charges related to $8.8 million of property, plant, equipment and software and $7.0 million associated with a certain definite lived intangible asset . The Company also recognized $1.1 million of various personnel costs for severance payments, medical coverage and related items.
The reserve balances and activity for restructuring charges at June 30, 2025 and 2024 were as follows:
| June 30, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Reserve balance beginning of year | $ | $ | ||||||||||||
| Restructuring charges excluding noncash impairments | ||||||||||||||
| Cash payments | ( | |||||||||||||
| Reserve balance end of year | $ | $ | ||||||||||||
3. Recent Accounting Pronouncements
Recently Issued Accounting Pronouncements - Pending Adoption
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance in this ASU enhances the transparency and decision functionality of income tax disclosures to provide investors information to better assess how an entity's operations and related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flow. The amendments in this ASU require public entities to disclose the following specific categories in the rate reconciliation by both percentages and reporting currency amounts: the effect of state and local income tax, net of federal (national) income tax, foreign tax effects, effects of changes in tax laws or rates enacted in the current period, effects of cross-border tax laws, tax credits, changes in valuation allowances, nontaxable or nondeductible items and changes in unrecognized tax benefits. The amendments in ASU 2023-09 also require public entities to provide additional information for reconciling items that meet the qualitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pre-tax income (loss) by the applicable statutory income tax rate). The ASU requires reporting entities to annually disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign localities. The amendments in this ASU should be applied on a prospective basis and retrospective application is permitted. For public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements not yet issued. ASU 2023-09 is a requirement for additional disclosure and is not expected to materially impact the consolidated financial statements.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In November 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance in this ASU improves the disclosures about a public business entity's expenses by requiring more detailed information about the types of expenses included within the income statement expense captions, such as: inventory purchases, employee compensation, depreciation and intangible asset amortization. This ASU does not change or remove current expense disclosure requirements, however, it does affect where this information appears in the notes to financial statements, as entities are required to include certain current disclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. ASU 2024-03 is a requirement for additional disclosure and is not expected to materially impact the consolidated financial statements. Additionally, in January 2025, the FASB issued ASU 2025-01 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies the effective date for non-calendar year-end entities.
Recently Issued Accounting Pronouncements - Adopted
In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The guidance in ASU 2023-07 seeks to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this ASU require a public entity to disclose the following: significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss; an amount for other segment items by reportable segment and a description of its composition; and the title and position of the CODM and how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. This ASU requires public entities to provide all annual disclosures about a reportable segment's profit or loss and assets currently required by Topic 280 in interim periods. ASU 2023-07 clarifies that if the CODM uses more than one measure of a segment's profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit. The Company adopted the provisions of ASU 2023-07 in the fourth quarter of fiscal year 2025 and will adopt the provisions for interim disclosures in the first quarter of fiscal year 2026. ASU 2023-07 is a requirement for additional disclosure, as such it did not impact the consolidated financial statements other than the disclosure requirements in Note 20.
4. Revenue
The Company recognizes revenue in accordance with Topic 606, Revenue from Contracts. The Company applies the five-step model in the FASB's guidance, which requires the Company to: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies a performance obligation.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company recognizes revenue when performance obligations under the terms of a customer purchase order or contract are satisfied. This occurs when control of the goods and services has transferred to the customer, which is generally determined when title, ownership and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product or the service is performed. Consignment transactions are arrangements where the Company transfers product to a customer location but retains ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon usage by the customer. Service revenue is recognized as the services are performed.
The customer purchase order or contract for goods transferred has a single performance obligation for which revenue is recognized at a point in time. The standard terms and conditions of a customer purchase order include general rights of return and product warranty provisions related to nonconforming product. Depending on the circumstances, the product is either replaced or a quality adjustment is issued. Such warranties do not represent a separate performance obligation.
Each customer purchase order or contract sets forth the transaction price for the products and services purchased under that arrangement. Some customer arrangements include variable consideration, such as volume rebates, which generally depend upon the Company's customers meeting specified performance criteria, such as a purchasing level over a period of time. The Company exercises judgment to estimate the most likely amount of variable consideration at each reporting date.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for its product. The normal payment terms are 30 days. The Company has elected to use the practical expedient that permits a Company to not adjust for the effects of a significant financing component if it expects that at the contract inception, the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Amounts billed to customers for shipping and handling activities to fulfill the Company's promise to transfer the goods are included in revenue and costs incurred by the Company for the delivery of goods are classified as cost of sales in the consolidated statements of operations. Shipping terms may vary for products shipped outside the United States depending on the mode of transportation, the country where the material is shipped and any agreements made with the customers.
Contract liabilities are recognized when the Company has received consideration from a customer to transfer goods or services at a future point in time when the Company performs under the purchase order or contract. Contract liabilities were $5.2 million and $12.3 million at June 30, 2025 and 2024, respectively, and are included in accrued liabilities on the consolidated balance sheets. Revenue recognized for the fiscal years ended June 30, 2025, 2024 and 2023 from amounts included in contract liabilities at the beginning of the period was not significant and substantially all of our contract liabilities are recognized within a twelve-month period.
The Company elected the practical expedient that permits the omission of disclosure for remaining performance obligations which are expected to be satisfied in one year or less.
Disaggregation of Revenue
The Company operates in two business segments, Specialty Alloys Operations ("SAO") and Performance Engineered Products ("PEP"). Revenue is disaggregated within these two business segments by diversified end-use markets and by geographical locations based on the location of the customer.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comparative information of the Company's overall revenue by end-use markets for fiscal year ended June 30, 2025 was as follows:
| End-Use Market | Year Ended June 30, 2025 | |||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||
| Aerospace and Defense | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Medical | ( | |||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||
| Transportation | ( | |||||||||||||||||||||||||
| Industrial and Consumer | ( | |||||||||||||||||||||||||
| Distribution | ( | |||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | |||||||||||||||||||||
Comparative information of the Company's overall revenue by end-use markets for fiscal year ended June 30, 2024 was as follows:
| End-Use Market | Year Ended June 30, 2024 | |||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||
| Aerospace and Defense | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Medical | ( | |||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||
| Transportation | ( | |||||||||||||||||||||||||
| Industrial and Consumer | ( | |||||||||||||||||||||||||
| Distribution | ( | |||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | |||||||||||||||||||||
Comparative information of the Company's overall revenue by end-use markets for fiscal year ended June 30, 2023 was as follows:
| End-Use Market | Year Ended June 30, 2023 | |||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||
| Aerospace and Defense | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Medical | ( | |||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||
| Transportation | ( | |||||||||||||||||||||||||
| Industrial and Consumer | ( | |||||||||||||||||||||||||
| Distribution | ( | |||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | |||||||||||||||||||||
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Comparative information of the Company's overall revenue by geographic locations for fiscal year ended June 30, 2025, was as follows:
| Geographic Location (a) | Year Ended June 30, 2025 | |||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||
| United States | $ | $ | $ | ( | ||||||||||||||||||||||
| Europe | ( | |||||||||||||||||||||||||
| Asia Pacific | ( | |||||||||||||||||||||||||
| Mexico | ||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | |||||||||||||||||||||
Comparative information of the Company's overall revenue by geographic locations for fiscal year ended June 30, 2024 was as follows:
| Geographic Location (a) | Year Ended June 30, 2024 | |||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||
| United States | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Europe | ( | |||||||||||||||||||||||||
| Asia Pacific | ( | |||||||||||||||||||||||||
| Mexico | ||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | |||||||||||||||||||||
Comparative information of the Company's overall revenue by geographic locations for fiscal year ended June 30, 2023 was as follows:
| Geographic Location (a) | Year Ended June 30, 2023 | |||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||
| United States | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Europe | ( | |||||||||||||||||||||||||
| Asia Pacific | ( | |||||||||||||||||||||||||
| Mexico | ||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | |||||||||||||||||||||
(a) Net sales are attributed to geographic region based on the location of the customer.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Earnings per Common Share
The Company calculates basic and diluted earnings per share using the two class method. Under the two class method, earnings are allocated to common stock and participating securities (non-vested restricted shares and units that receive non-forfeitable dividends) according to their participation rights in dividends and undistributed earnings. The earnings available to each class of stock are divided by the weighted average number of outstanding shares for the period in each class. Diluted earnings per share assumes the issuance of common stock for all potentially dilutive share equivalents outstanding.
The calculations of basic and diluted earnings per common share for the years ended June 30, 2025, 2024 and 2023 were as follows:
| Years Ended June 30, | ||||||||||||||||||||
| (in millions, except per share data) | 2025 | 2024 | 2023 | |||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||
| Dividends allocated to participating securities | ( | ( | ( | |||||||||||||||||
| Earnings available for common stockholders used in calculation of basic earnings per common share | $ | $ | $ | |||||||||||||||||
| Weighted average number of common shares outstanding, basic | ||||||||||||||||||||
| Basic earnings per common share | $ | $ | $ | |||||||||||||||||
| Net income | $ | $ | $ | |||||||||||||||||
| Dividends allocated to participating securities | ( | ( | ( | |||||||||||||||||
| Earnings available for common stockholders used in calculation of diluted earnings per common share | $ | $ | $ | |||||||||||||||||
| Weighted average number of common shares outstanding, basic | ||||||||||||||||||||
| Effect of shares issuable under share-based compensation plans | ||||||||||||||||||||
| Weighted average number of common shares outstanding, diluted | ||||||||||||||||||||
| Diluted earnings per common share | $ | $ | $ | |||||||||||||||||
The following awards issued under share-based compensation plans were excluded from the calculations of diluted earnings per share above because their effects were anti-dilutive:
| Years Ended June 30, | ||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Stock options | ||||||||||||||||||||
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Inventories
Inventories consisted of the following components at June 30, 2025 and 2024:
| June 30, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Raw materials and supplies | $ | $ | ||||||||||||
| Work in process | ||||||||||||||
| Finished and purchased products | ||||||||||||||
| Total inventories | $ | $ | ||||||||||||
7. Property, Plant, Equipment and Software, net
Property, plant, equipment and software, net consisted of the following components at June 30, 2025 and 2024:
| June 30, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Land | $ | $ | ||||||||||||
| Buildings and building equipment | ||||||||||||||
| Machinery and equipment | ||||||||||||||
| Capitalized software | ||||||||||||||
| Construction in progress | ||||||||||||||
| Total at cost | ||||||||||||||
| Less: accumulated depreciation and amortization | ||||||||||||||
| Total property, plant, equipment and software, net | $ | $ | ||||||||||||
The estimated useful lives of depreciable assets are as follows:
| Asset Category | Useful Life (in Years) | |||||||
| Buildings and building equipment | ||||||||
| Machinery and equipment | ||||||||
| Capitalized software | ||||||||
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Goodwill and Other Intangible Assets, Net
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 by performing a multi-step impairment test. For the fiscal year 2025 annual impairment test, the Company performed a Step 0 qualitative approach for the SAO reporting unit and the Dynamet reporting unit whereas historically a Step 1 quantitative approach was performed. The Company determined that it is more likely than not that the carrying value of each of our reporting units exceeded their respective fair value and no goodwill impairment was recorded.
As of June 30, 2025, the Company has two reporting units with goodwill recorded. Goodwill associated with the SAO reporting unit as of June 30, 2025, was $195.5 million and represents 86 percent of total goodwill. The remaining goodwill of $31.8 million is associated with the Dynamet reporting unit in the PEP segment.
During fiscal year 2024, the fair value for the Company's reporting units was estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques. When preparing the quantitative impairment test, 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. The fair value is estimated using a weighting of discounted cash flows and the use of market multiples valuation techniques for the SAO reporting unit and the Dynamet reporting unit. The discounted cash flow analysis for each reporting unit tested requires significant estimates and assumptions related to cash flow forecasts, discount rates, terminal values and income tax rates. The cash flow forecasts include significant judgments and assumptions related to revenue growth rates, which include perpetual growth rates, gross margin and weighted average cost of capital. The cash flow forecasts are developed based on assumptions about each reporting unit's markets, product offerings, pricing, capital expenditure and working capital requirements as well as cost performance.
In preparing the financial statements for the quarter ended March 31, 2024, the Company identified an impairment triggering event in the Latrobe Distribution reporting unit within the PEP segment related to a decline in customer ordering patterns. 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 efforts of the Company to mitigate the market challenges, results did not improve for the Latrobe Distribution reporting unit during the quarter ended March 31, 2024. In light of the market conditions at the time, the pace of growth in the future projections for the Latrobe Distribution reporting unit were lowered.
The Company determined the goodwill associated with the Latrobe Distribution reporting unit was impaired and recorded an impairment charge of $14.1 million during the quarter ended March 31, 2024, which represented the entire balance of goodwill. 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 discounted cash flows analysis for the SAO reporting unit includes assumptions related to our ability to increase volume, improve mix, expand product offerings and continue to implement opportunities to reduce costs over the next several years. For purposes of the discounted cash flow analysis for SAO's fair value, a weighted average cost capital of 9.5 percent and a terminal growth rate assumption of 2.5 percent were used. If the long-term growth rate for this reporting unit had been hypothetically reduced by 0.5 percent at June 1, 2024, the SAO reporting unit would have a fair value that exceeded the carrying value by approximately 196 percent.
Goodwill associated with the PEP segment is tested at the Dynamet reporting unit level. As of June 1, 2024, the fair value of the Dynamet reporting unit exceeded the carrying value by 144 percent. For purposes of the discounted cash flow analysis for Dynamet's fair value, a weighted average cost capital of 11.0 percent and a terminal growth rate assumption of 2.5 percent were used. 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 Company continuously monitors for events and circumstances that could negatively impact the key assumptions in determining fair value of the reporting units.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated goodwill impairment losses of $148.7 million are related solely to the PEP segment. The changes in the carrying amount of goodwill by reportable segment for fiscal years 2025 and 2024 were as follows:
| June 30, | ||||||||||||||||||||||||||
| ($ in millions) | 2023 | Impairment | 2024 | 2025 | ||||||||||||||||||||||
| Goodwill | $ | $ | — | $ | $ | |||||||||||||||||||||
| Accumulated impairment losses | ( | ( | ( | ( | ||||||||||||||||||||||
| Total goodwill | $ | $ | ( | $ | $ | |||||||||||||||||||||
| Specialty Alloys Operations | $ | $ | — | $ | $ | |||||||||||||||||||||
| Performance Engineered Products | ( | |||||||||||||||||||||||||
| Total goodwill | $ | $ | ( | $ | $ | |||||||||||||||||||||
Other Intangible Assets, Net
Other intangible assets, net consisted of the following as of June 30, 2025 and 2024:
| June 30, 2025 | June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | Useful Life (in Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||||||||||
| Trademarks and trade names | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
| Customer relationships | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Total other intangibles | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||
The Company recorded $5.7 million of amortization expense related to intangible assets during fiscal year 2025, $6.5 million during fiscal year 2024 and $6.8 million during fiscal year 2023. The estimated annual amortization expense related to intangible assets for each of the succeeding five fiscal years is $5.7 million in fiscal year 2026, $3.8 million in fiscal year 2027 and $0.0
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Accrued Liabilities
Accrued liabilities consisted of the following as of June 30, 2025 and 2024:
| June 30, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Accrued compensation and benefits | $ | $ | ||||||||||||
| Accrued interest expense | ||||||||||||||
| Accrued postretirement benefits | ||||||||||||||
| Current portion of lease liabilities | ||||||||||||||
| Accrued taxes | ||||||||||||||
| Contract liabilities | ||||||||||||||
| Accrued pension liabilities | ||||||||||||||
| Accrued income taxes | ||||||||||||||
| Derivative financial instruments | ||||||||||||||
| Other | ||||||||||||||
| Total accrued liabilities | $ | $ | ||||||||||||
10. Debt
On April 14, 2023, the Company entered into a Second Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer and the other lenders, agents and arrangers party thereto (the "Credit Facility"). The Credit Facility amended and restated the Company's then existing Amended and Restated Credit Agreement dated as of March 26, 2021 which had been set to expire on March 31, 2024. The Second Amendment extends the maturity to April 12, 2028.
The Credit Facility is a secured revolving credit facility with a commitment of $350.0 million subject to the 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 the consolidated EBITDA; and provides for the issuance of letters of credit subject to a $40.0 million sub-limit. The Company has 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, 2025, the Company had $1.1 million of issued letters of credit under the Credit Facility and no short-term borrowings, with the balance of $348.9 million available to the Company.
Interest on the borrowings under the Credit Facility accrue at variable rates which are determined based upon the Company's consolidated total leverage ratio. The applicable margin to be added to Alternative Currency Daily Rate, Alternative Currency Term Rate and Term SOFR determined loans ranges from 1.75 % to 2.50 % (1.75 % as of June 30, 2025), and for Base Rate-determined loans, from 0.75 % to 1.50 % (0.75 % as of June 30, 2025). The Company also pays a quarterly commitment fee ranging from 0.250 % to 0.375 % (0.250 % as of June 30, 2025), determined based upon the consolidated total leverage ratio, of the unused portion of the commitment under the Credit Facility. In addition, the Company must pay certain letter of credit fees, ranging from 1.75 % to 2.50 % (1.75 % as of June 30, 2025), with respect to letters of credit issued under the Credit Facility. As of June 30, 2025, the borrowing rate for the Credit Facility was 6.18 %, however the Company had no short-term borrowings.
The Company is subject to certain financial and restrictive covenants under the Credit Facility which requires the maintenance of a minimum interest coverage ratio of 3.00 to 1.00 and a consolidated net leverage ratio of no more than 4.00 to 1.00. The restrictions of these covenants (other than the financial ratio covenants) are subject to certain exceptions or thresholds triggering amounts or events specified in the Credit Facility, and in some cases the restrictions may be waived by the lenders. As of June 30, 2025, the Company was in compliance with all of the covenants of the Credit Facility.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-term debt outstanding at June 30, 2025 and 2024 consisted of the following:
| June 30, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
Senior unsecured notes, | $ | $ | ||||||||||||
Senior unsecured notes, | ||||||||||||||
| Total debt | ||||||||||||||
| Less: amounts due within one year | ||||||||||||||
| Long-term debt, net of current portion | $ | $ | ||||||||||||
Aggregate maturities of long-term debt for the five fiscal years subsequent to June 30, 2025, are $0.0 400.0 million in fiscal year 2029 and $300.0 million in fiscal year 2030.
For the years ended June 30, 2025, 2024 and 2023, interest costs totaled $51.0 million, $52.6 million and $55.6 million, respectively, of which $2.6 million, $1.6 million and $1.5 million, respectively, were capitalized as part of the cost of property, plant, equipment and software. The decrease in interest expense, net, for the fiscal year ended June 30, 2025, as compared to the fiscal year ended June 30, 2024, is due to no short-term borrowing activity under the Company's Credit Facility and higher capitalized interest in fiscal year 2025.
11. Pension and Other Postretirement Benefits
The Company provides several noncontributory defined benefit pension plans to certain employees. The plans provide defined benefits based on years of service and final average salary.
The Company also provides other postretirement benefit plans to certain of its employees. The postretirement benefit plans consist of health care and life insurance plans. Plan assets are maintained in a Voluntary Employee Benefit Association ("VEBA") Trust. During fiscal years 2025 and 2024, the Company funded benefit payments using assets in the VEBA Trust.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following provides a reconciliation of benefit obligations, plan assets and funded status of the plans:
| Pension Plans | Other Postretirement Plans | |||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Change in projected benefit obligation: | ||||||||||||||||||||||||||
| Projected benefit obligation at beginning of year | $ | $ | $ | $ | ||||||||||||||||||||||
| Service cost | ||||||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Benefits paid | ( | ( | ( | ( | ||||||||||||||||||||||
| Actuarial loss (gain) | ( | ( | ||||||||||||||||||||||||
| Plan settlements | ( | |||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||
| Projected benefit obligation at end of year | ||||||||||||||||||||||||||
| Change in plan assets: | ||||||||||||||||||||||||||
| Fair value of plan assets at beginning of year | ||||||||||||||||||||||||||
| Actual return | ||||||||||||||||||||||||||
| Benefits paid | ( | ( | ( | ( | ||||||||||||||||||||||
| Contributions | ||||||||||||||||||||||||||
| Plan settlements | ( | |||||||||||||||||||||||||
| Fair value of plan assets at end of year | ||||||||||||||||||||||||||
| Funded status of the plans | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Amounts recognized in the consolidated balance sheets: | ||||||||||||||||||||||||||
| Accrued liabilities - current | ( | ( | ( | ( | ||||||||||||||||||||||
| Accrued pension liabilities - noncurrent | ( | ( | — | — | ||||||||||||||||||||||
| Accrued postretirement benefits - noncurrent | — | — | ( | ( | ||||||||||||||||||||||
| Funded status of the plans | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The following tables provide additional information for the plans:
| Pension Plans | Other Postretirement Plans | |||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Amounts recognized in accumulated other comprehensive loss: | ||||||||||||||||||||||||||
| Net actuarial loss (gain) | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||
| Prior service cost | ||||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||
| Other changes in plan assets and benefit obligations recognized in other comprehensive income consist of: | ||||||||||||||||||||||||||
| Net actuarial (gain) loss | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||
| Amortization of net (loss) gain | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service (cost) benefit | ( | ( | ( | |||||||||||||||||||||||
| Settlement charge | ( | |||||||||||||||||||||||||
| Total, before tax effect | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Additional information: | ||||||||||||||||||||||||||
| Accumulated benefit obligation for all pension plans | $ | $ | N/A | N/A | ||||||||||||||||||||||
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended June 30, 2025, actuarial losses in pension plans were primarily impacted by a change in discount rate of $8.3 million partially offset by a change in plan experience of $0.4 million. Actuarial losses in other postretirement plans were primarily impacted by a change in discount rate of $3.0 million partially offset by a change in plan experience of $2.2 million and demographic assumption changes of $0.6 million. For the year ended June 30, 2024, actuarial gains in pension plans were impacted by a change in discount rate of $5.4 million partially offset by a change in plan experience of $3.1 million. Actuarial gains in other postretirement plans were impacted by a change in discount rate of $2.1 million and a change in plan experience of $4.9 million.
The following additional information is for plans with projected benefit obligations in excess of plan assets as of June 30, 2025 and 2024:
| Pension Plans | Other Postretirement Plans | |||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Projected benefit obligation | $ | $ | $ | $ | ||||||||||||||||||||||
| Fair value of plan assets | $ | $ | $ | $ | ||||||||||||||||||||||
The following additional information is for plans with accumulated benefit obligations in excess of plan assets as of June 30, 2025 and 2024:
| Pension Plans | Other Postretirement Plans | |||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Accumulated benefit obligation | $ | $ | $ | $ | ||||||||||||||||||||||
| Fair value of plan assets | $ | $ | $ | $ | ||||||||||||||||||||||
The components of the net periodic pension expense (income) related to the Company's pension and other postretirement benefits for the years ended June 30, 2025, 2024 and 2023 are as follows:
| Pension Plans | Other Postretirement Plans | |||||||||||||||||||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Amortization of net loss (gain) | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Amortization of prior service cost (benefit) | ( | ( | ||||||||||||||||||||||||||||||||||||
| Settlement charge | ||||||||||||||||||||||||||||||||||||||
| Net pension expense (income) | $ | $ | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||
The service cost component of the Company's net pension expense (income), which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating income (loss) of the business segments. The residual net pension expense (income), which is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, and amortization of actuarial gains and losses and prior service costs and benefits, is presented within other expense (income), net. See Note 19 to our consolidated financial statements included in Item 8. "Financial Statements and Supplementary Data."
During the fiscal year ended June 30, 2024, the Company executed a buy-out annuity transaction for the Company's largest defined benefit plan. The Company determined that the annuity settlement and lump-sum payments exceeded the threshold of service cost and interest cost components and therefore settlement accounting was required. As a result, the Company recorded a noncash settlement charge of $51.9 million in the year ended June 30, 2024 within other expense, net.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Weighted-average assumptions used by the plans are as follows:
| Weighted-average assumptions used to determine benefit obligations at fiscal year end | Pension Plans | Other Postretirement Plans | ||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
| Discount rate | % | % | % | % | ||||||||||||||||||||||
| Rate of compensation increase | % | % | N/A | N/A | ||||||||||||||||||||||
| Weighted-average assumptions used to determine net periodic benefit cost for each fiscal year | Pension Plans | Other Postretirement Plans | ||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Discount rate | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
| Expected long-term rate of return on plan assets | % | % | % | % | % | % | ||||||||||||||||||||||||||||||||
| Long-term rate of compensation increase | % | % | % | N/A | N/A | N/A | ||||||||||||||||||||||||||||||||
The following table shows the expected health care rate increase and the future rate and time at which it is expected to remain constant:
| June 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Assumed health care cost trend rate | % | % | ||||||||||||
| Rate to which the cost trend rate is assumed to decline and remain (the ultimate trend rate) | % | % | ||||||||||||
| Year that the rate reaches the ultimate trend rate | 2033 | 2031 | ||||||||||||
| ($ in millions) | Pension Plans | Other Postretirement Plans | Total | |||||||||||||||||
| Amortization of prior service cost | $ | $ | $ | |||||||||||||||||
| Amortization of net actuarial loss (gain) | ( | |||||||||||||||||||
| Amortization of accumulated other comprehensive loss (gain) | $ | $ | ( | $ | ||||||||||||||||
The Company's U.S. pension plans' weighted-average asset allocations at June 30, 2025 and 2024, by asset category are as follows:
| 2025 | 2024 | |||||||||||||
| Equity securities | % | % | ||||||||||||
| Fixed income securities | % | % | ||||||||||||
| Real assets securities | % | % | ||||||||||||
| Total | % | % | ||||||||||||
The Company's policy for developing a pension plan investment strategy includes the periodic development of an asset and liability study by an independent investment consultant. Management considers this study in establishing an asset allocation that is presented to and approved by the Company's Retirement Committee.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Based on the current funding level, the benchmark allocation policy for the Company's largest pension plan assets is to have approximately 75 percent in return seeking assets and 25 percent in liability-hedging assets. Return seeking assets include global equities, diversified credit and real assets. Liability-hedging assets include bond funds and cash. When the funding level of the plan reaches 95 percent and improves to fully or over-funded status in increments of 5 percent, assets will be shifted from return seeking to liability-hedging assets in accordance with the glidepath policy outlined in the pension plan's Investment Policy Statement. The assets related to the Company's other postretirement benefit plans are invested in approximately 100 percent U.S. equities. Management establishes the expected long-term rate of return assumption by reviewing historical trends and analyzing the current and projected market conditions in relation to the plan's asset allocation and risk management objectives. In determining the expected long-term rate of return, the Company considered historical returns for individual asset classes and the impact of active portfolio management.
A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Investments in domestic and international equities are generally valued at the closing price reported on the active market on which they are traded. Commingled funds, limited partnerships and mutual funds are valued based on the net asset value ("NAV") established for the fund at each valuation date. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of units/shares outstanding. Corporate and government agency bonds and other fixed income securities are valued using closing bid prices on an active market when possible, otherwise using evaluated bid prices.
The fair values of the Company's pension plan assets as of June 30, 2025 and 2024, by asset category and by the levels of inputs used to determine fair value were as follows:
| June 30, 2025 | ||||||||||||||||||||||||||
| Fair Value Measurements Using Input Type | ||||||||||||||||||||||||||
| ($ in millions) | Level 1 | Level 2 | Net Asset Value | Total | ||||||||||||||||||||||
| Short-term investments | $ | $ | $ | $ | ||||||||||||||||||||||
| Commingled trust funds | ||||||||||||||||||||||||||
| Mortgage/asset backed securities and other | ||||||||||||||||||||||||||
| Fair value of plan assets at end of year | $ | $ | $ | $ | ||||||||||||||||||||||
| June 30, 2024 | ||||||||||||||||||||||||||
| Fair Value Measurements Using Input Type | ||||||||||||||||||||||||||
| ($ in millions) | Level 1 | Level 2 | Net Asset Value | Total | ||||||||||||||||||||||
| Short-term investments | $ | $ | $ | $ | ||||||||||||||||||||||
| Commingled trust funds | ||||||||||||||||||||||||||
| Mortgage/asset backed securities and other | ||||||||||||||||||||||||||
| Fair value of plan assets at end of year | $ | $ | $ | $ | ||||||||||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair values of the Company's other postretirement benefit plans as of June 30, 2025 and 2024, by asset category and by the level of inputs used to determine fair value, were as follows:
| June 30, 2025 | ||||||||||||||||||||||||||
| Fair Value Measurements Using Input Type | ||||||||||||||||||||||||||
| ($ in millions) | Level 1 | Level 2 | Net Asset Value | Total | ||||||||||||||||||||||
| Commingled trust fund | $ | $ | $ | $ | ||||||||||||||||||||||
| Short-term investments | ||||||||||||||||||||||||||
| Fair value of plan assets at end of year | $ | $ | $ | $ | ||||||||||||||||||||||
| June 30, 2024 | ||||||||||||||||||||||||||
| Fair Value Measurements Using Input Type | ||||||||||||||||||||||||||
| ($ in millions) | Level 1 | Level 2 | Net Asset Value | Total | ||||||||||||||||||||||
| Commingled trust fund | $ | $ | $ | $ | ||||||||||||||||||||||
| Short-term investments | ||||||||||||||||||||||||||
| Fair value of plan assets at end of year | $ | $ | $ | $ | ||||||||||||||||||||||
Cash Flows — Employer Contributions
The Company made contributions to the qualified defined benefit pension plans of $64.8 million, $11.3 million and $0.0 million during fiscal years 2025, 2024 and 2023, respectively. The Company currently expects to make $23.5 million of required cash pension contributions to the domestic qualified defined benefit pension plans during fiscal year 2026. During the fiscal years ended June 30, 2025, 2024 and 2023, the Company made contributions of $3.2 million, $3.2 million and $3.6 million, respectively, to other non-qualified pension plans.
Estimated Future Benefit Payments
Pension benefits are currently paid from plan assets and other benefits are currently paid from both corporate assets and the VEBA trust. The benefit payments below, which reflect expected future service, as appropriate, are expected to be paid by fiscal year as follows:
| ($ in millions) | Pension Benefits | Other Benefits | ||||||||||||
| 2026 | $ | $ | ||||||||||||
| 2027 | $ | $ | ||||||||||||
| 2028 | $ | $ | ||||||||||||
| 2029 | $ | $ | ||||||||||||
| 2030 | $ | $ | ||||||||||||
| 2031-2035 | $ | $ | ||||||||||||
Other Benefit Plans
The Company also maintains defined contribution retirement and savings plans for substantially all domestic employees. Company contributions to the plans were $27.6 million, $26.5 million and $23.3 million in fiscal years 2025, 2024 and 2023, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. Contingencies and Commitments
Environmental
The Company is 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. Although compliance with these laws and regulations may affect the costs of the Company's operations, compliance costs to date have not been material. The Company has environmental remediation liabilities at some of its owned operating facilities and has been designated as a PRP with respect to certain third party Superfund waste-disposal sites and other third party-owned sites. The Company accrues amounts for environmental remediation costs that represent management's best estimate of the probable and reasonably estimable future costs related to environmental remediation.
During fiscal year 2025 the Company increased the liability for environmental remediation costs by $0.1 million. During fiscal year 2024, the Company increased the liability for environmental remediation costs by $0.8 million. The liabilities recorded for environmental remediation costs at Superfund sites, other third party-owned sites and Carpenter-owned current or former operating facilities remaining at June 30, 2025 and 2024 were $17.4 million and $17.3 million, respectively. Additionally, the Company has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against the Company. Neither the exact amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites have been determined. Accordingly, at this time the Company cannot reasonably estimate expected costs for such matters. The liability for future environmental remediation costs that can be reasonably estimated is evaluated by management on a quarterly basis. The Company accrues amounts for environmental remediation costs that represent management's best estimate of the probable and reasonably estimable future costs related to environmental remediation.
Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on the Company's financial position, results of operations or cash flows over the long-term. However, such costs could be material to the Company's financial position, results of operations or cash flows in a particular future quarter or year.
Other
The Company is defending various routine claims and legal actions that are incidental to its business and common to its operations, including those pertaining to product claims, commercial disputes, patent infringement, employment actions, employee benefits, compliance with domestic and foreign laws and regulations, personal injury claims and tax issues. Like many other manufacturing companies in recent years, the Company, from time to time, has been named as a defendant in lawsuits alleging personal injury as a result of exposure to chemicals and substances in the workplace such as asbestos. The Company provides for costs relating to these matters when a loss is probable and the amount of the loss is reasonably estimable. The effect of the outcome of these matters on the Company's future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, management believes that the total liability from these matters will not have a material effect on the Company's financial position, results of operations or cash flows over the long-term. 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 the Company's financial position, results of operations or cash flows in a particular future quarter or year.
The Company has entered into purchase agreements primarily for various key raw materials at market related prices, all made in the normal course of business. The commitments include both fixed and variable price provisions. Raw material prices as of June 30, 2025, were used for commitments with variable pricing. The purchase commitments covered by these agreements aggregate to $279.9 million as of June 30, 2025. Of this amount, $213.8 million relates to fiscal year 2026, $60.6 million to fiscal year 2027, $3.8 million to fiscal year 2028, $1.1 million to fiscal year 2029 and $0.6 million to fiscal year 2030.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. Share Repurchase Program
In July 2024, the Company's Board of Directors authorized a share repurchase program. The program authorizes the purchase of up to $400.0 million of the Company's outstanding common stock. The shares may be repurchased in the open market or in privately negotiated transactions. Under the terms of the share repurchase program, the Company may repurchase shares from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions, legal requirements and other considerations. There is no stated expiration for the share repurchase program. The Company is not obligated to repurchase any specific number of shares or to do so at any particular time, and the share repurchase program may be suspended, modified or terminated at any time without prior notice. During the year ended June 30, 2025, the Company purchased 575,000 shares of its common stock on the open market for an aggregate of $101.9 million. The Company did not purchase any shares of its common stock during the year ended June 30, 2024. As of June 30, 2025, $298.1 million remains available for future purchases.
14. Leases
The Company records ROU assets and operating lease liabilities on the consolidated balance sheets for several types of operating leases, including land and buildings, equipment (e.g. trucks and forklifts), vehicles and computer equipment. On the lease commencement date, the Company measures and records a ROU asset and lease liability equal to the present value of the remaining lease payments, discounted using the rate implicit in the lease (or if that rate cannot be readily determined, the Company's incremental borrowing rate). Operating leases are included in other assets, accrued liabilities (current) and other liabilities (long-term) on the consolidated balance sheets.
The Company elected the practical expedient to not separate lease components from nonlease components for all asset classes. The Company recognizes lease expense in the consolidated statements of operations on a straight-line basis over the lease term. The Company elected to not recognize ROU assets and lease liabilities for short-term leases with an initial term of 12 months or less for all asset classes. Leases with the option to extend their term or terminate early are reflected in the lease term when it is reasonably certain that the Company will exercise such options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the ROU asset or lease liability.
Total lease cost was $15.1 million, $14.6 million and $14.0 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively. The following table sets forth the components of the Company's lease cost for the fiscal years ended June 30, 2025, 2024 and 2023:
| Years Ended June 30, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Operating lease cost | $ | $ | $ | |||||||||||||||||
| Short-term lease cost | ||||||||||||||||||||
| Variable lease cost | ||||||||||||||||||||
| Sublease income | ( | ( | ( | |||||||||||||||||
| Total lease cost | $ | $ | $ | |||||||||||||||||
| Operating cash flow payments from operating leases | $ | $ | $ | |||||||||||||||||
| Noncash ROU assets obtained in exchange for lease obligations | $ | $ | $ | |||||||||||||||||
The leases have a remaining term of to twelve years . The following table sets forth the Company's weighted-average remaining lease term and weighted-average discount rate at June 30, 2025, 2024 and 2023:
| Years Ended June 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Weighted-average remaining lease term - operating leases | ||||||||||||||||||||
| Weighted-average discount rate - operating leases | % | % | % | |||||||||||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the Company's ROU assets and lease liabilities at June 30, 2025 and June 30, 2024:
| June 30, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Operating lease assets: | ||||||||||||||
| $ | $ | |||||||||||||
| Operating lease liabilities: | ||||||||||||||
| $ | $ | |||||||||||||
| $ | $ | |||||||||||||
Minimum lease payments by fiscal year for operating leases expiring subsequent to June 30, 2025, are as follows:
| ($ in millions) | Lease Payments | |||||||
| 2026 | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total future minimum lease payments | ||||||||
| Less: imputed interest | ||||||||
| Total | $ | |||||||
15. Fair Value Measurements
The following tables present the Company's assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
| June 30, 2025 | Fair Value Measurements Using Input Type | |||||||
| ($ in millions) | Level 2 | |||||||
| Assets: | ||||||||
| $ | ||||||||
| Liabilities: | ||||||||
| $ | ||||||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| June 30, 2024 | Fair Value Measurements Using Input Type | |||||||
| ($ in millions) | Level 2 | |||||||
| Assets: | ||||||||
| Derivative financial instruments | $ | |||||||
| Liabilities: | ||||||||
| Derivative financial instruments | $ | |||||||
The Company's derivative financial instruments have historically consisted of commodity forward contracts, foreign currency forward contracts, interest rate swaps and forward interest rate swaps. These instruments are measured at fair value using the market method valuation technique. The inputs to this technique utilize information related to foreign exchange rates, commodity prices and interest rates published by third party leading financial news and data providers. This is observable data; however, the valuation of these instruments is not based on actual transactions for the same instruments and, as such, they are classified as Level 2. The Company's use of derivatives and hedging policies are more fully discussed in Note 17.
The Company has currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with accounting principles generally accepted in the United States of America.
The carrying amounts of other financial instruments not listed in the table below approximate fair value due to the short-term nature of these items. The carrying amounts and estimated fair values of the Company's financial instruments not recorded at fair value in the financial statements were as follows:
| June 30, 2025 | June 30, 2024 | |||||||||||||||||||||||||
| ($ in millions) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||
| Long-term debt | $ | $ | $ | $ | ||||||||||||||||||||||
| Company-owned life insurance | $ | $ | $ | $ | ||||||||||||||||||||||
The fair values of long-term debt as of June 30, 2025, and June 30, 2024, were determined by using current interest rates for debt with terms and maturities similar to the Company's existing debt arrangements and accordingly would be classified as Level 2 inputs in the fair value hierarchy.
The carrying amount of company-owned life insurance reflects cash surrender values based upon the market values of underlying securities, using Level 2 inputs, net of any outstanding policy loans. The carrying value associated with the cash surrender value of these policies is recorded in other assets in the accompanying consolidated balance sheets.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Share-Based Compensation
The Company has two share-based compensation plans: the Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees (the "Omnibus Plan") and the Stock-Based Compensation Plan for Non-Employee Directors ("Director's Plan"). The Company recognizes compensation cost based on the fair value of the awards on the date of grant. The compensation cost is recognized over the requisite service period of the award, which is generally the shorter of the vesting period that the holder is required to provide service, or the period from the grant date to the date on which the employee is eligible to retire or the Director has a separation from service event. Upon the employee's retirement, as defined in the Omnibus Plan, or the Director's separation from service, as defined in the Director's Plan, outstanding awards are subject to certain accelerated vesting terms.
Awards granted under the share-based compensation plans are paid from shares held in treasury and newly issued shares. The total compensation cost that has been charged against income related to these share-based compensation plans was $22.8 million, $19.8 million and $16.4 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively.
Omnibus Plan
The Omnibus Plan provides that the Board of Directors or a designated committee may grant stock options, restricted stock and restricted stock units, and determine the terms and conditions of each grant. The Omnibus Plan provides the Chief Executive Officer with limited authority to grant awards. As of June 30, 2025, 3,135,432 shares were available for awards which may be granted under this plan.
Director's Plan
The Director's Plan provides for the granting of stock options and stock units to non-employee directors. As of June 30, 2025, 147,737 shares were available for awards which may be granted under this plan.
Stock Options (all plans)
Stock options granted under the plans above are granted with an exercise price equal to at least the fair market value of the Company's common stock on the date of grant. The options are typically exercisable after to three years of service and expire no later than ten years from the grant date.
The fair value of stock options awarded in fiscal years 2025, 2024 and 2023 was estimated on the date of each grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
| Years Ended June 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Expected volatility | % | % | % | |||||||||||||||||
| Dividend yield | % | % | % | |||||||||||||||||
| Risk-free interest rate | % | % | % | |||||||||||||||||
| Expected term (in years) | ||||||||||||||||||||
The assumptions are based on multiple factors, including historical exercise patterns of employees in relatively homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and the implied volatility of our stock price based on historical performance for the same expected term of the options granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of each grant.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional information on the Company's outstanding and exercisable options is as follows:
| Number of Awards | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value ($ in millions) | |||||||||||||||||||||||
| Outstanding at June 30, 2022 | $ | |||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
| Exercised | ( | $ | ||||||||||||||||||||||||
| Withheld | ( | |||||||||||||||||||||||||
| Forfeited | ( | $ | ||||||||||||||||||||||||
| Expired | ( | $ | ||||||||||||||||||||||||
| Outstanding at June 30, 2023 | $ | |||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
| Exercised | ( | $ | ||||||||||||||||||||||||
| Withheld | ( | $ | ||||||||||||||||||||||||
| Forfeited | ( | $ | ||||||||||||||||||||||||
| Outstanding at June 30, 2024 | $ | |||||||||||||||||||||||||
| Granted | $ | |||||||||||||||||||||||||
| Exercised | ( | $ | ||||||||||||||||||||||||
| Withheld | ( | $ | ||||||||||||||||||||||||
| Outstanding at June 30, 2025 | $ | $ | ||||||||||||||||||||||||
| Exercisable at June 30, 2025 | $ | $ | ||||||||||||||||||||||||
| Exercise Price Range | Number Outstanding at June 30, 2025 | Weighted Average Remaining Contractual Term (in Years) | Weighted Average Exercise Price | Number Exercisable at June 30, 2025 | Weighted Average Exercise Price | |||||||||||||||||||||||||||
$ | $ | $ | ||||||||||||||||||||||||||||||
$ | $ | $ | ||||||||||||||||||||||||||||||
$ | $ | $ | ||||||||||||||||||||||||||||||
$ | $ | $ | ||||||||||||||||||||||||||||||
$ | $ | $ | ||||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||
The weighted average grant date fair value of options awarded during fiscal years 2025, 2024 and 2023 was $88.78 , $34.06 and $15.55 , respectively. Share-based compensation charged against income related to stock options for the fiscal years ended June 30, 2025, 2024 and 2023 was $0.6 million, $0.4 million and $0.5 million, respectively. As of June 30, 2025, $0.7 million of compensation cost related to nonvested stock options will be recognized over a weighted average remaining life of 1.9 years. Of the options outstanding at June 30, 2025, 96,936 relate to the Omnibus Plan and 177,055 relate to the Directors' Plan.
Restricted Stock Unit Awards (Omnibus Plan)
Restricted stock unit awards are granted to employees with performance and/or service conditions. Dividend equivalents are accrued for earned restricted stock unit awards and will only be paid upon satisfaction of the terms and conditions applicable to the underlying restricted stock units. The fair value of the restricted stock unit awards is determined based on the close price of the Company's stock on the grant date.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Performance-based restricted stock unit awards are earned dependent upon how certain performance goals are achieved during a specified performance period according to the terms determined at the date of the grant. These shares typically vest upon expiration of the performance period. Compensation cost is determined and charged to expense beginning in the performance period through the vesting period.
Time-based restricted stock unit awards typically vest to three years from the date of grant. Compensation cost related to time-based stock unit awards is recognized over the vesting period of the award.
Amounts charged to compensation expense for restricted stock unit awards were $10.8 million, $9.8 million and $8.6 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively. As of June 30, 2025, $8.1 million of compensation cost related to restricted stock unit awards remains to be recognized over a weighted average remaining life of 1.5 years.
| Number of Awards | Weighted Average Grant Date Fair Value | |||||||||||||
| Restricted Award Balance at June 30, 2022 | $ | |||||||||||||
| Time-based granted | $ | |||||||||||||
| Vested | ( | $ | ||||||||||||
| Forfeited | ( | $ | ||||||||||||
| Restricted Award Balance at June 30, 2023 | $ | |||||||||||||
| Time-based granted | $ | |||||||||||||
| Vested | ( | $ | ||||||||||||
| Forfeited | ( | $ | ||||||||||||
| Restricted Award Balance at June 30, 2024 | $ | |||||||||||||
| Time-based granted | $ | |||||||||||||
| Vested | ( | $ | ||||||||||||
| Forfeited | ( | $ | ||||||||||||
| Restricted Award Balance at June 30, 2025 | $ | |||||||||||||
The Company granted performance-based awards in fiscal years 2025, 2024 and 2023 within the Omnibus Plan. The awards are granted at a target number of shares. These awards are earned dependent upon how certain performance goals are achieved during a specified performance period according to the terms determined at the date of the grant. The actual number of shares awarded may range from a minimum of 0 percent of the target shares to a maximum of 200 percent of the target shares. Participants do not have any rights to dividends (or equivalents) during the performance period. These shares typically vest upon expiration of the performance period. Compensation cost is determined and charged to expense beginning in the performance period through the vesting period. In fiscal years 2025, 2024 and 2023 expense of $10.0 million, $8.3 million and $6.1 million was recognized for these awards, respectively. Compensation cost in fiscal year 2025 reflects higher performance attainment compared to fiscal years 2024 and 2023.
Director Stock Units
According to the provisions of the Director's Plan, on the date of each annual stockholders' meeting or on such other regularly scheduled date as the Board of Directors may determine from time to time in light of the Company's prevailing practices for the grant of equity awards to employees, each Director shall be granted, in place of cash compensation, a number of stock units determined by dividing 50 percent of the Director's annual retainer by the fair market value of the Company's common stock on that date. These stock units vest on the first anniversary of the grant date, provided that one-quarter of the units granted within the one year period preceding separation from service (for reasons other than cause, a change in control, death or disability) will vest for every three months of service following the grant date. At the Director's election, the remaining 50 percent of the annual retainer and 100 percent of committee chair fees may be paid in stock units in lieu of cash. These units are immediately vested.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to the grant of retainer stock units described above, each Director may be granted annually an additional award of stock units as the Board may determine by resolution. These stock units vest on the first anniversary of the grant date, provided that one-quarter of the units granted within the one-year period preceding separation from service (for reasons other than cause, a change in control, death or disability) will vest for every three months of service following the grant date.
Additional units are credited to each Director on a quarterly basis to reflect dividend equivalents on the Company's common stock. In the case of separation from service due to death or disability, all stock units shall immediately vest. Following a Director's separation from service, or such other elected distribution date or event, the number of stock units credited to the Director's account will be converted to an equivalent number of the Company's common stock.
| Number of Units | Weighted Average Grant Date Fair Value | |||||||||||||
| Outstanding at June 30, 2022 | $ | |||||||||||||
| Granted | $ | |||||||||||||
| Distributed | ( | $ | ||||||||||||
| Dividend equivalents | $ | |||||||||||||
| Outstanding at June 30, 2023 | $ | |||||||||||||
| Granted | $ | |||||||||||||
| Distributed | ( | $ | ||||||||||||
| Forfeited | ( | $ | ||||||||||||
| Dividend equivalents | $ | |||||||||||||
| Outstanding at June 30, 2024 | $ | |||||||||||||
| Granted | $ | |||||||||||||
| Distributed | ( | $ | ||||||||||||
| Dividend equivalents | $ | |||||||||||||
| Outstanding at June 30, 2025 | $ | |||||||||||||
Compensation cost is determined using the grant date fair value and charged to expense over the vesting period of one year . This amounted to $1.4 million, $1.3 million and $1.2 million for the fiscal years ended June 30, 2025, 2024 and 2023, respectively. As of June 30, 2025, $0.4 million of compensation cost related to director stock units remains to be recognized over a weighted average remaining life of 0.6 years.
17. Derivatives and Hedging Activities
The Company, from time to time, uses commodity forwards, interest rate swaps, forward interest rate swaps and foreign currency forwards to manage risks generally associated with commodity price, interest rate and foreign currency rate fluctuations. The following explains the various types of derivatives utilized during the fiscal years ended June 30, 2025 and 2024, and includes a summary of the impact the derivative instruments had on the Company's financial position, results of operations and cash flows.
Cash Flow Hedging — Commodity forward contracts: The Company enters into commodity forward contracts to fix the price of a portion of anticipated future purchases of certain critical raw materials and energy to manage the risk of cash flow variability associated with volatile commodity prices. The commodity forward contracts have been designated as cash flow hedges. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in accumulated other comprehensive income (loss) to the extent effective, and reclassified to cost of sales in the period during which the hedged transaction affects earnings or it becomes probable that the forecasted transaction will not occur. As of June 30, 2025, the Company had forward contracts to purchase 1.2 million pounds of certain raw materials with settlement dates through January 2027.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Cash Flow Hedging — Foreign currency forward contracts: The Company, from time to time, uses 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. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI to the extent effective and reclassified to the cost of property, plant and equipment in the period during which the purchase transaction is completed or it becomes probable that the forecasted transaction will not occur.
Foreign Currency Derivatives: The Company also uses foreign currency forward contracts to protect certain short-term asset positions denominated in foreign currencies against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other expense (income), net. As of June 30, 2025, the fair value of the outstanding foreign currency forwards not designated as hedging instruments and the charges to income for changes in fair value for these contracts were not material.
The fair value and location of outstanding derivative contracts recorded in the accompanying consolidated balance sheets were as follows as of June 30, 2025 and 2024:
| June 30, 2025 ($ in millions) | Foreign Currency Contracts | Commodity Contracts | Total Derivatives | |||||||||||||||||
| Asset Derivatives: | ||||||||||||||||||||
| Other current assets | $ | $ | $ | |||||||||||||||||
| Other assets | ||||||||||||||||||||
| Total asset derivatives | $ | $ | $ | |||||||||||||||||
| Liability Derivatives: | ||||||||||||||||||||
| Accrued liabilities | $ | $ | $ | |||||||||||||||||
| Other liabilities | ||||||||||||||||||||
| Total liability derivatives | $ | $ | $ | |||||||||||||||||
| June 30, 2024 ($ in millions) | Foreign Currency Contracts | Commodity Contracts | Total Derivatives | |||||||||||||||||
| Asset Derivatives: | ||||||||||||||||||||
| Other current assets | $ | $ | $ | |||||||||||||||||
| Other assets | ||||||||||||||||||||
| Total asset derivatives | $ | $ | $ | |||||||||||||||||
| Liability Derivatives: | ||||||||||||||||||||
| Accrued liabilities | $ | $ | $ | |||||||||||||||||
| Other liabilities | ||||||||||||||||||||
| Total liability derivatives | $ | $ | $ | |||||||||||||||||
Substantially all of the Company's derivative contracts are subject to master netting arrangements, or similar agreements with each counterparty, which provide for the option to settle contracts on a net basis when they settle on the same day and in the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. The Company presents the outstanding derivative contracts on a net basis by counterparty in the consolidated balance sheets. If the Company had chosen to present the derivative contracts on a gross basis, the total asset derivatives would have been $0.9 million and total liability derivatives would have been $2.5 million as of June 30, 2025.
According to the provisions of the Company's derivative arrangements, in the event that the fair value of outstanding derivative positions with certain counterparties exceeds certain thresholds, the Company may be required to issue cash collateral to the counterparties. As of June 30, 2025, the Company had no cash collateral held by counterparties.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company is exposed to credit loss in the event of nonperformance by counterparties on its derivative instruments as well as credit or performance risk with respect to its customer commitments to perform. Although nonperformance is possible, the Company does not anticipate nonperformance by any of the parties. In addition, various master netting arrangements are in place with counterparties to facilitate settlements of gains and losses on these contracts.
Cash Flow Hedges
For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of AOCI and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings or it becomes probable the forecasted transactions will not occur. The following is a summary of the (losses) gains related to cash flow hedges recognized during the fiscal years ended June 30, 2025, 2024 and 2023:
| Amount of (Loss) Gain Recognized in AOCI on Derivatives Years Ended June 30, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||||||||
| Commodity contracts | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Foreign exchange contracts | ||||||||||||||||||||
| Total | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Amount of (Loss) Gain Reclassified from AOCI into Income Years Ended June 30, | ||||||||||||||||||||||||||
| ($ in millions) | Location of (Loss) Gain Reclassified from AOCI into Income | 2025 | 2024 | 2023 | ||||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||||||||||||||
| Commodity contracts | Cost of sales | $ | ( | $ | ( | $ | ||||||||||||||||||||
| Total | $ | ( | $ | ( | $ | |||||||||||||||||||||
The following is a summary of total amounts presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded during the fiscal years ended June 30, 2025 and 2024:
| Year Ended June 30, 2025 | Year Ended June 30, 2024 | |||||||||||||
| ($ in millions) | Cost of Sales | Cost of Sales | ||||||||||||
| Total amounts presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded | $ | $ | ||||||||||||
| Loss on Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||
| Commodity contracts | ||||||||||||||
| Amount of loss reclassified from AOCI to income | ( | ( | ||||||||||||
| Total loss | $ | ( | $ | ( | ||||||||||
The Company estimates that $1.4 million of net derivative losses included in AOCI as of June 30, 2025, will be reclassified into earnings within the next twelve months. No significant cash flow hedges were discontinued during the year ended June 30, 2025.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The changes in AOCI associated with derivative hedging activities during the fiscal years ended June 30, 2025, 2024 and 2023 were as follows:
| Years Ended June 30, | ||||||||||||||||||||
| ($ in millions) (a) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance, beginning | $ | ( | $ | ( | $ | |||||||||||||||
| Current period changes in fair value, net of tax | ( | ( | ( | |||||||||||||||||
| Reclassification to earnings, net of tax | ( | |||||||||||||||||||
| Balance, ending | $ | ( | $ | ( | $ | ( | ||||||||||||||
(a) All amounts are net of tax. Amounts in parentheses indicate debits.
18. Income Taxes
Income (loss) before income taxes for the Company's domestic and foreign operations was as follows:
| Years Ended June 30, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Domestic | $ | $ | $ | |||||||||||||||||
| Foreign | ( | |||||||||||||||||||
| Income before income taxes | $ | $ | $ | |||||||||||||||||
The expense (benefit) for income taxes from continuing operations consisted of the following:
| Years Ended June 30, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | $ | $ | |||||||||||||||||
| State | ||||||||||||||||||||
| Foreign | ||||||||||||||||||||
| Total current | ||||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | ( | ( | ( | |||||||||||||||||
| State | ( | ( | ( | |||||||||||||||||
| Foreign | ( | |||||||||||||||||||
| Total deferred | ( | ( | ( | |||||||||||||||||
| Total income tax expense | $ | $ | $ | |||||||||||||||||
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation of income taxes computed at the U.S. Federal income tax rate to the Company's effective income tax rates:
| Years Ended June 30, | ||||||||||||||||||||
| (% of pre-tax income) | 2025 | 2024 | 2023 | |||||||||||||||||
| Statutory federal income tax rate | % | % | % | |||||||||||||||||
| State income taxes, net of federal tax benefit | ||||||||||||||||||||
| Foreign tax rate differential | ( | |||||||||||||||||||
| Research and development tax credit | ( | ( | ( | |||||||||||||||||
| Foreign derived intangible income deduction | ( | ( | ||||||||||||||||||
| Adjustments of prior years' income taxes | ( | |||||||||||||||||||
| Non-deductible goodwill impairment | ||||||||||||||||||||
| Tax benefit related to closure of Additive operations | ( | |||||||||||||||||||
| Non-taxable income | ( | ( | ( | |||||||||||||||||
| Non-deductible expenses | ( | |||||||||||||||||||
| Non-deductible compensation | ||||||||||||||||||||
| Share-based compensation | ( | ( | ||||||||||||||||||
| Changes in valuation allowances | ( | ( | ||||||||||||||||||
| Law changes | ||||||||||||||||||||
| Interest on prior tax positions | ( | ( | ( | |||||||||||||||||
| Other, net | ||||||||||||||||||||
| Effective income tax rate | % | % | % | |||||||||||||||||
Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company had state net operating loss carryforwards of $139.8 million expiring between fiscal years 2026 and 2045. A significant portion of the state net operating loss carryforwards are subject to an annual limitation that, under current law, is likely to limit future tax benefits to approximately $6.1 million. Realization is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be revised in the near term if estimates of future taxable income during the carryforward period change.
Valuation allowances increased by $0.2 million during fiscal year 2025. As a result of increases in estimates of projected future taxable income during the carryforward period, valuation allowance was reduced by $0.1 million for the expected realization of previously limited state tax credit carryforwards. This was offset by a $0.3 million increase in net operating losses incurred in certain jurisdictions for which no tax benefit was recognized.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheets are summarized in the table below:
| June 30, | ||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Pensions | $ | $ | ||||||||||||
| Postretirement provisions | ||||||||||||||
| Non-equity compensation | ||||||||||||||
| Net operating loss carryforwards | ||||||||||||||
| Tax credit carryforwards | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other | ||||||||||||||
| Gross deferred tax assets | ||||||||||||||
| Valuation allowances | ( | ( | ||||||||||||
| Total deferred tax assets | ||||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Depreciation | ||||||||||||||
| Intangible assets | ||||||||||||||
| Inventories | ||||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Other | ||||||||||||||
| Total deferred tax liabilities | ||||||||||||||
| Deferred tax liabilities, net | $ | $ | ||||||||||||
The Company does not have unrecognized tax benefits as of June 30, 2025, 2024 and 2023. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
All years prior to fiscal year 2018 have been settled with the Internal Revenue Service and with most significant state, local and foreign tax jurisdictions.
19. Other Expense, Net
Other expense, net consists of the following:
| Years Ended June 30, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Unrealized gains on company-owned life insurance contracts and investments held in rabbi trusts | $ | ( | $ | ( | $ | ( | ||||||||||||||
| Interest income | ( | ( | ( | |||||||||||||||||
| Foreign exchange losses | ||||||||||||||||||||
| Pension earnings, interest and deferrals | ||||||||||||||||||||
| Pension settlement charge | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Total other expense, net | $ | $ | $ | |||||||||||||||||
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. Segment Information, Geographic and Product Data
The Company has two reportable segments, Specialty Alloys Operations and Performance Engineered Products.
The SAO segment is comprised of the Company's major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama. The combined assets of the SAO operations are managed in an integrated manner to optimize efficiency and profitability across the total system.
The PEP segment is comprised of the Company's differentiated operations. This segment includes the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses. The businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics.
The Company's CODM is the Chief Executive Officer. The measure of profit and loss that is used by the CODM to evaluate the performance of these operating segments is operating income. The CODM uses operating income when making decisions about allocating capital and personnel to the segments in the annual operating plan and monthly performance review processes. The CODM considers variances of actual results compared to the annual operating plan and subsequent forecasts for each segment. Operating income for each of the Company's reportable segments is comprised of the segment's net sales less directly related product costs and other operating expenses. Segment operating results exclude general corporate costs, which include executive and director compensation, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that management considers not representative of ongoing operations, such as restructuring charges and other specifically identified income or expense items. Total net sales and operating earnings by segment include intersegment sales which are generally recorded at cost-plus a specified fee for a negotiated fixed price. All significant intersegment transactions have been eliminated from each reportable segment's net sales and earnings for all periods presented.
The service cost component of the Company's net pension expense, which represents the estimated cost of future pension liabilities earned associated with active employees, is included in the operating income of the business segments. The residual net pension expense, which is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans, amortization of actuarial gains and losses and prior service costs and pension settlement charges is included within other expense, net, excluded from the business segments.
On a consolidated basis, no single customer accounted for 10 percent or more of net sales for the fiscal years ended June 30, 2025, 2024 and 2023. No single customer accounted for 10 percent or more of the accounts receivable outstanding at June 30, 2025 and 2024.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net sales and operating income by segment for the years ended June 30, 2025, 2024 and 2023 are provided below. See Note 4 Revenue for comparative information of the Company's overall revenue by segment, end-use market and geographical location. Further disaggregation of revenue is impracticable.
| Year Ended June 30, 2025 | Year Ended June 30, 2024 | Year Ended June 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Total | SAO | PEP | Total | SAO | PEP | Total | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Intersegment sales | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total sales | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of sales | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated net sales | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Less: (a) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other segment items (b) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment operating income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reconciliation of operating income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate costs | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Consolidated operating income | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other items: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other expense, net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||
(a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.
(b) Other segment items for each reportable segment include selling, general and administrative expenses.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additional data by segment for the years ended June 30, 2025, 2024 and 2023 is as follows:
| Depreciation and Amortization | Years Ended June 30, | |||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Specialty Alloys Operations | $ | $ | $ | |||||||||||||||||
| Performance Engineered Products | ||||||||||||||||||||
| Corporate | ||||||||||||||||||||
| Consolidated depreciation and amortization | $ | $ | $ | |||||||||||||||||
| Capital Expenditures | Years Ended June 30, | |||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Specialty Alloys Operations | $ | $ | $ | |||||||||||||||||
| Performance Engineered Products | ||||||||||||||||||||
| Corporate | ||||||||||||||||||||
| Consolidated capital expenditures | $ | $ | $ | |||||||||||||||||
| Total Assets | June 30, | |||||||||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||||||||
| Specialty Alloys Operations | $ | $ | ||||||||||||||||||
| Performance Engineered Products | ||||||||||||||||||||
| Total segment assets | ||||||||||||||||||||
| Corporate | ||||||||||||||||||||
| Intersegment | ( | ( | ||||||||||||||||||
| Consolidated total assets | $ | $ | ||||||||||||||||||
| Geographic Location | ||||||||||||||||||||
Net Sales (a) | Years Ended June 30, | |||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| United States | $ | $ | $ | |||||||||||||||||
| Europe | ||||||||||||||||||||
| Asia Pacific | ||||||||||||||||||||
| Mexico | ||||||||||||||||||||
| Canada | ||||||||||||||||||||
| Other | ||||||||||||||||||||
| Consolidated net sales | $ | $ | $ | |||||||||||||||||
| Long-lived Assets (a) | June 30, | |||||||||||||
| ($ in millions) | 2025 | 2024 | ||||||||||||
| United States | $ | $ | ||||||||||||
| Europe | ||||||||||||||
| Mexico | ||||||||||||||
| Asia Pacific | ||||||||||||||
| Canada | ||||||||||||||
| Consolidated long-lived assets | $ | $ | ||||||||||||
(a) Long-lived assets consists primarily of property, plant, equipment and software, net.
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. Reclassifications from Accumulated Other Comprehensive Loss
The changes in AOCI by component, net of tax, for the years ended June 30, 2025 and 2024 were as follows:
| ($ in millions) (a) | Cash flow hedging items | Pension and other postretirement benefit plan items | Foreign currency items | Total | ||||||||||||||||||||||
| Balances at June 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | |||||||||||||||||||||||||
| Amounts reclassified from AOCI (b) | ||||||||||||||||||||||||||
| Net other comprehensive income | ||||||||||||||||||||||||||
| Balances at June 30, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| ($ in millions) (a) | Cash flow hedging items | Pension and other postretirement benefit plan items | Foreign currency items | Total | ||||||||||||||||||||||
| Balances at June 30, 2023 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive (loss) income before reclassifications | ( | ( | ( | |||||||||||||||||||||||
| Amounts reclassified from AOCI (b) | ||||||||||||||||||||||||||
| Net other comprehensive income (loss) | ( | |||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
(a) All amounts are net of tax. Amounts in parentheses indicate debits.
(b) See separate table below for further details.
The following is a summary of amounts reclassified from AOCI for the years ended June 30, 2025 and 2024:
| Amount Reclassified from AOCI | ||||||||||||||||||||
| Details about AOCI Components | Years Ended June 30, | |||||||||||||||||||
| ($ in millions) (a) | Location of loss | 2025 | 2024 | |||||||||||||||||
| Cash flow hedging items: | ||||||||||||||||||||
| Commodity contracts | Cost of sales | $ | ( | $ | ( | |||||||||||||||
| Total before tax | ( | ( | ||||||||||||||||||
| Tax benefit | ||||||||||||||||||||
| Net of tax | $ | ( | $ | ( | ||||||||||||||||
| Amount Reclassified from AOCI | ||||||||||||||||||||
| Details about AOCI Components | Years Ended June 30, | |||||||||||||||||||
| ($ in millions) (a) | Location of (loss) gain | 2025 | 2024 | |||||||||||||||||
| Amortization of pension and other postretirement benefit plan items: | ||||||||||||||||||||
| Net actuarial loss | $ | ( | $ | ( | ||||||||||||||||
| Prior service (cost) benefit | ( | |||||||||||||||||||
| Settlement charge | ( | |||||||||||||||||||
| Total before tax | (b) | ( | ( | |||||||||||||||||
| Tax benefit | (b) | |||||||||||||||||||
| Net of tax | (b) | $ | ( | $ | ( | |||||||||||||||
(a) Amounts in parentheses indicate debits to income/loss.
(b) These AOCI components are included in the computation of net periodic benefit cost (see Note 11 for additional details).
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CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. Supplemental Data
The following are additional required disclosures and other material items:
| Years Ended June 30, | ||||||||||||||||||||
| ($ in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Cost Data: | ||||||||||||||||||||
| Repairs and maintenance costs | $ | $ | $ | |||||||||||||||||
| Cash Flow Data: | ||||||||||||||||||||
| Noncash investing and financing activities: | ||||||||||||||||||||
| Noncash purchases of property, plant, equipment and software | $ | $ | $ | |||||||||||||||||
| Cash paid during the year for: | ||||||||||||||||||||
| Interest payments, net | $ | $ | $ | |||||||||||||||||
| Income tax payments, net | $ | $ | $ | |||||||||||||||||
SUPPLEMENTARY DATA
Quarterly Financial Data (Unaudited)
Quarterly sales and earnings results can be influenced by seasonal factors with the first six months of the fiscal year typically being lower, principally because of annual plant vacation and maintenance shutdowns by us, as well as by many of our customers. However, the timing of major changes in the general economy or the markets for certain products can alter this pattern.
The quarterly financial data below does not reflect special items as identified in Item 7 "Non-GAAP Financial Measures" discussed above. The fiscal year ended June 30, 2025, results include a special item from additional restructuring and asset impairment charges of $3.6 million as a result of the actions taken to streamline operations in the Carpenter Additive business in the PEP segment, as announced in the quarter ended June 30, 2024. Special items included in the fiscal year ended June 30, 2024, results include: a goodwill impairment charge of $14.1 million; pre-tax restructuring and asset impairment charges of $16.9 million as a result of actions taken to streamline operations in the Carpenter Additive business; a noncash pension settlement charge of $51.9 million; and an $18.4 million U.S. tax benefit that was generated as a result of the Carpenter Additive restructuring actions.
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| Results of Operations | ||||||||||||||||||||||||||
| ($ in millions) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||||||||
| Fiscal Year 2025 | ||||||||||||||||||||||||||
| Net sales | $ | 717.6 | $ | 676.9 | $ | 727.0 | $ | 755.6 | ||||||||||||||||||
| Gross profit | $ | 176.3 | $ | 177.5 | $ | 200.8 | $ | 213.9 | ||||||||||||||||||
| Operating income | $ | 113.6 | $ | 118.9 | $ | 137.8 | $ | 151.4 | ||||||||||||||||||
| Net income | $ | 84.8 | $ | 84.1 | $ | 95.4 | $ | 111.7 | ||||||||||||||||||
| Fiscal Year 2024 | ||||||||||||||||||||||||||
| Net sales | $ | 651.9 | $ | 624.2 | $ | 684.9 | $ | 798.7 | ||||||||||||||||||
| Gross profit | $ | 124.1 | $ | 122.6 | $ | 147.0 | $ | 190.6 | ||||||||||||||||||
| Operating income | $ | 69.0 | $ | 69.8 | $ | 75.9 | $ | 108.3 | ||||||||||||||||||
| Net income | $ | 43.9 | $ | 42.7 | $ | 6.3 | $ | 93.6 | ||||||||||||||||||
| Earnings per common share | ||||||||||||||||||||||||||
| (per share amount) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||||||||
| Fiscal Year 2025 | ||||||||||||||||||||||||||
| Basic earnings | $ | 1.69 | $ | 1.68 | $ | 1.90 | $ | 2.23 | ||||||||||||||||||
| Diluted earnings | $ | 1.67 | $ | 1.66 | $ | 1.88 | $ | 2.21 | ||||||||||||||||||
| Fiscal Year 2024 | ||||||||||||||||||||||||||
| Basic earnings | $ | 0.89 | $ | 0.86 | $ | 0.12 | $ | 1.87 | ||||||||||||||||||
| Diluted earnings | $ | 0.88 | $ | 0.85 | $ | 0.12 | $ | 1.85 | ||||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||||
| (shares in millions) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||||||||||||
| Fiscal Year 2025 | ||||||||||||||||||||||||||
| Basic | 50.1 | 50.2 | 50.2 | 50.1 | ||||||||||||||||||||||
| Diluted | 50.7 | 50.7 | 50.7 | 50.6 | ||||||||||||||||||||||
| Fiscal Year 2024 | ||||||||||||||||||||||||||
| Basic | 49.2 | 49.7 | 49.7 | 50.0 | ||||||||||||||||||||||
| Diluted | 49.9 | 50.2 | 50.3 | 50.6 | ||||||||||||||||||||||
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
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Item 9A. Controls and Procedures
(a) Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") as of June 30, 2025. Based on that evaluation, the President and Chief Executive Officer and Senior Vice President and Chief Financial Officer concluded that the Company's disclosure controls and procedures as of June 30, 2025, were effective in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required under the Securities and Exchange Commission's rules and forms, including that information required to be disclosed by us in such reports is accumulated and communicated to the Company's management, including the Company's President and Chief Executive Officer and Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Management's Report on Internal Control over Financial Reporting
Management's Report on the Company's internal control over financial reporting is included in Item 8. of this Annual Report on Form 10-K under the caption "Management's Report on Internal Control Over Financial Reporting" and is incorporated herein by reference. PricewaterhouseCoopers LLP, an independent registered public accounting firm has audited the effectiveness of the Company's internal control over financial reporting as stated in their report which appears in Item 8. of this Annual Report on Form 10-K under the caption "Report of Independent Registered Public Accounting Firm" and is incorporated herein by reference.
(c) Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Item 9B. Other Information
During the three months ended June 30, 2025, none
The Company has adopted an Insider Trading Policy governing the purchase, sale and other dispositions of the Company’s securities by its directors, officers and employees, that the Company believes is reasonably designed to promote compliance with insider trading laws, rules and regulations and the listing standards of the NYSE applicable to the Company. A copy of the Company's insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K.
Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required as to the officers is set forth in Part I hereof.
The information required as to directors and the committees of the Board of Directors is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the captions "Election of Directors" and "Corporate Governance."
The information concerning compliance with Section 16(a) of the Securities and Exchange Act of 1934, as amended, is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the caption "Corporate Governance."
The information concerning Carpenter's Code of Ethics and certain additional information relating to the Company's Corporate Governance is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the caption "Corporate Governance."
The information concerning the Audit/Finance Committee and its financial experts is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the caption "Audit/Finance Committee Report."
The information concerning material changes to the procedures by which stockholders may recommend nominees to the Board of Directors is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the caption "General Information."
On October 15, 2024, we filed with the New York Stock Exchange ("NYSE") the Annual CEO Certification regarding our compliance with the NYSE's Corporate Governance listing standards as required by Section 303 A-12(a) of the NYSE Listed Company Manual. In addition, we have filed as exhibits to our annual report on Form 10-K for the fiscal year ended June 30, 2025, the applicable certifications of our Chief Executive Officer and our Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act of 2002, regarding the quality of Carpenter's public disclosures.
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the captions "Compensation Discussion and Analysis" and "Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the captions "Security Ownership of Principal Beneficial Owners" and "Directors, Nominees and Management Stock Ownership."
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Equity Compensation Plan Information
The following table shows the securities authorized for issuance under equity compensation plans as of June 30, 2025:
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | |||||||||||||||||||||||
| Equity compensation plans approved by security holders | 273,991 | $ | 44.76 | 3,283,169 | (1) | |||||||||||||||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||||||||||||||||
| Total | 273,991 | $ | 44.76 | 3,283,169 | (1) | |||||||||||||||||||||
(1) Includes 3,135,432 shares available for issuance under the Third Amendment to the Carpenter Technology Corporation Stock-Based Incentive Compensation Plan for Officers and Key Employees (which provides for the issuance of stock options, restricted stock and restricted stock units) and 147,737 shares available under the Second Amendment to the Stock-Based Compensation Plan for Non-Employee Directors (which provides for issuance of stock options, stock units and performance units).
There were no reportable purchases during the quarter ended June 30, 2025, provided however that 6,668 shares, at an average purchase price of $230.62, were surrendered by employees to the Company for the payment of the minimum tax liability withholding obligations upon the vesting of shares of restricted stock. We do not consider this a share repurchase program.
Item 13. Certain Relationships, Related Transactions and Director Independence
The information required by this item is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the captions "Corporate Governance" and "Executive Compensation."
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to the Company's fiscal year 2025 definitive Proxy Statement under the caption "Ratification of Appointment of Independent Registered Public Accounting Firm."
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Financial Statements and Schedule:
(1) Consolidated Financial Statements.
The consolidated financial statements of the Company filed as part of this Annual Report on Form 10-K are included in Item 8. "Financial Statements and Supplementary Data".
(2) Consolidated Financial Statements Schedule.
The following consolidated financial statements schedule should be read in conjunction with the consolidated financial statements:
Schedule II — Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the required information is contained in the consolidated financial statements or notes thereto.
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(b) Exhibits
Exhibits required to be filed by Item 601 of Regulation S-K are listed below. Documents not designated as being incorporated herein by reference are filed herewith. The exhibit numbers correspond to the paragraph numbers designated in Item 601 of Regulation S-K.
Exhibit No. | Description | |||||||
3(A) | Restated Certificate of Incorporation, dated October 26, 1998 (Exhibit 3(A) to our Annual Report on Form 10-K filed on September 9, 2005 and incorporated herein by reference). | |||||||
3(B) | By-Laws, amended as of August 11, 2015 (Exhibit 3.1 to our Current Report on Form 8-K filed on August 17, 2015 and incorporated herein by reference). | |||||||
3(C) | Amended and Restated Bylaws of Carpenter Technology Corporation. (as amended and restated through April 18, 2023) (Exhibit 3.1 to our Current Report on Form 8-K filed on April 21, 2023, and incorporated herein by reference). | |||||||
4(A) | Indenture, dated January 12, 1994, between Carpenter Technology Corporation and U.S. Bank Trust National Association (formerly known as First Trust of New York, National Association, as successor Trustee to Morgan Guaranty Trust Company of New York) (Exhibit 4(A) to our Quarterly Report on Form 10-Q filed on February 10, 1994 and incorporated herein by reference). | |||||||
4(B) | Forms of Fixed Rate and Floating Rate Medium-Term Note, Series B (Exhibit 4(F) to our Annual Report on Form 10-K filed on September 3, 2004 and incorporated herein by reference). | |||||||
4(C) | First Supplemental Indenture, dated May 22, 2003, between Carpenter Technology Corporation and U.S. Bank Trust National Association (formerly known as First Trust of New York, National Association as successor Trustee to Morgan Guaranty Trust Company of New York) (Exhibit 4(I) to our Annual Report on Form 10-K filed on September 12, 2003 and incorporated herein by reference). | |||||||
4(D) | Second Supplemental Indenture, dated as of June 30, 2011, between Carpenter Technology Corporation and U.S. Bank National Association (Exhibit 4.1 to our Current Report on Form 8-K filed on June 30, 2011 and incorporated herein by reference). | |||||||
4(E) | Registration Rights Agreement, dated February 29, 2012, by and among Carpenter, Watermill-Toolrock Partners, L.P., Watermill-Toolrock Partners II, L.P., Watermill-Toolrock Enterprises, LLC and HHEP-Latrobe, L.P. (Exhibit 10.2 to our Current Report on Form 8-K filed on March 1, 2012 and incorporated herein by reference). | |||||||
4(F) | Third Supplemental Indenture, dated as of February 26, 2013, between Carpenter Technology Corporation and U.S. Bank National Association (Exhibit 4.1 to our Current Report on Form 8-K filed on February 26, 2013 and incorporated herein by reference). | |||||||
4(G) | Fourth Supplemental Indenture, dated July 24, 2020, by and between Carpenter Technology Corporation and U.S. Bank National Association (Exhibit 4.2 to our Current Report on Form 8-K filed on July 24, 2020 and incorporated herein by reference). | |||||||
4(H) | Form of 6.375% Senior Notes Due 2028 (Exhibit 4.3 to our Current Report on Form 8-K filed on July 24, 2020 and incorporated herein by reference). | |||||||
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† 10(A) | Supplemental Retirement Plan for Executives of Carpenter Technology Corporation (Exhibit 10(A) to our Annual Report on Form 10-K filed on August 20, 2010 and incorporated herein by reference). | |||||||
† 10(B) | First Amendment to the Supplemental Retirement Plan for Executives of Carpenter Technology Corporation (Exhibit 10(A) to our Quarterly Report on Form 10-Q filed on October 27, 2016 and incorporated herein by reference). | |||||||
† 10(C) | Amended and Restated Deferred Compensation Plan for Non-Management Directors of Carpenter Technology Corporation (Exhibit 10(B) to our Annual Report on Form 10-K filed on August 24, 2011 and incorporated herein by reference). | |||||||
† 10(D) | Second Amendment to the Amended and Restated Deferred Compensation Plan for Non-Management Directors of Carpenter Technology Corporation (Exhibit 10(D) to our Annual Report on Form 10-K filed on August 29, 2019 and incorporated herein by reference). | |||||||
† 10(E) | Amended and Restated Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation (Exhibit 10(D) to our Annual Report on Form 10-K filed on August 11, 2017 and incorporated herein by reference). | |||||||
† 10(F) | Second Amendment to the Amended and Restated Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation (Exhibit 10(F) to our Annual Report on Form 10-K filed on August 29, 2019 and incorporated herein by reference). | |||||||
† 10(G) | Stock-Based Compensation Plan For Non-Employee Directors, as amended (Exhibit 10(E) to our Annual Report on Form 10-K filed on August 24, 2011 and incorporated herein by reference). | |||||||
† 10(H) | Second Amendment to the Stock-Based Compensation Plan for Non-Employee Directors, as amended (Exhibit 10(H) to our Annual Report on Form 10-K filed on August 29, 2019 and incorporated herein by reference). | |||||||
10(I) | Trust Agreement for Non-Qualified Employee Benefits Trust between Carpenter Technology Corporation and JP Morgan Chase Bank, N.A., effective as of August 15, 2014 (Exhibit 10(G) to our Annual Report on Form 10-K filed on August 25, 2015 and incorporated herein by reference). | |||||||
† 10(J) | Amended and Restated Stock-Based Incentive Compensation Plan for Officers and Key Employees (Exhibit A to our Definitive Proxy Statement filed on September 16, 2022 and incorporated herein by reference). | |||||||
† 10(K) | Form of Restricted Stock Unit Award Agreement (pursuant to Carpenter's Stock-Based Incentive Compensation Plan for Officers and Key Employees) (Exhibit 10(A) to our Quarterly Report on Form 10-Q filed on May 1, 2024 and incorporated herein by reference). | |||||||
† 10(L) | Form of Performance Stock Unit Award Agreement (pursuant to Carpenter's Stock-Based Incentive Compensation Plan for Officers and Key Employees) (Exhibit 10(B) to our Quarterly Report on Form 10-Q filed on May 1, 2024 and incorporated herein by reference). | |||||||
† 10(M) | Form of Stock Option Award Agreement (pursuant to Carpenter's Stock-Based Incentive Compensation Plan for Officers and Key Employees) (Exhibit 10(C) to our Quarterly Report on Form 10-Q filed on May 1, 2024 and incorporated herein by reference). | |||||||
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† 10(N) | Form of Three-Year Performance Stock Unit Award Agreement (pursuant to Carpenter's Stock-Based Incentive Compensation Plan for Officers and Key Employees) (Exhibit 10(D) to our Quarterly Report on Form 10-Q filed on May 1, 2024 and incorporated herein by reference). | |||||||
† 10(O) | Benefits Restoration Plan of Carpenter Technology Corporation (Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on May 2, 2016 and incorporated herein by reference). | |||||||
† 10(P) | First Amendment to the Benefits Restoration Plan of Carpenter Technology Corporation (Exhibit 10(P) to our Quarterly Report on Form 10-Q filed on October 27, 2016 and incorporated herein by reference). | |||||||
† 10(Q) | Form of Indemnification Agreement for Directors and Officers (Exhibit 10.1 to our Quarterly Report on Form 10-Q filed on May 7, 2015 and incorporated herein by reference). | |||||||
† 10(R) | Amended and Restated Severance Pay Plan for Executives of Carpenter Technology Corporation (Exhibit 10(S) to our Annual Report on Form 10-K filed on August 11, 2017 and incorporated herein by reference). | |||||||
† 10(S) | Offer Letter, dated June 1, 2015, by and between Carpenter Technology Corporation and Tony R. Thene (Exhibit 10.1 to our Current Report on Form 8-K filed on June 3, 2015 and incorporated herein by reference). | |||||||
† 10(T) | Offer Letter, dated August 6, 2018, by and between Carpenter Technology Corporation and Timothy Lain (Exhibit 10.1 to our Current Report on Form 8-K filed on August 8, 2018 and incorporated herein by reference). | |||||||
† 10(U) | Employment Letter of Agreement, dated August 13, 2010, by and between Carpenter Technology Corporation and James D. Dee (Exhibit 10(F) of Carpenter's Form 10-Q for the quarter ended September 30, 2010 filed November 5, 2010 and incorporated herein by reference). | |||||||
† 10(V) | Offer Letter, dated June 29, 2015, by and between Carpenter Technology Corporation and Brian J. Malloy (Exhibit 10(AA) to our Annual Report on Form 10-K filed on August 29, 2019 and incorporated herein by reference). | |||||||
† 10(W) | Offer Letter, dated February 18, 2022, by and between Carpenter Technology Corporation and Marshall Akins (filed herewith). | |||||||
† 10(X) | Executive incentive bonus compensation plan of Carpenter Technology Corporation effective July 1, 2021 (Exhibit 10(CC) to our Annual Report on Form 10-K filed on August 19, 2021 and incorporated herein by reference). | |||||||
† 10(Y) | First Amendment to the Executive Incentive Bonus Compensation Plan of Carpenter Technology Corporation effective as of July 1, 2021 (Exhibit 10.B to our Quarterly Report on Form 10-Q filed on October 28, 2021 and incorporated herein by reference). | |||||||
10(Z) | Fifth Supplemental Indenture, dated March 16, 2022, by and between Carpenter Technology Corporation and U.S. Bank National Association (Exhibit 4.2 to our Current Report on Form 8-K filed on March 16, 2022, and incorporated herein by reference). | |||||||
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10(AA) | Form of 7.625% Senior Notes due 2030 (Exhibit 4.3 to our Current Report on Form 8-K filed on March 16, 2022, and incorporated herein by reference). | |||||||
† 10(BB) | Amended and Restated Carpenter Technology Corporation Change of Control Severance Plan (Exhibit 10(FF) to our Annual Report on Form 10-K filed on August 15, 2022 and incorporated herein by reference). | |||||||
† 10(CC) | Second Amendment to the Stock-Based Compensation Plan for Officers and Key Employees, as amended (Exhibit 10(A) to our Quarterly Report on Form 10-Q filed on April 27, 2023 and incorporated herein by reference). | |||||||
10(DD) | Second Amended and Restated Credit Agreement dated as of April 14, 2023 by and among the Company, Bank of America, N.A. as administrative agent, swing line lender and letter of credit issuer, and the other lenders party thereto, JPMorgan Chase Bank, N.A., as syndication agent, PNC Bank, National Association and U.S. Bank, National Association, each, as a documentation agent, and BofA Securities Inc. and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners (filed herewith). | |||||||
10(EE) | Amended and Restated Security Agreement dated as of April 14, 2023 by and among the Company, the grantors party thereto and Bank of America, N.A. as administrative agent for the secured parties. (Exhibit 10.2 to our Current Report on Form 8-K filed on April 18, 2023, and incorporated herein by reference). | |||||||
†10(FF) | First Amendment to the Stock-Based Compensation Plan for Officers and Key Employees, as amended (Exhibit A to our Supplemental Proxy Statement filed on September 27, 2022 and incorporated herein by reference). | |||||||
†10(GG) | Second Amendment to the Executive Incentive Bonus Compensation Plan of Carpenter Technology Corporation (Exhibit 10(FF) to our Annual Report on Form 10-K filed on August 13, 2024 and incorporated herein by reference). | |||||||
†10(HH) | Third Amendment to the Carpenter Technology Corporation Stock-Based Incentive Compensation Plan for Officers and Key Employees, as amended (Exhibit 10(GG) to our Annual Report on Form 10-K filed on August 13, 2024 and incorporated herein by reference). | |||||||
†10(II) | Third Amendment to the Amended and Restated Deferred Compensation Plan for Officers and Key Employees of Carpenter Technology Corporation (Exhibit 10(HH) to our Annual Report on Form 10-K filed on August 13, 2024 and incorporated herein by reference). | |||||||
18 | Preferability letter from PricewaterhouseCoopers LLP on change in date of annual goodwill impairment testing performed by the Company (Exhibit 18 to our Annual Report on Form 10-K filed August 15, 2022 and incorporated herein by reference). | |||||||
19 | Carpenter Technology Corporation Insider Trading Policy (filed herewith). | |||||||
21 | Subsidiaries of the Registrant (filed herewith). | |||||||
23 | Consent of PricewaterhouseCoopers LLP (filed herewith). | |||||||
24 | Powers of Attorney in favor of James D. Dee or Timothy Lain (filed herewith). | |||||||
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31(A) | Certification of Chief Executive Officer required by the Securities and Exchange Commission Rule 13a-14(a)/15d-14(a) (filed herewith). | |||||||
31(B) | Certification of Chief Financial Officer required by the Securities and Exchange Commission Rule 13a-14(a)/15d-14(a) (filed herewith). | |||||||
32 | Certification pursuant to 18 U.S.C Section 1350 (furnished herewith). | |||||||
97 | Carpenter Technology Corporation Clawback Policy for Executive Officers (Exhibit 97 to our Annual Report on Form 10-K filed on August 13, 2024 and incorporated herein by reference). | |||||||
| 101 | The following financial information from this Annual Report on Form 10-K for the fiscal year ended June 30, 2025, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Changes in Equity; and (vi) the Notes to the Consolidated Financial Statements (filed herewith). | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
† Denotes employment- or compensation- related agreement, document or plan.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CARPENTER TECHNOLOGY CORPORATION | ||||||||
| By | /s/ Timothy Lain | |||||||
| Timothy Lain | ||||||||
| Senior Vice President and Chief Financial Officer | ||||||||
| Date: August 12, 2025 | ||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
| /s/ Tony R. Thene | President and Chief Executive Officer | August 12, 2025 | ||||||||||||
| Tony R. Thene | and Director | |||||||||||||
| (Principal Executive Officer) | ||||||||||||||
| /s/ Timothy Lain | Senior Vice President and Chief Financial Officer | August 12, 2025 | ||||||||||||
| Timothy Lain | (Principal Financial Officer) | |||||||||||||
| /s/ Elizabeth Socci | Vice President - Controller, Chief Accounting | August 12, 2025 | ||||||||||||
| Elizabeth Socci | Officer | |||||||||||||
| (Principal Accounting Officer) | ||||||||||||||
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| * | Chairman and Director | August 12, 2025 | ||||||||||||
| I. Martin Inglis | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Viola L. Acoff | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Julie Beck | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| A. John Hart | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Steven E. Karol | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Kathleen Ligocki | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Charles McLane, Jr. | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Colleen Pritchett | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Stephen M. Ward, Jr. | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Ramin Younessi | ||||||||||||||
| * | Director | August 12, 2025 | ||||||||||||
| Howard Yu | ||||||||||||||
Original Powers of Attorney authorizing James D. Dee or Timothy Lain to sign this Report on behalf of: I. Martin Inglis, Viola L. Acoff, Julie Beck, A. John Hart, Steven E. Karol, Kathleen Ligocki, Charles McLane, Jr., Colleen Pritchett, Stephen M. Ward, Jr., Ramin Younessi and Howard Yu are being filed with the Securities and Exchange Commission.
| *By | /s/ James D. Dee | |||||||
| James D. Dee | ||||||||
| Attorney-in-fact | ||||||||
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CARPENTER TECHNOLOGY CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
($ in millions)
| Column A | Column B | Column C Additions | Column D | Column E | ||||||||||||||||||||||||||||
| Description | Balance at Beginning of Period | Charged to Costs & Expenses | Charged to Other Accounts | Deductions | Balance at End of Period | |||||||||||||||||||||||||||
| Year Ended June 30, 2025 | ||||||||||||||||||||||||||||||||
| Allowance for doubtful accounts receivable | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| Deferred tax valuation allowance | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Year Ended June 30, 2024 | ||||||||||||||||||||||||||||||||
| Allowance for doubtful accounts receivable | $ | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| Deferred tax valuation allowance | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Year Ended June 30, 2023 | ||||||||||||||||||||||||||||||||
| Allowance for doubtful accounts receivable | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
| Deferred tax valuation allowance | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||
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FAQ
What were Carpenter Technology's (CRS) fiscal 2025 net sales and net income?
Fiscal 2025 net sales were $2,877.1 million and net income was $376.0 million ($7.42 diluted EPS).
How did the Aerospace and Defense market perform for CRS in fiscal 2025?
Aerospace and Defense sales were $1,768.6 million (62% of net sales), up 15% year-over-year and up 20% excluding surcharge revenue.
What cash returns and share repurchase activity did Carpenter (CRS) report?
The company repurchased 575,000 shares for $101.9 million in fiscal 2025 and has a $400 million repurchase authorization with $298.1 million available at June 30, 2025.
What is the company's adjusted free cash flow and capital expenditure level?
Adjusted free cash flow in fiscal 2025 was $287.5 million and purchases of property, plant, equipment and software were $154.3 million.
Does CRS disclose any material accounting or inventory risks?
Yes. The company uses LIFO inventory accounting; using FIFO instead would have increased inventories by approximately $344.5 million as of June 30, 2025.
Carpenter Technology Corp
NYSE:CRS
CRS Rankings
CRS Latest News
CRS Latest SEC Filings
CRS Stock Data
12.81B
47.77M
2.38%
102.21%
5.54%
Metal Fabrication
Steel Works, Blast Furnaces & Rolling Mills (coke Ovens)
United States
PHILADELPHIA