PORTLAND, Ore., May 9, 2006 (PRIMEZONE) -- Driven by the continued strength of the aerospace market, Precision Castparts Corp. (NYSE:PCP) delivered record sales, net income, and earnings per share from continuing operations both for the fourth quarter of fiscal 2006 and for the full fiscal year.
Fourth Quarter 2006 Financial Highlights
Precision Castparts Corp. (PCC) increased sales and consolidated segment operating income in the fourth quarter of fiscal 2006 by 17.7 percent and 34.8 percent year over year, respectively. Fourth quarter sales totaled $952.6 million, versus $809.5 million a year ago, while consolidated segment operating income in the quarter was $161.3 million, or 16.9 percent of sales, compared to consolidated segment operating income of $119.7 million, or 14.8 percent of sales, last year.
This strong operational performance boosted net income from continuing operations by 44.3 percent year over year. Net income from continuing operations totaled $100.6 million, or $0.74 per share (diluted, based on 136.7 million shares outstanding) in the fourth quarter of fiscal 2006, versus $69.7 million, or $0.52 per share (diluted, based on 134.4 million shares outstanding, adjusted for the stock split in September 2005). Net income for the fourth quarter of fiscal 2005 included a restructuring and impairment charge of $1.6 million, or $0.01 per share (diluted, adjusted for stock split).
Fiscal 2006 Financial Highlights
Fiscal 2006 sales grew 21.5 percent over fiscal 2005 sales, and net income from continuing operations increased by 45.8 percent year over year. Sales for fiscal 2006 were $3,546.4 million, compared to sales of $2,919.0 million for the previous year. Net income from continuing operations in fiscal 2006 totaled $349.1 million, or $2.57 per share (diluted, based on 135.7 million shares outstanding), versus $239.5 million for fiscal 2005, or $1.80 per share (diluted, based on 133.0 million shares outstanding, adjusted for stock split).
Business Highlights
Investment Cast Products: Investment Cast Products boosted fourth-quarter sales by 10.6 percent year over year, reporting $420.5 million of sales this quarter compared to sales of $380.2 million a year ago. The segment's sales in the fourth quarter included approximately $7.0 million of additional material pass-through pricing than the fourth quarter of fiscal 2005. Operating income for the quarter grew 19.6 percent over last year, from $72.9 million, or 19.2 percent of sales, in the fourth quarter of fiscal 2005 to $87.2 million, or 20.7 percent of sales, this year. Providing the thrust behind the segment's increased revenues was the robust aerospace market, driven both by heightened original equipment manufacturer (OEM) and aftermarket activity. Year over year, annual sales for Investment Cast Products increased by 18.3 percent, moving up from $1,360.6 million last year to sales of $1,609.4 million in fiscal 2006, and operating income jumped 25.7 percent, from $256.0 million, or 18.8 percent of sales, last year to operating income of $321.9 million, or 20.0 percent of sales, in fiscal 2006.
Forged Products: Fourth-quarter sales for Forged Products increased 36.5 percent over last year Segment sales totaled $250.6 million for the quarter, which included approximately $43.6 million of higher prices related to pass-through of increased nickel and titanium costs, compared to sales of $183.6 million a year ago, which included approximately $14.4 million of pass-through costs. Operating income in the fourth quarter grew 72.6 percent year over year, advancing from $20.8 million, or 11.3 percent of sales, last year to operating income of $35.9 million, or 14.3 percent of sales, in the fourth quarter of 2006. The higher sales in the quarter were propelled by continued strong demand for OEM and aftermarket aerospace components. Seamless, extruded pipe sales also continued to be robust, feeding off a solid backlog, which currently stands at nearly $300 million. Fiscal 2006 sales for the segment increased $247.7 million over last year, jumping from $631.7 million of sales in fiscal 2005 to sales of $879.4 this year, and operating income grew 42.0 percent, from $76.1 million, or 12.0 percent of sales, a year ago, to operating income of $108.1 million, or 12.3 percent of sales, in fiscal 2006.
Fastener Products: Fastener Products boosted its fourth quarter sales by $38.2 million over last year, an increase of 20.4 percent over sales of $186.8 million in the fourth quarter of fiscal 2005 to $225.0 million of sales, while operating income grew 67.9 percent from $26.5 million, or 14.2 percent of sales, a year ago, to $44.5 million, or 19.8 percent of sales, in the fourth quarter of fiscal 2006. Fourth-quarter segment sales included almost a full quarter of Shur-Lok sales. Fastener Products enjoyed the same aerospace OEM and aftermarket growth trends as the two segments discussed above, while also benefiting significantly from post-acquisition, organic growth at Air Industries. The segment continues to deliver further operating efficiencies from its manufacturing facilities, positioning the business well for profitable market share gains going forward. The segment grew its annual sales by 19.8 percent year over year, from $691.3 million last year to $828.0 million in fiscal 2006, and operating income increased from $88.3 million, or 12.8 percent of sales, to operating income of $144.3 million, or 17.4 percent of sales, this year.
Industrial Products: Industrial Products' fourth-quarter sales dropped by 4.1 percent year over year, from $58.9 million in the fourth quarter of fiscal 2005, to $56.5 million this year. Operating income decreased from $11.0 million, or 18.7 percent of sales, a year ago, to $7.4 million, or 13.1 percent of sales. Declining domestic automotive sales again affected the segment's sales and margins during the quarter, along with lower volumes at J&L Fiber Services. The segment also took approximately $1 million dollars of one-time adjustments during the quarter, primarily related to exiting products lines associated with the automotive sector. Year over year, Industrial Products sales fell slightly, from $235.4 million in fiscal 2005 to $229.6 million this year, and operating income also declined, from $42.5 million, or 18.1 percent of sales, a year ago to $31.3 million, or 13.6 percent of sales in fiscal 2006.
"The commercial aerospace industry continues its steady growth, and we have strategically positioned our businesses to take full advantage of this robust cycle," said Mark Donegan, PCC's chairman and chief executive officer. "As a result of new applications and market share growth, we are seeing unprecedented levels of demand, and there are still tremendous opportunities for more effective execution and further operational efficiencies in every one of our businesses. In addition, we are also very excited about our involvement on new aircraft programs, like the Airbus A380 and the Boeing 787, on which we have significant dollar content. These aircraft will fuel even further top- and bottom-line growth over the next several years.
"We are in the final phases of the regulatory process with the FTC and expect a decision on the Special Metals acquisition in the very near future," Donegan said. "This acquisition would provide us with outstanding near-term and long-term opportunities for value creation and profitable growth. Over the past several months, we have sharpened our strategies even further, and we will be able to hit the ground running. In addition, we have identified one of the key pieces of capital equipment that will significantly improve SMC's yields, and that machinery is currently being prepared for installation. Overall, we will aggressively drive operational efficiencies through SMC with the same intensity we focus on our current businesses."
Precision Castparts Corp. is hosting a conference call to discuss the financial results above today at 7:00 a.m. Pacific Daylight Time. The dial-in information for audio access is 866-550-6338 (passcode 3264616). Dial *0 for technical assistance. In order to assure the conference begins in a timely manner, please dial in five to ten minutes prior to the scheduled start time.
Individuals interested in monitoring the webcast should paste the following address into their browser for access to the live conference link: https://www.livemeeting.com/cc/vcc/join?id=w3264616&role=attend&pw=A326461. Access can also be gained through Precision Castparts Corp.'s corporate website: http://www.precast.com/PCC/CorpPres.html.
Precision Castparts Corp. is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power generation, automotive, and general industrial and other markets. PCC is the market leader in manufacturing large, complex structural investment castings, airfoil castings, and forged components used in jet aircraft engines and industrial gas turbines. The Company is also a leading producer of highly engineered, critical fasteners for aerospace, automotive, and other markets.
Information included within this press release describing 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, automotive, and other general industrial cycles; the relative success of the Company's entry into new markets; competitive pricing; the financial viability of the Company's significant customers; the availability and cost of energy, materials, supplies, insurance, and pension benefits; equipment failures; relations with the Company's employees; the Company's ability to manage its operating costs and to integrate acquired businesses in an effective manner; governmental regulations and environmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; and implementation of new technologies and process improvement. Any forward-looking statements should be considered in light of these factors. The Company undertakes no obligation to publicly release 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 the PrimeZone Media Network's website - http://www.PrimeZone.com or PCC's home page at http://www.precast.com.
PRECISION CASTPARTS CORP.
SUMMARY OF RESULTS(1)
(Unaudited; in millions, except share and per share data)
Three Months Ended Twelve Months Ended
------------------- ----------------------
April 2, April 3, April 2, April 3,
2006 2005 2006 2005
-------- -------- --------- ----------
Net sales $ 952.6 $ 809.5 $ 3,546.4 $ 2,919.0
Cost of goods sold 728.4 633.3 2,739.1 2,265.4
Selling and administrative
expenses 62.9 56.5 250.7 233.3
Restructuring and
impairment(2, 3) -- 1.6 2.3 1.6
Interest expense, net 10.1 12.9 41.4 56.6
------- ------- -------- --------
Income before income
taxes and minority
interest 151.2 105.2 512.9 362.1
Provision for income
taxes 50.2 35.2 162.2 121.3
Minority interest
in net earnings
of consolidated
entities (0.4) (0.3) (1.6) (1.3)
-------- ------- ---------- ----------
Net income from
continuing
operations 100.6 69.7 349.1 239.5
(Loss) income from
discontinued
operations (0.2) (3.7) 1.5 (241.2)
-------- ------- ---------- ----------
Net income (loss) $ 100.4 $ 66.0 $ 350.6 $ (1.7)
======== ======= ========== ==========
Net income per
share from
continuing
operations - basic $ 0.75 $ 0.53 $ 2.62 $ 1.83
Net (loss) income
per share from
discontinued
operations - basic -- (0.03) 0.01 (1.84)
-------- ------- ---------- ----------
$ 0.75 $ 0.50 $ 2.63 $ (0.01)
======== ======= ========== ==========
Net income per
share from
continuing
operations -
diluted $ 0.74 $ 0.52 $ 2.57 $ 1.80
Net (loss) income
per share from
discontinued
operations -
diluted (0.01) (0.03) 0.01 (1.81)
-------- ------- ---------- ----------
$ 0.73 $ 0.49 $ 2.58 $ (0.01)
======== ======= ========== ==========
Average common
shares
outstanding:
Basic 134.4 132.0 133.3 130.6
Diluted 136.7 134.4 135.7 133.0
Three Months Ended Twelve Months Ended
------------------- ----------------------
April 2, April 3, April 2, April 3,
2006 2005 2006 2005
-------- -------- --------- ----------
Sales by Segment
Investment Cast
Products $ 420.5 $ 380.2 $ 1,609.4 $ 1,360.6
Forged Products 250.6 183.6 879.4 631.7
Fastener Products 225.0 186.8 828.0 691.3
Industrial Products 56.5 58.9 229.6 235.4
-------- ------- ---------- ----------
Total $ 952.6 $ 809.5 $ 3,546.4 $ 2,919.0
======== ======= ========== ==========
Operating Income
(Loss) by Segment (4)
Investment Cast
Products $ 87.2 $ 72.9 $ 321.9 $ 256.0
Forged Products 35.9 20.8 108.1 76.1
Fastener Products 44.5 26.5 144.3 88.3
Industrial Products 7.4 11.0 31.3 42.5
Corporate expense (13.7) (11.5) (49.0) (42.6)
-------- ------- ---------- ----------
Total $ 161.3 $ 119.7 $ 556.6 $ 420.3
======== ======= ========== ==========
(1) Share amounts and earnings per share information have been restated
to reflect the two-for-one stock split, effective September 2005.
(2) During the third quarter of fiscal 2006, the Company recorded
charges related to restructuring and impairment activities.
These charges principally provided for the consolidation of a
machining operation and headcount reductions related to downsizing
the Company's tooling operation in Ireland.
(3) During the fourth quarter of fiscal 2005, the Company recorded a
restructuring and impairment charge primarily related to costs
associated with the closure of a business several years ago.
(4) Operating income represents earnings before interest, income taxes,
restructuring, impairment and other expense.
PRECISION CASTPARTS CORP.
CONSOLIDATED BALANCE SHEET
(Unaudited; in millions, except share data)
April 2, April 3,
2006 2005
---------- ---------
Assets
Current assets:
Cash and cash equivalents $ 59.9 $ 153.9
Receivables, net of reserves of
$6.2 in 2006 and $5.0 in 2005 503.2 408.2
Inventories 572.4 531.3
Prepaid expenses 29.0 17.5
Income taxes receivable -- 9.3
Deferred income taxes 65.2 55.0
Discontinued
operations 4.1 37.9
---------- ----------
Total current assets 1,233.8 1,213.1
---------- ----------
Property, plant and equipment:
Land 36.5 37.1
Buildings and improvements 241.5 235.8
Machinery and equipment 1,027.8 992.1
Construction in progress 46.6 29.4
---------- ----------
1,352.4 1,294.4
Accumulated depreciation (654.0) (601.9)
---------- ----------
Net property, plant
and equipment 698.4 692.5
---------- ----------
Goodwill, net 1,655.3 1,576.1
Acquired intangible
assets, net 4.5 5.2
Deferred income taxes -- 16.8
Other assets 152.4 103.2
Discontinued operations 6.8 18.1
---------- ----------
$ 3,751.2 $ 3,625.0
========== ==========
Liabilities and Shareholders Investment
Current liabilities:
Short-term borrowings $ 53.5 $ 6.0
Long-term debt
currently due 23.3 38.3
Accounts payable 368.8 312.4
Accrued liabilities 284.5 320.3
Income taxes payable 33.1 89.4
Discontinued operations 5.2 13.3
---------- ----------
Total current liabilities 768.4 779.7
---------- ----------
Long-term debt 599.8 798.7
Deferred tax liability 5.6 --
Pension and other postretirement
benefit obligations 174.9 205.5
Other long-term liabilities 58.7 55.7
Discontinued operations 3.3 5.0
Shareholders' investment:
Common stock, $1 stated value, authorized:
600,000,000 shares; issued and
outstanding 2006: 135,133,263
and 2005: 132,303,624 shares 135.1 66.2
Paid-in capital 780.2 773.4
Retained earnings 1,290.5 951.8
Accumulated other comprehensive
income (loss):
Foreign currency translation 38.8 72.3
Derivatives qualifying as
hedges (0.8) 0.6
Minimum pension
liability (103.3) (83.9)
---------- ----------
Total shareholders'
investment 2,140.5 1,780.4
---------- ----------
$ 3,751.2 $ 3,625.0
========== ==========
PRECISION CASTPARTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS(1)
(Unaudited; in millions)
Twelve Months Ended
----------------------------
April 2, April 3,
2006 2005
Revised Revised
---------- ----------
Operating Activities
Net income (loss) $ 350.6 $ (1.7)
(Income) loss from discontinued
operations (1.5) 241.2
Non-cash items included in income:
Impairment of long-lived
assets 1.7 --
Depreciation and amortization 99.2 97.0
Deferred income taxes 31.5 7.7
Tax benefit from stock option
exercises 27.8 16.0
Other non-cash adjustments 1.3 --
Changes in assets and
liabilities, excluding effects
of acquisitions
and dispositions of businesses:
Receivables (86.7) (33.4)
Inventories (31.7) (53.6)
Other current assets 36.0 18.6
Payables, accruals and current
taxes (18.7) 128.3
Retirement benefit obligations (144.6) (35.3)
Other non-current assets and
liabilities (36.2) (22.0)
Net cash provided by operating
activities of discontinued
operations 2.1 (8.7)
--------- ---------
Net cash provided by operating
activities 230.8 354.1
--------- ---------
Investing Activities
Acquisitions of businesses (115.5) (192.1)
Capital expenditures (99.2) (61.7)
Dispositions of businesses and
other 30.7 174.2
Net cash used by investing
activities of discontinued
operations (0.2) (5.9)
--------- ---------
Net cash used by investing
activities (184.2) (85.5)
--------- ---------
Financing Activities
Net change in short-term
borrowings 47.5 (5.8)
Net change in long-term debt (213.9) (224.5)
Common stock issued 47.9 41.2
Cash dividends (11.9) (7.7)
Other (1.4) (8.4)
Net cash provided by financing
activities of discontinued
operations -- 4.7
--------- ---------
Net cash used by financing
activities (131.8) (200.5)
--------- ---------
Effect of exchange rate changes
on cash and cash equivalents (8.8) 5.5
--------- ---------
Net (decrease) increase in cash
and cash equivalents (94.0) 73.6
Cash and cash equivalents at
beginning of year 153.9 80.3
--------- ---------
Cash and cash equivalents at end
of year $ 59.9 $ 153.9
========= =========
(1) Fiscal 2006 and 2005 consolidated statements of cash flows
are revised to reconcile net income to net cash provided by
operating activities. Previously, we reconciled income from
continuing operations to net cash provided by operating
activities.