Precision Castparts Second Quarter Fiscal 2016 Earnings

SALES OF $2.3 BILLION

REPORTED EPS OF $2.49 FROM CONTINUING OPERATIONS (DILUTED)¹

PORTLAND, Ore., Oct. 22, 2015 (GLOBE NEWSWIRE) -- Precision Castparts Corp. (NYSE:PCP) reported its results for the second quarter of fiscal 2016:

¹ Attributable to PCC

Large commercial aerospace demand remained solid during the second quarter, increasing approximately 2 percent over the same quarter last year.  Regional/business jet sales were down modestly and military demand was down approximately 15 percent.  Power markets remained the largest negative driver in the second quarter, with a 26 percent decline overall, reflecting a low-single digit IGT decline, but an approximately 50 percent decline in the non-IGT oil & gas and pipe markets.  Contractual pass-through and metal pricing had an approximately $20 million negative impact to sales.

Operating income fell 22 percent to $548 million, due to the negative impact of lower sales and pricing pressures in the oil & gas market, coupled with continued fastener destocking and operational challenges in the Airframe Products segment.  The company also incurred approximately $6 million of expenses associated with the pending transaction with Berkshire Hathaway Inc.

Q2 FY16 Segment Results

• Sales grew by 1 percent with approximately $3 million of lower contractual pass-through pricing year-over-year.  Commercial aerospace sales increased 6 percent year-over-year and regional/business jet sales increased by approximately 15 percent, driven by solid demand on current aerospace platforms.  Military shipments were lower by approximately 12 percent, reflecting timing of customer demand.  IGT sales were down slightly with solid OEM demand offset by softness in aftermarket sales.
   
• The segment's operating income increased 3 percent, and operating margins expanded by 60 basis points year over year from 36.0 percent to 36.6 percent, resulting from effective leverage of higher volumes.
  
  

• Sales declined by 16 percent, including the negative impact of approximately $16 million from metal prices and contractual pass-through pricing.  Commercial aerospace sales grew by 4 percent and regional/business jet sales were higher, both due to solid demand.  Military sales declined by approximately 15 percent due to similar dynamics as Investment Cast Products.  Power sales decreased by nearly 50 percent, primarily due to the lower oil & gas and pipe demand, coupled with lower general industrial sales as a second-derivative impact of lower oil prices and weak overall demand through distribution channels.
   
• Operating income dropped by 36 percent, while operating margins fell 600 basis points to 18.7 percent as a result of negative volume leverage, weaker pricing in oil & gas markets and scheduled maintenance outages and the extended outage on a critical asset in the United Kingdom. 
  
  

• Sales declined by 9 percent, driven by lower aerospace and general industrial sales.  Commercial aerospace was modestly lower, driven by continued inventory management efforts by key fastener customers.  Aerostructures demand declined versus the prior year’s rapid growth due to the disruptive impact of new programs moving out of development and into production.  Regional/business jet and military sales were also lower by double digits, primarily reflecting difficult year-over-year comparisons and lower military demand.  The segment remains focused on delivering to its customers’ demand in support of the next generation of commercial aerospace programs, and is well-positioned with multi-year contracts in place. 
   
• Operating income fell by 23 percent, and operating margins decreased 480 basis points from 30.4 percent to 25.6 percent, reflecting lower volumes and product mix, coupled with higher costs associated with new product introductions.
  
  

In light of the announced transaction with Berkshire Hathaway Inc., the Company will not hold a conference call for its quarterly results for the second quarter, and will not be issuing any updates to its annual guidance.

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 complex structural investment castings and forged components for aerospace markets, machined airframe components, and highly engineered, critical fasteners for aerospace applications, and in manufacturing airfoil castings for the aerospace and industrial gas turbine markets. PCC also is a leading producer of titanium and nickel superalloy melted and mill products for the aerospace, chemical processing, oil and gas, and pollution control industries, and manufactures extruded seamless pipe, fittings, and forgings for power generation and oil and gas applications.

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 the risk that the Merger with Berkshire is delayed or will not be completed and the resulting effect thereof on our future business, financial results and the price of our common stock; the effect the expenses related to the Merger may have on our operating results; the effect of business uncertainties and contractual restrictions while the Merger is pending; 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, and our ability to accelerate production levels to meet order increases on new or existing programs in a timely fashion; the availability and cost of energy, raw materials, supplies, and insurance; the cost of pension and postretirement medical benefits; equipment failures; product liability claims; changes in inventory valuations; 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; fluctuations in oil & gas prices and production; the impact of adverse weather conditions or natural disasters; the availability and cost of financing; and the implementation of new technologies and process improvements. 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.

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