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Precision Castparts Corp. Reports Second Quarter Fiscal 2014 Earnings

Forged Products

Forged Products' sales increased by 39 percent year over year, growing to $1.06 billion in the second quarter of fiscal 2014 from $762 million last year. Second quarter results included a full quarter of Texas Honing and TIMET. The segment improved year-over-year operating income by 65 percent, delivering $258 million of operating income, or 24.3 percent of sales, in the quarter, versus $156 million, or 20.5 percent of sales, a year ago. The segment's three primary nickel conversion mills saw alloy selling prices decline by approximately $37 million year over year, and lower prices for revert and other alloys negatively impacted sales by an additional $17 million. Contractual pass-through pricing in the second quarter was essentially flat compared to last year. For the quarter, Forged Products' aerospace sales grew by approximately 47 percent compared to the same quarter last year. The base businesses improved sales year over year, compounded by the addition of a full quarter of TIMET. Similar to Investment Cast Products, the segment is well-positioned to benefit from ramps in commercial aircraft build rates and the acceleration of the new re-engining narrow-body platforms. In the power market, sales also improved year over year by more than 15 percent, driven by increased demand for downhole casing and interconnect pipe. TIMET continued to outstrip the Company's initial expectations, establishing an improved competitive position going forward. Forged Products achieved these results during the quarter while also successfully meeting the challenge of rebuilding the 29,000-ton forging press in Houston on time and under budget.

Airframe Products

Total Airframe Products' sales for the second quarter of fiscal 2014 were $693 million, increasing by 25 percent over sales of $553 million a year ago. Second quarter results included a full quarter of Synchronous, Klune, and Progressive, compared to a partial quarter of Klune and Progressive in the same period last year. Despite absorbing multiple, lower-margin acquisitions, the segment reported a 27 percent year-over-year gain in operating income, improving to $210 million, or 30.3 percent of sales, versus $166 million, or 30.0 percent of sales, in the second quarter of fiscal 2013. Sales of critical aerospace fasteners, which improved slightly year over year, continue to lag the current commercial aircraft build rates, particularly on the Boeing 787 program, a situation that is expected to resolve moving into early fiscal 2015. On the aerostructures side of the business, aerospace sales increased by 66 percent year over year. The sales improvement was driven by a low double-digit increase in the base businesses, along with a strong contribution from acquisitions; further sales growth is anticipated as aircraft build schedules ramp. From a performance point of view, the segment is successfully moving higher volumes over an improving cost structure and is rapidly integrating new acquisitions into the overall operations. Airframe Products anticipates the closure of the Permaswage acquisition in the third quarter of fiscal 2014.           

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