Carpenter Technology Corp 10-Q for FY2026 Q3
Carpenter Technology Corp (CRS)
10-Q
2026-04-29
For: 2026-03-31
View Original
Added on
April 29, 2026
About this 10-Q
Carpenter Technology Corp filed this 10-Q on April 29, 2026, covering the quarter ended March 31, 2026 (FY2026 Q3).
Headline figures
Quarter ended March 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $811.5M
- up 11.6% from $727M a year earlier
- Net income
- $139.6M
- up 46.3% from net income of $95.4M a year earlier
- Diluted EPS
- $2.77
- up 47.3% from $1.88 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended March 31, 2026
or
For the transition period from to
Commission File Number 1-5828
(Exact name of Registrant as specified in its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | (Do not check if a smaller reporting company) | Smaller reporting company | |||||||||||
| Emerging growth company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the issuer's common stock as of April 27, 2026, was 49,685,612 .
CARPENTER TECHNOLOGY CORPORATION
FORM 10-Q
INDEX
| Page | |||||||||||
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (in millions, except share data) | March 31, 2026 | June 30, 2025 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable, net | ||||||||||||||
| Inventories | ||||||||||||||
| Other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Property, plant, equipment and software, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Other intangibles, net | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt | ||||||||||||||
| Accrued pension liabilities | ||||||||||||||
| Accrued postretirement benefits | ||||||||||||||
| Deferred income taxes | ||||||||||||||
| Other liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Contingencies and commitments (see Note 10) | ||||||||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||||
Common stock — authorized | ||||||||||||||
| Capital in excess of par value | ||||||||||||||
| Reinvested earnings | ||||||||||||||
Common stock in treasury ( | ( | ( | ||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total stockholders' equity | ||||||||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
2
CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| (in millions, except per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||||||||||||||
| Restructuring and asset impairment charges | ||||||||||||||||||||||||||
| Operating income | ||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||
| Debt extinguishment losses | ||||||||||||||||||||||||||
| Other expense (income), net | ( | |||||||||||||||||||||||||
| Income before income taxes | ||||||||||||||||||||||||||
| Income tax expense | ||||||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| EARNINGS PER COMMON SHARE: | ||||||||||||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
3
CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||||
Net (loss) gain on derivative instruments, net of tax of $ | ( | |||||||||||||||||||||||||
Pension and postretirement benefits, net of tax of $( | ||||||||||||||||||||||||||
| Foreign currency translation | ( | ( | ( | |||||||||||||||||||||||
| Total other comprehensive (loss) income, net of tax | ( | |||||||||||||||||||||||||
| Comprehensive income, net of tax | $ | $ | $ | $ | ||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
4
CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended March 31, | ||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| OPERATING ACTIVITIES | ||||||||||||||
| Net income | $ | $ | ||||||||||||
| Adjustments to reconcile net income to net cash provided from operating activities: | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Noncash restructuring and asset impairment charges | ||||||||||||||
| Debt extinguishment losses | ||||||||||||||
| Deferred income taxes | ( | |||||||||||||
| Net pension expense | ||||||||||||||
| Share-based compensation expense | ||||||||||||||
| Net loss on disposals of property, plant and equipment | ||||||||||||||
| Changes in working capital and other: | ||||||||||||||
| Accounts receivable | ( | ( | ||||||||||||
| Inventories | ( | ( | ||||||||||||
| Other current assets | ||||||||||||||
| Accounts payable | ( | |||||||||||||
| Accrued liabilities | ( | ( | ||||||||||||
| Pension plan contributions | ( | ( | ||||||||||||
| Other postretirement plan contributions | ( | ( | ||||||||||||
| Other, net | ( | ( | ||||||||||||
| Net cash provided from operating activities | ||||||||||||||
| INVESTING ACTIVITIES | ||||||||||||||
| Purchases of property, plant, equipment and software | ( | ( | ||||||||||||
| Proceeds from disposals of property, plant and equipment | ||||||||||||||
| Net cash used for investing activities | ( | ( | ||||||||||||
| FINANCING ACTIVITIES | ||||||||||||||
| Proceeds from issuance of long-term debt, net of offering costs | ||||||||||||||
| Payments on long-term debt | ( | |||||||||||||
| Payments for debt extinguishment costs | ( | |||||||||||||
| Payments for debt issue costs | ( | |||||||||||||
| Dividends paid | ( | ( | ||||||||||||
| Purchases of treasury stock | ( | ( | ||||||||||||
| Proceeds from stock options exercised | ||||||||||||||
| Withholding tax payments on share-based compensation awards | ( | ( | ||||||||||||
| Net cash used for financing activities | ( | ( | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | |||||||||||||
| DECREASE IN CASH AND CASH EQUIVALENTS | ( | ( | ||||||||||||
| Cash and cash equivalents at beginning of year | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||||||||
| Noncash investing activities: Purchase of property, plant, equipment and software | $ | $ | ||||||||||||
See accompanying notes to consolidated financial statements.
5
CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025
(Unaudited)
| Common Stock | Reinvested Earnings | Common Stock in Treasury | Accumulated Other Comprehensive (Loss) Income | Total Equity | ||||||||||||||||||||||||||||||||||
| ($ in millions, except per share data) | Par Value of $ | Capital in Excess of Par Value | ||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||
| Net loss on derivative instruments, net of tax | ( | ( | ||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefits, net of tax | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | ( | ( | ||||||||||||||||||||||||||||||||||||
| Cash dividends: | ||||||||||||||||||||||||||||||||||||||
Common @ $ | ( | ( | ||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | ||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | ( | |||||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Common Stock | Reinvested Earnings | Common Stock in Treasury | Accumulated Other Comprehensive (Loss) Income | Total Equity | ||||||||||||||||||||||||||||||||||
| ($ in millions, except per share data) | Par Value of $ | Capital in Excess of Par Value | ||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||
| Net gain on derivative instruments, net of tax | ||||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefits, net of tax | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | ||||||||||||||||||||||||||||||||||||||
| Cash dividends: | ||||||||||||||||||||||||||||||||||||||
Common @ $ | ( | ( | ||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | ||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | ||||||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
6
CARPENTER TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2026 AND 2025
(Unaudited)
| Common Stock | Reinvested Earnings | Common Stock in Treasury | Accumulated Other Comprehensive (Loss) Income | Total Equity | ||||||||||||||||||||||||||||||||||
| ($ in millions, except per share data) | Par Value of $ | Capital in Excess of Par Value | ||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||
| Net gain on derivative instruments, net of tax | ||||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefits, net of tax | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | ( | ( | ||||||||||||||||||||||||||||||||||||
| Cash dividends: | ||||||||||||||||||||||||||||||||||||||
Common @ $ | ( | ( | ||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | ||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2026 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Common Stock | Reinvested Earnings | Common Stock in Treasury | Accumulated Other Comprehensive (Loss) Income | Total Equity | ||||||||||||||||||||||||||||||||||
| ($ in millions, except per share data) | Par Value of $ | Capital in Excess of Par Value | ||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||||
| Net gain on derivative instruments, net of tax | ||||||||||||||||||||||||||||||||||||||
| Pension and postretirement benefits, net of tax | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | ( | ( | ||||||||||||||||||||||||||||||||||||
| Cash dividends: | ||||||||||||||||||||||||||||||||||||||
Common @ $ | ( | ( | ||||||||||||||||||||||||||||||||||||
| Purchase of treasury stock | ( | ( | ||||||||||||||||||||||||||||||||||||
| Share-based compensation plans | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Stock options exercised | ( | ( | ||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
7
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal and recurring adjustments, considered necessary for a fair statement of the results are reflected in the interim periods presented. The June 30, 2025, consolidated balance sheet data was derived from audited financial statements but does not include all of the disclosures required by U.S. GAAP. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in Carpenter Technology's Annual Report on Form 10-K for the fiscal year ended June 30, 2025 (the "2025 Form 10-K"). Operating results for the three and nine months ended March 31, 2026, are not necessarily indicative of the operating results for any future period.
As used throughout this report, unless the context requires otherwise, the terms "Carpenter," "Carpenter Technology," the "Company," "Registrant," "Issuer," "we" and "our" refer to Carpenter Technology Corporation.
2. Restructuring and Asset Impairment Charges
There were no restructuring and asset impairment charges for the three and nine months ended March 31, 2026, compared to $0.0 million and $3.6 million for the three and nine months ended March 31, 2025, respectively.
During the nine months ended March 31, 2025, the Company recorded restructuring and asset impairment charges of $3.6 million. This included $2.5 million of noncash pre-tax inventory impairment charges and $1.1 million of costs related to the decommissioning of property, plant and equipment. These costs were a result of actions taken to streamline operations in the Carpenter Additive business, as announced during the quarter ended June 30, 2024.
The reserve balances and activity for restructuring charges at March 31, 2026 and June 30, 2025 were as follows:
| ($ in millions) | March 31, 2026 | June 30, 2025 | ||||||||||||
| Reserve balance at beginning of fiscal year | $ | $ | ||||||||||||
| Restructuring charges excluding noncash impairments | ||||||||||||||
| Cash payments | ( | |||||||||||||
| Reserve balance at end of period | $ | $ | ||||||||||||
8
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. Recent Accounting Pronouncements
Recently Issued Accounting Pronouncements - Pending Adoption
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The guidance in this ASU enhances the transparency and decision functionality of income tax disclosures to provide investors information to better assess how an entity's operations and related tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flow. The amendments in this ASU require public entities to disclose the following specific categories in the rate reconciliation by both percentages and reporting currency amounts: the effect of state and local income tax, net of federal (national) income tax, foreign tax effects, effects of changes in tax laws or rates enacted in the current period, effects of cross-border tax laws, tax credits, changes in valuation allowances, nontaxable or nondeductible items and changes in unrecognized tax benefits. The amendments in ASU 2023-09 also require public entities to provide additional information for reconciling items that meet the qualitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pre-tax income (loss) by the applicable statutory income tax rate). The ASU requires reporting entities to annually disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign localities. The amendments in this ASU should be applied on a prospective basis and retrospective application is permitted. For public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption was permitted for annual financial statements not yet issued. ASU 2023-09 is a requirement for additional disclosure and is not expected to materially impact the consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance in this ASU improves the disclosures about a public business entity's expenses by requiring more detailed information about the types of expenses included within the income statement expense captions, such as: inventory purchases, employee compensation, depreciation and intangible asset amortization. This ASU does not change or remove current expense disclosure requirements, however, it does affect where this information appears in the notes to financial statements, as entities are required to include certain current disclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. ASU 2024-03 is a requirement for additional disclosure and is not expected to materially impact the consolidated financial statements. Additionally, in January 2025 the FASB issued ASU 2025-01 Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, which clarifies the effective date for non-calendar year-end entities.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amendments in this update make targeted improvements to increase the operability of the recognition guidance considering different methods of software development. The ASU is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company is currently evaluating the potential impact of the adoption of ASU 2025-06 on its consolidated financial statements and related disclosures.
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815) Hedge Accounting Improvements. The update provides targeted improvements intended to enhance the application of hedge accounting, including expanded eligibility of forecasted transactions, additional flexibility in measuring hedge effectiveness and clarifications related to hedging non-financial items. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of ASU 2025-09 on its consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-12 Codification Improvements to address suggestions received from stakeholders on the Accounting Standards Codification and to make other incremental improvements to U.S. GAAP. The update represents changes to the Codification that (1) clarify, (2) correct errors or (3) make minor improvements. The amendments make the Codification easier to understand and apply. The guidance is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. ASU 2025-12 is an update to correct, clarify and otherwise improve U.S. GAAP and is not expected to materially impact the consolidated financial statements and related disclosures.
9
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Recently Issued Accounting Pronouncements - Adopted
4. Revenue
The Company recognizes revenue in accordance with Topic 606, Revenue from Contracts. The Company applies the five-step model in the FASB's guidance, which requires the Company to: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies a performance obligation.
The Company recognizes revenue when performance obligations under the terms of a customer purchase order or contract are satisfied. This occurs when control of the goods and services has transferred to the customer, which is generally determined when title, ownership and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product or the service is performed. Consignment transactions are arrangements where the Company transfers product to a customer location but retains ownership and control of such product until it is used by the customer. Revenue for consignment arrangements is recognized upon usage by the customer. Service revenue is recognized as the services are performed.
The customer purchase order or contract for goods transferred has a single performance obligation for which revenue is recognized at a point in time. The standard terms and conditions of a customer purchase order include general rights of return and product warranty provisions related to nonconforming product. Depending on the circumstances, the product is either replaced or a quality adjustment is issued. Such warranties do not represent a separate performance obligation.
Each customer purchase order or contract sets forth the transaction price for the products and services purchased under that arrangement. Some customer arrangements include variable consideration, such as volume rebates, which generally depend upon the Company's customers meeting specified performance criteria, such as a purchasing level over a period of time. The Company exercises judgment to estimate the most likely amount of variable consideration at each reporting date.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for its product. The normal payment terms are 30 days. The Company has elected to use the practical expedient that permits the Company to not adjust for the effects of a significant financing component if it expects that at the contract inception, the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Amounts billed to customers for shipping and handling activities to fulfill the Company's promise to transfer the goods are included in revenues and costs incurred by the Company for the delivery of goods are classified as cost of sales in the consolidated statements of operations. Shipping terms may vary for products shipped outside the United States depending on the mode of transportation, the country where the material is shipped and any agreements made with the customers.
10
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contract liabilities are recognized when the Company has received consideration from a customer to transfer goods or services at a future point in time when the Company performs under the purchase order or contract. Contract liabilities were $6.0 million and $5.2 million at March 31, 2026 and June 30, 2025, respectively, and are included in accrued liabilities on the consolidated balance sheets. Revenue recognized for the three and nine months ended March 31, 2026 and 2025 from amounts included in contract liabilities at the beginning of the period was not significant and substantially all of our contract liabilities are recognized within a twelve-month period.
The Company elected the practical expedient that permits the omission of disclosure for remaining performance obligations which are expected to be satisfied in one year or less.
Disaggregation of Revenue
The Company operates in two business segments, Specialty Alloys Operations ("SAO") and Performance Engineered Products ("PEP"). Revenue is disaggregated within these two business segments by diversified end-use markets and by geographical locations based on the location of the customer.
Comparative information of the Company's overall revenue by end-use markets for the three and nine months ended March 31, 2026 and 2025 was as follows:
| End-Use Market | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||||||||||||||||||||||
| Aerospace and Defense | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Medical | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Transportation | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Industrial and Consumer | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| End-Use Market | Nine Months Ended March 31, 2026 | Nine Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||||||||||||||||||||||
| Aerospace and Defense | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Medical | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Energy | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Transportation | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Industrial and Consumer | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
11
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Comparative information of the Company's overall revenue by geographic locations for the three and nine months ended March 31, 2026 and 2025 was as follows:
| Geographic Location | Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Europe | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Asia Pacific | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Mexico | ( | |||||||||||||||||||||||||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Geographic Location | Nine Months Ended March 31, 2026 | Nine Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Intersegment | Total | SAO | PEP | Intersegment | Total | ||||||||||||||||||||||||||||||||||||||||||
| United States | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
| Europe | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Asia Pacific | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Mexico | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Canada | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Other | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Total net sales | $ | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||||
12
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Earnings per Common Share
The calculations of basic and diluted earnings per common share for the three and nine months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| (in millions, except per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Dividends allocated to participating securities | ( | ( | ( | |||||||||||||||||||||||
| Earnings available for common stockholders used in calculation of basic earnings per common share | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average number of common shares outstanding, basic | ||||||||||||||||||||||||||
| Basic earnings per common share | $ | $ | $ | $ | ||||||||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||||||||||||
| Dividends allocated to participating securities | ( | ( | ( | |||||||||||||||||||||||
| Earnings available for common stockholders used in calculation of diluted earnings per common share | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average number of common shares outstanding, basic | ||||||||||||||||||||||||||
| Effect of shares issuable under share-based compensation plans | ||||||||||||||||||||||||||
| Weighted average number of common shares outstanding, diluted | ||||||||||||||||||||||||||
| Diluted earnings per common share | $ | $ | $ | $ | ||||||||||||||||||||||
13
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. Inventories
Inventories consisted of the following components as of March 31, 2026 and June 30, 2025:
| ($ in millions) | March 31, 2026 | June 30, 2025 | ||||||||||||
| Raw materials and supplies | $ | $ | ||||||||||||
| Work in process | ||||||||||||||
| Finished and purchased products | ||||||||||||||
| Total inventories | $ | $ | ||||||||||||
7. Accrued Liabilities
Accrued liabilities consisted of the following as of March 31, 2026 and June 30, 2025:
| ($ in millions) | March 31, 2026 | June 30, 2025 | ||||||||||||
| Accrued compensation and benefits | $ | $ | ||||||||||||
| Accrued postretirement benefits | ||||||||||||||
| Current portion of lease liabilities | ||||||||||||||
| Contract liabilities | ||||||||||||||
| Accrued taxes | ||||||||||||||
| Accrued interest expense | ||||||||||||||
| Accrued pension liabilities | ||||||||||||||
| Accrued income taxes | ||||||||||||||
| Derivative financial instruments | ||||||||||||||
| Other | ||||||||||||||
| Total accrued liabilities | $ | $ | ||||||||||||
14
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. Pension and Other Postretirement Benefits
The components of the net periodic pension expense (income) related to the Company's pension and other postretirement benefits for the three and nine months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| ($ in millions) | Pension Plans | Other Postretirement Plans | ||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ||||||||||||||||||||||
| Amortization of net loss (gain) | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service cost | ||||||||||||||||||||||||||
| Net pension expense (income) | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||
| Nine Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| ($ in millions) | Pension Plans | Other Postretirement Plans | ||||||||||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest cost | ||||||||||||||||||||||||||
| Expected return on plan assets | ( | ( | ( | ( | ||||||||||||||||||||||
| Amortization of net loss (gain) | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service cost | ||||||||||||||||||||||||||
| Net pension expense (income) | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||
During the nine months ended March 31, 2026 and 2025, the Company made $17.1 million and $58.5 million, respectively, of cash contributions to its qualified defined benefit pension plans. The Company currently expects to make $6.4 million of required cash pension contributions to its domestic qualified defined benefit pension plans during the remainder of fiscal year 2026.
9. Debt
On November 20, 2025, the Company completed its offering and sale of $700.0 million in aggregate principal amount of 5.625 % Senior Notes due 2034 (the "2034 Notes"). The 2034 Notes accrue interest at the rate of 5.625 % per annum, with interest payable in cash semi-annually in arrears on March 1 and September 1, commencing March 1, 2026. The 2034 Notes will mature on March 1, 2034. The 2034 Notes are senior indebtedness of the Company, ranking equally in right of payment with all its existing and future senior indebtedness and senior to any future subordinated indebtedness. The Company used the net proceeds from the issuance of the 2034 Notes to repay, in November 2025, $400.0 million and $300.0 million in aggregate principal amount of its senior unsecured Notes due July 2028 and March 2030, respectively, including any interest and premium due thereon, thereby redeeming such notes in full.
On November 20, 2025, the Company entered into a Third Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer and the other lenders, agents and arrangers party thereto (the "Credit Facility"). The Credit Facility amended and restated the Company's then existing Second Amended and Restated Credit Agreement dated as of April 14, 2023, which had been set to expire on April 12, 2028. The Third Amendment extends the maturity to November 20, 2030.
15
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Credit Facility is an unsecured revolving credit facility with a commitment of $500.0 million subject to the right, from time to time, to request an increase of the commitment not in excess of $650.0 million and provides for the issuance of letters of credit subject to a $40.0 million sub-limit. The Company has the right to voluntarily prepay and re-borrow loans, to terminate or reduce the commitments under the Credit Facility, and, subject to certain lender approvals, to join subsidiaries as subsidiary borrowers. As of March 31, 2026, the Company had $1.0 million of issued letters of credit under the Credit Facility and no short-term borrowings. The balance of $499.0 million remains available to the Company.
Interest on the borrowings under the Credit Facility accrues at variable rates which are determined based upon the Company's consolidated total leverage ratio. The applicable margin to be added to Alternative Currency Daily Rate, Alternative Currency Term Rate and Term SOFR determined loans ranges from 1.375 % to 2.150 % (1.625 % as of March 31, 2026), and for Base Rate-determined loans, from 0.500 % to 1.250 % (0.750 % as of March 31, 2026). The Company also pays a quarterly commitment fee ranging from 0.200 % to 0.300 % (0.225 % as of March 31, 2026), determined based upon the consolidated total leverage ratio, of the unused portion of the commitment under the Credit Facility. In addition, the Company must pay certain letter of credit fees, ranging from 1.375 % to 2.150 % (1.625 % as of March 31, 2026), with respect to letters of credit issued under the Credit Facility. As of March 31, 2026, the borrowing rate for the Credit Facility was 5.390 %, however, the Company had no short-term borrowings.
The Company is subject to certain financial and restrictive covenants under the Credit Facility, which requires the maintenance of a minimum interest coverage ratio of 3.00 to 1.00 and a consolidated net leverage ratio of no more than 3.50 to 1.00. The restrictions of these covenants (other than the financial ratio covenants) are subject to certain exceptions or threshold triggering amounts or events specified in the Credit Facility, and in some cases the restrictions may be waived by the lenders. As of March 31, 2026, the Company was in compliance with all of the covenants of the Credit Facility.
Long-term debt outstanding as of March 31, 2026 and June 30, 2025 consisted of the following:
| ($ in millions) | March 31, 2026 | June 30, 2025 | ||||||||||||||||||||||||
Senior unsecured notes, | $ | $ | ||||||||||||||||||||||||
Senior unsecured notes, | ||||||||||||||||||||||||||
Senior unsecured notes, | ||||||||||||||||||||||||||
| Total debt | ||||||||||||||||||||||||||
| Less: amounts due within one year | ||||||||||||||||||||||||||
| Long-term debt, net of current portion | $ | $ | ||||||||||||||||||||||||
For the three months ended March 31, 2026 and 2025, interest costs totaled $10.6 million and $12.7 million, respectively, of which $1.9 million and $0.7 million, respectively, were capitalized as part of the cost of property, plant, equipment and software. For the nine months ended March 31, 2026 and 2025, interest costs totaled $35.0 million and $38.2 million, respectively, of which $4.7 million and $1.6 million, respectively, were capitalized as part of the cost of property, plant, equipment and software.
There were no 15.6 million related to the prepayment, in full, of the senior unsecured Notes due July 2028 and March 2030. This consisted of $11.4 million of debt prepayment costs and $4.2 million of accelerated issue costs. There were no debt extinguishment losses for the nine months ended March 31, 2025.
16
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. Contingencies and Commitments
Environmental
During the nine months ended March 31, 2026, the Company increased the liability for environmental remediation costs by $0.1 million. The liabilities recorded for environmental remediation costs at Superfund sites, other third party-owned sites and Carpenter-owned current or former operating facilities remaining at March 31, 2026 and June 30, 2025 were $17.5 million and $17.4 million, respectively. Additionally, the Company has been notified that it may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against the Company. Neither the exact amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites have been determined. Accordingly, at this time the Company cannot reasonably estimate expected costs for such matters. The liability for future environmental remediation costs that can be reasonably estimated is evaluated by management on a quarterly basis. The Company accrues amounts for environmental remediation costs that represent management's best estimate of the probable and reasonably estimable future costs related to environmental remediation.
Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on the Company's financial position, results of operations or cash flows over the long-term. However, such costs could be material to the Company's financial position, results of operations or cash flows in a particular future quarter or year.
Other
The Company is defending various routine claims and legal actions that are incidental to its business and common to its operations, including those pertaining to product claims, commercial disputes, patent infringement, employment actions, employee benefits, compliance with domestic and foreign laws and regulations, personal injury claims and tax issues. Like many other manufacturing companies in recent years, the Company, from time to time, has been named as a defendant in lawsuits alleging personal injury as a result of exposure to chemicals and substances in the workplace such as asbestos. The Company provides for costs relating to these matters when a loss is probable and the amount of the loss is reasonably estimable. The effect of the outcome of these matters on the Company's future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, management believes that the total liability from these matters will not have a material effect on the Company's financial position, results of operations or cash flows over the long-term. However, there can be no assurance that an increase in the scope of pending matters or that any future lawsuits, claims, proceedings or investigations will not be material to the Company's financial position, results of operations or cash flows in a particular future quarter or year.
17
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. Share Repurchase Program
In July 2024, the Company's Board of Directors authorized a share repurchase program. The program authorizes the purchase of up to $400.0 million of the Company's outstanding common stock. The shares may be repurchased in the open market or in privately negotiated transactions. Under the terms of the share repurchase program, the Company may repurchase shares from time to time, in amounts, at prices, and at such times as the Company deems appropriate, subject to market conditions, legal requirements and other considerations. There is no stated expiration for the share repurchase program. The Company is not obligated to repurchase any specific number of shares or to do so at any particular time, and the share repurchase program may be suspended, modified or terminated at any time without prior notice. During the nine months ended March 31, 2026, the Company purchased 445,000 shares of its common stock on the open market for an aggregate of $133.9 million. The fiscal year 2025 purchases totaled $101.9 million. As of March 31, 2026, $164.2 million remained available for future purchases.
12. Fair Value Measurements
The fair value hierarchy has three levels based on the inputs used to determine fair value. Level 1 refers to quoted prices in active markets for identical assets or liabilities. Level 2 refers to observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or trade infrequently; or other inputs that are observable or can be corroborated by observable market data. Level 3 refers to unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. Currently, the Company does not use Level 1 and 3 inputs.
The following tables present the Company's assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
| March 31, 2026 | Fair Value Measurements Using Input Type | |||||||
| ($ in millions) | Level 2 | |||||||
| Assets: | ||||||||
| Derivative financial instruments | $ | |||||||
| Liabilities: | ||||||||
| Derivative financial instruments | $ | |||||||
| June 30, 2025 | Fair Value Measurements Using Input Type | |||||||
| ($ in millions) | Level 2 | |||||||
| Assets: | ||||||||
| Derivative financial instruments | $ | |||||||
| Liabilities: | ||||||||
| Derivative financial instruments | $ | |||||||
The Company's derivative financial instruments have historically consisted of commodity forward contracts and foreign currency forward contracts. These instruments are measured at fair value using the market method valuation technique. The inputs to this technique utilize information related to commodity prices and foreign exchange rates published by third party leading financial news and data providers. This is observable data; however, the valuation of these instruments is not based on actual transactions for the same instruments and, as such, they are classified as Level 2. The Company's use of derivatives and hedging policies are more fully discussed in Note 13. Derivatives and Hedging Activities.
The Company has currently chosen not to elect the fair value option for any items that are not already required to be measured at fair value in accordance with U.S. GAAP.
18
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The carrying amounts of other financial instruments not listed in the table below approximate fair value due to the short-term nature of these items. The carrying amounts and estimated fair values of the Company's financial instruments not recorded at fair value in the financial statements were as follows:
| March 31, 2026 | June 30, 2025 | |||||||||||||||||||||||||
| ($ in millions) | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||
| Long-term debt | $ | $ | $ | $ | ||||||||||||||||||||||
| Company-owned life insurance | $ | $ | $ | $ | ||||||||||||||||||||||
The fair values of long-term debt as of March 31, 2026 and June 30, 2025 were determined by using current quoted prices for the Company's existing debt arrangements that are traded infrequently and accordingly would be classified as Level 2 inputs in the fair value hierarchy.
The carrying amount of Company-owned life insurance as of March 31, 2026 and June 30, 2025 reflects cash surrender values based upon the market values of underlying securities, using Level 2 inputs, net of any outstanding policy loans. The carrying value associated with the cash surrender value of these policies is recorded in other assets in the accompanying consolidated balance sheets.
13. Derivatives and Hedging Activities
The Company, from time to time, uses commodity forwards and foreign currency forwards to manage risks generally associated with commodity price and foreign currency rate fluctuations. The following explains the various types of derivatives utilized during the three and nine months ended March 31, 2026 and 2025, and includes a summary of the impact the derivative instruments had on the Company's financial position, results of operations and cash flows.
Cash Flow Hedging — Foreign currency forward contracts: The Company, from time to time, uses foreign currency forward contracts to hedge a portion of anticipated future purchase commitments for property, plant and equipment denominated in foreign currencies, principally the Euro, in order to offset the effect of changes in exchange rates. The qualifying hedge contracts are marked-to-market at each reporting date and any unrealized gains or losses are included in AOCI and reclassified to the cost of property, plant and equipment in the period during which the purchase transaction is completed or expensed if it becomes probable that the forecasted transaction will not occur. As of March 31, 2026 and June 30, 2025, the fair value of the outstanding foreign currency forwards designated as hedging instruments were not material.
Fair Value Hedging — Foreign currency forward contracts: The Company uses foreign currency forward contracts to protect certain short-term asset positions denominated in foreign currencies against the effect of changes in exchange rates. These positions do not qualify for hedge accounting and accordingly are marked-to-market at each reporting date through charges to other expense (income), net. As of March 31, 2026 and June 30, 2025, the fair value of the outstanding foreign currency forwards not designated as hedging instruments and the charges to income for changes in fair value for these contracts were not material.
19
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The fair value and location of outstanding derivative contracts recorded in the accompanying consolidated balance sheets were as follows as of March 31, 2026 and June 30, 2025:
| March 31, 2026 | Foreign Currency Contracts | Commodity Contracts | Total Derivatives | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Asset Derivatives: | ||||||||||||||||||||||||||
| Other current assets | $ | $ | $ | |||||||||||||||||||||||
| Other assets | ||||||||||||||||||||||||||
| Total asset derivatives | $ | $ | $ | |||||||||||||||||||||||
| Liability Derivatives: | ||||||||||||||||||||||||||
| Accrued liabilities | $ | $ | $ | |||||||||||||||||||||||
| Other liabilities | ||||||||||||||||||||||||||
| Total liability derivatives | $ | $ | $ | |||||||||||||||||||||||
| June 30, 2025 | Foreign Currency Contracts | Commodity Contracts | Total Derivatives | |||||||||||||||||||||||
| ($ in millions) | ||||||||||||||||||||||||||
| Asset Derivatives: | ||||||||||||||||||||||||||
| Other current assets | $ | $ | $ | |||||||||||||||||||||||
| Other assets | ||||||||||||||||||||||||||
| Total asset derivatives | $ | $ | $ | |||||||||||||||||||||||
| Liability Derivatives: | ||||||||||||||||||||||||||
| Accrued liabilities | $ | $ | $ | |||||||||||||||||||||||
| Other liabilities | ||||||||||||||||||||||||||
| Total liability derivatives | $ | $ | $ | |||||||||||||||||||||||
Substantially all of the Company's derivative contracts are subject to master netting arrangements, or similar agreements with each counterparty, which provide for the option to settle contracts on a net basis when they settle on the same day and in the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event. The Company presents the outstanding derivative contracts on a net basis by counterparty in the consolidated balance sheets. If the Company had chosen to present the derivative contracts on a gross basis, the total asset derivatives and total liability derivatives would have been $0.7 million and $1.7 million, respectively, as of March 31, 2026.
According to the provisions of the Company's derivative arrangements, in the event that the fair value of outstanding derivative positions with certain counterparties exceeds certain thresholds, the Company may be required to issue cash collateral to the counterparties. As of March 31, 2026 and June 30, 2025, the Company had no
The Company is exposed to credit loss in the event of nonperformance by counterparties on its derivative instruments as well as credit or performance risk with respect to its customer commitments to perform. Although nonperformance is possible, the Company does not anticipate nonperformance by any of the parties. In addition, various master netting arrangements are in place with counterparties to facilitate settlements of gains and losses on these contracts.
20
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Cash Flow
| Amount of Gain (Loss) Recognized in AOCI on Derivatives | ||||||||||||||||||||||||||
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||||||||||||||
| Commodity contracts | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Foreign exchange contracts | ( | ( | ||||||||||||||||||||||||
| Total | $ | $ | $ | ( | $ | |||||||||||||||||||||
| Location of Gain (Loss) Reclassified from AOCI into Income | Amount of Gain (Loss) Reclassified from AOCI into Income | |||||||||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||||||||||||||||||||
| Commodity contracts | Cost of Sales | $ | $ | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | ( | |||||||||||||||||||||||||||||
| ($ in millions) | Location of Loss Reclassified from AOCI into Income | Amount of Loss Reclassified from AOCI into Income | ||||||||||||||||||
| Nine Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||
| Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||||||||
| Commodity contracts | Cost of sales | $ | ( | $ | ( | |||||||||||||||
| Total | $ | ( | $ | ( | ||||||||||||||||
21
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following is a summary of total amounts presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded during the three and nine months ended March 31, 2026 and 2025:
| Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||
| ($ in millions) | Cost of Sales | Cost of Sales | ||||||||||||||||||||||||||||||
| Total amounts presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded | $ | $ | ||||||||||||||||||||||||||||||
| Gain (Loss) on Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||||||||||||||||||||
| Commodity contracts | ||||||||||||||||||||||||||||||||
| Amount of gain (loss) reclassified from AOCI to income | $ | $ | ( | |||||||||||||||||||||||||||||
| Total gain (loss) | $ | $ | ( | |||||||||||||||||||||||||||||
| Nine Months Ended March 31, 2026 | Nine Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||
| ($ in millions) | Cost of Sales | Cost of Sales | ||||||||||||||||||||||||||||||
| Total amounts presented in the consolidated statement of operations in which the effects of cash flow hedges are recorded | $ | $ | ||||||||||||||||||||||||||||||
| Loss on Derivatives in Cash Flow Hedging Relationship: | ||||||||||||||||||||||||||||||||
| Commodity contracts | ||||||||||||||||||||||||||||||||
| Amount of loss reclassified from AOCI to income | $ | ( | $ | ( | ||||||||||||||||||||||||||||
| Total loss | $ | ( | $ | ( | ||||||||||||||||||||||||||||
14. Other Expense (Income), Net
Other expense (income), net consisted of the following:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Interest income | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Unrealized losses (gains) on company-owned life insurance contracts and investments held in rabbi trusts | ( | ( | ||||||||||||||||||||||||
| Pension earnings, interest and deferrals | ||||||||||||||||||||||||||
| Foreign exchange losses | ||||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||
| Total other expense (income), net | $ | $ | $ | ( | $ | |||||||||||||||||||||
22
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
15. Income Taxes
The effective tax rate used for interim periods is the estimated annual effective consolidated tax rate, based on the current estimate of full year results, except that taxes related to specific events, if any, are recorded in the interim period in which they occur. The annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pre-tax income, or loss, of the Company in each tax jurisdiction in which it operates, and the development of tax planning strategies during the year. In addition, the Company's tax expense or benefit can be impacted by changes in tax rates or laws, the finalization of tax audits, and other factors that cannot be predicted with certainty. As such, there can be significant volatility in interim tax provisions.
Income tax expense was $37.1 million, or 21.0 percent of income before income taxes for the three months ended March 31, 2026, as compared with income tax expense of $26.6 million, or 21.8 percent of income before income taxes for the three months ended March 31, 2025. Income tax expense was $84.1 million, or 18.6 percent of income before income taxes for the nine months ended March 31, 2026, as compared with income tax expense of $63.9 million, or 19.5 percent of income before income taxes for the nine months ended March 31, 2025.
Income tax expense for the three months ended March 31, 2026, includes discrete tax benefits of $1.6 million attributable to employee share-based compensation and $2.5 million as a result of changes in the Company's prior year tax positions. Income tax expense for the three months ended March 31, 2025, included discrete tax benefits of $3.2 million attributable to employee share-based compensation.
Income tax expense for the nine months ended March 31, 2026, includes discrete tax benefits of $17.0 million attributable to employee share-based compensation, $3.6 million associated with the debt prepayment costs and $2.5 million as a result of changes in the Company's prior year tax positions. Income tax expense for the nine months ended March 31, 2025, included discrete tax benefits of $13.0 million attributable to employee share-based compensation.
16. Business Segments
The Company has two reportable segments, Specialty Alloys Operations ("SAO") and Performance Engineered Products ("PEP").
The SAO segment is comprised of the Company's major premium alloy and stainless steel manufacturing operations. This includes operations performed at mills primarily in Reading and Latrobe, Pennsylvania and surrounding areas as well as South Carolina and Alabama. The combined assets of the SAO operations are managed in an integrated manner to optimize efficiency and profitability across the total system.
The PEP segment is comprised of the Company's differentiated operations. This segment includes the Dynamet titanium business, the Carpenter Additive business and the Latrobe and Mexico distribution businesses. The businesses in the PEP segment are managed with an entrepreneurial structure to promote flexibility and agility to quickly respond to market dynamics.
The Company's chief operating decision maker ("CODM") is the Chief Executive Officer. The measure of profit and loss that is used by the CODM to evaluate the performance of these operating segments is operating income. The CODM uses operating income when making decisions about allocating capital and personnel to the segments in the annual operating plan and monthly performance review processes. The CODM considers variances of actual results compared to the annual operating plan and subsequent forecasts for each segment. Operating income for each of the Company's reportable segments is comprised of the segment's net sales less directly related product costs and other operating expenses. Segment operating results exclude general corporate costs, which include executive and director compensation, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that management considers not representative of ongoing operations, such as restructuring charges and other specifically identified income or expense items. Total net sales and operating earnings by segment include intersegment sales which are generally recorded at cost-plus a specified fee for a negotiated fixed price. All significant intersegment transactions have been eliminated from each reportable segment's net sales and earnings for all periods presented.
23
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On a consolidated basis, no single customer accounted for 10 percent or more of net sales for the three and nine months ended March 31, 2026 or March 31, 2025. No single customer accounted for 10 percent or more of the accounts receivable outstanding as of March 31, 2026 or June 30, 2025.
See Note 4 Revenue for comparative information of the Company's overall revenue by segment, end-use market and geographical location. The Company believes further disaggregation of revenue is impracticable. Net sales and operating income by segment for the three and nine months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, 2026 | Three Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Total | SAO | PEP | Total | ||||||||||||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Intersegment sales | ||||||||||||||||||||||||||||||||||||||
| Total sales | ||||||||||||||||||||||||||||||||||||||
| Reconciliation of sales | ||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment | ( | ( | ||||||||||||||||||||||||||||||||||||
| Consolidated net sales | $ | $ | ||||||||||||||||||||||||||||||||||||
| Less: (a) | ||||||||||||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||||||||
| Other segment items (b) | ||||||||||||||||||||||||||||||||||||||
| Segment operating income | ||||||||||||||||||||||||||||||||||||||
| Reconciliation of operating income | ||||||||||||||||||||||||||||||||||||||
| Corporate costs (c) | ( | ( | ||||||||||||||||||||||||||||||||||||
| Elimination of intersegment | ( | ( | ||||||||||||||||||||||||||||||||||||
| Consolidated operating income | $ | $ | ||||||||||||||||||||||||||||||||||||
| Other items: | ||||||||||||||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||||||||||||||
| Other expense, net | ||||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | ||||||||||||||||||||||||||||||||||||
24
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Nine Months Ended March 31, 2026 | Nine Months Ended March 31, 2025 | |||||||||||||||||||||||||||||||||||||
| ($ in millions) | SAO | PEP | Total | SAO | PEP | Total | ||||||||||||||||||||||||||||||||
| Sales to external customers | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Intersegment sales | ||||||||||||||||||||||||||||||||||||||
| Total sales | ||||||||||||||||||||||||||||||||||||||
| Reconciliation of sales | ||||||||||||||||||||||||||||||||||||||
| Elimination of intersegment | ( | ( | ||||||||||||||||||||||||||||||||||||
| Consolidated net sales | $ | $ | ||||||||||||||||||||||||||||||||||||
| Less: (a) | ||||||||||||||||||||||||||||||||||||||
| Cost of sales | ||||||||||||||||||||||||||||||||||||||
| Other segment items (b) | ||||||||||||||||||||||||||||||||||||||
| Segment operating income | ||||||||||||||||||||||||||||||||||||||
| Reconciliation of operating income | ||||||||||||||||||||||||||||||||||||||
| Corporate costs (c) | ( | ( | ||||||||||||||||||||||||||||||||||||
| Elimination of intersegment | ( | ( | ||||||||||||||||||||||||||||||||||||
| Consolidated operating income | $ | $ | ||||||||||||||||||||||||||||||||||||
| Other items: | ||||||||||||||||||||||||||||||||||||||
| Interest expense, net | ||||||||||||||||||||||||||||||||||||||
| Debt extinguishment losses | ||||||||||||||||||||||||||||||||||||||
| Other (income) expense, net | ( | |||||||||||||||||||||||||||||||||||||
| Income before income taxes | $ | $ | ||||||||||||||||||||||||||||||||||||
(a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. Intersegment expenses are included within the amounts shown.
(b) Other segment items for each reportable segment primarily includes selling, general and administrative expenses.
(c) Corporate costs include executive and director compensation, and other corporate facilities and administrative expenses not allocated to the segments. Also excluded are items that management considers not representative of ongoing operations, such as restructuring charges and other specifically identified income or expense items.
Additional data by segment for the three and nine months ended March 31, 2026 and 2025 is as follows:
| Depreciation and Amortization | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Specialty Alloys Operations | $ | $ | $ | $ | ||||||||||||||||||||||
| Performance Engineered Products | ||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||
| Consolidated depreciation and amortization | $ | $ | $ | $ | ||||||||||||||||||||||
25
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Capital Expenditures | Three Months Ended March 31, | Nine Months Ended March 31, | ||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Specialty Alloys Operations | $ | $ | $ | $ | ||||||||||||||||||||||
| Performance Engineered Products | ||||||||||||||||||||||||||
| Corporate | ||||||||||||||||||||||||||
| Consolidated capital expenditures | $ | $ | $ | $ | ||||||||||||||||||||||
| Total Assets | March 31, 2026 | June 30, 2025 | ||||||||||||
| ($ in millions) | ||||||||||||||
| Specialty Alloys Operations | $ | $ | ||||||||||||
| Performance Engineered Products | ||||||||||||||
| Total segment assets | ||||||||||||||
| Corporate | ||||||||||||||
| Intersegment | ( | ( | ||||||||||||
| Consolidated total assets | $ | $ | ||||||||||||
| Long-lived Assets (a) | March 31, 2026 | June 30, 2025 | ||||||||||||
| ($ in millions) | ||||||||||||||
| United States | $ | $ | ||||||||||||
| Europe | ||||||||||||||
| Mexico | ||||||||||||||
| Asia Pacific | ||||||||||||||
| Canada | ||||||||||||||
| Consolidated long-lived assets | $ | $ | ||||||||||||
(a) Long-lived assets consist primarily of property, plant, equipment and software, net.
26
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
17. Reclassifications from Accumulated Other Comprehensive Loss
The changes in AOCI by component, net of tax, for the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, 2026 ($ in millions) (a) | Cash flow hedging items | Pension and other postretirement benefit plan items | Foreign currency items | Total | ||||||||||||||||||||||||||||
| Balances at December 31, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI (b) | ( | ( | ||||||||||||||||||||||||||||||
| Total other comprehensive (loss) income, net of tax | ( | ( | ( | |||||||||||||||||||||||||||||
| Balances at March 31, 2026 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
Three Months Ended March 31, 2025 ($ in millions) (a) | Cash flow hedging items | Pension and other postretirement benefit plan items | Foreign currency items | Total | ||||||||||||||||||||||||||||
| Balances at December 31, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| Other comprehensive income before reclassifications | ||||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI (b) | ||||||||||||||||||||||||||||||||
| Total other comprehensive income, net of tax | ||||||||||||||||||||||||||||||||
| Balances at March 31, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
(a) All amounts are net of tax. Amounts in parentheses indicate debits.
(b) See separate table below for further details.
27
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The changes in AOCI by component, net of tax, for the nine months ended March 31, 2026 and 2025 were as follows:
| Nine Months Ended March 31, 2026 ($ in millions) (a) | Cash flow hedging items | Pension and other postretirement benefit plan items | Foreign currency items | Total | |||||||||||||||||||||||||
| Balances at June 30, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| Other comprehensive loss before reclassifications | ( | ( | ( | ||||||||||||||||||||||||||
| Amounts reclassified from AOCI (b) | |||||||||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||||||||
| Balances at March 31, 2026 | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||
| Nine Months Ended March 31, 2025 ($ in millions) (a) | Cash flow hedging items | Pension and other postretirement benefit plan items | Foreign currency items | Total | ||||||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI (b) | ||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | ( | |||||||||||||||||||||||||||||||
| Balances at March 31, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
(a) All amounts are net of tax. Amounts in parentheses indicate debits.
(b) See separate table below for further details.
The following is a summary of amounts reclassified from AOCI for the three and nine months ended March 31, 2026 and 2025:
| Details about AOCI Components | Location of gain (loss) | Amount Reclassified from AOCI Three Months Ended March 31, | Amount Reclassified from AOCI Nine Months Ended March 31, | |||||||||||||||||||||||||||||
| ($ in millions) (a) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||
| Cash flow hedging items: | ||||||||||||||||||||||||||||||||
| Commodity contracts | Cost of sales | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| Total before tax | ( | ( | ( | |||||||||||||||||||||||||||||
| Tax (expense) benefit | ( | |||||||||||||||||||||||||||||||
| Net of tax | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||
28
CARPENTER TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| Details about AOCI Components | Location of loss | Amount Reclassified from AOCI Three Months Ended March 31, | Amount Reclassified from AOCI Nine Months Ended March 31, | |||||||||||||||||||||||||||||
| ($ in millions) (a) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||
| Amortization of pension and other postretirement benefit plan items: | ||||||||||||||||||||||||||||||||
| Net actuarial loss | (b) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
| Prior service cost | (b) | ( | ( | ( | ( | |||||||||||||||||||||||||||
| Total before tax | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Tax benefit | ||||||||||||||||||||||||||||||||
| Net of tax | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
(a) Amounts in parentheses indicate debits to income/loss.
(b) These AOCI components are included in the computation of net periodic pension expense (income) (see Note 8 Pension and Other Postretirement Benefits for additional details).
29
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Background and General
We are a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels and tool steels. We are a recognized leader in high-performance specialty alloy materials and process solutions for critical applications in the aerospace and defense, medical, energy, transportation and industrial and consumer markets. Founded in 1889, we have evolved to become a pioneer in premium specialty alloys including nickel, cobalt, and titanium and material process capabilities that solve our customers' current and future material challenges. We primarily process basic raw materials such as nickel, cobalt, titanium, manganese, chromium, molybdenum, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire and narrow strip in many sizes and finishes. We also produce certain metal powders and parts. Our sales are distributed directly from our production plants and distribution network as well as through independent distributors. Unlike many other specialty steel producers, we operate our own worldwide network of service and distribution centers. These service centers, located in the United States, Canada, Mexico, Europe and Asia allow us to work more closely with customers and to offer various just-in-time stocking programs.
As part of our overall business strategy, we have sought out and considered opportunities related to strategic acquisitions and joint collaborations as well as possible business unit dispositions aimed at broadening our offering to the marketplace. We have participated with other companies to explore potential terms and structures of such opportunities and expect that we will continue to evaluate these opportunities.
Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in Item 7 of our 2025 Form 10-K. Our discussions here focus on our results during or as of the three and nine month periods ended March 31, 2026, and the comparable periods of fiscal year 2025, and to the extent applicable, on material changes from information discussed in the 2025 Form 10-K and other important intervening developments or information that we have reported on Form 8-K. These discussions should be read in conjunction with the 2025 Form 10-K for detailed background information and with any such intervening Form 8-K.
30
Impact of Raw Material Prices and Product Mix
We value most of our inventory utilizing the LIFO inventory costing methodology. Under the LIFO inventory costing method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials may have been acquired at potentially significantly different values due to the length of time from the acquisition of the raw materials to the sale of the processed finished goods to the customers. In a period of rising raw material costs, the LIFO inventory valuation normally results in higher cost of sales. Conversely, in a period of decreasing raw material costs, the LIFO inventory valuation normally results in lower cost of sales.
The volatility of the costs of raw materials has impacted our operations over the past several years. We, and others in our industry, generally have been able to pass cost increases on major raw materials through to our customers using surcharges that are structured to recover increases in raw material costs including the impact of tariffs. Generally, the formula used to calculate a surcharge is based on published prices of the respective raw materials for the previous month which correlates to the prices we pay for our raw material purchases. However, a portion of our surcharges to customers may be calculated using a different surcharge formula or may be based on the raw material prices at the time of order, which creates a lag between surcharge revenue and corresponding raw material costs recognized in cost of sales. The surcharge mechanism protects our net income on such sales except for the lag effect discussed above. However, surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report.
During the nine months ended March 31, 2026, approximately 43 percent of our net sales were sales to customers under firm price sales arrangements. Firm price sales arrangements involve a risk of profit margin fluctuations, particularly when raw material prices are volatile. In order to reduce the risk of fluctuating profit margins on these sales, we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the related products sold. Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. If a customer fails to meet the volume commitments (or the consumption schedule deviates from the agreed-upon terms of the firm price sales arrangements), we may need to absorb the gains or losses associated with the commodity forward contracts on a temporary basis. Gains or losses associated with commodity forward contracts are reclassified to earnings (loss) when earnings are impacted by the hedged transaction. Because we value most of our inventory under the LIFO costing methodology, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period attempting to match the most recently incurred costs with revenues. Gains and/or losses on the commodity forward contracts are reclassified from accumulated other comprehensive income (loss) together with the actual purchase price of the underlying commodities when the underlying commodities are purchased and recorded in inventory. To the extent that the total purchase price of the commodities, inclusive of the gains or losses on the commodity forward contracts, are higher or lower relative to the beginning of year costs, our cost of goods sold reflects such amounts. Accordingly, the gains and/or losses associated with commodity forward contracts may not impact the same period that the firm price sales arrangements revenue is recognized, and comparisons of gross profit from period to period may be impacted. These firm price sales arrangements are expected to continue as we look to strengthen our long-term customer relationships by expanding, renewing and, in certain cases, extending to a longer term, our customer arrangements.
We produce hundreds of grades of materials with a wide range of pricing and profit levels depending on the grade. In addition, our product mix within a period is subject to the fluctuating order patterns of our customers as well as decisions we may make on participation in certain products based on available capacity, including the impacts of capacity commitments we may have under existing customer agreements. While we expect to see positive contribution from a more favorable product mix in our margin performance over time, the impact by period may fluctuate and period-to-period comparisons may vary.
Net Pension Expense
Net pension expense, as we define it below, includes the net periodic benefit costs related to both our pension and other postretirement plans. The net periodic benefit costs are determined annually based on beginning of year balances and are recorded ratably throughout the fiscal year, unless a significant remeasurement event occurs. We currently expect the total net pension expense for fiscal year 2026 will be $14.3 million as compared with total net pension expense of $24.8 million in fiscal year 2025. The lower expected expense for fiscal year 2026 reflects higher plan assets and a higher expected return on plan assets compared to fiscal year 2025.
31
The following is the net pension expense for the three and nine months ended March 31, 2026 and March 31, 2025:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Pension plans | $ | 4.5 | $ | 6.5 | $ | 13.3 | $ | 19.7 | ||||||||||||||||||
| Other postretirement plans | (0.9) | (0.3) | (2.5) | (1.1) | ||||||||||||||||||||||
| Net pension expense | $ | 3.6 | $ | 6.2 | $ | 10.8 | $ | 18.6 | ||||||||||||||||||
The service cost component of net pension expense represents the estimated cost of future pension liabilities earned associated with active employees. The pension earnings, interest and deferrals is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans and amortization of actuarial gains and losses and prior service costs and benefits.
Net pension expense is recorded in accounts that are included in cost of sales, selling, general and administrative expenses and other expense (income), net, based on the function of the associated employees and nature of expense. The following is a summary of the classification of net pension expense for the three and nine months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Service cost included in Cost of sales | $ | 1.9 | $ | 2.0 | $ | 5.6 | $ | 6.1 | ||||||||||||||||||
| Service cost included in Selling, general and administrative expenses | 0.3 | 0.3 | 0.9 | 0.9 | ||||||||||||||||||||||
Pension earnings, interest and deferrals included in Other expense (income), net | 1.4 | 3.9 | 4.3 | 11.6 | ||||||||||||||||||||||
| Net pension expense | $ | 3.6 | $ | 6.2 | $ | 10.8 | $ | 18.6 | ||||||||||||||||||
As of March 31, 2026 and June 30, 2025, service cost amounts related to the net pension expense capitalized in gross inventory were $1.1 million and $1.6 million, respectively.
32
Operating Performance Overview and Outlook
In the quarter ended March 31, 2026, we reported operating income of $186.5 million compared to $137.8 million in the prior year same quarter. The results for the quarter ended March 31, 2026, represent an increase of 35 percent over the prior year third quarter and surpassed our second quarter of fiscal year 2026 by 20 percent, which at that time was a record. The SAO segment realized $208.0 million of operating income with an operating margin of 28.3 percent, or adjusted operating margin of 35.6 percent. This compares to $151.4 million of operating income with an operating margin of 23.5 percent, or adjusted operating margin of 29.1 percent, during the quarter ended March 31, 2025. The SAO margin expansion was driven by a combination of continued productivity gains, pricing realization and improved product mix. These factors enabled SAO to deliver its strongest quarterly operating performance to date.
The record operating performance was accompanied by strong cash generation, reflecting higher earnings and continued discipline in working capital management. We generated $364.9 million of cash from operating activities in the nine months ended March 31, 2026, as compared with cash provided from operating activities of $182.3 million in the nine months ended March 31, 2025. Adjusted free cash flow was $207.3 million in the nine months ended March 31, 2026, as compared with adjusted free cash flow of $86.1 million in the nine months ended March 31, 2025. With a strong balance sheet and meaningful cash provided from operations, we will continue to take a balanced approach to capital allocation by sustaining our current asset base and investing in high value growth initiatives while returning cash to shareholders. As such, we are investing to accelerate our growth with our brownfield expansion project which is expected to add primary and secondary melt capacity. Additionally, during the nine months ended March 31, 2026, we repurchased 445,000 shares of our common stock on the open market for an aggregate of $133.9 million and funded dividend payments of $30.2 million.
Looking ahead, demand in our Aerospace and Defense end-use market continues to accelerate as customers gain confidence in higher build rates. As a result, customers are placing more orders for materials used in the Aerospace structural sub-market. Structural demand is closely tied to new production activity and is a clear indication of growing confidence in the aerospace supply chain. And as customers prioritize security of supply for these critical applications, we continue to advance long-term agreements that support volume visibility and pricing consistency, reinforcing our outlook for sustained growth. In the quarter ended March 31, 2026, Carpenter Technology delivered record earnings at a time when the Aerospace and Defense end-use market is at the beginning of the growth cycle. With demand accelerating, we believe Carpenter Technology is well positioned to deliver sustained performance and continue to generate long‑term value. We remain focused on supporting our customer needs, operational execution and living our Values as we drive to exceptional near-term and long-term performance.
We continue to closely monitor the evolving conflict among the United States, Israel and Iran and its impact to the end-use markets we serve. We also continue to monitor the ongoing tariff changes and engage with our customers and suppliers to analyze how these items could impact our business. We, as well as others in our industry, have established long-standing surcharge mechanisms to pass through changes in raw material prices to our customers. We are using and will continue to use these surcharge mechanisms to pass through the impact of any incremental tariffs on our raw material costs to our customers. As such, at this time and based on current information, we believe these items will not have a material impact on the Company.
Results of Operations — Three Months Ended March 31, 2026 vs. Three Months Ended March 31, 2025
For the three months ended March 31, 2026, we reported net income of $139.6 million, or $2.77 earnings per diluted share. This compares with net income for the three months ended March 31, 2025, of $95.4 million, or $1.88 earnings per diluted share. The results for the three months ended March 31, 2026, reflect an ongoing shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies compared to the three months ended March 31, 2025.
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Net Sales
Net sales for the three months ended March 31, 2026, were $811.5 million, which is a 12 percent increase over the three months ended March 31, 2025. Excluding surcharge revenue, sales increased 10 percent from the three months ended March 31, 2025. The results excluding surcharge revenue reflect realized price increases and improving product mix during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Excluding surcharge revenue, sales in the Aerospace and Defense end-use market increased 17 percent compared to the three months ended March 31, 2025.
Geographically, domestic net sales increased 9 percent from the three months ended March 31, 2025, to $473.9 million. Excluding surcharge revenue, domestic sales increased 8 percent from the three months ended March 31, 2025, driven by higher sales in the Aerospace and Defense, Energy and Industrial and Consumer end-use markets, partially offset by lower sales in the Medical end-use market. Sales outside the United States increased 15 percent from the three months ended March 31, 2025, to $337.6 million for the three months ended March 31, 2026. Excluding surcharge revenue, sales outside the United States increased 13 percent from the three months ended March 31, 2025. This reflects higher sales in the Aerospace and Defense end-use market in all regions and higher sales in the Energy end-use market in the European region offset by lower sales in the Energy end-use market in the Asia Pacific region and the Medical end-use market in the European region compared to the three months ended March 31, 2025. A portion of our sales outside the United States are denominated in foreign currencies. The impact of fluctuations in foreign currency exchange rates resulted in a $1.3 million increase in net sales during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Net sales outside the United States represented 42 percent and 40 percent of net sales for the three months ended March 31, 2026 and 2025, respectively.
Sales by End-Use Markets
We sell to customers across diversified end-use markets. We believe that disclosing net sales by end-use markets is helpful supplemental information in analyzing the performance of the business from period to period. The following table includes comparative information for our net sales, which includes surcharge revenue, by principal end-use markets:
| Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Aerospace and Defense | $ | 534.2 | $ | 454.7 | $ | 79.5 | 17 | % | ||||||||||||||||||
| Medical | 65.8 | 85.0 | (19.2) | (23) | % | |||||||||||||||||||||
| Energy | 69.0 | 46.4 | 22.6 | 49 | % | |||||||||||||||||||||
| Transportation | 24.7 | 28.1 | (3.4) | (12) | % | |||||||||||||||||||||
| Industrial and Consumer | 97.0 | 90.5 | 6.5 | 7 | % | |||||||||||||||||||||
| Distribution | 20.8 | 22.3 | (1.5) | (7) | % | |||||||||||||||||||||
| Total net sales | $ | 811.5 | $ | 727.0 | $ | 84.5 | 12 | % | ||||||||||||||||||
The following table includes comparative information for our net sales by the same principal end-use markets, but excluding surcharge revenue:
| Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Aerospace and Defense | $ | 435.6 | $ | 373.2 | $ | 62.4 | 17 | % | ||||||||||||||||||
| Medical | 51.7 | 72.4 | (20.7) | (29) | % | |||||||||||||||||||||
| Energy | 50.5 | 35.0 | 15.5 | 44 | % | |||||||||||||||||||||
| Transportation | 19.3 | 21.9 | (2.6) | (12) | % | |||||||||||||||||||||
| Industrial and Consumer | 78.1 | 72.4 | 5.7 | 8 | % | |||||||||||||||||||||
| Distribution | 20.4 | 22.1 | (1.7) | (8) | % | |||||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | $ | 58.6 | 10 | % | ||||||||||||||||||
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Aerospace and Defense end-use market sales increased 17 percent from the three months ended March 31, 2025, to $534.2 million. Excluding surcharge revenue, sales increased 17 percent from the three months ended March 31, 2025. The results for the three months ended March 31, 2026, reflect strong demand driven by increasing build rates and the need to maintain aging fleets. The three months ended March 31, 2026, also reflect higher sales in the Defense end-use market for program specific applications.
Medical end-use market sales decreased 23 percent from the three months ended March 31, 2025, to $65.8 million. Excluding surcharge revenue, sales decreased 29 percent from the three months ended March 31, 2025. For the three months ended March 31, 2026, results reflect lower shipments as a result of the medical supply chain managing inventory levels closely, partially offset by realized price increases particularly in the dental sub-market compared to the three months ended March 31, 2025.
Energy end-use market sales of $69.0 million in the three months ended March 31, 2026, reflect a 49 percent increase from the three months ended March 31, 2025. Excluding surcharge revenue, sales increased 44 percent from the three months ended March 31, 2025. The results reflect higher sales in the power generation sub-market for material used in new and refurbished industrial gas turbines primarily driven by the demand for data centers compared to the three months ended March 31, 2025.
Transportation end-use market sales decreased 12 percent from the three months ended March 31, 2025, to $24.7 million. Excluding surcharge revenue, sales decreased 12 percent from the three months ended March 31, 2025. The results reflect weaker production rates for light-duty vehicles and lower build rates for medium and heavy-duty vehicles compared to the three months ended March 31, 2025.
Industrial and Consumer end-use market sales increased 7 percent from the three months ended March 31, 2025, to $97.0 million. Excluding surcharge revenue, sales increased 8 percent from the three months ended March 31, 2025. The results reflect higher demand across all Industrial sub-markets, particularly semiconductor and fluid control materials, partially offset by lower demand for consumer electronics materials compared to the three months ended March 31, 2025.
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Gross Profit
Our gross profit in the three months ended March 31, 2026, increased to $251.8 million, or 31.0 percent of net sales, as compared with $200.8 million, or 27.6 percent of net sales in the three months ended March 31, 2025. Excluding the impact of surcharge revenue, our adjusted gross margin in the three months ended March 31, 2026, was 38.4 percent as compared to 33.6 percent in the three months ended March 31, 2025. The increased gross profit for the three months ended March 31, 2026, reflects an ongoing improvement in product mix in the Aerospace and Defense and Energy end-use markets with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies.
Our surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect as discussed above. While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures. The following represents a summary of the dilutive impact of the surcharge on gross margin.
| Three Months Ended March 31, | ||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 811.5 | $ | 727.0 | ||||||||||
| Less: surcharge revenue | 155.9 | 130.0 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | ||||||||||
| Gross profit | $ | 251.8 | $ | 200.8 | ||||||||||
| Gross margin | 31.0 | % | 27.6 | % | ||||||||||
| Gross margin excluding surcharge revenue | 38.4 | % | 33.6 | % | ||||||||||
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the three months ended March 31, 2026, were $65.3 million or 8.0 percent of net sales (10.0 percent of net sales excluding surcharge) as compared with $63.0 million or 8.7 percent of net sales (10.6 percent of net sales excluding surcharge) in the three months ended March 31, 2025. The selling, general and administrative expenses for the three months ended March 31, 2026, reflect higher salary, benefit and variable compensation costs compared to the three months ended March 31, 2025.
Operating Income
Our operating income in the three months ended March 31, 2026, was $186.5 million, or 23.0 percent of net sales, as compared with operating income of $137.8 million, or 19.0 percent of net sales, in the three months ended March 31, 2025. Excluding surcharge revenue, adjusted operating margin was 28.4 percent for the three months ended March 31, 2026, as compared with 23.1 percent for the three months ended March 31, 2025. The operating results for the three months ended March 31, 2026, reflect an ongoing improvement in product mix in the Aerospace and Defense and Energy end-use markets with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies compared to the three months ended March 31, 2025.
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The following presents our operating income and operating margin, in each case excluding the impact of surcharge revenue on net sales. We present and discuss these financial measures because management believes removing these items provides a more consistent and meaningful basis for comparing ongoing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Three Months Ended March 31, | ||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 811.5 | $ | 727.0 | ||||||||||
| Less: surcharge revenue | 155.9 | 130.0 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | ||||||||||
| Operating income | $ | 186.5 | $ | 137.8 | ||||||||||
| Operating margin | 23.0 | % | 19.0 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue | 28.4 | % | 23.1 | % | ||||||||||
Interest Expense, Net
Interest expense, net for the three months ended March 31, 2026, was $8.7 million compared with $12.0 million in the three months ended March 31, 2025. Capitalized interest reduced interest expense by $1.9 million for the three months ended March 31, 2026, and $0.7 million for the three months ended March 31, 2025. The lower interest expense, net in the three months ended March 31, 2026, is due to higher capitalized interest and a lower interest rate on the 2034 Notes as compared to the notes that were prepaid and redeemed in full in November 2025.
Other Expense, Net
Other expense, net for the three months ended March 31, 2026, was $1.1 million as compared with $3.8 million of other expense, net for the three months ended March 31, 2025. The three months ended March 31, 2026, reflect $1.4 million of expense from pension earnings, interest and deferrals compared to $3.9 million of expense in the three months ended March 31, 2025, driven primarily by greater expected returns on plan assets during fiscal year 2026.
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Income Taxes
Income tax expense was $37.1 million, or 21.0 percent of income before income taxes for the three months ended March 31, 2026, as compared with income tax expense of $26.6 million, or 21.8 percent of income before income taxes for the three months ended March 31, 2025.
Income tax expense for the three months ended March 31, 2026, includes discrete tax benefits of $1.6 million attributable to employee share-based compensation and $2.5 million as a result of changes in the Company's prior year tax positions. Income tax expense for the three months ended March 31, 2025 included discrete tax benefits of $3.2 million attributable to employee share-based compensation.
The One Big Beautiful Bill Act ("OBBBA") was signed into law on July 4, 2025. The provisions of the OBBBA have varying effective dates. The OBBBA allows an elective deduction for domestic research and development expenses, a reinstatement of elective 100 percent first-year bonus depreciation and modifies the tax rates on Foreign-Derived Deduction Eligible Income and income from non-U.S. subsidiaries (Net CFC Tested Income), among other provisions. A quantitative estimate of the specific financial effects for future periods cannot be reasonably determined at this time due to the complexity of the changes in the tax reform. The impact of the provisions in the OBBBA will depend on our facts in each fiscal year and anticipated guidance from the Internal Revenue Service; however, we do not expect they will have a material impact on our effective tax rate.
On October 8, 2021, the Organization for Economic Co-operation and Development ("OECD") released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework. In June 2025, the U.S. and the G-7 countries announced the intention to reach an agreement that would exempt U.S. parented multinationals from certain of the Pillar Two rules. In January of 2026 additional guidance was released, the "Side-by Side Package." We are currently evaluating the guidance. The Pillar Two Framework as it exists today does not have a significant impact on our financial position, results of operations or cash flows.
Business Segment Results
We have two reportable business segments: SAO and PEP. For more detailed segment information, see Note 16 of the Notes to Consolidated Financial Statements included in Item 1.
The following table includes comparative information for our volumes by business segment:
| Pounds sold | Three Months Ended March 31, | Pounds Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||||||||||||||
| Specialty Alloys Operations | 51,832 | 44,584 | 7,248 | 16 | % | |||||||||||||||||||||
| Performance Engineered Products * | 2,602 | 2,584 | 18 | 1 | % | |||||||||||||||||||||
| Intersegment | (960) | (672) | (288) | (43) | % | |||||||||||||||||||||
| Total pounds sold | 53,474 | 46,496 | 6,978 | 15 | % | |||||||||||||||||||||
* Pounds sold data for the PEP segment includes Dynamet and Additive businesses only.
The following table includes comparative information for our net sales by business segment:
| Net sales | Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Specialty Alloys Operations | $ | 735.1 | $ | 642.9 | $ | 92.2 | 14 | % | ||||||||||||||||||
| Performance Engineered Products | 97.7 | 104.9 | (7.2) | (7) | % | |||||||||||||||||||||
| Intersegment | (21.3) | (20.8) | (0.5) | (2) | % | |||||||||||||||||||||
| Total net sales | $ | 811.5 | $ | 727.0 | $ | 84.5 | 12 | % | ||||||||||||||||||
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The following table includes comparative information for our net sales by business segment, but excluding surcharge revenue:
| Net sales excluding surcharge revenue | Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Specialty Alloys Operations | $ | 585.0 | $ | 519.4 | $ | 65.6 | 13 | % | ||||||||||||||||||
| Performance Engineered Products | 90.6 | 96.8 | (6.2) | (6) | % | |||||||||||||||||||||
| Intersegment | (20.0) | (19.2) | (0.8) | (4) | % | |||||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | $ | 58.6 | 10 | % | ||||||||||||||||||
The following presents our operating margin excluding the impact of surcharge revenue on net sales for our SAO segment:
| Specialty Alloys Operations | Three Months Ended March 31, | |||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 735.1 | $ | 642.9 | ||||||||||
| Less: surcharge revenue | 150.1 | 123.5 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 585.0 | $ | 519.4 | ||||||||||
| Operating income | $ | 208.0 | $ | 151.4 | ||||||||||
| Operating margin | 28.3 | % | 23.5 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue | 35.6 | % | 29.1 | % | ||||||||||
The following presents our operating margin excluding the impact of surcharge revenue on net sales for our PEP segment:
| Performance Engineered Products | Three Months Ended March 31, | |||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 97.7 | $ | 104.9 | ||||||||||
| Less: surcharge revenue | 7.1 | 8.1 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 90.6 | $ | 96.8 | ||||||||||
| Operating income | $ | 6.7 | $ | 10.9 | ||||||||||
| Operating margin | 6.9 | % | 10.4 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue | 7.4 | % | 11.3 | % | ||||||||||
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Specialty Alloys Operations Segment
Net sales for the three months ended March 31, 2026, for the SAO segment increased 14 percent to $735.1 million, as compared with $642.9 million in the three months ended March 31, 2025. Excluding surcharge revenue, net sales for the three months ended March 31, 2026 increased 13 percent compared to the three months ended March 31, 2025. The higher sales are driven by realized price increases and improving product mix in the Aerospace and Defense and Energy end-use markets compared to the three months ended March 31, 2025.
Operating income for the SAO segment was $208.0 million or 28.3 percent of net sales (35.6 percent of net sales excluding surcharge revenue) in the three months ended March 31, 2026, as compared with operating income of $151.4 million or 23.5 percent of net sales (29.1 percent of net sales excluding surcharge revenue) in the three months ended March 31, 2025. This marks the seventeenth consecutive quarter with increasing adjusted operating margins in SAO. The operating income for the three months ended March 31, 2026, reflects a combination of continued productivity gains, pricing realization and improved product mix compared to the three months ended March 31, 2025.
Performance Engineered Products Segment
Net sales for the three months ended March 31, 2026, for the PEP segment decreased 7 percent to $97.7 million, as compared with $104.9 million in the three months ended March 31, 2025. Excluding surcharge revenue, net sales for the three months ended March 31, 2026, decreased 6 percent compared to the three months ended March 31, 2025. The current quarter results reflect lower sales in the Medical and Distribution end-use markets partially offset by growth in the Aerospace and Defense and Industrial and Consumer end-use markets.
Operating income for the PEP segment was $6.7 million or 6.9 percent of net sales (7.4 percent of net sales excluding surcharge revenue) in the three months ended March 31, 2026, compared with operating income of $10.9 million or 10.4 percent of net sales (11.3 percent of net sales excluding surcharge revenue) in the three months ended March 31, 2025. The results for the three months ended March 31, 2026, reflect a reduction in Medical end-use market sales in Titanium partially offset by improving profitability in Additive compared to the three months ended March 31, 2025.
Results of Operations — Nine Months Ended March 31, 2026 vs. Nine Months Ended March 31, 2025
For the nine months ended March 31, 2026, we reported net income of $367.4 million, or $7.29 earnings per diluted share. During the nine months ended March 31, 2026, we recorded debt extinguishment losses of $15.6 million, or $12.0 million net of tax. Excluding this special item, adjusted earnings per diluted share was $7.53 for the nine months ended March 31, 2026. This compares with net income for the nine months ended March 31, 2025, of $264.3 million, or $5.21 earnings per diluted share. During the nine months ended March 31, 2025, we recorded restructuring and asset impairment charges of $3.6 million as a result of actions taken to streamline operations in the Carpenter Additive business as announced during the quarter ended June 30, 2024. Excluding this special item, adjusted earnings per diluted share was $5.27 for the nine months ended March 31, 2025. The results for the nine months ended March 31, 2026, reflect stronger product mix, pricing actions and improved operational efficiencies compared to the nine months ended March 31, 2025.
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Net Sales
Net sales for the nine months ended March 31, 2026, were $2,273.2 million, a 7 percent increase over the nine months ended March 31, 2025. Excluding surcharge revenue, sales increased 7 percent from the nine months ended March 31, 2025. The results reflect the impact of price increases in the Aerospace and Defense and Energy end-use markets partially offset by lower product demand for materials used in the Medical end-use market compared to the nine months ended March 31, 2025.
Geographically, sales in the United States increased 5 percent from the nine months ended March 31, 2025, to $1,340.3 million. Excluding surcharge revenue, domestic sales increased 5 percent from the nine months ended March 31, 2025, driven by higher sales in the Aerospace and Defense, Energy and Industrial and Consumer end-use markets partially offset by lower sales in the Medical and Transportation end-use markets. Sales outside the United States increased 10 percent from the nine months ended March 31, 2025, to $932.9 million for the nine months ended March 31, 2026. Excluding surcharge revenue, international sales increased 10 percent from the nine months ended March 31, 2025, driven by stronger demand in the Aerospace and Defense and Energy end-use markets in the European and Asia Pacific regions partially offset by lower demand for Medical materials in all regions except South America compared to the nine months ended March 31, 2025. A portion of our sales outside the United States are denominated in foreign currencies. The impact of fluctuations in foreign currency exchange rates resulted in a $2.7 million increase in sales during the nine months ended March 31, 2026, compared to the nine months ended March 31, 2025. Net sales outside the United States represented 41 percent and 40 percent of net sales for the nine months ended March 31, 2026 and 2025, respectively.
Sales by End-Use Markets
We sell to customers across diversified end-use markets. We believe that net sales by end-use markets is helpful supplemental information in analyzing the performance of the business from period to period. The following table includes comparative information for our net sales, which includes surcharge revenue, by end-use markets:
| Nine Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Aerospace and Defense | $ | 1,477.2 | $ | 1,305.6 | $ | 171.6 | 13 | % | ||||||||||||||||||
| Medical | 211.0 | 258.1 | (47.1) | (18) | % | |||||||||||||||||||||
| Energy | 174.5 | 142.3 | 32.2 | 23 | % | |||||||||||||||||||||
| Transportation | 70.2 | 85.0 | (14.8) | (17) | % | |||||||||||||||||||||
| Industrial and Consumer | 284.5 | 266.9 | 17.6 | 7 | % | |||||||||||||||||||||
| Distribution | 55.8 | 63.6 | (7.8) | (12) | % | |||||||||||||||||||||
| Total net sales | $ | 2,273.2 | $ | 2,121.5 | $ | 151.7 | 7 | % | ||||||||||||||||||
The following table includes comparative information for our net sales by the same end-use markets, but excluding surcharge revenue:
| Nine Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Aerospace and Defense | $ | 1,209.0 | $ | 1,056.8 | $ | 152.2 | 14 | % | ||||||||||||||||||
| Medical | 170.2 | 219.3 | (49.1) | (22) | % | |||||||||||||||||||||
| Energy | 131.5 | 106.6 | 24.9 | 23 | % | |||||||||||||||||||||
| Transportation | 54.5 | 64.4 | (9.9) | (15) | % | |||||||||||||||||||||
| Industrial and Consumer | 227.4 | 212.2 | 15.2 | 7 | % | |||||||||||||||||||||
| Distribution | 55.2 | 63.1 | (7.9) | (13) | % | |||||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 1,847.8 | $ | 1,722.4 | $ | 125.4 | 7 | % | ||||||||||||||||||
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Aerospace and Defense end-use market sales increased 13 percent from the nine months ended March 31, 2025, to $1,477.2 million. Excluding surcharge revenue, sales increased 14 percent from the nine months ended March 31, 2025. The results for the nine months ended March 31, 2026, reflect strong demand driven by increasing build rates and the need to maintain and replace aging fleets compared to the nine months ended March 31, 2025. The nine months ended March 31, 2026, also reflect higher sales in the Defense end-use market for program specific applications.
Medical end-use market sales decreased 18 percent from the nine months ended March 31, 2025, to $211.0 million. Excluding surcharge revenue, sales decreased 22 percent from the nine months ended March 31, 2025. The results for the nine months ended March 31, 2026, reflect lower shipments as a result of the medical supply chain managing inventory levels closely, partially offset by realized price increases particularly in the dental sub-market compared to the nine months ended March 31, 2025.
Energy end-use market sales of $174.5 million reflect a 23 percent increase from the nine months ended March 31, 2025. Excluding surcharge revenue, sales increased 23 percent from the nine months ended March 31, 2025. The results reflect higher demand in the power generation sub-market for both new and refurbished industrial gas turbines partially offset by decreased shipments for material used in the oil and gas sub-market compared to the nine months ended March 31, 2025.
Transportation end-use market sales decreased 17 percent from the nine months ended March 31, 2025, to $70.2 million. Excluding surcharge revenue, sales decreased 15 percent from the nine months ended March 31, 2025. The results for the nine months ended March 31, 2026, reflect lower production rates for both light-duty vehicles and medium and heavy-duty trucks compared to the nine months ended March 31, 2025.
Industrial and Consumer end-use market sales increased 7 percent from the nine months ended March 31, 2025, to $284.5 million. Excluding surcharge revenue, sales increased 7 percent from the nine months ended March 31, 2025. The results reflect higher demand in numerous Industrial sub-markets, primarily semiconductor materials, compared to the nine months ended March 31, 2025.
Gross Profit
Our gross profit in the nine months ended March 31, 2026, increased $132.0 million to $686.6 million, or 30.2 percent of net sales, as compared with $554.6 million, or 26.1 percent of net sales in the nine months ended March 31, 2025. Excluding the impact of surcharge revenue, our gross margin in the nine months ended March 31, 2026, was 37.2 percent as compared to 32.2 percent in the nine months ended March 31, 2025. The increased gross profit for the nine months ended March 31, 2026, reflects an ongoing improvement in product mix with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies compared to the nine months ended March 31, 2025.
While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. The following represents a summary of the dilutive impact of the surcharge on gross margin for the comparative periods. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Nine Months Ended March 31, | ||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 2,273.2 | $ | 2,121.5 | ||||||||||
| Less: surcharge revenue | 425.4 | 399.1 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 1,847.8 | $ | 1,722.4 | ||||||||||
| Gross profit | $ | 686.6 | $ | 554.6 | ||||||||||
| Gross margin | 30.2 | % | 26.1 | % | ||||||||||
| Gross margin excluding surcharge revenue | 37.2 | % | 32.2 | % | ||||||||||
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Selling, General and Administrative Expenses
Selling, general and administrative expenses of $191.5 million were 8.4 percent of net sales (10.4 percent of net sales excluding surcharge) for the nine months ended March 31, 2026, as compared with $180.6 million or 8.5 percent of net sales (10.5 percent of net sales excluding surcharge) in the nine months ended March 31, 2025. The selling, general and administrative expenses for the nine months ended March 31, 2026, reflect higher salary, benefit and variable compensation costs compared to the nine months ended March 31, 2025.
Restructuring and Asset Impairment Charges
During the nine months ended March 31, 2026, there were no restructuring and asset impairment charges compared to $3.6 million of restructuring and asset impairment charges in the nine months ended March 31, 2025. The restructuring and asset impairment charges were a result of actions taken to streamline operations in our Carpenter Additive business in the PEP segment, as announced in the quarter ended June 30, 2024.
Operating Income
Our operating income in the nine months ended March 31, 2026, was $495.1 million, or 21.8 percent of net sales, as compared with operating income of $370.4 million, or 17.5 percent of net sales, in the nine months ended March 31, 2025. Excluding surcharge revenue, operating margin was 26.8 percent for the nine months ended March 31, 2026, and 21.7 percent for the nine months ended March 31, 2025, when excluding surcharge revenue and the special item identified below. The operating results for the nine months ended March 31, 2026, reflect an ongoing improvement in product mix with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies compared to the nine months ended March 31, 2025. The nine months ended March 31, 2025 include restructuring and asset impairment charges of $3.6 million.
The following presents our operating income and operating margin, in each case excluding the impact of surcharge revenue on net sales and the special item. We present and discuss these financial measures because management believes removing these items provides a more consistent and meaningful basis for comparing ongoing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Nine Months Ended March 31, | ||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 2,273.2 | $ | 2,121.5 | ||||||||||
| Less: surcharge revenue | 425.4 | 399.1 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 1,847.8 | $ | 1,722.4 | ||||||||||
| Operating income | $ | 495.1 | $ | 370.4 | ||||||||||
| Special item: | ||||||||||||||
| Restructuring and asset impairment charges | — | 3.6 | ||||||||||||
| Adjusted operating income excluding special item | $ | 495.1 | $ | 374.0 | ||||||||||
| Operating margin | 21.8 | % | 17.5 | % | ||||||||||
| Operating margin excluding surcharge revenue and special item | 26.8 | % | 21.7 | % | ||||||||||
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Interest Expense, Net and Debt Extinguishment Losses
Interest expense, net for the nine months ended March 31, 2026, was $30.3 million compared with $36.6 million in the nine months ended March 31, 2025. Capitalized interest reduced interest expense by $4.7 million for the nine months ended March 31, 2026, and $1.6 million for the nine months ended March 31, 2025. The lower interest expense, net in the nine months ended March 31, 2026, is due to higher capitalized interest and a lower interest rate on the 2034 Notes as compared to the notes that were prepaid and redeemed in full in November 2025.
Debt extinguishment losses for the nine months ended March 31, 2026, were $15.6 million related to the prepayment, in full, of the senior unsecured notes due July 2028 and March 2030. This consisted of $11.4 million of debt prepayment costs and $4.2 million of accelerated issue costs. There were no debt extinguishment losses for the nine months ended March 31, 2025.
Other (Income) Expense, Net
Other income, net was $2.3 million for the nine months ended March 31, 2026, compared to other expense, net of $5.6 million in the nine months ended March 31, 2025. The nine months ended March 31, 2026, reflect interest income of $6.1 million compared to $5.5 million in the nine months ended March 31, 2025. The nine months ended March 31, 2026, includes $4.3 million of expense from pension earnings, interest and deferrals compared to expense of $11.6 million in the nine months ended March 31, 2025, driven primarily by greater expected returns on plan assets during fiscal year 2026.
Income Taxes
Income tax expense for the nine months ended March 31, 2026, was $84.1 million, or 18.6 percent of income before income taxes as compared with income tax expense of $63.9 million, or 19.5 percent of income before income taxes for the nine months ended March 31, 2025.
Income tax expense for the nine months ended March 31, 2026, includes discrete tax benefits of $17.0 million attributable to employee share-based compensation, $3.6 million associated with debt prepayment costs and $2.5 million as a result of changes in the Company's prior year tax positions. Income tax expense for the nine months ended March 31, 2025, included discrete tax benefits of $13.0 million attributable to employee share-based compensation.
The One Big Beautiful Bill Act (“OBBBA”) was signed into law on July 4, 2025. The provisions of the OBBBA have varying effective dates. The OBBBA allows an elective deduction for domestic research and development expenses, a reinstatement of elective 100 percent first-year bonus depreciation and modifies the tax rates on Foreign-Derived Deduction Eligible Income and income from non-U.S. subsidiaries (Net CFC Tested Income), among other provisions. A quantitative estimate of the specific financial effects for future periods cannot be reasonably determined at this time due to the complexity of the changes in the tax reform. The impact of the provisions in the OBBBA will depend on our facts in each fiscal year and anticipated guidance from the Internal Revenue Service; however, we do not expect they will have a material impact on our effective tax rate.
On October 8, 2021, the Organization for Economic Co-operation and Development ("OECD") released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework. In June 2025, the U.S. and the G-7 countries announced the intention to reach an agreement that would exempt U.S. parented multinationals from certain of the Pillar Two rules. In January of 2026 additional guidance was released, the “Side-by Side Package." We are currently evaluating the guidance. The Pillar Two Framework as it exists today does not have a significant impact on our financial position, results of operations or cash flows.
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Business Segment Results
We have two reportable business segments: SAO and PEP.
The following table includes comparative information for our volumes by business segment:
| Pounds sold | Nine Months Ended March 31, | Pounds Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | ||||||||||||||||||||||||
| Specialty Alloys Operations | 143,418 | 139,400 | 4,018 | 3 | % | |||||||||||||||||||||
| Performance Engineered Products * | 7,104 | 7,424 | (320) | (4) | % | |||||||||||||||||||||
| Intersegment | (2,226) | (2,590) | 364 | 14 | % | |||||||||||||||||||||
| Total pounds sold | 148,296 | 144,234 | 4,062 | 3 | % | |||||||||||||||||||||
* Pounds sold data for the PEP segment includes Dynamet and Additive businesses only.
The following table includes comparative information for our net sales by business segment:
| Net sales | Nine Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Specialty Alloys Operations | $ | 2,056.3 | $ | 1,889.5 | $ | 166.8 | 9 | % | ||||||||||||||||||
| Performance Engineered Products | 274.5 | 300.8 | (26.3) | (9) | % | |||||||||||||||||||||
| Intersegment | (57.6) | (68.8) | 11.2 | 16 | % | |||||||||||||||||||||
| Total net sales | $ | 2,273.2 | $ | 2,121.5 | $ | 151.7 | 7 | % | ||||||||||||||||||
The following table includes comparative information for our net sales by business segment, but excluding surcharge revenue:
| Net sales excluding surcharge revenue | Nine Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||||||||||||||
| Specialty Alloys Operations | $ | 1,646.1 | $ | 1,509.9 | $ | 136.2 | 9 | % | ||||||||||||||||||
| Performance Engineered Products | 255.0 | 275.3 | (20.3) | (7) | % | |||||||||||||||||||||
| Intersegment | (53.3) | (62.8) | 9.5 | 15 | % | |||||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 1,847.8 | $ | 1,722.4 | $ | 125.4 | 7 | % | ||||||||||||||||||
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The following presents our operating margin excluding the impact of surcharge revenue on net sales for our SAO segment:
| Specialty Alloys Operations | Nine Months Ended March 31, | |||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 2,056.3 | $ | 1,889.5 | ||||||||||
| Less: surcharge revenue | 410.2 | 379.6 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 1,646.1 | $ | 1,509.9 | ||||||||||
| Operating income | $ | 553.2 | $ | 421.5 | ||||||||||
| Operating margin | 26.9 | % | 22.3 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue | 33.6 | % | 27.9 | % | ||||||||||
The following presents our operating margin excluding the impact of surcharge revenue on net sales for our PEP segment:
| Performance Engineered Products | Nine Months Ended March 31, | |||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net sales | $ | 274.5 | $ | 300.8 | ||||||||||
| Less: surcharge revenue | 19.5 | 25.5 | ||||||||||||
| Net sales excluding surcharge revenue | $ | 255.0 | $ | 275.3 | ||||||||||
| Operating income | $ | 23.0 | $ | 25.3 | ||||||||||
| Operating margin | 8.4 | % | 8.4 | % | ||||||||||
| Adjusted operating margin excluding surcharge revenue | 9.0 | % | 9.2 | % | ||||||||||
Specialty Alloys Operations Segment
Net sales for the nine months ended March 31, 2026, for the SAO segment increased 9 percent to $2,056.3 million, as compared with $1,889.5 million in the nine months ended March 31, 2025. Excluding surcharge revenue, net sales increased 9 percent on 3 percent higher shipment volume from the nine months ended March 31, 2025. The SAO segment results reflect realized price increases and improving product mix particularly in the Aerospace and Defense and Energy end-use markets compared to the nine months ended March 31, 2025. In particular, sales excluding surcharge increased 14 percent for the Aerospace and Defense end-use market and increased 24 percent in the Energy end-use market in the nine months ended March 31, 2026, compared to the nine months ended March 31, 2025.
Operating income for the SAO segment was $553.2 million or 26.9 percent of net sales (33.6 percent of net sales excluding surcharge revenue) in the nine months ended March 31, 2026, as compared with operating income of $421.5 million or 22.3 percent of net sales (27.9 percent of net sales excluding surcharge revenue) in the nine months ended March 31, 2025. The operating income for the nine months ended March 31, 2026, reflects a combination of continued productivity gains, pricing realization and improved product mix compared to the nine months ended March 31, 2025.
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Performance Engineered Products Segment
Net sales for the nine months ended March 31, 2026, for the PEP segment decreased 9 percent to $274.5 million, as compared with $300.8 million in the nine months ended March 31, 2025. Excluding surcharge revenue, net sales decreased 7 percent compared to the nine months ended March 31, 2025. The results for the nine months ended March 31, 2026, reflect lower sales in the Medical and Distribution end-use markets partially offset by higher sales in the Aerospace and Defense and Industrial and Consumer end-use markets compared to the nine months ended March 31, 2025.
Operating income for the PEP segment was $23.0 million or 8.4 percent of net sales (9.0 percent of net sales excluding surcharge revenue) in the nine months ended March 31, 2026, compared with operating income of $25.3 million or 8.4 percent of net sales (9.2 percent of net sales excluding surcharge revenue) in the nine months ended March 31, 2025. The results for the nine months ended March 31, 2026, reflect lower sales and flat operating margins compared to the nine months ended March 31, 2025.
Liquidity and Financial Resources
During the nine months ended March 31, 2026, we generated cash from operating activities of $364.9 million as compared to $182.3 million in the nine months ended March 31, 2025. Our adjusted free cash flow, which we define under "Non-GAAP Financial Measures" below, was $207.3 million in the nine months ended March 31, 2026, as compared to $86.1 million for the nine months ended March 31, 2025. The improvement in cash from operating activities for the nine months ended March 31, 2026, reflects higher earnings after noncash adjustments to net income and less cash used to build inventory and lower required pension contributions partially offset by higher cash used for other working capital needs compared to the nine months ended March 31, 2025. Cash used to build inventory was $45.1 million in the nine months ended March 31, 2026, compared to $93.3 million of cash used to build inventory in the nine months ended March 31, 2025. During the nine months ended March 31, 2026, cash flow was negatively impacted by $31.0 million of cash used for accrued liabilities compared to $14.0 million in the nine months ended March 31, 2025.
Capital expenditures for property, plant, equipment and software were $157.6 million for the nine months ended March 31, 2026, as compared to $96.3 million for the nine months ended March 31, 2025. In fiscal year 2026, we expect capital expenditures, including the brownfield expansion, to be approximately $260.0 million.
We evaluate liquidity needs for alternative uses including funding external growth opportunities, share repurchases as well as funding consistent dividend payments to stockholders. Dividends for the nine months ended March 31, 2026, were $30.2 million as compared to $30.2 million in the nine months ended March 31, 2025. In the nine months ended March 31, 2026 and 2025 we declared and paid quarterly dividends of $0.20 per share. Additionally, we will discretionarily use excess cash for a share repurchase program up to $400.0 million of our outstanding common stock. During the nine months ended March 31, 2026, we repurchased 445,000 shares of our common stock on the open market for an aggregate of $133.9 million. During the nine months ended March 31, 2025, we repurchased 475,000 shares of our common stock on the open market for an aggregate of $77.8 million. As of March 31, 2026, $164.2 million remained available for future purchases.
During the nine months ended March 31, 2026, we made pension contributions of $17.1 million to our qualified defined benefit pension plans. We currently expect to make required contributions of $6.4 million to our domestic qualified defined benefit pension plans during the remainder of fiscal year 2026.
We have demonstrated the ability to generate cash to meet our needs through cash flows from operations, management of working capital and the ability to access capital markets to supplement internally generated funds. We target minimum liquidity of $150.0 million, consisting of cash and cash equivalents added to available borrowing capacity under our Credit Facility.
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On November 20, 2025, we entered into a Third Amended and Restated Credit Agreement with Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer and the other lenders, agents and arrangers party thereto (the "Credit Facility"). The Credit Facility amended and restated our then existing Second Amended and Restated Credit Agreement dated as of April 14, 2023, which had been set to expire on April 12, 2028. The Third Amendment extends the maturity to November 20, 2030.
The Credit Facility is an unsecured revolving credit facility with a commitment of $500.0 million subject to the right, from time to time, to request an increase of the commitment not in excess of $650.0 million and provides for the issuance of letters of credit subject to a $40.0 million sub-limit. We have the right to voluntarily prepay and re-borrow loans, to terminate or reduce the commitments under the Credit Facility, and, subject to certain lender approvals, to join subsidiaries as subsidiary borrowers. As of March 31, 2026, the borrowing rate for the Credit Facility was 5.39%, however, we had no short-term borrowings. As of March 31, 2026, we had $1.0 million of issued letters of credit under the Credit Facility and the balance of the Credit Facility, $499.0 million, remains available to us.
We believe that our total liquidity of $793.8 million as of March 31, 2026, which includes total cash and cash equivalents of $294.8 million and available borrowing capacity of $499.0 million under the Credit Facility, will be sufficient to fund our cash needs over the foreseeable future.
As of March 31, 2026, we had cash and cash equivalents of $16.6 million held at various foreign subsidiaries. Our global cash deployment considers, among other things, the geographic and institutional location of our subsidiaries' cash balances, the locations of our anticipated liquidity needs and the cost to access international cash balances, as necessary. During the nine months ended March 31, 2026, we repatriated no cash from foreign jurisdictions. From time to time, we may make short-term intercompany borrowings against our cash held outside the United States in order to reduce or eliminate any required borrowing under our Credit Facility.
We are subject to certain financial and restrictive covenants under the Credit Facility which requires the maintenance of a minimum interest coverage ratio of 3.00 to 1.00 and a consolidated net leverage ratio of no more than 3.50 to 1.00. The restrictions of these covenants (other than the financial ratio covenants) are subject to certain exceptions or threshold triggering amounts or events specified in the Credit Facility, and in some cases the restrictions may be waived by the lenders. As of March 31, 2026, we were in compliance with all of the covenants of the Credit Facility.
The following table shows our actual ratio performance with respect to the financial covenants as of March 31, 2026:
| Covenant | Covenant Requirement | Actual Ratio | ||||||||||||
| Consolidated interest coverage ratio | 3.00 to 1.00 (minimum) | 19.55 to 1.00 | ||||||||||||
| Consolidated net leverage ratio | 3.50 to 1.00 (maximum) | 0.59 to 1.00 | ||||||||||||
To the extent that we do not comply with the current or modified covenants under the Credit Facility, this could reduce our liquidity and flexibility due to potential restrictions on borrowings available to us unless we are able to obtain waivers or modifications of the covenants.
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Non-GAAP Financial Measures
The following provides additional information regarding certain non-GAAP financial measures that we use in this report. Our definitions and calculations of these items may not necessarily be the same as those used by other companies.
Net Sales and Gross Margin Excluding Surcharge Revenue
This report includes discussions of net sales as adjusted to exclude the impact of raw material surcharge and the resulting impact on gross margin, which represent financial measures that have not been determined in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). We present and discuss these financial measures because management believes removing the impact of raw material surcharge from net sales provides a more consistent basis for comparing results of operations from period to period for the reasons discussed earlier in this report. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, our Board of Directors and others. See our earlier discussion of "Gross Profit" for a reconciliation of net sales and gross margin, excluding surcharge revenue, to net sales as determined in accordance with U.S. GAAP. Net sales and gross margin excluding surcharge revenue are not U.S. GAAP financial measures and should not be considered in isolation of, or as a substitute for, net sales and gross margin calculated in accordance with U.S. GAAP.
Adjusted Operating Income and Adjusted Operating Margin Excluding Surcharge Revenue and Special Items
This report includes discussions of operating income and operating margin as adjusted to exclude the impact of raw material surcharge revenue and special items which represent financial measures that have not been determined in accordance with U.S. GAAP. We present and discuss these financial measures because management believes removing the impact of raw material surcharge from net sales provides a more consistent and meaningful basis for comparing results of operations from period to period for the reasons discussed earlier in this report. In addition, management believes that excluding special items from operating income and operating margin is helpful in analyzing our operating performance, as these items are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, our Board of Directors and others. See our earlier discussion of operating income for a reconciliation of adjusted operating income and adjusted operating margin excluding surcharge revenue and special items to operating income and operating margin determined in accordance with U.S. GAAP. Adjusted operating income and adjusted operating margin excluding surcharge revenue and special items are not U.S. GAAP financial measures and should not be considered in isolation of, or as a substitute for, operating income and operating margin calculated in accordance with U.S. GAAP.
Adjusted Earnings Per Diluted Share
The following provides a reconciliation of adjusted earnings per diluted share, to its most directly comparable U.S. GAAP financial measures:
| ($ in millions, except per share amounts) | Earnings Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||||||||||||
Three Months Ended March 31, 2026, as reported | $ | 176.7 | $ | (37.1) | $ | 139.6 | $ | 2.77 | ||||||||||||||||||
| Special item: | ||||||||||||||||||||||||||
| None reported | — | — | — | — | ||||||||||||||||||||||
Three Months Ended March 31, 2026, as adjusted | $ | 176.7 | $ | (37.1) | $ | 139.6 | $ | 2.77 | ||||||||||||||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 50.3 million for the three months ended March 31, 2026.
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| ($ in millions, except per share amounts) | Earnings Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||||||||||||
Three Months Ended March 31, 2025, as reported | $ | 122.0 | $ | (26.6) | $ | 95.4 | $ | 1.88 | ||||||||||||||||||
| Special item: | ||||||||||||||||||||||||||
| None reported | — | — | — | — | ||||||||||||||||||||||
Three Months Ended March 31, 2025, as adjusted | $ | 122.0 | $ | (26.6) | $ | 95.4 | $ | 1.88 | ||||||||||||||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 50.7 million for the three months ended March 31, 2025.
| ($ in millions, except per share amounts) | Earnings Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||||||||||||
Nine Months Ended March 31, 2026, as reported | $ | 451.5 | $ | (84.1) | $ | 367.4 | $ | 7.29 | ||||||||||||||||||
| Special item: | ||||||||||||||||||||||||||
| Debt extinguishment losses | 15.6 | (3.6) | 12.0 | 0.24 | ||||||||||||||||||||||
Nine Months Ended March 31, 2026, as adjusted | $ | 467.1 | $ | (87.7) | $ | 379.4 | $ | 7.53 | ||||||||||||||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 50.4 million for the nine months ended March 31, 2026.
| ($ in millions, except per share amounts) | Earnings Before Income Taxes | Income Tax Expense | Net Income | Earnings Per Diluted Share* | ||||||||||||||||||||||
Nine Months Ended March 31, 2025, as reported | $ | 328.2 | $ | (63.9) | $ | 264.3 | $ | 5.21 | ||||||||||||||||||
| Special item: | ||||||||||||||||||||||||||
| Restructuring and asset impairment charges | 3.6 | (0.9) | 2.7 | 0.06 | ||||||||||||||||||||||
Nine Months Ended March 31, 2025, as adjusted | $ | 331.8 | $ | (64.8) | $ | 267.0 | $ | 5.27 | ||||||||||||||||||
* Impact per diluted share calculated using weighted average common shares outstanding of 50.7 million for the nine months ended March 31, 2025.
Management believes that the presentation of earnings per diluted share adjusted to exclude the impact of special items is helpful in analyzing the operating performance of the Company, as these items are not indicative of ongoing operating performance. Management uses its results excluding these amounts to evaluate its operating performance and to discuss its business with investment institutions, the Company's Board of Directors and others. Our definitions and calculations of these items may not necessarily be the same as those used by other companies. Adjusted earnings per diluted share is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, earnings per diluted share calculated in accordance with U.S. GAAP.
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Adjusted Free Cash Flow
This report includes discussions of adjusted free cash flow which is a non-GAAP financial measure and may not be comparable to adjusted free cash flow reported by other companies. The following provides a reconciliation of adjusted free cash flow, as used in this report, to its most directly comparable U.S. GAAP financial measure:
| Nine Months Ended March 31, | ||||||||||||||
| ($ in millions) | 2026 | 2025 | ||||||||||||
| Net cash provided from operating activities | $ | 364.9 | $ | 182.3 | ||||||||||
| Purchases of property, plant, equipment and software | (157.6) | (96.3) | ||||||||||||
| Proceeds from disposals of property, plant and equipment | — | 0.1 | ||||||||||||
| Adjusted free cash flow | $ | 207.3 | $ | 86.1 | ||||||||||
Management believes that the presentation of adjusted free cash flow provides useful information to investors regarding our financial condition because it is a measure of cash generated which management evaluates for alternative uses. It is management's current intention to use excess cash to fund investments in capital equipment, acquisition opportunities and consistent dividend payments. Additionally, we will discretionarily use excess cash for an approved share repurchase program up to $400.0 million of our outstanding common stock. Adjusted free cash flow is not a U.S. GAAP financial measure and should not be considered in isolation of, or as a substitute for, cash flows calculated in accordance with U.S. GAAP.
Contingencies
Environmental
We are subject to various federal, state, local and international environmental laws and regulations relating to pollution, protection of public health and the environment, natural resource damages and occupational safety and health. Although compliance with these laws and regulations may affect the costs of our operations, compliance costs to date have not been material. We have environmental remediation liabilities at some of our owned operating facilities and have been designated as a PRP with respect to certain third party Superfund waste-disposal sites and other third party-owned sites. We accrue amounts for environmental remediation costs that represent our best estimate of the probable and reasonably estimable future costs related to environmental remediation. During the nine months ended March 31, 2026, we increased the liability for environmental remediation costs by $0.1 million. The liabilities recorded for environmental remediation costs at Superfund sites, other third party-owned sites and Carpenter-owned current or former operating facilities remaining at March 31, 2026 and June 30, 2025 were $17.5 million and $17.4 million, respectively. Additionally, we have been notified that we may be a PRP with respect to other Superfund sites as to which no proceedings have been instituted against us. Neither the exact amount of remediation costs nor the final method of their allocation among all designated PRPs at these Superfund sites have been determined. Accordingly, at this time, we cannot reasonably estimate expected costs for such matters. The liability for future environmental remediation costs that can be reasonably estimated is evaluated on a quarterly basis.
Estimates of the amount and timing of future costs of environmental remediation requirements are inherently imprecise because of the continuing evolution of environmental laws and regulatory requirements, the availability and application of technology, the identification of currently unknown remediation sites and the allocation of costs among the PRPs. Based upon information currently available, such future costs are not expected to have a material effect on our financial position, results of operations or cash flows over the long-term. However, such costs could be material to our financial position, results of operations or cash flows in a particular future quarter or year.
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Other
We are defending various routine claims and legal actions that are incidental to our business, and that are common to our operations, including those pertaining to product claims, commercial disputes, patent infringement, employment actions, employee benefits, compliance with domestic and foreign laws and regulations, personal injury claims and tax issues. Like many other manufacturing companies in recent years we, from time to time, have been named as a defendant in lawsuits alleging personal injury as a result of exposure to chemicals and substances in the workplace such as asbestos. We provide for costs relating to these matters when a loss is probable and the amount of the loss is reasonably estimable. The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount and timing (both as to recording future charges to operations and cash expenditures) of the resolution of such matters. While it is not feasible to determine the outcome of these matters, we believe that the total liability from these matters will not have a material effect on our financial position, results of operations or cash flows over the long-term. However, there can be no assurance that an increase in the scope of pending matters or that any future lawsuits, claims, proceedings or investigations will not be material to our financial position, results of operations or cash flows in a particular future quarter or year.
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Critical Accounting Policies and Estimates
A summary of other significant accounting policies is discussed in our 2025 Form 10-K Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," and in Note 1, Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in Part II, Item 8 thereto.
Long-Lived Assets
Long-lived assets are reviewed for impairment and written down to fair value whenever events or changes in circumstances indicate that the carrying value may not be recoverable through estimated future undiscounted cash flows. The amount of the impairment loss is the excess of the carrying amount of the impaired assets over the fair value of the assets based upon estimated future discounted cash flows. We evaluate long-lived assets for impairment by individual business unit. Changes in estimated cash flows could have a significant impact on whether or not an asset is impaired and the amount of the impairment.
Goodwill
Goodwill is not amortized but instead is tested at least annually for impairment as of June 1, or more frequently if events or circumstances indicate that the carrying amount of goodwill may be impaired. Goodwill may first be assessed based on qualitative factors (Step 0) to determine whether a quantitative goodwill impairment test is necessary. In fiscal year 2025, we performed the Step 0 qualitative assessment rather than immediately performing the Step 1 quantitative valuation as has been done historically. The qualitative assessment includes, but is not limited to, reviewing factors such as macroeconomic conditions, industry and market considerations, cost factors, reporting unit-specific financial performance and other events, such as strategy and primary customer base.
As of March 31, 2026, we have two reporting units with goodwill recorded. Goodwill associated with the SAO reporting unit as of March 31, 2026, was $195.5 million and represents 86 percent of total goodwill. The remaining goodwill recorded as of March 31, 2026, of $31.8 million is associated with the Dynamet reporting unit in the PEP segment.
For fiscal year 2025, we concluded that the qualitative assessment for each of the reporting units as of June 1, 2025 was appropriate given (a) just one year has passed since we performed a full valuation of the reporting units, (b) the June 1, 2024 valuations of our reporting units yielded significant cushions between the fair value and carrying value, and (c) there had been no significant adverse changes to the Company since the prior year. Based on the results of the qualitative analysis, and consideration of the totality of the positive and mitigating events and circumstances with adverse factors, we concluded there was no indication that it was more likely than not that any of our reporting units’ carrying values (with allocated goodwill) exceeded their respective fair values as of June 30, 2025.
When preparing the quantitative impairment test, if applicable, potential impairment is identified by comparing the fair value of a reporting unit to its carrying value. If the carrying value of the reporting unit exceeds its fair value, any impairment loss is measured by the difference between the carrying value of the reporting unit and its fair value, not to exceed the carrying amount of goodwill. The discounted cash flow analysis for each reporting unit tested requires significant estimates and assumptions related to cash flow forecasts, discount rates, terminal values and income tax rates. The cash flow forecasts include significant judgments and assumptions related to revenue growth rates, which include perpetual growth rates, gross margin and weighted average cost of capital. The cash flow forecasts are developed based on assumptions about each reporting unit's markets, product offerings, pricing, capital expenditure and working capital requirements as well as cost performance.
The discount rates used in the discounted cash flow are estimated based on a market participant's perspective of each reporting unit's weighted average cost of capital. The terminal value, which represents the value attributed to the reporting unit beyond the forecast period, is estimated using a perpetuity growth rate assumption. The income tax rates used in the discounted cash flow analysis represent estimates of the long-term statutory income tax rates for each reporting unit based on the jurisdictions in which the reporting units operate.
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The estimate of fair value requires significant judgment. We based our fair value estimates on assumptions that we believe to be reasonable but that are unpredictable and inherently uncertain, including estimates of future growth rates and operating margins and assumptions about the overall economic climate and the competitive environment for our business units. There can be no assurance that our estimates and assumptions made for purposes of our goodwill and identifiable intangible asset testing as of the time of testing will prove to be accurate predictions of the future. If our assumptions regarding business projections, competitive environments or anticipated growth rates are not correct, we may be required to record goodwill and/or intangible asset impairment charges in future periods, whether in connection with our next annual impairment testing or earlier, if an indicator of an impairment is present before our next annual evaluation. We continuously monitor for events and circumstances that could negatively impact the key assumptions in determining fair value of the reporting units.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 3 to Notes to Consolidated Financial Statements included in Item 1.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected, anticipated or implied. The most significant of these uncertainties are described in Carpenter Technology's filings with the Securities and Exchange Commission, including its report on Form 10-K for the fiscal year ended June 30, 2025, Form 10-Q for the fiscal quarters ended September 30, 2025, and December 31, 2025, and the exhibits attached to such filings. They include but are not limited to: (1) the cyclical nature of the specialty materials business and certain end-use markets, including aerospace, defense, medical, energy, transportation, industrial and consumer, or other influences on Carpenter Technology's business such as new competitors, the consolidation of competitors, customers, and suppliers or the transfer of manufacturing capacity from the United States to foreign countries; (2) the ability of Carpenter Technology to achieve cash generation, growth, earnings, profitability, operating income, cost savings and reductions, qualifications, productivity improvements or process changes; (3) the ability to recoup increases in the cost of energy, raw materials, freight or other factors; (4) domestic and foreign excess manufacturing capacity for certain metals; (5) fluctuations in currency exchange and interest rates; (6) the effect of government trade actions, including tariffs; (7) the valuation of the assets and liabilities in Carpenter Technology's pension trusts and the accounting for pension plans; (8) possible labor disputes or work stoppages; (9) the potential that our customers may substitute alternate materials or adopt different manufacturing practices that replace or limit the suitability of our products; (10) the ability to successfully acquire and integrate acquisitions; (11) the availability of credit facilities to Carpenter Technology, its customers or other members of the supply chain; (12) the ability to obtain energy or raw materials, especially from suppliers located in countries that may be subject to unstable political or economic conditions; (13) Carpenter Technology's manufacturing processes are dependent upon highly specialized equipment located primarily in facilities in Reading and Latrobe, Pennsylvania and Athens, Alabama for which there may be limited alternatives if there are significant equipment failures or a catastrophic event; (14) the ability to hire and retain a qualified workforce and key personnel, including members of the executive management team, management, metallurgists and other skilled personnel; (15) fluctuations in oil and gas prices and production; (16) the impact of potential cyber attacks and information technology or data security breaches; (17) the ability of suppliers to meet obligations due to supply chain disruptions or otherwise; (18) the ability to meet increased demand, production targets or commitments; (19) the ability to manage the impacts of natural disasters, climate change, pandemics and outbreaks of contagious diseases and other adverse public health developments; (20) geopolitical, economic, and regulatory risks relating to our global business, including geopolitical and diplomatic tensions, instabilities and conflicts, such as the war in Iran, the war in Ukraine, the war between Israel and HAMAS, the war between Israel and Hezbollah, Houthi attacks on commercial shipping vessels and other naval vessels as well as compliance with U.S. and foreign trade and tax laws, sanctions, embargoes and other regulations; (21) challenges affecting the commercial aviation industry or key participants including, but not limited to production and other challenges at The Boeing Company; and (22) the consequences of the announcement, maintenance or use of Carpenter Technology’s share repurchase program. Any of these factors could have an adverse and/or fluctuating effect on Carpenter Technology's results of operations. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this Form 10-Q or as of the dates otherwise indicated in such forward-looking statements. Carpenter Technology undertakes no obligation to update or revise any forward-looking statements.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We use derivative financial instruments to reduce certain types of financial risk. Firm price sales arrangements involve a risk of profit margin fluctuations particularly as raw material prices have been volatile. Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. As discussed in Note 13 to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, "Financial Statements," in order to reduce the risk of fluctuating profit margins on these sales, we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the products sold under the firm price sales arrangements. If a customer fails to perform its obligations under the firm price sales arrangements, we may realize losses as a result of the related commodity forward contracts. As of March 31, 2026, we had approximately $0.3 million of net deferred gains related to commodity forward contracts to purchase certain raw materials. A large portion of this balance is related to commodity forward contracts to support firm price sales arrangements associated with many customers in addition to credit already extended to these customers in connection with outstanding trade receivables. Our customers have historically performed under these arrangements, and we believe that they will honor such obligations in the future.
We are actively involved in managing risks associated with energy resources. Risk containment strategies include interaction with primary and secondary energy suppliers as well as obtaining adequate insurance coverage to compensate us for potential business interruption related to lack of availability of energy resources. In addition, we have used forwards to fix the price of a portion of our anticipated future purchases of certain energy requirements to protect against the impact of significant increases in energy costs. We also use surcharge mechanisms to offset a portion of these charges where appropriate.
Fluctuations in foreign currency exchange rates could subject us to risk of losses on anticipated future cash flows from our international operations or customers. Foreign currency forward contracts are used to hedge certain foreign exchange risk.
All hedging strategies are reviewed and approved by senior financial management before being implemented. Senior financial management has established policies regarding the use of derivative instruments that prohibit the use of speculative or leveraged derivatives.
Based on the current funding level, the benchmark allocation policy for the Company's largest pension plan assets is to have approximately 75 percent in return seeking assets and 25 percent in liability-hedging assets. Return seeking assets include global equities, diversified credit and real assets. Liability-hedging assets include bond funds and cash. When the funding level of the plan reaches 95 percent and improves to fully or over-funded status in increments of 5 percent, assets will be shifted from return seeking to liability-hedging assets in accordance with the glidepath policy outlined in the pension plan's Investment Policy Statement.
The status of our financial instruments as of March 31, 2026, is provided in Note 13 to the consolidated financial statements included in Part I, Item 1, "Financial Statements" of this Quarterly Report on Form 10-Q. Assuming either of the following occurred on March 31, 2026, (a) an instantaneous 10 percent decrease in the price of raw materials and energy for which we have commodity forward contracts, or (b) a 10 percent strengthening of the U.S. dollar versus foreign currencies for which foreign exchange forward contracts existed, our results of operations would not have been materially affected in either scenario.
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Item 4. Controls and Procedures
(a) Evaluation of Effectiveness of Disclosure Controls and Procedures
The Company's management, with the participation of the Company's Chairman of the Board and Chief Executive Officer and Senior Vice President and Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as defined in Rules 13a—15(e) and 15d—15(e) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") as of March 31, 2026. Based on that evaluation, the Chairman of the Board and Chief Executive Officer and Senior Vice President and Chief Financial Officer, concluded that the Company's disclosure controls and procedures as of March 31, 2026, were effective in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required under the Securities and Exchange Commission's rules and forms, including a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to the Company's management, including the Company's Chairman of the Board and Chief Executive Officer and Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Pending legal proceedings involve ordinary routine litigation incidental to our business, which we do not believe would have a material adverse effect on our business regardless of their outcome. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Contingencies."
Item 1A. Risk Factors
We have evaluated the risks associated with our business and operations and determined that those risk factors included in Part 1, Item 1A of our 2025 Annual Report on Form 10-K adequately disclose the material risks that we face.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In July 2024, the Company's Board of Directors authorized a share repurchase program of up to $400.0 million of the Company's outstanding common stock. There is no stated expiration for the share repurchase program. The shares may be repurchased from time to time at our discretion based on capital needs of the business, general market conditions and market price of the stock. The timing or amount of the shares to be repurchased cannot be assured. The share repurchase program may be discontinued at any time. As of March 31, 2026, $164.2 million of the $400.0 million remained available for future purchases. During the quarter ended March 31, 2026, the Company purchased 145,000 shares pursuant to the terms of the share repurchase program.
The following table contains information about purchases by us of our common stock during the quarter ended March 31, 2026:
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs ($ in millions) | ||||||||||||||||||||||
| January 1-31, 2026 | — | $ | — | — | $ | 216.9 | ||||||||||||||||||||
| February 1-28, 2026 | 50,000 | 332.90 | 50,000 | 200.3 | ||||||||||||||||||||||
| March 1-31, 2026 | 95,000 | 379.64 | 95,000 | 164.2 | ||||||||||||||||||||||
Quarter ended March 31, 2026 | 145,000 | $ | 363.52 | 145,000 | $ | 164.2 | ||||||||||||||||||||
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In addition to the share repurchase program, for the three months ended March 31, 2026, 1,251 shares, at an average purchase price of $367.95, were surrendered by employees to the Company for the payment of the minimum tax liability withholding obligations upon the vesting of shares of restricted stock. We do not consider this a share repurchase program.
Item 5. Other Information
During the three months ended March 31, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act).
Item 6. Exhibits
| Exhibit No. | Description | |||||||
| Certification of Chairman of the Board and Chief Executive Officer pursuant to Rule 13a—14(a) and Rule 15d—14(a) of the Securities Exchange Act, as amended (filed herewith). | ||||||||
| Certification of Senior Vice President and Chief Financial Officer pursuant to Rule 13a—14(a) and Rule 15d—14(a) of the Securities Exchange Act, as amended (filed herewith). | ||||||||
| Certification of Chairman of the Board and Chief Executive Officer and Senior Vice President and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith). | ||||||||
| 101 | The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026, formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Changes in Equity; and (vi) the Notes to Consolidated Financial Statements (filed herewith). | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized officer.
| Carpenter Technology Corporation | |||||
| (Registrant) | |||||
| Date: April 29, 2026 | /s/ Timothy Lain | ||||
| Timothy Lain | |||||
| Senior Vice President and Chief Financial Officer | |||||
(Principal Financial Officer) | |||||
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Exhibit 31 (A)
CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Tony R. Thene, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of Carpenter Technology Corporation (the “Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: April 29, 2026 | /s/ Tony R. Thene | ||||
| Tony R. Thene | |||||
| Chairman of the Board and Chief Executive Officer | |||||
Exhibit 31 (B)
CERTIFICATIONS OF PERIODIC REPORTS PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Timothy Lain, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of Carpenter Technology Corporation (the “Registrant”);
2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and
(d) Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
| Date: April 29, 2026 | /s/ Timothy Lain | ||||
| Timothy Lain | |||||
| Senior Vice President and Chief Financial Officer | |||||
Exhibit 32
CERTIFICATION OF PERIODIC FINANCIAL REPORTS PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Carpenter Technology Corporation (the “Issuer”) on Form 10-Q for the quarter ended March 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the “Periodic Report”), I, Tony R. Thene, and I, Timothy Lain, each hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Periodic Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and that information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
| Date: April 29, 2026 | ||||||||
| /s/ Tony R. Thene | /s/ Timothy Lain | |||||||
| Tony R. Thene | Timothy Lain | |||||||
| Chairman of the Board and Chief Executive Officer | Senior Vice President and Chief Financial Officer | |||||||