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Precision Castparts Corp. Reports First Quarter Fiscal 2014 Earnings



Precision Castparts Corp. Reports First Quarter Fiscal 2014 Earnings

                     First Quarter Fiscal 2014 Highlights

  * Record EPS (diluted) of $2.88 from continuing operations
  * Record consolidated segment operating margin of 27.2 percent
  * Continued strong cash generation

PORTLAND, Ore., July 25, 2013 (GLOBE NEWSWIRE) -- Stable shipments in line
with high aircraft build rates, solid power markets, and heightened
acquisition activity during fiscal 2013 fueled 20 percent year-over-year sales
growth for Precision Castparts Corp. (NYSE:PCP) in the first quarter of fiscal
2014, with increased earnings reflecting strong leverage in the base
businesses and further acceleration in the rapid integration of TIMET and
other recent acquisitions.

First Quarter Fiscal 2014 Financial Highlights

Total sales in the first quarter of fiscal 2014 were $2.37 billion, improving
by 20 percent over sales of $1.97 billion a year ago. Consolidated segment
operating income was $644 million, a 25 percent increase compared to $515
million last year. Net income from continuing operations (attributable to PCC)
in the first quarter grew by 23 percent to $424 million over net income of
$344 million in the first quarter of fiscal 2013. Earnings per share (EPS)
from continuing operations (attributable to PCC) were $2.88 (diluted, based on
147.1 million shares outstanding), compared to $2.35 (diluted, based on 146.4
million shares outstanding) in the same period last year.

Including discontinued operations, total net income (attributable to PCC) for
the first quarter of fiscal 2014 was $436 million, or $2.96 per share
(diluted).

Business Highlights

Investment Cast Products:

Total sales for Investment Cast Products in the first quarter of fiscal 2014
totaled $616 million, versus $620 million in last fiscal year's first quarter,
with operating income improving to $213 million, or 34.6 percent of sales,
compared to $206 million, or 33.2 percent of sales, a year ago. The segment
continued to see stable aerospace schedules in line with the current high
levels of commercial OEM production and is solidly positioned to benefit as
build rates accelerate on key platforms, and new aircraft and engine
development programs advance. In addition, driven by increased OEM demand,
industrial gas turbine (IGT) sales grew by 7 percent year over
year. Contractual pass-through pricing declined by approximately $2 million
year over year. During the quarter, the Company's Portland, Oregon, locations
addressed union organizing activity, which negatively impacted sales by
approximately $12 million and operating income by $8 to $9 million. The
Portland workers voted not to unionize, and delinquencies will be shipped out
over the next two quarters. Despite this disruption, the segment's operations
delivered record operating margins by improving productivity, controlling
their cost structures, and effectively leveraging high volumes across their
fixed assets. 

Forged Products:

Forged Products' year-over-year sales improved by 25 percent, climbing to
$1.07 billion in the first quarter compared to last year's sales of $853
million. First quarter results included a full quarter of revenues from TIMET,
Texas Honing, and Dickson/Aerocraft, compared to only a partial quarter of
Dickson/Aerocraft in fiscal 2013. The segment's operating income grew by 37
percent, increasing to $267 million, or 25.1 percent of sales, in the first
quarter, from $195 million, or 22.9 percent of sales, a year ago. Lower
market-driven pricing of raw material inputs, which comprise approximately
55-60 percent of Forged Products' cost of goods sold, had a significant
negative impact on the segment's year-over-year sales. Selling prices of alloy
at the segment's three primary nickel conversion mills decreased by
approximately $33 million year over year, the falling price of revert and
other alloys negatively impacted sales by an additional $21 million, and
contractual pass-through pricing declined by approximately $4 million from the
same period last year. Like Investment Cast Products, the segment supported
commercial aircraft production at levels consistent with aircraft build rates
and will benefit from similar upside opportunities as commercial OEMs ramp
production, and new aircraft and engine development programs progress. On the
power side of the business, both downhole casing and interconnect pipe
shipments grew year over year. Contributing to Forged Products' earnings in
the quarter was strong performance from TIMET, where operational improvements
are being implemented at an accelerated rate, as well as leverage throughout
its aerospace manufacturing operations, and performance improvements from the
seamless pipe businesses.

Airframe Products:

First quarter sales in the Airframe Products segment increased by 39 percent
year over year, moving to $686 million this year from sales of $493 million a
year ago. Sales included a full quarter of Centra, Klune, Progressive,
Synchronous, and several small acquisitions, compared to only a partial
quarter of Centra in fiscal 2013. Operating income grew 40 percent to $205
million, or 29.9 percent of sales, compared to $146 million, or 29.6 percent
of sales, in the same period last year, despite the inclusion of several
lower-margin acquisitions. Critical aerospace fasteners sales improved by
approximately 12 percent year over year, although shipments of these fasteners
have still not fully caught up to aircraft production rates. This situation
applies most notably to the Boeing 787 program, where the segment's fastener
plants are supplying at an average pace of approximately five shipsets per
month. The base aerostructures business, which grew year-over-year aerospace
sales by 5 percent, is more closely tracking current commercial OEM build
rates and will accelerate in line with further ramp-ups in aircraft schedules.
Airframe Products' operating income was driven by rapid integration of the
acquisitions completed over the last two years, effective cost management, and
strong leverage of its increased workload. The pending acquisition of
Permaswage establishes a firm foothold in the fittings market and will be
immediately accretive to earnings.

"We continue to extract and deliver value from all of our operations," said
Mark Donegan, chairman and chief executive officer of Precision Castparts
Corp. "We are achieving strong earnings growth on stable commercial aircraft
schedules, gaining share on new airframe and engine development programs,
maintaining a steady drumbeat to meet or exceed our cost-reduction targets,
and continuing to set an aggressive pace in integrating our new
acquisitions. The course we set for ourselves over the past decade is now
playing out as we expected and delivering strong benefits to our
shareholders. 

"As we expand our reach in key markets, we are leveraging both our legacy
businesses and our acquisitions to achieve further profitable growth for the
Company," Donegan said. "Our base operations continue to deliver strong
incremental margins. In addition, the targeted acquisitions we have made in
recent years are capturing improvements at an accelerated rate and are
yielding solid results. Most notably, TIMET has already proven to be a major
contributor to earnings by rapidly adopting the PCC tool kit throughout its
operations, but we have a long runway of both top- and bottom-line
opportunities out ahead of us. 

"Looking ahead, we have secured solid positions on all major production and
development commercial aircraft programs, and our casting and forging
operations will ramp up or level out as the OEM schedules dictate," Donegan
said. "Our fastener production schedules still do not align with current
commercial production rates, but the orders are accelerating, and we have
great potential for further growth. In addition, our aerostructures business
has only just begun to uncover the upside opportunities in its base and
acquired companies. Beginning in the back half of calendar 2014, many of our
operations will be ramping up to handle increased volumes, as the new aircraft
and engine development programs roll out. At the same time, we are
aggressively pursuing further upside in power markets with our industrial gas
turbine, interconnect pipe, downhole casing, and other oil and gas
products. On every front, the Company remains focused on executing at the
highest levels and fully capturing the potential that lies ahead."

Precision Castparts is hosting a conference call to discuss the above
financial results today at 7:00 a.m. Pacific Time.

NOTE: The presentation charts are immediately available on the Company's web
site: http://www.precast.com/investors/presentations

Individuals interested in monitoring the webcast should paste the following
address into their browser for access to the live conference link:
http://w.on24.com/r.htm?e=617621&s=1&k=D9C231E4AFEC6D3FDF74C8A734B9BA3A

This link will provide both audio and video through the Internet
connection. You may use the following link to check your computer system's
compatibility any time prior to the call:
http://webcast.premiereglobal.com/clients/premiere/help/help.html

For Webcast assistance, please dial (888) 569-3848 or (719) 785-6626.

Those interested in asking questions following the earnings presentation must
dial in for audio access to: 800-946-0783, Access Code: 1855110. Dial *0 for
technical assistance with dial-in access. In order to assure the conference
begins in a timely manner, please dial in 5 to 10 minutes prior to the
scheduled start time.

You may also gain access to the webcast through Precision Castparts Corp.'s
corporate website: http://www.precast.com/investors/presentations

Following the conference call, you may replay the conference by calling
888-203-1112 or 719-457-0820; the replay pass code is 1855110.

Precision Castparts Corp. is a worldwide, diversified manufacturer of complex
metal components and products. It serves the aerospace, power, and general
industrial markets. PCC is the market leader in manufacturing large, complex
structural investment castings, airfoil castings, forged components and highly
engineered, critical fasteners for aerospace applications.  The Company is
also the leading producer of airfoil castings for the industrial gas turbine
market.  In addition, PCC manufactures extruded seamless pipe, fittings,
forgings, and clad products for power generation and oil & gas applications;
commercial and military airframe aerostructures; and metal alloys and other
materials to the casting, forging, and other industries.

Information included within this press release describing the projected growth
and future results and events constitutes forward-looking statements, within
the meaning of the Private Securities Litigation Reform Act of 1995. Actual
results in future periods may differ materially from the forward-looking
statements because of a number of risks and uncertainties, including but not
limited to fluctuations in the aerospace, power generation, and general
industrial cycles; the relative success of our entry into new markets;
competitive pricing; the financial viability of our significant customers; the
concentration of a substantial portion of our business with a relatively small
number of key customers; the impact on the Company of customer or supplier
labor disputes; demand, timing and market acceptance of new commercial and
military programs, including the Boeing 787; the availability and cost of
energy, raw materials, supplies, and insurance; the cost of pension and
postretirement medical benefits; equipment failures; product liability claims;
relations with our employees; our ability to manage our operating costs and to
integrate acquired businesses in an effective manner, including the ability to
realize expected synergies; the timing of new acquisitions; misappropriation
of our intellectual property rights; governmental regulations and
environmental matters; risks associated with international operations and
world economies; the relative stability of certain foreign currencies; the
impact of adverse weather conditions or natural disasters; the availability
and cost of financing; and implementation of new technologies and process
improvements. Any forward-looking statements should be considered in light of
these factors. We undertake no obligation to update any forward-looking
information to reflect anticipated or unanticipated events or circumstances
after the date of this document.

Precision Castparts Corp.'s press releases are available on the Internet at
Globe Newswire's website – http://www.globenewswire.com or PCC's home page at
http://www.precast.com. If you wish to be removed from this list, please reply
to Unsubscribe@precastcorp.com.

 
 
PRECISION CASTPARTS CORP.
SUMMARY OF RESULTS^1
(Unaudited; in millions, except per share data)
                                                  Three Months Ended
                                                  June 30,       July 1,
                                                  2013           2012
Net sales                                          $ 2,367        $ 1,966
Costs and expenses:                                               
Cost of goods sold                                 1,570          1,331
Selling and administrative expenses                153            120
Interest expense                                   20             3
Interest income                                    (1)            (2)
Total costs and expenses                           1,742          1,452
Income before income tax expense and equity in     625            514
earnings of unconsolidated affiliates
Income tax expense                                 (200)          (172)
Equity in earnings of unconsolidated affiliates    1              2
Net income from continuing operations              426            344
Net income (loss) from discontinued operations    12             (2)
Net income                                         438            342
Net income attributable to noncontrolling          (2)            —
interests
Net income attributable to Precision Castparts     $ 436          $ 342
Corp. ("PCC")
Net income per common share attributable to PCC                   
shareholders – basic:
Net income per share from continuing operations    $ 2.90         $ 2.37
Net income (loss) per share from discontinued      0.08           (0.02)
operations
Net income per share                               $ 2.98         $ 2.35
Net income per common share attributable to PCC                   
shareholders – diluted:
Net income per share from continuing operations    $ 2.88         $ 2.35
Net income (loss) per share from discontinued      0.08           (0.02)
operations
Net income per share                               $ 2.96         $ 2.33
Weighted average common shares outstanding:                       
Basic                                              146.2          145.3
Diluted                                            147.1          146.4
                                                                  
                                                  Three Months Ended
                                                  June 30,       July 1,
                                                  2013           2012
Sales by Segment                                                  
Investment Cast Products                           $ 616          $ 620
Forged Products                                    1,065          853
Airframe Products                                 686            493
Total                                              $ 2,367        $ 1,966
Segment Operating Income (Loss)^2                                 
Investment Cast Products                           $ 213          $ 206
Forged Products                                    267            195
Airframe Products                                  205            146
Corporate expense                                  (41)           (32)
Consolidated segment operating income              644            515
Interest expense                                   20             3
Interest income                                    (1)            (2)
Income before income tax expense and equity in     $ 625          $ 514
earnings of unconsolidated affiliates
                                                                  
^1 Reported results for the three months ended July 1, 2012 have been restated
for discontinued operations.
^2 Operating income represents earnings before interest, income tax expense,
and equity in earnings of unconsolidated affiliates.

 
 
PRECISION CASTPARTS CORP.
SELECTED BALANCE SHEET AND CASH FLOW STATISTICS
(Unaudited; in millions)
                                                 June 30,  March 31,
                                                 2013      2013
Cash and Debt Balances                                      
Cash                                              $ 293     $ 280
Total Debt                                        $ 3,386   $ 3,807
Total PCC Shareholders' Equity                    $ 10,184  $ 9,783
Total Debt, as % of Total Capitalization         25.0%     28.0%
Working Capital Items^1                                     
Receivables, Net                                  $ 1,476   $ 1,507
Inventories                                       3,112     2,980
Accounts Payable                                  868       940
Total                                             $ 3,720   $ 3,547
                                                            
                                                 Three Months Ended
                                                 June 30,  July 1,
                                                 2013      2012
Selected Cash Flow Items^1                                  
Depreciation and Amortization                     $ 70      $ 46
Capital Expenditures                              $ 82      $ 60
Acquisitions of Businesses, Net of Cash Acquired  $ 2       $ 848
                                                            
^1 Reported results exclude discontinued operations.

CONTACT: Jay Khetani, Vice President of Investor Relations
         (503) 946-4700
         Website: http://www.precast.com

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