First Quarter Fiscal 2015
Highlights
- Year-over-year EPS growth of 15 percent from continuing
operations
- Record EPS from continuing operations of $3.32 (diluted)
- Record consolidated segment operating margin of 29.1
percent
In the first quarter of fiscal 2015, Precision Castparts Corp.
(NYSE:PCP) showed steady sales growth year over year in its key end
markets and continued to strongly leverage increasing production
volumes.
First Quarter Fiscal 2015 Financial
Highlights
Precision Castparts Corp. (PCC) sales in the first quarter of
fiscal 2015 were $2.53 billion, a 7 percent improvement over sales
of $2.37 billion last year. Year over year, organic sales growth
was approximately 4 percent, excluding the impact of metal/revert
pricing. Consolidated segment operating income showed a 14 percent
increase year over year, climbing to $736 million, or 29.1 percent
of sales, versus $644 million, or 27.2 percent of sales, a year
ago. Net income from continuing operations (attributable to PCC) in
the first quarter rose to $484 million, compared to net income of
$424 million in the first quarter of fiscal 2014. Earnings per
share (EPS) from continuing operations (attributable to PCC) were
$3.32 in the quarter (diluted, based on 145.9 million shares of
stock outstanding), versus $2.88 (diluted, based on 147.1 million
shares of stock outstanding) in the same period last year.
First quarter sales were also positively impacted by a full
quarter of Permaswage and two months of Aerospace Dynamics
International.
Including discontinued operations, total net income
(attributable to PCC) for the first quarter of fiscal 2015 was $483
million, or $3.31 per share (diluted).
Business Highlights
Investment Cast Products: Investment Cast
Products sales increased by 1 percent in the first quarter, growing
to $625 million from last year's $616 million. In addition,
contractual pass-through pricing accounted for a year-over-year
sales decline of approximately $5 million. The segment's operating
income improved by 5 percent, climbing to $224 million, or 35.8
percent of sales this quarter, from $213 million, or 34.6 percent
of sales in the same quarter last year. Year over year, continued
strength in the large commercial aerospace market yielded an
approximate 5 percent sales increase for the segment, offsetting
continued weak demand in military and regional/business jet
markets. Industrial gas turbine (IGT) sales, which grew
approximately 5 percent year over year, benefited from solid upside
in spares sales and upgrade programs, offsetting lower overall OEM
turbine output. Investment Cast Products continued to deliver solid
performance on all operating metrics and to extract added value
across its operations.
Forged Products: Forged Products sales were
$1,096 million in the first quarter, versus $1,065 million in the
previous year, including a year-over-year decline in alloy and
revert selling prices of approximately $50 million. The segment's
operating income grew 15 percent, increasing to $308 million, or
28.1 percent of sales, from $267 million, or 25.1 percent of sales,
last year. The segment saw an approximate 2 percent improvement in
aerospace sales year over year, with higher regional/business jet
sales and flat large commercial and military sales. In power
markets, IGT sales grew by approximately 10 percent, despite lower
OEM turbine production. In addition, interconnect pipe sales showed
an approximate 50 percent increase year over year. Oil & gas
shipments decreased by 9 percent in the first quarter of fiscal
2015, compared to a vigorous shipping profile a year ago. Forged
Products continued to significantly improve its manufacturing
performance during the quarter. Now into the second year of
integration, TIMET further improved its performance on operational
metrics and delivered greater value by accelerating vertical
integration, increasing revert utilization, and driving higher
throughput from market share gains over its assets. In addition,
the segment's base businesses demonstrated their ability to
leverage increased volume effectively across their operations.
Airframe Products: Sales for the Airframe
Products segment increased year over year by 18 percent, growing to
$807 million in the first quarter compared to $686 million a year
ago. Despite some margin dilution from new acquisitions, operating
income improved by 18 percent to $242 million, or 30.0 percent of
sales, versus $205 million, or 29.9 percent of sales, a year ago.
Aerospace sales, which grew by approximately 22 percent year over
year, still reflected a disconnect of one to one-and-a-half
aircraft between 787 build rates and fastener shipments, which will
align with current aircraft production over the coming months.
During the quarter, the segment saw a significant boost in customer
ordering patterns, with heightened demand for key components and
more aggressive shipment schedules. Operationally, Airframe
Products segment made further progress in improving its performance
through continued solid leverage of increased volumes in its base
businesses, while rapidly integrating its newer acquisitions to
deliver operating margins closer to the segment average. In
addition, the segment's operations are aggressively putting plans
in place to meet these rising customer requirements.
"In the first quarter we saw both solid operating results and a
significant shift in customer ordering dynamics in our major end
markets," said Mark Donegan, chairman and chief executive officer
of Precision Castparts Corp. "Our order books began to fill in
rapidly, and customer demand for accelerated delivery increased. As
a result, we now have a clear line of sight to the steady growth we
are anticipating in the second half of our fiscal year. Having
already secured strong market shares, our operations are squarely
faced with the welcome challenges of adjusting manpower levels,
laying in materials, and planning production schedules to
effectively meet the higher volume levels in the year ahead.
"Commercial aerospace activity is and will continue to be the
single biggest driver of our growth in fiscal 2015," Donegan said.
"Across the Company, base aircraft production continues to be
solid. Production of 787 components in the majority of our
aerospace operations now supports the original goal of 10 aircraft
per month, and we now have orders in hand that will close the gap
completely. In addition, some Airframe Products' customers
significantly accelerated their ordering activity during the
quarter. These higher volumes, along with further share gains, are
driving the segment's operations to take steps right now to be
ready for the increased production that we can expect later this
fiscal year. Also, our casting and forging businesses are
supporting the rapid development of the next-generation engines for
narrow-body aircraft. Our dollar content on these engines will
create significant growth as the programs ramp in fiscal 2016 to
fiscal 2018.
"We also saw solid upward shifts in orders from our customers in
power markets," Donegan said. "For several quarters now, our IGT
sales have remained relatively flat even in the face of decreased
OEM production activity, due to higher spares sales and our strong
content on OEM upgrade programs. Based on increased order intake in
the first quarter, we expect IGT growth to resume for the balance
of this fiscal year and into fiscal 2016. In addition, continued
expansion in interconnect pipe demand has enabled us to maintain a
backlog of approximately one year, even with an increased shipping
profile. In the oil & gas market, we are winning sizeable new
orders that leverage our unique capabilities, and we anticipate
that shipments will ramp up over the next twelve months and
beyond.
"In the second quarter, we will be performing scheduled, annual
maintenance on our large forging press complexes, as we have in
past years," Donegan said. "We are including TIMET assets in this
process for the first time since we acquired the business. While
this work is being performed, we will also be making major
improvements to some of our critical assets, which are targeted at
enhancing productivity and throughput in order to meet our
customer's growing demand. In addition, many of our operations
in Europe will shut down as usual for vacation over the course of
the summer months. We have built adequate inventory to meet
customer demand, but, similar to previous second quarters, the
reduced throughput and the lost absorption will have a slight
negative impact on both top- and bottom-line growth.
"Coming into the third and fourth quarters, we are looking
forward to solid growth in all of our segments," Donegan
said. "Customer order dynamics underwent a significant shift
this past quarter, and, with this transition, we face a strong
production load ahead of us. All of our operations are gearing
up for the challenges of the increased workload and are attacking
them head on - meeting demanding customer schedules, continuing to
improve their processes, and further leveraging increased
throughput effectively. At the same time, we intend to put our
strong cash flow to work on pursuing new opportunities that make
sense over the long term, and that we anticipate will enable us to
establish even higher levels of operational performance going
forward."
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://event.on24.com/r.htm?e=812391&s=1&k=BA8B1DFC7DC79FEAE136B9538E9ABC5C
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 (888) 293-6952,
Access Code: 2935892. Dial *0 for technical assistance with
dial-in access. In order to assure the conference begins in a
timely manner, please dial in 10 to 15 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
2935892.
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 a market leader in manufacturing large,
complex structural investment castings, airfoil castings, forged
components, aerostructures and highly engineered, critical
fasteners for aerospace applications. In addition, the
Company is a leading producer of airfoil castings for the
industrial gas turbine market. 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; cybersecurity threats; 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; implementation of new technologies and
process improvements; and our ability to accelerate production
levels to timely match order increases. 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 |
(Unaudited; in
millions, except per share data) |
|
Three Months
Ended |
|
June 29, 2014 |
June 30, 2013 |
Net sales |
$ 2,528 |
$ 2,367 |
Costs and expenses: |
|
|
Cost of goods sold |
1,634 |
1,570 |
Selling and administrative
expenses |
158 |
153 |
Interest expense |
17 |
20 |
Interest income |
(1) |
(1) |
Total costs and expenses |
1,808 |
1,742 |
Income before income tax expense and equity
in earnings of unconsolidated affiliates |
720 |
625 |
Income tax expense |
(237) |
(200) |
Equity in earnings of unconsolidated
affiliates |
— |
1 |
Net income from continuing operations |
483 |
426 |
Net (loss) income from discontinued
operations |
(1) |
12 |
Net income |
482 |
438 |
Less: Net loss (income) attributable to
noncontrolling interests |
1 |
(2) |
Net income attributable to Precision
Castparts Corp. ("PCC") |
$ 483 |
$ 436 |
Net income per common share attributable to
PCC shareholders – basic: |
|
|
Net income per share from
continuing operations |
$ 3.34 |
$ 2.90 |
Net (loss) income per share
from discontinued operations |
(0.01) |
0.08 |
Net income per share |
$ 3.33 |
$ 2.98 |
Net income per common share attributable to
PCC shareholders – diluted: |
|
|
Net income per share from
continuing operations |
$ 3.32 |
$ 2.88 |
Net (loss) income per share
from discontinued operations |
(0.01) |
0.08 |
Net income per share |
$ 3.31 |
$ 2.96 |
Weighted average common shares
outstanding: |
|
|
Basic |
144.9 |
146.2 |
Diluted |
145.9 |
147.1 |
|
|
|
|
Three Months
Ended |
|
June 29, 2014 |
June 30, 2013 |
Sales by Segment |
|
|
Investment Cast Products |
$ 625 |
$ 616 |
Forged Products |
1,096 |
1,065 |
Airframe Products |
807 |
686 |
Total |
$ 2,528 |
$ 2,367 |
Segment Operating Income
(Loss)1 |
|
|
Investment Cast Products |
$ 224 |
$ 213 |
Forged Products |
308 |
267 |
Airframe Products |
242 |
205 |
Corporate expense |
(38) |
(41) |
Consolidated segment operating
income |
736 |
644 |
Interest expense |
17 |
20 |
Interest income |
(1) |
(1) |
Income before income tax expense and equity
in earnings of unconsolidated affiliates |
$ 720 |
$ 625 |
|
|
|
1 Operating income represents
earnings before interest, income tax expense, and equity in
earnings of unconsolidated affiliates. |
|
|
PRECISION CASTPARTS
CORP. |
SELECTED BALANCE SHEET,
CASH FLOW AND SALES INFORMATION |
(Unaudited; in
millions) |
|
June 29, 2014 |
March 30, 2014 |
Cash and Debt Balances |
|
|
Cash |
$ 373 |
$ 361 |
Total Debt |
$ 3,914 |
$ 3,572 |
Total PCC Shareholders' Equity |
$ 11,789 |
$ 11,386 |
Total Debt, as % of Total
Capitalization |
24.9 % |
23.9 % |
Working Capital Items1 |
|
|
Receivables, Net |
$ 1,656 |
$ 1,578 |
Inventories |
3,599 |
3,438 |
Accounts Payable |
978 |
1,047 |
Total |
$ 4,277 |
$ 3,969 |
|
|
|
|
Three Months
Ended |
|
June 29, 2014 |
June 30, 2013 |
Selected Cash Flow
Items1 |
|
|
Depreciation and Amortization |
$ 79 |
$ 70 |
Capital Expenditures |
$ (76) |
$ (82) |
Acquisitions of Businesses, Net of Cash
Acquired |
$ (625) |
$ (2) |
|
|
|
|
Three Months
Ended |
|
June 29, 2014 |
June 30, 2013 |
Sales by Market1 |
|
|
Aerospace |
69 % |
68 % |
Power |
18 % |
18 % |
General Industrial & Other |
13 % |
14 % |
|
|
|
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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