Carpenter Technology Corp (CRS) 2021 Q1 法說會逐字稿

Good morning, and welcome to the Carpenter Technology Corporation First Quarter Fiscal 2021 Conference Call. (Operator Instructions) Please note, this event is being recorded.

早上好，歡迎來到 Carpenter Technology Corporation 2021 財年第一季度電話會議。（操作員說明）請注意，正在記錄此事件。

I would now like to turn the conference over to Brad Edwards with Investor Relations. Please go ahead.

我現在想將會議轉交給投資者關係部的 Brad Edwards。請繼續。

Thank you, operator. Good morning, everyone, and welcome to the Carpenter Technology earnings conference call for the fiscal 2021 first quarter ended September 30, 2020. This call is also being broadcast over the Internet along with presentation slides. Please note, for those of you listening by phone, you may experience a time delay in slide movement.

謝謝你，運營商。大家早上好，歡迎來到 Carpenter Technology 截至 2020 年 9 月 30 日的 2021 財年第一季度財報電話會議。此電話會議還連同演示幻燈片一起通過 Internet 進行廣播。請注意，對於那些通過電話收聽的人，您可能會遇到幻燈片移動的時間延遲。

Speakers on the call today are Tony Thene, President and Chief Executive Officer; and Tim Lain, Vice President and Chief Financial Officer.

今天的電話會議發言人是總裁兼首席執行官 Tony Thene；副總裁兼首席財務官 Tim Lain。

Statements made by management during this earnings presentation that are forward-looking statements are based on current expectations. Risk factors that could cause actual results to differ materially from those forward-looking statements can be found in Carpenter Technology's most recent SEC filings, including the company's report on Form 10-K for the year ended June 30, 2020, and the exhibits attached to that filing.

管理層在本次收益報告中所作的前瞻性陳述基於當前預期。可能導致實際結果與這些前瞻性陳述存在重大差異的風險因素可以在 Carpenter Technology 最近提交給美國證券交易委員會的文件中找到，包括該公司截至 2020 年 6 月 30 日止年度的 10-K 表格報告，以及那個備案。

Please also note that in the following discussion, unless otherwise noted, when management discusses sales or revenue, that reference excludes surcharge. When referring to operating margins, that is based on operating income and sales, excluding surcharge.

另請注意，在以下討論中，除非另有說明，否則當管理層討論銷售或收入時，該參考不包括附加費。當提到營業利潤率時，這是基於營業收入和銷售額，不包括附加費。

I will now turn the call over to Tony.

我現在將電話轉給托尼。

Thank you, Brad, and good morning to everyone. As we always do, let's start with a review of our safety performance on Slide #4.

謝謝你，布拉德，大家早上好。與往常一樣，讓我們首先回顧幻燈片 #4 上的安全性能。

Our total case incident rate, or TCIR, was 0.4 in the first quarter. This marked our lowest quarterly TCIR rate ever recorded. In addition, we achieved our first official injury-free month in the company's 131-year history during the month of September. A 0-injury workplace is possible. And we look forward to achieving our next milestone on our way to 0.

第一季度，我們的總案件事故率 (TCIR) 為 0.4。這是我們有史以來最低的季度 TCIR 率。此外，我們在 9 月份實現了公司 131 年曆史上的第一個官方無傷害月。零傷害工作場所是可能的。我們期待在通往 0 的道路上實現下一個里程碑。

Before moving on, I want to take a minute to recognize and thank all of our employees for their ongoing hard work and commitment during these unprecedented times. All of our facilities remain open and operating safely, which is a tremendous accomplishment. Our team has done a remarkable job of building on our core safety value and protecting each other and the communities we operate in while, at the same time, staying focused on serving our customers.

在繼續之前，我想花一點時間來表彰並感謝我們所有的員工在這個空前的時期所做的不懈努力和承諾。我們所有的設施都保持開放和安全運行，這是一項巨大的成就。我們的團隊在建立我們的核心安全價值和保護彼此以及我們經營所在的社區方面做得非常出色，同時專注於為我們的客戶提供服務。

Now let's turn to Slide 5 and review the first quarter. Our first quarter operating performance was in line with our previous guidance as demand headwinds across our end-use markets continue to be the driving factor. Given the current environment, the demand weakness is difficult to offset. However, as I have stated before, our primary focus is staying cash flow positive, and we have taken significant actions, which enabled us to continue our strong cash generation performance in Q1.

現在讓我們轉到幻燈片 5 並回顧第一季度。我們第一季度的經營業績與我們之前的指導一致，因為我們最終使用市場的需求逆風仍然是驅動因素。鑑於當前環境，需求疲軟難以抵消。然而，正如我之前所說，我們的主要重點是保持現金流為正，並且我們採取了重大行動，這使我們能夠在第一季度繼續保持強勁的現金產生表現。

In the first quarter, we generated $63 million of free cash flow and ended the first quarter with over $600 million in total liquidity, including $219 million of cash. In addition, we completed a bond offering that extended our maturities profile and provides us additional financial flexibility as we navigate the current environment. We have ample liquidity to continue managing through the COVID-19 pandemic.

第一季度，我們產生了 6300 萬美元的自由現金流，第一季度結束時流動資金總額超過 6 億美元，其中包括 2.19 億美元的現金。此外，我們完成了一次債券發行，延長了我們的期限，並在我們應對當前環境時為我們提供了額外的財務靈活性。我們有足夠的流動性來繼續應對 COVID-19 大流行。

In the first quarter, we completed the divestiture of our Amega West oil and gas business and took additional restructuring actions in our additive business unit to streamline operations and reduce costs. At the same time, we are pushing forward with our long-term growth initiatives and balancing our actions to ensure that we emerge in an even stronger market position with our customers. This includes our Athens facility, which remains a key long-term growth driver and differentiator for Carpenter Technology. We continue to collaborate with customers and make progress on achieving key additional qualifications for the facility.

第一季度，我們完成了對 Amega West 石油和天然氣業務的剝離，並對添加劑業務部門採取了額外的重組行動，以簡化運營並降低成本。與此同時，我們正在推進我們的長期增長計劃並平衡我們的行動，以確保我們在客戶面前處於更強大的市場地位。這包括我們的雅典工廠，它仍然是 Carpenter Technology 的關鍵長期增長驅動力和差異化因素。我們將繼續與客戶合作，並在實現該設施的關鍵附加資格方面取得進展。

In addition, we have further strengthened our capabilities in critical emerging technologies, most recently through the launch of our Carpenter Electrification brand. Electrification is a rapidly growing area of focus across our end-use markets, and we believe our materials solution can help customers drive enhanced performance for the product. Our new hot strip mill installation is nearing completion, which will enable us to further excel in our capabilities in this emerging area.

此外，我們進一步加強了我們在關鍵新興技術方面的能力，最近推出了我們的 Carpenter Electrification 品牌。電氣化是我們最終用途市場中一個快速增長的重點領域，我們相信我們的材料解決方案可以幫助客戶提高產品性能。我們新的熱帶鋼軋機安裝即將完工，這將使我們能夠在這一新興領域進一步發揮我們的能力。

Now let's move to Slide #6 and the end-use market update. Let me spend a little more time than usual on this slide as I anticipate most of the questions will be focused on market dynamics, especially in the Aerospace and Defense end-use market. Starting with the Aerospace and Defense end-use market and specifically the aerospace submarket, the supply chain continued to adjust to revise forward build rates in a lowered demand environment. Most supply chains continue to be over inventory, and OEMs continued the process of adjusting inventory levels across the supply chain during the quarter. Individual customers reported ongoing destocking at various rates. Many customers continue to report refusals of obligations throughout the supply chain and several customers, especially in Europe, had longer-than-normal extended shutdowns. We continue to work closely with all of our customers and finalize commercial discussions with many regarding forward sales arrangements. Though at depressed levels, we continued to secure and support areas of real demand. Cancellation and deferral requests, while not altogether behind us, did decline in the quarter. Direct bookings were relatively flat, while stock shipment activity declined as customers had lower consumption requirements versus stock contracts.

現在讓我們轉到幻燈片 #6 和最終用途市場更新。讓我在這張幻燈片上比平時多花點時間，因為我預計大多數問題將集中在市場動態上，尤其是在航空航天和國防終端市場。從航空航天和國防終端市場，特別是航空航天子市場開始，供應鏈繼續調整以在需求下降的環境中修改遠期建造率。大多數供應鏈繼續庫存過剩，原始設備製造商在本季度繼續調整整個供應鏈的庫存水平。個別客戶報告稱，他們正在以不同的速度進行去庫存。許多客戶繼續報告在整個供應鏈中拒絕履行義務，一些客戶（尤其是在歐洲）的停工時間比正常情況更長。我們將繼續與所有客戶密切合作，並與許多客戶就遠期銷售安排完成商業討論。儘管處於低迷狀態，但我們繼續確保和支持有實際需求的領域。取消和延期請求雖然沒有完全落後於我們，但在本季度確實有所下降。直接預訂相對平穩，而由於客戶的消費要求低於庫存合同，庫存運輸活動有所下降。

In our fiscal second quarter, we expect customers to continue to work through destocking requirements. While we are seeing an uptick of demand activity in some limited areas, most customers continue to report significant amounts of inventory. At the extreme, some customers report over 12 months of inventory at the current shipment levels for certain parts. On the other hand, some customers are beginning to discuss restocking, though at very limited levels.

在我們的第二財季，我們預計客戶將繼續滿足去庫存要求。雖然我們看到一些有限區域的需求活動有所增加，但大多數客戶繼續報告有大量庫存。在極端情況下，一些客戶報告某些零件的當前裝運水平超過 12 個月的庫存。另一方面，一些客戶開始討論補貨，儘管幅度非常有限。

During our second quarter, we are continuing to support near-term customer needs and are also in negotiation with key customers developing mutually beneficial outcomes in both the mid and long term. As credit has become an increasing concern with some of our customer base, we are also closely monitoring and adjusting to customer financial situations as necessary.

在第二季度，我們將繼續支持近期客戶需求，並與主要客戶進行談判，以期在中長期內取得互惠互利的成果。由於信用已成為我們一些客戶群日益關注的問題，我們也在密切監控客戶的財務狀況，並在必要時進行調整。

Concerning our defense submarket, we continue to see steady activity standing in contrast to commercial aerospace. Many of our customers involved in commercial aerospace are also involved in defense. And some customer locations report defense work as the main activity that is currently sustaining their operations. Some of the defense programs we support are seeing increased activity, and we are working to support these accordingly. We continue to be involved in new platform design and prototyping and remain excited about our long-term growth.

關於我們的國防子市場，我們繼續看到與商業航空航天形成鮮明對比的穩定活動。我們涉及商業航空航天的許多客戶也涉及國防。一些客戶地點將國防工作報告為目前維持其運營的主要活動。我們支持的一些防禦計劃正在增加活動，我們正在努力相應地支持這些計劃。我們將繼續參與新平台的設計和原型設計，並對我們的長期發展保持興奮。

Let's turn to our medical end-use market. From a macro perspective, as it relates to trends in electric procedures, hospitals reported a gradual recovery of procedures beginning in fiscal Q1 with recovery expected to continue. Medical device companies acknowledged this gradual return of elective surgeries during fiscal Q1, but are continuing to manage inventory levels downwards and only reordering necessary materials to replace critical needs. We expect destocking efforts to level off within our fiscal Q2 at both OEMs and distributors that support the medical device market.

讓我們轉向我們的醫療最終用途市場。從宏觀角度來看，由於與電動程序的趨勢有關，醫院報告稱，從第一財季開始，程序逐漸恢復，預計復甦將繼續。醫療器械公司承認在第一財季期間擇期手術逐漸恢復，但仍在繼續降低庫存水平，並且只重新訂購必要的材料來滿足關鍵需求。我們預計支持醫療器械市場的原始設備製造商和分銷商的去庫存工作將在我們第二財季趨於平穩。

In the transportation end-use market, sales increased 42% sequentially, but were down on a year-over-year basis. Global light-duty vehicle production rebounded across most global markets. In North America, we believe the light vehicle market is currently on track to recover and come close to reaching prepandemic levels in calendar year 2021. Overall, confidence is returning to the supply chain, and we believe we can benefit given the unique value our high-temperature solutions deliver. In the heavy-duty truck submarket, we began to see signs of recovery off historical low levels due in part to cyclical timing but also increased freight demand.

在運輸終端使用市場，銷售額環比增長 42%，但同比下降。全球大多數市場的輕型汽車產量都出現反彈。在北美，我們認為輕型汽車市場目前有望復蘇，並在 2021 日曆年接近大流行前的水平。總體而言，供應鏈正在恢復信心，我們相信，鑑於我們的高溫解決方案提供的獨特價值，我們可以從中受益。在重型卡車子市場，我們開始看到從歷史低位回升的跡象，部分原因是周期性時機以及貨運需求增加。

Now moving to the energy end-use market, where conditions in North America remain challenged and drilling activity is at severely depressed levels. International market has held up better due to longer project cycle lead times, but current activity levels are low. In the power generation submarket within energy, we are seeing some signs of increased activity related to a delayed maintenance cycle, but a potential uptick remains in the early stages.

現在轉向能源終端使用市場，北美的條件仍然充滿挑戰，鑽井活動處於嚴重低迷的水平。由於較長的項目週期提前期，國際市場表現較好，但目前的活動水平較低。在能源的發電子市場中，我們看到一些與延遲維護週期相關的活動增加的跡象，但潛在的上漲仍處於早期階段。

Lastly, for the industrial and consumer end-use market, sales were up both year-over-year and sequentially. Industrial sales were driven by continued strong demand for our semiconductor and control applications.

最後，對於工業和消費者終端用途市場，銷售額同比和環比都有所增長。對我們的半導體和控制應用的持續強勁需求推動了工業銷售。

Now I'll turn it over to Tim for the financial review.

現在我將把它交給蒂姆進行財務審查。

Thank you, Tony. Good morning, everyone. I'll start on Slide 8 with the income statement summary.

謝謝你，托尼。大家，早安。我將從幻燈片 8 的損益表摘要開始。

Net sales in the first quarter were $353 million, and sales, excluding surcharge, totaled $307 million. Sales, excluding surcharge, decreased 18% sequentially on 8% lower volume. Compared to the first quarter a year ago, sales decreased 37% on 29% lower volume. As Tony covered in his review of the end-use markets, the results reflected ongoing demand impacts driven by COVID-19 headwinds in our key end-use markets of Aerospace and Defense and medical. This was partially offset by increased sequential demand in transportation as North American vehicle production rebounded, albeit off a low base, from the COVID-19-related shutdowns in Q4.

第一季度的淨銷售額為 3.53 億美元，不包括附加費的銷售額總計為 3.07 億美元。銷售額（不包括附加費）環比下降 18%，銷量下降 8%。與一年前的第一季度相比，銷售額下降了 37%，銷量下降了 29%。正如 Tony 在對最終用途市場的審查中所涵蓋的那樣，結果反映了 COVID-19 逆風對我們航空航天、國防和醫療等主要最終用途市場的持續需求影響。由於北美汽車產量從第四季度與 COVID-19 相關的停工中反彈，儘管基數較低，但運輸需求的增加部分抵消了這一點。

As we have mentioned since the beginning of the pandemic, we continue to actively manage our production schedules and focus on accelerating a targeted inventory reduction program. While the reduction in inventory drives near-term cash flow generation, which I'll talk about shortly, it negatively impacts our operating income performance. SG&A expenses were $42.3 million in the first quarter, down $11 million from the same period a year ago and flat sequentially. The lower year-over-year SG&A expenses primarily reflect the impacts of restructuring actions, including the elimination of salary positions, salary furloughs as well as the impact of remote working conditions that reduced certain administrative costs, such as travel and entertainment.

正如我們自大流行開始以來所提到的，我們繼續積極管理我們的生產計劃，並專注於加速有針對性的庫存減少計劃。雖然庫存的減少推動了短期現金流的產生，我將在稍後討論這一點，但它對我們的營業收入表現產生了負面影響。第一季度的 SG&A 費用為 4230 萬美元，比去年同期減少 1100 萬美元，環比持平。SG&A 費用同比下降主要反映了重組行動的影響，包括取消薪資職位、薪資休假以及遠程工作條件的影響，這些影響降低了差旅和娛樂等某些行政成本。

The current quarter's operating results include $17.9 million of special items. This includes $10 million of restructuring charges, including severance costs, noncash asset impairment charges and lease acceleration costs. These costs are principally associated with actions that we initiated in the current quarter to reduce cost and streamline operations in our additive business unit. The special items also includes $7.9 million in COVID-19-related costs. Included in these costs are direct incremental operating costs, including outside services to execute enhanced cleaning protocols, isolation pay for employees potentially exposed to COVID-19 and additional personal protective equipment and other operating supplies and costs necessary to maintain the operations while keeping the employees safe against possible exposure. The COVID-19 costs in the current quarter also include $3.1 million of costs associated with a customer bankruptcy resulting from the COVID-19 pandemic.

本季度的經營業績包括 1790 萬美元的特殊項目。這包括 1000 萬美元的重組費用，包括遣散費、非現金資產減值費用和租賃加速費用。這些成本主要與我們在本季度為降低添加劑業務部門的成本和簡化運營而採取的行動有關。特殊項目還包括 790 萬美元的 COVID-19 相關費用。這些成本中包括直接增量運營成本，包括執行增強型清潔協議的外部服務、可能接觸 COVID-19 的員工的隔離費、額外的個人防護設備和其他運營用品以及在確保員工安全的同時維持運營所需的成本防止可能的暴露。本季度的 COVID-19 成本還包括與 COVID-19 大流行導致的客戶破產相關的 310 萬美元成本。

The operating loss was $48.8 million in the quarter. When excluding the impact of the special items, adjusted operating loss was $30.9 million compared to operating income of $59.8 million in the prior year period and adjusted operating loss of $10.7 million in the fourth quarter of fiscal year 2020. Again, the current quarter's results reflect the impact of significantly lower volume, combined with a targeted inventory reduction. Our effective tax rate for the first quarter was 28.6%. The income tax benefit was below our full year tax rate guidance as a result of the discrete tax impact of the special items as well as a $1.2 million discrete tax charge associated with certain stock-based compensation awards vesting in the quarter.

本季度的營業虧損為 4880 萬美元。排除特殊項目的影響後，調整後的營業虧損為 3090 萬美元，上年同期營業收入為 5980 萬美元，2020 財年第四季度調整後的營業虧損為 1070 萬美元。同樣，本季度的結果反映了銷量大幅下降以及有針對性的庫存減少的影響。我們第一季度的有效稅率為 28.6%。由於特殊項目的離散稅收影響以及與本季度歸屬的某些基於股票的獎勵獎勵相關的 120 萬美元的離散稅收，所得稅收益低於我們的全年稅率指導。

Earnings per share for the quarter was a loss of $0.98 per share. When excluding the impacts of special items, adjusted earnings per share was a loss of $0.58 per share.

本季度每股收益為每股虧損 0.98 美元。排除特殊項目的影響後，調整後的每股收益為每股虧損 0.58 美元。

Now turning to Slide 9 and our SAO segment results. Net sales for the quarter were $300.7 million or $254.8 million excluding surcharge. Compared to the first quarter last year, sales, excluding surcharge, decreased 35% on 28% lower volume. Sequentially, sales, excluding surcharge, decreased 17% on 6% lower volume. The results reflect ongoing demand headwinds in Aerospace and Defense as the supply chain continues to deal with the near-term reductions in OEM build rates. This was partially offset by stronger shipments in Transportation as North American production returned from COVID-19-related shutdowns and by higher demand in certain industrial applications.

現在轉向幻燈片 9 和我們的 SAO 部分結果。本季度淨銷售額為 3.007 億美元或 2.548 億美元，不包括附加費。與去年第一季度相比，不包括附加費的銷售額下降了 35%，銷量下降了 28%。不包括附加費的銷售額環比下降 17%，銷量下降 6%。該結果反映了航空航天和國防領域持續的需求逆風，因為供應鏈繼續應對 OEM 建造率的近期下降。由於北美生產從與 COVID-19 相關的停工中恢復，以及某些工業應用的需求增加，運輸出貨量增加部分抵消了這一影響。

SAO reported an operating loss of $18.6 million for the current quarter. The same quarter a year ago, SAO's operating income was $81 million and in the fourth quarter of fiscal year 2020, SAO generated $5.3 million of operating income. The year-over-year reduction in operating income primarily reflects the impacts of lower volume as well as the negative income statement impacts of reducing inventory.

SAO 報告本季度運營虧損 1860 萬美元。去年同期，SAO 的營業收入為 8100 萬美元，而在 2020 財年第四季度，SAO 的營業收入為 530 萬美元。營業收入的同比下降主要反映了銷量下降的影響以及庫存減少對損益表的負面影響。

To note, during the quarter, SAO reduced inventory by approximately $73 million. Sequentially, the lower operating income result is principally the result of lower volume as well as the impact of an unfavorable product mix due to the pronounced decline in Aerospace and Defense. In addition, the current quarter's results reflect approximately $7.3 million of direct incremental costs associated with our efforts to protect our facilities and employees against COVID-19, and as I mentioned earlier, also includes $3.1 million of costs associated with a customer bankruptcy directly resulting from COVID-19.

需要注意的是，在本季度，SAO 減少了大約 7300 萬美元的庫存。因此，較低的營業收入結果主要是由於銷量下降以及由於航空航天和國防業務的明顯下滑導致的不利產品組合的影響。此外，本季度的結果反映了與我們為保護我們的設施和員工免受 COVID-19 侵害所做的努力相關的直接增量成本約為 730 萬美元，正如我之前提到的，還包括與客戶破產直接相關的 310 萬美元成本2019冠狀病毒病。

Looking ahead, we expect demand conditions across most end-use markets will remain challenged in our upcoming second quarter of fiscal year 2021. As we have stated before, we anticipate that the demand environment across our key end-use markets will stabilize and begin to recover as we enter the second half of our fiscal year 2021.

展望未來，我們預計在即將到來的 2021 財年第二季度，大多數終端用途市場的需求狀況仍將面臨挑戰。正如我們之前所說，我們預計隨著我們進入 2021 財年下半年，我們主要終端用途市場的需求環境將趨於穩定並開始復蘇。

In response to current market conditions, we continue our focus on managing costs and further enhancing our liquidity position via working capital management. Based on current expectations, we expect SAO to generate an operating loss of approximately $18 million to $23 million in the second quarter of fiscal year 2021. This estimate includes $3 million to $4 million of COVID-19-related costs in the quarter.

為了應對當前的市場狀況，我們繼續專注於管理成本，並通過營運資金管理進一步增強我們的流動性狀況。根據目前的預期，我們預計 SAO 在 2021 財年第二季度將產生約 1800 萬至 2300 萬美元的運營虧損。這一估計包括本季度 300 萬至 400 萬美元的 COVID-19 相關成本。

Now turning to Slide 10 and our PEP segment results. Net sales, excluding surcharge, were $61.2 million, which were down 43% from the same quarter a year ago and down 20% sequentially. The year-over-year decline in sales is driven by the impacts of lower demand as a result of COVID-19, particularly in Aerospace and Defense, Medical and distribution. Additionally, sales in the energy end-use market declined as a result of our exit of the Amega West oil and gas business. The sequential decline in sales follows the themes covered in the market summary. Ongoing near-term demand pressures in Aerospace and Defense and Medical are due primarily to the impacts of the global pandemic and its impact on aircraft OEM build rates and medical elective procedures. The bright spot was in our distribution business, where we saw a sequential increase in sales off a relatively low base.

現在轉向幻燈片 10 和我們的 PEP 部分結果。不包括附加費的淨銷售額為 6120 萬美元，比去年同期下降 43%，比上一季度下降 20%。銷售額同比下降是由於 COVID-19 導致需求下降的影響，特別是在航空航天和國防、醫療和分銷領域。此外，由於我們退出 Amega West 石油和天然氣業務，能源終端使用市場的銷售額有所下降。銷售額連續下降遵循市場摘要中涵蓋的主題。航空航天、國防和醫療領域持續存在的近期需求壓力主要是由於全球大流行病的影響及其對飛機 OEM 製造率和醫療選修程序的影響。亮點是我們的分銷業務，我們看到銷售額從相對較低的基數開始連續增長。

In the current quarter, PEP reported an operating loss of $3.6 million. This compares to an operating loss of $8.4 million in the fourth quarter of fiscal year 2020 and an operating loss of $2 million in the same quarter last year. The sequential operating results reflect the unfavorable impacts of lower volume, driven primarily by COVID, offset by some savings realized from the actions we initiated over the last several quarters, both in our additive business unit and the recent divestiture of our Amega West oil and gas business. The approach to reducing cost in additives has been balanced in that we recognize the importance of being innovative in this business and remain excited about its long-term future prospects. With that approach in mind, we took actions to rationalize our footprint and infrastructure, and we have identified areas where we can reduce costs without affecting our ability to capitalize on the anticipated long-term growth opportunities. As we look ahead, we currently anticipate PEP will generate an operating loss of $3 million to $5 million in our upcoming second quarter.

在本季度，PEP 報告經營虧損 360 萬美元。相比之下，2020 財年第四季度的運營虧損為 840 萬美元，去年同期的運營虧損為 200 萬美元。連續的經營業績反映了主要由 COVID 驅動的銷量下降的不利影響，被我們在過去幾個季度採取的行動實現的一些節省所抵消，包括我們的添加劑業務部門和最近剝離我們的 Amega West 石油和天然氣商業。降低添加劑成本的方法是平衡的，因為我們認識到在該業務中進行創新的重要性，並對它的長期未來前景保持興奮。考慮到這種方法，我們採取了合理化我們的足跡和基礎設施的行動，並且我們已經確定了我們可以在不影響我們利用預期的長期增長機會的能力的情況下降低成本的領域。展望未來，我們目前預計 PEP 將在即將到來的第二季度產生 300 萬至 500 萬美元的運營虧損。

Now turning to Slide 11 and a review of free cash flow. In the current quarter, we generated $88 million of cash from operating activities. This cash generation was driven by improvements in working capital, primarily inventory. Within the quarter, we decreased inventory by $85 million, with the bulk of the inventory reduction coming from SAO. This reduction is substantial and the result of considerable effort throughout the organization to accelerate targeted inventory reduction programs across our facilities. It's worth noting that we also reduced inventory by $117 million in the fourth quarter of fiscal year 2020. That's a reduction of over $200 million of inventory in the last 2 quarters. We remain in constant communication with our key customers to ensure that we maintain the appropriate inventory and lead times are aligned as demand patterns change.

現在轉向幻燈片 11 和自由現金流的回顧。在本季度，我們從經營活動中產生了 8800 萬美元的現金。這種現金產生是由營運資本（主要是庫存）的改善推動的。在本季度內，我們減少了 8500 萬美元的庫存，其中大部分庫存減少來自 SAO。這種減少是巨大的，是整個組織為加速我們設施中有針對性的庫存減少計劃付出巨大努力的結果。值得注意的是，我們還在 2020 財年第四季度減少了 1.17 億美元的庫存。在過去的兩個季度中，庫存減少了超過 2 億美元。我們與主要客戶保持持續溝通，以確保隨著需求模式的變化，我們保持適當的庫存和交貨時間。

In the first quarter, we spent $33 million on capital expenditures. We remain on track to spend about $120 million in capital expenditures for fiscal year 2021 as planned. As a reminder, within the $120 million planned for fiscal year 2021 is the completion of the multiyear $100 million hot strip mill project to support growing demand for our soft magnetics materials. Tony will speak to the importance of this new hot strip mill will have to further enhance our leading position in the emerging area of electrification. We are also nearing the completion of a large-scale ERP system implementation that is expected to be operational in the second half of this fiscal year. In addition, as I mentioned previously, we completed the divestiture of our Amega West oil and gas business. We are pleased that we could complete this transaction and realized $18 million of proceeds in our current quarter.

第一季度，我們在資本支出上花費了 3300 萬美元。我們仍有望按計劃在 2021 財年支出約 1.2 億美元的資本支出。提醒一下，在 2021 財年計劃的 1.2 億美元中，將完成耗資 1 億美元的多年熱帶鋼軋機項目，以支持對我們軟磁材料不斷增長的需求。Tony 將談到這家新熱帶鋼軋機的重要性，它將進一步加強我們在新興電氣化領域的領先地位。我們也即將完成大規模的 ERP 系統實施，預計將在本財年下半年投入運營。此外，正如我之前提到的，我們完成了對 Amega West 石油和天然氣業務的剝離。我們很高興能夠完成此項交易並在本季度實現 1800 萬美元的收益。

With those highlights in mind, we generated $63 million of free cash flow in the quarter. From a liquidity perspective, we ended the current quarter with a total liquidity of $613 million, including $219 million of cash and $394 million of available borrowings under our credit facility. The increased liquidity reflects the cash flow generation in the quarter as well as the debt refinancing we completed in the quarter in which we issued $400 million of notes and used the proceeds to repay the $250 million of notes that were due to mature in July of 2021. For reference, the net incremental cost of extinguishing the notes of $8.2 million is included in our reported interest expense for the quarter and is treated as a special item, net of tax, when calculating adjusted EPS.

考慮到這些亮點，我們在本季度產生了 6300 萬美元的自由現金流。從流動性的角度來看，我們在本季度結束時的總流動性為 6.13 億美元，其中包括 2.19 億美元的現金和 3.94 億美元的信貸額度下的可用借款。流動性增加反映了本季度產生的現金流以及我們在本季度完成的債務再融資，我們在該季度發行了 4 億美元的票據，並將所得款項用於償還將於 2021 年 7 月到期的 2.5 億美元票據.作為參考，取消票據的淨增量成本 820 萬美元包含在我們報告的本季度利息費用中，並在計算調整後的每股收益時被視為特殊項目，扣除稅款。

Our focus on liquidity is essential in the near-term as we work our way through the temporary market disruptions brought on by COVID-19 in our end-use markets. Our thoughtful approach to capital allocation over the years as well as the actions we have taken since the onset of the pandemic have been critical and will enable us to exit this latest challenge even stronger than we entered.

我們對流動性的關注在短期內至關重要，因為我們正在努力應對 COVID-19 在我們的最終用途市場帶來的臨時市場中斷。我們多年來深思熟慮的資本配置方法以及我們自大流行病爆發以來採取的行動至關重要，將使我們能夠以比進入時更強大的方式應對這一最新挑戰。

With that, I will turn the call back over to Tony.

有了這個，我會把電話轉回給托尼。

Thanks, Tim. Moving to Slide #13. Our key priorities in the near term continue to be safeguarding our facilities and employees, maintaining liquidity and working closely with our customers. While our near-term focus is centered on the execution of those priorities, we cannot turn a blind eye to our future and the future needs of our customers.

謝謝，蒂姆。轉到幻燈片 #13。我們近期的主要優先事項仍然是保護我們的設施和員工、保持流動性以及與我們的客戶密切合作。雖然我們近期的重點是執行這些優先事項，但我們不能對我們的未來和客戶的未來需求視而不見。

During its long history, Carpenter Technology has weathered many downturns, both cyclical and macroeconomic driven, and each time emerged on the other side a stronger company. Despite these unprecedented times, we believe we have that opportunity again. Today, we remain focused on innovation and creating unique solutions that address evolving industry trends and customer material requirements. To that end, during the first quarter, we launched our Carpenter Electrification brand. Electrification is an exciting trend that is changing the way we live in and move around our world. Part of this movement involves electric motors and generators, which are replacing combustion engines in vehicles. This is where Carpenter Electrification plays a significant role.

在其悠久的歷史中，Carpenter Technology 經歷了多次週期性和宏觀經濟驅動的低迷期，並且每次都從另一邊崛起為更強大的公司。儘管經歷了前所未有的時期，但我們相信我們再次擁有這樣的機會。今天，我們仍然專注於創新和創造獨特的解決方案，以滿足不斷變化的行業趨勢和客戶材料要求。為此，在第一季度，我們推出了 Carpenter Electrification 品牌。電氣化是一個令人興奮的趨勢，它正在改變我們在世界各地生活和出行的方式。這一運動的一部分涉及電動機和發電機，它們正在取代車輛中的內燃機。這就是 Carpenter Electrification 發揮重要作用的地方。

We foresee a rapid increase in the use of electric motor and generator systems in a wide variety of mobility applications. The electric motor is now a well-established technology for passenger cars. Electric vehicles have been rapidly gaining popularity over the last 5 years and are now a reliable alternative to internal combustion engines. This trend is beginning to take hold in other markets as well. New commercial aircraft are already using more onboard electricity to power their systems than ever before. We have seen an increase in hybrid and electric aircraft designs and prototypes over the last few years. In addition, we see similar trends in the defense industry and other markets that rely on mobility and miniaturization, such as drones, autonomous robots and consumer electronics applications. In cars, aircraft and other mobility applications, size and weight are always issues that must be considered for overall performance. Vehicle designers are increasingly turning to more powerful and efficient motors that must also be small and light. Improved system designs and new technologies will deliver the performance improvements needed for future applications.

我們預見到電動馬達和發電機系統在各種移動應用中的使用將迅速增加。電動機現在是乘用車的成熟技術。電動汽車在過去 5 年中迅速普及，現在已成為內燃機的可靠替代品。這種趨勢也開始在其他市場佔據一席之地。新型商用飛機已經使用比以往更多的機載電力為其係統供電。在過去幾年中，我們看到混合動力和電動飛機設計和原型的增加。此外，我們在國防工業和其他依賴移動性和小型化的市場中看到了類似的趨勢，例如無人機、自主機器人和消費電子應用。在汽車、飛機和其他移動應用中，尺寸和重量始終是整體性能必須考慮的問題。汽車設計師越來越多地轉向更強大、更高效的電機，這些電機還必須體積小、重量輕。改進的系統設計和新技術將提供未來應用程序所需的性能改進。

New designs are using advanced state-of-the-art materials to achieve optimal performance. Our high induction, high permeability and low loss soft magnetic alloys are delivering performance benefits, miniaturization and product development flexibility. As product manufacturers push the boundaries of performance for electrification, they need stronger technology partners. Applications and testing support are increasingly important as companies work to optimize their product designs. They also need a reliable and streamlined supply chain and partners that can scale with them from prototype to production. With our high-performance soft magnetic alloy portfolio, technical expertise and advanced production capabilities, Carpenter Electrification is uniquely positioned to help electronics, motor and vehicle OEMs bring new electrification solutions to the world. With the technology and market demand as a backdrop, we remain excited about the completion of the hot strip mill installation on our Reading campus. This project, once completed later this fiscal year, will provide us with significant capabilities and critical capacity to service this growing opportunity.

新設計使用最先進的先進材料來實現最佳性能。我們的高感應、高磁導率和低損耗軟磁合金正在提供性能優勢、小型化和產品開發靈活性。隨著產品製造商不斷突破電氣化性能的界限，他們需要更強大的技術合作夥伴。隨著公司努力優化其產品設計，應用和測試支持變得越來越重要。他們還需要一個可靠和精簡的供應鍊和合作夥伴，可以與他們一起從原型擴展到生產。憑藉我們的高性能軟磁合金產品組合、技術專長和先進的生產能力，Carpenter Electrification 在幫助電子、汽車和車輛原始設備製造商為世界帶來新的電氣化解決方案方面處於獨特的地位。以技術和市場需求為背景，我們對在雷丁校區完成熱帶軋機安裝感到興奮。該項目一旦在本財年晚些時候完成，將為我們提供重要的能力和關鍵能力來服務這一不斷增長的機會。

Now let's turn to the next slide and my closing comments. Our first quarter performance was as anticipated, given volume and cost headwinds related to COVID-19 as well as our focus on driving and preserving liquidity in the near term. Looking ahead, we expect market conditions will remain largely challenging, but do anticipate some recovery in the second half of fiscal year 2021. We have chosen not to simply sit back and wait for market conditions to improve, rather we continue to actively manage our organization and align our cost structure and business activities with evolving end-use market conditions. We've taken significant actions since the start of pandemic to reduce costs and generate cash flow. These actions include accelerating working capital improvement via the Carpenter Operating Model; executing on targeted portfolio actions, including idling and divesting underperforming businesses as well as reducing cost through position eliminations, temporary furlough and hiring freezes among many other actions.

現在讓我們轉到下一張幻燈片和我的結束語。考慮到與 COVID-19 相關的數量和成本逆風，以及我們專注於在短期內推動和保持流動性，我們第一季度的業績符合預期。展望未來，我們預計市場狀況仍將充滿挑戰，但預計 2021 財年下半年會有所復甦。我們選擇不只是坐等市場狀況好轉，而是繼續積極管理我們的組織，並使我們的成本結構和業務活動與不斷變化的最終使用市場狀況保持一致。自大流行開始以來，我們已採取重大行動來降低成本並產生現金流。這些行動包括通過 Carpenter 運營模式加速改善營運資本；執行有針對性的投資組合行動，包括閒置和剝離表現不佳的業務，以及通過裁員、臨時休假和凍結招聘等許多其他行動來降低成本。

With the bulk of our growth investments largely completed, we are also able to significantly reduce capital expenditures beginning in fiscal year 2021. These actions have been critical to maintain our healthy balance sheet and provide ample liquidity to weather the near-term challenges created by the pandemic. Despite the challenges related to COVID-19, today, we remain an established supply chain partner and often one of only a few providers of specialty solutions that enable mission-critical performance. We are a leader in our industry today and are committed to remaining a leader for decades to come. In the face of these unprecedented times, we reaffirm that we expect to generate positive free cash flow and positive adjusted EBITDA in fiscal year 2021. We have taken and will continue to take the necessary steps to position Carpenter Technology to be an even stronger company on the other side of this pandemic. Thank you for your interest, and I'll turn it back to the operator to field your questions.

隨著我們的大部分增長投資基本完成，我們還能夠從 2021 財年開始大幅減少資本支出。這些行動對於維持我們健康的資產負債表和提供充足的流動性以應對疫情帶來的近期挑戰至關重要。儘管存在與 COVID-19 相關的挑戰，但今天，我們仍然是成熟的供應鏈合作夥伴，並且通常是少數幾個能夠實現關鍵任務性能的專業解決方案提供商之一。我們是當今行業的領導者，並致力於在未來幾十年保持領導地位。面對這些前所未有的時代，我們重申，我們預計將在 2021 財年產生正的自由現金流和正的調整後 EBITDA。我們已經並將繼續採取必要的措施，使 Carpenter Technology 成為一家在這場大流行病的另一端更加強大的公司。感謝您的關注，我會把它轉回給接線員回答您的問題。

(Operator Instructions) And the first question will come from Gautam Khanna with Cowen.

（操作員說明）第一個問題將來自 Gautam Khanna 和 Cowen。

I wanted to just maybe ask you to expand the comments about kind of the various levels of channel inventory. We have some customers with a years' worth and some that are restocking. Is there any broad trends you can characterize? Maybe if you could talk about engine-oriented applications versus fasteners versus other airframe? Or if there's anything you can expand upon?

我可能只是想請您擴展有關各種級別的渠道庫存的評論。我們有一些客戶有多年的價值，有些客戶正在補貨。您可以描述任何廣泛的趨勢嗎？也許您可以談談面向引擎的應用、緊固件和其他機身？或者如果有什麼可以擴展的？

Yes. Gautam, this is Tony. Yes, there's really no more additional color there. That cuts across all of our customers. So I wouldn't classify it as the engine customers are the ones that have greater inventory or not. We see variations across whether it's engines, fasteners, structural, our distribution business in Aerospace. So really no difference there, Gautam.

是的。高塔姆，這是托尼。是的，那裡真的沒有更多的顏色了。這涉及到我們所有的客戶。所以我不會將其歸類為引擎客戶是否擁有更多庫存。無論是發動機、緊固件、結構件，還是我們在航空航天領域的分銷業務，我們都看到了變化。所以真的沒有區別，Gautam。

Okay. And you guys have talked about how in the second half of the fiscal year, so the March quarter, you'll start to see demand recover. What grounds that view? I'm just curious, like do you have order visibility? Do you have -- what gives you that conviction?

好的。你們談到瞭如何在本財年下半年，即三月季度，你們將開始看到需求復蘇。這種觀點的根據是什麼？我只是好奇，你有訂單可見性嗎？你有——是什麼讓你有這種信念？

Well, we are very close to our customers, spend a lot of time, obviously, with our customers. So we have a good line of sight on what we think is going to happen in the second half. And in fact, we just reaffirmed that internally going through it customer by customer, market by market. So I don't think you're going to see a 50% increase in the second half, Gautam, I don't think anybody's saying that. But I do think that you'll see an uptick in the third and the fourth quarter. Keeping in mind that first and second quarter have been obviously extremely low. So yes, we're fairly confident that we'll see an uptick in the second half.

好吧，我們與客戶非常接近，顯然，我們花了很多時間與客戶在一起。因此，我們對下半年將要發生的事情有很好的了解。事實上，我們剛剛重申，在內部逐個客戶、逐個市場地檢查它。所以我認為你不會在下半年看到 50% 的增長，Gautam，我認為沒有人這麼說。但我確實認為你會看到第三和第四季度有所上升。請記住，第一季度和第二季度顯然非常低。所以是的，我們相當有信心我們會在下半年看到一個上升。

And I'm sorry to keep belaboring the point. But just to be clear on magnitude, right now, obviously, we're in a destocked period. So it looks like sales levels are below underlying consumption by the end customers, what it should be, anyway. Is the right way to think about where the Aerospace, ex surcharge, sales will shake out once we get through destocking as 30% or 40% below what you guys did in fiscal '19? So we get back to some level, obviously, below where we were because production rates are down. I'm just curious, like in terms of gauging the magnitude of the potential recovery, is that where we should think things level out, kind of 60%, 70% of where they were pre-COVID because the production rates are down by that level? Or is there some sort of offset to that, whether it be share or otherwise? Or downside to that because of...

我很抱歉一直在強調這一點。但只是為了明確規模，現在，顯然，我們正處於去庫存時期。所以看起來銷售水平低於最終客戶的基本消費，無論如何它應該是。一旦我們通過去庫存比你們在 19 財年所做的低 30% 或 40%，考慮航空航天（不包括附加費）銷售額將在哪裡出現的正確方法是正確的嗎？因此，我們顯然回到了某個水平，低於我們原來的水平，因為生產率下降了。我只是好奇，就像衡量潛在復甦的幅度一樣，我們應該認為事情趨於平穩，大約是 COVID 前水平的 60%、70%，因為生產率下降了等級？或者是否有某種抵消，無論是份額還是其他？或者不利的是因為...

Really, really -- yes, Gautam tough question, obviously, and it's the question that most people are asking. If you just take a look at this quarter on a year-over-year basis, Aerospace is down 45% to 50%. So when does that come back? Is it 2 quarters? Is it 3, 4 quarters? I can tell you this that might help you, if you take a look at what we think the second half of the year is going to be, you're probably in that 10% to 15% -- or you're in that teen, you're -- that type of recovery that I think you'll see. And I think it's going to be a gradual improvement from then on.

真的，真的——是的，Gautam 顯然是個棘手的問題，而且這是大多數人都在問的問題。如果你只看這個季度的同比情況，航空航天下降了 45% 到 50%。那什麼時候回來呢？是2個季度嗎？是3、4節嗎？我可以告訴你這可能對你有幫助，如果你看一下我們認為今年下半年會發生什麼，你可能在 10% 到 15% 之間——或者你在那個青少年，你是——我認為你會看到的那種恢復。而且我認為從那時起這將是一個漸進的改進。

Got it. Like 10% to 15% above where we are now, thereabouts?

知道了。大約比我們現在高出 10% 到 15%？

Yes. I think that's reasonable. I think that's reasonable, yes.

是的。我認為這是合理的。我認為這是合理的，是的。

Okay. And just last one for me. Any changes -- as you talked about coming to better -- more mutually beneficial kind of agreements with customers over the mid and long term, just I'm curious what types of things is Carpenter advocating for? Is it kind of minimum quantity guarantees? Is it better pricing? Is it -- what are the types of things that you guys are advocating for to kind of -- what would you consider better terms?

好的。最後一個給我。任何變化——正如你所說的在中長期內與客戶達成更好的——更多互惠互利的協議，我很好奇 Carpenter 提倡的是什麼類型的東西？它是一種最低數量保證嗎？它的定價更好嗎？是——你們提倡的是什麼類型的東西——你認為更好的條款是什麼？

Yes. It's a good question. We have great relationships with our customers. And it really hasn't been where Carpenter Technology is reaching out to them indicating this is what we're requiring. In many cases, they're giving us ideas as well. They understand that the market is going to come back. There's no one we're talking to that said, "Well, aerospace is never going to come back." So everyone understands that the market is going to come back. Everyone still believes in the macro trend. And they know that Carpenter Technology is only one of a couple of companies that can supply the materials they need. So it is a very -- it's a mutual respect type of relationship. And what we're looking for and what they're, in many cases, very happy to do is let's extend that contract for a period of time or let's increase the share that we have on that contract. So it's those types of items that we're looking for, Gautam, and quite frankly, don't get a lot of pushback in that area.

是的。這是個好問題。我們與客戶有著良好的關係。Carpenter Technology 確實沒有向他們伸出援手，表明這正是我們所需要的。在許多情況下，他們也會給我們提供想法。他們明白市場會回來。與我們交談的人沒有人說，“好吧，航空航天永遠不會回來了。”所以每個人都明白市場會回來。大家還是相信宏觀趨勢的。他們知道 Carpenter Technology 只是少數幾家可以提供他們所需材料的公司之一。所以這是一種非常 - 這是一種相互尊重的關係。在許多情況下，我們正在尋找的以及他們非常樂意做的是讓我們將該合同延長一段時間，或者讓我們增加我們在該合同中的份額。所以這就是我們正在尋找的那些類型的項目，高塔姆，坦率地說，在那個領域沒有太多的阻力。

The next question will come from Josh Sullivan with The Benchmark Company.

下一個問題將來自 The Benchmark Company 的 Josh Sullivan。

I just -- on the refusal of service that you mentioned at the aerospace customers for Q3, just in the prepared remarks there, what is the tempo of those here in early Q4? Is it the same pace as Q3? Or are those incidences either decelerated or accelerated here?

我只是 - 關於您在第 3 季度的航空航天客戶中提到的拒絕服務，就在那裡準備好的評論中，第 4 季度初這裡的節奏如何？跟Q3一樣的節奏嗎？或者這些事件在這裡是減速還是加速？

Well, I made that comment, that's across -- we're saying that across all of the supply chain. It's not just Carpenter Technology. I mean you can -- I'm sure you've heard it many times, when you have this type of drastic slowdown, everyone's trying to conserve cash and many people are trying not to take shipments. So that's happening across the entire supply chain, across every level. That's pretty well known.

好吧，我發表了那個評論，這是跨 - 我們說的是整個供應鏈。不僅僅是 Carpenter Technology。我的意思是你可以——我相信你已經聽過很多次了，當你遇到這種急劇放緩時，每個人都在努力節省現金，很多人都在努力不收貨。所以這發生在整個供應鏈的各個層面。這是眾所周知的。

From our standpoint, it's much like the answer I just gave Gautam is we work very closely with our customers trying to get to a win-win. And then specifically for us, we've seen that type of activity slow down quite a bit and believe the majority of that is behind us right now.

從我們的角度來看，這很像我剛剛給 Gautam 的答案是我們與客戶密切合作以實現雙贏。然後特別是對我們來說，我們已經看到這種類型的活動放慢了很多，並且相信其中大部分現在已經過去了。

Got it. Got it. And then just on the medical exposure, how do you think that the restocking takes place? Is it going to be a snapback as those elective surgeries come back if we might see COVID research here? Just what are you thinking about the restocking on the medical side and the timing of it?

知道了。知道了。然後就醫療曝光而言，您認為補貨是如何發生的？如果我們可以在這裡看到 COVID 研究，那麼隨著那些擇期手術的回歸，它是否會迅速恢復？您對醫療方面的補貨及其時機有何看法？

I think that -- Josh, that's a really good question. In my remarks, I talked about how we saw an increase in surgery, in procedures, but not necessarily a one-for-one as far as our supply to them, which tells you that those medical device companies and others in the supply chain are decreasing their inventories. Everybody is looking to conserve cash. What we're getting prepared for is that I think you could see a steeper recovery than in the second half as opposed to what you would normally see because I just don't think there's a one-for-one right now. I think people are still trying to protect their inventory, especially as we get to most -- everyone else that the calendar year is the end of their fiscal year, and they're being extra cautious on it. So a long way of answering your question is to say, yes, I think that the spike that you've seen in shipments or demand, let's say, for Medical could be a little steeper than maybe other markets.

我認為 - 喬什，這是一個非常好的問題。在我的發言中，我談到了我們如何看到手術、程序的增加，但就我們對他們的供應而言不一定是一對一的，這告訴你那些醫療設備公司和供應鏈中的其他人減少他們的庫存。每個人都希望節省現金。我們正在準備的是，我認為你可能會看到比下半年更陡峭的複蘇，而不是你通常會看到的，因為我認為現在沒有一對一的情況。我認為人們仍在努力保護他們的庫存，尤其是當我們了解到大多數人時——日曆年是他們財政年度的結束，他們對此格外謹慎。所以回答你的問題的一個很長的方法是說，是的，我認為你在出貨量或需求中看到的峰值，比方說，醫療可能比其他市場更陡峭一些。

Got it. And then just on the inventory drawdown, between the components and where raw materials finish, where are you focused right now? And maybe how should we see that progress since -- just as that second half, 10%, 15% kind of looks like? If you can just walk us through some of the components there and some of the changing dynamics?

知道了。然後就庫存縮減而言，在組件和原材料完成的地方之間，你現在關注哪裡？也許我們應該如何看待這一進展——就像下半年 10%、15% 的樣子一樣？您是否可以帶我們了解其中的一些組件以及一些不斷變化的動態？

Well, the 3 big components of raw materials work in process and finished goods. We look at all of those. And I think it's important to note that this inventory drawdown that we're having is not an approach, let's say, take inventory out at all cost. It's a very disciplined approach based on our lean manufacturing philosophy. And that is, as you well know, just 6 months ago, we were running at 100% and trying to make as much as possible. So in many cases, yes, we have produced inventory for future dates knowing that I was never going to shut down the front end of my process that had 50-week lead times.

好吧，原材料的三大組成部分是在製品和產成品。我們看看所有這些。而且我認為重要的是要注意，我們正在進行的這種庫存縮減並不是一種方法，比方說，不惜一切代價減少庫存。這是一種基於我們精益製造理念的非常嚴格的方法。也就是說，正如您所知，就在 6 個月前，我們還在以 100% 的速度運行，並試圖盡可能多地生產。所以在很多情況下，是的，我們已經為未來的日期製作了庫存，因為我知道我永遠不會關閉有 50 週交貨時間的流程前端。

So our inventory got a little higher than what we would have liked through -- from -- when you're looking at it from lean manufacturing point of view. So this has given us an opportunity to continue to work on our productivity and balance our plant and take out that inventory to become more balanced. Inventory, in many cases, is a detractor to productivity because it keeps you from working on the right thing. So this has been a very surgical, if you will, inventory reduction. I think there's still more that we can do. But obviously, we're not going to take out these global inventories for the next 4, 5, 6 quarters. There will be a time where they were balanced. I think the important thing is, Josh, is when we see demand come back, we're not going to put ourselves in a position where you'll have to see a significant inventory build to support that. We're going to get down to these levels. We're locking in our productivity, and we'll be able to maintain these types of relative levels even when we see the demand pick up over the next several quarters.

因此，當您從精益製造的角度來看時，我們的庫存比我們希望的要高一些。因此，這使我們有機會繼續提高生產力並平衡我們的工廠，並消除庫存以變得更加平衡。在許多情況下，庫存會降低生產力，因為它使您無法做正確的事情。因此，如果您願意的話，這是一種非常外科手術式的庫存減少。我認為我們還可以做更多的事情。但顯然，我們不會在接下來的 4、5、6 個季度中刪除這些全球庫存。總有一天他們會達到平衡。我認為重要的是，喬希，當我們看到需求回升時，我們不會讓自己處於必須看到大量庫存來支持需求的位置。我們將深入到這些級別。我們正在鎖定我們的生產力，即使我們看到未來幾個季度的需求回升，我們也能夠保持這些類型的相對水平。

Got it. No, that's very helpful. And then just one last one. You talked about your push into the electric world. Can you talk a little bit about your special alloys there? How do those compare to the current market offering? And is there any way to quantify some of the special attributes, weight, power or some metric why you think Carpenter is going to be successful in those markets?

知道了。不，這非常有幫助。然後就是最後一個。你談到了你對電氣世界的推動。你能談談你們那裡的特殊合金嗎？這些與當前市場產品相比如何？有沒有什麼方法可以量化某些特殊屬性、重量、功率或某些您認為 Carpenter 將在這些市場取得成功的指標？

Yes. I appreciate you asking that question because we think this is really important for us. We have our core business that is going to grow over the next several decades just because of the macro trends. But what we're trying to do is look at other areas of growth in areas that we're already participating in, but we can take it to the next level. And if I could take a step back, in this, what we call, soft magnetics, running an electric motor, the real the real key there is that you're -- the material that you're using, that soft magnetic material, is magnetizing and demagnetizing on and off. And that's what creates the rotation in the motor, and that's what creates the ultimate power.

是的。感謝您提出這個問題，因為我們認為這對我們來說非常重要。由於宏觀趨勢，我們的核心業務將在未來幾十年內增長。但我們正在努力做的是看看我們已經參與的領域的其他增長領域，但我們可以將其提升到一個新的水平。如果我可以退後一步，在這個，我們稱之為軟磁，運行電動機，真正的關鍵是你 - 你正在使用的材料，軟磁材料，正在通斷磁化和消磁。這就是在電機中產生旋轉的原因，也是產生最終動力的原因。

The material that you use is really important because that material will dictate the magnetic response or, what I said in my prepared comments, the induction. So the higher the induction materials, that leads to a better performing motor, that leads to a motor with higher power, higher torque, higher speed. All at the same time, making that motor smaller and lighter, which is really important for electric vehicles. Our proprietary product hyperscope does all those, and it is rated as the best in the industry right now. So that's why we have a lot of interest for that product.

您使用的材料非常重要，因為該材料將決定磁響應，或者，如我在準備好的評論中所說，感應。因此，感應材料越高，電機性能越好，從而導致電機具有更高的功率、更高的扭矩和更高的速度。同時，讓電機更小更輕，這對電動汽車來說非常重要。我們專有的產品 hyperscope 可以完成所有這些，目前被評為業內最佳。所以這就是為什麼我們對該產品很感興趣。

Now remember, Josh, even before the pandemic, Carpenter Technology was the leader in this area when it came to auxiliary power units in aerospace. We're just taking it to the next level. As the market continues to grow with the electrification of the world, we're moving closer to the customer by not just making the material but moving into stack production, and quite frankly, being pulled by our customers to get even more involved. And now, as Tim mentioned in his remarks, finishing up the almost $100 million project in our Reading campus to put in a hot strip mill, which will increase the capacity, but more importantly, the capabilities to produce that product at a lower cost than we do now and hopefully even attract more and more business that way. It's a big market today, and it's a market that could be 3 to 4x bigger over the next 5 to 10 years. So I really appreciate the question that allow us to talk about something that can really be an earnings accelerator for Carpenter Technology over the next year.

現在請記住，喬希，甚至在大流行之前，Carpenter Technology 在航空航天輔助動力裝置方面就是該領域的領導者。我們只是把它提升到一個新的水平。隨著市場隨著世界電氣化的不斷發展而不斷增長，我們不僅通過製造材料而且通過進入堆棧生產來更接近客戶，並且坦率地說，被我們的客戶拉近更多地參與其中。而現在，正如蒂姆在他的發言中提到的那樣，完成了我們雷丁校區近 1 億美元的項目，即安裝熱帶鋼軋機，這將提高產能，但更重要的是，能夠以比以往更低的成本生產該產品。我們現在這樣做，並希望以這種方式吸引越來越多的業務。今天這是一個很大的市場，而且在未來 5 到 10 年內，這個市場可能會擴大 3 到 4 倍。所以我真的很感激這個問題，它讓我們能夠談論一些真正可以成為 Carpenter Technology 明年盈利加速器的事情。

(Operator Instructions) The next question will come from Phil Gibbs with KeyBanc Capital Markets.

（操作員說明）下一個問題將來自 KeyBanc Capital Markets 的 Phil Gibbs。

Tony, can you give us some color on your backlog, either to change sequentially or year-over-year?

托尼，你能給我們一些關於你積壓的顏色嗎，是按順序改變還是按年改變？

Backlog was down about 18% sequentially. That's across all of Carpenter, that's total. Aerospace backlog was down 16% sequentially. On a year-over-year basis, backlog was down about 40% on. Aerospace backlog was down a couple of percentage points higher than that.

積壓訂單環比下降約 18%。這就是 Carpenter 的全部，這就是全部。航空航天積壓訂單環比下降 16%。與去年同期相比，積壓下降了約 40%。航空航天積壓比這高出幾個百分點。

That's helpful. And then on aerospace engines, specifically, what was the either year-over-year or sequential decline in engine revenues?

這很有幫助。然後在航空發動機方面，具體來說，發動機收入的同比下降或環比下降是多少？

If you look at engine, you remember last quarter, sequentially, it was down 30%. Now we get to this quarter, it's down another almost 40% year-over-year. For this quarter, aero engine is down about 50%. Now remember to back -- you're comparing to periods a year ago that were at the high point. Over the last 5 to 10 years, you were at the high point. So we're coming off the tops, but year-over-year, 50% down.

如果你看引擎，你會記得上個季度，按順序，它下降了 30%。現在我們到了這個季度，同比又下降了近 40%。本季度，航空發動機下降了約 50%。現在請記住後退——您正在與一年前處於高點的時期進行比較。在過去的 5 到 10 年裡，你處於巔峰時期。所以我們正在擺脫困境，但與去年同期相比，下降了 50%。

So you're saying year-over-year down 50%?

所以你是說同比下降 50%？

Yes. On aero engine.

是的。在航空發動機上。

Okay. And then I just wanted to be clear on the net working capital side. So this coming quarter, this December quarter, it sounds like it's going to be another strong quarter of taking down your inventories. Is that -- I got that. Just a simple question on that, and then I'll ask a Part B. Is that right?

好的。然後我只想明確淨營運資金方面的情況。所以下個季度，這個 12 月的季度，聽起來這將是另一個減少庫存的強勁季度。那是——我明白了。只是一個簡單的問題，然後我會問 B 部分。對嗎？

That's correct. Maybe not at the same levels, but we do still see opportunity where we'll be taking inventory out.

這是正確的。也許不在同一水平上，但我們確實看到了我們將去庫存的機會。

So any way to handicap the impacts to the P&L just from the lost absorption in this past quarter? I mean I think you had an EBIT loss in SAO of north of $15 million. If you weren't taking out inventory, just trying to gauge what that intrinsic profit would have been, would it have been closer to breakeven if you hadn't been taking out inventory and losing absorption?

那麼有什麼方法可以阻止過去一個季度吸收損失對損益表的影響呢？我的意思是，我認為您在 SAO 中的息稅前利潤損失超過 1500 萬美元。如果你不去存貨，只是想衡量內在利潤是多少，如果你不去存貨和失去吸收，它會更接近盈虧平衡嗎？

Yes. I'll let Tim take that one on him being involved.

是的。我會讓蒂姆承擔起他參與其中的責任。

Yes. Phil, I mean, I think that's a fair way of looking at it. It certainly would have been closer to breakeven or positive. I mean it really is an absorption impact, as you said. I mean you've got fixed costs that don't go into inventory. Then you've also got the variable costs when you're running at lower levels, have a larger impact on your P&L as you're bringing the inventory down. So I think that's a fair estimate directionally of what it would look like this quarter.

是的。菲爾，我的意思是，我認為這是一種公平的看待方式。它肯定會更接近盈虧平衡或積極。正如你所說，我的意思是它確實是一種吸收效應。我的意思是你有不進入庫存的固定成本。然後，當您以較低水平運行時，您還會獲得可變成本，當您降低庫存時，會對您的損益產生更大的影響。所以我認為這是對本季度情況的合理估計。

Okay. So you had about a plus or minus $20 million hit from under absorption. And then you're also saying you had about a $3.5 million hit from COVID costs.

好的。因此，由於吸收不足，您的損失大約為正負 2000 萬美元。然後你還說你因 COVID 成本損失了大約 350 萬美元。

The COVID costs we said were about $7.3 million, we said. And included in that $7.3 million is a $3 million bankruptcy impact. So the right cost is about $4 million. So just to clarify on that.

我們說的 COVID 成本約為 730 萬美元。包括在這 730 萬美元中的是 300 萬美元的破產影響。因此，正確的成本約為 400 萬美元。所以只是為了澄清這一點。

So what -- so was that bankruptcy hit in your numbers, you didn't strip it out?

那又怎麼樣——破產對你的數字造成了打擊，你沒有把它去掉嗎？

We added it back for adjusted EPS, but it's in the segment numbers that we reported.

我們為調整後的每股收益添加了它，但它在我們報告的細分市場數字中。

Okay. And then on these COVID costs, what -- can you just explain what these actually are? You may have done that, I apologize if you did.

好的。然後關於這些 COVID 成本，你能解釋一下這些到底是什麼嗎？您可能已經這樣做了，如果您這樣做了，我深表歉意。

Yes. I mean, sure, we tried to give some high level. It's basically the cost of keeping the facilities going that we wouldn't have had it not been for COVID. It's things like the extra cleaning protocols that we've initiated, rentals of equipment and extra PPE for the people in the facilities. There's some aspect of, as people suspect they have been exposed to COVID-19, we're paying them to stay home. And then just kind of other operating supplies for just general protection in the current environment.

是的。我的意思是，當然，我們試圖給出一些高水平。這基本上是保持設施運轉的成本，如果不是因為 COVID，我們就不會這樣做。這就像我們已經啟動的額外清潔協議、設備租賃和為設施中的人員提供的額外個人防護裝備。在某些方面，因為人們懷疑他們已經接觸過 COVID-19，所以我們付錢讓他們呆在家裡。然後是其他操作用品，用於在當前環境中提供一般保護。

And the next question will come from Chris Olin with Tier4 Research.

下一個問題將來自 Tier4 Research 的 Chris Olin。

I apologize, I got disconnected there for a second. So hopefully, I'm not repeating anything. If I do, let's just chalk it up to 2020. But I wanted to just follow up. I heard the tail end of the magnetic Q&A session, and I just want to make sure I understood how the -- I should think about the time line. I guess, maybe you've given numbers I've just forgotten, but how do I think about the -- you were saying demand could be 5 to 10x greater, and you mentioned earlier the end markets that you're looking at. When do we start thinking about those, call them, green bananas turning into real volume or the inflection starts? I guess I'm asking because if I was wondering if there was any big element in terms of the CapEx and the time line for the hot strip mill.

抱歉，我在那裡斷線了一秒鐘。所以希望我沒有重複任何內容。如果我這樣做，讓我們把它記到 2020 年。但我只想跟進。我聽到了有吸引力的問答環節的尾聲，我只是想確保我理解——我應該如何考慮時間線。我想，也許你給出了我剛剛忘記的數字，但我如何看待——你說需求可能會增加 5 到 10 倍，而你之前提到了你正在關注的終端市場。我們什麼時候開始考慮這些，稱它們為綠色香蕉變成實際體積或拐點開始？我想我問是因為我是否想知道在資本支出和熱帶鋼軋機的時間線方面是否有任何重要因素。

Yes. And just to be clear on that, I said the current available market to us could be 3 to 4x higher over the next 5 to 10 years. So not 5 to 10x higher, 3 to 4x higher over the next 5 to 10 years.

是的。為了明確這一點，我說過，在未來 5 到 10 年內，我們當前的可用市場可能會高出 3 到 4 倍。因此，在未來 5 到 10 年內，不是高出 5 到 10 倍，而是高出 3 到 4 倍。

Okay. I apologize.

好的。我道歉。

Yes. So that's still a big number. And I think if you followed us for a long time, you're aware that we've been in this market for quite some time on the APU side with aerospace, and this is just a way for us to fairly broaden that. As you know, I mean we're moving more and more towards the electrification. So this just takes proprietary products and now process and increased equipment into other markets like transportation, defense and so -- and consumer electronics. So this -- we're getting earnings and revenue for this right now. And I think over the next several quarters, you'll see that continue to increase. I can't give you a specific time on when that might get to that triple, but I do think it's over the next 5 years.

是的。所以這仍然是一個很大的數字。而且我認為，如果您長期關注我們，您就會知道我們在航空航天 APU 方面進入這個市場已經有一段時間了，這只是我們擴大這一市場的一種方式。如您所知，我的意思是我們正在越來越多地走向電氣化。所以這只是採用專有產品，現在加工和增加設備進入其他市場，如運輸、國防等——以及消費電子產品。所以這 - 我們現在正在為此獲得收益和收入。我認為在接下來的幾個季度裡，你會看到這種情況繼續增加。我不能給你一個具體的時間，告訴你什麼時候可以達到那個三倍，但我認為它是在未來 5 年內。

Okay. So we're not waiting for anything like the new Tesla plant in Texas or anything like that? It's just a gradual outlook of growth?

好的。所以我們不是在等待德克薩斯州的新特斯拉工廠之類的東西嗎？這只是一個漸進的增長前景？

I think it's a gradual outlook. But you read all of the stories, I mean more and more companies are moving to this direction. I mean you saw the announcement from General Motors and what they're going to do, that's significant. Across aerospace, how you could potentially see electric commercial flights, certainly at a very small scale. They're doing the testing that now. This is going to touch a lot of areas, drones and robotics. And I think we're really at the right point in time here to capitalize on it. And I think the most important point to make really is not only do we have the expertise, we have a proprietary product. And we now -- within the next 3, 6 months, we'll have our new mill up and running, which is quite an accomplishment. We're getting significant pull from our customers that want us to not only supply that proprietary product, but want us to move further or closer to them in the supply chain, whether that be in the building of stack, what we may or may not do going forward in terms of motors. So it's a really exciting opportunity for us. That is near term, and we'll hit the bottom line in the near term. It's not a decade away.

我認為這是一個循序漸進的觀點。但是你讀了所有的故事，我的意思是越來越多的公司正在朝著這個方向發展。我的意思是你看到了通用汽車公司的公告以及他們將要做的事情，這很重要。在整個航空航天領域，您如何可能看到電動商業飛行，當然是在非常小的範圍內。他們現在正在進行測試。這將涉及很多領域，無人機和機器人技術。而且我認為我們真的是在正確的時間點來利用它。我認為最重要的一點是我們不僅擁有專業知識，而且擁有專有產品。而我們現在 - 在接下來的 3、6 個月內，我們將啟動並運行我們的新工廠，這是一項了不起的成就。我們從客戶那裡獲得了巨大的吸引力，他們希望我們不僅提供專有產品，而且希望我們在供應鏈中進一步或更接近他們，無論是在堆棧構建中，我們可能會或可能不會在電機方面繼續前進。所以這對我們來說是一個非常令人興奮的機會。這是近期的，我們將在短期內觸及底線。距離十年還不到。

Okay. That makes sense. One of the issues I used to follow pretty closely with the whole product approval process at Athens. And I guess I was wondering if anything has changed since the COVID outbreak and kind of everybody got distracted by other issues. Like has it slowed down? Are you doing less work there where now maybe it pushes out some of the longer term opportunities?

好的。這就說得通了。我曾經在雅典的整個產品審批流程中密切關注的問題之一。而且我想我想知道自 COVID 爆發以來是否有任何變化，每個人都被其他問題分散了注意力。好像變慢了？你在那裡做的工作是否減少了，現在可能會推出一些長期機會？

I wouldn't say that -- I think the best word is that it's different now. The qualification process for a long, long time is a very face-to-face type of process. The customer visits your plant, you visit the customer. Obviously, with the travel restrictions, that has been limited. But we deal with a very sophisticated customer group. So we've found other ways to continue to push this process along. I mean I wouldn't say that we're at the exact speed that we were at prior to the pandemic, but it has not slowed much, again, because of the sophisticated customer base. They know that this market is coming back, and they know prior to the pandemic, this is a sold-out market that could not meet their demand. In other words, they couldn't build enough engines prior to the pandemic. So they know how important that fiscal is and we'll continue to push forward, albeit in a different manner than we did before.

我不會這麼說——我認為最好的詞是現在不同了。長期以來，資格認證過程是一個非常面對面的過程。客戶參觀你的工廠，你參觀客戶。顯然，由於旅行限制，這受到了限制。但我們與一個非常複雜的客戶群打交道。所以我們找到了其他方法來繼續推動這一進程。我的意思是我不會說我們的速度與大流行之前的速度完全一樣，但由於復雜的客戶群，它並沒有減慢多少。他們知道這個市場正在回歸，他們知道在大流行之前，這是一個售罄的市場，無法滿足他們的需求。換句話說，他們無法在大流行之前製造出足夠的發動機。所以他們知道財政的重要性，我們將繼續推進，儘管方式與以往不同。

Is there still low-hanging fruits in terms of like some big products out there, big volume products that could move the needle?

就一些大產品而言，是否仍然有唾手可得的成果，大批量產品可以移動針頭？

Yes. There's still a couple of big ones out there for us to get qualified for sure.

是的。仍然有幾個大的，我們可以肯定地獲得資格。

Okay. And then just the last question. I thought Tim said distribution orders or demand picked up. I was wondering if that was just transportation related. Or did that tie into -- I thought you said there were some areas of aerospace that were getting better. Just curious what drove that.

好的。然後是最後一個問題。我以為蒂姆說分銷訂單或需求回升。我想知道這是否只是交通相關。或者這是否與 - 我想你說過航空航天的某些領域正在變得更好。只是好奇是什麼驅動了它。

Yes. Just to be clear, when I said distribution, I was talking in the PEP business unit, in our PEP segment. We've got a distribution business within our PEP segment. And I think, Chris, that you're right at the comment, distribution is tied pretty significantly to transportation. So like the automakers returned to work, they saw a spike in demand.

是的。需要明確的是，當我說分銷時，我是在我們 PEP 部門的 PEP 業務部門談論的。我們的 PEP 部門有分銷業務。我認為，克里斯，你的評論是對的，分銷與運輸密切相關。因此，就像汽車製造商復工一樣，他們看到了需求激增。

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Brad Edwards for any closing remarks.

女士們，先生們，我們的問答環節到此結束。我想將會議轉回 Brad Edwards 的閉幕詞。

Thanks, Chad, and thanks, everyone, for joining us today on our first quarter fiscal '21 conference call. We look forward to speaking with all of you on our second quarter call. Thanks again, and have a great day.

感謝查德，感謝大家今天加入我們的 21 財年第一季度電話會議。我們期待在第二季度的電話會議上與大家交談。再次感謝，祝你有美好的一天。

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

會議現已結束。感謝您參加今天的演講。您現在可以斷開連接。