Q3 2013 Earnings Call Transcript

Transcript Call Date 01/24/2013

Operator: Good morning and welcome to the Precision Castparts' Webcast and Conference Call to discuss its third quarter for Fiscal 2013. This event is being recorded and will be available on PCC's Company website at, shortly after the conclusion of the presentation and discussion. Following the remarks by members of PCC management, the dial-in access lines will be opened for questions.

Now, I will turn the floor over to Mr. Mark Donegan, Chairman and Chief Executive Officer of Precision Castparts.

Mark Donegan - Chairman and CEO: Thank you, operator. I'm sure you're all very familiar with the forward-looking statement and you need to take into consideration when you are analyzing the following presentation. As you can see we have a number of topics to cover today. We have the normal quarterly package, talk for a period of time about providing longer range targets, we are going to go over that and then we also are going to talk about additional use for cash deployment. But starting with the quarterly presentation; for the Company, we saw sales growth of 13.4% going from $1.8 billion last year to roughly $2.43 billion this year. We saw operating income increased 13.1% going from $460 million last year to roughly $521 million this year. We saw operating margins remained flat and this is with the inclusion of lower margin acquisitions and the corporate expenses from the acquisitions in the quarter. EPS went from $2.13 last year to $2.32 this year and the impact from the acquisitions in the quarter was roughly $0.08 and again that was mainly Timet.

If I look at sales year-on-year we saw solid Aerospace growth of 15% versus last year with organic increasing 5% from last year, OEM grew by 4% and for our business and our product line we continue to see aftermarket grow by 6%. We still – even though those numbers are carrying upside in terms of what was available to us as we recover from the 29,000 ton press outage and we ended the quarter with roughly $30 million of delinquencies in the quarter. So, our customers wanted significantly more than we are able to get out given the short quarter. We continue to see very solid IGT demand both on OEM and spares. OEM increased by roughly 8% and spares were up by almost 30% versus last year. We are starting to accelerate on the oil and gas shipments which increased 33% versus last year and we got solid contribution from our acquisitions versus last year of roughly $200 million. We had a 4% decrease in General Industrial, which is impacted to a smaller degree by lower nickel price, but probably more and selectively choosing what we go after. And then putting an apples-to-apples comparison, we had overall lower contractual pass through and lower materials selling price of roughly $13 million versus last year.

If I look sequentially, we saw a 6% increase in aerospace sales and most of this step up are the difference from last quarter was driven by the recovery from the press outages in Q2 and we did continue to see strength in our Airframe Products. We had IGT growth of 10% and we had increased oil and gas deliveries of roughly 32% from Q2. And on the General Industrial side, we had a decrease of 7%. Overall, there was additional opportunity, but the three less manufacturing days from Q2 certainly in Forged Products had an impact of what the customer wanted and what we're able to get out.

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