Carpenter Technology Corporation
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Background and General
We are a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels and tool steels. We are a recognized leader in high-performance specialty alloy materials and process solutions for critical applications in the aerospace and defense, medical, energy, transportation and industrial and consumer markets. Founded in 1889, we have evolved to become a pioneer in premium specialty alloys including nickel, cobalt, and titanium and material process capabilities that solve our customers' current and future material challenges. We primarily process basic raw materials such as nickel, cobalt, titanium, manganese, chromium, molybdenum, iron scrap and other metal alloying elements through various melting, hot forming and cold working facilities to produce finished products in the form of billet, bar, rod, wire and narrow strip in many sizes and finishes. We also produce certain metal powders and parts. Our sales are distributed directly from our production plants and distribution network as well as through independent distributors. Unlike many other specialty steel producers, we operate our own worldwide network of service and distribution centers. These service centers, located in the United States, Canada, Mexico, Europe and Asia allow us to work more closely with customers and to offer various just-in-time stocking programs.
As part of our overall business strategy, we have sought out and considered opportunities related to strategic acquisitions and joint collaborations as well as possible business unit dispositions aimed at broadening our offering to the marketplace. We have participated with other companies to explore potential terms and structures of such opportunities and expect that we will continue to evaluate these opportunities.
Our discussions below in this Item 2 are based upon the more detailed discussions about our business, operations and financial condition included in Item 7 of our 2025 Form 10-K. Our discussions here focus on our results during or as of the three and nine month periods ended March 31, 2026, and the comparable periods of fiscal year 2025, and to the extent applicable, on material changes from information discussed in the 2025 Form 10-K and other important intervening developments or information that we have reported on Form 8-K. These discussions should be read in conjunction with the 2025 Form 10-K for detailed background information and with any such intervening Form 8-K.
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Impact of Raw Material Prices and Product Mix
We value most of our inventory utilizing the LIFO inventory costing methodology. Under the LIFO inventory costing method, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period even though these materials may have been acquired at potentially significantly different values due to the length of time from the acquisition of the raw materials to the sale of the processed finished goods to the customers. In a period of rising raw material costs, the LIFO inventory valuation normally results in higher cost of sales. Conversely, in a period of decreasing raw material costs, the LIFO inventory valuation normally results in lower cost of sales.
The volatility of the costs of raw materials has impacted our operations over the past several years. We, and others in our industry, generally have been able to pass cost increases on major raw materials through to our customers using surcharges that are structured to recover increases in raw material costs including the impact of tariffs. Generally, the formula used to calculate a surcharge is based on published prices of the respective raw materials for the previous month which correlates to the prices we pay for our raw material purchases. However, a portion of our surcharges to customers may be calculated using a different surcharge formula or may be based on the raw material prices at the time of order, which creates a lag between surcharge revenue and corresponding raw material costs recognized in cost of sales. The surcharge mechanism protects our net income on such sales except for the lag effect discussed above. However, surcharges have had a dilutive effect on our gross margin and operating margin percentages as described later in this report.
During the nine months ended March 31, 2026, approximately 43 percent of our net sales were sales to customers under firm price sales arrangements. Firm price sales arrangements involve a risk of profit margin fluctuations, particularly when raw material prices are volatile. In order to reduce the risk of fluctuating profit margins on these sales, we enter into commodity forward contracts to purchase certain critical raw materials necessary to produce the related products sold. Firm price sales arrangements generally include certain annual purchasing commitments and consumption schedules agreed to by the customers at selling prices based on raw material prices at the time the arrangements are established. If a customer fails to meet the volume commitments (or the consumption schedule deviates from the agreed-upon terms of the firm price sales arrangements), we may need to absorb the gains or losses associated with the commodity forward contracts on a temporary basis. Gains or losses associated with commodity forward contracts are reclassified to earnings (loss) when earnings are impacted by the hedged transaction. Because we value most of our inventory under the LIFO costing methodology, changes in the cost of raw materials and production activities are recognized in cost of sales in the current period attempting to match the most recently incurred costs with revenues. Gains and/or losses on the commodity forward contracts are reclassified from accumulated other comprehensive income (loss) together with the actual purchase price of the underlying commodities when the underlying commodities are purchased and recorded in inventory. To the extent that the total purchase price of the commodities, inclusive of the gains or losses on the commodity forward contracts, are higher or lower relative to the beginning of year costs, our cost of goods sold reflects such amounts. Accordingly, the gains and/or losses associated with commodity forward contracts may not impact the same period that the firm price sales arrangements revenue is recognized, and comparisons of gross profit from period to period may be impacted. These firm price sales arrangements are expected to continue as we look to strengthen our long-term customer relationships by expanding, renewing and, in certain cases, extending to a longer term, our customer arrangements.
We produce hundreds of grades of materials with a wide range of pricing and profit levels depending on the grade. In addition, our product mix within a period is subject to the fluctuating order patterns of our customers as well as decisions we may make on participation in certain products based on available capacity, including the impacts of capacity commitments we may have under existing customer agreements. While we expect to see positive contribution from a more favorable product mix in our margin performance over time, the impact by period may fluctuate and period-to-period comparisons may vary.
Net Pension Expense
Net pension expense, as we define it below, includes the net periodic benefit costs related to both our pension and other postretirement plans. The net periodic benefit costs are determined annually based on beginning of year balances and are recorded ratably throughout the fiscal year, unless a significant remeasurement event occurs. We currently expect the total net pension expense for fiscal year 2026 will be $14.3 million as compared with total net pension expense of $24.8 million in fiscal year 2025. The lower expected expense for fiscal year 2026 reflects higher plan assets and a higher expected return on plan assets compared to fiscal year 2025.
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The following is the net pension expense for the three and nine months ended March 31, 2026 and March 31, 2025:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Pension plans | $ | 4.5 | $ | 6.5 | $ | 13.3 | $ | 19.7 | ||||||||||||||||
| Other postretirement plans | (0.9) | (0.3) | (2.5) | (1.1) | ||||||||||||||||||||
| Net pension expense | $ | 3.6 | $ | 6.2 | $ | 10.8 | $ | 18.6 | ||||||||||||||||
The service cost component of net pension expense represents the estimated cost of future pension liabilities earned associated with active employees. The pension earnings, interest and deferrals is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans and amortization of actuarial gains and losses and prior service costs and benefits.
Net pension expense is recorded in accounts that are included in cost of sales, selling, general and administrative expenses and other expense (income), net, based on the function of the associated employees and nature of expense. The following is a summary of the classification of net pension expense for the three and nine months ended March 31, 2026 and 2025:
| Three Months Ended March 31, | Nine Months Ended March 31, | |||||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Service cost included in Cost of sales | $ | 1.9 | $ | 2.0 | $ | 5.6 | $ | 6.1 | ||||||||||||||||
| Service cost included in Selling, general and administrative expenses | 0.3 | 0.3 | 0.9 | 0.9 | ||||||||||||||||||||
Pension earnings, interest and deferrals included in Other expense (income), net | 1.4 | 3.9 | 4.3 | 11.6 | ||||||||||||||||||||
| Net pension expense | $ | 3.6 | $ | 6.2 | $ | 10.8 | $ | 18.6 | ||||||||||||||||
As of March 31, 2026 and June 30, 2025, service cost amounts related to the net pension expense capitalized in gross inventory were $1.1 million and $1.6 million, respectively.
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Operating Performance Overview and Outlook
In the quarter ended March 31, 2026, we reported operating income of $186.5 million compared to $137.8 million in the prior year same quarter. The results for the quarter ended March 31, 2026, represent an increase of 35 percent over the prior year third quarter and surpassed our second quarter of fiscal year 2026 by 20 percent, which at that time was a record. The SAO segment realized $208.0 million of operating income with an operating margin of 28.3 percent, or adjusted operating margin of 35.6 percent. This compares to $151.4 million of operating income with an operating margin of 23.5 percent, or adjusted operating margin of 29.1 percent, during the quarter ended March 31, 2025. The SAO margin expansion was driven by a combination of continued productivity gains, pricing realization and improved product mix. These factors enabled SAO to deliver its strongest quarterly operating performance to date.
The record operating performance was accompanied by strong cash generation, reflecting higher earnings and continued discipline in working capital management. We generated $364.9 million of cash from operating activities in the nine months ended March 31, 2026, as compared with cash provided from operating activities of $182.3 million in the nine months ended March 31, 2025. Adjusted free cash flow was $207.3 million in the nine months ended March 31, 2026, as compared with adjusted free cash flow of $86.1 million in the nine months ended March 31, 2025. With a strong balance sheet and meaningful cash provided from operations, we will continue to take a balanced approach to capital allocation by sustaining our current asset base and investing in high value growth initiatives while returning cash to shareholders. As such, we are investing to accelerate our growth with our brownfield expansion project which is expected to add primary and secondary melt capacity. Additionally, during the nine months ended March 31, 2026, we repurchased 445,000 shares of our common stock on the open market for an aggregate of $133.9 million and funded dividend payments of $30.2 million.
Looking ahead, demand in our Aerospace and Defense end-use market continues to accelerate as customers gain confidence in higher build rates. As a result, customers are placing more orders for materials used in the Aerospace structural sub-market. Structural demand is closely tied to new production activity and is a clear indication of growing confidence in the aerospace supply chain. And as customers prioritize security of supply for these critical applications, we continue to advance long-term agreements that support volume visibility and pricing consistency, reinforcing our outlook for sustained growth. In the quarter ended March 31, 2026, Carpenter Technology delivered record earnings at a time when the Aerospace and Defense end-use market is at the beginning of the growth cycle. With demand accelerating, we believe Carpenter Technology is well positioned to deliver sustained performance and continue to generate long‑term value. We remain focused on supporting our customer needs, operational execution and living our Values as we drive to exceptional near-term and long-term performance.
We continue to closely monitor the evolving conflict among the United States, Israel and Iran and its impact to the end-use markets we serve. We also continue to monitor the ongoing tariff changes and engage with our customers and suppliers to analyze how these items could impact our business. We, as well as others in our industry, have established long-standing surcharge mechanisms to pass through changes in raw material prices to our customers. We are using and will continue to use these surcharge mechanisms to pass through the impact of any incremental tariffs on our raw material costs to our customers. As such, at this time and based on current information, we believe these items will not have a material impact on the Company.
Results of Operations — Three Months Ended March 31, 2026 vs. Three Months Ended March 31, 2025
For the three months ended March 31, 2026, we reported net income of $139.6 million, or $2.77 earnings per diluted share. This compares with net income for the three months ended March 31, 2025, of $95.4 million, or $1.88 earnings per diluted share. The results for the three months ended March 31, 2026, reflect an ongoing shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies compared to the three months ended March 31, 2025.
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Net Sales
Net sales for the three months ended March 31, 2026, were $811.5 million, which is a 12 percent increase over the three months ended March 31, 2025. Excluding surcharge revenue, sales increased 10 percent from the three months ended March 31, 2025. The results excluding surcharge revenue reflect realized price increases and improving product mix during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Excluding surcharge revenue, sales in the Aerospace and Defense end-use market increased 17 percent compared to the three months ended March 31, 2025.
Geographically, domestic net sales increased 9 percent from the three months ended March 31, 2025, to $473.9 million. Excluding surcharge revenue, domestic sales increased 8 percent from the three months ended March 31, 2025, driven by higher sales in the Aerospace and Defense, Energy and Industrial and Consumer end-use markets, partially offset by lower sales in the Medical end-use market. Sales outside the United States increased 15 percent from the three months ended March 31, 2025, to $337.6 million for the three months ended March 31, 2026. Excluding surcharge revenue, sales outside the United States increased 13 percent from the three months ended March 31, 2025. This reflects higher sales in the Aerospace and Defense end-use market in all regions and higher sales in the Energy end-use market in the European region offset by lower sales in the Energy end-use market in the Asia Pacific region and the Medical end-use market in the European region compared to the three months ended March 31, 2025. A portion of our sales outside the United States are denominated in foreign currencies. The impact of fluctuations in foreign currency exchange rates resulted in a $1.3 million increase in net sales during the three months ended March 31, 2026, compared to the three months ended March 31, 2025. Net sales outside the United States represented 42 percent and 40 percent of net sales for the three months ended March 31, 2026 and 2025, respectively.
Sales by End-Use Markets
We sell to customers across diversified end-use markets. We believe that disclosing net sales by end-use markets is helpful supplemental information in analyzing the performance of the business from period to period. The following table includes comparative information for our net sales, which includes surcharge revenue, by principal end-use markets:
| Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Aerospace and Defense | $ | 534.2 | $ | 454.7 | $ | 79.5 | 17 | % | |||||||||||||||
| Medical | 65.8 | 85.0 | (19.2) | (23) | % | ||||||||||||||||||
| Energy | 69.0 | 46.4 | 22.6 | 49 | % | ||||||||||||||||||
| Transportation | 24.7 | 28.1 | (3.4) | (12) | % | ||||||||||||||||||
| Industrial and Consumer | 97.0 | 90.5 | 6.5 | 7 | % | ||||||||||||||||||
| Distribution | 20.8 | 22.3 | (1.5) | (7) | % | ||||||||||||||||||
| Total net sales | $ | 811.5 | $ | 727.0 | $ | 84.5 | 12 | % | |||||||||||||||
The following table includes comparative information for our net sales by the same principal end-use markets, but excluding surcharge revenue:
| Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | |||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Aerospace and Defense | $ | 435.6 | $ | 373.2 | $ | 62.4 | 17 | % | |||||||||||||||
| Medical | 51.7 | 72.4 | (20.7) | (29) | % | ||||||||||||||||||
| Energy | 50.5 | 35.0 | 15.5 | 44 | % | ||||||||||||||||||
| Transportation | 19.3 | 21.9 | (2.6) | (12) | % | ||||||||||||||||||
| Industrial and Consumer | 78.1 | 72.4 | 5.7 | 8 | % | ||||||||||||||||||
| Distribution | 20.4 | 22.1 | (1.7) | (8) | % | ||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | $ | 58.6 | 10 | % | |||||||||||||||
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Aerospace and Defense end-use market sales increased 17 percent from the three months ended March 31, 2025, to $534.2 million. Excluding surcharge revenue, sales increased 17 percent from the three months ended March 31, 2025. The results for the three months ended March 31, 2026, reflect strong demand driven by increasing build rates and the need to maintain aging fleets. The three months ended March 31, 2026, also reflect higher sales in the Defense end-use market for program specific applications.
Medical end-use market sales decreased 23 percent from the three months ended March 31, 2025, to $65.8 million. Excluding surcharge revenue, sales decreased 29 percent from the three months ended March 31, 2025. For the three months ended March 31, 2026, results reflect lower shipments as a result of the medical supply chain managing inventory levels closely, partially offset by realized price increases particularly in the dental sub-market compared to the three months ended March 31, 2025.
Energy end-use market sales of $69.0 million in the three months ended March 31, 2026, reflect a 49 percent increase from the three months ended March 31, 2025. Excluding surcharge revenue, sales increased 44 percent from the three months ended March 31, 2025. The results reflect higher sales in the power generation sub-market for material used in new and refurbished industrial gas turbines primarily driven by the demand for data centers compared to the three months ended March 31, 2025.
Transportation end-use market sales decreased 12 percent from the three months ended March 31, 2025, to $24.7 million. Excluding surcharge revenue, sales decreased 12 percent from the three months ended March 31, 2025. The results reflect weaker production rates for light-duty vehicles and lower build rates for medium and heavy-duty vehicles compared to the three months ended March 31, 2025.
Industrial and Consumer end-use market sales increased 7 percent from the three months ended March 31, 2025, to $97.0 million. Excluding surcharge revenue, sales increased 8 percent from the three months ended March 31, 2025. The results reflect higher demand across all Industrial sub-markets, particularly semiconductor and fluid control materials, partially offset by lower demand for consumer electronics materials compared to the three months ended March 31, 2025.
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Gross Profit
Our gross profit in the three months ended March 31, 2026, increased to $251.8 million, or 31.0 percent of net sales, as compared with $200.8 million, or 27.6 percent of net sales in the three months ended March 31, 2025. Excluding the impact of surcharge revenue, our adjusted gross margin in the three months ended March 31, 2026, was 38.4 percent as compared to 33.6 percent in the three months ended March 31, 2025. The increased gross profit for the three months ended March 31, 2026, reflects an ongoing improvement in product mix in the Aerospace and Defense and Energy end-use markets with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies.
Our surcharge mechanism is structured to recover increases in raw material costs, although in certain cases with a lag effect as discussed above. While the surcharge generally protects the absolute gross profit dollars, it does have a dilutive effect on gross margin as a percent of sales. We present and discuss these financial measures because management believes removing the impact of these items provides a more consistent and meaningful basis for comparing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures. The following represents a summary of the dilutive impact of the surcharge on gross margin.
| Three Months Ended March 31, | |||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||
| Net sales | $ | 811.5 | $ | 727.0 | |||||||||
| Less: surcharge revenue | 155.9 | 130.0 | |||||||||||
| Net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | |||||||||
| Gross profit | $ | 251.8 | $ | 200.8 | |||||||||
| Gross margin | 31.0 | % | 27.6 | % | |||||||||
| Gross margin excluding surcharge revenue | 38.4 | % | 33.6 | % | |||||||||
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the three months ended March 31, 2026, were $65.3 million or 8.0 percent of net sales (10.0 percent of net sales excluding surcharge) as compared with $63.0 million or 8.7 percent of net sales (10.6 percent of net sales excluding surcharge) in the three months ended March 31, 2025. The selling, general and administrative expenses for the three months ended March 31, 2026, reflect higher salary, benefit and variable compensation costs compared to the three months ended March 31, 2025.
Operating Income
Our operating income in the three months ended March 31, 2026, was $186.5 million, or 23.0 percent of net sales, as compared with operating income of $137.8 million, or 19.0 percent of net sales, in the three months ended March 31, 2025. Excluding surcharge revenue, adjusted operating margin was 28.4 percent for the three months ended March 31, 2026, as compared with 23.1 percent for the three months ended March 31, 2025. The operating results for the three months ended March 31, 2026, reflect an ongoing improvement in product mix in the Aerospace and Defense and Energy end-use markets with a shift in capacity to more complex, higher value materials as well as pricing actions and expanding operational efficiencies compared to the three months ended March 31, 2025.
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The following presents our operating income and operating margin, in each case excluding the impact of surcharge revenue on net sales. We present and discuss these financial measures because management believes removing these items provides a more consistent and meaningful basis for comparing ongoing results of operations from period to period. See the section "Non-GAAP Financial Measures" below for further discussion of these financial measures.
| Three Months Ended March 31, | |||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||
| Net sales | $ | 811.5 | $ | 727.0 | |||||||||
| Less: surcharge revenue | 155.9 | 130.0 | |||||||||||
| Net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | |||||||||
| Operating income | $ | 186.5 | $ | 137.8 | |||||||||
| Operating margin | 23.0 | % | 19.0 | % | |||||||||
| Adjusted operating margin excluding surcharge revenue | 28.4 | % | 23.1 | % | |||||||||
Interest Expense, Net
Interest expense, net for the three months ended March 31, 2026, was $8.7 million compared with $12.0 million in the three months ended March 31, 2025. Capitalized interest reduced interest expense by $1.9 million for the three months ended March 31, 2026, and $0.7 million for the three months ended March 31, 2025. The lower interest expense, net in the three months ended March 31, 2026, is due to higher capitalized interest and a lower interest rate on the 2034 Notes as compared to the notes that were prepaid and redeemed in full in November 2025.
Other Expense, Net
Other expense, net for the three months ended March 31, 2026, was $1.1 million as compared with $3.8 million of other expense, net for the three months ended March 31, 2025. The three months ended March 31, 2026, reflect $1.4 million of expense from pension earnings, interest and deferrals compared to $3.9 million of expense in the three months ended March 31, 2025, driven primarily by greater expected returns on plan assets during fiscal year 2026.
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Income Taxes
Income tax expense was $37.1 million, or 21.0 percent of income before income taxes for the three months ended March 31, 2026, as compared with income tax expense of $26.6 million, or 21.8 percent of income before income taxes for the three months ended March 31, 2025.
Income tax expense for the three months ended March 31, 2026, includes discrete tax benefits of $1.6 million attributable to employee share-based compensation and $2.5 million as a result of changes in the Company's prior year tax positions. Income tax expense for the three months ended March 31, 2025 included discrete tax benefits of $3.2 million attributable to employee share-based compensation.
The One Big Beautiful Bill Act ("OBBBA") was signed into law on July 4, 2025. The provisions of the OBBBA have varying effective dates. The OBBBA allows an elective deduction for domestic research and development expenses, a reinstatement of elective 100 percent first-year bonus depreciation and modifies the tax rates on Foreign-Derived Deduction Eligible Income and income from non-U.S. subsidiaries (Net CFC Tested Income), among other provisions. A quantitative estimate of the specific financial effects for future periods cannot be reasonably determined at this time due to the complexity of the changes in the tax reform. The impact of the provisions in the OBBBA will depend on our facts in each fiscal year and anticipated guidance from the Internal Revenue Service; however, we do not expect they will have a material impact on our effective tax rate.
On October 8, 2021, the Organization for Economic Co-operation and Development ("OECD") released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. On December 20, 2021, the OECD released Pillar Two model rules defining a 15 percent global minimum tax rate for large multinational corporations. The OECD continues to release additional guidance and countries are implementing legislation with widespread adoption of the Pillar Two Framework. In June 2025, the U.S. and the G-7 countries announced the intention to reach an agreement that would exempt U.S. parented multinationals from certain of the Pillar Two rules. In January of 2026 additional guidance was released, the "Side-by Side Package." We are currently evaluating the guidance. The Pillar Two Framework as it exists today does not have a significant impact on our financial position, results of operations or cash flows.
Business Segment Results
We have two reportable business segments: SAO and PEP. For more detailed segment information, see Note 16 of the Notes to Consolidated Financial Statements included in Item 1.
The following table includes comparative information for our volumes by business segment:
| Pounds sold | Three Months Ended March 31, | Pounds Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||
| (in thousands) | 2026 | 2025 | |||||||||||||||||||||
| Specialty Alloys Operations | 51,832 | 44,584 | 7,248 | 16 | % | ||||||||||||||||||
| Performance Engineered Products * | 2,602 | 2,584 | 18 | 1 | % | ||||||||||||||||||
| Intersegment | (960) | (672) | (288) | (43) | % | ||||||||||||||||||
| Total pounds sold | 53,474 | 46,496 | 6,978 | 15 | % | ||||||||||||||||||
* Pounds sold data for the PEP segment includes Dynamet and Additive businesses only.
The following table includes comparative information for our net sales by business segment:
| Net sales | Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Specialty Alloys Operations | $ | 735.1 | $ | 642.9 | $ | 92.2 | 14 | % | |||||||||||||||
| Performance Engineered Products | 97.7 | 104.9 | (7.2) | (7) | % | ||||||||||||||||||
| Intersegment | (21.3) | (20.8) | (0.5) | (2) | % | ||||||||||||||||||
| Total net sales | $ | 811.5 | $ | 727.0 | $ | 84.5 | 12 | % | |||||||||||||||
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The following table includes comparative information for our net sales by business segment, but excluding surcharge revenue:
| Net sales excluding surcharge revenue | Three Months Ended March 31, | $ Increase (Decrease) | % Increase (Decrease) | ||||||||||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||||||||||||
| Specialty Alloys Operations | $ | 585.0 | $ | 519.4 | $ | 65.6 | 13 | % | |||||||||||||||
| Performance Engineered Products | 90.6 | 96.8 | (6.2) | (6) | % | ||||||||||||||||||
| Intersegment | (20.0) | (19.2) | (0.8) | (4) | % | ||||||||||||||||||
| Total net sales excluding surcharge revenue | $ | 655.6 | $ | 597.0 | $ | 58.6 | 10 | % | |||||||||||||||
The following presents our operating margin excluding the impact of surcharge revenue on net sales for our SAO segment:
| Specialty Alloys Operations | Three Months Ended March 31, | ||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||
| Net sales | $ | 735.1 | $ | 642.9 | |||||||||
| Less: surcharge revenue | 150.1 | 123.5 | |||||||||||
| Net sales excluding surcharge revenue | $ | 585.0 | $ | 519.4 | |||||||||
| Operating income | $ | 208.0 | $ | 151.4 | |||||||||
| Operating margin | 28.3 | % | 23.5 | % | |||||||||
| Adjusted operating margin excluding surcharge revenue | 35.6 | % | 29.1 | % | |||||||||
The following presents our operating margin excluding the impact of surcharge revenue on net sales for our PEP segment:
| Performance Engineered Products | Three Months Ended March 31, | ||||||||||||
| ($ in millions) | 2026 | 2025 | |||||||||||
| Net sales | $ | 97.7 | $ | 104.9 | |||||||||
| Less: surcharge revenue | 7.1 | 8.1 | |||||||||||
| Net sales excluding surcharge revenue | $ | 90.6 | $ | 96.8 | |||||||||
| Operating income | $ | 6.7 | $ | 10.9 | |||||||||
| Operating margin | 6.9 | % | 10.4 | % | |||||||||
| Adjusted operating margin excluding surcharge revenue | 7.4 | % | 11.3 | % | |||||||||
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Specialty Alloys Operations Segment
Net sales for the three months ended March 31, 2026, for the SAO segment increased 14 percent to $735.1 million, as compared with $642.9 million in the three months ended March 31, 2025. Excluding surcharge revenue, net sales for the three months ended March 31, 2026 increased 13 percent compared to the three months ended March 31, 2025. The higher sales are driven by realized price increases and improving product mix in the Aerospace and Defense and Energy end-use markets compared to the three months ended March 31, 2025.
Operating income for the SAO segment was $208.0 million or 28.3 percent of net sales (35.6 percent of net sales excluding surcharge revenue) in the three months ended March 31, 2026, as compared with operating income of $151.4 million or 23.5 percent of net sales (29.1 percent of net sales excluding surcharge revenue) in the three months ended March 31, 2025. This marks the seventeenth consecutive quarter with increasing adjusted operating margins in SAO. The operating income for the three months ended March 31, 2026, reflects a combination of continued productivity gains, pricing realization and improved product mix compared to the three months ended March 31, 2025.
Performance Engineered Products Segment
Net sales for the three months ended March 31, 2026, for the PEP segment decreased 7 percent to $97.7 million, as compared with $104.9 million in the three months ended March 31, 2025. Excluding surcharge revenue, net sales for the three months ended March 31, 2026, decreased 6 percent compared to the three months ended March 31, 2025. The current quarter results reflect lower sales in the Medical and Distribution end-use markets partially offset by growth in the Aerospace and Defense and Industrial and Consumer end-use markets.
Next expected filings
- ~2026-08-11 10-K expected by 2026-08-24 (in 102 days)
- ~2026-10-22 10-Q expected by 2026-11-05 (in 174 days)
- ~2027-01-28 10-Q expected by 2027-02-11 (in 272 days)
- ~2027-04-28 10-Q expected by 2027-05-12 (in 362 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-04-29 10-Q Quarterly Report
- 2026-04-29 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-29 8-K Earnings Release; Financial Statements and Exhibits
- 2026-04-17 8-K Officer/Director Change; Financial Statements and Exhibits
- 2026-02-17 8-K Officer/Director Change; Regulation FD Disclosure; Financial Statements and Exhibits
- 2026-01-29 10-Q Quarterly Report
- 2026-01-29 8-K Earnings Release; Financial Statements and Exhibits
- 2026-01-29 8-K Earnings Release; Financial Statements and Exhibits
- 2025-11-20 8-K Material Agreement Entered; Material Financial Obligation; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-10-23 10-Q Quarterly Report
- 2025-10-23 8-K Earnings Release; Financial Statements and Exhibits
- 2025-10-23 8-K Earnings Release; Financial Statements and Exhibits
- 2025-08-13 8-K Officer/Director Change; Financial Statements and Exhibits
- 2025-08-12 10-K Annual Report
- 2025-08-06 8-K Earnings Release; Financial Statements and Exhibits