First Quarter Highlights (from Continuing Operations)
* Record consolidated segment operating income margin of 26.8%
* EPS from continuing operations of $1.70 (diluted)
* Total cash of $632 million and debt of $306 million after
pension contributions of ~$190 million
PORTLAND, Ore., July 21, 2009 (GLOBE NEWSWIRE) -- Precision Castparts Corp. (NYSE:PCP) drove operating margins to record levels in the first quarter of fiscal 2010, overcoming the challenges of lower volume in an extremely volatile aerospace destocking environment and soft demand in general industrial end markets.
First Quarter Fiscal 2010 Financial Highlights
Total sales in the first quarter of fiscal 2010 were $1.4 billion, compared to sales of $1.8 billion a year ago. Of that year-over-year sales decline, a total of approximately $157 million was due to foreign exchange (~$60 million), material pass-through (~$37 million), and lower selling prices of external alloys at Special Metals (~$60 million). Exclusive of the factors discussed above, lower aerospace sales accounted for approximately $125 million of additional year-over-year sales decline, or approximately 15 percent. Consolidated segment operating income was $369.7 million, or 26.8 percent of sales in the first quarter of fiscal 2010, compared to $421.8 million, or 23.3 percent of sales last year. In the first quarter, net income from continuing operations totaled $240.2 million, versus $273.5 million in the first quarter of fiscal 2009. Earnings per share from continuing operations in the quarter were $1.70 (diluted, based on 141.2 million shares outstanding), compared to earnings per share from continuing operations of $1.94 (diluted, based on 140.8 million shares outstanding) last year.
Including discontinued operations, Precision Castparts' net income for the first quarter of fiscal 2010 totaled $240.4 million, or $1.70 per share (diluted).
Business Highlights
Investment Cast Products: Investment Cast Products boosted operating margins to 29.1 percent of sales in the first quarter of fiscal 2010, compared to 25.3 percent of sales a year ago. The segment's operations demonstrated their capacity for continued cost takeout and productivity improvements, achieving strong operating margins in the first quarter, despite reduced demand from destocking aerospace customers. First quarter sales were $488.7 million, versus sales of $597.7 million last year. Contractual material pass-through pricing decreased from $27.5 million last year to $10.7 million in this fiscal year's first quarter. Segment operating income was $142.4 million for the quarter, compared to operating income of $151.0 million in the first quarter of fiscal 2009. Due to destocking and softening demand, Investment Cast Products' aerospace volume decreased approximately 22 percent year over year, mitigated by increased component volume related to aftermarket growth and an expanding customer base in the segment's industrial gas turbine (IGT) business.
Forged Products: Forged Products sales totaled $539.0 million in the first quarter of fiscal 2010, compared to sales of $816.5 million during the same period last year. Contractual material pass-through pricing and lower selling prices of external alloy sales from the segment's three primary mills negatively impacted year-over-year sales in the quarter by approximately $78 million. Despite the segment's high fixed cost base, Forged Products increased its operating margins year over year by 3.8 percentage points. The segment reported operating income and margins of $141.2 million, or 26.2 percent of sales, in the first quarter, compared to $182.8 million, or 22.4 percent of sales, in the first quarter of fiscal 2009. Sales declines were driven by lower aerospace volume, representing a drop of approximately 25 percent from the first quarter of last year, and continuing softening of the general industrial markets. Seamless pipe sales were stable year over year, with backlog holding steady at nearly $1 billion.
Fastener Products: Total Fastener Products sales were $351.8 million in the first quarter, compared to sales of $395.9 million last year. Despite the lower sales volume, operating income and margins increased to $114.0 million, or 32.4 percent of sales, in the first quarter, compared to operating income of $112.6 million, or 28.4 percent a year ago. The segment continued to identify cost and productivity opportunities throughout its operations to optimize the return on its assets and extract additional value. Despite major top-line challenges from aerospace destocking throughout its large commercial supply chain, significant cuts in regional/business aircraft production at several facilities, and general industrial market declines, Fastener Products demonstrated continued operational improvement. As the year progresses, the segment is well positioned for further aerospace opportunities.
"With solid operating contributions from each segment, our first quarter margins increased by 3.5 percentage points over last year despite the drop in sales volume," said Mark Donegan, chairman and chief executive officer of Precision Castparts Corp. "Every employee in this Company has demonstrated - and will continue to demonstrate - that we will seize all available opportunities and execute during challenging times. We attacked costs head-on and delivered record operating margins in an extremely tough environment, with still more areas to attack.
"In line with what we stated at the end of last quarter, inventory destocking across our aerospace operations was going to impact sales both in the first and second quarter," Donegan said.
