KEYBANC CAPITAL MARKETS Basic Materials & Packaging Conference. September 10, 2008

Transcription

1 KEYBANC CAPITAL MARKETS Basic Materials & Packaging Conference September 10, 2008

2 FORWARD-LOOKING STATEMENTS Some of Carpenter s statements will be forward-looking statements, which are based on current expectations. Risk factors that could cause actual results to differ materially from these forward-looking statements can be found in Carpenter s recent SEC filings CRS Holding, Inc. All Rights Reserved. Slide 2

3 CARPENTER TECHNOLOGY OVERVIEW Leader in Specialty Materials for Critical Applications 119 Years of Metallurgical and Manufacturing Expertise Strong Customer Relationships Well Positioned for Growth Attractive End-Use Markets International Experience and Capabilities Broad Product Offerings -Expanding Capacity for High Margin Products Superior Financial Resources Strong Cash Flow Generation Excellent Balance Sheet Able to Prosper in Challenging Economic Conditions 2007 CRS Holding, Inc. All Rights Reserved CRS Holding, Inc. All Rights Reserved. Slide 3

4 SOPHISTICATED PRODUCTS FOR NICHE MARKETS 2008 $1.95 BILLION Revenue by End-Use Market 12% 7% 11% 9% Revenue By Alloy Type 9% 39% 22% 53% Aerospace Energy Medical 34% Automotive Consumer Industrial 4% Specialty Alloys Stainless Steels Titanium Tool and Other Steels 2008 CRS Holding, Inc. All Rights Reserved. Slide 4

5 CARPENTER S POSITION IN U.S. STEEL INDUSTRY Operating in a Niche Segment U.S. STEEL CONSUMPTION* 153,400,000 TONS CARBON STEEL 150,080,600 TONS SPECIALTY STEEL 3,319,400 TONS STAINLESS STEEL ELECTRICAL STEEL SUPERALLOYS TOOL STEEL 2,620,000 TONS 440,000 TONS 98,400 TONS 161,000 TONS FLAT ROLLED / OTHER 2,200,000 TONS LONG PRODUCTS 420,000 TONS LONG 18,900 TONS FLAT 39,600 TONS INGOT BILLET 39,900 TONS *Calendar Year 2007 Source: IISI, ISSF, AISI, SSINA and Management s Estimate 2008 CRS Holding, Inc. All Rights Reserved. Slide 5

6 MANUFACTURING PROCESSES Expansions / Upgrades / Extended Maintenance Premium Melting Vacuum Induction Melting (VIM) -New furnace by CY end 40% capacity expansion Electroslag Remelting (ESR) -2 New furnaces by CY end Vacuum Arc Remelting (VAR) -4 New furnaces completed and operating Hot Working Rotary Forge -Major electrical and mechanical rebuild Q1 09 Rolling Mill -Control upgrades Q1 09 Finishing Cleaning line; extended maintenance Q CRS Holding, Inc. All Rights Reserved CRS Holding, Inc. All Rights Reserved. Slide 6

7 ENERGY INDUSTRIAL AUTOMOTIVE CONSUMER MEDICAL 2008 CRS Holding, Inc. All Rights Reserved. Slide 7

8 (in millions) $800 $700 $600 $500 $400 CRS Aerospace Revenue ENGINEERED MATERIALS FOR AEROSPACE APPLICATIONS Diverse Variety of High Performance Materials Specialty Alloys Stainless Steel Titanium Globally Recognized Certified Material Supplier for Mission-Critical Applications $300 $200 $100 $ Jet Engine Components (Ni-based alloys) Compressors / Rings and Disks Turbine Blades Gears and Drive Shafts Fasteners (Ni-based and Ti alloys) Structural Parts (Ni-based and stainless alloys) Landing Gear Flap Tracks 2008 CRS Holding, Inc. All Rights Reserved. Slide 8

9 ENGINEERED MATERIALS FOR AEROSPACE APPLICATIONS AVIONICS / APU Hiperco 50 FUSELAGE FASTENERS Titanium Pyromet Alloy A-286 FLAP TRACK / SLOT TRACK COMPONENTS Custom PH ENGINE COMPONENTS Pyromet Alloy 718 Waspaloy AM-355 Pyromet Alloy 901 Controlled Expansion Alloys LANDING GEAR COMPONENTS AerMet 100 Custom 465 PYLON FASTENERS Pyromet Alloy 718 Pyromet Alloy A CRS Holding, Inc. All Rights Reserved. Slide 9

10 BOEING/AIRBUS COMMERCIAL JET BUILD RATES CHANGE IN BUILD SCHEDULE Jul Jan Deliveries Source: Airline Monitor Jul-07 Jan-08 Jul CRS Holding, Inc. All Rights Reserved. Slide 10

11 AEROSPACE MARKET CONDITIONS Robust Long-Term Dynamics Strong Build Schedule Thru 2015 Full Boeing/Airbus Order Books Increased Air Travel in Mid-East and Asia Pacific Need for Fuel Efficient Planes Expanding Customer Relationships Increased Revenue Per Plane From Larger Composite Planes Short-Term Disruptions Boeing Strike High Fuel Costs Removal of Planes From Domestic Service Pushouts of 787 and A380 Stretch-out of Build Rates by Airline Monitor Weakening Revenue Passenger Miles Viability of New International Airlines 2008 CRS Holding, Inc. All Rights Reserved. Slide 11

12 AEROSPACE INDUSTRIAL AUTOMOTIVE CONSUMER MEDICAL 2008 CRS Holding, Inc. All Rights Reserved. Slide 12

13 (in millions) $250 $200 $150 CRS Energy Revenue ENGINEERED MATERIALS FOR ENERGY APPLICATIONS Highly Engineered Materials Specialty Alloys Stainless Steels Powder Metals Performance Materials for Demanding Applications $100 $50 Oil & Gas Exploration Non-Magnetic Drill Collars Pressure Housings Pump Shafts Down Hole Safety Cable $ Power Generation (Industrial Gas Turbines) Turbine Blades Disks Shafts 2008 CRS Holding, Inc. All Rights Reserved. Slide 13

14 ENGINEERED MATERIALS FOR ENERGY APPLICATIONS WELLHEAD EQUIPMENT Carpenter Alloy 925 OIL AND GAS EXPLORATION AND COMPLETION MEASUREMENT WHILE DRILLING HOUSINGS Custom Age 625 PLUS Stainless NON-MAGNETIC DRILL COLLARS 15-15HS Max Stainless 15-15LC Mod PUMP & MOTOR ASSEMBLIES Custom 465 Stainless Pyromet Alloy 718 ROTARY STEERABLE TOOLS Pyromet Alloy 718 Pyromet Alloy 625 PRESSURE VESSELS Carpenter MP35N ARMOR CABLE 20Mo-6 HS Stainless POWER GENERATION SHAFTS AND DISKS Pyromet Alloy 706 GAS TURBINE ENGINE DUCTING Pyromet Alloy 625 BOLTING Pyromet Alloy CRS Holding, Inc. All Rights Reserved. Slide 14

15 AEROSPACE ENERGY 2008 CRS Holding, Inc. All Rights Reserved. Slide 15

16 OTHER END MARKETS (millions) Industrial Automotive Consumer Medical Revenue 2008 $420 $221 $185 $137 Valves and fittings Welding Fuel injectors Engine valves Safety applications Electronics Housing Sports Bone fracture fixation Hip and knee replacements Vascular devices Surgical instruments 2008 CRS Holding, Inc. All Rights Reserved. Slide 16

17 INTERNATIONAL SALES ( 2008) (in millions) 56% 12% $700 6% $600 18% 8% $500 27% CAGR Asia Pacific Canada Mexico Europe Other $400 12% 7% 11% $300 10% $200 39% $100 21% Aerospace Energy Medical Automotive Consumer Industrial $ CRS Holding, Inc. All Rights Reserved. Slide 17

18 STRATEGIC PRIORITIES GROWTH Expansion in Key Global Markets Aerospace 50% of Energy revenues Expected to grow 10%+ per year Market and Customer Focus Expanding Key Customer Relationships Improved Understanding of Marketplace Drivers and Opportunities International Expansion China Middle East India Eastern Europe Latin America Acquisitions Close to Core 2007 CRS Holding, Inc. All Rights Reserved CRS Holding, Inc. All Rights Reserved. Slide 18

19 STRATEGIC PRIORITIES OPERATIONAL EXCELLENCE Improving Basic Systems and Processes Driving Out Waste Focus on Customer Satisfaction (Quality and Delivery) TECHNOLOGY LEADERSHIP Develop New Products for Increasingly Demanding Applications Increase R&D Investment Improve Quality and Lower Costs Through Process Development and State-of-the-Art Equipment 2007 CRS Holding, Inc. All Rights Reserved CRS Holding, Inc. All Rights Reserved. Slide 19

20 FINANCIAL HIGHLIGHTS (CONTINUING OPERATIONS) $ IN MILLIONS (ex. special legal reserve)* SALES SALES excl. surcharge % change from prior year % % % OPERATING INCOME EX. PENSION EID % of sales excl. surcharge % % % DILUTED EPS % change from prior year $ % $ % $ % EBITDA % of sales excl. surcharge % % % *Notes: Special environmental litigation reserve in Q was $21 million or $.26/share 2008 CRS Holding, Inc. All Rights Reserved. Slide 20

21 STRONG OPERATING MARGINS Operating Income as Percent of Sales excl. Surcharge Revenue * * 2008 excludes 4Q special environmental litigation reserve of $21 million 2008 CRS Holding, Inc. All Rights Reserved. Slide 21

22 CASH FLOW FROM OPERATIONS FREE CASH FLOW GENERATION (after capex, dividends and before purchase of marketable securities and excluding purchase and sales of businesses) $300 $250 $238 $275 $260 $200 $143 $150 $100 $50 $134 $92 $104 $80 $80 $88 $134 $238 $203 $202 $112 $ $ Millions 2008 CRS Holding, Inc. All Rights Reserved. Slide 22

23 CAPITAL EXPENDITURES (millions) $160 $153 $140 $120 $100 $94 $100 $105 $119 $125 $80 $60 $49 $51 $47 $40 $27 $20 $9 $8 $14 $19 $ Est 2008 CRS Holding, Inc. All Rights Reserved. Slide 23

24 PROSPECTS FOR 2009 Strong Revenue Growth Momentum Continued Growth in Aerospace and Energy Markets Investing Resources Internationally Additional Premium Melt capacity coming on mid-year Improving Performance Through 2009 Expect overall 09 Operating Margin ex. Pension EID in line with 08 Operating Results Will Vary by Quarter - First Half Comparison Tougher Than Second Half Improving Product Mix and Acceleration of Cost Reductions During the Year Expect Record 2009 EPS Despite $0.28/Share Differential From 2008 in Net Pension Expense 2008 CRS Holding, Inc. All Rights Reserved. Slide 24

25 CASH DEPLOYMENT PRIORITIES CAPITAL INVESTMENTS Completion of $115 million premium melt capacity expansion Completion of upgrade to hot rolling facility ACQUISITION OPPORTUNITIES Active and disciplined approach Close to core and in strategic markets/geographies Take advantage of opportunities SHARE BUYBACK Completed $250 million authorization in Dec Executing against second $250 million program Retired 7.6 million shares in total DIVIDEND Consistent payout 2008 CRS Holding, Inc. All Rights Reserved. Slide 25

26 Summary Leading position in attractive end markets and product niches Strong cash generation and balance sheet, with flexibility to fund growth initiatives through challenging economic conditions Industry leader in metallurgical and processing expertise, with commitment to future R&D, to meet demand for higher performing materials Driving significant improvements to core operating processes Commitment to deliver attractive return to shareholders 2008 CRS Holding, Inc. All Rights Reserved. Slide 26