PORTLAND, Ore., April 27, 2004 (PRIMEZONE) -- Precision Castparts Corp. (NYSE:PCP) continued to achieve strong results for the fourth quarter of fiscal 2004 and for the fiscal year, despite challenging conditions in its core aerospace and power generation markets. These results were principally driven by solid operating performance from the Company's base businesses and by rapid realization of expected synergies associated with the acquisition of SPS Technologies (SPS) in December 2003.
Fourth Quarter 2004 Financial Highlights
Precision Castparts Corp. (PCC) sales for the fourth quarter of fiscal 2004 were $705.1 million, a 39.4 percent increase over sales of $505.9 million a year ago. Consolidated segment operating income in the quarter totaled $86.3 million, or 12.2 percent of sales, up from $77.5 million, or 15.3 percent of sales, for the fourth quarter of fiscal 2003.
PCC reported net income from continuing operations of $41.5 million, or $0.63 per share (diluted, based on 65.6 million shares outstanding). These results included restructuring charges during the quarter of $5.4 million, or $0.06 per share, which provided for employee severances and other costs principally associated with the consolidation of the Reed-Rico thread-rolling facility in Holden, Massachusetts, into the newly acquired SPS thread-rolling operations in Shannon, Ireland. Cost reductions from this consolidation, some of which were already achieved in the fourth quarter, should generate significant savings in future quarters. Including discontinued operations, PCC's net income was $41.3 million, or $0.63 per share (diluted), for the fourth quarter of fiscal 2004.
This quarter's net income from continuing operations compares with fourth quarter 2003 results of $38.9 million, or $0.73 per share (diluted, based on 53.2 million shares outstanding). Fiscal 2003 fourth quarter results included restructuring charges of $10.6 million, or $0.14 per share (diluted), partially offset by favorable tax settlements of $5.7 million, or $0.11 per share (diluted).
Fourth quarter results from continuing operations represent the first full quarter of SPS operations. These businesses generated sales of $192.4 million and operating income of $18.1 million, or 9.4 percent, which translated into $0.05 EPS accretion from continuing operations. This accretion excludes $0.02 per share (diluted) earned by the SPS Magnetics business, which was classified as a discontinued operation.
Fiscal 2004 Financial Highlights
Fiscal 2004 sales were $2,174.7 million, up 4.7 percent from fiscal 2003 sales of $2,076.6 million. Net income from continuing operations for fiscal 2004 was $135.5 million, or $2.35 per share (diluted, based on 57.6 million shares outstanding). Fiscal 2004 results included restructuring charges of $13.9 million, or $0.16 per share (diluted), and non-recurring charges of $11.2 million, or $0.12 per share (diluted), related to financing the SPS acquisition. Including discontinued operations, PCC's fiscal 2004 net income was $117.9 million, or $2.05 per share (diluted).
By comparison, fiscal 2003 net income was $161.1 million, or $3.04 per share (diluted, based on 53.0 million shares outstanding). Fiscal 2003 results included restructuring charges of $21.6 million, or $0.28 per share (diluted), offset by benefits from an insurance settlement of $14.5 million, or $0.17 per share (diluted), and favorable tax settlements of $5.7 million, or $0.11 per share (diluted).
Business Highlights
Investment Cast Products: In the fourth quarter of fiscal 2004, Investment Cast Products' sales totaled $296.8 million, with operating income of $53.2 million, or 17.9 percent, versus segment sales of $258.0 million and operating income of $49.6 million, or 19.2 percent, a year ago. The base businesses, consisting of PCC Structurals and PCC Airfoils, had sales of $263.0 million and operating income of $47.7 million, or 18.1 percent of sales in the fourth quarter of this year. These operations, despite substantially higher raw material costs and annual price concessions to major customers, continued to generate solid earnings. The segment's higher sales during the quarter were principally due to the addition of SPS' Specialty Materials and Alloys Group (SMAG). In the fourth quarter, SMAG accounted for $33.8 million of sales and $5.5 million of operating income, or 16.3 percent of sales for this segment. In particular, the Cannon-Muskegon operation is experiencing strong sales growth from supplying alloy for spare parts, and this strength is expected to continue moving forward. Annual sales for the segment were $1,042.8 million, with operating income of $190.4 million, or 18.3 percent, compared to sales of $1,071.3 million and operating income of $210.7 million, or 19.7 percent, in fiscal 2003.
Forged Products: Forged Products reported operating income of $17.1 million, or 12.6 percent, on sales of $135.5 million in the fourth quarter of fiscal 2004, compared to $20.0 million of operating income, or 14.5 percent on $137.8 million of sales last year. Stronger operating performance helped to minimize the negative effects of significantly increased raw material costs, as well as annual price concessions to major customers. Commercial aerospace and industrial gas turbine (IGT) market share gains, along with increased military penetration, will help to fuel sales growth in the year ahead. In addition, seamless pipe sales, particularly to the rapidly emerging China market, played a major role in boosting fourth quarter sales, as the aerospace and IGT markets are just starting to recover. Seamless pipe backlog at the end of fiscal 2004 is approximately $95 million higher than a year ago and will provide a benefit to fiscal 2005 sales and beyond. For fiscal 2004, the segment reported $64.7 million of operating income, or 12.9 percent, on sales of $502.4 million, compared to operating income of $81.5 million, or 14.4 percent, on sales of $566.9 million in fiscal 2003.
Fastener Products: In its first full quarter as a PCC business, Fastener Products achieved an operating income of $12.1 million, or 8.0 percent, on $150.9 million of sales in the fourth quarter of fiscal 2004. For the year, which includes approximately 17 weeks of activity since PCC acquired SPS on December 9, 2004, Fastener Products' operating income was $13.5 million, or 7.4 percent of sales, on $181.3 million of sales. In the first four months, this segment rapidly executed the synergies originally identified for the full year, exiting the fourth quarter at a run rate for this segment of $20-25 million per year of cost takeouts. Additional opportunities for cost reductions and synergies will continue to fuel earnings growth over the next year and beyond. During the quarter, Fastener Products also demonstrated its strengthened capabilities to penetrate markets and achieve growth by winning share at both airframe and aircraft engine customers and opening up share gain opportunities with major automotive customers.
Fluid Management Products: Sales for Fluid Management Products totaled $79.8 million in the fourth quarter of fiscal 2004, with operating income of $7.6 million, or 9.5 percent, compared to $75.9 million of sales and $8.7 million of operating income, or 11.5 percent for the same period last year. Sales of lower margin products continued to replace sales to the declining IGT power plant installation market. Moving forward, Fluid Management Products' offshore manufacturing facilities in China and Romania are fully operational, enabling the segment to improve its cost competitiveness and positioning it well to penetrate new and existing markets. In fact, at the end of fiscal 2004, Fluid Management Products' backlog was almost 50 percent higher than a year ago, building a strong base for fiscal 2005. For fiscal 2004, the segment reported sales of $308.7 million, which generated operating income of $31.0 million, or 10.0 percent, versus last year's sales of $310.9 million and operating income of $32.5 million, or 10.5 percent.
Industrial Products: Industrial Products' sales for the fourth quarter of fiscal 2004 were $42.1 million, with operating income of $5.2 million, or 12.4 percent, compared to fiscal 2003 sales of $34.2 million and operating income of $4.8 million, or 14.0 percent. For the quarter, the segment's base businesses, Advanced Forming Technology and J&L Fiber Services, showed significant improvement, achieving record earnings on sales that increased 9.8 percent over the same quarter last year. These results were driven by new product introductions, increased long life-cycle production programs, and significantly lower cost structures at both businesses. The segment's higher sales and lower margins were principally due to the addition of SPS' Precision Tool Group. SPS' Precision Tool Group achieved sales of $7.7 million and operating income of $0.5 million, or 6.5 percent. The consolidation of Reed-Rico and the SPS businesses has significantly increased their worldwide share of the fastener tooling market and will improve sales and margins as a result of improved cost structures and leverage from higher volume, with significant upside in future years. For the year, the segment's sales totaled $139.5 million, with operating income of $18.9 million, or 13.5 percent, versus fiscal 2003 sales of $127.5 million and operating income of $13.0 million, or 10.2 percent.
"We are pleased by the performance this quarter of both PCC's base businesses and of our newly acquired SPS operations," said Mark Donegan, chairman and chief executive officer of PCC. "Despite strong headwinds from raw material cost increases and price concessions, our base businesses continued to identify ways to absorb the brunt of these negative pressures.
"In addition, we have quickly and effectively incorporated synergies throughout the SPS operations," Donegan continued. "In only four months, we have executed the synergies that we originally identified for the first full year of the acquisition. As we exit fiscal 2004, we have achieved an annual run rate of $25 million of cost takeouts, and we have only begun to realize the additional opportunities for cost reductions and synergies. The aggressive execution of synergies enabled us to deliver $0.05 per share accretion in the fourth quarter, while overcoming the loss of $0.02 per share of earnings from SPS' profitable Magnetics business, which was classified into discontinued operations.
"With a continued focus on a healthy balance sheet, we reduced our total debt to $1.077 billion at the end of the fiscal year," Donegan said. "That brought our debt-to-capital ratio to 38.6 percent, an improvement from 39.7 percent as of December 28, 2003, following the acquisition of SPS. That is well ahead of where we expected to be at this point. We are aggressively generating cash from earnings and operating working capital improvements. During fiscal 2004, we contributed $95.1 million of that cash to our pension plans, significantly improving the funded status of our plans and reducing our ongoing pension expense. Over the next year, we expect continued strong cash flows, which will be used to strengthen the Company's credit profile and provide flexibility for future growth.
"We have built a solid platform for the year ahead," Donegan said. "PCC is poised for profitable growth. Our key markets -- commercial and military OEM, IGT OEM, aerospace and IGT aftermarket, and seamless pipe -- are showing steady improvement, market share gains are providing additional upside, and SPS opportunities continue to multiply."
Precision Castparts Corp. is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power generation, fluid management, 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.
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, fluid management, pulp and paper, 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,Orune/zone.com or PCC's home page at http://www.precast.com.
PRECISION CASTPARTS CORP.
SUMMARY OF RESULTS(1)
(In millions, except per share data)
(unaudited) (unaudited)
Three Months Ended Twelve Months Ended
------------------- ---------------------
March 28, March 30, March 28, March 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net sales $ 705.1 $ 505.9 $ 2,174.7 $ 2,076.6
Cost of goods sold 549.7 387.7 1,679.1 1,586.7
Selling and
administrative
expenses 69.1 40.7 204.0 180.1
Provision for
restructuring(2) 5.4 10.6 13.9 21.6
Other expense
(income)(3) -- -- 11.2 (14.5)
Interest expense, net 15.7 13.4 54.1 56.4
---------- ---------- ---------- ----------
Income before income
taxes and minority
interest 65.2 53.5 212.4 246.3
Provision for income
taxes 23.3 14.1 75.8 84.4
Minority interest in
net earnings of
consolidated
entities 0.4 0.5 1.1 0.8
---------- ---------- ---------- ----------
Net income from
continuing
operations 41.5 38.9 135.5 161.1
Loss from
discontinued
operations 0.2 18.5 17.6 36.8
---------- ---------- ---------- ----------
Net income $ 41.3 $ 20.4 $ 117.9 $ 124.3
========== ========== ========== ==========
Net income per
share from
continuing
operations - basic $ 0.64 $ 0.74 $ 2.40 $ 3.07
Net loss per share
from discontinued
operations - basic -- 0.35 0.31 0.70
---------- ---------- ---------- ----------
$ 0.64 $ 0.39 $ 2.09 $ 2.37
========== ========== ========== ==========
Net income per share
from continuing
operations -
diluted $ 0.63 $ 0.73 $ 2.35 $ 3.04
Net loss per share
from discontinued
operations - diluted -- 0.35 0.30 0.69
---------- ---------- ---------- ----------
$ 0.63 $ 0.38 $ 2.05 $ 2.35
========== ========== ========== ==========
Average common
shares outstanding:
Basic 64.5 52.7 56.4 52.4
Diluted 65.6 53.2 57.6 53.0
(unaudited) (unaudited)
Three Months Ended Twelve Months Ended
------------------- -------------------
March 28, March 30, March 28, March 30,
2004 2003 2004 2003
---------- ---------- ---------- ----------
Sales by Segment
Investment Cast
Products $ 296.8 $ 258.0 $1,042.8 $1,071.3
Forged Products 135.5 137.8 502.4 566.9
Fastener Products 150.9 -- 181.3 --
Fluid Management
Products 79.8 75.9 308.7 310.9
Industrial Products 42.1 34.2 139.5 127.5
---------- ---------- ---------- ----------
Total $ 705.1 $ 505.9 $2,174.7 $2,076.6
========== ========== ========== ==========
Operating Income by
Segment(4)
Investment Cast
Products $ 53.2 $ 49.6 $ 190.4 $ 210.7
Forged Products 17.1 20.0 64.7 81.5
Fastener Products 12.1 -- 13.5 --
Fluid Management
Products 7.6 8.7 31.0 32.5
Industrial Products 5.2 4.8 18.9 13.0
Corporate expense (8.9) (5.6) (26.9) (27.9)
---------- ---------- ---------- ----------
Total $ 86.3 $ 77.5 $ 291.6 $ 309.8
========== ========== ========== ==========
(1) Reported results for the three and twelve months ended March 30,
2003 have been restated for discontinued operations.
(2) During the second and fourth quarters of fiscal 2003 and fiscal
2004, the Company recorded charges related to restructuring
activities. These charges principally provided for severance
costs associated with downsizing and restructuring operations
throughout the Company.
(3) The reported earnings for fiscal 2004 included a non-recurring
charge recorded in the third quarter for the write-off of
unamortized bank fees from the early termination of bank credit
facilities and termination of an interest rate swap associated
with the refinancing of debt in connection with the SPS
Technologies Inc. acquisition. During the second quarter of
fiscal 2003, the Company recorded other income associated with
insurance settlements.
(4) Operating income represents earnings before interest, income
taxes, restructuring and other income.