PORTLAND, Ore., May 9, 2007 (PRIME NEWSWIRE) -- Driven principally by the continued strength of the commercial 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 2007 and for the full fiscal year.
Fourth Quarter 2007 Financial Highlights
Precision Castparts Corp.'s (PCC, or the Company) sales in the fourth quarter of fiscal 2007 grew 64.1 percent over sales in the fourth quarter of fiscal 2006, while consolidated segment operating income increased 90.9 percent year over year. Total sales in the fourth quarter were $1,546.5 million, compared to $942.3 million last year, generating consolidated segment operating income of $305.9 million, or 19.8 percent of sales, in the quarter, versus consolidated segment operating income of $160.2 million, or 17.0 percent of sales, a year ago.
Net income from continuing operations, which grew 101.1 percent year over year, established a new performance benchmark of $199.9 million, or $1.44 per share (diluted, based on 139.0 million average shares outstanding) this year, compared to $99.4 million, or $0.73 per share (diluted, based on 136.7 million average shares outstanding) in the fourth quarter of fiscal 2006. Results from the fourth quarter of fiscal 2007 include a non-recurring tax benefit of $6.2 million, or $0.04 per share (diluted), associated with tax refund claims and changes in tax reserves resulting from completed audits of the Company's tax returns.
Net income (including discontinued operations) was $204.5 million, or $1.47 per share (diluted), in the fourth quarter of fiscal 2007, compared to net income of $100.4 million, or $0.73 per share (diluted), in the same quarter last year.
Fiscal 2007 Financial Highlights
Fiscal 2007 sales increased 52.4 percent over last year's sales, and net income from continuing operations grew by 75.8 percent in the same time period. Sales in fiscal 2007 totaled $5,361.2 million, versus sales of $3,518.4 million last year. Net income from continuing operations in fiscal 2007 was $614.7 million, or $4.45 per share (diluted, based on 138.0 million average shares outstanding), compared to $349.7 million for the previous year, or $2.58 per share (diluted, based on 135.7 million average shares outstanding.) Results for fiscal 2007 include non-recurring tax benefits of $11.1 million, or $0.08 per share (diluted), compared to $5.3 million, or $0.04 per share (diluted), last year. Net income (including discontinued operations) was $633.1 million, or $4.59 per share (diluted), for fiscal 2007, compared to net income of $350.6 million, or $2.58 per share (diluted), last year.
Business Highlights
Investment Cast Products: Total fourth-quarter sales for Investment Cast Products increased 13.5 percent over the fourth quarter of fiscal 2006, growing to sales of $477.3 million this quarter versus sales of $420.5 million last year. The segment's sales in the fourth quarter included approximately $29 million more material pass-through pricing than the fourth quarter of fiscal 2006. Investment Cast Products boosted its operating income for the quarter by 19.0 percent over last year's fourth quarter, achieving an operating income of $103.8 million, or 21.7 percent of sales, in the fourth quarter of fiscal 2007, compared to $87.2 million, or 20.7 percent of sales a year ago. Fourth quarter results included approximately two months of sales and earnings from GSC Foundries, which was acquired February 2, 2007. The healthy commercial aerospace cycle, enhanced by increased PCC aircraft/engine content and expanded capacity, continued to fuel this segment's performance. In addition, industrial gas turbine ("IGT") orders, both OEM and aftermarket, are steadily accelerating. Investment Cast Products improved annual sales by 11.7 percent year over year, growing sales to $1,797.9 million this year from $1,609.4 million in fiscal 2006, with operating income of $391.5 million, or 21.8 percent of sales, versus $321.9 million, or 20.0 percent of sales, in fiscal 2006.
Forged Products: Forged Products grew fourth quarter sales by 201.5 percent year over year. Segment sales were $727.8 million for the quarter, compared to sales of $241.4 million a year ago. Operating income in the fourth quarter grew 332.7 percent year over year, moving up to operating income of $148.0 million, or 20.3 percent of sales, this year from $34.2 million, or 14.2 percent of sales, in the fourth quarter of 2006. The fourth quarter of fiscal 2006 did not include sales and operating income from Special Metals, which was acquired May 25, 2006. During the quarter, Special Metals made further inroads into non-aerospace markets, such as oil & gas, chemical processing, and pollution control, while continued strength in aerospace benefited the whole segment, and strong seamless pipe production at Wyman-Gordon helped drive higher sales in the base business. The top line in the quarter also included approximately $79 million of higher prices related to pass-through of increased nickel and titanium costs, versus approximately $43 million of pass-through pricing a year ago. The robust fourth quarter operating margins were spurred by effective volume leverage, successful cost-reduction initiatives, and surgical capital expenditures at Special Metals, while increased volumes and throughput enabled the base business to shoulder the higher material costs and improve operating margins. The Forged Products segment grew annual sales by 169.7 percent year over year, advancing to sales of $2,309.5 million this year from $856.4 million in fiscal 2006, with operating income increasing to $403.0 million, or 17.4 percent of sales, in fiscal 2007 from $107.1 million, or 12.5 percent of sales, last year.
Fastener Products: Fastener Products' fourth quarter sales of $341.4 million marked a 21.8 percent increase over sales of $280.4 million last year, while operating income jumped 50.1 percent to $78.8 million, or 23.1 percent of sales, in the fourth quarter of fiscal 2007 from $52.5 million, or 18.7 percent of sales, last year. Including the addition of Cherry Aerospace, which was acquired February 23, 2007, Fastener Products' aerospace OEM and aftermarket sales jumped nearly 40 percent year over year, propelled both by the dynamics of the commercial aerospace cycle and market share gains. The segment continues to work through a full pipeline of cost-reduction initiatives and has targeted further market share opportunities going forward. Year over year, the segment's annual sales of $1,253.8 million showed an increase of 19.1 percent over fiscal 2006 sales of $1,052.6 million, with operating income growing this year to $265.5 million, or 21.2 percent of sales, from $176.9 million, or 16.8 percent of sales, a year ago. The above segment results reflect the integration of the Fastener Products segment and the former Industrial Products segment, which was effective in the fourth quarter of fiscal 2007.
"Positive market forces and our strong market position have converged to create an outstanding environment for profitable growth," said Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. "The commercial aerospace cycle continues to be the primary engine for this growth. However, Special Metals is rapidly increasing its share in non-aerospace markets, Wyman-Gordon's extruded pipe sales still have a lot of runway, and the IGT market appears to be regaining strength.
"All of our businesses continue to push the envelope and achieve higher operating margins," Donegan said. "We are driving performance and achieving solid leverage from increased production volumes, while, at the same time, exploiting a full pipeline of cost-reduction initiatives. There is not a single PCC operation that does not have a clear line of sight to future performance improvement.
"Special Metals has certainly performed well beyond our initial projections, and we have solid plans in place for continued upside," Donegan continued. "Moving into fiscal 2008, we expect more moderate gains in operating margins than we experienced in our first three quarters of ownership. That being said, fiscal 2008 holds many opportunities for further top- and bottom-line improvement, and we plan to capture all the upside available to us. In addition, we remain relentlessly focused on cash, generating approximately $370 million in the fourth quarter and approximately $800 million for the year, before acquisitions and debt paydown, providing a solid platform for further profitable growth."
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 800.238.9007 or 719.457.2622 (passcode 9766334). 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: http://www.vcall.com/IC/CEPage.asp?ID=113010. 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 and supplies metal alloys and other materials to the casting and forging industry.
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 materials, energy, 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 PrimeNewswire's website -- http://www.PrimeNewswire.com or PCC's home page at http://www.precast.com.
PRECISION CASTPARTS CORP.
SUMMARY OF RESULTS(a)(b)
(Unaudited; in millions, except per share data)
Three Months Ended Twelve Months Ended
--------------------- ---------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
-------- -------- -------- --------
Net sales $1,546.5 $ 942.3 $5,361.2 $3,518.4
Cost of goods sold 1,151.4 720.3 4,051.0 2,714.2
Selling and
administrative
expenses 89.2 61.8 337.2 247.3
Restructuring and
impairment(c) -- -- -- 2.3
Interest expense,
net 11.6 9.9 52.2 40.6
-------- -------- -------- --------
Income before
income taxes and
minority interest 294.3 150.3 920.8 514.0
Provision for
income taxes 94.2 50.5 304.7 162.7
Minority interest
in net earnings
of consolidated
entities (0.2) (0.4) (1.4) (1.6)
-------- -------- -------- --------
Net income from
continuing
operations 199.9 99.4 614.7 349.7
Net income from
discontinued
operations 4.6 1.0 18.4 0.9
-------- -------- -------- --------
Net income $ 204.5 $ 100.4 $ 633.1 $ 350.6
======== ======== ======== ========
Net income per
share from
continuing
operations - basic $ 1.46 $ 0.74 $ 4.52 $ 2.62
Net income per
share from
discontinued
operations - basic 0.03 0.01 0.14 0.01
-------- -------- -------- --------
$ 1.49 $ 0.75 $ 4.66 $ 2.63
======== ======== ======== ========
Net income per
share from
continuing
operations -
diluted $ 1.44 $ 0.73 $ 4.45 $ 2.58
Net income per
share from
discontinued
operations -
diluted 0.03 -- 0.14 --
-------- -------- -------- --------
$ 1.47 $ 0.73 $ 4.59 $ 2.58
======== ======== ======== ========
Average common
shares
outstanding:
Basic 137.0 134.4 136.0 133.3
Diluted 139.0 136.7 138.0 135.7
Three Months Ended Twelve Months Ended
--------------------- ---------------------
April 1, April 2, April 1, April 2,
2007 2006 2007 2006
-------- -------- -------- --------
Sales by Segment(d)
Investment Cast
Products $ 477.3 $ 420.5 $1,797.9 $1,609.4
Forged Products 727.8 241.4 2,309.5 856.4
Fastener Products 341.4 280.4 1,253.8 1,052.6
-------- -------- -------- --------
Total $1,546.5 $ 942.3 $5,361.2 $3,518.4
======== ======== ======== ========
Segment Operating
Income (Loss)(d)(e)
Investment Cast
Products $ 103.8 $ 87.2 $ 391.5 $ 321.9
Forged Products 148.0 34.2 403.0 107.1
Fastener Products 78.8 52.5 265.5 176.9
Corporate expense (24.7) (13.7) (87.0) (49.0)
-------- -------- -------- --------
Consolidated
segment operating
income 305.9 160.2 973.0 556.9
Restructuring and
impairment -- -- -- 2.3
Interest expense,
net 11.6 9.9 52.2 40.6
-------- -------- -------- --------
Income before
income taxes and
minority interest $ 294.3 $ 150.3 $ 920.8 $ 514.0
======== ======== ======== ========
(a) Reported results for the three and twelve months ended April 2,
2006 have been restated for discontinued operations.
(b) Fiscal 2007 results include a tax benefit of $11.1 million, or
$0.08 per share (diluted) associated with tax refund claims
recognized and changes in tax reserves resulting from completed
and ongoing audits. Of this tax benefit, $6.2 million, or $0.04
per share (diluted) was recognized in the fourth quarter. Fiscal
2006 results include a tax benefit of $5.3 million, or $0.04 per
share (diluted), recognized in the third quarter.
(c) 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.
(d) During the fourth quarter of fiscal 2007, the former Industrial
Products segment was integrated with the Fastener Products
segment; prior periods have been restated to reflect the change
in reportable segments.
(e) Operating income represents earnings before interest, income
taxes, restructuring and other expense.
PRECISION CASTPARTS CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited; in millions, except share data)
April 1, April 2,
2007 2006
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 150.4 $ 59.9
Receivables, net of reserves of $7.4 in
2007 and $6.1 in 2006 847.7 495.4
Inventories 876.2 557.0
Prepaid expenses 22.9 28.6
Deferred income taxes 109.0 65.2
Discontinued operations 30.7 27.7
-------- --------
Total current assets 2,036.9 1,233.8
-------- --------
Property, plant and equipment:
Land 60.0 34.5
Buildings and improvements 297.0 234.7
Machinery and equipment 1,272.5 1,001.5
Construction in progress 131.6 46.6
-------- --------
1,761.1 1,317.3
Accumulated depreciation (759.9) (645.7)
-------- --------
Net property, plant and equipment 1,001.2 671.6
-------- --------
Goodwill, net 2,088.8 1,655.3
Acquired intangible assets, net 10.8 4.5
Other assets 117.1 152.2
Discontinued operations 3.9 32.4
-------- --------
$5,258.7 $3,749.8
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ 383.1 $ 47.5
Long-term debt currently due 170.7 21.3
Accounts payable 580.5 365.3
Accrued liabilities 435.9 283.4
Income taxes payable 67.1 33.1
Discontinued operations 20.9 17.8
-------- --------
Total current liabilities 1,658.2 768.4
-------- --------
Long-term debt 319.2 593.8
Deferred tax liability 26.7 4.2
Pension and other postretirement benefit
obligations 320.5 174.9
Other long-term liabilities 94.5 49.8
Discontinued operations 3.4 18.2
Shareholders' equity:
Common stock, $1 stated value, authorized:
450,000,000 shares; issued and
outstanding: 137,208,948 and 135,133,263
shares in 2007 and 2006 137.2 135.1
Paid-in capital 878.5 780.2
Retained earnings 1,903.2 1,290.5
Accumulated other comprehensive loss (82.7) (65.3)
-------- --------
Total shareholders' equity 2,836.2 2,140.5
-------- --------
$5,258.7 $3,749.8
======== ========
PRECISION CASTPARTS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited; in millions)
Twelve Months Ended
---------------------
April 1, April 2,
2007 2006
-------- --------
Operating Activities
Net income $ 633.1 $ 350.6
Income from discontinued operations (18.4) (0.9)
Non-cash items included in income:
Depreciation and amortization 112.5 96.4
Deferred income taxes 17.3 31.3
Stock-based compensation expense 26.8 --
Excess tax benefits on equity instruments
issued under share-based payment
arrangements (28.9) --
Tax benefit from stock option exercises -- 27.8
Impairment of long-lived assets -- 1.7
Other non-cash adjustments -- 1.3
Changes in assets and liabilities, excluding
effects of acquisitions and dispositions of
businesses:
Receivables (147.3) (81.9)
Inventories 105.3 (27.4)
Other current assets (2.3) (1.9)
Payables, accruals and current taxes 201.8 (21.0)
Retirement benefit obligations 16.4 (132.4)
Other non-current assets and liabilities (48.4) (14.3)
Net cash (used) provided by operating
activities of discontinued operations (2.4) 1.5
-------- --------
Net cash provided by operating activities 865.5 230.8
-------- --------
Investing Activities
Acquisitions of businesses (919.2) (115.5)
Capital expenditures (221.5) (97.5)
Dispositions of businesses and other 71.7 30.7
Net cash used by investing activities of
discontinued operations (1.6) (1.9)
-------- --------
Net cash used by investing activities (1,070.6) (184.2)
-------- --------
Financing Activities
Net change in short-term borrowings 335.4 47.5
Net change in long-term debt (127.1) (212.4)
Common stock issued 49.3 47.9
Excess tax benefits on equity instruments
issued under share-based payment
arrangements 28.9 --
Cash dividends (16.3) (11.9)
Other 1.1 (1.4)
Net cash provided (used) by financing
activities of discontinued operations 2.7 (1.5)
-------- --------
Net cash provided (used) by financing
activities 274.0 (131.8)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents 21.6 (8.8)
-------- --------
Net increase (decrease) in cash and cash
equivalents 90.5 (94.0)
Cash and cash equivalents at beginning of
year 59.9 153.9
-------- --------
Cash and cash equivalents at end of year $ 150.4 $ 59.9
======== ========