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Precision Castparts 10-Q 2011

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
WebFilings | EDGAR view
 

 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 2, 2011 
Commission File Number 1-10348
 
 
 
 
Precision Castparts Corp.
 
 
 
 
 
 
 
An Oregon Corporation
IRS Employer Identification No. 93-0460598
4650 S.W. Macadam Avenue
Suite 400
Portland, Oregon 97239-4262
Telephone: (503) 946-4800
 
 
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [x]  No [  ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [x] Yes  [  ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
[x]
Accelerated filer
[  ]
Non-accelerated filer
[  ] (Do not check if a smaller reporting company)
Smaller reporting company
[  ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [x]
Number of shares of Common Stock, no par value, outstanding as of February 2, 2011: 143,451,159
 
 
 

 

PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
 
Precision Castparts Corp. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(In millions, except per share data)
 
 
Three Months Ended
 
1/2/11
 
12/27/09
Net sales
$
1,590.3
 
 
$
1,364.6
 
Operating costs and expenses:
 
 
 
Cost of goods sold
1,101.7
 
 
921.6
 
Selling and administrative expenses
101.7
 
 
88.6
 
Interest expense
3.7
 
 
4.3
 
Interest income
(1.3
)
 
(0.6
)
Total operating costs and expenses
1,205.8
 
 
1,013.9
 
Income before income tax expense and equity in earnings of unconsolidated affiliates
384.5
 
 
350.7
 
Income tax expense
(127.9
)
 
(121.8
)
Equity in earnings of unconsolidated affiliates
2.5
 
 
 
Net income from continuing operations
259.1
 
 
228.9
 
Net (loss) income from discontinued operations
(2.2
)
 
4.3
 
Net income
256.9
 
 
233.2
 
Net income attributable to noncontrolling interests
(0.4
)
 
(0.3
)
Net income attributable to Precision Castparts Corp. (“PCC”)
$
256.5
 
 
$
232.9
 
Net income (loss) per common share attributable to PCC shareholders - basic:
 
 
 
Net income from continuing operations
$
1.81
 
 
$
1.62
 
Net (loss) income from discontinued operations
(0.01
)
 
0.03
 
 
$
1.80
 
 
$
1.65
 
Net income (loss) per common share attributable to PCC shareholders - diluted:
 
 
 
Net income from continuing operations
$
1.80
 
 
$
1.61
 
Net (loss) income from discontinued operations
(0.02
)
 
0.03
 
 
$
1.78
 
 
$
1.64
 
Weighted average common shares outstanding:
 
 
 
Basic
142.8
 
 
140.8
 
Diluted
144.1
 
 
142.3
 
See Notes to the Condensed Consolidated Financial Statements.
 

1

 

Precision Castparts Corp. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(In millions, except per share data)
 
 
Nine Months Ended
 
1/2/11
 
12/27/09
Net sales
$
4,545.2
 
 
$
4,025.5
 
Operating costs and expenses:
 
 
 
Cost of goods sold
3,145.6
 
 
2,690.3
 
Selling and administrative expenses
298.2
 
 
272.8
 
Interest expense
10.5
 
 
12.4
 
Interest income
(2.9
)
 
(2.3
)
Total operating costs and expenses
3,451.4
 
 
2,973.2
 
Income before income tax expense and equity in earnings of unconsolidated affiliates
1,093.8
 
 
1,052.3
 
Income tax expense
(368.8
)
 
(364.0
)
Equity in earnings of unconsolidated affiliates
14.5
 
 
 
Net income from continuing operations
739.5
 
 
688.3
 
Net income (loss) from discontinued operations
4.1
 
 
(7.2
)
Net income
743.6
 
 
681.1
 
Net income attributable to noncontrolling interests
(1.1
)
 
(0.5
)
Net income attributable to Precision Castparts Corp. (“PCC”)
$
742.5
 
 
$
680.6
 
Net income (loss) per common share attributable to PCC shareholders - basic:
 
 
 
Net income from continuing operations
$
5.19
 
 
$
4.90
 
Net income (loss) from discontinued operations
0.02
 
 
(0.05
)
 
$
5.21
 
 
$
4.85
 
Net income (loss) per common share attributable to PCC shareholders - diluted:
 
 
 
Net income from continuing operations
$
5.14
 
 
$
4.85
 
Net income (loss) from discontinued operations
0.03
 
 
(0.05
)
 
$
5.17
 
 
$
4.80
 
Weighted average common shares outstanding:
 
 
 
Basic
142.4
 
 
140.4
 
Diluted
143.7
 
 
141.8
 
See Notes to the Condensed Consolidated Financial Statements.

2

 

Precision Castparts Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
 
 
1/2/11
 
3/28/10
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
822.8
 
 
$
112.4
 
Receivables, net
853.3
 
 
846.6
 
Inventories
1,520.5
 
 
1,435.3
 
Prepaid expenses and other current assets
23.0
 
 
21.7
 
Income tax receivable
18.2
 
 
78.7
 
Deferred income taxes
6.7
 
 
3.4
 
Discontinued operations
10.6
 
 
24.0
 
Total current assets
3,255.1
 
 
2,522.1
 
Property, plant and equipment, at cost
2,314.8
 
 
2,220.6
 
Accumulated depreciation
(1,124.5
)
 
(1,014.1
)
Net property, plant and equipment
1,190.3
 
 
1,206.5
 
Goodwill
2,874.2
 
 
2,835.9
 
Acquired intangible assets, net
459.7
 
 
468.4
 
Investment in unconsolidated affiliates
399.5
 
 
372.4
 
Other assets
328.7
 
 
203.6
 
Discontinued operations
46.3
 
 
51.8
 
 
$
8,553.8
 
 
$
7,660.7
 
Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Long-term debt currently due and short-term borrowings
$
14.8
 
 
$
15.1
 
Accounts payable
554.3
 
 
581.8
 
Accrued liabilities
291.4
 
 
285.8
 
Discontinued operations
5.9
 
 
11.1
 
Total current liabilities
866.4
 
 
893.8
 
Long-term debt
222.1
 
 
234.9
 
Pension and other postretirement benefit obligations
250.0
 
 
284.4
 
Other long-term liabilities
207.0
 
 
212.2
 
Deferred income taxes
192.9
 
 
137.6
 
Discontinued operations
2.5
 
 
6.1
 
Commitments and contingencies (See Notes)
 
 
 
Shareholders' equity:
 
 
 
Preferred stock
 
 
 
Common stock
143.1
 
 
141.9
 
Paid-in capital
1,390.2
 
 
1,263.8
 
Retained earnings
5,530.0
 
 
4,800.3
 
Accumulated other comprehensive loss
(253.5
)
 
(317.2
)
Total PCC shareholders' equity
6,809.8
 
 
5,888.8
 
Noncontrolling interest
3.1
 
 
2.9
 
Total equity
6,812.9
 
 
5,891.7
 
 
$
8,553.8
 
 
$
7,660.7
 
See Notes to the Condensed Consolidated Financial Statements.

3

 

Precision Castparts Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
 
 
Nine Months Ended
 
1/2/11
 
12/27/09
Operating activities:
 
 
 
Net income
$
743.6
 
 
$
681.1
 
Net (income) loss from discontinued operations
(4.1
)
 
7.2
 
Non-cash items:
 
 
 
Depreciation and amortization
122.6
 
 
112.7
 
Deferred income taxes
47.4
 
 
33.2
 
Stock-based compensation expense
35.8
 
 
30.0
 
Excess tax benefits from share-based payment arrangements
(23.1
)
 
(16.6
)
Other non-cash adjustments
(4.1
)
 
0.3
 
Changes in assets and liabilities, excluding effects of acquisitions and dispositions of businesses:
 
 
 
Receivables
0.3
 
 
220.0
 
Inventories
(70.9
)
 
(54.6
)
Prepaid expenses and other current assets
(1.1
)
 
(8.1
)
Income tax receivable and payable
83.6
 
 
(19.9
)
Payables and accruals
(26.9
)
 
(181.7
)
Pension and other postretirement benefit plans
(143.0
)
 
(181.5
)
Other non-current assets and liabilities
(22.6
)
 
10.3
 
Net cash (used) provided by operating activities of discontinued operations
(5.5
)
 
5.5
 
Net cash provided by operating activities
732.0
 
 
637.9
 
Investing activities:
 
 
 
Acquisitions of businesses
(37.2
)
 
(867.3
)
Investment in unconsolidated affiliates
(4.1
)
 
 
Capital expenditures
(83.7
)
 
(137.9
)
Dispositions of businesses
17.6
 
 
 
Other investing activities
8.8
 
 
(18.4
)
Net cash provided (used) by investing activities of discontinued operations
2.2
 
 
(0.3
)
Net cash used by investing activities
(96.4
)
 
(1,023.9
)
Financing activities:
 
 
 
Net change in long-term debt
(14.5
)
 
(16.2
)
Common stock issued
69.1
 
 
54.5
 
Excess tax benefits from share-based payment arrangements
23.1
 
 
16.6
 
Cash dividends
(12.8
)
 
(12.7
)
Other financing activities
(0.9
)
 
 
Net cash used by financing activities of discontinued operations
 
 
(0.2
)
Net cash provided by financing activities
64.0
 
 
42.0
 
Effect of exchange rate changes on cash and cash equivalents
10.8
 
 
7.9
 
Net increase (decrease) in cash and cash equivalents
710.4
 
 
(336.1
)
Cash and cash equivalents at beginning of period
112.4
 
 
554.5
 
Cash and cash equivalents at end of period
$
822.8
 
 
$
218.4
 
See Notes to the Condensed Consolidated Financial Statements.
 
 

4

 

Notes to the Condensed Consolidated Financial Statements
(Unaudited)
(In millions, except share and per share data)
 
(1) Basis of Presentation
The condensed consolidated financial statements have been prepared by Precision Castparts Corp. (“PCC”, the “Company”, or “we”), without audit and subject to year-end adjustment, in accordance with accounting principles generally accepted in the United States of America, except that certain information and footnote disclosures made in the latest annual report on Form 10-K have been condensed or omitted for the interim statements. Certain costs are estimated for the full year and allocated in interim periods based on estimates of operating time expired, benefit received, or activity associated with the interim period. The condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.
 
(2) Stock-based Compensation
During the three and nine months ended January 2, 2011 and December 27, 2009, we recorded stock-based compensation expense under our stock option, employee stock purchase, deferred stock unit and deferred compensation plans. A detailed description of the awards under these plans and the respective accounting treatment is included in the “Notes to the Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended March 28, 2010.
The following table sets forth total stock-based compensation expense and related tax benefit recognized in our Condensed Consolidated Statements of Income:
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
 
12/27/09
 
1/2/11
 
12/27/09
Cost of goods sold
$
4.5
 
 
$
3.4
 
 
$
12.8
 
 
$
9.4
 
Selling and administrative expenses
8.1
 
 
7.2
 
 
23.0
 
 
20.6
 
Stock-based compensation expense before income taxes
12.6
 
 
10.6
 
 
35.8
 
 
30.0
 
Income tax benefit
(3.8
)
 
(3.1
)
 
(10.1
)
 
(9.0
)
Total stock-based compensation expense after income taxes
$
8.8
 
 
$
7.5
 
 
$
25.7
 
 
$
21.0
 
 
(3) Acquisitions
Fiscal 2010
On January 15, 2010, we acquired a 49% equity interest in Yangzhou Chengde Steel Tube Co., Ltd (“Chengde”) for approximately $355 million in cash, comprised of approximately $115 million of cash on hand and the proceeds of approximately $240 million of commercial paper debt issuance (subsequently repaid). This investment is accounted for under the equity method as we have significant influence over, but not control of, the major operating and financial policies of Chengde. The carrying value of this investment as of January 2, 2011 was $382.3 million and was included in investment in unconsolidated affiliates in our consolidated balance sheet. The carrying value of our investment in Chengde exceeded the amount of underlying equity in net assets of Chengde by approximately $175 million as of the date we acquired Chengde. This difference arose through the valuation process that was applied to the assets acquired. Chengde is a leading manufacturer of seamless, extruded pipe for boiler applications in coal-fired power plants, as well as pipe and tubing for other energy-related applications, such as compressed natural gas. The company operates from one facility with a manufacturing footprint of nearly 6 million square feet, in the Jiangsu Province of China. Chengde has built a leading position in the Chinese boiler pipe market and has begun to make inroads into export markets. Refer to Subsequent Events footnote for further discussion.
On September 30, 2009, we completed the acquisition of Carlton Forge Works and a related entity (“Carlton”) for approximately $847 million in cash, comprised of approximately $502 million of cash on hand (reduced $3 million due to working capital adjustments) and the proceeds of approximately $345 million of commercial paper debt issuance (subsequently repaid). Carlton, a leading manufacturer of seamless rolled rings for critical aerospace applications, offers nickel, titanium, and steel rolled rings across the widest range of product sizes in the industry. Carlton broadens our forging capabilities and enables us to provide a full range of forged products to our aerospace engine customers. The Carlton acquisition is an asset purchase for tax purposes and operates as part of our Forged Products segment. This transaction resulted in $400.1 million of goodwill (which is deductible for tax purposes) and $336.7 million of other intangible assets, including tradenames with indefinite lives valued at $89.1 million, customer relationships with indefinite lives valued at $204.8 million, customer relationships with finite

5

 

lives valued at $3.7 million, backlog valued at $10.2 million and revenue sharing agreements valued at $28.9 million. We also recorded a long-term liability related to the fair value of a pre-existing revenue sharing agreement valued at $92.0 million. The impact of this acquisition was not material to our consolidated results of operations; consequently, pro forma information has not been included.
The preceding business acquisition was accounted for under the acquisition method of accounting and, accordingly, the results of operations have been included in the Consolidated Statements of Income since the acquisition date.
 
(4) Discontinued Operations
During the second quarter of fiscal 2011, we sold an automotive fastener business. The transaction resulted in a gain of approximately $6.4 million (net of tax).
During the first quarter of fiscal 2011, we decided to divest a small non-core business in the Fastener Products segment and reclassified it to discontinued operations.
The components of discontinued operations for the periods presented are as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
 
12/27/09
 
1/2/11
 
12/27/09
Net sales
$
7.0
 
 
$
21.2
 
 
$
39.4
 
 
$
62.6
 
Cost of goods sold
6.7
 
 
18.3
 
 
37.3
 
 
55.0
 
Selling and administrative expenses
0.9
 
 
2.8
 
 
4.0
 
 
19.9
 
(Loss) income from operations before income taxes
(0.6
)
 
0.1
 
 
(1.9
)
 
(12.3
)
Interest income
(0.1
)
 
 
 
(0.1
)
 
(0.1
)
Income tax benefit
(0.1
)
 
(4.9
)
 
(0.3
)
 
(7.7
)
Net (loss) income from operations
(0.4
)
 
5.0
 
 
(1.5
)
 
(4.5
)
(Loss) gain on disposal, net of $0.0, $0.4, $2.6, and $(0.3) tax expense (benefit), respectively
(1.8
)
 
(0.7
)
 
5.6
 
 
(2.7
)
Net (loss) income from discontinued operations
$
(2.2
)
 
$
4.3
 
 
$
4.1
 
 
$
(7.2
)
Included in the Condensed Consolidated Balance Sheets are the following major classes of assets and liabilities associated with the discontinued operations after adjustment for write-downs to fair value less cost to sell:
 
 
1/2/11
    
3/28/10
Assets of discontinued operations:
 
    
 
Current assets
$
10.6
 
    
$
24.0
 
Net property, plant and equipment
31.7
 
    
37.0
 
Other assets
14.6
 
    
14.8
 
 
$
56.9
 
    
$
75.8
 
Liabilities of discontinued operations:
 
    
 
Other current liabilities
$
5.9
 
    
$
11.1
 
Other long-term liabilities
2.5
 
    
6.1
 
 
$
8.4
 
    
$
17.2
 
 

6

 

(5) Inventories
Inventories consisted of the following:
 
 
1/2/11
    
3/28/10
Finished goods
$
321.8
 
    
$
287.2
 
Work-in-process
546.7
 
    
509.6
 
Raw materials and supplies
465.7
 
    
441.9
 
 
1,334.2
 
    
1,238.7
 
LIFO provision
186.3
 
    
196.6
 
Total inventory
$
1,520.5
 
    
$
1,435.3
 
 
(6) Goodwill and Acquired Intangibles
We perform our annual goodwill impairment test during the second quarter of each fiscal year. For fiscal 2011, it was determined that the fair value of the related reporting units was greater than book value and that there was no impairment of goodwill.
The changes in the carrying amount of goodwill by reportable segment for the nine months ended January 2, 2011 were as follows:
 
 
Balance at
 
 
 
Currency
Translation
and Other
 
Balance at
 
3/28/10
 
Acquired
  
 
1/2/11
Investment Cast Products
$
336.6
 
 
$
17.5
 
  
$
0.8
 
 
$
354.9
 
Forged Products
1,249.8
 
 
 
  
11.4
 
 
1,261.2
 
Fastener Products
1,249.5
 
 
8.4
 
  
0.2
 
 
1,258.1
 
Total
$
2,835.9
 
 
$
25.9
 
  
$
12.4
 
 
$
2,874.2
 
The gross carrying amount and accumulated amortization of our acquired intangible assets were as follows:
 
 
January 2, 2011
  
March 28, 2010
 
Gross
Carrying
Amount
  
Accumulated
Amortization
 
Net
Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
 
Net
Carrying
Amount
Amortized intangible assets:
 
  
 
 
 
  
 
  
 
 
 
Patents
$
14.8
 
  
$
(7.2
)
 
$
7.6
 
  
$
14.8
 
  
$
(6.0
)
 
$
8.8
 
Proprietary technology
2.3
 
  
(1.1
)
 
1.2
 
  
2.3
 
  
(1.0
)
 
1.3
 
Tradenames
0.4
 
  
(0.4
)
 
 
  
0.4
 
  
(0.4
)
 
 
Long-term customer relationships
34.7
 
  
(13.0
)
 
21.7
 
  
33.0
 
  
(8.9
)
 
24.1
 
Backlog
18.6
 
  
(15.4
)
 
3.2
 
  
18.6
 
  
(10.7
)
 
7.9
 
Revenue sharing agreements
28.9
 
  
(0.3
)
 
28.6
 
  
28.9
 
  
 
 
28.9
 
 
$
99.7
 
  
$
(37.4
)
 
62.3
 
  
$
98.0
 
  
$
(27.0
)
 
71.0
 
Unamortized intangible assets:
 
  
 
 
 
  
 
  
 
 
 
Tradenames
 
  
 
 
192.6
 
  
 
  
 
 
192.6
 
Long-term customer relationships
 
  
 
 
204.8
 
  
 
  
 
 
204.8
 
Acquired intangibles, net
 
  
 
 
$
459.7
 
  
 
  
 
 
$
468.4
 

7

 

Amortization expense for acquired intangible assets for the three and nine months ended January 2, 2011 was $3.5 million and $10.4 million, respectively. Amortization expense related to finite-lived intangible assets is projected to total $13.9 million for fiscal 2011. Projected amortization expense for the succeeding five fiscal years is as follows:
 
Fiscal Year
 
Estimated
Amortization
Expense
2012
 
$
8.4
 
2013
 
6.8
 
2014
 
6.9
 
2015
 
4.9
 
2016
 
3.6
 
The amortization will change in future periods if other intangible assets are acquired, existing intangibles are disposed or impairments are recognized.
 
(7) Guarantees
In the ordinary course of business, we generally warrant that our products will conform to our customers' specifications over various time periods. The warranty accrual as of January 2, 2011 and March 28, 2010 is immaterial to our financial position, and the change in the accrual for the current quarter and year to date is immaterial to our results of operations and cash flows.
In conjunction with certain transactions, primarily divestitures, we may provide routine indemnifications (e.g., retention of previously existing environmental and tax liabilities) with terms that range in duration and often are not explicitly defined. Where appropriate, an obligation for such indemnifications is recorded as a liability. Because the obligated amounts of these types of indemnifications often are not explicitly stated, the overall maximum amount of the obligation under such indemnifications cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have not historically made significant payments for these indemnifications.
 
(8) Earnings per Share
Net income and weighted average number of shares outstanding used to compute earnings per share were as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
 
12/27/09
 
1/2/11
 
12/27/09
Amounts attributable to PCC:
 
 
 
 
 
 
 
Net income from continuing operations
$
258.7
 
 
$
228.6
 
 
$
738.4
 
 
$
687.8
 
Net (loss) income from discontinued operations
(2.2
)
 
4.3
 
 
4.1
 
 
(7.2
)
Net income attributable to PCC
$
256.5
 
 
$
232.9
 
 
$
742.5
 
 
$
680.6
 
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
  
12/27/09
 
1/2/11
  
12/27/09
Basic weighted average shares outstanding
142.8
 
  
140.8
 
 
142.4
 
  
140.4
 
Dilutive stock options
1.3
 
 
1.5
 
 
1.3
 
  
1.4
 
Average shares outstanding assuming dilution
144.1
 
  
142.3
 
 
143.7
 
  
141.8
 
Basic earnings per share are calculated based on the weighted average number of shares outstanding. Diluted earnings per share are computed based on that same number of shares plus additional dilutive shares (if any) representing stock distributable under stock option, employee stock purchase, and phantom stock plans computed using the treasury stock method.
For the three and nine months ended January 2, 2011, stock options to purchase 1.6 million and 2.1 million shares of common stock were excluded from the computation of diluted earnings per share, respectively, because they would have been antidilutive. For the three and nine months ended December 27, 2009, stock options to purchase 1.6 million and 1.3 million shares of common stock were excluded from the computation of diluted earnings per share, respectively, because they would have been antidilutive. These options could be dilutive in the future.
 

8

 

(9) Comprehensive Income
Total comprehensive income consisted of the following:
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
 
12/27/09
 
1/2/11
 
12/27/09
Net income
$
256.9
 
 
$
233.2
 
 
$
743.6
 
 
$
681.1
 
Other comprehensive income ("OCI"), net of tax:
 
 
 
 
 
 
 
Unrealized translation adjustments
2.5
 
 
(4.3
)
 
57.2
 
 
97.9
 
Pension and postretirement obligations
 
 
0.1
 
 
6.9
 
 
4.2
 
Unrealized gain (loss) on derivatives:
 
 
 
 
 
 
 
Periodic revaluations (net of income tax (benefit) expense of $(0.5), $0.3, $0.1, and $4.0, respectively)
0.4
 
 
0.6
 
 
3.0
 
 
5.0
 
Reclassification to net income of previously deferred (gains) losses (net of income tax expense (benefit) of $0.7, $0.0, $1.5 and $(2.2), respectively)
(1.5
)
 
 
 
(3.4
)
 
6.3
 
Other comprehensive income (loss)
1.4
 
 
(3.6
)
 
63.7
 
 
113.4
 
Comprehensive income attributable to noncontrolling interests
(0.4
)
 
(0.3
)
 
(1.1
)
 
(0.5
)
Total comprehensive income attributable to PCC
$
257.9
 
 
$
229.3
 
 
$
806.2
 
 
$
794.0
 
 
Accumulated other comprehensive loss consisted of the following:
 
 
1/2/11
 
3/28/10
Cumulative unrealized foreign currency translation losses
$
(19.6
)
 
$
(76.8
)
Pension and postretirement obligations
(235.8
)
 
(242.7
)
Unrealized gain on derivatives
1.9
 
 
2.3
 
Accumulated other comprehensive loss
$
(253.5
)
 
$
(317.2
)
 
(10) Derivatives and Hedging Activities
We hold and issue derivative financial instruments for the purpose of hedging the risks of certain identifiable and anticipated transactions and to protect our investments in foreign subsidiaries. In general, the types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates and changes in commodity prices and interest rates. We document our risk management strategy and hedge effectiveness at the inception of and during the term of each hedge.
Derivative financial instruments are recorded in the financial statements and measured at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in income or shareholders' equity (as a component of accumulated other comprehensive income (loss)) depending on whether the derivative is being used to hedge changes in fair value, cash flows, or a net investment in a foreign operation. In the normal course of business, we execute the following types of hedge transactions:
Fair value hedges
We have sales and purchase commitments denominated in foreign currencies. Foreign currency forward contracts are used to hedge against the risk of change in the fair value of these commitments attributable to fluctuations in exchange rates. We also have exposure from fluctuations in interest rates. Interest rate swaps are used to hedge against the risk of change in the fair value of fixed rate borrowings attributable to changes in interest rates. Changes in the fair value of the derivative instrument are offset in the income statement by changes in the fair value of the item being hedged.
Net investment hedges
We use foreign currency forward contracts designated as net investment hedges to hedge net investments in certain foreign subsidiaries whose functional currency is the local currency. The effective portion of the gains and losses on net investment hedge transactions are reported in cumulative translation adjustment as a component of shareholders' equity.
Cash flow hedges
We have exposure from fluctuations in foreign currency exchange rates. Foreign currency forward contracts and options are

9

 

used to hedge the variability in cash flows from forecast receipts or expenditures denominated in currencies other than the functional currency. We also have exposure from fluctuations in commodity prices. Commodity swaps are used to hedge against the variability in cash flows from forecasted commodity purchases. For cash flow hedge transactions, changes in the fair value of the derivative instruments are reported in accumulated other comprehensive income (loss). The gains and losses on cash flow hedge transactions that are reported in accumulated other comprehensive income (loss) are reclassified to earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portions of all hedges are recognized in current period earnings.
We formally assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are designated as hedging instruments have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. When it is determined that a derivative is not, or has ceased to be, highly effective as a hedge, we discontinue hedge accounting prospectively.
As of January 2, 2011, there were $2.8 million of deferred net gains (pre-tax) relating to derivative activity in accumulated other comprehensive loss that is expected to be transferred to net earnings over the next twelve months when the forecasted transactions actually occur. As of January 2, 2011, the maximum term over which we are hedging exposures to the variability of cash flows for all forecasted and recorded transactions is 15 months. The amount of net notional foreign exchange contracts outstanding as of January 2, 2011 was approximately $375 million. We believe that there is no significant credit risk associated with the potential failure of any counterparty to perform under the terms of any derivative financial instrument.
The following table presents the fair values of derivative instruments included within the consolidated balance sheet as of January 2, 2011:
 
 
 
Asset Derivatives
  
Liability Derivatives
Derivative instruments
 
Balance Sheet Location
  
Fair Value
  
Balance Sheet Location
  
Fair Value
Foreign exchange contracts
Accounts receivable
  
$
2.9
 
  
Accounts payable
  
$
2.5
 
Commodity swap contracts
Accounts receivable
 
2.9
 
 
 
 
 
Interest rate swap contracts
Other assets
  
1.4
 
  
 
  
 
 
 
 
  
$
7.2
 
  
 
  
$
2.5
 
 
The following table presents the effect of derivatives not designated as hedging instruments in the consolidated statements of income for the three and nine months ended January 2, 2011:  
Derivatives not designated as
hedging instruments
 
Location of Gain (Loss) Recognized in Income on Derivatives
  
Amount of Gain (Loss) Recognized in
Income on Derivatives
 
Three Months Ended
 
Nine Months Ended
  
1/2/11
 
1/2/11
Foreign exchange contracts
Selling and administrative expense
  
$
0.8
 
 
$
3.1
 
 

10

 

The following table presents the effect of derivatives designated as hedging instruments in the consolidated balance sheet as of January 2, 2011 and the consolidated statement of income for the three months ended January 2, 2011:
 
Derivatives designated as
hedging instruments
  
Amount of Gain or (Loss) Recognized in OCI on Derivative
(Effective Portion)
 
 
Location of Gain (Loss) in Pre-tax Income
 
Amount of Gain (Loss) Reclassified from Accumulated OCI into Pre-tax Income
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative
 
Total Amount of Gain (Loss) Recognized in Pre-tax Income
 
  
 
  
 
 
 
(Effective Portion)
 
(Ineffective Portion)
 
(Effective Portion)
 
 
Cash Flow Hedges: Foreign exchange contracts
$
0.3
 
 
 
Net sales
 
$
0.7
 
 
$
 
 
$
 
 
$
0.7
 
 
  
 
 
 
Cost of goods sold
 
0.6
 
 
 
 
 
 
0.6
 
 
  
 
 
 
Selling and administrative expense
 
0.1
 
 
 
 
 
 
0.1
 
 
  
 
 
 
Interest income (expense), net
 
 
 
0.1
 
 
 
 
0.1
 
Cash Flow Hedges: Commodity swap contracts
2.5
 
 
 
Cost of goods sold
 
0.6
 
 
 
 
 
 
0.6
 
Net Investment Hedges: Foreign exchange contracts
(0.6
)
 
 
Interest income (expense), net
 
 
 
 
 
 
 
 
Fair Value Hedges: Interest rate swap contracts
 
 
 
Selling and administrative expense
 
 
 
 
 
(0.7
)
 
(0.7
)
 
  
 
 
 
Interest income (expense), net
 
 
 
 
 
0.3
 
 
0.3
 
 
  
$
2.2
 
 
 
Total Pre-tax
 
$
2.0
 
 
$
0.1
 
 
$
(0.4
)
 
$
1.7
 

11

 

The following table presents the effect of derivatives designated as hedging instruments in the consolidated balance sheet as of January 2, 2011 and the consolidated statement of income for the nine months ended January 2, 2011:
 
Derivatives designated as
hedging instruments
  
Amount of Gain or (Loss) Recognized in OCI on Derivative
(Effective Portion)
 
 
Location of Gain (Loss) in Pre-tax Income
 
Amount of Gain (Loss) Reclassified from Accumulated OCI into Pre-tax Income
 
Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
Amount of Gain (Loss) Recognized in Income on Derivative
 
Total Amount of Gain (Loss) Recognized in Pre-tax Income
 
  
 
  
 
 
 
(Effective Portion)
 
(Ineffective Portion)
 
(Effective Portion)
 
 
Cash Flow Hedges: Foreign exchange contracts
$
0.3
 
 
 
Net sales
 
$
2.8
 
 
$
0.1
 
 
$
 
 
$
2.9
 
 
  
 
 
 
Cost of goods sold
 
2.8
 
 
(0.1
)
 
 
 
2.7
 
 
  
 
 
 
Selling and administrative expense
 
0.1
 
 
(0.1
)
 
 
 
 
 
  
 
 
 
Interest income (expense), net
 
 
 
0.3
 
 
 
 
0.3
 
Cash Flow Hedges: Commodity swap contracts
2.5
 
 
 
Cost of goods sold
 
0.6
 
 
 
 
 
 
0.6
 
Net Investment Hedges: Foreign exchange contracts
(0.6
)
 
 
Interest income (expense), net
 
 
 
 
 
 
 
 
Fair Value Hedges: Interest rate swap contracts
 
 
 
Selling and administrative expense
 
 
 
 
 
1.4
 
 
1.4
 
 
  
 
 
 
Interest income (expense), net
 
 
 
 
 
0.8
 
 
0.8
 
 
  
$
2.2
 
 
 
Total Pre-tax
 
$
6.3
 
 
$
0.2
 
 
$
2.2
 
 
$
8.7
 
 
(11) Fair Value Measurements
Fair value guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. Fair value guidance defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
 
Level 1
Quoted prices in active markets for identical assets or liabilities.
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following table presents the assets and liabilities measured at fair value on a recurring basis as of January 2, 2011:
 
 
Fair Value Measurements Using
  
Assets/Liabilities
at Fair Value
 
Level 1
  
Level 2
  
Level 3
  
Assets:
 
  
 
  
 
  
 
Trading securities
$
371.9
 
 
$
55.0
 
 
$
 
 
$
426.9
 
Derivative instruments
$
 
  
$
7.2
 
  
$
 
  
$
7.2
 
Liabilities:
 
  
 
  
 
  
 
Derivative instruments
$
 
  
$
2.5
 
  
$
 
  
$
2.5
 

12

 

The following table presents the assets and liabilities measured at fair value on a recurring basis as of March 28, 2010:
 
 
Fair Value Measurements Using
  
Assets/Liabilities
at Fair Value
 
Level 1
  
Level 2
  
Level 3
  
Assets:
 
  
 
  
 
  
 
Trading securities
$
31.6
 
 
$
 
 
$
 
 
$
31.6
 
Derivative instruments
$
 
  
$
5.4
 
  
$
 
  
$
5.4
 
Liabilities:
 
  
 
  
 
  
 
Derivative instruments
$
 
  
$
2.9
 
  
$
 
  
$
2.9
 
Trading securities consist of money market funds, commercial paper, and other highly liquid short-term instruments with maturities of three months or less at the time of purchase. These investments are readily convertible to cash with market value approximating cost. There were no transfers between Level 1 and Level 2 fair value measurements during the first nine months of fiscal 2011 and fiscal 2010.
Derivative instruments consist of fair value hedges, net investment hedges, and cash flow hedges. Foreign exchange, commodity swap and interest rate swap contracts' values are determined using pricing models with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. There were no changes in our valuation techniques used to measure assets and liabilities at fair value on a recurring basis.
We estimate that the fair value of our long-term fixed rate debt instruments was $260.4 million compared to a book value of $236.4 million at January 2, 2011. At March 28, 2010, the estimated fair value of our long-term fixed rate debt instruments was $264.9 million compared to a book value of $249.3 million. The fair value of long-term debt was estimated using our borrowing rate at quarter-end for similar types of borrowing arrangements. The estimated fair value of our miscellaneous long-term debt approximates book value.
 
(12) Pensions and Other Postretirement Benefit Plans
We sponsor many domestic and foreign defined benefit pension plans. In addition, we offer postretirement medical benefits for certain eligible employees. These plans are more fully described in the “Notes to the Consolidated Financial Statements” included in our Annual Report on Form 10-K for the fiscal year ended March 28, 2010.
The net periodic benefit cost for our pension plans consisted of the following components:
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
 
12/27/09
 
1/2/11
 
12/27/09
Service cost
$
9.0
 
 
$
7.6
 
 
$
27.0
 
 
$
24.2
 
Interest cost
21.8
 
 
21.0
 
 
65.6
 
 
67.5
 
Expected return on plan assets
(29.8
)
 
(25.4
)
 
(89.4
)
 
(81.6
)
Recognized net actuarial loss
4.7
 
 
1.0
 
 
14.1
 
 
3.2
 
Amortization of prior service cost
0.8
 
 
2.9
 
 
2.4
 
 
9.4
 
Net periodic benefit cost
$
6.5
 
 
$
7.1
 
 
$
19.7
 
 
$
22.7
 
The net periodic benefit cost of postretirement benefits other than pensions consisted of the following components:
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
 
12/27/09
 
1/2/11
 
12/27/09
Service cost
$
0.1
 
 
$
0.3
 
 
$
0.6
 
 
$
0.9
 
Interest cost
1.1
 
 
2.1
 
 
4.3
 
 
6.3
 
Recognized net actuarial loss (gain)
0.1
 
 
(0.2
)
 
0.5
 
 
(0.4
)
Amortization of prior service (benefit) cost
(0.1
)
 
0.2
 
 
(0.4
)
 
0.6
 
Net periodic benefit cost
$
1.2
 
 
$
2.4
 
 
$
5.0
 
 
$
7.4
 
During the three and nine months ended January 2, 2011, we contributed $2.5 million and $107.5 million, respectively, to the defined benefit pension plans, of which $100.0 million was voluntary. We expect to contribute approximately $2.5 million of additional required contributions in fiscal 2011, for total contributions to the defined benefit pension plans of approximately $110.0 million in fiscal 2011. We expect to contribute approximately $10.8 million to the other postretirement benefit plans during fiscal 2011. In addition, we paid $38.3 million in July 2010 to one of our postretirement medical benefit plans that was

13

 

jointly administered with a union. This payment and the related administrative changes remove PCC and its affiliates from any further financial, administrative or fiduciary responsibilities to this plan, and we therefore accounted for these events as a settlement of the plan and reversed the related liability. There was no significant gain or loss associated with the settlement.
 
(13) Commitments and Contingencies
Various lawsuits arising during the normal course of business are pending against us. In the opinion of management, the outcome of these lawsuits, either individually or in the aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows.
 
(14) New Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance which requires new disclosures and clarifies existing disclosure requirements for fair value measurements. Specifically, the changes require disclosure of transfers into and out of “Level 1” and “Level 2” (as defined in the accounting guidance) fair value measurements, and also require more detailed disclosure about the activity within “Level 3” (as defined) fair value measurements. This guidance was effective for the Company in the fourth quarter of fiscal 2010, except for disclosures about purchases, sales, issuances and settlements of Level 3 assets and liabilities, which will be effective in the first quarter of fiscal 2012. As this guidance only requires expanded disclosures, the adoption did not and will not impact our consolidated financial position, results of operations or cash flows.
In October 2009, the FASB issued amendments to the accounting and disclosure for revenue recognition for multiple element arrangements. These amendments modify the criteria for recognizing revenue and require enhanced disclosures for multiple element-deliverable revenue arrangements. This guidance will be effective in the first quarter of fiscal 2012. The adoption of this guidance is not expected to have a significant impact on our consolidated financial position, results of operations or cash flows.
In June 2009, the FASB issued guidance to require an enterprise to perform an analysis to determine whether the enterprise's variable interest gives it a controlling financial interest in a variable interest entity. This guidance was effective in the first quarter of fiscal 2011. The adoption of this guidance did not impact our consolidated financial position, results of operations or cash flows.
 
(15) Segment Information
Information regarding segments is presented in accordance with segment disclosure guidance. Based on the criteria outlined in this guidance, our operations are classified into three reportable business segments: Investment Cast Products, Forged Products and Fastener Products. The Investment Cast Products and Forged Products segments are each comprised of two operating segments, which are aggregated in accordance with segment disclosure guidance in our determination of reportable segments.
 
 
Three Months Ended
 
Nine Months Ended
 
1/2/11
 
12/27/09
 
1/2/11
 
12/27/09
Net sales:
 
 
 
 
 
 
 
    Investment Cast Products
$
537.7
 
 
$
454.7
 
 
$
1,536.7
 
 
$
1,384.4
 
Forged Products
708.5
 
 
587.0
 
 
2,008.4
 
 
1,642.7
 
Fastener Products
344.1
 
 
322.9
 
 
1,000.1
 
 
998.4
 
Consolidated net sales
$
1,590.3
 
 
$
1,364.6
 
 
$
4,545.2
 
 
$
4,025.5
 
Segment operating income (loss):
 
 
 
 
 
 
 
Investment Cast Products
$
170.8
 
 
$
137.5
 
 
$
488.4
 
 
$
414.7
 
Forged Products
141.8
 
 
136.4
 
 
392.1
 
 
397.6
 
Fastener Products
104.8
 
 
105.8
 
 
306.0
 
 
332.1
 
Corporate expenses
(30.5
)
 
(25.3
)
 
(85.1
)
 
(82.0
)
Total segment operating income
386.9
 
 
354.4
 
 
1,101.4
 
 
1,062.4
 
Interest expense
3.7
 
 
4.3
 
 
10.5
 
 
12.4
 
Interest income
(1.3
)
 
(0.6
)
 
(2.9
)
 
(2.3
)
Consolidated income before income tax expense and equity in earnings of unconsolidated affiliates
$
384.5
 
 
$
350.7
 
 
$
1,093.8
 
 
$
1,052.3
 
 

14

 

(16) Subsequent Events
On January 3, 2011, we acquired an additional 1% equity interest in Yangzhou Chengde Steel Tube Co., Ltd (“Chengde”) for approximately $7 million in cash, increasing our equity interest to 50%. Chengde is a leading manufacturer of seamless, extruded pipe for boiler applications in coal-fired power plants, as well as pipe and tubing for other energy-related applications, such as compressed natural gas.
 
(17) Condensed Consolidating Financial Information
Certain of our subsidiaries guarantee our registered securities consisting of $200 million of 5.6% Senior Notes due 2013, as well as our private notes, bank credit facilities and commercial paper (“CP”), when applicable. The following condensed consolidating financial statements present, in separate columns, financial information for (i) Precision Castparts Corp. (on a parent only basis) with its investment in its subsidiaries recorded under the equity method, (ii) guarantor subsidiaries that guarantee the Company's public and private notes, bank credit facilities and CP on a combined basis, with any investments in non-guarantor subsidiaries recorded under the equity method, (iii) direct and indirect non-guarantor subsidiaries on a combined basis, (iv) the eliminations necessary to arrive at the information for the Company and its subsidiaries on a consolidated basis, and (v) the Company on a consolidated basis, in each case for balance sheets as of January 2, 2011 and March 28, 2010, statements of income for the three and nine months ended January 2, 2011 and December 27, 2009, and statements of cash flows for the nine months ended January 2, 2011 and December 27, 2009. The public and private notes, bank facility and CP are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantor subsidiaries include our domestic subsidiaries within the Investment Cast Products, Forged Products and Fastener Products segments that are 100% owned, directly or indirectly, by the Company within the meaning of Rule 3-10(h)(1) of Regulation S-X. There are no contractual restrictions limiting transfers of cash from guarantor and non-guarantor subsidiaries to the parent company, Precision Castparts Corp. The condensed consolidating financial information is presented herein, rather than separate financial statements for each of the guarantor subsidiaries, because guarantors are 100% owned and the guarantees are full and unconditional, joint and several.
 
The parent company had positive cash flows from operations for the nine months ended January 2, 2011. The positive operating cash flows are due to a variety of factors, including the application of tax overpayments from the prior year's tax returns to reduce quarterly estimated tax payments, the tax benefit on the book expense recorded for stock based compensation expense, and timing differences on intercompany charges from the parent to the subsidiaries as those charges are often settled with subsidiaries prior to the payment to our third party vendors. In addition, a significant portion of the parent company’s expenses, such as stock based compensation expense, do not result in a current period cash outflow.

15

 

Condensed Consolidating Statements of Income
Three Months Ended January 2, 2011 
(Unaudited)
(In millions)
 
Precision Castparts Corp.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total
Net sales
$
 
 
$
1,305.8
 
 
$
352.1
 
 
$
(67.6
)
 
$
1,590.3
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of goods sold
4.5
 
 
881.8
 
 
283.0
 
 
(67.6
)
 
1,101.7
 
Selling and administrative expenses
23.6
 
 
56.5
 
 
21.6
 
 
 
 
101.7
 
Other (income) expense
(0.3
)
 
(0.1
)
 
0.4
 
 
 
 
 
Interest (income) expense, net
(12.9
)
 
16.3
 
 
(1.0
)
 
 
 
2.4
 
Equity in earnings of subsidiaries
(265.1
)
 
4.1
 
 
 
 
261.0
 
 
 
Total operating costs and expenses
(250.2
)
 
958.6
 
 
304.0
 
 
193.4
 
 
1,205.8
 
Income (loss) before income tax and equity in earnings of unconsolidated affiliates
250.2
 
 
347.2
 
 
48.1
 
 
(261.0
)
 
384.5
 
Income tax benefit (expense)
6.3
 
 
(117.2
)
 
(17.0
)
 
 
 
(127.9
)
Equity in earnings of unconsolidated affiliates
 
 
0.2
 
 
2.3
 
 
 
 
2.5
 
Net income (loss) from continuing operations
256.5
 
 
230.2
 
 
33.4
 
 
(261.0
)
 
259.1
 
Net loss from discontinued operations
 
 
(0.3
)
 
(1.9
)
 
 
 
(2.2
)
Net income (loss)
256.5
 
 
229.9
 
 
31.5
 
 
(261.0
)
 
256.9
 
Net income attributable to noncontrolling interests
 
 
 
 
(0.4
)
 
 
 
(0.4
)
Net income (loss) attributable to PCC
$
256.5
 
 
$
229.9
 
 
$
31.1
 
 
$
(261.0
)
 
$
256.5
 
 
Condensed Consolidating Statements of Income
Three Months Ended December 27, 2009 
(Unaudited)
(In millions)
 
 
Precision
Castparts
Corp.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net sales
$
 
 
$
1,134.4
 
 
$
270.7
 
 
$
(40.5
)
 
$
1,364.6
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of goods sold
3.4
 
 
761.8
 
 
196.9
 
 
(40.5
)
 
921.6
 
Selling and administrative expenses
19.4
 
 
47.4
 
 
21.8
 
 
 
 
88.6
 
Other (income) expense
(0.5
)
 
 
 
0.5
 
 
 
 
 
Interest (income) expense, net
(10.3
)
 
14.4
 
 
(0.4
)
 
 
 
3.7
 
Equity in earnings of subsidiaries
(241.4
)
 
(10.3
)
 
 
 
251.7
 
 
 
Total operating costs and expenses
(229.4
)
 
813.3
 
 
218.8
 
 
211.2
 
 
1,013.9
 
Income (loss) before income tax and noncontrolling interest
229.4
 
 
321.1
 
 
51.9
 
 
(251.7
)
 
350.7
 
Income tax benefit (expense)
3.5
 
 
(114.8
)
 
(10.5
)
 
 
 
(121.8
)
Net income (loss) from continuing operations
232.9
 
 
206.3
 
 
41.4
 
 
(251.7
)
 
228.9
 
Net income (loss) from discontinued operations
 
 
6.2
 
 
(1.9
)
 
 
 
4.3
 
Net income (loss)
232.9
 
 
212.5
 
 
39.5
 
 
(251.7
)
 
233.2
 
Net income attributable to noncontrolling interests
 
 
(0.2
)
 
(0.1
)
 
 
 
(0.3
)
Net income (loss) attributable to PCC
$
232.9
 
 
$
212.3
 
 
$
39.4
 
 
$
(251.7
)
 
$
232.9
 

16

 

 
Condensed Consolidating Statements of Income
Nine Months Ended January 2, 2011
(Unaudited)
(In millions)
 
Precision Castparts Corp.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total
Net sales
$
 
 
$
3,837.4
 
 
$
916.8
 
 
$
(209.0
)
 
$
4,545.2
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of goods sold
12.8
 
 
2,616.5
 
 
725.3
 
 
(209.0
)
 
3,145.6
 
Selling and administrative expenses
65.4
 
 
171.1
 
 
61.7
 
 
 
 
298.2
 
Other expense (income)
3.8
 
 
(1.8
)
 
(2.0
)
 
 
 
 
Interest (income) expense, net
(35.9
)
 
45.7
 
 
(2.2
)
 
 
 
7.6
 
Equity in earnings of subsidiaries
(769.6
)
 
(26.3
)
 
 
 
795.9
 
 
 
Total operating costs and expenses
(723.5
)
 
2,805.2
 
 
782.8
 
 
586.9
 
 
3,451.4
 
Income (loss) before income tax and equity in earnings of unconsolidated affiliates
723.5
 
 
1,032.2
 
 
134.0
 
 
(795.9
)
 
1,093.8
 
Income tax benefit (expense)
19.0
 
 
(348.2
)
 
(39.6
)
 
 
 
(368.8
)
Equity in earnings of unconsolidated affiliates
 
 
0.9
 
 
13.6
 
 
 
 
14.5
 
Net income (loss) from continuing operations
742.5
 
 
684.9
 
 
108.0
 
 
(795.9
)
 
739.5
 
Net income (loss) from discontinued operations
 
 
6.5
 
 
(2.4
)
 
 
 
4.1
 
Net income (loss)
742.5
 
 
691.4
 
 
105.6
 
 
(795.9
)
 
743.6
 
Net income attributable to noncontrolling interests
 
 
 
 
(1.1
)