Company Overview

Precision Castparts Corp. is a worldwide, diversified manufacturer of complex metal components and products. It serves the aerospace, power, and general industrial markets. PCC is the market leader in manufacturing large, complex structural investment castings, airfoil castings, forged components, aerostructures and highly engineered, critical fasteners for aerospace applications. In addition, the Company is the leading producer of airfoil castings for the industrial gas turbine market. PCC manufactures extruded seamless pipe, fittings, forgings, and clad products for power generation and oil & gas applications; commercial and military airframe aerostructures; and metal alloys and other materials to the casting and forging industries.

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PCC History
(Last Updated: September 2013)

Precision Castparts Corp. has been headquartered in Portland, Oregon, for more than 60 years. The business has grown from a small manufacturer of investment castings for a wide variety of applications to a Fortune 500 company producing investment castings, forgings, and fasteners for aerospace, power, and general industrial customers. This growth has resulted from increased market share, entry into new end markets, and strategic acquisitions. Over the course of the company’s history, Precision Castparts has been led by just three chairmen and chief executive officers: Ed Cooley, Bill McCormick, and Mark Donegan. Each has made significant contributions during his tenure to make Precision Castparts one of the foremost manufacturing companies in the world today.

Ed Cooley Era

In 1949, Joseph Cox, president and owner of Oregon Saw Chain in Portland, Oregon, started a small investment casting business with the intention of making a special cutter for his chain saw products. Ed Cooley, assistant general manager for the company, began to spend more and more time with the casting operation and solicited outside work primarily from local businesses. This venture proved so successful that, by the spring of 1953, the casting division was made into a separate business and named Precision Castparts Corp. Three years later, the company, owned by Cooley and two other individuals, was incorporated under the laws of the State of Oregon.

The company pushed aggressively to make ever larger structural castings and, in 1962, purchased a vacuum furnace with the capability of pouring a part weighing up to 1,000 pounds. That moved the business far ahead of its competition and resulted in several contracts for large aircraft engine castings. Then, in 1967, Precision Castparts was awarded a contract with General Electric for TF39 engine components. The TF39 engine, designed to power the U.S. Air Force C-5 Galaxy heavy military transport, was the first high-bypass turbofan engine and the forerunner of GE’s commercial CF6 family of jet engines, installed on Airbus and Boeing wide-body aircraft around the world. It wasn’t long before Pratt & Whitney signed up to incorporate large structural castings into their JT9D commercial engine, and Precision Castparts became a significant participant in the aerospace industry.

In 1968, Precision Castparts became a public company with the offering of 120,000 shares of common stock to 1,100 new shareholders. At the same time, the company was hard at work developing a process to manufacture titanium castings, adding to its already proven capabilities with nickel and stainless steel alloys. This endeavor eventually resulted in the addition of a new titanium production facility, and Precision Castparts soon became the world’s leading manufacturer of large titanium castings as well. In the meantime, the company also focused on building its own internal capability to melt alloys and to create ingot, the input stock for investment castings.

Acquisitions then became the next growth engine. Precision Castparts acquired a titanium foundry in France from Messier Fonderie d’Arudy early in 1985 and moved the operations into a new plant in Ogeu-les-Bains, France, the following year. This operation continues to prosper today as PCC France, part of PCC Structurals. In 1986, the acquisition of the airfoils business from TRW nearly doubled the size of the company. The business was a leading producer of investment cast blades and vanes used in the high-temperature turbine sections of aircraft engines. Strategically, this acquisition enabled Precision Castparts to bring a better value equation to the same customers who were buying structural castings.

Bill McCormick Era

Bill McCormick became chief executive officer of Precision Castparts in 1991. He had joined the company in 1985 as president and chief operating officer after a successful manufacturing career with General Electric. Shortly after arriving at the company, he asked Mark Donegan, also from General Electric, to join him. Donegan went to work as a supervisor in the Portland investment casting operations. McCormick stepped into the CEO role at a time when the cyclical commercial aerospace industry was particularly bad. Airlines were canceling or stretching out the sizeable orders for aircraft they had placed late in the previous decade, and, with more than 80 percent of its sales in aerospace, Precision Castparts was feeling the pain deeply. The company’s board of directors commissioned a study to determine what other types of businesses would generate profitable growth to smooth out the valleys of the aerospace cycle.

This study inspired a series of acquisitions from 1995 to the end of the decade that drew the company into the machine tool and fluid management industries. While these businesses appeared to offer some promise at first, they did not match up well to the company’s core competencies as a manufacturer of complex components for critical applications, which nurtures close interface relationships with original equipment manufacturers, drives process control disciplines throughout its individual operations, and capitalizes on its expertise in and buying power of premium aerospace metals. Most of the acquired businesses had very little, if any, contact with the end users of their products, which were primarily sold through distributors. The products themselves were a collection of components brought together from outside sources, then assembled and tested prior to shipment.

Two major engines of long-term growth were fired up during these years, however. McCormick had the vision to extend the company’s expertise in aerospace airfoil technology and manufacturing to the industrial gas turbine (IGT) industry. Customers were looking for a way to burn the turbines hotter, both to increase overall efficiency and to reduce emissions, and Precision Castparts had the answer. The company began its push into this end market in 1995 with virtually zero market share and, by 2001, its share surpassed 50 percent. The acquisition of Wyman-Gordon, the world’s premier manufacturer of aerospace forgings, was also completed during the McCormick era. Wyman-Gordon dramatically increased the value proposition that the company could offer to its customers and provided a major platform on which to build a second business segment. In fact, very shortly after this acquisition, Precision Castparts added two hammer forging operations to enhance Wyman-Gordon’s capabilities.

McCormick established a system of metrics that he drove through each individual manufacturing operation. These metrics enable a facility to determine whether it was meeting its budget objectives on a daily basis and to deliver cost reductions quarter after quarter. Each quarter, McCormick visited every plant and reviewed its progress based on these measurements. This system, which continues to be central to Precision Castparts’ success, has enabled the company to become the low cost producer in its end markets and has served as an efficient tool for acquired businesses to get traction quickly on improving their cost structure.

Mark Donegan Era

In 2001, Mark Donegan was named president and chief operating officer of Precision Castparts, and in August of the next two years, he took on the roles of chief executive officer and chairman, respectively. As mentioned earlier, Donegan joined the company as a manufacturing supervisor in Portland in 1985. The acquisition of the airfoils business created many new career opportunities in the company, and Donegan went to Cleveland to run a small ceramic core facility and, soon afterwards, a large aerospace airfoil plant. He returned in the early 1990s to lead the structural casting business through some of the toughest times in the company’s history – driving out costs, reducing lead times, enhancing relationships with long-time customers, and adding important new customers. With the acquisition of Wyman-Gordon in late 1999, Donegan headed to Massachusetts to turn what had been an ailing business into a strong, vital enterprise with significant opportunities for profitable growth. In all of these assignments, he developed a keen focus on a manufacturing operation’s daily metrics and the requirements for a business’s long-term success.

The aerospace industry was mired at the bottom of one of its cycles when Donegan took the reins as chief executive officer. He seized this downturn as an opportunity. Confident in the operations’ ability to reduce cost structures going forward, Donegan offered major aerospace customers deflationary pricing in exchange for longer term contracts and market share gains. This approach proved so successful that, when the new contracts kicked in at the beginning of 2003, the company had the largest number of parts under development in its history. As these components moved into production, and the cycle ramped back up, Precision Castparts achieved unprecedented sales levels.

While continuing to drive the daily manufacturing discipline through the plants, Donegan focused on profitable growth by diligently pursuing strategic acquisitions that complemented the company’s core competencies. In late 2003, the company acquired SPS Technologies, a manufacturer of fasteners, primarily for critical aerospace applications. Just as Wyman-Gordon had, SPS served as a platform on which to build an all-new segment: Fastener Products. Since the acquisition, five additional fastener businesses have been added to expand its complement of products to offer to aircraft and engine customers. Cannon-Muskegon, a manufacturer of nickel-based alloys for the casting industry, was also part of the SPS deal and enabled Precision Castparts to meet all its casting requirements for nickel ingot internally.

The acquisition of Special Metals in 2006 guaranteed a similar nickel-based independence for the company’s forging businesses. Before Special Metals, Wyman-Gordon was buying all its nickel billet from outside suppliers; now the forging operation gets more than 70 percent of its billet from Special Metals. In addition, this acquisition opened up sizeable opportunities in general industrial markets previously untapped by Precision Castparts, including oil & gas, chemical transport, and industrial processing. The internal capability to melt alloy and create the input stock for forgings, castings, and fasteners inspired the acquisition of Caledonian the following year. Caledonian’s expertise is sorting, cleaning, and reconditioning metal revert, which can then be reused to manufacture components – often at a considerable discount to virgin metals.

Donegan also exploited underutilized internal assets to enter new markets. Wyman-Gordon’s ability to extrude long lengths of seamless pipe was just a footnote at the time of acquisition. However, no one had conceived of this pipe’s value in coal-fired plant applications. China and India have since purchased billions of dollars of this pipe to connect the boiler to the steam turbine. A 50/50 working relationship with a Chinese manufacturer, Chengde, then provided Precision Castparts with access to boiler pipe, which could be effectively packaged with the Wyman-Gordon interconnect pipe. Chengde also offers a tremendous amount of additional capacity as the company moves aggressively to expand further into the oil & gas market. Wyman-Gordon has formed an Energy Group specifically targeted on products such as 9 5/8” downhole casing, subsea clad pipe, and specialized forgings.

Acquistions will continue to play a major role in Precision Castparts’ long-term strategy.  Forged Products has significantly broadened its product offerings to expand its reach into both aerospace and oil & gas end markets.  Similarly, Airframe Products has added further aerospace fastener assets to its portfolio and has aggressively acquired aerostructures companies to complement Primus International’s line of complex components and assemblies.  And, in addition to providing a critical, internal supply of titanium, the acquisition of TIMET opens up a vast range of operational synergies and solid opportunities for top- and bottom-line growth.  The company has instituted a stock buyback program to offset share dilution but sees no shortage of acquisition candidates for continued growth in the years ahead.

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Company Quarterly Financials

 
Q2 FY15
Jun 30, 2014 - Sep 28, 2014
Sales $2,522M
Consolidated Segment
Operating Income
$706M
Margin % 28.0%
Earnings Per Share From Cont. Operations $3.24
Sales By Market 
Aerospace:68%
Power:18%
General Industrial
& Other:
14%
Number of Employees (approx., from cont. ops) 29,350
Number of Manufacturing Locations 161
Next Earnings Release Date:
Jan 22, 2015
For more complete details, visit our SEC Filings page.