PHILADELPHIA - It was a solid second quarter and first half of fiscal 2018 for Carpenter Technology Corporation.
"We delivered a solid first half to fiscal year 2018, including driving consistent backlog growth, gaining market share through expanded and new customer relationships, and enhancing our manufacturing discipline through the Carpenter operating model," said Tony Thene, Carpenter's president and CEO. "Our specialty alloys operations segment recorded its best second quarter and best first half since fiscal year 2014, while results at our performance engineered products segment finished well ahead of our expectations. In addition, we submitted the majority of our aerospace vendor approved processes (VAP) qualifications for our Athens, Alabama, facility, representing a major milestone. We are now actively working with our major customers to secure necessary approvals.
"Conditions across our end-use markets continue to improve and we are generating increased customer demand for our solutions and growing our backlog. In the aerospace and defense end-use market, new engine platform demand is increasing and we are further benefiting from our strong position across a range of attractive sub-markets. In addition, demand for our solutions portfolio in the medical end-use market remains high while the recovery in the oil and gas sub-market is strengthening."
Net sales for the second quarter of fiscal year 2018 were $487.8 million, compared with $427.4 million in the second quarter of fiscal year 2017, an increase of 14.1 percent, on 13.1 percent higher volume. Net sales excluding surcharge were $415.5 million, an increase of $48.8 million from the same period a year ago. For the first six months of fiscal 2018, net sales were $967.5 million, compared with $816.3 million for the first six months of fiscal 2017.
Net income in fiscal second quarter 2018 was $92.1 million, compared to $7.0 million in the prior year second quarter. For the first six months of fiscal 2018, net income was $115.5 million, compared to $800,000 the previous year.
In December 2017, the Tax Act was enacted and the permanent reduction to the U.S. federal corporate income tax rate from 35 percent to 21 percent was effective January 1, 2018. Based on the provisions of the act, during the quarter ended December 31, 2017, Carpenter's estimated annual effective tax rate was adjusted to incorporate the lower federal tax rate that will be phased in for fiscal year 2018. During the quarter ended December 31, 2017, the company recorded a discrete income tax net benefit of $66.0 million. Provisional amounts related to the act include a $73.3 million income tax benefit to reflect the re-measurement of deferred tax assets and liabilities at the reduced federal tax rate and a $5.1 million income tax charge for the liability associated with the transition tax. Also included in the net discrete income tax benefit is a charge of $2.2 million related to increases in certain state valuation allowances resulting from a state law change that will limit the company's ability to utilize certain state net operating loss carry forwards in future periods.
"Moving forward, we will continue to strategically invest in our core long-term growth capabilities," Thene said. "In addition, given the recent tax legislation, we plan to accelerate our investment into key areas including additive manufacturing and soft magnetics, which is consistent with our commitment to being a leading solutions provider for our customers. By combining our solutions-focused commercial approach with high-end specialty alloys, we have a real opportunity to raise our performance for both customers and investors to sustain a healthy, dynamic and growing enterprise that will reward our shareholders for years to come."
Carpenter, founded in Berks County in 1889, is now headquartered in Philadelphia. Much of its manufacturing is done in Reading and Muhlenberg Township.
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