Sunil Widge Senior VP Strategic Business Development & Governmental Affairs Carpenter Technology Corporation Stainless and its Alloys Conference September 17, 2013
Cautionary Statement Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act. These statements, which represent the Company s expectations or beliefs concerning various future events, include statements concerning future revenues, projections, targets, synergies, strategy, earnings, and liquidity associated with continued growth in various market segments, cost reductions expected from various initiatives, our acquisitions and other events. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. Any of these risks could have adverse and/or fluctuating effects on the Company s results of operations. For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see the Company s SEC filings including its annual report on Form 10-K for the year ended June 30, 2013 and the exhibits attached to that filing. All subsequent forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. The Company is not under any obligation to, and expressly disclaims any obligation to, update or alter any forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise. Non-GAAP Financial Measures Some of the information included in this presentation is derived from Carpenter s consolidated financial information but is not presented in Carpenter s financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered non-gaap financial measures under SEC rules. These non-gaap financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Reconciliations to the most directly comparable GAAP financial measures and management s rationale for the use of the non-gaap financial measures can be found in the Appendix to this presentation. 2
Who is Carpenter? Established: 1889 Headquarters: Wyomissing, PA Number of Employees: 4,804 Annual Sales: $2.3 billion Net Income: $146 million Total Assets: $2.88 billion Market Capitalization: ~$2.9 billion Bar Turning Circa 1920 3
SAO/PEP Model CONFIDENTIAL 4
Growing Infrastructure to Meet Customer Needs CANADA US UK BELGIUM SWEDEN CHINA KOREA Headquarters Int l Sales Distribution/Warehousing Manufacturing MEXICO GERMANY INDIA Joint Venture SINGAPORE TAIWAN CONFIDENTIAL 5
Our Values Drive world-class innovation for diverse applications Positive force in our communities Enable customer success in demanding applications Dedication, pride in craftsmanship, quality and service shine through in all we do Loyalty, integrity, respect, dignity, work ethic and professionalism guide our actions CONFIDENTIAL 6
Carpenter s Focus Area Global Steel Production (volume) Specialty Steel Market 100% 90% 80% 70% Specialty Steel Market 9% Ni 0.2% Special Alloy <2% Stainless Long 4% Bearing 5% Carpenter focus <1% of total steel market 60% 50% 40% 30% 20% 10% Carbon Steel 91% Stainless Flat 20% Other Alloy Steels 69% 0% We target the high end of the specialty steel market. CONFIDENTIAL 7
Our Aspiration CONFIDENTIAL 8
Aerospace, Energy and Medical is 67% of Total Net Sales End Market Net Sales FY 2013 Net Sales Mix 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Distribution Industrial & Consumer Transportation Medical Energy Aerospace & Defense Industrial & Consumer 21% Transportation 6% Medical 5% Distribution 6% Energy 15% Aerospace & Defense 47% 0% FY 2006 FY 2013 9
Record Adjusted EBITDA in a Challenging Environment $Millions Adjusted EBITDA* $500 $400 Prior Peak of $364 $406 $364 $300 $336 $200 $224 $100 $137 $132 $0 FY08 FY09 FY10 FY11 FY12 FY13 * Non-GAAP measure. See appendix for details of calculation. 10
Aerospace is Our Largest End Market STRUCTURAL/ OTHER COMPONENTS Slat tracks/flap tracks Actuators Landing gear Wing bolts Avionics Growth Focus FASTENERS Titanium Ni based superalloy Stainless Market Segment Leader ENGINE COMPONENTS Seamless rings Rotating disks Gears Shafts Bearings 11
Aerospace Market Drivers Point to Significant Growth Revenue Passenger Miles % Wide Body Builds 6,000 40 Billions 5,000 4,000 CAGR 6% 35 30 25 2013 2014 2015 2016 2017 2018 2019 2020 Source: June 2013 Airline Monitor 2012 2013 2014 2015 2016 2017 2018 Source: June 2013 Airline Monitor and CRS Market Analysis 2,000 1,750 1,500 1,250 Commercial Delivery Forecast 1,000 2012 2013 2014 2015 2016 2017 2018 Source: June 2013 Airline Monitor CAGR 6% Relative Material Content Index* 5 1 Narrow Body 737 A320 Source: AeroStrategy and CRS Market Analysis A-380 747-8 A350 787 Wide Body * Material Index = Number of 737 aircraft that would be built with the equivalent amount of material (engine billet, Ni and Ti fasteners, airframe SS) used in the other aircraft 12
Energy is Our Fastest Growing End Market Strong Historical Growth North American Oil & Gas Exploration Amega West and Latrobe acquisitions Share gain in completions Carpenter Energy Net Sales (millions) $195 $287 $337 Areas of Future Growth Oil & Gas Increased N. American drilling activity Continued growth in completions Amega West portfolio diversification Increased international drilling, CRS footprint Increased offshore exploration Power Generation Shift toward gas and industrial gas turbines Higher operating temperature for coalfired plants, steam turbines $80 FY10 FY11 FY12 FY13 13
Medical is Our Most Challenging End Market FRACTURE FIXATION Carpenter Stainless Type 316/316L Ti 6AI-4V ELI BioDur 108 Alloy ARTIFICIAL DISCS & SPINAL FIXATION Micro-Melt BioDur Carpenter CCM Alloy BioDur CCM Plus Alloy Ti 6Al-4V ELI Ti 6Al-7Nb CP Titanium HIP & KNEE REPLACEMENTS BioDur Carpenter CCM Alloy BioDur CCM Plus Alloy VASCULAR DEVICES (Stents) Carpenter MP35N Alloy Carpenter L-605 Alloy Arterial Stent SURGICAL NEEDLES & STAPLES Custom 475 Stainless Carpenter Stainless Type 420 Ti 6AI-4V ELI CP Titanium DENTAL INSTRUMENTS & IMPLANTS Carpenter Stainless Type 440A Custom 465 Stainless Ti 6AI-4V ELI 14
Continuous Investment in Plant & Equipment 2011-2014 $518 million Athens Operations 1997-2000 $101 million VIM 20MT 7 VARs Heating Furnaces ESR Electrode Cutting and Grinding Cell 4500T Press 2008-2011 $115 million Reading Expansion VIM 20MT 6 VARs 2 ESRs Heating and Annealing Furnaces IT/Manufacturing Execution System Upgrades 2012 $558 million Latrobe Acquisition $42 million Reading Expansion 2 ESRs Forge Finish Expansion Immersion Expansion 2013 $27 million Latrobe Expansion 3 VARs Alabama Greenfield Site >27K Tons Initial Premium Production >50K Tons Forge Capacity Carpenter has invested $1.25 billion in last 5 years to double its premium capacity. CONFIDENTIAL 15
Athens is the Game Changer $500M facility to be operational by April 2014 Significantly reduced lead times for products sold into the aerospace, energy and other key markets First four VAR furnaces and the main frame of the radial press installed Lean flow and state-of-the-art equipment to result in low cost production 27k ton annual capacity capability 16
Hydraulic Radial Press Frame at Athens Facility CONFIDENTIAL 17
Wrought Alloys TEMPER TOUGH TM High strength; ductility CUSTOM 465 High strength; corrosion resistance TRINAMET 300 High strength, fatigue resistance, corrosion resistance CUSTOM 565 TM Ultra high strength; corrosion resistance PREMOMET High strength; fatigue resistance CONFIDENTIAL 18
Powder Alloys MICRO-MELT NCORR 44 Corrosion & stress; Corrosion cracking resistance MICRO-MELT LEAN DUPLEX Modified chemistry enables thick cross section net shape parts MICRO-MELT DUOSORB TM & NEUTROSORB Alloys Neutron absorption CONFIDENTIAL 22
Carpenter s Strategic Positioning Super Critical Markets Demanding Applications Technology Emphasis We are a rapidly growing, highly profitable specialty materials company with a strong presence in the Aerospace and Energy markets. CONFIDENTIAL 20
Appendix of Non-GAAP Schedules 21
Adjusted EBITDA ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (ADJUSTED EBITDA) Fiscal Year ($ in millions) 2008 2009 2010 2011 2012 2013 Income from continuing operations $ 200.5 $ 47.9 $ 2.1 $ 71.7 $ 121.6 $ 146.5 Interest expense 20.5 16.1 17.8 17.1 23.8 21.0 Income tax expense 96.8 15.1 2.6 16.1 67.0 70.3 Depreciation and amortization 49.2 52.7 59.1 66.5 83.8 104.1 Other income, net (24.2) (15.1) (10.8) (8.5) (2.3) (5.1) EBITDA 342.8 116.7 70.8 162.9 293.9 336.8 Net pension expense (0.1) 20.6 61.3 60.8 42.1 68.8 Boarhead farms litigation reserve adjustment 21.0 - - - - - Adjusted EBITDA $ 363.7 $ 137.3 $ 132.1 $ 223.7 $ 336.0 $ 405.6 Management believes that adjusted EBITDA is helpful in analyzing the operating performance. Our definitions and calculations of these items may not necessarily be the same as those used by other companies. EBITDA is not a measure of liquidity or profitability and should not be considered as an alternative to net income, operating income, net cash provided by operating activities or any other measure determined in accordance with US GAAP. 22