Carpenter Technology Corporation (CRS) Earnings Call Transcript & Summary

Welcome to the Annual Meeting for Carpenter Technology Corporation. Our host for today's call is Tony Thene, President and Chief Executive Officer. [Operator Instructions] I will now turn the call over to your host, Mr. Thene. You may begin, sir.

Good morning, and welcome to the 2021 Annual Stockholders Meeting of Carpenter Technology Corporation. I am Tony Thene, President and Chief Executive Officer of Carpenter Technology. The company is hosting our meeting virtually again this year, which we believe will allow us to reach a greater number of our stockholders. Following the conclusion of the business to be conducted at this meeting, we will finish by answering questions that are presented. Before we get to the business of the annual meeting, I just wanted to provide a few opening comments regarding fiscal year 2021. In fiscal year 2021, we maintained our focus on the safety of our employees and our facilities, cash flow generation, cost control, expanding customer relationships and progressing development of our emerging growth platforms. As COVID-19 challenges endured through the fiscal year, we were able to adapt to the changing landscape of conditions by rapidly implementing, enhancing and modifying our safety protocols. Our workforce continues to embrace our safety culture, which at its core is aimed at keeping themselves and our fellow employees safe. This is clearly demonstrated in our safety performance. Despite the challenges of COVID-19, our safety performance, as measured by total case incident rate for fiscal year 2021, was the best on record for Carpenter Technology. From a financial perspective, we generate significant cash flow enabled through targeted inventory reduction, and we've demonstrated continued discipline on cost management. We recently commissioned our state-of-the-art hot strip mill facility on our Reading campus. And we are excited about the opportunities this mill offers in terms of enhanced capabilities and capacity to meet the growing demand for applications suited to a broad range of electrification initiatives. The actions we have taken position us to emerge even stronger as the recovery in our markets continues to take shape. As always, I want to thank you for your continued support and confidence in Carpenter Technology. Before I finish my comments, I'd like to take a moment to recognize Greg Pratt, the Chairman of the Board. Following today's meeting, Greg will be retiring as Chairman, having reached the mandatory retirement age for nonmanagement directors. On behalf of the Board of Directors and all Carpenter Technology employees, I would like to express our sincerest gratitude to Greg for his many years of service on the Board. His expertise and leadership have been invaluable to the company during his tenure as Director and Chairman of the Board. With that, I will turn it over to our Chairman to conduct the business portion of our meeting.

Thank you, Tony, and good morning. I am Gregory A. Pratt, and I am Chairman of the Board of Carpenter Technology Corporation. It's a little after 11 a.m. Eastern Standard Time on October 12. And in accordance with the notice of meeting, I call this meeting of stockholders officially to order. Before proceeding to the business of the meeting, I would like to introduce the Directors present with us this morning. I will introduce them based on their tenure on the Board, starting with the most senior member. Stephen M. Ward, Jr. has been a director since 2001. Mr. Ward is a retired President and Chief Executive Officer of Lenovo Corporation and is the Chairperson of the Board's Corporate Governance Committee. As I mentioned earlier, I am Gregory A. Pratt. I have been a Director since 2002 and serve as Chairman of the Board. I also served as Interim President and Chief Executive Officer of the company in fiscal years 2010 and 2015. As Tony mentioned, I'm retiring from the Board today. I. Martin Inglis has been a Director since 2003. Mr. Inglis is the retired Executive Vice President and Chief Operating Officer of Battelle, and serves as the Chairperson of the Audit Finance Committee. Dr. Jeffrey Wadsworth, who is also nominated to a 3-year term today, has been a Director since 2006 and is the retired President and Chief Executive Officer of Battelle. Dr. Wadsworth serves as Chairperson of the Science and Technology Committee. Steven E. Karol has been a Director since 2012 and is the Managing Partner and Founder of the Watermill Group. Mr. Karol serves as Chairperson of the Strategy Committee. Tony R. Thene has been a Director of the company since 2015 when he also became Carpenter Technology's President and Chief Executive Officer. Kathleen Ligocki, who is also nominated to a 3-year term today, has been a Director since 2017. Ms. Ligocki served as CEO of Agility Fuel Solutions and serves as Chairperson of the Board's Human Capital Management Committee. Dr. Viola L. Acoff has been a Director since 2019. Dr. Acoff is the Associate Dean for Undergraduate and Graduate Programs at the University of Alabama, College of Engineering. Dr. A. John Hart, who is also nominated to a 3-year term today, has been a Director since 2019. Dr. Hart is a Professor of Mechanical Engineering at the Massachusetts Institute of Technology. Charles D. McLane, Jr. has been a Director since 2020. Mr. McLane is the retired Executive Vice President and Chief Financial Officer of Alcoa Corporation. Additionally, we are joined here today by AJ Conti of PricewaterhouseCoopers, our independent auditors. I would also like to introduce James Dee, who is Carpenter Technology's Senior Vice President, General Counsel and Secretary. Mr. Dee will act as secretary of this meeting, and now I will ask him to deal with the meeting's procedural issues.

Thank you, Mr. Chairman. The company has appointed [ Mr. Thomas Tai ] of Broadridge Financial Services to act as inspector of elections. Mr. Tai will assist with the tabulation of proxies and ballots at this meeting. Mr. Tai has previously signed an oath to execute his duties as inspector with strict impartiality and to the best of his ability. His oath will be filed with the records of this meeting. After the formal meeting has been adjourned, we will provide time for general questions. Only validated stockholders may ask questions in the designated field on the web portal. [Operator Instructions]. Please note that no one attending this meeting via the webcast or telephone is permitted to use any audio recording device. The Board of Directors fixed August 13, 2021, as the record date for determining stockholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that the documents, including the notice of this meeting, were mailed on or about September 17, 2021, to all stockholders as of the record date. The stockholder list shows that as of the record date, there were 48,067,164 shares of common stock outstanding and entitled to vote at this meeting. We are informed by the inspector of elections that there are represented in person or by proxy shares of common stock representing 44,964,009 votes, or approximately 93.54% of the voting power on the record date. Because more than a majority of Carpenter Technology's outstanding shares of common stock are represented here today, a quorum is present. The meeting is duly constituted, and we may proceed with the business of the meeting.

Thank you, Mr. Dee. Now I will present the matters to be voted upon. The first proposal to be acted upon by the stockholders is the election of 3 directors to serve for a term of 3 years. In accordance with Carpenter Technology's bylaws, stockholders desiring to nominate directors must provide advanced written notice prior to the annual meeting. Because no stockholder notices of director nominations were received this year, we will only entertain a motion to nominate the nominees listed in the proxy statement. The persons nominated by the Board of Directors for election at this meeting are Dr. A. John Hart, Kathleen Ligocki and Dr. Jeffrey Wadsworth. Proposal 2 is the approval of the appointment by the Board of Directors of PricewaterhouseCoopers LLP as Carpenter's independent registered public accounting firm for fiscal year 2022. The final proposal is an advisory vote to approve the compensation of our named executive officers. Our shareholders previously indicated that their preference was to hold such a vote on an annual basis, and the Board has elected to do so. Although this is a nonbinding vote, the Human Capital Management Committee and the Board will consider the results of the vote when making future compensation decisions. The polls for the matters to be voted upon at this annual meeting are now open. Most stockholders have already submitted proxies or voted by telephone or by Internet. Any stockholder who has not yet voted or wishes to change their vote may do so by clicking on the voting button on the web portal and following the instructions there. Stockholders who have previously sent in proxies or voted via telephone or Internet and do not want to change their vote do not need to take any further action. [Voting]

Now that everyone has had the opportunity to vote, I now declare the polls for the 2021 Carpenter Technology Corporation Annual Meeting of Stockholders closed. Mr. Dee, do we have preliminary voting results?

We do. We have been informed by the inspector of elections that the preliminary vote report shows that the nominees for election to the Board have been duly elected for 3-year terms. The independent registered public accounting firm of PricewaterhouseCoopers has been appointed to audit the financial statements of the company for the fiscal year ending June 30, 2022. And the advisory vote on the compensation of the company's named executive officers has been approved. We will be reporting the final voting results in a filing with the SEC.

Thank you, Mr. Dee. There being no further business to come before the meeting, the 2021 Annual Meeting of Stockholders of Carpenter Technology Corporation is now adjourned.

At this point, we would like to open things up for stockholder questions and comments. [Operator Instructions] Also, please note that only questions that are germane to the meeting and appropriate to the company-related topics will be addressed.

Mr. Chairman, we got 1 -- Mr. Chairman, we have 1 question that I will read and answer. Why did total compensation increase...

Thank you, Tony.

Why did total compensation increase for all NEOs as well as salary increases for 2 NEOs? Thank you very much for the question. As a reminder, in FY '20, we made no adjustments to our bonus targets for executives, and our bonus payout was significantly below target based on the market impacts of COVID-19 pandemic affecting our results. For the fiscal year 2021 that we are speaking of today, the bonus payment was made at or above target. That represented the value of the work of the organization to execute against our plan in light of the ongoing uncertainty. If you recall, we had the best safety performance on record, and we also generate significant cash flow, both greatly beneficial to our shareholders. In terms of merit increases, they were frozen for FY '21. However, we did 2 -- we did have 2 NEOs who received an increase. One was because of the change in job responsibilities and the other because of the relationship to the market pay for his position. There are no further questions, Mr. Chairman. I'd like to thank you all for attending the 2021 Annual Meeting of Stockholders for Carpenter Technology Corporation. Goodbye, and stay safe.

Thank you.

This now concludes the meeting. Thank you for joining, and have a pleasant day.