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Precision Castparts (NYSE:PCP)

Q3 2013 Earnings Call

January 24, 2013 10:00 am ET

Executives

Mark Donegan - Chairman, Chief Executive Officer and President

Shawn R. Hagel - Chief Financial Officer, Principal Accounting Officer, Executive Vice President and Assistant Secretary

Analysts

Noah Poponak - Goldman Sachs Group Inc., Research Division

Carter Copeland - Barclays Capital, Research Division

Robert Spingarn - Crédit Suisse AG, Research Division

Gautam Khanna - Cowen and Company, LLC, Research Division

Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division

Myles A. Walton - Deutsche Bank AG, Research Division

Michael F. Ciarmoli - KeyBanc Capital Markets Inc., Research Division

Jason M. Gursky - Citigroup Inc, Research Division

David E. Strauss - UBS Investment Bank, Research Division

Robert Stallard - RBC Capital Markets, LLC, Research Division

Joseph B. Nadol - JP Morgan Chase & Co, Research Division

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

Kenneth Herbert - Imperial Capital, LLC, Research Division

Howard A. Rubel - Jefferies & Company, Inc., Research Division

Ronald J. Epstein - BofA Merrill Lynch, Research Division

Operator

Good morning, and welcome to Precision Castparts' webcast and conference call to discuss its third quarter for fiscal 2013. This event is being recorded and will be available on PCC's company website at www.precast.com shortly after the conclusion of the presentation and discussion. Following remarks made by members of PCC management, the dial-in access lines will be open for questions. [Operator Instructions] Now I will turn the floor over to Mr. Mark Donegan, Chairman and Chief Executive Officer for Precision Castparts.

Mark Donegan

Thank you, operator. I'm sure that you're all familiar with the forward-looking statement. You need to take this consideration when you're analyzing the following presentations. As you can see, we have a number of topics to cover today. We have the normal quarterly package. I've talked for a period of time about providing longer-range targets. We're going to go over that. And then we also are going to talk about additional use for cash deployment. But starting with the quarterly presentation, as a company, we saw sales growth of 13.4% going from $1.8 billion last year to roughly $2.43 billion this year. We saw operating income increase 13.1% going from $460 million last year to roughly $521 million this year. We saw operating margins remain flat and this is with the inclusion of lower-margin acquisitions and corporate expenses from the acquisitions in the quarter. And EPS went from $2.13 last year to $2.32 this year, and the impact from the acquisitions in the quarter was roughly $0.08. Again, that was mainly Timet.

If I look at sales year-on-year, we saw a solid aerospace growth of 15% versus last year, with organic increasing 5% from last year. OEM grew by 4% and we -- in our business and our product line we continue to see aftermarket grow by 6%. We still, even though those numbers are carrying upside in terms of what was available to us as we recover from the 29,000-ton press outage, and we ended the quarter with roughly $30 million of delinquencies in the quarter. So our customers wanted significantly more than we were able to get out in the short quarter.

We continue to see very solid IGT demand, both on OEM and spares. OEM increased by roughly 8%, and spares were up by almost 30% versus last year. And we are starting to accelerate on the oil and gas shipments, which increased 33% versus last year. We got solid contribution from our acquisitions versus last year of roughly $200 million. We had a 4% decrease in general industrial. It is impacted, to a small degree, by a lower nickel price but probably more of selectively choosing what we go after. And then, making an apples-to-apples comparison, we had overall lower contractual pass-through and lower material (sic) [metal] selling price of roughly $13 million versus last year.

If I look sequentially, we saw a 6% increase in aerospace sales and most of this step-up or the difference from last quarter was driven by the recovery from the press outages in Q2. And we did continue to see strength in our Airframe Products. We had IGT growth of 10% and we had increased oil and gas deliveries of roughly 32% from Q2. And on the general industrial side, we had a decrease of 7%. And overall, there was additional opportunity but the 3 less manufacturing days from Q2, certainly in Forged Products, had an impact of what the customer wanted and what we were able to get out.

If I look operationally, we continue to see solid leverage on incremental sales across all 3 of our segments. In total, we delivered roughly 40% drop-through versus last year on the incremental sales. And then to that, we add the new acquisitions versus last year which contributed roughly $40 million. We did face significantly higher corporate expense versus last year as a result of the acquisitions in the quarter, and again this was mainly Timet, of $9.5 million. And in the same transaction, we put long-term debt on our balance sheet and incurred roughly $8.4 million related to financing expense. So all-in, we're roughly $18 million between those 2 lines in the quarter which resulted from pretty much the Timet acquisition.

If I look at sales by segment. Aerospace increased from 64% last year to 65% this year. Power increased 21% this year versus 19% last year. And general industrial decreased from 17% to 14%. If I look at the organic elements to that, aerospace saw 5% versus last year, and in that also, did not include the lost opportunity that was still there from the 29,000 outage. Power organically increased 15% versus last year and general industrial decreased 24% versus last year.

Moving into the segments, beginning with Investment Cast Products. We saw sales growth of 5.2% versus last year going from $520 million last year to $613 million this year. We saw operating income increase 8.4% versus last year going from $193 million last year to $209 million this year. And we saw our margins expand from 33.2% last year to 34.1% this year. If I look at the key drivers in Investment Cast. On sales year-on-year beginning with aerospace -- and we've been, for a while, we've been aligned in Investment Cast Products with the current aerospace rates. With that, compared to last year, we saw an increase of 1%. It's important to note, though, if I go back and look at last Q2 and Q3, we were carrying a significant delinquency leading into that as a result of not having the DS Synchronous to furnaces and air flows. So as we came into Q2 and Q3, we were certainly accelerating in shipping over to recover that delinquency. So when you're looking back and comparing that, we had that pent-up demand during that period of time. We also saw in our world, we saw continued spares growth of 2% versus last year. IGT continues to remain strong, where we saw a 20% increase versus last year, with spares growing by roughly 30% and OEM growth of 12% versus last year. And we did see a decline in general industrial but in Investment Cast, it is a very small portion of the total sales and it's mainly medical implants and it's what we call housing, but it's really the spinners which go into the installation and manufacturing for houses.

If I look sequentially. Again this, due to the 3 less manufacturing days, it was certainly -- was at the rate. So it provided us basically flat sales to Q2 which we basically sent or put more product over a shorter number of days. But in the IGT, we had to continue to drive, put more resource to keep up with the demand. We saw an additional 4% in sequential growth in Q2. And the same dynamics year-over-year for general industrial where it decreased 5% from Q2 versus Q3.

Operationally, we've been able to maximize our incremental volume across our assets. Investment Cast drop-through of greater than 50%. We continue to find the same areas, from my vantage point. We still have a number of opportunities in front of us from a performance standpoint. But where we continue to extract value: coming from productivity; rework, we are scavenging the world for additional opportunities in rework. Certainly, getting that volume across the same asset base helps us in a fixed absorption.

If I look forward, in Aerospace, the next accelerators really will start to come from the rate increases that are out there on the announced platforms. For the purpose of calculation, we will see that demand roughly 6 months ahead of when the rate increases come through. In another area, looking forward, that becomes very important for us as we move to the very back half of '14 into '15. We have gotten a very solid position on all the development engine programs. So as we go through development and support that effort and then, going into production, as that begins to accelerate, it will become a contributor to us. And I think we also have upside on spares as the revenue miles and the planes stay up at a higher rate. IGT remains solid through the first half of fiscal year '14. And in this world, that's pretty much the snapshot we get. We get about a 6- to 9-month look and then, we'll fill in the balance, but through the first half of '14, we remain strong.

Moving off of Investment Cast Products into Forged. On sales, we saw an 8.5% increase versus last year going from $768 million last year to $833 million this year. We saw operating income increase roughly 1%, going from $172 million last year to $174 million this year and operating margins decreased from 22.4% last year to 20.9% this year. If I look at the key drivers, on sales, we saw aerospace growth of 6%. Aftermarket grew 33% but this is on a much smaller base in Forged Products than in Investment Cast Products. And again, our customers wanted a significantly larger share than we were able to get them as we recover from the 29 outage. Again, we carried that delinquency of roughly $30 million as we exited Q3. We saw strong growth in power generation of 21%, the primary driver in this was the oil and gas. IGT remained relatively flat. And we also benefited from a full quarter of RathGibson, Aerocraft/Dickson and partial quarter of Texas Honing. And then, just -- to compare apples-to-apples, we had lower contractual and selling price of roughly $12 million versus last year. If I look sequentially, as you'd expect, we saw good aerospace growth of 11%. As we came off of the outages in Q2, but again, this was not nearly at the rate that the customers wanted. And we also saw solid IGT sales growth of 28%, this was mainly as we came back off the planned outage in the 50,000-ton press. We had a 9% drop in general industrial and again, in Forged Products, the lack of days certainly had an impact. Those 3 days would've been needed to put additional product through. Operationally, and even though we are closing the gap off of the Q2, we still had operational deficiencies resulting from the outage of the 29. As we continue to work to meet our customers in that delinquency, we continue to run suboptimum lot sizes, really, across all of our processes: forging, heat treat, machining. We're extensively using outside resources at a higher cost, and compared to last quarter, all-in this quarter, the impact was roughly $6 million. So it's coming down but in order to do what we need to do for our customer, we had to continue to use all assets that were available to us. We did accelerate our shipments of downhole casings. Again, as you can imagine, these initial shipments were carrying with it the higher burden of development. And the acquisitions were a positive contributor to the bottom line.

If I look forward, look at the significant drivers. Obviously, the most -- strongest contributor moving into the future will be just the base value of Timet. And then from there, the future synergies, of which we'll talk in a moment. But in the base forging operations, we have to continue to move those delinquencies through and out the door. The $30 million incremental has to get out and we'll not be able to recover all of it this quarter, but it's probably going to have to get out over the next 2 quarters. If I look at the accelerators, we're looking at the same accelerators as Investment Cast to support the announced rate increases. And then, they also have one strong position on the new engine programs. So as those come out through the back half of '14 into '15, they'll be an accelerator from that in that side of Forged Products. On power, we see growing sales on both downhole and on interconnect pipe.

If I take a closer look at Timet, I think Timet, as Special Metals did and Wyman-Gordon and SPS, Timet provides us a very long runway for value creation with upside on all fronts. If I look at the key drivers of where we expect to go, our manufacturing systems will, in a very short period of time, extract, look and identify every area of opportunity across that entire portfolio. And this is, again, the way we look at all of our acquisitions. If I look at the materials side of Timet, internally, I think Timet has numerous opportunities to drive yield improvement, scrap reduction, utilization, and again, these are the same type of benefits we saw out of SMC. They have an abundance of inventory that we can take out of the system over time. That will certainly be a strong contributor to cash. And if I look from an external standpoint, we now have the opportunity to capture all the chips, the Ti scraps across aerostructures, castings, forgings. We can close the loop on titanium, which is something we did not have up to this point in time.

An area in our acquisitions that we focus on strongly is to go look at latent capacity. And if I look at what I think one of the core competencies we have, is to identify where that latent capacity is, drive it out of the system, open up capacity and put more volume across those assets, which allows us to get strong leverage. And it's a model we've used in SPS. You're seeing that roll through as we continue to open up and the volume goes across it. SMC, I think the aerostructures group have benefited strongly from that opportunity. But that is one of the cores that we will go across in the Timet operation. There's an abundance of opportunity across the other cross drivers and we will be able, as with nickel, we'll be able to provide internal, stronger to ourselves. And the one value, the difference that Timet has, is we can now put it on the backend. So if you look at Timet, being the melter that they are, and they are a very good melter, we can match up the Forged assets out of both SMC and Wyman-Gordon to convert and go into any number of shapes which will allow us to attack the cost side and go into additional markets that are out there. If you look at that, you'll start saying, "Okay. We've got these opportunities, how are we going to execute?" I think Timet has a very solid management team. This is a transaction that we've been involved in to some degree for roughly 3 years. We liked the management team when we saw them 3 years ago and certainly, in the short period of time we've been involved with them, we feel very strongly about their ability to grasp whoever's going to run it. We've already had them sit through a couple of quarterly reviews. They've kind of gotten the indoctrination of what it's going to look like. And then, leading all of these is Steve Hackett, who most of you know. He was the division president of Fastener when we bought Fastener. He's done an integration. He did a number of the subsequent acquisitions that we did in SPS. He then moved to Carlton and that integration, he's been heavily involved in the aerostructures integration. I think that there is the right team, the right mentality to execute what we're looking for. If I look graphically -- and there's certainly some -- this is the chart that I like but I think -- I don't know if any other people like it. But if you look at what Timet does today, Timet provides into Forged Products in billet and ingot, they come into investment Cast Products in ingot. If I now look at with the combination of the 2 assets, we're able to utilize over time the Forged assets could be the stucco mill, could be extrusion capabilities. We'll be able to convert into any number of shapes that are used across a number of our operations. So we can go into plate, sheet, bar, preformed shapes and eventually, we could go into fastener feedstock if we choose to.

So from that standpoint, it allows us to really drive out and attack a number of cost elements.

And flipping back the other way, it lets us take all of the unused scrap and revert and pull it back into Timet and close the loop. So if you look at this, we're basically taking a very strong front end and a strong back end and matching it up together. If I kind of look at SMC and use it as a baseline, and as a baseline only, so the areas that we went after in SMC, we're using the Precision Castparts toolbox, going after working capital, coming back and supplying internal to PCC, as well as growing external shares, kind of attacking every one of the cost elements that are out there. At the time, so sitting where we are now, the very beginning of SMC, we went out and we committed and we expected in the first 12 to 15 months synergies of roughly $10 million to $15 million. Then we expected 24 to 36 months, roughly $30 million, $40 million. As you could see, over that period of time in Timet, we're able to get a better understanding, drive through, get better benefits and we certainly significantly exceeded our targets. Using that as the baseline in our knowledge and then moving into Timet, we still have the piece on the top which is the PCC toolbox that's shared. But the difference in the additive is being able to link the converging capabilities of our Forged assets, also going to the same markets now being that we are in the metals. So you can look at the SG&A costs. And again, we can close the loop on titanium, which you didn't have. With that, if I look at the synergies in the first 12 to 16 months, we're expecting $30 million to $40 million. And if I go out 24 to 36, we're looking at an incremental run rate of roughly $80 million to $100 million. I think we have tremendous opportunity. I think we have the right team focus. Now it's just a matter of going and attacking it.

If I move out of Forged Products and onto Airframe Products. Airframe Products saw a strong sales growth of 32.1% going from $452 million last year to $597 million this year. We saw operating income grow by 43.3%, going from $126 million last year to $180 million this year. And we saw margins expand from 27.8% last year to 30.1% this year. If I look at the key drivers, on sales year-on-year, certainly as you'd expect, we saw a strong aerospace growth of 41%, a 10% in organic improvement. It comes on a couple of fronts, we continue to see demand steady for our -- for Fastener Products. We kind of talked about the last 2, 3 quarters, it is a steady increasing drumbeat. We saw more benefit from that. And we saw strong content on the right platform in aerostructures. Between the both of them, certainly, we are getting a benefit from going back to last year to this year on the 787 build rate and we're currently at roughly 4 to 5 in Airframe Products in total on the 787 build rate. We also saw a benefit from the acquisition of Centra, Klune and Progressive in the whole quarter, and a partial quarter of Synchronous. We did see a drop in general industrial of 2% and again, this is on a small percentage. If I look sequentially, we continue to see strong aerospace growth of 9% and on the flipside, we saw general industrial down 3%. And as with the other 2 segments, we did have the less manufacturing days than Q2. Operationally, we saw continuously very strong performance across our base operations of Fasteners and Primus. And we're at varying points on the value stream but we continue to see accelerated performance from our integration across recent acquisitions.

Looking forward, for Airframe Products, in the fasteners, we are coming into alignment but we should continue to see a steady increase in the fastener side of the business. We continue to open up additional capacity at our aerostructures operations, and this has been a key. And the nice thing about this is, we can -- now we have a baseline. As we acquire, we can look and do a best practices and actually show the new operation we're doing what is capable, but certainly being able to put more volume across those. And again, we're just beginning to capture the synergies of Klune, Progressive, McSwain and Synchronous. And this is an area, and will continue to be an area, of which we will target acquisition. So if I look over the next 12 to 24 months, I'd expect to continue to see us to being active in this space from an acquisition standpoint. With that, now Shawn is going to take you through the cash and inventory pages.

Shawn R. Hagel

Thanks, Mark. During the quarter, we saw cash growth to $483 million. That represents an increase of $290 million over our second quarter balance. The primary driver for that increase was because we didn't finish the tender offer for Timet until early in January when we paid an additional $405 million to purchase the remaining shares of that acquisition. Debt also grew in the quarter by $3.16 billion, again, due to the acquisition activity that we had. We completed our $3 billion bond offering with an all-in rate of 2.15% that allowed us to do the Timet acquisition. And we drew on our revolver and utilized cash to pay for the other 4 acquisitions for the quarter as well. Overall, if you exclude the cash utilized and cash acquired from acquisitions and the net debt acquired or paid off related to the acquisitions, we had a really strong cash-generation quarter of about $361 million, it's a $225 million improvement over last quarter. Albeit that last quarter had 2 estimated tax payments versus the traditional 1 that we incurred this quarter, we still saw our operating -- our cash generation grow.

Going onto the inventory slide, we did have a very significant increase over -- in the quarter of $946 million of inventory, although the majority of that, $915 million related to the acquisitions that were acquired during the period. And $880 million of that related specifically to Timet, it drove the majority of the change. If you exclude the inventory that was acquired through acquisition, we saw just slightly over $30 million worth of inventory increases or approximately 1% of our total balance. And the biggest driver of that, obviously, was the delinquencies you've previously spoken about, at Houston where we've got inventory backed up given the efficient processes that we're having to run through in order to get that product out. We did, though, see inventory reduced in our Grafton facility as we got that 50,000-ton press rebuild behind us, and started to see inventory move there. So we saw a $14 million reduction. And overall, that's really the most -- the majority of the movement in inventory for the quarter.

Mark Donegan

Okay. Thanks, Shawn. So if I look at Q4 and I'm looking at this sequentially, by segment, Investment Cast certainly, again, we said the schedules are basically at rate. We will get a benefit from the 3 more manufacturing days and we would expect to see the same moderate growth from here on IGT. Forged Products, first and foremost, it will be the first full quarter of the Timet baseline and we will just start to scratch the surface of our synergies. Again, the synergies are significant, but we'll just be getting into the initial start of them. We have to continue to deliver above the current rate. After eating that delinquency from the 29, again, I think we'll recover over Q4 and Q1. We will continue to accelerate the level of shipping activity on oil and gas and these will carry with them kind of the same development cost that the shipments in Q2 carry. And we would also expect to deliver steady increasing levels of interconnect pipe.

Airframe Products. To some degree, the space schedules are aligned with the rates but I do expect to see Fasteners to continue at the steady rate we've been able to do over the last 2 quarters. We'll receive a full quarter from Synchronous, and we will continue to drive the improvements across the other recent acquisitions. And across the company, again, we will have the benefit of the 3 additional manufacturing days.

So if I move off the quarter, the normal charts, and I've talked about providing long-range target for a period of time. What I want to cover now is kind of what we see and how we build up to those targets. If I look at the elements, and the way I think about this company kind of falls into 5 categories. It starts with the base building block, or the foundation, which is our core businesses. We have worked tirelessly to get market shares and get positions. We've attacked that cost model, and certainly, we'll get the benefit of the volume as it goes across that. From there, our expectations are nowhere set that we're going to just say in those base businesses, "that's okay." So we've got a metric and a model that we'll go after and attack at quarter-on-quarter, year-on-year opportunity and we do expect to yield something over and above in terms of performance. If you take that same mentality and bring it into the acquisitions, pre-Timet, so the ones over the course of the last 2 years, our expectation is, we do accelerate the first 2 or 3 years in terms of what is that performance level we expect. So I would expect to get additional performance out of recent acquisitions. We then move into Timet. I broke Timet in 2 categories. We certainly get the benefit of the base value of Timet. So what it comes over to us at. And then to that, we see the inclusion of the synergies, of which we talked about on the previous pages.

Looking at each one of these -- so if I look at the base drivers for us on our businesses. From Aerospace, again, we have to support the announced rate increases that are already out there. 787, 737, A380 are all very substantial programs for us that'll be going through incremental growth between now and '16. I've talked about this. We have a very strong position on re-engining programs. So if I look at our content on the engines that we are going from -- to, we have a better content and value on the newer engines. These will start coming in as we start doing development, again, on the very back half of '14 and through '15. And then, they will move into production and will be in there in that '15, '16 time frame.

On the power side, oil and gas, we have current products to carry us basically well into '14. We're now looking at follow-on orders, same type of products that we would carry in deliveries into '15 and '16. And again on these, the development curve is known, so these follow-on orders, obviously, will have better value for us.

On IGT, we're seeing stable OEM demands. We've had very robust spares. And during this planning horizon we would expect to see spares volume continue to -- again, there may be some ups and downs but in general, in this period of time we would expect them to see -- show some upside. Key drivers for that are the large installed bases out there now. We have a very strong market share and the low price of natural gas is really getting a lot of these operating as a base load.

And we expect, but it's not in our plan, somewhere in the industry [ph] horizon that we would see some growth in the OEM. But again, it is not in our plan but we would expect that to be a potential upside. General industrial, from here, we're looking at steady to basically GDP-like type of rates. If I look at the cost drivers, so you're kind of looking at the performance we want. We've seen these before and a lot of you have been through the plants and actually seen what this looks like. But that expectation is that we will go after that 2% per quarter. We'll go after it aggressively, we'll go after it with full vengeance and we still have opportunity on all of our operations and productivity. Sales per employee, overtime opportunities, revert utilizations. So what we look at and what I think we've become very good at is knowing where we are in responding to the dynamics of this cycle. We've gone through low prices of metal, all-time highs, back down. We've gone through 2 or 3 cycles and we know how to deploy the right -- and what to expect out of these cost drivers. I think we move very quickly. So from that standpoint, that's the expectations. We've talked about what to use over a long period of time and our goal is -- it hasn't really changed. Basically, to offset inflation and over time drop-through at that roughly 35%. We do see times when we go above it, when we're not adding capital and driving our volume over the existing capital and we have times when we drop to the lower end where we are making significant investments. All-in, I think that 35% average is a good number to use for the drop in.

If I look at Timet, we've gone over this before, but certainly again, that first-base step is bringing Timet over at its baseline performance. If I look at what that is, we're defining that as what was out there in Management Case A in Schedule 14D-9, which I'm assuming you all know what that is. Timet sales to PCC will be eliminated in the consolidation, which in fiscal year '13 would've been roughly 16%. We have incremental depreciation and amortization from purchase accounting of roughly $12 million to $15 million a year. And our interest on $3 billion, as Shawn said, all-in, will have a rate of 2.15%. From there, we already went over these. From the synergies today, we expect the value, 24 to 36 months, to be in the $80 million to $100 million range. So if I look at this and stack it all up from where -- what we see today and what we know, we're looking at a target of $15.50 to $16.50 in EPS by fiscal year '16. There's a lot to do. We have a tremendous set of assets to do it with, and we have the right mentality, the right management team to go and attack and drive on this. If I look at the last area to cover is our cash deployment and I want to make sure it is abundantly clear. We have been, and we will continue to be, a company that focuses on M&A first. We still have numerous opportunities available moving forward. We are not at a loss of ideas. They're all in our current space, so we're not looking to go off in some new direction. But as you can see from this chart, we will continue to be a very strong driver of cash flow moving forward. And look at what we're expecting. We are expecting roughly $5 billion to deploy through fiscal year '16. With that -- and stated again, we'll continue to be a very acquisitive company, and our primary focus will be on growth; the board has authorized the establishment of $750 million share repurchase program. Our main goal with this, and the target, is to offset dilution from exercising stock options and employee stock purchase plan. So if I look at the chart we showed before, certainly, through that $15.50 to $16.50, the share repurchase and the M&A would provide additional upside to those targets.

So I know I've been talking for a long period of time. With that, we can go right into questions.

Question-and-Answer Session

Operator

[Operator Instructions] We will take our first question from Noah Poponak of Goldman Sachs.

Noah Poponak - Goldman Sachs Group Inc., Research Division

Mark, I don't want to get too far ahead of you on this long-term outlook, but if I break out the ruler on your Slide 22 there, the M&A and the share repurchase that you have at the top, in size, is about 1/3 of what it takes to get to $15.50 to $16.50, which is pretty large. So -- and if I took your $5 billion number that you talked about on M&A and if I look at what you're 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

I want to make sure -- this is our first look at providing long-range targets. So what I would say to that is, again, the $15.50 to $16.50, 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 that 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 Poponak - Goldman Sachs Group Inc., Research Division

And just one quick follow-up to that, of the segments you report in, which look the most different, whether it's in organic growth rate or segment operating margin? Which look the most different in that '16 time frame versus where they are today?

Mark Donegan

Well, the fact that you have Timet, which will be such a significant component, certainly, Forged Products will look different from it 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, it will be Forged Products because of the Timet acquisition.

Operator

Moving next to Carter Copeland of Barclays.

Carter Copeland - Barclays Capital, Research Division

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 are still some areas that are below, and some above, and where are they at? And then, with respect to Investment Cast, when does the drag that you saw in the quarter from the furnaces coming on, when does that begin to abate? And how do those 2 factors affect aerospace growth in the next, say, 2 to 3 quarters?

Mark Donegan

Let me answer the second portion of the question since it's fresh in my mind. I'll remember the first one. But while I was going over 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 Q2 -- excuse me Q3, we're comparing it against a rate of which we're overproducing because we had to catch up. So the depreciation and the cost is all behind us. That comment was just to, 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 2 fronts. I think there still is a closure -- it is closing, but I think that there's still an overstock condition that existed and that is whittling its way down pretty significantly. And then, in some of the contracts that we were awarded, we have not yet produced 100% of all the award because there was a burndown of the previous supplier of that. So I think that Fasteners, from where we expect to be and look over the next 2 or 3 quarters, still has upside to kind of accelerate above the rates as they continue to close that gap.

Operator

And we'll move next to Robert Spingarn of Crédit Suisse.

Robert Spingarn - Crédit Suisse AG, Research Division

I have a couple of similar clarification questions, Mark. The first thing is, on the buyback. The way you phrased it, it sounds like that's kind of linear blended over the outlook time frame because of the offset to option dilution, et cetera, that we shouldn't look for that to happen in the near-term?

Mark Donegan

No, I think that, again, I think that looking over the 2.5 year period of time, yes, we would expect that we would deploy to overcome the dilution. It may not come in a nice straight quarterly linear line. Again, I would like to be opportunistic as we do, do that. So it could go nothing-nothing in a hit, or it could be linear. It all depends on kind of what's happening out there. But certainly, there will be over that period of time. And again, as we acquire, it can come and go based on that too. So it will be all balanced in. We're going to have strong cash generation. I mean, there's no doubt about it, we will be kicking off very strong amounts of cash. So I think that it will come and go, it will depend on what we're doing from an acquisition standpoint, we will be opportunistic. But again, I think you can use kind of in your model, that -- over that 2.5 year period of time, our goal is to overcome the dilution.

Robert Spingarn - Crédit Suisse AG, Research Division

Okay. And then, on the -- I'm looking at your Slide 18, which is this roadmap. It looks like it's kind of a chronological Timet synergy roadmap, and the front end of it has some sales synergies, then cost, and then sales again. Can you talk about the early sales opportunities here, given that the environment is largely governed by LTAs? Where are your opportunities to pick up sales in the near-term?

Mark Donegan

I don't want to get into a lot of that right now but there are situations where Timet does have opportunities, even in contractually, that I think over this period of time certainly, they will come through. I don't want to get into a lot of that detail, Rob. Obviously, we need to keep some things because they become strategic to us in what we are going to do.

Robert Spingarn - Crédit Suisse AG, Research Division

Okay. Fair enough, but how about if I go a slightly different direction. Of the $80 million to $100 million that you'll eventually get to as a run rate, what percentage of that -- how does that mix between revenue synergies and cost synergies?

Mark Donegan

Rob, consistent with what we do, and if I look at kind of going in total -- so let me back up from Timet. When we did the stack-up or the buildup on that chart that shows base businesses and performance. We will move in and out of the different opportunities that we have. So to give you a hard number, obviously, when I give a number, we have a larger amount that we're going after and they mix-and-match. So I don't want to be in a situation where we're looking at, spotting to a particular element. All-in, that value is in that $80 million to $100 million. And obviously, we have got opportunity kind of above that.

Operator

We will take our next question from Gautam Khanna of Cowen and Company.

Gautam Khanna - Cowen and Company, LLC, Research Division

Two questions that are sort of related. One, as we look at kind of the out-year forecast, have you given -- can you give us any sense for how much contents you have on the A350 at this point, given all the recent acquisitions? And then, I have a quick follow-up.

Mark Donegan

We're going to go and we're going to redo that because obviously, as Timet comes in, we have to go and look at all of our platforms, all of our platforms will go up. So we are going to, over the next couple of months, try to update what that looks like and get the new values out on our website as to what those values are. I will say, though, that the 350 is still a work-in-progress in terms of what's out there, what are we bidding, what are we getting, and how is it additive? So it is by no means done, but all of our programs will have to be redone. All of them will obviously go north of where they are.

Gautam Khanna - Cowen and Company, LLC, Research Division

Okay. And just to follow-up on the Fastener questions, Boeing's basin initiative started about a year ago. Could you just comment on how that implementation is going from your perspective? Do you expect it to accelerate this year? And what does that mean for PCP from both a share and perhaps a visibility perspective?

Mark Donegan

I mean, I think overall, the program itself is going well. So has Boeing been able to execute and move the work they were trying to move inside? Yes, I mean, I think from that standpoint, it's worked pretty seamless. If I look at the parts we won, which was an increasing value to us, we have not yet delivered 100% on what we were awarded. And again, that is as Boeing works down the supply they had from the old suppliers. So we are not yet through the entire value that, that contract has had for us. And we're probably about 85% of the way there. But in general, I think it's worked well. And I can't answer whether Boeing's going to expand this, that's kind of a question you'd have to ask from Boeing. But there's been -- to date, there's been no real hiccups.

Operator

We will take our next question from Sam Pearlstein of Wells Fargo.

Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division

Mark, so you finally gave some guidance, but...

Mark Donegan

Not guidance, it's target sales.

Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division

It's a target, okay. Can I ask you a question about that, just, if I look at castings and forgings where you're already in line with production rates, I'm trying to just think about why does growth accelerate over the next few years. Because the bulk of the percentage increase on the 777, '37 et cetera, have already happened. It looks like only the '87 is left. So I'm trying to just think about, is it back-end loaded from A350, F-35, the MAX, the Neo coming in late in that FY '16? Or is it more driven by the integration of Timet? Just try to help me think about that next few years, how that plays out?

Mark Donegan

That's a fair question. If I look at, even though they're at rate, again, that 787 for us in Investment Cast is a big number. So we have got very, very, very good positions on that program in Investment Cast Products. So the fact that, that is going to go from kind of the rate of 5 to 10 over the next 12-ish type of months, that is a big driver. The thing that -- it's funny because as I went through the quarterly reviews on the front side, I do use the Investment Cast, happens pretty quick in the quarter. And I started looking at the magnitude and the value of these -- the next engine, and I look at the technology that's getting put in there. Not only is it going to be a development program, but the content and the value of the new engines, for us, is substantial. So if you look at kind of going from the ADC to the GEnx, that was a step up in terms of technology. And in that, technology step-ups for us mean higher value and higher content. So as we look at the next engines, seeing that they're putting a lot of technology and performance in there, not only do we get the program coming into development at a very rapid rate. So if I look at the task that's facing us, you're looking at a very condensed development cycle. So we're going to have to run through a number of trials at a very rapid rate, bring on the development and go to production with a higher content and a higher value in the engines. So that, you're getting a fast, a quick rate and you're getting -- even if we have a position, the value of that position's even higher because of the technology that's in there. So all that in, as I start looking at it, that has a good value to us as we move, and it starts -- the tools start coming in really the back half of '14. But I'd say, we'll see a lot of it in '15, and then we move into kind of that development/production going into '16. So that's how I'd see it playing out.

Samuel J. Pearlstein - Wells Fargo Securities, LLC, Research Division

Okay. And then, just also in that, are there any differences in the assumptions with regards to, say, pension or SG&A or anything else that we should be thinking about over the next few year period?

Mark Donegan

Not dramatic. And I mean, obviously, we did not assume pension being any major downside and we didn't picture it at all during this planning horizon being any upside, should the discount rates start to move. So to answer your question, it assumes kind of a baseline of where we are today, for the most part, and no major changes in SG&A. But having said that, if I look at certainly the integration with Timet in some of that integration value, would be the company looking how to better utilize our assets from that standpoint. Because we do go-to-market in some cases in the same place with different people coming in the same market. So I think there's some of that built into the synergy model for Timet.

Operator

And next up, from Deutsche Bank, Myles Walton.

Myles A. Walton - Deutsche Bank AG, Research Division

Shawn, first, a clarification on the $361 million of cash generated. Is that free cash flow, operating cash flow less CapEx?

Shawn R. Hagel

No, that's just total cash generation.

Myles A. Walton - Deutsche Bank AG, Research Division

And it's defined as?

Shawn R. Hagel

It's before CapEx.

Myles A. Walton - Deutsche Bank AG, Research Division

Okay. Operating cash flow.

Shawn R. Hagel

Yes.

Myles A. Walton - Deutsche Bank AG, Research Division

And then, I guess, the other clarification, Mark, on Aero within Investment Cast, I think your toughest comp for at least aftermarket, as you brought those items online, is probably 4Q, is that right? I think it was a plus-50% in aftermarket, last year's fourth quarter?

Mark Donegan

If it's okay, I'll have Dwight get back to you on that one because I looked at Q2 and Q3, and did not look at Q4. So I couldn't give you a real accurate answer right now. So if it's okay, I'll have Dwight get back to you. I know that we shipped very, very heavily in Q2 and Q3 because the furnaces came on and we had to get it out. But I can't answer Q4. I will have Dwight get back to you.

Myles A. Walton - Deutsche Bank AG, Research Division

Okay. And this is kind of the question, and you may or may not answer, but what exactly is based in the forecasts as a total company organic growth trend when you mash all of your segments together and everything you own, with Timet included?

Mark Donegan

I have not done that analysis with Timet included. So I can't give you an articulate answer right now.

Operator

We'll take our next question from Michael Ciarmoli of KeyBanc Capital Markets.

Michael F. Ciarmoli - KeyBanc Capital Markets Inc., Research Division

Mark, just on some of the items, maybe more near-term, you guys sound to have a lot of confidence in the IGT power side of the business. How do we sort of reconcile that with what we're hearing and seeing from GE and Siemens, orders for turbines are down, it looks like shipments are going to be down. What's giving you the confidence in that growth?

Mark Donegan

Well, we get -- I'd say, we used it to say that our breakout was probably 50% spares, 50% OEM. We are -- in last year, we are skewed heavily towards spares. So I'd say, probably 65% to 70% of our volume is of the -- the growth is coming out of spares movement. So what we tend to look at is the price of natural gas, the -- are they -- is the installed base aging and all that would, on the spare side of it, would lead us to say that -- again, there may be some ups and downs, but over this planning horizon, there's no doubt about it that we expect, given that, to see it continue. I will say, on the shorter side, we have orders right now on the books. So again, if you go through that -- the next 2 quarters, we have hard POs that we're manufacturing today to a number and we are still carrying a delinquency in that side of the business. So the short haul, we have orders and then, the fact that the price of natural gas is low and the bulk of our business is coming out of spares, that's kind of what's in there. Now if you -- I also did say that we didn't plan for any significant change in OEM during this planning horizon. So we're assuming flat, for all intents and purposes, over a 3-year period of time on the OEM side of the business.

Michael F. Ciarmoli - KeyBanc Capital Markets Inc., Research Division

Got you. And then, if I could just sneak one more in on Timet, over this forecast period, would it be -- you've got, I guess, the 35% incrementals laid out. I'm assuming your operating working capital with sales will probably take a step up here as you become a little bit more capital-intensive. Are you guys expecting to generate similar returns on investment over this forecast period as you've done, say, the previous 12 to 24 months?

Mark Donegan

Yes. I think we will take a step-up. But then, from there, if you -- again, as a baseline, Timet and SMC, as inventory and as a percent of operating working capital, look similar. And over a 2-year period of time, we generated a tremendous amount of cash or lowered their OWC, so I think what you'll see is a step up and then, over the year, we should be able to -- from a Timet standpoint, extract a value greater and bring that back down. So again, I think you'll see an optic step-up. But then, I think from there, we should be able to drive aggressively forward.

Operator

We'll go to Jason Gursky of Citi next.

Jason M. Gursky - Citigroup Inc, Research Division

Just a quick question on the downhole casing. You mentioned that a couple of times on the call, and I was wondering if you could maybe size that business for us today? And then, give us a sense of when you think you're going to see the ramps and the profitability, and when we would get to a profitability level that you think is a bit fairer of the longer-term trajectory.

Mark Donegan

Yes. No, I think those are fair questions. We currently have -- over the next couple of quarters, we have got to get out probably close to $150 million to $200 million worth of work. As we move to the back half of that, I think that the profitability will begin to improve. But I think the next step-up to get to where I think it should be. So I don't think even at that point in time, it's what I would consider an acceptable rate. I think when we move into the next set of orders, of which we're looking at today, the fact that we've been able to get those with all the knowledge we have today and put it through the process that we now know delivers a -- what we consider a much more acceptable return, I think you're looking at the back half of those orders to get a true level of acceptance. But I think as you get to the back end of the existing orders, it moves in the right direction. But to get the real profitability that we would expect to get, it's probably the next follow-on orders. And that's not uncommon. If I kind of go with interconnect pipe, we were -- it took us a period of time to get the process learned out. And then, as we put the additional volume or the new orders over that process, it does very well for us. Kind of the same experience we got in interconnect pipe. The only difference is, in interconnect pipe, we had to learn on $50 million, $100 million orders. So you make a commitment to that process for those and then you put a follow-on that you get through it. Hopefully, that answered your question.

Jason M. Gursky - Citigroup Inc, Research Division

Yes, it does. And then, just one quick one. On your $15.50 to $16.50 target, what are the greatest risks and opportunities to getting there?

Mark Donegan

Well, honestly, if I say what do we control, I'd say that it's our ability to execute operationally. There is improvement in there. I would say to that, if you look over the last 10 years through unbelievably challenging environments, we've had 2 or 3 metal runaways, we have had 3 cycles with an economic meltdown. I think we have demonstrated, as a management team, we can pull those levers. So it is a challenge, but from that standpoint, internally, it feels as though, "Hey, you know what? We're good." Then you start saying, "Okay. The 787 is a big program for us." So if I start looking externally, any significant hiccup in the '87 would obviously cause us to say, "All right, based on whatever that hiccup is, we're going to have to respond accordingly." So I'd say, externally, with not taking into account economic meltdowns and all that, just from the standpoint of platforms. I think that second to that would be -- the re-engining for us is a huge opportunity, so properly executing that and delivering that would probably be the next thing, I'd say, is very, very important us. So internally, it's execution; externally, excluding some sort of global economics, the 787 would probably be #1. And then, the introduction in bringing on the re-engining would probably be the next significant area of opportunity, if something were to happen there, that would put a kink in our armor.

Operator

And we'll go now to David Strauss with UBS.

David E. Strauss - UBS Investment Bank, Research Division

On taking [indiscernible] taking their projections [indiscernible] pretty aggressive growth in both top line and [indiscernible] and margin upside, how much have you actually stress test those assumptions that were in that base pit?

Mark Donegan

David, I want to make sure that in there, it says we used Case A as our baseline. So I think that there were 3 -- if I'm not mistaken, there were 3 cases in there.

Shawn R. Hagel

There are 3, A being the most conservative.

Mark Donegan

Right. So we used, as our starting point, the most conservative. So I think what we tried to do in this model and what we've talked about is to take what we think is the most conservative and build off of that. So if you go back and look, that's what we used in that model.

David E. Strauss - UBS Investment Bank, Research Division

Right, right. Yes, I know that, but it's still -- the Case A still had a fair amount of something like 10% to 12% top line growth with 4%...

Mark Donegan

I think we're okay with Case A. There are, besides the market dynamics, there are other things that are in there available to Timet that we feel pretty confident with Case A.

David E. Strauss - UBS Investment Bank, Research Division

Okay. And then on 787, you obviously talked about that being a risk here. Based on Boeing's delivery schedule, I would think you guys are supposed to here [ph] pretty soon step-up to a 7-a-month rate. How concerned are you? How are you thinking about that in light of all the stuff that's going on with '87 right now?

Mark Donegan

Well, obviously, I'd be not doing my job if I didn't tell you I was concerned. What we've done is we've gone back around to the engine guys, and certainly, we've had conversations with the airframer. We, today, everybody's staying with the build rates. So if I look at -- to your point, if I look at, the first thing we'll see in our schedules would be the step-up from the engine side, and those schedules today are holding firm. So we've not seen any shift yet at all from the engine guys and we are not at the point that we'd start to see kind of that increase from the Fastener side. In the aerostructures side, again, we are seeing the schedules hold firm. So at this point, we're seeing no change in schedules and they do support that step-up.

David E. Strauss - UBS Investment Bank, Research Division

But am I correct that, that 5 to 7 move on the engines side is supposed to happen here pretty soon?

Mark Donegan

Yes, yes. We would certainly start entering that very soon.

David E. Strauss - UBS Investment Bank, Research Division

Okay. And then the last one, you had some additional deal cost run-through in the third quarter. Is there going to be anything unusual with regard to the old costs or step-ups or anything to happen in the fourth quarter?

Mark Donegan

No, but there is a hangover. We still have additional legal fees that will be coming through from the Timet deal. So yes, I mean, it's not anywhere near. It's small, but we'll still have some incremental follow-through but nowhere -- nothing out of the ordinary other than just a following carryover. And it's in the $1 million-ish range. But it's not huge number.

Shawn R. Hagel

And we'll keep with the amortization and depreciation step-up.

Mark Donegan

Right. And David, are you still there?

David E. Strauss - UBS Investment Bank, Research Division

Yes.

Mark Donegan

We did have in there what the amortization step-up would be. That's in the presentation.

Operator

And next up, Robert Stallard of Royal Bank of Canada.

Robert Stallard - RBC Capital Markets, LLC, Research Division

Not too bad, a marathon session this morning.

Mark Donegan

I'll tell you what, it was a lot of data to go through and cover but we tried to do it as clean and concise as we could.

Robert Stallard - RBC Capital Markets, LLC, Research Division

It's very helpful. I was wondering if I could ask you a quick question on Timet and where its sales are going in the future. Do you anticipate, for example, that the 16% of its sales that are going into PCC will double so you can take all your titanium internally? And then, looking at Timet's external markets, what's the sort of split there? And do you see that changing over time?

Mark Donegan

Let me see if I -- I may not answer it sequentially what you just said, but we will -- it's never our desire, in any situation, that we will go 100% internal, period. We haven't done in the nickel. We won't do it. We need to make sure that we have valid, qualified sources on all of our material input. So no, I do not see the point that we'll ever go 100%. We -- and again, as with Timet, it was -- I mean, with SNC, it evolved over a 3 to 5-year period of time to get to the rates that both us and our customers were comfortable. And that is exactly the same way we'll go here. I think there is opportunity to continue to increase both internal and external in working with our customers. But I would expect it to occur kind of over a 3-year period of time. I wouldn't expect any significant change one way or the other in a short period of time.

Robert Stallard - RBC Capital Markets, LLC, Research Division

So looking at the external sales, are you comfortable with the mix that's currently there? Or do you see an opportunity to maybe increase aerospace and defense and decrease, say, industrial sales?

Mark Donegan

Well, I think there's opportunity in all fronts. Certainly, I think there is opportunity in -- Timet had been doing quite a bit of negotiation on their own, prior to us, to go and identify those areas of opportunity. I think the combined company has an opportunity to go to the market and make a case that is beneficial for PCC and the customers that would give us further upside to that. One thing I think is an opportunity, again, I think there is non-aero opportunity for them. Timet is putting in a lower-cost commercial melting capability that I think does have the opportunity to give them some upside there. But I think, underneath our watch, we will obviously be very selective over what we go after in that. But I do think in the combined company, working with the customers, there is an opportunity to benefit the customers and us that would move volume/share up.

Robert Stallard - RBC Capital Markets, LLC, Research Division

And do you know whether you're getting too much into a commodity metal market that's vulnerable to volatility in pricing demand?

Mark Donegan

Well, I mean, I know that from the standpoint, parts of the metals world, we'll do that. But again, what we're doing is we are pulling metal through in new markets that we serve, power and the aerospace. So I think that we stay focused on delivering shapes. And again, we have the ability to deliver a shape. So if we were just -- I think your question probably feels a little different if we were just a metal maker, not having the capability to create plate, sheet, bar, of which we could start using ourselves, coil, as any number. So I think that what -- number one, do I -- do I even [ph] know because there's tremendous opportunity? But I think that it is different that we are not -- our goal is to pull it through into a shape. It's not just to go out and sell -- just sell an ingot. It's to create something out of it and move it through from there. And I think that is what has made us different over this period of time. And then, given the volatility, if I kind of even look at our casting/forging side, we go through cycles of peak-to-trough of 35%. So it's not as though the forging or casting world is protected from extreme volatility. So again, now it comes back to the way we manage and what do we do and how we attack cost and what's available to us, and that's where I think we say we'll manage our way through those cycles.

Operator

And we'll go now to Joe Nadol of JPMorgan.

Joseph B. Nadol - JP Morgan Chase & Co, Research Division

Mark, just a couple of high-level ones for you on the guidance. The first one is, just stepping back, you've always shied away from giving guidance and, I guess, you're calling it a target, whatever the case is. You did it here and you put in a very specific EPS number in there. And I'm just wondering why, at this stage of the game, you sort of got pushed over the -- you changed your mind that, that was the right thing to do?

Mark Donegan

Yes. There's a number of things over time, I think, as the company has gotten bigger and evolved. I was fighting having a conference call and after today, I wish I'd kept fighting but that's beside the point. I think that it's my obligation. I think the shareholders pay me to continue to look at the way this company is evolving and changing and deal with it in a manner that communicates effectively to the marketplace and delivers a message that needs to be delivered. So I think it falls in a couple of different categories. I vehemently disagree with giving quarterly, yearly targets because there are too many moving pieces, puts and takes, and I don't want to get into a situation. But I think that the way these company has been evolving, it's been changing. We've been in an M&A. We've added Timet. I think there was a need to communicate to the market what the value of these businesses are in a longer horizon. So right now, to me, giving this type of target/guidance, feels very comfortable from the standpoint that I feel that we have the assets and everything in place. It feels very manageable to me, but at the same time, I think it allows us to point to something of the value to the company in the long haul that people can use in their planning models. And again, we're not going to get as much of a disconnect in the long haul from, no disrespect, people that are out there trying to pick a point in time where things are going to happen. I think this allows us all to at least agree and focus on something out there that can happen versus necessarily saying -- and you guys face a tough battle, too, because you've got to say "this event's going to occur on this day." I don't get that choice. I have -- sometimes I have to have the event occur when I get POs or whatever. So I think it's a horizon that allows us all to communicate on an effective basis. I think the company's changed and has got to a size that we need to do something like this. And we'll see how it evolves.

Joseph B. Nadol - JP Morgan Chase & Co, Research Division

Is this something that you can use or you plan to use as a tool internally at all, whether it's just as a target for all the employees and the management team or as something more concrete that you're going to use for compensation purposes?

Mark Donegan

Well, let me answer the back half. I don’t see us necessarily changing that we're going to have some sort of cash long-term program associated. So there's been no conversations with that in the board. We do drive down the stock EPS and all that to our plant levels. So yes, it is a tool. In fact, we've got a group of people that are going to be together tomorrow that we're going to share with them how this impacts them. So yes, we will divvy out the portion. So I know what makes this up. So if I look at what am I expecting out of Forged products and Cast products and aeroframe products, yes, we will get that out. We know what that make-up is, so they will all be given their component of it and they will all be held responsible for it. Having said that, has this changed the way we -- no. And you go out any operation, you can rest assured that they're not going to say "Oh wow, now I'm going feel some sort of different intensity I didn't feel before." They feel the share price. They have conversations on EPS every single time we deal with it, I drive it back to them as if they were a standalone company. And what does it mean? But yes, we will communicate and use it as an effective tool to motivate them.

Joseph B. Nadol - JP Morgan Chase & Co, Research Division

Okay. And then just on the -- I heard everything you said on the balance sheet and on the cash deployment and the buyback is kind of a backup to the M&A. But just -- I'm wondering if you've set a target leverage level. Just looking at the balance sheet, you don't know when M&A is going to come or when it is not. So is there a point at which, if you're just paying down debt, the M&A is not there, that you'll be more aggressive on the buyback? Or is there -- maybe another way of asking it, is there a minimum leverage level at this point? Because it used to be you have no leverage, now you have over $3 billion. And is that going to drift down in the absence of M&A?

Mark Donegan

Well, that's pretty -- let me try to capture it. There's a lot of moving pieces there. What we will do is we will continually evaluate what opportunities are in front of us, where are all the areas. We now have an additional lever to pull when it comes to cash deployment. They all intertwine. So I don't think there is a set situation where I can say at a particularly stock price, at a particular dilution level or at a particular leverage level, we're going to do the following things. What I can tell you is that we carry on these conversations every month with ourselves, every quarter with the board. What we will do is -- and again, we know what's going to -- we're trying to get coming down the pike. So it won't be uncommon for you to see us necessarily putting cash on the balance sheet as we're waiting for somebody to come through. So as an example, we got a lot of pressure as we're putting cash in the balance sheet that when we're getting ready to do Carlton, and then all of a sudden the market rolled over and we'd still do Carlton. So what we will do is we'll look at all that. If I look at this planning horizon, to us, with the M&A work, the leverage we want to do, the pay-down we're going to have coming and the M&A work, the way we are looking right now, it all seems to be balanced well. So the $750 million stock buyback, the cash deployment and the debt that comes due, all feels like the right all-blended-in. It may shift. And if it shifts, we'll adjust accordingly. But from what we see today, we have a lot of M&A still out there, and we have M&A that we've been in conversations already for over a year. So it's not as though we're out there rescratching, starting from the beginning. So to that degree, again, if I could wave a magic wand, I could deploy another $1 billion pretty quick in terms of M&A work. So we're not at the end but all-blended-in right now from where we are. $750 million, the M&A and the debt level all feels about right.

Joseph B. Nadol - JP Morgan Chase & Co, Research Division

Right. Finally, I -- this is -- I know that most of your growth here, you're targeting bottom line, not top line, fully understand that. Having said that, is there -- for your '15 and '16 metric that you're laying out, is there conceptually a sales level that gets you there?

Mark Donegan

Do I know what it is? Yes. But what I want to be careful of, and this is kind of why I have shied away from, I think our shareholders pay to manage the market conditions. And what I do not want to get into is answering any changes to one particular element. I get paid, the management team gets paid to respond accordingly and deliver. If we get challenging sales conditions, then we better figure out a way to accelerate the cost takeout. If we get extreme growth, we got to figure out a way to manage that growth and keep the cost from expanding. So it is a balancing act and that's why the way we presented it was all-in. I think I get paid to do that, I take responsibility for doing that, and it could shift. I don't want to find myself having to answer each component of that, why one's up, one's down. I view my job as getting paid to deliver those results in pretty much any reasonable business case, and I got to figure out how to drive through that and deliver the benefit.

Operator

And our next question will come from Peter Arment of Sterne Agee.

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

A follow-up on Timet. I guess one of the areas I want to focus on was the revert opportunity. It seems like, back with SMC and then once you've folded in Caledonia, the revert opportunity really provided you another opportunity, a big leverage to take cost out. And certainly, with titanium, it takes a lot longer to machine. Can you kind of give us some color on the revert opportunity here?

Mark Donegan

Yes, I'd say it's comparable to what SMC was. Again, it's been a -- obviously, we used titanium. The difference is, and I don't know the exact number, but we probably use twice the amount of nickel as we do titanium but the value of it is 4x? 4x. Dwight just told me 4x. But the value of it is higher. So if I look at the all-in, it, dollar-wise, it might be comparable. In terms of pounds, it's not comparable, but all-in, it would feel the same. We've had no home to any great degree for the chips that come out. We've kind of been out there, selling them on the open market and moving them through. So we now get a home. What we'll do is we'll sit with Timet and their management team. We'll figure out the best way to pull those through. But it feels like it's a comparable number, and we are not getting the amount of revert that we want in those mixes.

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

Okay. And then just to follow up again. I know you're being sensitive about the LTAs and what you plan to do, but did SMC have something similar in its mix? Did it look fairly similar?

Mark Donegan

Yes, it did. I mean, at the time, SMC was all under LTA, too. Again, it was a process we went through our customers, that we worked with them, they got value, we got value. But yes, the LTA had been in place from the time we bought SMC, so it's comparable market dynamics.

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

Okay. And if I can just sneak in one more. On your kind of the Tier 2 airframe acquisitions that you've been doing, if you look at kind of the last, I guess, starting with Primus and rolling it all the way up through Synchronous. I mean, the revenue base is almost similar to here, what Timet is bringing to the table. What are you seeing in terms of the opportunities to continue to go after and build that franchise in Tier 2?

Mark Donegan

Well, the aerostructures franchise?

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

Yes.

Mark Donegan

Yes, aerostructures, we had a vision. And I'll tell you that if I look at the way we're coming through, it is playing out certainly equal or better than we thought. So from that standpoint -- and the reason, one of the reasons why I liked it is it was an amazingly fragmented market. So I do not think, by any stretch of imagination, we're done. And if I look at the M&A conversations we're having now, 90% of them fall into category of the aerostructures continue M&A work.

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

Okay. And then just the last one was on the debt. I mean...

Mark Donegan

You're really pushing, Peter, but go ahead.

Peter J. Arment - Sterne Agee & Leach Inc., Research Division

2% paper. I mean, historically, you've paid down debt pretty quickly after these deals. Have you -- is there a desire to keep that given the attractiveness of the low rate?

Mark Donegan

Absolutely. I mean, at that rate -- again, it's -- we'll make the evaluation based on where we are but, I mean, to get -- some of the debt goes out 30 years?

Shawn R. Hagel

Yes, we have 5 -- we have 3, 5, 10 and 30, and we laid it out in that fashion, so we have an opportunity to pay some of the debt down earlier. But given the price of it, we just felt like we needed to put some out there for the longer term given how low our leverage was.

Operator

And we'll go to Ken Herbert of Imperial Capital.

Kenneth Herbert - Imperial Capital, LLC, Research Division

Just one quick one here. Just a follow-up. You do have -- obviously, you've done $200 million incremental from the acquisitions you've done prior to Timet. I know, obviously, on an absolute level, it's maybe not as interesting from a synergy standpoint as Timet, but collectively, as you look at, on the aerostructures side and then what you've done with these other deals recently, do we see a comparable ramp from a synergy and improvement standpoint from that side of the business as well as we might see...

Mark Donegan

Yes, you do. In fact, the ramp -- the expectations that we have, and we look at it in a number of different ways, but it actually comes down to a rate of improvement as a percent. And we drive that into every acquisition we do. We don't -- when we get an acquisition, we don't come in and we don't suggest and we don't say "Gee, you should try this." It is a very disciplined, "Here it is. Here's what you're going to do. Here is where the opportunity stands. We're going to measure you. We're going to put in. We're going to build it in." So the rate of acceleration in the aerostructures business has been comparable to what we're expecting out of Timet, it's just on a smaller number. But the aerostructures business is a business that I am extremely pleased with the performance of. And more so the mindset of that leadership team. I mean, we've been able to take the Primus leaders, kind of get them indoctrinated to what we do and then we've been able to spread them out and roll some of these businesses underneath them. If I look at Synchronous, I think Synchronous has another management team that has got a mindset that we're going to be able to put this through and subsequently roll additional things underneath their leadership, too. So we're getting the same rate of returns, just on a smaller number.

Operator

We'll take our next question from Howard Rubel of Jefferies & Company.

Howard A. Rubel - Jefferies & Company, Inc., Research Division

And I just want to do one quick thing on this. If you do all the puts and takes in the near term, it's not wrong to think that the range for the accounting accretion, I mean, in the first full year, is somewhere in the $0.45 to $0.60 range?

Mark Donegan

I got to think in my brain. Hold it, give me just one minute.

Shawn R. Hagel

For all acquisitions?

Howard A. Rubel - Jefferies & Company, Inc., Research Division

No, no, no. I'm just thinking Timet. I'm sorry, Shawn.

Shawn R. Hagel

Okay.

Mark Donegan

Yes, you're in the right range, Howard.

Howard A. Rubel - Jefferies & Company, Inc., Research Division

Okay. Yes, I mean, that made sense. The second thing, and I'll try to end this pretty quickly, is that the G&I business has clearly been down and some of it's because you're taking advantage of the other markets. Is that a trend we're likely to continue? Or are there some things that you can do to sort of fill in or expand out there?

Mark Donegan

I actually like that question. I think it's a blend. I think we have had to take a certain amount of our assets. And with this enormous amount of downhole pipe, we had to take the assets and put that massive volume across it. Having said that, I think that there are some limited opportunities in the general industrial that we probably would have taken and would have liked to have had, had we not have taken the assets and deployed to that. So I think as we move forward, there are some avenues. What we have seen though, Howard, I'm sure this is kind of a consistent story you've heard, is as nickel was falling, you find people that have projects holding off to wait and see where is it going to bottom out. And then when they really see where the bottom is, then you'll start seeing some of the longer-term projects. We would prefer the longer-term general industrial projects versus spot buys or something like that. So what I'd like to do now is, as we look over the next 12 months, to reengage some of those longer-term projects now that we have this -- through the melting facilities, the bulk of this pipe has been melted, reengage in that. So I would hope to see some growth in that but I think it will still be -- continue to be selective and I don't ever want go back to making coil for stoves. And again, going back to titanium, we -- I didn't want to make titanium golf clubs. So I mean, it's kind of -- there are certain things that you just -- I think you want to stay away from, if you can at all possible.

Howard A. Rubel - Jefferies & Company, Inc., Research Division

And then just to follow up on that. Are you at the point now where you've been able to show people that this downhole pipe process really works and that some of the other customers that have been sitting on the pipeline -- on the sideline are now ready to...

Mark Donegan

Yes. And again, more than sitting on the sideline, is the customers that use this have multiple fields. So what they were doing was doing field #1 and then waiting and then rolling out field 2, field 3 and so on. So in most cases, it is the same customer looking at the same product, opening up other fields. We are just now engaging those conversations on the next fields.

Operator

And our final question comes from Ron Epstein of Bank of America Merrill Lynch.

Ronald J. Epstein - BofA Merrill Lynch, Research Division

One thing you really didn't mention that I want to follow up on is, back to pipe, where does Chengde fit into all this, right?

Mark Donegan

No, I think that's -- I think it's a great question. Chengde, I was asked off and on, I don't know if it was on some of these calls, but if I look at all the M&A work, and we've done a hell of a lot of M&A. Certainly, the one that's not where I want it to be is Chengde. We fought a couple of things. We fought the turnover in the market and inside boiler in China. And then as a result, I think we got into kind of what I would consider a leadership problem. Chengde is not -- has not been where it needs to be. Having said that, we now have had a management shift, just occurred. So there is an independent Chairman now running the company, which is a big step for us. As I look forward, and it's interesting to me because we just did the review in Houston last week. We started saying that we have work that we can move back to that asset. We just quoted a combined project for the first time. It actually went the way it should go with Chengde. So in the long haul, in this planning horizon, we do need Chengde and can serve a purpose. I think we'll go through probably 6 months to a year as we transition to the new leadership but we have a leader in there that gets it, understands it, asking the right questions, asking for help. And again, on the first project, actually went different than any other project we've ever done. So it's underperforming. It's not where we want it, hasn't been, but I think it is a critical piece of the puzzle moving forward in terms of incremental growth over and above what our assets can do today.

Ronald J. Epstein - BofA Merrill Lynch, Research Division

Okay, great. And maybe just one detail question on that. What kind of work can you put through there? And when you think about doing a shared asset project, what kind of projects are your customers comfortable with?

Mark Donegan

It's going to non-nickel. So you're going to be looking at something that's going to be more in the super stainless we call P1 through P21. It will probably be in power projects. It will not be downhole right now. There is -- there's not anybody that we're dealing with. I'm not saying that there's not anybody out there. Anybody we're dealing with will not accept at this period of time, pipe running over a Chinese asset. So it will probably stay more in the coal, certainly in combined cycle in IGT, it can go there. So there's a lot of lower grade pipe that the Houston asset will not do, that, over time, can move their way.

Operator

Okay. And that concludes our question-and-answer session. On behalf of Precision Castparts, Mr. Donegan and PCC management, I would like to thank you for joining today's call. As a reminder, the webcast and call has been recorded and will be available on Precision Castparts' website at www.precast.com for approximately 30 days. This concludes today's meeting.

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