Fourth Quarter Fiscal 2013 Highlights

Record sales of $2.44 billion and EPS of $2.82 from continuing operations
Consolidated segment operating margin of 25.7%
Rapid Timet integration and achievement of synergies
Cash generation of $437 million, excluding cash paid for acquisitions, stock repurchases, and debt repayments
PORTLAND, Ore., May 9, 2013 (GLOBE NEWSWIRE) — Precision Castparts Corp. (NYSE:PCP) continued to effectively leverage sales in its major markets in the fourth quarter of 2013, driven by year-over-year growth in commercial OEM aerospace demand, steady improvement in industrial gas turbine (IGT) spares, and accelerating oil and gas downhole casing production, along with a full quarter of strong Timet performance.

Fourth Quarter Fiscal 2013 Financial Highlights

Sales totaled $2.44 billion in the fourth quarter of fiscal 2013, growing 25 percent over sales of $1.95 billion in the same period last year. Consolidated segment operating income improved by approximately 26 percent year over year, rising to $627.3 million, or 25.7 percent of sales in the quarter, versus consolidated segment operating income of $497.5 million, or 25.6 percent of sales a year ago. Net income from continuing operations (attributable to PCC) in the fourth quarter was $415.1 million, an increase of 23 percent over net income of $338.2 million in the fourth quarter of fiscal 2012. In the quarter, the Company delivered earnings per share (EPS) from continuing operations (attributable to PCC) of $2.82 (diluted, based on 147.1 million shares outstanding), compared to $2.31 (diluted, based on 146.2 million shares outstanding) last year.

Including discontinued operations, PCC’s net income (attributable to PCC) for the fourth quarter of fiscal 2013 totaled $414.2 million, or $2.82 per share (diluted).

Business Highlights

Investment Cast Products:

Investment Cast Products grew year-over-year sales by approximately 5 percent in the fourth quarter of fiscal 2013, increasing to $635.7 million from $602.7 million a year ago. Fourth quarter operating income of $214.3 million, or 33.7 percent of sales, increased by approximately 9 percent over last year’s $196.4 million, or 32.6 percent of sales. Contractual material pass-through pricing for Investment Cast Products was relatively flat year over year. The segment’s aerospace sales improved approximately 5 percent over the same period last year. OEM shipments remain aligned with current production rates, with further growth opportunities from future build rate increases and accelerated shipments of development parts for narrow-body re-engining programs beginning in the second half of fiscal 2014. In addition, strong demand for industrial gas turbine (IGT) spares drove a year-over-year increase in power sales of approximately 8 percent. The segment delivered solid operating performance and generated strong incremental margins, continuing to capture opportunities for cost reduction and improved productivity across its manufacturing facilities.

Forged Products:

Sales for Forged Products in the fourth quarter increased by 31 percent to $1,118.1 million, compared to sales of $855.1 million in the same period last year, and operating income improved to $252.8 million, or 22.6 percent of sales in the fourth quarter, compared to operating income of $192.7 million, or 22.5 percent of sales, last year. Contractual material pass-through pricing was relatively flat year over year, and selling prices of metal at the segment’s three primary mills were approximately $17 million lower than a year ago. The inclusion of a full quarter of Timet was the largest driver of the sales growth in the fourth quarter. In addition, throughput improved on the 29,000-ton press, which helped boost aerospace sales at the Houston plant by more than 25 percent sequentially. Downhole casing for the oil and gas market also continued to show a robust shipping profile for the second quarter in row. In terms of segment performance, Timet made a substantial contribution during its first full quarter; the integration is making rapid progress, with significant top- and bottom-line improvements identified for continued, long-term growth. In addition, segment operating results benefitted from continued strong leverage on base production, the restoration of the 29,000-ton press to more normal efficiency levels, and the production of downhole casing moving steadily down the learning curve.

Airframe Products:

Airframe Products’ fourth quarter sales grew by 40 percent to $685.1 million, compared to sales of $487.9 million in the same period last year, and the segment’s operating income increased by 42 percent in the fourth quarter to $198.0 million, or 28.9 percent of sales, versus $139.5 million, or 28.6 percent of sales last year. In addition to the impact from acquisitions, Airframe Products’ commercial aerospace sales showed organic growth of more than 10 percent over last year, reflecting solid market share positions and core fasteners further narrowing the gap with current 787 production rates. The segment demonstrated strong operating leverage, extracting solid drop-through from its base businesses and overcoming significant dilution from six lower-margin acquisitions. This strength is expected to continue as aerospace demand increases, and the recent Airframe Products acquisitions further accelerate and drive even greater improvements throughout their operations.

“In our fourth quarter, we started to realize the solid benefits of a long-term plan for continued profitable growth,” said Mark Donegan, chairman and chief executive officer of Precision Castparts. "We have focused on and have been diligent in acquiring the right assets over the last few years, and now those acquisitions have started to deliver on the value we anticipated. Our fourth quarter performance is only an initial data point on a long continuum for improved sales and earnings performance in the future.

“Timet is certainly a significant catalyst in achieving our long-term objectives. We are integrating Timet’s businesses at a rapid pace, and we see multiple opportunities for growth and improvement well out into the future. It’s a strong first step, but we are really just beginning to scratch the surface of this value-creating opportunity.

“The fourth quarter also showed how well positioned our base businesses are for further upside,” said Donegan. "Commercial OEM build rates are solid, with additional acceleration as the 787 program moves from five aircraft per month to 10 by the end of the calendar year, and the 737 rate steps up again in early 2014. We have secured strong positions on the development engines for the new narrow-body platforms and will begin increasing shipments of that hardware starting in the second half of this fiscal year. Our power businesses are improving on several fronts. IGT spares sales have been strong and continue to present upside opportunity, and we are also participating in several upgrade programs, which will drive growth even in a flat OEM market. In addition, shipments of our oil & gas downhole casing continue, with several large contracts currently in the negotiation phase, and the international markets for our interconnect seamless pipe are slowly recovering.

“An unyielding focus on improving performance in all our manufacturing operations will always be what drives this business forward,” said Donegan. “Over the past year, we completed 12 acquisitions, the vast majority with margins lower than the Company average, and our overall operating performance increased. Investment Cast Products continues to deliver strong incremental drop-through, and each improvement in operating margins establishes a new data point to beat. The Forged Products segment is benefitting from the fast-paced Timet integration, higher volumes moving across the 29K-ton press, and margin opportunities as future downhole casing production ramps. And, in Airframe Products, double-digit increases in core fastener volumes and aggressive cost management are generating solid incremental margins, and the integration of the new aerostructure acquisitions continues to accelerate. We continue to expect a steady and sustained improvement across our operations for the foreseeable future. The long-term prospects for Precision Castparts are truly exciting.”

At the end of the quarter, cash was $280 million, and debt was $3,807 million.

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