Fiscal 2014 Q3 Earnings. Mark Donegan Chairman & CEO January 23, 2014

Transcription

1 Fiscal 2014 Q3 Earnings Mark Donegan Chairman & CEO January 23, 2014

2 Forward-Looking Statements Information included within this presentation describing the projected growth and future results and events constitutes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to fluctuations in the aerospace, power generation, and general industrial cycles; the relative success of our entry into new markets; competitive pricing; the financial viability of our significant customers; the concentration of a substantial portion of our business with a relatively small number of key customers; the impact on the Company of customer or supplier labor disputes; demand, timing and market acceptance of new commercial and military programs, including the Boeing 787; the availability and cost of energy, raw materials, supplies, and insurance; the cost of pension and postretirement medical benefits; equipment failures; product liability claims; relations with our employees; our ability to manage our operating costs and to integrate acquired businesses in an effective manner, including the ability to realize expected synergies; the timing of new acquisitions; misappropriation of our intellectual property rights; governmental regulations and environmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; the impact of adverse weather conditions or natural disasters; the availability and cost of financing; and implementation of new technologies and process improvements. Any forward-looking statements should be considered in light of these factors. We undertake no obligation to update any forward-looking information to reflect anticipated or unanticipated events or circumstances after the date of this document. 2

3 Solid Sales Growth and Record Earnings $ Millions, except EPS Q3 FY14 Q3 FY13 % Change Net Sales $ 2,357 $ 2, % Consolidated Segment Operating Income $ 659 $ % Margin % 28.0 % 25.5 % +250bp Earnings Per Share from Continuing Operations (diluted) $ 2.95 $ % Y-O-Y Q3 Sales: Increased intercompany activity ~ $23M Principally driven by acquisitions Decline in metal pricing and pass-through ~ $50M Organic sales growth ~ 1% Excludes negative impact of pass-through and metal/revert pricing Tempered by last-minute customer schedule shifts Aerospace sales growth ~ 21% Solid contribution from TIMET Continued commercial growth ~ 30% Slight decrease in regional/business jet and military sales ~ 4% Power sales ~ 1% IGT sales ~ 1% Seamless interconnect sales ~ 52% Significant recovery from Q3 FY13 run rate Lower oil & gas deliveries ~ 6% Compared to strong Q3 FY13 activity General industrial and other sales ~ 14% Driven by TIMET Y-O-Y Q3 EBIT: Increased leverage of higher volumes Strong contribution from TIMET Rapid implementation of PCC toolkit Continued solid performance at Airframe Products ~ 50% incremental base margins Further improvements in Investment Cast Products and base Forged Products operations Productivity Cost take-out Revert utilization Lost EBIT opportunity due to customer schedule shifts Sequential Sales Q2 to Q3: Aerospace sales ~ 2% Growth in power sales ~ 3% General industrial and other sales ~ 15% Fewer shipping days Late-quarter customer schedule shifts 3

4 Investment Cast Products $ Millions, except EPS Q3 FY14 Q3 FY13 % Change Sales $ 609 $ 613 (1) % Operating Income $ 218 $ % Operating Margin 35.8 % 34.1 % +170bp Y-O-Y Q3 Sales: Contractual pass-through/metal pricing ~ $2M Aerospace sales ~ 2% Commercial sales ~ 12% Robust aerospace cycle Military and regional/business jet ~ 19% Primarily spares on active military programs IGT OEM and spares ~ 3% Y-O-Y Q3 EBIT: Continued drive for improved operational metrics Increased operating income on ~ $4M sales decline Aerospace OEM demand profile intact Accelerated development on new narrow-body engines Flat regional/business jet and military end markets Anticipate modest recovery of military spares Further opportunities for margin expansion IGT Basically stable market Models targeted for growth in PCC sweet spot Drivers beyond base production Upgrades to installed base Market share gains on new platforms 4

5 Forged Products $ Millions, except EPS Q3 FY14 Q3 FY13 % Change Sales $ 1,026 $ % Operating Income $ 261 $ % Operating Margin 25.4 % 20.8 % +460bp Y-O-Y Q3 Sales: Increased intercompany activity ~ $8M Predominantly TIMET Decline in metal pricing and contractual pass-through ~ $48M Aerospace sales ~ 32% Large contribution from TIMET Stable demand in base operations Tempered by customer schedule shifts late in Q3 Slight decline in regional/business jet sales Higher military sales ~ 13% Driven by TIMET Power sales ~ 3% IGT sales ~ 4% All OEM Seamless interconnect pipe sales ~ 52% Off low Q3 FY13 base Oil & gas sales ~ 6% Versus robust Q3 FY13 shipments General industrial and other sales ~ 27% Chiefly influenced by TIMET Y-O-Y Q3 EBIT: Continued TIMET performance strength Further operational improvements in base businesses Lost EBIT opportunity due to customer schedule shifts TIMET synergy update Aerospace OEM demand profile intact Supplemented by recovery of Q3 schedule shifts Higher content on development narrow-body engines Additional TIMET market share gains More opportunities available Power Interconnect pipe Continued recovery Backlog of nearly one year Oil & gas Expanding penetration of market Sizeable near-term projects under discussion IGT Overall build rates flat to down Anticipated sources of growth Upgrading installed base Expanding share on new platforms 5

6 TIMET Synergy Update Deploy PCC Toolbox Improve Working Capital Performance Grow Share, with PCC and Externally Enter New Markets Create End-to-End Product Offering Optimize Revert Flows Rationalize SG&A Costs Link Conversion Assets ~ $30-40M Synergies in Months ~ $80-100M Synergies in Months ~ $ M Synergies in Months 6 Months 12 Months 6

7 Airframe Products $ Millions, except EPS Q3 FY14 Q3 FY13 % Change Sales $ 722 $ % Operating Income $ 216 $ % Operating Margin 29.9 % 30.3 % - 40bp Y-O-Y Q3 Sales: Strong aerospace sales ~ 27% Mid single-digit improvement in core commercial aerospace fasteners Shipping 787 content at ~ 6 per month Aerostructure sales expansion Low double-digit growth from base business Market growth plus share gains Shipping 787 content at ~ 7 per month Tempered by late-quarter customer schedule shifts Solid contribution from acquisitions Full quarter of Synchronous Addition of Permaswage for ~ two months Y-O-Y Q3 EBIT: Continued operational strength ~ 50% incremental base margins Solid leverage of higher throughput Effective integration of new acquisitions Offset by 190 bp dilutive margin impact from acquisitions Lost EBIT opportunity due to customer schedule shifts Fasteners leveraging strong portfolio Still trailing 787 production Line of sight to schedule alignment Further share gains on current and next-generation platforms Recovery of Q3 schedule shifts Significant top- and bottom-line opportunities across all aerostructure operations More rapid performance gains from recent acquisitions Continued strong drop-through from base operations Closure of Permaswage acquisition during the quarter Aggressive cash deployment for targeted acquisitions 7

8 Cash and Debt Position for Q3 FY14 $ Millions Sept 29, 2013 Dec 29, 2013 Q3 Change Cash $ 269 $ 337 $ 68 Debt 3,558 3,622 (64) Debt-To-Capitalization 25.3 % 24.7 % Add: Net cash utilized for stock repurchase program and acquisitions (1) 697 Total net change in cash, excluding cash utilized for acquisitions, stock repurchase program and debt borrowings $ 701 (1) Includes $9M to repurchase 35,000 shares during the quarter at an average price of $249 per share, and $688M net for the acquisition of Permaswage, several small acquisitions, and purchase price true-ups. 8

9 Outlook INVESTMENT CAST PRODUCTS Aerospace Improved base sales in Q4 vs. Q3 OEM demand profile intact Heightened focus on new narrow-body re-engining programs Active development programs Increased engine content Modest recovery anticipated in military spares Stabilizing regional/business jet demand Power Stable overall sales Q4 vs. Q3 Steady OEM and spares demand Potential future growth drivers Upgrade programs Increased content on new product launches Higher spares demand 9

10 Outlook FORGED PRODUCTS Aerospace Power Improved base sales in Q4 vs. Q3 OEM demand profile intact Supplemented by recovery of Q3 schedule shifts Strong position on development engine programs Further TIMET upside Stronger competitor in the marketplace improved cost base Multiple share gain opportunities Aggressive execution on downstream linkages Stabilizing regional/business jet and military markets Improved base sales in Q4 vs. Q3 Interconnect pipe Growing backlog nearly one year Oil & gas Active discussions with new and existing customers Large, near-term projects IGT Growth drivers similar to Investment Cast Products Continued targeting of TIMET opportunities 10

11 Outlook AIRFRAME PRODUCTS Aerospace (> 80% of segment sales) Fasteners Continued positive production slope Close to matching up with 787 rates Increased shipment profile spurred by announced ramps Supplemented by recovery of Q3 schedule shifts Further share opportunities in existing contracts Additional market share upside Aggressive Permaswage integration Aerostructures Delivering in line with build rates Continue to expand product portfolio Deliver value-added solutions 11

12 Questions Mark Donegan Chairman & CEO