William A. Wulfsohn
Thank you, Mike, and good morning everyone. Fiscal year 2012 was an excellent year for Carpenter. As a team, we executed well and we exceeded our earnings targets. The legacy Carpenter business saw a 68% increase in operating income, excluding pension EID, which was above our 50% growth target. This profit growth was driven primarily by focus pricing action, mix management initiatives designed to free up capacity for increased sales of high value products and excellent manufacturing performance, which reduced our cost per ton for the third straight year. Combined these actions drove a $0.44 per pound or 66% improvement in SAO profit per pound, and equally as important, these actions enabled the capacity gains to sell an additional 4,500 premium tons in the year.
Fiscal year 2012 was also an outstanding year for the company in terms of positioning for future growth. I would like to highlight four key areas of particular strategic importance. First, and the highlight of the year, was our acquisition of Latrobe Specialty Metals. We have now owned Latrobe for four months and the results in the business are strong. As expected, on an operating basis, the acquisition has been immediately accretive to earnings. I am also pleased to report that the integration is going extremely well.
Based upon what we have learned to date, we are even more excited about the strategic value and synergy potential from this transaction. Thus in summary, Latrobe is tracking ahead of our overall deal economics and we remain confident that we will achieve at least $25 million of synergy by year three.
Second, we announced earlier this year the construction of a $500 million premium products facility in Alabama. This state-of-the-art facility will enable us to support existing and increasing customer demand for our aerospace and energy products, with 27,000 tons of new premium product capacity.
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