Precision Castparts Earnings Call Insights: Long Range Target and Aerospace Growth
Long Range Target
Noah Popanak – Goldman Sachs: Mark, I don’t want to get too far ahead of you on this long-term outlook. But if I breakout the rule on your Slide 22 there the M&A and share repurchase that you have at the top in size is about a third of what it takes to get to $15.50 to $16.50 which is pretty large. And if I took your $5 billion number that you talked about on M&A and if I look at what you are talking about with share repurchase it sort of implies that as well. That could get you into the $20 range or above. Is there anything wrong with that logic?
Mark Donegan – Chairman and CEO: I want to make sure this is our first look at providing long range target. So what I would say to that is, again, the 15.50 to 16.50 does, that is without the share repurchase so that would be additive to that. So, from the standpoint of how we deploy that, that would change the slope. It’s not going to be a straight line. We will be opportunistic as we look at share repurchase, but to answer your question, that would be over and above that and again so would any incremental M&A work that we would do.
Noah Popanak – Goldman Sachs: Just one quick follow-up to that. Of the segments you report in, which look the most different whether it’s an organic growth rate or a segment operating margin, which look the most different in that ’16 timeframe versus where they are today?
Mark Donegan – Chairman and CEO: Well, the fact that you have Timet which will be such a significant component certainly Forged Products will look different from a just finished Q3, but if I look at taking that out, you have very equal value across the segments as we start handling the increased rates across Forged Products casting and fasteners and I still think fasteners is not yet where they should be in terms of the total demand. So, there still is a lag there in the product that fasteners has delivered, but on sheer optics, it will be from, Q3 will be Forged Products because of the Timet acquisition.
Carter Copeland – Barclays: Just a couple of sort of clarifications around Aerospace growth that you expect in the next few quarters. I wondered if you might speak to the comments around fasteners, you have the general commentary in Airframe of production rates at 4% to 5%, but I wondered if you might comment on the differentials of – are there still some areas that are below and some above and where they’re at. Then, with respect to Investment Cast, when does the drag that you saw in the quarter from the furnace is coming on, when does that begin to abate and how do those two factors affect Aerospace growth in the next say, two to three quarters?
Mark Donegan – Chairman and CEO: Let me answer the second portion of the question, since it’s fresh in my mind, I remember the first too, but what I was going over in those furnaces, we actually brought the furnaces onboard in Investment Cast, fiscal year ’12, Q2 and Q3. So, we had a very substantial delinquency coming into last year’s Q2 and Q3. So, the comparables looking at this Q3, we’re comparing against a rate of which we were over producing, because we had to catch up. So the depreciation and the cost is all behind us. That comment was just looking back, compared to last year in Investment Cast, we were shipping at a higher rate in Investment Cast products. If I look at the first part of your question, fasteners is still under where we think they should be and it comes in two fronts, I think there still is a closure. It is closing but I think that there’s still a overstock condition that existed and that is wiggling its way down pretty significantly. And then in some of the contracts that we were awarded, we have not yet produced 100% of all they were, because there was a burn down of the previous supplier of that. So I think that fasteners from where we expect to be and look over the next two or three quarters still has upside to kind of accelerate above the rates as they continue to close that gap.
A Closer Look: Precision Castparts Earnings Cheat Sheet>>