Net sales for the third quarter were $539.9 million, up 16 percent from the prior year. Excluding surcharge revenue, net sales were $419.0 million, up 24 percent from a year ago on 10 percent higher volume. Excluding the Latrobe impact, third quarter revenue excluding surcharge was up 13 percent on flat overall volume. Specialty Alloy Operations (SAO) segment sales without surcharge increased 12 percent on 1 percent lower volume, while Performance Engineered Products (PEP) segment sales without surcharge increased 21 percent on 8 percent lower volume compared with the fiscal year 2011 third quarter.
Gross profit was $105.1 million compared with $73.1 million in the fiscal year 2011 third quarter. The higher gross profit in this year’s third quarter was driven by a significantly higher profit per pound due to an improved product mix and higher prices, and the inclusion of Latrobe.
SG&A expense as a percentage of revenue excluding surcharge was 1.3 percent lower than the prior year third quarter. SG&A expense in the current quarter was $41.5 million or 9.9 percent of revenue excluding surcharge, compared with $37.9 million or 11.2 percent of revenue excluding surcharge for the third quarter of fiscal year 2011. The increase in spending mostly reflects the addition of Latrobe overhead costs.
Operating income for the third quarter was $55.7 million compared with $35.2 million a year earlier. Latrobe accounted for $5.1 million of operating income, before being reduced by inventory fair value cost adjustments of $2.9 million. Excluding surcharge revenue and pension earnings, interest and deferrals (EID), operating margin was 14.2 percent (or 16.8 percent excluding total Latrobe acquisition related costs) for the quarter compared to 13.0 percent in the fiscal year 2011 third quarter.Interest expense in the quarter was $5.6 million compared to $4.4 million in the year-ago period due to the impact of financing actions taken during last year’s fourth quarter. There was no incremental interest expense related to the Latrobe transaction since the Latrobe debt was fully paid off at closing..