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Precision Castparts 10-Q 2012

Documents found in this filing:

  1. 10-Q
  2. Ex-10.1
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2
PCP 20120930 10-Q



 

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 September 30, 2012
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 November 1, 2012: 145,537,570
 
 





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
 
9/30/12
 
10/2/11
Net sales
$
1,930.5

 
$
1,781.6

Costs and expenses:
 
 
 
Cost of goods sold
1,310.8

 
1,231.4

Selling and administrative expenses
121.3

 
111.1

Interest expense
3.4

 
3.2

Interest income
(1.6
)
 
(1.8
)
Total costs and expenses
1,433.9

 
1,343.9

Income before income tax expense and equity in earnings of unconsolidated affiliates
496.6

 
437.7

Income tax expense
(164.1
)
 
(145.2
)
Equity in earnings of unconsolidated affiliates
1.2

 
4.1

Net income from continuing operations
333.7

 
296.6

Net loss from discontinued operations
(0.6
)
 
(1.6
)
Net income
333.1

 
295.0

Net income attributable to noncontrolling interests
(0.4
)
 
(0.3
)
Net income attributable to Precision Castparts Corp. (“PCC”)
$
332.7

 
$
294.7

Net income per common share attributable to PCC shareholders - basic:
 
 
 
Net income from continuing operations
$
2.29

 
$
2.06

Net loss from discontinued operations

 
(0.01
)
Net income per share
$
2.29

 
$
2.05

Net income per common share attributable to PCC shareholders - diluted:
 
 
 
Net income from continuing operations
$
2.28

 
$
2.04

Net loss from discontinued operations
(0.01
)
 
(0.01
)
Net income per share
$
2.27

 
$
2.03

Weighted average common shares outstanding:
 
 
 
Basic
145.4

 
144.1

Diluted
146.4

 
145.3










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)
 
Six Months Ended
 
9/30/12
 
10/2/11
Net sales
$
3,896.5

 
$
3,453.8

Costs and expenses:
 
 
 
Cost of goods sold
2,641.8

 
2,379.3

Selling and administrative expenses
241.2

 
216.2

Interest expense
6.3

 
6.1

Interest income
(3.2
)
 
(3.7
)
Total costs and expenses
2,886.1

 
2,597.9

Income before income tax expense and equity in earnings of unconsolidated affiliates
1,010.4

 
855.9

Income tax expense
(335.7
)
 
(280.7
)
Equity in earnings of unconsolidated affiliates
3.1

 
7.3

Net income from continuing operations
677.8

 
582.5

Net loss from discontinued operations
(2.6
)
 
(1.0
)
Net income
675.2

 
581.5

Net income attributable to noncontrolling interests
(0.8
)
 
(0.8
)
Net income attributable to Precision Castparts Corp. (“PCC”)
$
674.4

 
$
580.7

Net income per common share attributable to PCC shareholders - basic:
 
 
 
Net income from continuing operations
$
4.66

 
$
4.04

Net loss from discontinued operations
(0.02
)
 

Net income per share
$
4.64

 
$
4.04

Net income per common share attributable to PCC shareholders - diluted:
 
 
 
Net income from continuing operations
$
4.62

 
$
4.01

Net loss from discontinued operations
(0.01
)
 
(0.01
)
Net income per share
$
4.61

 
$
4.00

Weighted average common shares outstanding:
 
 
 
Basic
145.3

 
143.9

Diluted
146.4

 
145.2










See Notes to the Condensed Consolidated Financial Statements.

2



Precision Castparts Corp. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
(In millions)
 
Three Months Ended
 
Six Months Ended
 
9/30/12
 
10/2/11
 
9/30/12
 
10/2/11
Net income
$
333.1

 
$
295.0

 
$
675.2

 
$
581.5

Other comprehensive income (loss) ("OCI"), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
47.0

 
(55.5
)
 
1.2

 
(38.3
)
Gain (loss) on derivatives:
 
 
 
 
 
 
 
Unrealized gains (losses) due to periodic revaluations (net of income tax expense (benefit) of $1.3, ($1.1), $0.6 and ($1.4) respectively)
3.6

 
(2.0
)
 
1.6

 
(1.9
)
Less: reclassification adjustment for losses (gains) included in net income (net of income tax (benefit) expense of ($0.2), $0.2, ($0.2) and $0.6 respectively)
0.6

 
(0.8
)
 
0.5

 
(1.6
)
Other comprehensive income (loss), net of tax
51.2

 
(58.3
)
 
3.3

 
(41.8
)
Total comprehensive income attributable to noncontrolling interests
(0.6
)
 
(0.3
)
 
(0.7
)
 
(0.8
)
Total comprehensive income attributable to PCC
$
383.7

 
$
236.4

 
$
677.8

 
$
538.9
























See Notes to the Condensed Consolidated Financial Statements.

3



Precision Castparts Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions)
 
9/30/12
 
4/1/12
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
193.4

 
$
698.7

Receivables, net
1,223.7

 
1,186.4

Inventories
2,103.7

 
1,815.3

Prepaid expenses and other current assets
39.0

 
29.4

Income tax receivable
24.7

 
7.8

Deferred income taxes
1.0

 

Discontinued operations
37.5

 
48.2

Total current assets
3,623.0

 
3,785.8

Property, plant and equipment, at cost
2,920.7

 
2,608.4

Accumulated depreciation
(1,364.7
)
 
(1,286.2
)
Net property, plant and equipment
1,556.0

 
1,322.2

Goodwill
4,167.3

 
3,514.3

Acquired intangible assets, net
1,754.2

 
1,228.1

Investment in unconsolidated affiliates
445.9

 
442.8

Other assets
227.0

 
195.4

Discontinued operations
37.4

 
70.2

 
$
11,810.8

 
$
10,558.8

Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Long-term debt currently due and short-term borrowings
$
4.5

 
$
0.5

Accounts payable
741.9

 
713.7

Accrued liabilities
345.5

 
335.0

Deferred income taxes

 
1.4

Discontinued operations
12.8

 
20.3

Total current liabilities
1,104.7

 
1,070.9

Long-term debt
661.8

 
207.7

Pension and other postretirement benefit obligations
336.2

 
358.9

Other long-term liabilities
257.4

 
279.6

Deferred income taxes
362.2

 
259.1

Discontinued operations
12.8

 
17.8

Commitments and contingencies (See Notes)

 

Shareholders' equity:
 
 
 
Preferred stock

 

Common stock
145.5

 
145.3

Paid-in capital
1,695.5

 
1,653.6

Retained earnings
7,669.1

 
7,003.5

Accumulated other comprehensive loss
(438.4
)
 
(441.7
)
Total PCC shareholders' equity
9,071.7

 
8,360.7

Noncontrolling interest
4.0

 
4.1

Total equity
9,075.7

 
8,364.8

 
$
11,810.8

 
$
10,558.8


See Notes to the Condensed Consolidated Financial Statements.

4



Precision Castparts Corp. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
 
 
Six Months Ended
 
9/30/12
 
10/2/11
Operating activities:
 
 
 
Net income
$
675.2

 
$
581.5

Net loss from discontinued operations
2.6

 
1.0

Non-cash items:
 
 
 
Depreciation and amortization
93.5

 
83.2

Deferred income taxes
40.4

 
20.1

Stock-based compensation expense
25.2

 
23.3

Excess tax benefits from share-based payment arrangements
(4.1
)
 
(10.8
)
Other non-cash adjustments
(4.9
)
 
(6.3
)
Changes in assets and liabilities, excluding effects of acquisitions and dispositions of businesses:
 
 
 
Receivables
54.7

 
(94.4
)
Inventories
(162.2
)
 
(184.7
)
Prepaid expenses and other current assets
(4.2
)
 
(2.5
)
Income tax receivable and payable
(12.8
)
 
11.9

Payables and accruals
(40.7
)
 
8.3

Pension and other postretirement benefit plans
(31.3
)
 
(57.9
)
Other non-current assets and liabilities
(43.0
)
 
(9.2
)
Net cash used by operating activities of discontinued operations
(9.9
)
 
(10.1
)
Net cash provided by operating activities
578.5

 
353.4

Investing activities:
 
 
 
Acquisitions of businesses, net of cash acquired
(1,430.2
)
 
(1,268.3
)
Capital expenditures
(124.2
)
 
(66.4
)
Dispositions of businesses
31.4

 

Other investing activities, net
(4.6
)
 
3.4

Net cash (used) provided by investing activities of discontinued operations
(0.6
)
 
2.8

Net cash used by investing activities
(1,528.2
)
 
(1,328.5
)
Financing activities:
 
 
 
Net change in long-term debt and short-term borrowings
444.9

 
6.6

Common stock issued
11.9

 
27.6

Excess tax benefits from share-based payment arrangements
4.1

 
10.8

Cash dividends
(8.8
)
 
(8.7
)
Other financing activities, net
(0.9
)
 
(0.3
)
Net cash provided by financing activities
451.2

 
36.0

Effect of exchange rate changes on cash and cash equivalents
(6.8
)
 
(24.8
)
Net decrease in cash and cash equivalents
(505.3
)
 
(963.9
)
Cash and cash equivalents at beginning of period
698.7

 
1,159.0

Cash and cash equivalents at end of period
$
193.4

 
$
195.1





See Notes to the Condensed Consolidated Financial Statements.

5



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 are subject to year-end adjustment, in accordance with accounting principles generally accepted in the United States of America ("GAAP"), 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 into 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) Acquisitions
Fiscal 2013
On April 2, 2012, we acquired RathGibson LLC ("RathGibson"). RathGibson manufactures precision thin-wall, nickel-alloy and stainless steel welded and seamless tubing, with broad capabilities in length, wall thickness, and diameter. RathGibson's products are used in a multitude of oil & gas, chemical/petrochemical processing, and power generation applications, as well as in other commercial markets. RathGibson operates three facilities in Janesville, Wisconsin; North Branch, New Jersey; and Clarksville, Arkansas, and employs more than 500 people. The RathGibson acquisition was an asset purchase for tax purposes and operates as part of the Forged Products segment.
On May 18, 2012, we acquired Centra Industries ("Centra"), a state-of-the art aerostructures manufacturer located in Cambridge, Ontario, Canada. Centra manufactures a range of machined airframe components and assemblies, in both aluminum and hard metals. Core competencies include the high-speed machining of complex, high-precision structures, sub-assembly, and kit integration. Established in 1974, Centra has approximately 400 employees. The Centra acquisition was a stock purchase for tax purposes and operates as part of the Airframe Products segment.
On June 15, 2012, we acquired Dickson Testing Company ("Dickson") and Aerocraft Heat Treating Company ("Aerocraft"). Dickson offers a full range of destructive testing services including: mechanical properties; metallurgical and chemical analyses; and low-cycle fatigue testing. Dickson is located in South Gate, California, with approximately 110 employees. Aerocraft provides precision heat treating services for titanium and nickel alloy forgings and castings used in the aerospace industry, as well as other related services including straightening, de-twisting and forming. Aerocraft is located in Paramount, California, with nearly 60 employees. The acquisition was an asset purchase for tax purposes and operates as part of the Forged Products segment.
On August 7, 2012, we acquired Klune Industries ("Klune"), a manufacturer of complex aluminum, nickel, titanium, and steel aerostructures. Klune focuses on complex forming, machining, and assembly of aerostructure parts, in addition to offering significant expertise in a range of cold-formed sheet metal components. Klune, which operates facilities in North Hollywood, California; Spanish Fork, Utah; and Kent, Washington, employs approximately 740 employees. The Klune acquisition was a stock purchase for tax purposes and operates as part of the Airframe Products segment.
On August 31, 2012, we acquired certain aerostructures business units and McSwain Manufacturing from Heroux-Devtek Inc. These aerostructures operations manufacture a wide variety of components and assemblies from aluminum, aluminum-lithium, and titanium, such as bulkheads, wing ribs, spars, frames, and engine mounts. The aerostructures operations include Progressive Incorporated in Arlington, Texas, as well as plants in Dorval (Montreal), Canada, and Queretaro, Mexico. McSwain, headquartered in Cincinnati, Ohio, specializes in turning, milling, and drilling, and has developed a strong presence in components for gas turbine and mining applications. These four facilities employ a total of approximately 440 people. The acquisition was an asset purchase for tax purposes and operates as part of the Airframe Products segment.
The purchase price allocations for each business acquisition above are subject to further refinement. The impact of these acquisitions is not material to our consolidated results of operations; consequently, pro forma information has not been included.

6



Fiscal 2012
On July 14, 2011, we acquired the rings operations of Unison Engine Components ("Tru-Form") from GE Aviation, an operating unit of General Electric Company. Tru-Form is a leader in the manufacture of flash-welded and cold-rolled rings for jet engine and gas turbine applications, including spacer rings, combustion casings and liners, low pressure turbine casings, and fan cases. The innovative Tru-Form cold-rolling process produces a near-net-shaped part from a flash-welded ring, reducing material and machining costs and enabling the production of more complex part shapes.  Tru-Form employs approximately 275 people across its three locations in Wilkes-Barre and Mountaintop, Pennsylvania, and Tyseley, England. The Tru-Form acquisition was an asset purchase for tax purposes and operates as part of the Forged Products segment.
On July 22, 2011, we acquired the assets of the Rollmet business ("Rollmet") from Rockwell Collins. Rollmet has developed a unique cold-roll extrusion process to manufacture precision thin wall pipe across a range of materials, including nickel alloys, stainless steel, aluminum, and carbon steel.  Rollmet's products are utilized in a variety of oil and gas applications, as well as motor cases for missile programs.  Rollmet has approximately 70 employees and operates one facility in Irvine, California. The Rollmet acquisition was an asset purchase for tax purposes and operates as part of the Forged Products segment.
On August 9, 2011, we acquired Primus International ("Primus") for approximately $900 million in cash.  Primus is a leading supplier of aerostructures and complex components and assemblies to the global aerospace industry, including swaged rods, and machined aluminum and titanium components.  Product applications include wing, fuselage and engine-related assemblies, passenger and exit doors, and actuation and flight control assemblies.  Headquartered in Bellevue, Washington, Primus employs approximately 1,500 people across five manufacturing locations, including three in the Seattle, Washington area, as well as Tulsa, Oklahoma, and Suzhou, China.  The Primus acquisition was a stock purchase for tax purposes and operates as part of the Airframe Products segment. This transaction resulted in $419.8 million of goodwill and $505.3 million of other intangible assets, including customer relationships with indefinite lives valued at $468.5 million, customer relationships with finite lives valued at $15.6 million and backlog valued at $21.2 million. We also recorded a long-term liability related to the fair value of loss contracts valued at $85.3 million.
On October 4, 2011, we acquired the assets of PB Fasteners ("PB"). PB is an industry leader in the design and manufacturing of fastener products for airframe applications, including the development of the SLEEVbolt ® fastening system. PB’s sleeve bolt technology is critical to mitigating the impact of lightning strikes on the Boeing 787 aircraft and other composite body aircraft. Located in Gardena, California, PB entered the aerospace fastener business in 1967. The PB acquisition was an asset purchase for tax purposes and operates as part of the Airframe Products segment.
Over the course of fiscal 2012, we completed several additional acquisitions which were not material, but do provide us with additional manufacturing capabilities.
The above business acquisitions were 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.

(3) Discontinued Operations
During the second quarter of fiscal 2013, we decided to divest a small non-core business in the Forged Products segment and reclassified it to discontinued operations. The sale of the business was completed in the second quarter of fiscal 2013. The transaction resulted in a gain of approximately $2.3 million (net of tax) and cash proceeds of $6.0 million.
During the fourth quarter of fiscal 2012, we decided to divest a small non-core business in the Airframe Products segment and reclassified it to discontinued operations.
During the first quarter of fiscal 2011, we decided to divest a small non-core business in the Airframe Products segment and reclassified it to discontinued operations. The sale of the business was completed in the second quarter of fiscal 2013. The transaction resulted in a loss of approximately $0.1 million (net of tax) and proceeds of $25.4 million in cash and an unsecured, subordinated, convertible promissory note in the principal amount of $17.6 million. The note is due on August 7, 2017 and pays interest quarterly based on the 5-year Treasury Note Constant Maturity Rate.

7



The components of discontinued operations for the periods presented are as follows:
 
 
Three Months Ended
 
Six Months Ended
 
9/30/12
 
10/2/11
 
9/30/12
 
10/2/11
Net sales
$
21.2

 
$
16.9

 
$
49.1

 
$
28.5

Cost of goods sold
19.1

 
16.6

 
44.3

 
26.4

Selling and administrative expenses
3.4

 
1.8

 
7.5

 
3.1

Loss income from operations before income taxes
(1.3
)
 
(1.5
)
 
(2.7
)
 
(1.0
)
Income tax benefit (expense)
0.1

 

 
(0.3
)
 
(0.1
)
Loss from operations
(1.2
)
 
(1.5
)
 
(3.0
)
 
(1.1
)
Gain (loss) on disposal and other expenses, net of ($2.7), $0.1, ($2.6), and ($0.3) tax (expense) benefit, respectively
0.6

 
(0.1
)
 
0.4

 
0.1

Net loss from discontinued operations
$
(0.6
)
 
$
(1.6
)
 
$
(2.6
)
 
$
(1.0
)
 
 
 
 
 
 
 
 
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:
 
 
9/30/12
    
4/1/12
Assets of discontinued operations:
 
    
 
Current assets
$
37.5

    
$
48.2

Net property, plant and equipment
35.5

    
55.7

Other assets
1.9

    
14.5

 
$
74.9

    
$
118.4

Liabilities of discontinued operations:
 
    
 
Current liabilities
$
12.8

    
$
20.3

Other long-term liabilities
12.8

    
17.8

 
$
25.6

    
$
38.1


(4) Inventories
Inventories consisted of the following:
 
 
9/30/12
    
4/1/12
Finished goods
$
381.0

    
$
338.2

Work-in-process
833.7

    
742.2

Raw materials and supplies
670.4

    
544.5

 
1,885.1

    
1,624.9

Excess of LIFO cost over current cost
218.6

    
190.4

Total inventory
$
2,103.7

    
$
1,815.3


(5) Goodwill and Acquired Intangibles
We perform our annual goodwill and indefinite-lived intangible assets impairment testing during the second quarter of each fiscal year. For fiscal 2013, 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. Furthermore, it was determined that the fair value of indefinite-lived intangible assets was greater than the carrying value and that there was no impairment of indefinite-lived intangible assets.

8



The changes in the carrying amount of goodwill by reportable segment for the six months ended September 30, 2012 were as follows:
 
 
Balance at
 
 
 
Currency
Translation
and Other(1)
 
Balance at
 
4/1/12
 
Acquired
  
 
9/30/12
Investment Cast Products
$
338.0

 
$

  
$
0.4

 
$
338.4

Forged Products
1,407.6

 
352.3

  
8.1

 
1,768.0

Airframe Products
1,768.7

 
294.3

  
(2.1
)
 
2,060.9

Total
$
3,514.3

 
$
646.6

  
$
6.4

 
$
4,167.3


(1) Includes final purchase price allocations of Primus and Welded Rings acquisitions.
The gross carrying amount and accumulated amortization of our acquired intangible assets were as follows:
 
 
September 30, 2012
  
April 1, 2012
 
Gross
Carrying
Amount
  
Accumulated
Amortization
 
Net
Carrying
Amount
  
Gross
Carrying
Amount
  
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizable intangible assets:
 
  
 
 
 
  
 
  
 
 
 
Patents
$
15.0

  
$
(9.8
)
 
$
5.2

  
$
15.0

  
$
(9.0
)
 
$
6.0

Proprietary technology
2.3

  
(1.4
)
 
0.9

  
2.3

  
(1.3
)
 
1.0

Tradenames
0.4

  
(0.4
)
 

  
0.4

  
(0.4
)
 

Long-term customer relationships
152.2

  
(26.7
)
 
125.5

  
56.7

  
(20.5
)
 
36.2

Backlog
35.0

  
(18.1
)
 
16.9

  
34.3

  
(15.5
)
 
18.8

Revenue sharing agreements
28.9

  
(1.3
)
 
27.6

  
28.9

  
(1.0
)
 
27.9

 
$
233.8

  
$
(57.7
)
 
176.1

  
$
137.6

  
$
(47.7
)
 
89.9

Unamortizable intangible assets:
 
  
 
 
 
  
 
  
 
 
 
Tradenames
 
  
 
 
475.9

  
 
  
 
 
261.4

Long-term customer relationships
 
  
 
 
1,102.2

  
 
  
 
 
876.8

Acquired intangibles, net
 
  
 
 
$
1,754.2

  
 
  
 
 
$
1,228.1

Amortization expense for acquired intangible assets for the three and six months ended September 30, 2012 was $5.2 million and $10.0 million, respectively. Amortization expense for acquired intangible assets for the three and six months ended October 2, 2011 was $3.4 million and $5.5 million, respectively. Amortization expense related to finite-lived intangible assets is projected to total $20.7 million for fiscal 2013. Amortization expense related to finite-lived intangible assets for fiscal 2012 was $13.8 million. Projected amortization expense for the succeeding five fiscal years is as follows:
 
Fiscal Year
 
Estimated
Amortization
Expense
2014
 
$
21.3

2015
 
19.2

2016
 
17.8

2017
 
12.2

2018
 
9.7

The amortization will change in future periods if other intangible assets are acquired, existing intangibles are disposed or impairments are recognized.


9



(6) 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 September 30, 2012 and April 1, 2012 is immaterial to our financial position, and the change in the accrual for the current period 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 incurred significant charges for these indemnifications.

(7) Earnings per Share
Net income and weighted average number of shares outstanding used to compute earnings per share were as follows:
 
 
Three Months Ended
 
Six Months Ended
 
9/30/12
 
10/2/11
 
9/30/12
 
10/2/11
Amounts attributable to PCC shareholders:
 
 
 
 
 
 
 
Net income from continuing operations
$
333.3

 
$
296.3

 
$
677.0

 
$
581.7

Net loss from discontinued operations
(0.6
)
 
(1.6
)
 
(2.6
)
 
(1.0
)
Net income attributable to PCC shareholders
$
332.7

 
$
294.7

 
$
674.4

 
$
580.7

 
 
Three Months Ended
 
Six Months Ended
 
9/30/12
  
10/2/11
 
9/30/12
 
10/2/11
Weighted average shares outstanding-basic
145.4

  
144.1

 
145.3

 
143.9

Effect of dilutive stock-based compensation plans
1.0

 
1.2

 
1.1

 
1.3

Weighted average shares outstanding-dilutive
146.4

  
145.3

 
146.4

 
145.2

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 six months ended September 30, 2012, stock options to purchase 1.2 million shares of common stock were excluded from the computation of diluted earnings per share, because they would have been antidilutive. For the three and six months ended October 2, 2011, stock options to purchase 1.0 million shares of common stock were excluded from the computation of diluted earnings per share, because they would have been antidilutive. These options could be dilutive in the future.

(8) Stock-based Compensation
During the three and six months ended September 30, 2012 and October 2, 2011, 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 April 1, 2012.
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
 
Six Months Ended
 
9/30/12
 
10/2/11
 
9/30/12
 
10/2/11
Cost of goods sold
$
3.8

 
$
3.9

 
$
7.9

 
$
8.0

Selling and administrative expenses
8.8

 
7.5

 
17.3

 
15.3

Stock-based compensation expense before income taxes
12.6

 
11.4

 
25.2

 
23.3

Income tax benefit
(4.0
)
 
(3.8
)
 
(7.8
)
 
(7.4
)
Total stock-based compensation expense after income taxes
$
8.6

 
$
7.6

 
$
17.4

 
$
15.9




10



(9) Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive loss consisted of the following:

 
9/30/12
 
4/1/12
Cumulative unrealized foreign currency translation gains
$
20.8

 
$
19.6

Pension and postretirement obligations
(462.0
)
 
(462.0
)
Unrealized gain on derivatives
2.8

 
0.7

Accumulated other comprehensive loss
$
(438.4
)
 
$
(441.7
)

(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 to fluctuations in interest rates. Interest rate swaps may be used to hedge against the risk of changes 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 may use foreign currency forward contracts 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 to fluctuations in foreign currency exchange rates. Foreign currency forward contracts and options are 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 to 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, the effective portion of 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 September 30, 2012, there were $3.5 million of deferred net gains (pre-tax) relating to derivative activity in accumulated other comprehensive loss that are expected to be transferred to net earnings over the next twelve months when the forecasted transactions actually occur. As of September 30, 2012, 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 September 30, 2012 was approximately $460 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.

11



Derivative instruments are measured at fair value within the consolidated balance sheet either as assets or liabilities. As of September 30, 2012, accounts receivable included foreign exchange contracts of $5.0 million and accounts payable included foreign exchange contracts of $1.0 million. As of April 1, 2012, accounts receivable included foreign exchange contracts of $2.5 million and other assets included interest rate swap contracts of $1.6 million. As of April 1, 2012, accounts payable included foreign exchange contracts of $1.9 million.
For the three months ended September 30, 2012 and October 2, 2011, we recognized $0.7 million and $1.5 million of gains, respectively, in the consolidated statements of income for derivatives designated as hedging instruments. For the three months ended September 30, 2012 and October 2, 2011, we recognized $1.5 million and $5.6 million of losses, respectively, in the consolidated statements of income for derivatives not designated as hedging instruments. The ineffective portion of gains and losses relating to derivatives designated as hedging instruments in either period was not significant.
For the six months ended September 30, 2012 and October 2, 2011, we recognized $0.8 million and $3.6 million of gains, respectively, in the consolidated statements of income for derivatives designated as hedging instruments. For the six months ended September 30, 2012 and October 2, 2011, we recognized $2.8 million and $3.6 million of losses, respectively, in the consolidated statements of income for derivatives not designated as hedging instruments. The ineffective portion of gains and losses relating to derivatives designated as hedging instruments in either period was not significant.

(11) Fair Value Measurements
Fair value guidance within GAAP defines fair value, establishes a framework for measuring fair value, 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 guidance 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 September 30, 2012:
 
 
Fair Value Measurements Using
  
Assets/Liabilities
at Fair Value
 
Level 1
  
Level 2
  
Level 3
  
Assets:
 
  
 
  
 
  
 
Trading securities
$
23.7

 
$

 
$

 
$
23.7

Derivative instruments
$

  
$
5.0

  
$

  
$
5.0

Liabilities:
 
  
 
  
 
  
 
Derivative instruments
$

  
$
1.0

  
$

  
$
1.0

The following table presents the assets and liabilities measured at fair value on a recurring basis as of April 1, 2012:
 
 
Fair Value Measurements Using
  
Assets/Liabilities
at Fair Value
 
Level 1
  
Level 2
  
Level 3
  
Assets:
 
  
 
  
 
  
 
Trading securities
$
74.5

 
$

 
$

 
$
74.5

Derivative instruments
$

  
$
4.1

  
$

  
$
4.1

Liabilities:
 
  
 
  
 
  
 
Derivative instruments
$

  
$
1.9

  
$

  
$
1.9

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 six months of fiscal 2013 or fiscal 2012.

12



Derivative instruments consist of fair value hedges, net investment hedges, and cash flow hedges. Foreign exchange, commodity swap and interest rate swap contract 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 $218.3 million compared to a book value of $207.0 million at September 30, 2012. At April 1, 2012, the estimated fair value of our long-term fixed rate debt instruments was $221.0 million compared to a book value of $207.4 million. The fair value of long-term fixed rate debt was estimated using bond yields at quarter-end for comparable market instruments. Long-term fixed rate debt would be classified as Level 2 within the fair value hierarchy if it were measured at fair value. 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 April 1, 2012.
The net periodic pension cost for our pension plans consisted of the following components:
 
 
Three Months Ended
 
Six Months Ended
 
9/30/12
 
10/2/11
 
9/30/12
 
10/2/11
Service cost
$
11.5

 
$
9.2

 
$
22.9

 
$
18.2

Interest cost
23.1

 
23.1

 
46.2

 
45.8

Expected return on plan assets
(33.4
)
 
(33.1
)
 
(66.7
)
 
(66.1
)
Amortization of net actuarial loss
11.4

 
5.5

 
22.8

 
11.0

Amortization of prior service cost
0.8

 
0.7

 
1.6

 
1.5

Net periodic pension cost
$
13.4

 
$
5.4

 
$
26.8

 
$
10.4

The net periodic benefit cost of postretirement benefits other than pensions consisted of the following components:
 
 
Three Months Ended
 
Six Months Ended
 
9/30/12
 
10/2/11
 
9/30/12
 
10/2/11
Service cost
$
0.2

 
$
0.2

 
$
0.4

 
$
0.4

Interest cost
1.1

 
1.2

 
2.1

 
2.4

Amortization of net actuarial loss
0.3

 
0.1

 
0.5

 
0.2

Amortization of prior service cost (benefit)
0.1

 
(0.1
)
 
0.2

 
(0.2
)
Net periodic benefit cost
$
1.7

 
$
1.4

 
$
3.2

 
$
2.8

During the three and six months ended September 30, 2012, we contributed $2.7 million and $55.5 million, respectively, to the defined benefit pension plans, of which $50.0 million was voluntary. During the three and six months ended October 2, 2011, we contributed $3.0 million and $55.6 million, respectively, to the defined benefit pension plans, of which $50.0 million was voluntary. We expect to contribute approximately $6.9 million of additional required contributions in fiscal 2013, for total contributions to the defined benefit pension plans of approximately $62.4 million in fiscal 2013. We expect to contribute a total of approximately $7.0 million to the other postretirement benefit plans during fiscal 2013.

(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.



13



(14) New Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board (“FASB”) issued guidance which amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment. Under the new guidance, an entity testing an indefinite-lived intangible asset for impairment has the option of performing a qualitative assessment before calculating the fair value of the asset. If the entity determines, on the basis of qualitative factors, that the fair value of the indefinite-lived intangible asset is not more likely than not impaired, the entity would not need to calculate the fair value of the asset. The guidance is effective for the Company for our annual impairment test for fiscal 2014. 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 December 2011, the FASB issued guidance increasing disclosures regarding offsetting of assets and liabilities in the balance sheet. For derivatives and financial assets and liabilities, the amendments require disclosure of gross asset and liability amounts, amounts offset on the balance sheet, and amounts subject to the offsetting requirements but not offset on the balance sheet. The guidance is effective for the Company beginning the first quarter of fiscal 2014 and will be applied retrospectively. 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 2011, the FASB issued guidance that requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income in either a single continuous statement or two separate but consecutive statements. This guidance does not change the items that must be reported in OCI. In December 2011, the FASB deferred some aspects of the June guidance that relate to the presentation of reclassification adjustments. The FASB is considering whether to present the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income on the face of the financial statements. The guidance was effective for the Company beginning the first quarter of fiscal 2013 and has been applied retrospectively. The guidance required a change in the Company's financial statement presentation.
In September 2011, the FASB issued guidance to aid in an entity's assessment of goodwill and whether it is necessary to perform the two-step quantitative goodwill impairment test. Under this guidance, an entity would not be required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The amendments include a number of events and circumstances for an entity to consider in conducting the qualitative assessment. This pronouncement was effective in the first quarter of fiscal 2013. As this guidance only modified the requirements of impairment testing, the adoption 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 Airframe Products. 
 
Three Months Ended
 
Six Months Ended
 
9/30/12
 
10/2/11
 
9/30/12
 
10/2/11
Net sales:
 
 
 
 
 
 
 
Investment Cast Products
$
612.4

 
$
573.3

 
$
1,232.1

 
$
1,142.1

Forged Products
761.2

 
798.3

 
1,614.7

 
1,553.7

Airframe Products
556.9

 
410.0

 
1,049.7

 
758.0

Consolidated net sales
$
1,930.5

 
$
1,781.6

 
$
3,896.5

 
$
3,453.8

Segment operating income (loss):
 
 
 
 
 
 
 
Investment Cast Products
$
208.8

 
$
189.9

 
$
414.9

 
$
377.0

Forged Products
155.2

 
163.9

 
350.4

 
320.1

Airframe Products
166.6

 
116.1

 
312.8

 
222.9

Corporate expenses
(32.2
)
 
(30.8
)
 
(64.6
)
 
(61.7
)
Total segment operating income
498.4

 
439.1

 
1,013.5

 
858.3

Interest expense
3.4

 
3.2

 
6.3

 
6.1

Interest income
(1.6
)
 
(1.8
)
 
(3.2
)
 
(3.7
)
Consolidated income before income tax expense and equity in earnings of unconsolidated affiliates
$
496.6

 
$
437.7

 
$
1,010.4

 
$
855.9




14



(16) Subsequent Events
On October 24, 2012, we acquired Texas Honing, Inc. ("THI"). THI provides precision, tight tolerance pipe processing services, including honing, boring, straightening, and turning. THI's products are used in oil & gas drilling, completion, and production applications, as well as other commercial markets. THI operates three facilities in the Houston, Texas area and employs more than 200 people. The THI acquisition was a stock purchase for tax purposes and will be reported as part of the Forged Products segment.
On November 9, 2012, we entered into a definitive agreement to acquire Titanium Metals Corporation ("Timet") for $16.50 per share in cash. The transaction values Timet at a total enterprise value of approximately $2.9 billion, including net cash and equivalents. PCC has secured a fully underwritten $3.0 billion bridge financing commitment that may be used to complete this acquisition.  The acquisition will ultimately be funded through a combination of cash on hand, commercial paper, bank debt, and proceeds from the sale of notes and bonds. Timet, the largest independent titanium manufacturer in the United States, offers a full range of titanium products, including ingot and slab, forging billet, and mill forms. Timet operates seven primary melting or mill facilities in Henderson, Nevada; Toronto, Ohio; Morgantown, Pennsylvania; Vallejo, California; Witton, England; Waunarlwydd, Wales; and Ugine, France, and employs approximately 2,750 people. The Timet acquisition will be a stock purchase for tax purposes. Subject to the satisfaction or waiver of certain conditions, the tender offer is expected to be completed in the third quarter of fiscal 2013, after which Timet's results will be reported as part of the Forged Products segment.

(17) Condensed Consolidating Financial Information
Certain of our subsidiaries guarantee our registered securities consisting of $200 million of 5.6% Senior Notes due in fiscal 2014. 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 notes, 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 September 30, 2012 and April 1, 2012, statements of income for the three and six months ended September 30, 2012 and October 2, 2011, statements of comprehensive income for the three and six months ended September 30, 2012 and October 2, 2011, and statements of cash flows for the six months ended September 30, 2012 and October 2, 2011. The public notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantor subsidiaries include the majority of our domestic subsidiaries within the Investment Cast Products, Forged Products and Airframe 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.


15



Condensed Consolidating Statements of Income
Three Months Ended September 30, 2012
(Unaudited)
(In millions)
 
Precision Castparts Corp.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Total
Net sales
$

 
$
1,624.5

 
$
380.0

 
$
(74.0
)
 
$
1,930.5

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of goods sold
3.8

 
1,097.2

 
283.8

 
(74.0
)
 
1,310.8

Selling and administrative expenses
26.8

 
74.9

 
19.6

 

 
121.3

Other expense (income)
9.2

 
(2.2
)
 
(7.0
)
 

 

Interest (income) expense, net
(14.7
)
 
16.5

 

 

 
1.8

Equity in earnings of subsidiaries
(351.3
)
 
(15.0
)
 

 
366.3

 

Total costs and expenses
(326.2
)
 
1,171.4

 
296.4

 
292.3

 
1,433.9

Income before income tax expense and equity in earnings of unconsolidated affiliates
326.2

 
453.1

 
83.6

 
(366.3
)
 
496.6

Income tax benefit (expense)
6.5

 
(151.9
)
 
(18.7
)
 

 
(164.1
)
Equity in earnings of unconsolidated affiliates

 
0.2

 
1.0

 

 
1.2

Net income from continuing operations
332.7

 
301.4

 
65.9

 
(366.3
)
 
333.7

Net income (loss) from discontinued operations

 
12.1

 
(12.7
)
 

 
(0.6
)
Net income
332.7

 
313.5

 
53.2

 
(366.3
)
 
333.1

Net income attributable to noncontrolling interests

 

 
(0.4
)
 

 
(0.4
)
Net income attributable to PCC
$
332.7

 
$
313.5

 
$
52.8

 
$
(366.3
)
 
$
332.7


Condensed Consolidating Statements of Income
Three Months Ended October 2, 2011
(Unaudited)
(In millions)
 
 
Precision
Castparts
Corp.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net sales
$

 
$
1,495.3

 
$
388.8

 
$
(102.5
)
 
$
1,781.6

Costs and expenses:
 
 
 
 
 
 
 
 
 
Cost of goods sold
3.9

 
1,028.5

 
301.5

 
(102.5
)
 
1,231.4

Selling and administrative expenses
24.6

 
66.3

 
20.2

 

 
111.1

Other expense (income)
1.7

 
(4.3
)
 
2.6

 

 

Interest (income) expense, net
(12.7
)
 
15.8

 
(1.7
)
 

 
1.4

Equity in earnings of subsidiaries
(306.8
)
 
(15.2
)
 

 
322.0

 

Total costs and expenses
(289.3
)
 
1,091.1

 
322.6

 
219.5

 
1,343.9

Income before income tax expense and equity in earnings of unconsolidated affiliates
289.3

 
404.2

 
66.2

 
(322.0
)
 
437.7

Income tax benefit (expense)
5.4

 
(137.5
)
 
(13.1
)
 

 
(145.2
)
Equity in earnings of unconsolidated affiliates

 
0.4

 
3.7

 

 
4.1

Net income from continuing operations
294.7

 
267.1

 
56.8

 
(322.0
)
 
296.6

Net income (loss) from discontinued operations

 
0.4

 
(2.0
)
 

 
(1.6
)
Net income
294.7

 
267.5

 
54.8

 
(322.0
)
 
295.0

Net income attributable to noncontrolling interests

 

 
(0.3
)
 

 
(0.3
)
Net income attributable to PCC
$
294.7

 
$
267.5

 
$
54.5

 
$
(322.0
)
 
$
294.7





16



Condensed Consolidating Statements of Income
Six Months Ended September 30, 2012
(Unaudited)
(In millions)
 

Precision
Castparts
Corp.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net sales
$


$
3,290.5


$
756.9


$
(150.9
)

$
3,896.5

Costs and expenses:









Cost of goods sold
7.9


2,216.8


568.0


(150.9
)

2,641.8

Selling and administrative expenses
52.5


150.4


38.3




241.2

Other expense (income)
8.4


(2.3
)

(6.1
)




Interest (income) expense, net
(29.6
)

33.7


(1.0
)



3.1

Equity in earnings of subsidiaries
(699.1
)

(33.3
)



732.4



Total costs and expenses
(659.9
)

2,365.3


599.2


581.5


2,886.1

Income before income tax expense and equity in earnings of unconsolidated affiliates
659.9


925.2


157.7


(732.4
)

1,010.4

Income tax benefit (expense)
14.5


(311.0
)

(39.2
)



(335.7
)
Equity in earnings of unconsolidated affiliates


0.8


2.3




3.1

Net income from continuing operations
674.4


615.0


120.8


(732.4
)

677.8

Net income (loss) from discontinued operations


12.0


(14.6
)



(2.6
)
Net income
674.4


627.0


106.2


(732.4
)

675.2

Net income attributable to noncontrolling interests




(0.8
)



(0.8
)
Net income attributable to PCC
$
674.4


$
627.0


$
105.4


$
(732.4
)

$
674.4


Condensed Consolidating Statements of Income
Six Months Ended October 2, 2011
(Unaudited)
(In millions)
 
 
Precision
Castparts
Corp.
 
Guarantor
Subsidiaries
 
Non-
Guarantor
Subsidiaries
 
Eliminations
 
Total
Net sales
$

 
$
2,875.6

 
$
757.6

 
$
(179.4
)
 
$
3,453.8

Costs and expenses:

 

 

 

 

Cost of goods sold
8.0

 
1,966.2

 
584.5

 
(179.4
)
 
2,379.3

Selling and administrative expenses
48.9

 
125.7

 
41.6

 

 
216.2

Other expense (income)
5.8

 
(4.3
)
 
(1.5
)
 

 

Interest (income) expense, net
(25.4
)
 
31.4

 
(3.6
)
 

 
2.4

Equity in earnings of subsidiaries
(600.9
)
 
(34.4
)
 

 
635.3

 

Total costs and expenses
(563.6
)
 
2,084.6

 
621.0

 
455.9

 
2,597.9

Income before income tax expense and equity in earnings of unconsolidated affiliates
563.6

 
791.0

 
136.6

 
(635.3
)
 
855.9

Income tax benefit (expense)
17.1

 
(268.1
)
 
(29.7
)
 

 
(280.7
)
Equity in earnings of unconsolidated affiliates

 
0.7

 
6.6

 

 
7.3

Net income from continuing operations
580.7

 
523.6

 
113.5

 
(635.3
)
 
582.5

Net income (loss) from discontinued operations

 
0.6

 
(1.6
)
 

 
(1.0
)
Net income
580.7

 
524.2

 
111.9

 
(635.3
)
 
581.5

Net income attributable to noncontrolling interests

 

 
(0.8
)
 

 
(0.8
</