CARPENTER TECHNOLOGY CORP

Carpenter Technology Corporation is a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels, and tool steels, serving critical applications in the aerospace and defense, medical, energy, transportation, and industrial and consumer markets. The industry is highly competitive, with less than ten companies producing one or more similar products considered major competitors for the company's high-value products used in demanding applications, while several dozen smaller producing and converting companies, several hundred independent distributors, and numerous foreign companies also compete. Competitive advantages include over 135 years of metallurgical and manufacturing expertise, complex customer product specifications requiring qualification prior to supply, and research and development efforts that represent barriers to existing and potential competitors.

The company is organized in two reportable business segments: Specialty Alloys Operations (SAO) and Performance Engineered Products (PEP). The SAO segment comprises the company's major premium alloy and stainless steel manufacturing operations, including mills primarily in Reading and Latrobe, Pennsylvania, as well as South Carolina and Alabama, managed in an integrated manner. The PEP segment includes the Dynamet titanium business, the Carpenter Additive business, and the Latrobe and Mexico distribution businesses, managed with an entrepreneurial structure to promote flexibility and agility.

Revenue is generated through the manufacturing, fabrication, and distribution of specialty metals, with sales distributed directly from production plants, a worldwide network of service and distribution centers, and through independent distributors. The company operates its own global network of service centers located in the United States, Canada, Mexico, Europe, and Asia, allowing close customer collaboration and just-in-time stocking programs. No single customer accounted for 10 percent or more of total net sales for the years ended June 30, 2026, June 30, 2025, and June 30, 2024.

The SAO segment is comprised of the company's major premium alloy and stainless steel manufacturing operations, including operations at mills primarily in Reading and Latrobe, Pennsylvania, South Carolina, and Alabama, with assets managed in an integrated manner to optimize efficiency and profitability. The PEP segment includes the Dynamet titanium business, the Carpenter Additive business, and the Latrobe and Mexico distribution businesses, managed with an entrepreneurial structure to promote flexibility and agility. Sales outside of the United States, including export sales, were $1,300.0 million ¹, $1,177.2 million ², and $1,136.7 million ³ in fiscal years 2026, 2025, and 2024, respectively.

The company's sales by end-use market for fiscal year 2026 included Aerospace and Defense of $2,035.2 million ⁴ (65% ⁵ of total), Medical of $278.4 million ⁶ (9% ⁷), Energy of $230.6 million ⁸ (7% ⁹), Transportation of $100.4 million ¹⁰ (3% ¹¹), Industrial and Consumer of $401.8 million ¹² (13% ¹³), and Distribution of $77.8 million ¹⁴ (3% ¹⁵). Pounds sold were 207,874 thousand ¹⁶ in fiscal year 2026, compared to 192,980 thousand ¹⁷ in fiscal year 2025 and 206,302 thousand ¹⁸ in fiscal year 2024.

In July 2024, the company's Board of Directors authorized a share repurchase program of up to $400.0 million ¹⁹ of outstanding common stock, with no stated expiration. As of June 30, 2026, $119.0 million ²⁰ of the $400.0 million ²¹ remained available for future purchases. During the quarter ended June 30, 2026, the company purchased 100,000 ²² shares pursuant to the share repurchase program. The company paid a quarterly dividend of $0.20 ²³ per share of common stock during each quarter of fiscal years 2026 and 2025. Company-sponsored research and development expenditures were $27.7 million ²⁴, $26.1 million ²⁵, and $25.6 million ²⁶ in fiscal years 2026, 2025, and 2024, respectively.

Net sales for fiscal year 2026 were $3,124.2 million ²⁷, compared to $2,877.1 million ²⁸ in fiscal year 2025 and $2,759.7 million ²⁹ in fiscal year 2024. Operating income was $702.0 million ³⁰ in fiscal year 2026, compared to $521.8 million ³¹ in fiscal year 2025 and $323.1 million ³² in fiscal year 2024. Net income was $529.8 million ³³ in fiscal year 2026, compared to $376.0 million ³⁴ in fiscal year 2025 and $186.5 million ³⁵ in fiscal year 2024. Diluted earnings per share were $10.52 ³⁶ in fiscal year 2026, compared to $7.42 ³⁷ in fiscal year 2025 and $3.70 ³⁸ in fiscal year 2024.

The company has undertaken capital projects associated with expanding production capacity and capability, including a current brownfield expansion project in Athens, Alabama. The company's future success requires, among other things, expanding in key international energy markets by successfully adding to its customer base, distribution channels, and product portfolio. The company also seeks to expand its operations in a cost-effective manner, depending upon factors including the ability of management to ensure necessary resources are in place, obtaining internal and customer qualifications to produce material from facilities, and operating facilities to maximize potential opportunities.

The company uses pricing surcharges, indexing mechanisms, base price adjustments, and raw material forward contracts to reduce the impact of changing prices for the most significant raw 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 results and could affect comparability from period to period.

The company anticipates spending approximately $3.1 million ³⁹ on environmental capital projects over the next five fiscal years, including approximately $0.8 million ⁴⁰ in fiscal year 2027. The company makes regular, substantial capital investments and changes to manufacturing processes to lower production costs, improve productivity, manufacture new or improved products, and remain competitive.

Purchases of property, plant, equipment and software were $242.7 million ⁴¹ in fiscal year 2026, compared to $154.3 million ⁴² in fiscal year 2025 and $96.6 million ⁴³ in fiscal year 2024. The company paid a quarterly dividend of $0.20 ⁴⁴ per share of common stock during each quarter of fiscal years 2026 and 2025. As of June 30, 2026, $119.0 million ⁴⁵ of the $400.0 million ⁴⁶ share repurchase authorization remained available for future purchases.

Demand in the company's 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. The commercial aerospace and defense markets are historically cyclical due to factors including 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 energy market has been historically cyclical, principally as a result of volatile oil prices that impact demand for products. Periods of reduced demand and excess supply, as well as the availability of substitute lower cost materials, can adversely affect the ability to price and sell products at required profitability levels.

Demand in the company's end-use markets, particularly commercial aerospace, defense, and energy, is cyclical and sensitive to general economic conditions, with a downturn in commercial aerospace or defense or volatility in oil prices potentially materially adversely affecting results. The company relies on third parties for critical raw materials such as nickel, cobalt, chromium, manganese, molybdenum, titanium, and iron, whose prices have been volatile, and if suppliers are unwilling or unable to meet demand, alternative sources may not be available. As of June 30, 2026, if the FIFO method of inventory had been used instead of LIFO, inventories would have been approximately $432.6 million ⁴⁷ higher, and repeal of the LIFO method could result in a substantial tax liability. The company's manufacturing processes depend on critical, high-cost equipment concentrated in Reading and Latrobe, Pennsylvania and Athens, Alabama, and unplanned equipment failures or catastrophic events could cause prolonged production reductions. The company has environmental remediation liabilities at some owned operating facilities and has been designated as a potentially responsible party at certain third-party Superfund sites, with future costs inherently imprecise but potentially material in a particular quarter or year.

Management emphasizes the company's position as a recognized leader in high-performance specialty alloy-based materials and process solutions for critical applications, having 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. The company's strategic priorities include expanding production capacity and capability through capital projects such as the brownfield expansion project in Athens, Alabama, expanding in key international energy markets, and continuing to invest in research and development with expenditures of $27.7 million ⁴⁸ in fiscal year 2026. Management also highlights the importance of maintaining a high-performance work environment, with safety as the number one core value and a commitment to a Zero Injury workplace.