Carpenter Technology Corp (CRS) 2020 Q2 法說會逐字稿

Good morning, and welcome to the Carpenter Technology Second Quarter Fiscal 2020 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded.

早上好，歡迎來到 Carpenter Technology 2020 財年第二季度收益電話會議。（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, 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 Second Quarter ended December 31, 2019. 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. Speakers on the call today are Tony Thene, President and Chief Executive Officer; and Tim Lain, Vice President and Chief Financial Officer.

謝謝你，運營商。大家早上好，歡迎參加截至 2019 年 12 月 31 日的第二財季 Carpenter Technology 收益電話會議。此電話會議連同演示幻燈片也在互聯網上播出。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。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, 2019, Form 10-Q for the quarter ended September 30, 2019 and the exhibits attached to those filings. 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.

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，包括該公司關於截至 2019 年 6 月 30 日止年度的 10-K 表格報告、10-Q 表格報告截至 2019 年 9 月 30 日的季度以及這些文件所附的證物。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 on the call today. Let's begin on Slide 4 and a review of our safety performance. Our total case incident rate, or TCIR, stands at 1.3 through the second quarter of fiscal year 2020. Our employees are the face of our safety program. They are the most knowledgeable about the workplace and know-how to make it safer. Their engagement and promotion of our safety system is essential for our success. While TCIR is our primary measure of performance, we continue to see improvements in our leading indicators.

謝謝你，布拉德，早上好，今天在電話會議上的每個人。讓我們從幻燈片 4 開始，回顧一下我們的安全績效。到 2020 財年第二季度，我們的總案件事故率 (TCIR) 為 1.3。我們的員工是我們安全計劃的代言人。他們最了解工作場所，也知道如何使工作場所更安全。他們對我們安全系統的參與和推廣對我們的成功至關重要。雖然 TCIR 是我們衡量績效的主要指標，但我們繼續看到我們的領先指標有所改善。

For instance, when we look at our total injuries, which include first-aid treatment cases, our injury frequency rate has improved 17% year-over-year. In addition, proactive activities such as reporting of near misses and safety stops have increased by 44%.

例如，當我們查看包括急救病例在內的總傷害時，我們的傷害頻率同比提高了 17%。此外，報告未遂事件和安全停留等主動活動增加了 44%。

The emphasis we have placed on improving our safety culture has resulted in a reduced severity of injuries, which is a direct result of our employees' involvement and engagement. We're confident that continued focus on ongoing investment in our safety systems will deliver our ultimate goal of a 0 injury workplace.

我們對改善安全文化的重視降低了傷害的嚴重程度，這是我們員工參與和參與的直接結果。我們相信，繼續關注對我們安全系統的持續投資將實現我們零傷害工作場所的最終目標。

Now let's turn to Slide 5 and a review of the second quarter performance. Our second quarter results demonstrate our ability to deliver consistent year-over-year earnings growth and drive backlog expansion while generating record performance at SAO. This past quarter marked our 12th consecutive quarter of year-over-year sales and earnings growth. It also marked the 12th consecutive quarter of year-over-year backlog growth, as we continue to execute at a high level. Our solutions help customers address critical performance requirements, and this is driving expanded sales opportunities and share gains across our end-use markets.

現在讓我們轉到幻燈片 5 和第二季度業績回顧。我們第二季度的業績表明，我們有能力在 SAO 創造創紀錄業績的同時實現持續的同比收入增長並推動積壓業務擴張。上個季度標誌著我們連續第 12 個季度實現銷售額和盈利的同比增長。這也標誌著積壓訂單連續第 12 個季度同比增長，因為我們繼續保持高水平執行。我們的解決方案幫助客戶滿足關鍵的性能要求，這正在推動擴大銷售機會並在我們的最終用途市場中分享收益。

At SAO, we are driving a richer product mix, which contributed to record second quarter operating income. This marked the second consecutive quarter of record operating income performance at SAO. In addition, our deliberate mix shift, the benefit of our Athens facility and productivity improvements resulted in adjusted operating margin of 19.9% during the second quarter. This is the fifth consecutive quarter in which SAO adjusted operating margin was above 18%.

在 SAO，我們正在推動更豐富的產品組合，這有助於創紀錄的第二季度營業收入。這標誌著 SAO 連續第二個季度創紀錄的營業收入表現。此外，我們深思熟慮的組合轉變、雅典工廠的優勢和生產力的提高導致第二季度調整後的營業利潤率為 19.9%。這是 SAO 調整後營業利潤率連續第五個季度超過 18%。

In the Aerospace and Defense end-use market, sales increased 19% year-over-year and backlog was up 14% compared to last year. Our sales and backlog performance in Aerospace and Defense end-use market demonstrate the benefits of our broad solutions portfolio, our strong presence across attractive submarkets and participation on almost all the major platforms.

在航空航天和國防終端用途市場，銷售額同比增長 19%，積壓訂單同比增長 14%。我們在航空航天和國防終端用途市場的銷售和積壓業績證明了我們廣泛的解決方案組合的優勢、我們在有吸引力的子市場的強大影響力以及對幾乎所有主要平台的參與。

In addition, customer activity and dialogue at Athens remains high, and we received 4 additional VAP approvals during the second quarter. Sales in the medical end-use market, which accounts for approximately 9% of total company revenue, increased 13% compared to last year as our high-value solutions continue to capitalize on strong demand patterns.

此外，雅典的客戶活動和對話仍然很高，我們在第二季度又獲得了 4 個 VAP 批准。由於我們的高價值解決方案繼續利用強勁的需求模式，醫療終端用途市場的銷售額約占公司總收入的 9%，與去年相比增長了 13%。

Lastly, we continue to be committed to building on our strong core business by making strategic investments in critical emerging technologies. These are areas that we believe will be significant in the future of our industry, and our investments will strengthen our long-term position as a solutions provider and critical supply chain partner for our customers. I will touch more on this subject later in the presentation.

最後，我們繼續致力於通過對關鍵新興技術進行戰略投資來鞏固我們強大的核心業務。我們認為這些領域對我們行業的未來具有重要意義，我們的投資將鞏固我們作為客戶的解決方案提供商和重要供應鏈合作夥伴的長期地位。我將在稍後的演示中更多地討論這個主題。

Now let's move to Slide 6 and the end market update. Looking first at Aerospace and Defense, where sales increased 19% compared to last year. This is year-over-year growth in each of our aerospace submarkets. The 737 MAX grounding and recent production halt is a major and ongoing development for the entire aerospace supply chain. While we are certainly not immune to the situation, we do believe we are well positioned to navigate the near-term impact. I will provide more detailed comments on this topic shortly.

現在讓我們轉到幻燈片 6 和終端市場更新。首先看航空航天和國防，其銷售額與去年相比增長了 19%。這是我們每個航空航天子市場的同比增長。737 MAX 停飛和最近的停產是整個航空航天供應鏈的重大且持續的發展。雖然我們當然不能倖免於這種情況，但我們確實相信我們有能力應對近期的影響。我將很快就此主題提供更詳細的評論。

Moving on to the Medical end-use market, where sales were up 13% year-over-year. This growth was due to share gains primarily in the orthopedic and dental submarkets. It is clear our solutions bring significant value to customers as we are winning market share, and our deepened OEM relationships are unlocking incremental opportunities for our high-value applications.

轉向醫療最終用途市場，銷售額同比增長 13%。這一增長主要是由於骨科和牙科子市場的份額增長。很明顯，隨著我們贏得市場份額，我們的解決方案為客戶帶來了巨大的價值，而且我們深化的 OEM 關係正在為我們的高價值應用釋放更多機會。

Capacity expansion projects at Dynamet are nearing completion, which will allow us to further capitalize on the strong forward demand indicators we see in this end-use market. We see ongoing strong demand for applications across many of our submarkets, including orthopedics, cardiology and dental.

Dynamet 的產能擴張項目即將完成，這將使我們能夠進一步利用我們在這個終端使用市場看到的強勁的遠期需求指標。我們看到我們許多子市場對應用程序的持續強勁需求，包括骨科、心髒病學和牙科。

In the Transportation end-use market, sales were up 4% compared to last year. In the light vehicle submarket, there is increasing demand in North America for local content and high temperature resistant alloys. We are capitalizing on these demand patterns with our high temperature bar and strip solutions that are specifically designed to address increasing engine performance requirements.

在運輸終端使用市場，銷售額比去年增長了 4%。在輕型汽車子市場中，北美對本地成分和耐高溫合金的需求不斷增加。我們通過專為滿足日益增長的發動機性能要求而設計的高溫棒材和帶材解決方案來利用這些需求模式。

Now moving to the energy end-use market and our oil and gas and power generation submarkets. Total energy sales declined 26% year-over-year. The oil and gas market is facing significant headwinds in North America as operators have reduced drilling activity, idled equipment and continue to operate with a focus on managing free cash flow.

現在轉向能源終端使用市場以及我們的石油和天然氣以及發電子市場。能源總銷售額同比下降 26%。由於運營商減少了鑽井活動、閒置設備並繼續以管理自由現金流為重點，北美的石油和天然氣市場正面臨著巨大的阻力。

The North American directional and horizontal rig count fell 9% sequentially and was down 23% compared to last year. The oil and gas submarket accounts for only 5% of total company revenue. Given the ongoing challenges facing the oil and gas business, especially in North America, we initiated restructuring actions at our Amega West business during the second quarter.

北美定向和水平鑽機數量環比下降 9%，與去年相比下降 23%。石油和天然氣子市場僅占公司總收入的 5%。鑑於石油和天然氣業務面臨的持續挑戰，尤其是在北美，我們在第二季度啟動了 Amega West 業務的重組行動。

In industrial and consumer end-use market, revenues were down 18% year-over-year and sales declined mainly due to reduced infrastructure activity and some volatility in the semiconductor market. It is also important to note that our sales into the industrial submarket continue to be impacted by portfolio prioritization as we further shift our production to higher-value solutions.

在工業和消費者終端用途市場，收入同比下降 18%，銷售額下降主要是由於基礎設施活動減少和半導體市場的一些波動。同樣重要的是要注意，隨著我們進一步將生產轉向更高價值的解決方案，我們在工業子市場的銷售繼續受到產品組合優先級的影響。

Now let's move to Slide 7, where I will update you on the 737 MAX discussion. Over the last several years, we have worked hard to refine our strategic vision, which is to be a preferred solutions provider of mission-critical products and an irreplaceable partner in the supply chains we participate. I've mentioned several times in the past that the breadth of our solutions portfolio is a strategic advantage. That advantage is evident today as the supply chain manages through the 737 MAX disruption.

現在讓我們轉到幻燈片 7，我將在其中向您更新 737 MAX 的討論。在過去的幾年裡，我們一直在努力完善我們的戰略願景，即成為關鍵任務產品的首選解決方案提供商和我們參與的供應鏈中不可替代的合作夥伴。我過去曾多次提到，我們解決方案組合的廣度是一項戰略優勢。如今，隨著供應鏈順利度過 737 MAX 中斷，這一優勢顯而易見。

More than half of our total revenue is generated from the Aerospace and Defense end-use market, which, as you know, is an attractive margin business. However, we also provide key solutions in other strategic end-use market such as Medical, Industrial and Consumer and Transportation.

我們總收入的一半以上來自航空航天和國防最終用途市場，如您所知，這是一項利潤豐厚的業務。然而，我們也為其他戰略性終端用途市場提供關鍵解決方案，例如醫療、工業和消費品以及交通運輸。

Important to note that across every one of these end-use markets, we participate in the top 1% of the value pyramid, high-end specialty alloy products that address critical application performance requirements. In our Aerospace and Defense market, we participate in rich submarkets such as engines, fasteners, structural and defense with exposure on practically all commercial platforms. We believe our diverse industry participation from an application and submarket standpoint is an important differentiator when compared to other aerospace supply chain participants. As such, this portfolio breadth provides opportunities to partially mitigate disruptions in the market, such as the current 737 MAX issue over the next couple of quarters.

需要注意的是，在這些最終用途市場的每一個中，我們都參與了價值金字塔的前 1%，即滿足關鍵應用性能要求的高端特種合金產品。在我們的航空航天和國防市場，我們參與了發動機、緊固件、結構和國防等豐富的子市場，幾乎涉足所有商業平台。我們相信，與其他航空航天供應鏈參與者相比，我們從應用和子市場的角度參與多元化的行業是一個重要的區別。因此，這種投資組合的廣度提供了部分緩解市場混亂的機會，例如未來幾個季度當前的 737 MAX 問題。

With that said, it's clear that the supply chain reaction to the recent 737 MAX development remains in a state of flux. We're working closely with our customers to understand their material needs and evaluate how the reaction to the 737 MAX production halt will ultimately impact our production plans. Of course, every customer is different.

話雖如此，供應鏈對最近 737 MAX 開發的反應顯然仍處於不斷變化的狀態。我們正在與客戶密切合作，了解他們的材料需求，並評估對 737 MAX 停產的反應最終將如何影響我們的生產計劃。當然，每個客戶都是不同的。

For instance, we know of certain customers that already anticipated the latest negative news to some degree and adjusted their projected requirements. We've also seen certain customers reporting a high need for spares and asking for urgent spot support. To be clear, when I speak of the need for spares, I'm referring to older engines, which are still in service and are running longer.

例如，我們知道某些客戶已經在一定程度上預料到了最新的負面消息，並調整了他們的預期需求。我們還看到某些客戶報告對備件的需求很高，並要求緊急現場支持。需要明確的是，當我談到備件需求時，我指的是仍在使用且運行時間更長的舊發動機。

Of course, there are many supply chain participants who are still evaluating how they want to proceed as they look to balance near-term reduced requirements against the need to maintain production rate readiness. This is a critical concept to manage this production capacity in this complex supply chain can easily and effectively be turned off and on.

當然，有許多供應鏈參與者仍在評估他們希望如何進行，因為他們希望在近期減少的需求與維持生產率準備就緒的需要之間取得平衡。這是管理這個複雜供應鏈中的生產能力的關鍵概念，可以輕鬆有效地關閉和打開。

Finally, there are participants that did not anticipate the recent news. Having built ahead, they are now expressing reduced near-term requirements. That takes us to the ultimate question. What is the anticipated impact of Carpenter Technology due to the 737 MAX disruption? Carpenter Technology provides specialty materials to our customers, who, in turn, use that material to forge and manufacture parts that are ultimately used in the production of aircraft and related components.

最後，有些參與者沒有預料到最近的消息。在提前建設之後，他們現在表示會減少近期需求。這就把我們帶到了最終的問題。由於 737 MAX 中斷，Carpenter Technology 的預期影響是什麼？Carpenter Technology 為我們的客戶提供特種材料，而客戶又使用該材料鍛造和製造最終用於生產飛機和相關部件的零件。

This makes it more difficult for us to specifically identify which platform or application each pound of material that we sell will be used in. However, we know our customers well and can make certain assumptions. Those assumptions are based on where we believe our customers are positioned in the supply chain and what portion of their business is allocated to each aircraft platform as well as where they might be leading or lagging actual demand.

這使我們更難具體確定我們銷售的每磅材料將用於哪個平台或應用程序。但是，我們非常了解我們的客戶，可以做出某些假設。這些假設基於我們認為我們的客戶在供應鏈中所處的位置、他們的業務的哪一部分分配給每個飛機平台以及他們可能領先或落後於實際需求的地方。

With that framework in mind and based on what we know today, we estimate the net impact for our SAO segment in the third quarter to be approximately $10 million of operating income. Let me offer a few points of clarification. The estimate is not exact, but rather represents the average of a range based on varying time assumptions. The estimated financial impact is a net impact number. In other words, it is our estimated gross impact less an estimate of any mitigating actions.

考慮到該框架並根據我們今天所了解的情況，我們估計第三季度 SAO 部門的淨影響約為 1000 萬美元的營業收入。讓我澄清幾點。該估計並不准確，而是代表基於不同時間假設的範圍的平均值。估計的財務影響是淨影響數。換句話說，這是我們估計的總影響減去任何緩解措施的估計。

And finally, this estimate is for SAO Q3 only and may not be relevant to other periods.

最後，此估計僅適用於 SAO Q3，可能與其他時期無關。

Assuming this estimated net impact, SAO operating income in Q3 is projected to be similar to the results delivered in Q2, the result would be a record third quarter for SAO despite the negative impact of the 737 MAX disruption. I think that speaks to the earnings strength of SAO.

假設這一估計的淨影響，SAO 第三季度的營業收入預計將與第二季度的結果相似，儘管 737 MAX 中斷的負面影響，結果將是 SAO 創紀錄的第三季度。我認為這說明了 SAO 的盈利能力。

For our PEP segment, we estimate that the net impact in Q3 will be between $1.5 million and $2.5 million in operating income. The same clarifications I just made apply to the PEP segment estimate as well. Obviously, the fourth quarter is less clear. We would expect that the gross impact will be higher, but we also have more opportunity to exercise the mitigating actions. That being said, it is possible that the fourth quarter net impact is similar to what I just communicated for the third quarter.

對於我們的 PEP 部門，我們估計第三季度的淨影響將在 150 萬美元至 250 萬美元的營業收入之間。我剛才所做的相同說明也適用於 PEP 細分市場估算。顯然，第四季度不太明朗。我們預計總體影響會更大，但我們也有更多機會採取緩解措施。話雖這麼說，第四季度的淨影響可能與我剛剛傳達的第三季度的影響相似。

As I mentioned, the exposure we are referring to is net of actions we anticipate will reduce the disruption impact. Those actions in the near term include redeploying capacity to non-737 MAX demand for firm orders currently in our backlog. This would include firm orders for the broader Aerospace and Defense market as well as high-value applications across our other end-use markets, including Transportation, Medical, Energy and Industrial and Consumer end-use markets.

正如我所提到的，我們所指的風險是我們預計將減少中斷影響的行動的淨值。短期內的這些行動包括將產能重新部署到非 737 MAX 對我們目前積壓的確定訂單的需求。這將包括更廣泛的航空航天和國防市場的確定訂單，以及我們其他最終用途市場的高價值應用，包括運輸、醫療、能源和工業以及消費者最終用途市場。

In some cases, the long lead times we have seen due to the ramp in aerospace demand over the last several years have been limiting our ability to capitalize on sales opportunities in other markets. We believe we may be able to be more flexible in these high-value areas by redeploying our capacity as the aerospace supply chain digests the 737 MAX production situation.

在某些情況下，由於過去幾年航空航天需求的增加，我們看到的交貨時間很長，這限制了我們利用其他市場銷售機會的能力。我們相信，隨著航空供應鏈消化 737 MAX 的生產情況，我們可以通過重新部署我們的產能，在這些高價值領域更加靈活。

While the ongoing 737 MAX situation is certainly a major development, we continue to believe in strong long-term underlying fundamentals of the aerospace market. 737 MAX situation clearly presents challenges for the overall aerospace supply chain. However, we believe we are better positioned than many other companies to weather this situation. We will continue to evaluate the situation, stay in close contact with our customers and execute initiatives aimed at partially offsetting the negative impact of the 737 MAX disruption.

雖然目前 737 MAX 的情況肯定是一個重大發展，但我們仍然相信航空航天市場長期強勁的基本面。737 MAX 的情況顯然對整個航空航天供應鏈提出了挑戰。但是，我們相信我們比許多其他公司更有能力應對這種情況。我們將繼續評估情況，與客戶保持密切聯繫，並執行旨在部分抵消 737 MAX 中斷的負面影響的舉措。

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。

Thanks, Tony. Good morning, everyone. I'll start on Slide 9, the income statement summary. Net sales in the second quarter were $573 million, and sales, excluding surcharge, were $471.2 million.

謝謝，托尼。大家，早安。我將從幻燈片 9 開始，損益表摘要。第二季度淨銷售額為 5.73 億美元，不包括附加費的銷售額為 4.712 億美元。

Sales, excluding surcharge, grew 5% year-over-year on 7% lower volume, driven by double-digit growth in our Aerospace and Defense and Medical end-use markets.

銷售額（不包括附加費）同比增長 5%，銷量下降 7%，這主要得益於我們的航空航天、國防和醫療最終用途市場的兩位數增長。

Demand levels remain strong as total backlog grew 7% year-over-year, again, driven by the strength in Aerospace and Defense. This quarter marked the 12th consecutive quarter of year-over-year backlog growth.

由於航空航天和國防實力的推動，總積壓訂單同比增長 7%，需求水平依然強勁。本季度標誌著積壓訂單連續第 12 個季度同比增長。

SG&A expenses were $55.3 million in the second quarter, up roughly $4 million from the same period a year ago. The increase was primarily due to the ongoing investments in additive manufacturing.

第二季度的 SG&A 費用為 5530 萬美元，比去年同期增加約 400 萬美元。這一增長主要是由於對增材製造的持續投資。

Going forward, we expect SG&A expenses to be relatively flat or about $55 million per quarter for the balance of the year. Operating income was $55 million in the quarter compared to $55.4 million in the prior year period. Operating income in the current second quarter includes $2.3 million of restructuring charges related to our Amega West business as we took actions to rightsize the footprint and cost structure of that business to reflect current market conditions.

展望未來，我們預計今年剩餘時間的 SG&A 費用將相對持平或每季度約 5500 萬美元。本季度營業收入為 5500 萬美元，上年同期為 5540 萬美元。當前第二季度的營業收入包括與我們的 Amega West 業務相關的 230 萬美元重組費用，因為我們採取行動調整該業務的足跡和成本結構以反映當前的市場狀況。

Last year's second quarter included $1.2 million of acquisition-related costs associated with the LPW transaction. Excluding these special items, operating income was $57.3 million in the current quarter and $56.6 million in the same quarter last year. Operating income, excluding special items as a percentage of sales was 12.2% in the quarter.

去年第二季度包括 120 萬美元與 LPW 交易相關的收購相關成本。不包括這些特殊項目，本季度營業收入為 5730 萬美元，去年同期為 5660 萬美元。本季度營業收入（不包括特殊項目）佔銷售額的百分比為 12.2%。

Our effective tax rate for the second quarter was 23.2%. We currently expect the effective tax rate to be 23% to 25% for the balance of the year. Net income for the quarter was $38.8 million or $0.79 per diluted share. When adjusted for the restructuring charges, adjusted earnings per share was $0.83 for the quarter. Adjusted EPS grew 9% year-over-year, marking the 12th consecutive quarter of year-over-year earnings growth.

我們第二季度的有效稅率為 23.2%。我們目前預計今年剩餘時間的有效稅率為 23% 至 25%。本季度的淨收入為 3880 萬美元或每股攤薄收益 0.79 美元。根據重組費用進行調整後，本季度調整後每股收益為 0.83 美元。調整後每股收益同比增長 9%，連續第 12 個季度實現盈利同比增長。

Now turning to Slide 10 and a review of free cash flow. Free cash flow in the second quarter was negative $35 million. Within the quarter, we increased inventory by $57 million. We expect to reduce inventory in the second half of our fiscal year, consistent with our historic pattern of building inventory in the first half with a follow-on reduction in inventory in the second half of the fiscal year. In the second quarter, we spent $47 million on capital projects. We expect to spend $170 million in capital expenditures for fiscal year 2020, consistent with our prior guidance.

現在轉向幻燈片 10 和自由現金流的回顧。第二季度的自由現金流為負 3500 萬美元。在本季度內，我們增加了 5700 萬美元的存貨。我們預計將在本財年下半年減少庫存，這與我們在上半年建立庫存並在本財年下半年隨後減少庫存的歷史模式一致。第二季度，我們在資本項目上花費了 4700 萬美元。我們預計 2020 財年的資本支出將達到 1.7 億美元，這與我們之前的指導一致。

Within the $170 million, there are several large multiyear projects. First, the $100 million hot strip mill being constructed on our Reading, PA campus, this investment is being made to provide enhanced capacity and capabilities related to our soft magnetics portfolio and is expected to be completed in the summer of this year. Second, in the third quarter of fiscal year 2020, we will complete the capacity expansion projects for our Dynamet titanium business, allowing us to capture emerging growth for our high-value titanium solutions in the Medical market. Finally, we recently completed our Emerging Technology Center. In early December, we held a grand opening to showcase the facility that is located on our Athens, Alabama campus. Tony will provide some more commentary on this project later in the presentation.

在這 1.7 億美元中，有幾個大型的多年期項目。首先，我們正在賓夕法尼亞州雷丁校區建設耗資 1 億美元的熱帶鋼軋機，這項投資旨在提供與我們的軟磁產品組合相關的增強產能和能力，預計將於今年夏季完工。其次，在 2020 財年第三季度，我們將完成 Dynamet 鈦業務的產能擴張項目，使我們能夠抓住醫療市場高價值鈦解決方案的新興增長點。最後，我們最近完成了新興技術中心。12 月初，我們舉行了盛大的開幕式，展示位於阿拉巴馬州雅典校區的設施。Tony 將在稍後的演示中提供更多關於該項目的評論。

Finishing up this slide, our liquidity position remains strong. As of the close of the current quarter, we had $305 million of total liquidity, including $30 million of cash. As we have consistently said, our financial position is important as it allows us the flexibility to invest in our future growth and return value to shareholders.

這張幻燈片結束時，我們的流動性狀況依然強勁。截至本季度末，我們擁有 3.05 億美元的總流動資金，其中包括 3000 萬美元的現金。正如我們一貫所說，我們的財務狀況很重要，因為它使我們能夠靈活地投資於我們未來的增長和回報股東的價值。

Now turning to Slide 11 and our SAO segment results. Net sales for the quarter were $483 million or $382.5 million, excluding surcharge. Sales excluding surcharge increased 7% year-over-year on 8% lower volume. The results reflect strong demand in the Aerospace and Defense and Medical end-use markets combined with continued improvement in our product mix. The improvement was partially offset by the ongoing weakness in the energy market and our portfolio rationalization efforts in the industrial and consumer market.

現在轉向幻燈片 11 和我們的 SAO 部分結果。本季度淨銷售額為 4.83 億美元或 3.825 億美元，不包括附加費。不包括附加費的銷售額同比增長 7%，銷量下降 8%。這些結果反映了航空航天、國防和醫療最終用途市場的強勁需求，以及我們產品組合的持續改進。能源市場的持續疲軟以及我們在工業和消費市場的投資組合合理化努力部分抵消了這種改善。

Sequentially, sales excluding surcharge decreased 3% on 6% lower volumes. SAO operating income was $76.3 million for the second quarter with adjusted operating margin of 19.9%. The same quarter a year ago, SAO's operating income was $69 million. The current quarter's performance marks the highest second quarter operating income on record for SAO.

隨後，不包括附加費的銷售額下降了 3%，銷量下降了 6%。SAO 第二季度營業收入為 7630 萬美元，調整後營業利潤率為 19.9%。一年前同一季度，SAO 的營業收入為 6900 萬美元。本季度的業績標誌著 SAO 有記錄以來最高的第二季度營業收入。

We continue to surpass prior financial performance due to the coupling of improving year-over-year product mix and creating incremental capacity via manufacturing improvements. The current quarter's results were negatively impacted by a pronounced surcharge lag.

由於逐年改善產品組合併通過製造改進創造增量產能，我們繼續超越之前的財務業績。本季度的業績受到明顯的附加費滯後的負面影響。

As a reminder, for most of our business, the impact of changes in raw materials is passed through to our customers via surcharges. A portion of our business has a surcharge mechanism that is not aligned with how we buy raw materials and therefore, creates a surcharge lag. The surcharge lag is only significant in periods of sharply changing raw material prices. Over the last several quarters, the surcharge lag has been in the range of $1 million to $2 million and has not had a significant impact on earnings. In the current quarter, given a sharp increase in nickel prices, the surcharge lag resulted in an unfavorable impact in operating income of about $4 million.

提醒一下，對於我們的大部分業務，原材料變化的影響會通過附加費傳遞給我們的客戶。我們部分業務的附加費機制與我們購買原材料的方式不一致，因此造成附加費滯後。只有在原材料價格急劇變化的時期，附加費滯後才會顯著。在過去的幾個季度中，附加費滯後一直在 100 萬至 200 萬美元之間，並未對收益產生重大影響。本季度，由於鎳價大幅上漲，滯後附加費對營業收入產生了約 400 萬美元的不利影響。

In terms of the outlook for the upcoming third quarter, we continue to see strong demand in most of our key end-use markets. As Tony mentioned in his comments, we are currently evaluating opportunities to mitigate the impact of the 737 MAX disruption in our third quarter. Based on feedback from our customers and what we now know, we expect that we will be able to partially mitigate the near-term impacts of this disruption and still deliver similar operating income in Q3 relative to Q2 for SAO.

就即將到來的第三季度的前景而言，我們繼續看到我們大多數主要終端用途市場的強勁需求。正如托尼在評論中提到的那樣，我們目前正在評估在第三季度減輕 737 MAX 中斷影響的機會。根據我們客戶的反饋和我們現在所知道的情況，我們預計我們將能夠部分減輕這種中斷的近期影響，並且在第三季度仍能為 SAO 提供與第二季度相似的營業收入。

Now turning to Slide 12 and our PEP segment results. Net sales excluding surcharge were $104.1 million, which were down $5 million from Q2 of fiscal year 2019. In the current quarter, PEP generated operating income of $0.4 million. Dynamet continued to experience strong demand for titanium products, predominantly in the Aerospace and Defense and Medical end-use markets in the second quarter. The current quarter's results for Dynamet were slightly below expectations. However, with the completion of the expansion projects, we expect to capture additional Medical market opportunities in the second half of the fiscal year.

現在轉向幻燈片 12 和我們的 PEP 部分結果。不包括附加費的淨銷售額為 1.041 億美元，比 2019 財年第二季度下降 500 萬美元。在本季度，PEP 產生了 40 萬美元的營業收入。Dynamet 在第二季度繼續經歷對鈦產品的強勁需求，主要是在航空航天、國防和醫療最終用途市場。Dynamet 本季度的業績略低於預期。然而，隨著擴建項目的完成，我們預計將在本財年下半年抓住更多醫療市場機會。

The ongoing challenges in the oil and gas industry, especially in North America, continue to negatively impact Amega West's operating income. As I mentioned earlier, we took action in the second quarter to rationalize the footprint and cost structure of that business based on the current market environment. We will continue to evaluate strategic options for Amega West going forward as the market evolves. The additive manufacturing business generated similar sequential losses in the current quarter, and we continue to view additive as a long-term investment in an emerging market.

石油和天然氣行業持續面臨的挑戰，尤其是在北美，繼續對 Amega West 的營業收入產生負面影響。正如我之前提到的，我們在第二季度採取了行動，根據當前的市場環境合理化該業務的足跡和成本結構。隨著市場的發展，我們將繼續評估 Amega West 未來的戰略選擇。增材製造業務在本季度產生了類似的連續虧損，我們繼續將增材製造視為對新興市場的長期投資。

As we look ahead to the third quarter, we expect PEP to deliver operating income similar to the second quarter. Our estimate for Q3 includes the expected impact of 737 MAX disruption on PEP. Further, the downturn in the energy market, specifically in the Permian Basin, is expected to continue. Oil and gas customers are continuing to moderate investments. We will also continue to invest strategically in additive manufacturing as this platform is critical for our long-term growth strategy.

展望第三季度，我們預計 PEP 的營業收入將與第二季度相似。我們對第三季度的估計包括 737 MAX 中斷對 PEP 的預期影響。此外，預計能源市場，特別是二疊紀盆地的低迷將繼續下去。石油和天然氣客戶正在繼續減少投資。我們還將繼續對增材製造進行戰略投資，因為該平台對我們的長期增長戰略至關重要。

I'll now turn the call back over to Tony.

我現在將電話轉回給托尼。

Thanks, Tim. Let's move to Slide 14. As I noted earlier, over half of our revenue comes from the Aerospace and Defense end-use market. The long-term fundamentals of the aerospace market are robust, and Carpenter Technology is well positioned to capitalize on the future growth, especially with the ramp-up of our facility in Athens, Alabama.

謝謝，蒂姆。讓我們轉到幻燈片 14。正如我之前提到的，我們一半以上的收入來自航空航天和國防終端市場。航空航天市場的長期基本面強勁，Carpenter Technology 已做好充分準備利用未來的增長，尤其是隨著我們在阿拉巴馬州雅典的工廠的擴產。

But the 737 MAX issue is a reminder that disruptions in the complex aerospace supply chain will occur from time to time. At Carpenter Technology, we want to be well prepared to mitigate such disruptions as well as build out businesses that will accelerate our revenue and earnings growth. With that in mind, we continue to operate with a focus on driving near-term earnings growth while also investing for the future in order to position Carpenter Technology for sustainable long-term growth. We are doing this in 3 distinct areas as portrayed on the slide: first, investing in emerging technologies, such as additive manufacturing to ensure our place as an irreplaceable solutions provider in the years to come; second, identifying attractive market adjacencies for our solutions, such as soft magnetics that will strengthen our capabilities to capitalize on future disruptive trends; and third, expanding our capacity and capability to meet strong forward demand patterns in our Medical end-use market, which is one of our fastest-growing markets.

但 737 MAX 的問題提醒我們，複雜的航空航天供應鏈中斷時有發生。在 Carpenter Technology，我們希望做好充分準備以減輕此類干擾，並建立能夠加速我們的收入和收益增長的業務。考慮到這一點，我們將繼續專注於推動近期收益增長，同時也為未來投資，以使 Carpenter Technology 實現可持續的長期增長。如幻燈片所示，我們在 3 個不同的領域這樣做：首先，投資增材製造等新興技術，以確保我們在未來幾年成為不可替代的解決方案提供商；其次，為我們的解決方案確定有吸引力的相鄰市場，例如軟磁，這將增強我們利用未來顛覆性趨勢的能力；第三，擴大我們的產能和能力，以滿足我們增長最快的市場之一的醫療最終用途市場的強勁前瞻性需求模式。

Let me start with additive manufacturing. I firmly believe that the future of our industry and our customers' material needs are going to be meaningfully impacted by additive manufacturing. Our strategy over the last several years has been to build a leading end-to-end additive manufacturing platform by combining the foundation of our long history of powder metallurgy capabilities and expertise with capabilities acquired through several strategic acquisitions.

讓我從增材製造開始。我堅信增材製造將對我們行業的未來和客戶的材料需求產生重大影響。我們在過去幾年的戰略是通過將我們長期的粉末冶金能力和專業知識的基礎與通過多次戰略收購獲得的能力相結合，建立領先的端到端增材製造平台。

The capstone of our additive manufacturing journey to date was the completion of our Emerging Technology Center, or ETC, on our Athens campus. ETC demonstrates our end-to-end platform by managing the complete production cycle under one roof and in one location of making metal powder, producing parts via additive manufacturing, finishing the parts and shipping the finished parts to customers.

迄今為止，我們增材製造之旅的頂峰是在雅典校區建成了新興技術中心 (ETC)。ETC 展示了我們的端到端平台，它通過在一個屋簷下和一個地點管理整個生產週期，包括製造金屬粉末、通過增材製造生產零件、完成零件並將成品零件運送給客戶。

Another area where we continued to invest for future growth is soft magnetics to capitalize on the growing number of electrification initiatives being pursued by major OEMs. We're leveraging our existing proprietary alloys and developing solutions for this rapidly developing market that includes not only electric vehicles but also other electrification initiatives and markets such as Aerospace and Defense. The construction of our hot strip mill on our Reading campus remains on track as we look to expand our existing soft magnetics capabilities and capacity.

我們為未來增長繼續投資的另一個領域是軟磁，以利用主要原始設備製造商正在推行的越來越多的電氣化計劃。我們正在利用我們現有的專有合金並為這個快速發展的市場開發解決方案，該市場不僅包括電動汽車，還包括其他電氣化計劃和市場，例如航空航天和國防。我們雷丁校區的熱帶鋼軋機建設仍在進行中，因為我們希望擴大現有的軟磁能力和產能。

And lastly, the capacity expansion projects at our Dynamet facilities. The Medical end-use market has been one of our fastest growing markets, given consistent strong demand for our high-value solutions. The capacity expansion at Dynamet will enable us to further capitalize on the demand for our solutions, which are becoming increasingly recognized and used in the development of new medical applications.

最後，我們 Dynamet 設施的產能擴張項目。鑑於對我們高價值解決方案的持續強勁需求，醫療最終用途市場一直是我們增長最快的市場之一。Dynamet 的產能擴張將使我們能夠進一步利用對我們解決方案的需求，這些解決方案在新醫療應用的開發中得到越來越多的認可和使用。

To summarize, these growth areas, additive manufacturing, soft magnetics and increased titanium capacity, are strategic extensions of our core business and critical to accelerating our earnings growth and remain a solutions provider for our customers in the years and decades to come.

總而言之，這些增長領域，即增材製造、軟磁和增加的鈦產能，是我們核心業務的戰略延伸，對於加速我們的收入增長以及在未來幾年和幾十年內繼續為我們的客戶提供解決方案至關重要。

Now let's turn to the next slide and my closing comments. In closing, let me summarize the key takeaways from today's call. Number one, we continued to deliver consistent year-over-year earnings growth and backlog expansion. The second quarter was our 12th consecutive quarter of year-over-year earnings and sales growth and our 12th consecutive quarter of year-over-year backlog growth.

現在讓我們轉到下一張幻燈片和我的結束語。最後，讓我總結一下今天電話會議的要點。第一，我們繼續實現持續的同比收益增長和積壓擴張。第二季度是我們連續第 12 個季度實現盈利和銷售額同比增長，也是我們連續第 12 個季度實現積壓訂單增長。

Number two, SAO delivered another record quarterly operating income with adjusted operating margins of 19.9%. We see strong potential for further margin expansion at SAO, given our ongoing mix shift to higher-value applications, the benefits of our Athens facility and continued productivity improvement through the Carpenter operating model.

第二，SAO 的季度營業收入再創新高，調整後的營業利潤率為 19.9%。考慮到我們不斷向更高價值應用的組合轉變、我們雅典工廠的優勢以及通過 Carpenter 運營模式持續提高生產力，我們看到 SAO 進一步擴大利潤的巨大潛力。

Number three, customer engagement at Athens remains high given the critical incremental capacity we can offer the aerospace industry. We continue to progress on obtaining the stringent VAP qualifications and received 4 additional qualifications during our second quarter.

第三，鑑於我們可以為航空航天業提供關鍵的增量能力，雅典的客戶參與度仍然很高。我們在獲得嚴格的 VAP 資格方面繼續取得進展，並在第二季度獲得了 4 個額外的資格。

Number four, the long-term demand signals in Aerospace and Defense remain robust with a current backlog posted 13,000 aircraft, which represents 7 to 8 years of production. In addition, our broad platform exposure and leading position across multiple attractive aerospace submarkets offer strong future growth opportunities.

第四，航空航天和國防領域的長期需求信號依然強勁，目前積壓了 13,000 架飛機，這代表了 7 到 8 年的生產。此外，我們廣泛的平台曝光和在多個有吸引力的航空航天子市場的領先地位提供了強大的未來增長機會。

Number five, our Medical end-use market continues to deliver meaningful year-over-year growth as our high-value solutions are fulfilling emergent demand, and we're consistently driving sales in excess of market growth rates.

第五，我們的醫療最終用途市場繼續實現有意義的同比增長，因為我們的高價值解決方案正在滿足緊急需求，並且我們一直在推動銷售額超過市場增長率。

Number six, we continue to operate with a focus on driving near-term earnings growth while also investing for the future in order to position Carpenter Technology for sustainable long-term growth. These investments include additive manufacturing, soft magnetics and the titanium capacity expansion.

第六，我們繼續專注於推動近期收益增長，同時也為未來投資，以使 Carpenter Technology 實現可持續的長期增長。這些投資包括增材製造、軟磁和鈦產能擴張。

Number seven, our balance sheet remained strong, and we have no significant near-term financial obligations. This gives us the continued flexibility to invest in our future growth and best position Carpenter Technology for increasing returns to shareholders.

第七，我們的資產負債表依然強勁，我們沒有重大的短期財務義務。這使我們能夠繼續靈活地投資於我們未來的增長和最佳位置 Carpenter Technology 以增加股東回報。

And number eight, while the supply chain disruption caused by the 737 MAX will have a near-term impact, we believe we are well positioned to manage the situation. We have a diverse range of applications across other end-use markets. We have a broad solution portfolio across multiple attractive aerospace submarkets. We participate on almost every commercial aerospace platform, and we have opportunities to redeploy capacity to capitalize on the growth opportunities in markets other than aerospace.

第八，雖然 737 MAX 造成的供應鏈中斷將產生短期影響，但我們相信我們有能力應對這種情況。我們在其他最終用途市場上有各種各樣的應用。我們在多個有吸引力的航空航天子市場擁有廣泛的解決方案組合。我們參與了幾乎所有商業航空航天平台，我們有機會重新部署產能，以利用航空航天以外市場的增長機會。

737 MAX disruption is the highest profile topic in aerospace industry today and rightly so. However, we are optimistic that an appropriate solution will be agreed to and aircraft will return to service. Without question, there will be a near-term impact to earnings. We have given you guidance estimates for our next 2 quarters with the understanding that the situation can change quickly.

737 MAX 中斷是當今航空航天業最引人注目的話題，這是理所當然的。然而，我們樂觀地認為，將商定一個適當的解決方案，飛機將恢復服務。毫無疑問，這將對收益產生短期影響。我們已經為您提供了未來 2 個季度的指導估計，並了解到情況可能會迅速發生變化。

But the long-term earnings potential of Carpenter is intact. 737 MAX disruption does not change that. We remain excited about the future of Carpenter Technology. We believe the execution of our strategy will continue to enhance our long-term sustainable growth profile and will result in increasing returns for our shareholders and customers for years to come. Thank you for your interest.

但 Carpenter 的長期盈利潛力完好無損。737 MAX 中斷並沒有改變這一點。我們仍然對 Carpenter Technology 的未來感到興奮。我們相信，我們戰略的執行將繼續增強我們的長期可持續增長狀況，並將在未來幾年為我們的股東和客戶帶來更高的回報。感謝您的關注。

And I'll turn it back to the operator to field your questions.

我會把它轉回給接線員來回答你的問題。

(Operator Instructions) The first question is from Josh Sullivan of The Benchmark Company.

（操作員說明）第一個問題來自 The Benchmark Company 的 Josh Sullivan。

Can you just talk a little bit about the appetite of those aerospace programs outside of the 737 to take advantage of this short-term capacity? You said either just build spares or OEM stocks. Are they willing to negotiate? How aggressive do you need to be to get them to take that capacity?

您能否談談 737 以外的那些航空航天項目對利用這種短期能力的興趣？你說要么只生產備件，要么生產 OEM 庫存。他們願意談判嗎？你需要多積極才能讓他們接受這種能力？

Josh, I think the point is, here, we have orders from customers in different markets that today we cannot fit into our near-term schedule. So this isn't a point of us going out and trying to find "new business." This is a business that we have in front of us that now allows us to pull that forward and satisfy that customer.

喬希，我認為關鍵是，我們有來自不同市場客戶的訂單，今天我們無法將其納入我們的近期計劃。所以這不是我們出去尋找“新業務”的目的。這是擺在我們面前的一項業務，現在我們可以將其向前推進並滿足該客戶。

And customers are taking that inventory without any price concessions or anything along those lines?

客戶在沒有任何價格優惠或類似的情況下就拿走了這些庫存？

We don't have any reason to do price concessions.

我們沒有任何理由做價格優惠。

Got it. And then just as far as the VAP qualifications go, where do you stand on the total number expected? I know some are more important than others. Maybe where do you stand on a percentage basis of the total business needing VAP approvals?

知道了。然後就 VAP 資格而言，您對預期總數的看法如何？我知道有些比其他更重要。也許您佔需要 VAP 批准的總業務的百分比？

With the 4 this quarter that puts us at 19. So I would say that's well over half of our way there. As you know, not every qualification is of equal weight.

隨著本季度的 4，我們排在第 19 位。所以我想說我們已經完成了一半以上。如您所知，並非每項資格都同等重要。

Obviously, the 4 that we received this quarter are meaningful, but there are still a couple large ones out there that we are working through. And in many times, I've said this before. I would take progress on a very substantial qualification before I might take a final qualification on another one, if that makes sense. So we received 4 qualifications this month, but just as importantly, we moved the ball down the field substantially on a couple other very significant ones for us that I think you'll see us start to announce over the next couple of quarters.

顯然，我們本季度收到的 4 個是有意義的，但我們仍在處理幾個大的問題。很多次，我以前說過這個。如果有意義的話，我會先在一個非常重要的資格上取得進步，然後再在另一個資格上取得最終資格。所以我們這個月獲得了 4 個資格，但同樣重要的是，我們在其他幾個對我們來說非常重要的方面大幅推進了比賽，我想你會看到我們在接下來的幾個季度開始宣布。

Got it. And then just switching over to the PEP business. On the Medical side, obviously, some great growth. One, is there any opportunity to vertically integrate there? And then two, the utilization versus the margin dynamic with this new capacity coming on, how leverageable is that? How should we think about that as it gets filled here over the next year?

知道了。然後就切換到 PEP 業務。在醫療方面，顯然有一些巨大的增長。第一，那裡有垂直整合的機會嗎？其次，隨著這種新產能的出現，利用率與利潤率之間的關係，它的槓桿作用有多大？我們應該如何考慮它，因為它會在明年被填滿？

Let me take the second part first. We've timed this expansion in our Dynamet facility, primarily due to Medical, and we're really on the razor's edge so to speak. In many cases, you build capacity before the demand. We are actually both of those simultaneously. So our customers are asking for that material right now.

讓我先講第二部分。我們已經在我們的 Dynamet 設施中安排了這次擴張，主要是由於醫療，可以這麼說，我們真的處於剃刀邊緣。在許多情況下，您在需求之前建立能力。我們實際上同時是這兩者。所以我們的客戶現在需要這種材料。

It is a relatively complex expansion because we're expanding not just both of our facilities, but we are moving some equipment between the facilities. So that makes just another level of complexity. So the answer there is we are trying to expand and move equipment at the same time that we're trying to deal with at -- in some cases, significant increase in demand. That is the challenge right now. To be very transparent, I think the team is doing a very nice job, but I think we need to go faster and we have customers that are standing beside us right now. But at the end of the day, they want more material. And we need to up our game a bit there to push this expansion across the line and get them the material they so much desire.

這是一個相對複雜的擴展，因為我們不僅要擴展我們的兩個設施，而且還要在設施之間移動一些設備。所以這只是另一個層次的複雜性。因此，答案是我們正試圖在我們試圖處理的同時擴展和移動設備——在某些情況下，需求會顯著增加。這就是現在的挑戰。非常透明，我認為團隊做得很好，但我認為我們需要走得更快，我們現在有站在我們身邊的客戶。但歸根結底，他們想要更多的材料。我們需要在那裡提高我們的遊戲水平，以推動這種擴展，並為他們提供他們非常想要的材料。

The first part of your question of vertical integration, I think that really might come from a -- I think that's where the additive manufacturing comes into play. I don't want to talk -- I don't have a lot of information I'd share with you at this time, but I think there are opportunities for us in the vertical integration side around the AM business that we're building.

你的垂直整合問題的第一部分，我認為這真的可能來自 - 我認為這就是增材製造發揮作用的地方。我不想談——我現在沒有太多的信息可以和你分享，但我認為我們在圍繞我們正在建設的 AM 業務的垂直整合方面有機會.

The next question is from Phil Gibbs of KeyBanc Capital Markets.

下一個問題來自 KeyBanc Capital Markets 的 Phil Gibbs。

Tony, what was the backlog growth overall year-on-year? I think you said Aerospace and Defense is 14%. But what was the overall number? And then also, can you give us a feel for what your jet engine sales were year-end?

托尼，積壓的總體同比增長是多少？我想你說航空航天和國防是 14%。但總數是多少？然後，您能否讓我們了解一下您的噴氣發動機年終銷售額是多少？

You got it. So the overall backlog growth was 7%. So it's a little lower than it's been in the last couple of quarters. As you might guess, what's pushing that number down is energy business. The backlog has decreased substantially year-over-year and also our Transportation business was down a bit as well. That's a business for us that is quite critical for us, but at times, we have an issue of fitting that into the schedule.

你說對了。因此，總體積壓增長為 7%。所以它比過去幾個季度略低。您可能會猜到，推動該數字下降的是能源業務。積壓訂單同比大幅減少，我們的運輸業務也有所下降。這對我們來說是一項非常重要的業務，但有時我們會遇到將其納入時間表的問題。

From an engine -- I think you asked the engine sales year-over-year. They were up year-over-year by 17.5% and up 4% sequentially.

從發動機來看——我想你問的是發動機銷量同比增長。它們同比增長 17.5%，環比增長 4%。

Okay. And then just a general kind of view here as we think about your Aerospace and Defense businesses and its entirety, you gave a nice breakout here between engines, fasteners, structural and defense. But if I think about just overall aftermarket or, call it, MRO versus OEM within that whole portfolio, any sense and -- or feel? Is it an equal split? Are you heavier on the OE side? Just trying to think through this as the market's going to be in flux for a few quarters.

好的。然後，當我們考慮您的航空航天和國防業務及其整體時，這裡只是一種一般的觀點，您在這裡在發動機、緊固件、結構和國防之間進行了很好的突破。但是，如果我只考慮整個售後市場，或者稱之為整個產品組合中的 MRO 與 OEM，有什麼意義和 - 或感覺？是平分嗎？你在OE方面更重嗎？只是想通過這個來思考，因為市場將在幾個季度內不斷變化。

It is not an equal split. I would say we're more dependent on the OEM versus the aftermarket. I'd rather not give you the exact breakout, but I would say the majority is OEM.

這不是平等的分裂。我會說我們更依賴原始設備製造商而不是售後市場。我不想給你確切的突破，但我會說大多數是 OEM。

(Operator Instructions) The next question comes from Gautam Khanna of Cowen and Company.

（操作員說明）下一個問題來自 Cowen and Company 的 Gautam Khanna。

A couple of questions. So just on the sequential EBIT impact that you talked about at SAO of $10 million, so flat sequentially. That's net. So what is sort of -- what's your estimate of the gross impact, if you will, before the mitigation? And what happens to the $4 million of out-of-phase surcharges? Does that ever come back? Is that included in the $10 million net? Any granularity there would be helpful.

幾個問題。因此，就您在 SAO 談到的 1000 萬美元的連續息稅前利潤影響而言，連續持平。那是淨的。那麼，在緩解之前，您對總體影響的估計是多少？400 萬美元的異相附加費會怎樣？那會回來嗎？這包括在 1000 萬美元的淨額中嗎？那裡的任何粒度都會有所幫助。

Okay. I'll start with the first, and I'll let Tim take on your 2 different questions in 2 separate issues. We made a conscious decision, Gautam, and I'm not surprised you're the one to ask this question. We made a conscious decision to say it's not the best thing for us to do to talk about water content is per platform, right, which gets into your question about what's gross and what's net and trying to really bifurcate all of that, that out.

好的。我將從第一個開始，讓蒂姆在 2 個不同的問題中回答你的 2 個不同問題。Gautam，我們做出了一個有意識的決定，我對你提出這個問題並不感到驚訝。我們有意識地決定說，談論每個平台的水含量對我們來說不是最好的事情，對吧，這會涉及到你關於什麼是粗略的，什麼是淨的問題，並試圖真正將所有這些分開。

Obviously, we have assumptions and we have marks for each one of those platforms to be able to get you to the number that we did. For us, we thought it was the best to give you that net number and really give you some clarity of what the impact was going to be for the quarter. We spent quite a bit of time on that, quite frankly. And I'd rather just stick to that going forward as opposed to saying what's the gross amount, what is the net amount.

顯然，我們有假設，並且我們對這些平台中的每一個都有標記，以便能夠讓您達到我們所做的數字。對我們來說，我們認為最好給你這個淨數字，並真正讓你清楚地了解本季度的影響。坦率地說，我們在這上面花了很多時間。而且我寧願堅持這一點，而不是說總金額是多少，淨金額是多少。

I think it is fair to point out that because of the longer cycle products that we make, the production cycle is quite long. Obviously, the impact in Q3 is going to be less because those products are already in production cycle. Our contracts, for the most part, allow us to not accept changes to that cycle once it has been started. But then once we get to the second quarter -- sorry, the fourth quarter -- fiscal fourth quarter, that dynamic changes a little bit, right? So the gross impact will increase. But as I said on the call, it also gives us an opportunity now to adjust mill schedules to go after some other business. So didn't answer your question directly there, but hopefully, you understand, that's really the way we've decided to guide on this very important issue going forward. And I'll give it back to Tim to talk about the lag.

我認為可以公平地指出，由於我們製造的產品週期較長，因此生產週期很長。顯然，第三季度的影響會較小，因為這些產品已經進入生產週期。在大多數情況下，我們的合同允許我們在該週期開始後不接受對該週期的更改。但是一旦我們進入第二季度 - 抱歉，第四季度 - 財政第四季度，這種動態就會發生一些變化，對吧？所以總體影響會增加。但正如我在電話中所說，這也讓我們現在有機會調整工廠的時間表，以開展其他業務。所以沒有直接回答你的問題，但希望你明白，這確實是我們決定在這個非常重要的問題上繼續前進的方式。我會把它還給蒂姆來談談延遲。

Gautam, on the lag, I mean, as I said in my remarks, it generally hasn't been a big driver of profitability. One way or the other it's been about $1 million or $2 million. We did have that big spike in nickel prices early in the quarter. So assuming nickel prices normalize here and stay where they are, yes, there may be some return of that in a favorable lag, but that's kind of all built into our numbers for Q3.

高塔姆，在滯後，我的意思是，正如我在發言中所說，它通常不是盈利能力的重要推動力。不管怎樣，它大約是 100 萬美元或 200 萬美元。本季度初我們確實看到了鎳價的大幅上漲。因此，假設鎳價在這裡正常化並保持在原位，是的，它可能會在一個有利的滯後時間出現一些回報，但這在我們第三季度的數據中都有所體現。

And Gautam, I'll just add, as you all know, you can do the math. I mean, $0.01 earnings per share is only about $600,000 of operating income for us. So it doesn't take a whole lot to get to a $0.01 a share, and SAO came in a bit below our guidance, and that was really one of the main factors. The lag was a little bit more negative than what we anticipated, and our shipments were a little bit like those last couple of days of the quarter with the holidays. There's a couple of shipments that we didn't get out. That was really the main -- the 2 main drivers for a relatively small miss in SAO from our standpoint -- versus our guidance, I should say.

Gautam，我只想補充一點，你們都知道，你們可以算一下。我的意思是，每股 0.01 美元的收益對我們來說只有大約 600,000 美元的營業收入。因此，達到每股 0.01 美元並不需要太多，SAO 的表現略低於我們的指導，這確實是主要因素之一。滯後比我們預期的要負一些，我們的出貨量有點像本季度最後幾天的假期。有幾批貨物我們沒有發貨。這確實是主要的——從我們的角度來看，SAO 中相對較小的未命中的 2 個主要驅動因素——與我們的指導相比，我應該說。

Yes. No, I agree. And then just so I understand, have the customers -- have your customers in the forging supply chain conveyed to you what their plans are for the June quarter? Or is this truly in flux, like you just don't know, they haven't given you a number? Because we're hearing all kinds of things from the supply chain as they report. I'm just curious how fluid the situation is. And then relatedly to a prior question on pricing in other markets, should we be concerned that as other suppliers like yourselves look to backfill capacity that's been freed up from a lower MAX volume that there is a bit of a price degradation as you pursue those marginal -- those other markets because everyone's trying to do it at the same time? Any perspective on both questions?

是的。不，我同意。然後據我了解，客戶 - 鍛造供應鏈中的客戶是否向您傳達了他們對 6 月季度的計劃？或者這真的在不斷變化，就像你只是不知道，他們沒有給你一個數字？因為我們在報告時從供應鏈中聽到了各種各樣的事情。我只是好奇情況有多不穩定。然後與之前關於其他市場定價的問題相關，我們是否應該擔心，當像您這樣的其他供應商希望回填從較低的 MAX 容量中釋放出來的容量時，當您追求那些邊際價格時，價格會有所下降——那些其他市場，因為每個人都在同時嘗試這樣做？對這兩個問題有什麼看法嗎？

Listen, I'll take the second one first. We do not anticipate that, and we do not anticipate taking that approach. We see this as a long-term approach. This is a short-term issue, the way we see it, albeit a significant one. So it's not about price concessions in the near term.

聽著，我先拿第二個。我們沒有預料到這一點，我們也不期望採取這種方法。我們認為這是一個長期的方法。從我們的角度來看，這是一個短期問題，儘管它很重要。因此，這與近期的價格優惠無關。

It doesn't make sense to us. That's not the business that we're in. And I think the relationships we have with our customers are very strong, and we understand that. And we want to have a long-term relationship with the customer. So I do not see that dynamic in the market.

這對我們來說沒有意義。那不是我們從事的業務。我認為我們與客戶的關係非常牢固，我們理解這一點。我們希望與客戶建立長期關係。所以我在市場上看不到這種動態。

To your customer question, there's -- you can think about it this way. Our customers are in about every situation you can be in. Like we said, there are some that have been very -- much more, I'll say, aggressive looking forward, anticipating what this might be, and they've made some adjustments to their requirement, and those are built in. Those are built into our guidance today. There are others that, although they're making these adjustments, they've pivoted a bit and said, "Hey, we have a need over here. Can we move some of our "capacity" to that area?" We still see some urgent spot request. There are other customers, Gautam, them that are still working through this and understanding how they want to handle it.

對於您的客戶問題，您可以這樣考慮。我們的客戶幾乎處在您可能遇到的任何情況。就像我們說的那樣，有些人已經非常 - 我要說的更多，積極展望未來，預測這可能是什麼，他們已經對他們的要求進行了一些調整，這些都是內置的。這些內容已納入我們今天的指南中。還有一些人說，雖然他們正在做這些調整，但他們已經改變了一點，然後說，“嘿，我們這裡有需要。我們可以將我們的一些“能力”轉移到那個區域嗎？”我們仍然看到一些緊急的現場請求。還有其他客戶，Gautam，他們仍在努力解決這個問題並了解他們想要如何處理它。

I've listened to a couple earnings calls prior to ours and listened to the management team speak, and it's a very important point that you said you can't turn this capacity on and off like a light switch. So a lot of them are really trying to think, hey, I can't take this production down to 0 because if I do, I can't get it back fast enough when this demand comes back. So there's a nice chunk of customers that are wrestling with that very difficult question right now.

在我們之前，我聽過幾次財報電話會議，聽過管理團隊的講話，這是非常重要的一點，你說你不能像電燈開關一樣打開和關閉這種能力。所以他們中的很多人真的在想，嘿，我不能把這個產量降到 0，因為如果我這樣做，當需求回來時我就不能足夠快地恢復它。所以現在有很多客戶正在努力解決這個非常困難的問題。

And of course, there's a couple that have built a little bit more inventory than what they would like, and we're working with them on an individual basis to mitigate that for them. I can't say that majority of our contracts do have some flexibility clauses that we -- that -- and it -- that it defines when a customer can and can't make a change. For the most part, we do not accept changes once that, that product has started production or if it's in finished goods. But again, we prefer a long-term relationship, and we work with each of our customers on a one-on-one basis to try to help them manage through this process effectively just like we're trying to.

當然，有幾個人的庫存比他們想要的要多一點，我們正在與他們單獨合作，以減輕他們的負擔。我不能說我們的大多數合同確實有一些靈活性條款，我們 - 那個 - 它 - 它定義了客戶何時可以和不能進行更改。在大多數情況下，一旦該產品已開始生產或已製成成品，我們將不接受更改。但同樣，我們更喜歡長期合作關係，我們在一對一的基礎上與我們的每個客戶合作，試圖幫助他們有效地管理這個過程，就像我們正在努力的那樣。

And one last one if I may. Just at the PEP segment, Boeing announced the 787 rate cut to 10 at some point in early 2021. When would you -- a, like, is there any ballpark you can give us on the magnitude of the impact to PEP Dynamet and when you might feel it? Because I know it's a big titanium fastener platform and wondering when that starts to kick in and how that informs your view on the June quarter.

如果可以的話，還有最後一張。就在 PEP 部分，波音公司宣佈在 2021 年初的某個時候將 787 降價至 10 架。你什麼時候——比如，你能告訴我們對 PEP Dynamet 影響的大小以及你什麼時候會感受到它嗎？因為我知道這是一個很大的鈦緊固件平台，我想知道它什麼時候開始發揮作用，以及它如何影響您對 6 月季度的看法。

We've taken into consideration -- so the guidance that we have given you takes into consideration all those factors. Now I've not given a specific number of what the -- how that impacts us for the 787. I would say this when you think about Dynamet. And a lot of people rightly so think about Dynamet as an aerospace business, and that's true. But the -- and it's a very good business for us, and we're very appreciative to have it. But Dynamet is a medical business as well, and over 50% of our revenues are coming from Medical in Dynamet. And that's a bit of a mind shift that not everyone has really caught on to yet. So I hope that helps.

我們已經考慮到了——所以我們給你的指導考慮了所有這些因素。現在我還沒有給出具體數字——這對 787 有何影響。當您想到 Dynamet 時，我會這麼說。許多人正確地將 Dynamet 視為一家航空航天企業，這是事實。但是 - 這對我們來說是一項非常好的業務，我們非常感謝擁有它。但 Dynamet 也是一家醫療企業，我們超過 50% 的收入來自 Dynamet 的醫療業務。這是一種思想上的轉變，並不是每個人都真正理解了這一點。所以我希望能有所幫助。

This concludes our question-and-answer session. I would like to turn the conference back over to Brad Edwards for closing remarks.

我們的問答環節到此結束。我想把會議轉回給布拉德愛德華茲作閉幕詞。

Thanks, Kate, and thanks, everyone, for joining us today on our second quarter earnings call. We look forward to speaking with all of you on our third quarter call in April. Have a great day.

謝謝凱特，也謝謝大家今天加入我們的第二季度財報電話會議。我們期待在 4 月份的第三季度電話會議上與大家交談。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。