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.”