Davenport and Company. June 3, PDF Free Download

Davenport and Company June 3, 2008

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. 2007 CRS Holding, Inc. All Rights Reserved. Slide 2

CARPENTER TECHNOLOGY OVERVIEW Leaders in Specialty Materials for Critical Applications 119 Years of Metallurgical and Manufacturing Expertise Highly Engineered Materials Specialty Alloys (52% of Sales) -High Temperature Alloys -High Strength Alloys -Magnetic, Controlled Expansion and Electronic Alloys Stainless Steels (35% of Sales) -Focus on High Value Stainless Steels Titanium (9% of Sales) -Leading Supplier of Titanium Fastener Wire to Aerospace Market Tool and Other Steels (4% of Sales) -Leading producer of gas atomized powders Divested ceramics businesses 3/08 2007 CRS Holding, Inc. All Rights Reserved. 2007 CRS Holding, Inc. All Rights Reserved. Slide 3

SOPHISTICATED PRODUCTS FOR NICHE MARKETS TTM 3.31.2008 $2.0 BILLION 12% 6% 12% 10% 38% 22% Aerospace Energy Medical Automotive Consumer Industrial Management s estimate 2007 CRS Holding, Inc. All Rights Reserved. Slide 4

CARPENTER S POSITION IN U.S. STEEL INDUSTRY Operating in a Niche Segment U.S. STEEL CONSUMPTION 132,400,000 TONS CARBON STEEL 129,500,000 TONS SPECIALTY STEEL 2,900,000 TONS STAINLESS STEEL ELECTRICAL STEEL SUPERALLOYS TOOL STEEL 2,329,000 TONS 397,000 TONS 76,000 TONS 98,000 TONS FLAT ROLLED / OTHER 2,051,000 TONS LONG PRODUCTS 278,000 TONS LONG 19,000 TONS FLAT 28,000 TONS INGOT BILLET 29,000 TONS Source: AISI/SSINA and management s estimates 2007 CRS Holding, Inc. All Rights Reserved. Slide 6

MANUFACTURING PROCESSES Air Melting Electric Arc Furnace (EAF) Argon-Oxygen Decarburization Furnace (AOD) Continuous Caster Premium Melting Vacuum Induction Melting (VIM) Electroslag Remelting (ESR) Vacuum Arc Remelting (VAR) Hot Working Press Rotary Forge Rolling Mill Finishing 2007 CRS Holding, Inc. All Rights Reserved. 2007 CRS Holding, Inc. All Rights Reserved. Slide 7

(in millions) $800 $700 $600 $500 $400 $300 $200 $100 $0 CRS Aerospace Revenue FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 TTM 3/31/08 ENGINEERED MATERIALS FOR AEROSPACE APPLICATIONS Diverse Variety of Performance Materials Specialty Alloys Stainless Steel Titanium Globally Recognized Certified Material Supplier for Mission-Critical Applications Compressors / Rings and Disks Fasteners Landing Gear Structural Turbine Blades Gears and Drive Shafts 2007 CRS Holding, Inc. All Rights Reserved. Slide 9

ENGINEERED MATERIALS FOR AEROSPACE APPLICATIONS AVIONICS / APU Hiperco 50 FUSELAGE FASTENERS Titanium Pyromet Alloy A-286 FLAP TRACK / SLOT TRACK COMPONENTS Custom 465 17-4 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-286 2007 CRS Holding, Inc. All Rights Reserved. Slide 10

BOEING/AIRBUS COMMERCIAL JET BUILD RATES CHANGE IN BUILD SCHEDULE Deliveries 1400 1200 1000 1037 1005 1133 1130 1180 1220 1065 1190 985 815 800 650 600 400 200 0 2005 2008 2009 2010 2011 2012 Source: Airline Monitor Jul-07 Jan-08 2007 CRS Holding, Inc. All Rights Reserved. Slide 11

(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 $0 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 TTM 3/31/08 Power Generation Turbine Blades Disks Shafts 2007 CRS Holding, Inc. All Rights Reserved. Slide 13

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 718 2007 CRS Holding, Inc. All Rights Reserved. Slide 14

450 CRS Industrial Revenue ENGINEERED MATERIALS FOR INDUSTRIAL APPLICATIONS 400 350 300 250 200 Diverse Product Offering Specialty Alloys Stainless Steels Powder Metals Industrial market sales driven by demand for capital equipment 150 100 50 0 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 TTM 3/31/08 Capital equipment Electronics Chemical Petro-chemical Other 2007 CRS Holding, Inc. All Rights Reserved. Slide 17

CARPENTER S CAPABILITIES MATCH ATTRIBUTES OF NICHE BUSINESS High End Niche business 1. High quality and consistency 2. Flexibility to make variety of products, including shapes (hexagons etc), in small volumes 3. Cost 4. On time delivery Volume business Low End 1. Good enough quality 2. Cost 3. On time delivery Ferritic Austenitic Martensitic Precipitation Hardened 4. Narrow range of large volume products 2007 CRS Holding, Inc. All Rights Reserved. Slide 18

250 CRS Automotive Revenue ENGINEERED MATERIALS FOR AUTOMOTIVE APPLICATIONS 200 150 Engineered Materials and Components Stainless Steels Specialty Alloys Powder Metals 100 50 0 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 TTM 3/31/08 Focus on Higher Value Materials Fuel Injectors Engine Valves Sensors Safety Applications Materials for Changing Technologies Demand for Higher Performing Alloys Global Participation 2007 CRS Holding, Inc. All Rights Reserved. Slide 19

210 CRS Consumer Revenue ENGINEERED MATERIALS FOR CONSUMER APPLICATIONS 205 200 195 190 Engineered Materials and Components Specialty Alloys Stainless Steels Titanium 185 180 175 170 165 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 TTM 3/31/08 Broad Diversification Housing Electronics Fasteners Sports Other Focus on Higher Value Materials 2007 CRS Holding, Inc. All Rights Reserved. Slide 20

140 CRS Medical Revenue ENGINEERED MATERIALS FOR MEDICAL MARKET APPLICATIONS 120 100 80 60 40 20 0 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 TTM 3/31/08 Global Provider of Highly Specialized, High-Quality Materials Stainless Steels Specialty Alloys Titanium Powder Metals Exacting Standards for Use in Critical Applications Fracture and Spinal Fixation Hip and Knee Replacements Surgical Needles and Staples Vascular Devices 2007 CRS Holding, Inc. All Rights Reserved. Slide 21

MEDICAL MARKET APPLICATIONS FRACTURE FIXATION Carpenter Stainless Type 316/316L Ti 6AI-4V ELI BioDur 108 Alloy HIP AND KNEE REPLACEMENTS BioDur Carpenter CCM Alloy BioDur CCM Plus Alloy VASCULAR DEVICES (stents) Carpenter MP35N Alloy Carpenter L-605 Alloy ARTIFICIAL DISCS AND SPINAL FIXATION Micro-Melt BioDur Carpenter CCM Alloy BioDur CCM Plus Alloy SURGICAL NEEDLES AND STAPLES Custom 475 Stainless Carpenter Stainless Type 420 Ti 6AI-4V ELI DENTAL INSTRUMENTS AND IMPLANTS Carpenter Stainless Type 440A Custom 465 Stainless Ti 6AI-4V ELI Arterial Stent 2007 CRS Holding, Inc. All Rights Reserved. Slide 22

INTERNATIONAL SALES (TTM 3/31/08) Management s estimate (in millions) 55% $700 12% $600 8% $500 17% 8% $400 27% CAGR Asia Pacific Canada Mexico Europe Other $300 12% 10% $200 21% $100 36% 16% 5% Aerospace Automotive Consumer $0 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 TTM 3/31/08 Energy Industrial Medical 2007 CRS Holding, Inc. All Rights Reserved. Slide 24

STRATEGIC PRIORITIES GROWTH Market & Customer Focus Growth in Core Markets Aerospace 50% of Energy revenues Expected to grow 10%+ per year International Expansion China Middle East India Eastern Europe Latin America Acquisitions Close to Core Development of New Markets Defense ~ $100 million opportunity 2007 CRS Holding, Inc. All Rights Reserved. 2007 CRS Holding, Inc. All Rights Reserved. Slide 25

STRATEGIC PRIORITIES OPERATIONAL EXCELLENCE Lean Manufacturing Safety, Quality, Delivery, Cost TECHNOLOGY LEADERSHIP Innovate Product Development Process Improvement Collaborate Manufacturing Technology 2007 CRS Holding, Inc. All Rights Reserved. 2007 CRS Holding, Inc. All Rights Reserved. Slide 26

FY 2008 FINANCIAL HIGHLIGHTS $ millions FY 08 Q1 FY 08 Q2 FY 08 Q3 FY 08 YTD VOLUME (lbs., 000) % change from 2007 49,216-9% 49,996-9% 59,218-7% 158,430-8% SALES Excl. surcharge 451.2 313.8 446.4 317.8 509.8 355.7 1407.4 987.3 % change from 2007 4% -1% 0% 1% OPERATING INCOME % of sales excl. surcharge Adjusted % of sales excl. surcharge* 82.9 26.4% 23.6% 80.5 25.3% 22.8% 75.3 21.2% 23.1% 238.7 24.2% 23.1% DILUTED EPS from continuing operations $1.08 $1.17 $1.05 $3.32 % change from 2007 17% 36% -14% 11% *adjusted for lag effect on surcharge and year-to-year difference in LIFO inventory impacts 2007 CRS Holding, Inc. All Rights Reserved. Slide 28

IMPROVING OPERATING PERFORMANCE TTM EBITDA* as Percent of Sales excl. Surcharge Revenue 35 30 25 20 15 10 5 Beginning of U.S. manufacturing recession CRS announces major cost reduction initiatives 0 Q3 2001 Q4 2001 Q1 2002 Q2 2002 Q3 2002 Q4 2002 Q1 2003 Q2 2003 Q3 2003 Q4 2003 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 *Operating income + depreciation/amortization and excluding non-cash pension effects and restructuring charges 2007 CRS Holding, Inc. All Rights Reserved. Slide 29

CASH FLOW FROM OPERATIONS FREE CASH FLOW GENERATION (after capex, dividends and before purchase of marketable securities) $300 $250 $238 $275 $250 $200 $143 $150 $100 $50 $134 $92 $104 $80 $80 $88 $134 $238 $203 $202 $100 $0 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 $ Millions 2007 CRS Holding, Inc. All Rights Reserved. Slide 30

CAPITAL EXPENDITURE REQUIREMENTS (millions) $160 $153 $140 $125 $120 $100 $94 $100 $105 $80 $60 $49 $51 $47 $40 $20 $27 $9 $8 $14 $19 $0 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 est 2007 CRS Holding, Inc. All Rights Reserved. Slide 31

ENHANCING SHAREHOLDER VALUE CASH DEPLOYMENT CAPITAL INVESTMENTS $115 million premium melt capacity expansion $16 million upgrade to hot rolling facility ACQUISITION OPPORTUNITIES Active and disciplined approach SHARE BUYBACK Completed $250 million authorization Initiated follow-on $250 million program DIVIDEND Consistent payout Competitive yield 2007 CRS Holding, Inc. All Rights Reserved. Slide 32

Summary Leading position in attractive end markets and product niches Core metallurgical and processing expertise, and commitment to future R&D, to meet demand for higher performing materials Strong cash generation and balance sheet, with flexibility to fund growth initiatives Commitment to invest cash to deliver return to shareholders 2007 CRS Holding, Inc. All Rights Reserved. Slide 33

Davenport and Company. June 3, 2008