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Precision Castparts Corp. (NYSE:PCP)

Q3 FY08 Earnings Call

January 22, 2008, 10:00 AM ET

Executives

Mark Donegan - Chairman and CEO

Analysts

Rob Stallard - Banc of America Securities

J.B. Groh - D.A. Davidson

Rob Spingarn - Credit Suisse

Ron Epstein - Merrill Lynch

Joe Nadol - JP Morgan

Cai von Rumohr - Cowen and Company

Peter Arment - American Technology Research

David Strauss - UBS

Eric Hugel - Stephens Inc.

George Shapiro - Citigroup

Howard Rubel - Jefferies & Company

Gary Liebowitz - Wachovia Securities

Brendan J. Hartman - Cramer Rosenthal

Operator

Good morning and welcome to Precision Castparts' Webcast and Conference Call to discuss its Third Quarter Earnings for Fiscal 2008. As a reminder, you may listen to this morning's presentation and view the accompanying slides in real time by going to www.vcall.com and locating Precision Castparts Corp. on the Investor calendar.

Additionally, this event is being recorded and will be available on Precision Castparts' website at www.precast.com shortly after the conclusion of the presentation and discussion. After remarks by members of PCC management, the dial-in access lines will be opened for questions. [Operator Instructions].

Now, I'll turn the floor over to Mr. Mark Donegan, Chairman and Chief Executive Officer of Precision Castparts.

Mark Donegan - Chairman and Chief Executive Officer

Thank you and thank you for all listening in. I'm sure you all are very familiar with the forward-looking statements and you need to take this into consideration in analyzing the following presentation.

Q3 continue to see the same trend we've been seeing for quite a while now. We saw extremely strong aerospace demand and the IGT demand also continue to grow. For the quarter, we saw sales growing by just under 23% from $1.38 billion last year to roughly $1.7 billion this year. Also a point of note that in that number, we did have lower nickel pricing, mainly in the Forged; that impacted sales by roughly $55 million.

In the quarter we saw operating income grow by just under 52% from $246 million last year to $373.5 million this year, and our margins expanded from 17.8% last year to 22% this year. All this generated a 51% increase on EPS going from $1.14 last year to $1.73 this year.

Looking at the segment results, and beginning with Investment Cast; overall, we saw increase in sales up 24% from $436 million last year to $541 million this year. We saw operating income grow by 36.8% year-over-year going from $96.2 million last year to $131.6 million this year. We saw margins increase from 22.1% last year to 24.3% this year.

Looking at the major drivers for Investment Cast, as you would expect, we have seen extremely strong demand continue from aerospace. It's really across all of our operations. And as of today, that... we see that demand continuously strong and continue to increase moving forward.

In Q3, we also did see the demand for development hardware on the 787 continue. We didn't see in the quarter any significant changes to the schedule on our 787 hardware; that kind of the general rule for all of our operations. We also saw the IGT demand continue to grow. We're seeing it both from our existing base and we also won new programs from the expanding customer base, so we're seeing it really on all sides.

We will be able to make small incremental output improvements, but in order to really see some significant growth we need both the expansion that we complete in our Deer Creek operation and we need the new facility in Ohio. And we knew this again impact our demand with significant changes and support the customer. So throughout the course of this year, we certainly will be in a situation of kind of living hand-to-mouth with what our customers want until we get the expansion projects done.

Also in the quarter, we reclassified Greenville Metals under Forged. It's a small business, not material to operations at all. But the main reason is we want to make sure that we were able to capitalize on the material movement between Caledonian and Greenville. The tremendous amount of movement back and forth, so I want to make sure that we were able to get right focus and get... squeeze much benefits as we can out of that particular product offering.

Forged Products saw year-over-year sales growth of 21.2% from $636 million last year to just under $772 million this year. We saw a 53% growth in operating income from $110 million last year to $169.2 million this year, and we saw our margins expand from 17.3% last year to just under 22% this year.

Looking at the primary drivers; again, as you'd expect with Cast as with Casting we saw extremely strong aerospace demand on our base programs and as I stated, again we saw very strong demand on keeping up with the 787 development schedules, in the Forged business.

Looking at the year-over-year sales, we are seeing more internal sales; and then looking at versus last year is roughly $50 million of internal sales to PCC again versus last year. They're eliminated from our sales by the end of Forged Products.

And then as you'd expect with the following material price, especially nickel, average sales in the first page we saw lower nickel prices at really SMC, it impacted top line by roughly $55 million versus Q2.

We continue to see both strong demand and output from Seamless Extruded business. Our backlog is now in excess of $600 million, while at the same time our shipments have increased by 25% year-over-year. So, again, this is a business that we are seeing opportunities really globally and don't seem to be subsiding any point in the near future.

One of the areas that we certainly want to make sure we stay focused on is the value moving forward, whatever the material prices do, of the combination of Greenville and Caledonian is for us have to be a major area of focus and should be a significant contributor moving forward on getting us an average to lower material prices certainly in the Forged world. This is a very significant portion of containing the costs as we move forward.

Fasteners saw sales growth year-over-year of just under 24%, going from $310 million last year to $384 million this year. We saw good operating leverage income growing by 49.5%, going from $65.7 million last year to $98.2 million this year. We saw again, strong margin improvement going from 21.2% last year to 25.6% this year.

We continue to see very strong aerospace growth, growing by roughly 40% year-over-year. And the 787 certainly has a little different tone in the Fastener side, and we saw... I guess, I have to classify as tremendous pressure to deliver hardware all the way through the quarter and that certainly kind of carrying on right now. Today Fastener content is roughly 50% of our total content on the 787. So it's a very significant platform for Fasteners.

The good news from our standpoint is as we are being asked to qualify our new product families that historically we've not been on an aircraft, that's holding up opportunities and we certainly see further upside as we would move through the next year on continuing more market penetration on that 787.

On the flip side for Fasteners, we continue to see weakness in both the automotive and the general industrial. So, we are seeing that kind of pull back the overall fastener growth somewhat. But, again the aerospace growth we're seeing is far out weighing maintenance going on in the automotive and general industrial. And what we are seeing in there is roughly about a 10% decrease year-over-year on the automotive, general industrial side.

Moving on to cash, I think we had a solid cash generation quarter, generating roughly $230 million of cash. During the quarter, we also took out $150 million of 6.75% public notes. So that should again help us as we move forward.

So, what's next for us? Certainly, the aerospace demand stays strong. We have a very, very, very substantial backlog in terms of what is wanted across all of our businesses. Again, we see critical fasteners growing at 50%, and I think we have the opportunity to grow that on the 787 as we move forward.

IGT demand is here, it's real, it's honest. Again, we can make small changes as we move through the next two or three quarters. The order book is increasing, but we need completion of our expansion in Deer Creek and our new building in the Ohio area to really be able to support what our customer wants really to again the end of this year moving into for us, will be fiscal year '10.

Seamless extruded pipe, we continue to see tremendous opportunities open up around the world. Again, we did new highs and we would expect our shipments to continue grow throughout the course of next year. And we do see non-alloy opportunity open up. We did do in the quarter some upgrading of some of our key pieces of equipments in SMC to be able to support some of this work as it comes in towards the mid and back half of fiscal year '09. So, there is new business that we are in and we have won contracts and business that we have not won in the past. And we certainly have much greater opportunities in terms of costs and yield improvements as we move again through the course of next year.

787, I think it's a very, very, very solid significant program for us as we move forward. I don't know a lot more than you know right now in terms of what will happen and what some of the impacts will be. We tend to find out what is required, at the same time Boeing are with their announcements, so we as, with you we will wait and respond accordingly to whatever really occurs on the 787. But we have not seen anything fall through as a result of the latest announcements. But I'm sure that, that will roll out at some point in time.

So with that, we certainly have a lot to do. There are still significant opportunities to move forward and we will adjust to whatever challenges are kind of thrown our way. So with that, we will open up for questions, I guess.

Question And Answer

Operator

Thank you. [Operator Instructions]. And we are going to take our first question from David Strauss with UBS.

Mark Donegan - Chairman and Chief Executive Officer

Hi David.

Unidentified Analyst

This is Joe Jacunski with Broadway Research [ph]. Couple of things, Mark; congratulations on a good quarter. Can you talk about what your operational improvement initiatives are in regards to lean, CPM and recommend [ph] how you guys are improving your throughput in each of your segments and what concerns do you have regarding that?

Mark Donegan - Chairman and Chief Executive Officer

Well the biggest, the biggest opportunity there for improvement certainly vary by operation. If you look at Forged Products in general, tackling material costs is our number one objective. I mean the material goes anywhere from 50% to really 70% of the cost. So Greenville Metals, Caledonian material substitutions, low cost scrap and revert that is a primary focus of what we can do to impact costs. And then probably second to that would be the yield improvements, we still have in the SMC side from melting all the way through conversion whether it's flat, sheet or bar.

I think and again on kind of lean initiatives in terms of the Forged Products, we... we've leaned ourselves in sense of inventory, but we still have what I would determine a lot to do in being able to effectively operate with the lower inventories. And that can be moving equipments to be closer, cutting down the transportation time, it's a wide array. If you are moving castings, our labor becomes a very significant piece of the puzzle.

So attacking the productivity, we've been on a very strong demand of hiring additional people. I think we're at the point now that we can probably start slowing that down and as you slow down, certainly you pick up some productivity improvements as you bring your latest employees up speed. So attacking productivities are never ending, but again Greenville Metals also allows us to impact the material side.

Fasteners, one of the biggest things we can do is really increase our man-to-machine ratios for being able to put more product over the set of assets we have, I think has been a significant part of what Fasteners success has been. So continuing to do that, we do have small capital packages in the fastener world that allow us to continue to up that man-to-machine ratio. So, those are primary lean/cost take out the cost really up our major end markets.

Unidentified Analyst

What metrics are you guys using to measure these like in terms of OE or RONO [ph], what's important to you as a CEO of Precision to measure that to see how effective you are to your shareholders?

Mark Donegan - Chairman and Chief Executive Officer

Well, what our basic metrics are always going to be you kind of roll around our quarterly view, monthly views of where we are looking at operating working capital as a percentage sales, variable costs, margins, operating margins, and all that would definitely come back to EPS type of situation for us. In terms of our returns, every capital project that we look at is on a very aggressive standalone basis as to what return do we expect to get from that, and then that is monitored through again the close view process of what type of returns are we getting against what we thought we are going to get.

Unidentified Analyst

Okay. And final question, going forward for your CI [ph] initiatives, I really like what I am hearing. What systems are you going to be putting in place to accelerate these initiatives and to make sure you guys stay number one in the market?

Mark Donegan - Chairman and Chief Executive Officer

Well, again we don't use outside, everything we do is kind of home grown, and we continue to kind of expand our capabilities in that. So I hate using the typical buzz words. But for us, our TOC which is kind of a base program that we have internally developed and created for our own purposes, and our own metrics. That's probably always going to be our primary one. And in support of that would be our total cost improvement, which is a version of Six Sigma and those are the primary tools we use. But the basic driving for us is TOC which is kind of a complete overall system and which we used in increased improvement.

Unidentified Analyst

Thank you very much. Good luck gentlemen.

Mark Donegan - Chairman and Chief Executive Officer

Thanks.

Operator

Thank you. And we'll take our next question from Robert Stallard with Banc of America.

Rob Stallard - Banc of America Securities

How are you guys?

Mark Donegan - Chairman and Chief Executive Officer

Hi Rob.

Rob Stallard - Banc of America Securities

Couple of questions, Mark. First of all, on organic growth, you stated in the past that you're comfortable with the projection that organic growth will accelerate as you move into fiscal '09. Do you think that's still possible given what you said about nickel prices in the quarter, the weakness in the alternate [ph] market and potentially a slowdown on 787?

Mark Donegan - Chairman and Chief Executive Officer

Well, I think that in terms of the nickel, as nickel comes down it starts to impact all of our businesses on the top line. So, from a standpoint of the dollar sales growth, I would agree that that would probably slow. I think what we need to do, Rob, is we needed to be communicating more efficiently in the number of pounds we are putting through or something that at least shows the growth that which we are seeing. And I think as we move forward, we're going to have to be more clear on what is the impact of the nickel. But there is no doubt about it as nickel price falls down and it blend itself out, right now we are kind of seeing blended effect. We still have... some nickel contracts are in there in the 20s and then they are kind of working their way down. So as that blends in, yes, our sales line will come down.

Now the 787, Rob, I don't have any insight at this point in time. That would either be from our revenue sharing partners or from Boeing itself. Obviously in the fastener side, we are seeing it, the demand stay very, very strong and the pressure very, very hard. But if there would be some significant impacts of the combined '08, '09, yes, I would expect to see that we would have to do something to respond to that. On the flip side of that, we do have a very significant backlog on non-787 hardware, which we would have to sell a whole process blended out. Does that answer your question?

Rob Stallard - Banc of America Securities

Yes, on the acquisition front, you said last quarter you're still interested in trying to make a substantial acquisition. We haven't seen anything yet. Could you give us an update on how you see the landscape there?

Mark Donegan - Chairman and Chief Executive Officer

Yes, I think that certainly in these times we are making sure we are extremely diligent in our process, and it would be easy to just say make a ratchet move and do something quick. We are... I think we have properties that we like a lot and we are in varying degrees of where we are in that process. But I want to make sure that as we understand what we are looking at, we kind of take the landscape you just mentioned. And what's the impact potentially could be on 787, what do we see out there? But I think that we are making sure that we are being extremely diligent in that process into our... what would typically be our normal model would probably being a little more diligent than we historically would have been.

Rob Stallard - Banc of America Securities

Okay. And just a final one, are you still comfortable with the target for 30% incremental margin going forward?

Mark Donegan - Chairman and Chief Executive Officer

Yes, I think that, that is a good overall to use for the company and certainly that's kind of where I hold everybody accountable to. Though we have some that are higher and some that are lower, yes, but as a blended rate I think it's probably still reasonable number to use.

Rob Stallard - Banc of America Securities

Okay, thanks Mark.

Mark Donegan - Chairman and Chief Executive Officer

Okay Rob.

Operator

Thank you. And we will take our next question from J.B. Groh with D.A. Davidson.

J.B. Groh - D.A. Davidson

Good morning Mark.

Mark Donegan - Chairman and Chief Executive Officer

Hi JB, how are you doing?

J.B. Groh - D.A. Davidson

I am doing good. You mentioned the 50% fastener content on 787 and that I hadn't heard that number before. I think what I have heard before is that it's your $4.5 million to $5 million roughly incur 787 when I see that 50% number it makes me wonder if content has increased, is that the case or is it relatively stable over the last?

Mark Donegan - Chairman and Chief Executive Officer

Well, it's more... it's kind of been in that depending on the engine a reason why we kind of give that range is where the engine content. But yes, it's been in that $5-ish million range. I think that over the course of the last quarter we certainly have provided additional new parts that we've not provided in the past in terms of fasteners. So yes, I would say as we move to the quarter we have gotten some additional parts and we are again, we're also seeing ourselves in the qualification process on hardware that we have not been qualified in the past.

J.B. Groh - D.A. Davidson

Okay. And then on the strength in IGT, is that still inherited mostly by aftermarket retrofit opportunities or are you starting to see some pull through from OEM orders?

Mark Donegan - Chairman and Chief Executive Officer

We are seeing OEM, but it is more the international OEM. So we're not seeing any significant change to the North American OEM, but certainly on the European, Asian engines we are seeing significant OEM demand right now and both after market. But the demand... again, the demand right now is outstripping our capacity.

J.B. Groh - D.A. Davidson

But that should improve with your expansion?

Mark Donegan - Chairman and Chief Executive Officer

Yes, the first one that comes on is our expansion is in Deer Creek because we are not doing brick and mortar way. We're able to get it in basically the square footprint that we have. And then the brick and mortar is well underway. Walls are up; roof is going on in the Ohio plant. So all of those projects are on and we are supporting our customer right now, but we certainly would like to be in a much more comfortable position than we are.

J.B. Groh - D.A. Davidson

And then in the past, when these aerospace programs had kind of slipped, do you... it seems to me that you would have a little bit of a buffer versus someone at full direct to Boeing or Airbus because of that engine manufacture in the mill, you expect that would be the same this time or further push outs occurred?

Mark Donegan - Chairman and Chief Executive Officer

Well, it's been the say it's been that way to date. It's hard for me to answer because again I have no additional knowledge and we've certainly got no additional knowledge from any of our other customers, be it the engine guys, or the revenue partners. Well, it's hard for me to answer that. There is some point at which those intimated people say I'm not going to keep absorbing this, I don't know what that is at this point in time because we haven't seen what kind... kind of what they are asking for, but today to answer your question, because our demand is so strong, we've seen them be able to absorb that. Will they keep doing it moving forward, time will tell.

J.B. Groh - D.A. Davidson

Okay. Then lastly, could you give us an update on your isothermal press that you've been expanding.

Mark Donegan - Chairman and Chief Executive Officer

Yes, the isothermal press is up and operational, we are... what we've been doing is qualifying families as well as will qualify a partner, bring along three or four of the parts with it. Kind of the dilemma we are in is we've been using it as soon as we qualify a part we have been running production on that part. So to find the windows that continue to qualify is kind of where we are right now. We are probably half way to three quarters of the way through that process.

J.B. Groh - D.A. Davidson

Okay. Thank you for your time.

Mark Donegan - Chairman and Chief Executive Officer

Okay.

Operator

Thank you. And we're going to take our next question from Robert Spingarn with Credit Suisse.

Mark Donegan - Chairman and Chief Executive Officer

Hey Rob.

Rob Spingarn - Credit Suisse

Hey, good morning Mark. Going back to the 787 once again, you talked about you're shipping product, you haven't really seen a slow down. Can you give us a sense of about how much you've shipped, it's 5 million roughly per aircraft, have you shipped 5 ship sets, 10, 15?

Mark Donegan - Chairman and Chief Executive Officer

We are kind of... what I've been as a general rule, I wish I could tell you is hard and fast, because it kind of moves. I think we count them at a run rate of about 1-ish a month. It's kind of where we've been and, some of that's going to developments, some is going to test, some of it is redesigned, some of it's... I am not trying to say that we've built plant up, because a lot of our hardware will go under other destructive testing, wherever it may be. We are kind of at a run rate of around one month.

Rob Spingarn - Credit Suisse

How many months then would you say you are?

Mark Donegan - Chairman and Chief Executive Officer

That rate may be 4, 5 at most.

Rob Spingarn - Credit Suisse

Okay. Going back to your answer to the M&A question, it sounds like one of the issues that concerns you or at least factors in here, a little bit more heavily is end market strength?

Mark Donegan - Chairman and Chief Executive Officer

It's not so much the end market strength; again, when we do our due diligence we tend to look at programs, positions, agreements with customers. So we want to make sure that we understand very, very, very clearly what those are and how they are impacted.

Rob Spingarn - Credit Suisse

Okay.

Mark Donegan - Chairman and Chief Executive Officer

Certainly one of the keys is 787 making sure that we would understand and make some assumptions on that. The overall, the end market from a standpoint of the A320 family, the 777, the 320, I mean 737, you know that we... that is not a real concern, but we are making sure that we understand the obligations that are out there on any new platform, as we would in any new platforms, whether is a significant exposure.

Rob Spingarn - Credit Suisse

Well, looking at it slightly differently, are there any concerns for you in any of your end markets, above and beyond... aerospace and other? And what you do to... how do you figure that into your forecast and into your planning, at what point, because it's hard to affect your CapEx?

Mark Donegan - Chairman and Chief Executive Officer

Let me see... I'll try to answer that but what I thought here was a multitude of question, if I don't, I am sure you will fire back at me.

Rob Spingarn - Credit Suisse

Okay.

Mark Donegan - Chairman and Chief Executive Officer

In terms of what markets... obviously, the automotive market is a BizMo [ph] and again we are basically the North American, again I can't say we've seen about 10% decrease in that. So that's the market I don't see getting good for us anytime in the near future.

The IGT market, it's here, I got orders. I had demand, and right now I am not going to be able to keep up to what everything my customer wants, so I think we will be able to keep the engines build going from a standpoint from my customer sure want a lot more. So the IGT market feels good and solid. The aerospace demand, we are seeing through schedules is very strong. So, if I look at the schedules we have, the demand we are getting, it's staying strong. Where I wake up a lot now, you look at this global fear, and I don't know what that means. It's to us right now, schedules, contracts, buying material, it doesn't feel like different, but I would not be doing my job effectively, if I didn't start asking and pushing back the question.

In terms of capital, we always look very stringently, and I started about a year half ago of kind of doing two things. On major capital, you could submit to me what the current schedules were, what the current justifications were, and then you got a certain payback. Our payback tends to run in this environment about two years, year and half, two years is kind of what we are looking for. What I then do is say, okay, and these major ones assume that the day after we implement it, the market cuts by 30%. And just a... it's the figure I pulled. So, I don't want read anything into that, it's just the number I have been using for a while. And then I would say, okay, if that occurs, do I still need to capital project. So the major one set across a double hurdle like that, and we've been doing that like I said for the last year and a half. I don't expect to stop doing that, in fact, probably make sure to that that is done religiously as w e move forward.

Rob Spingarn - Credit Suisse

Okay. Thank you for that. Last question on your sourcing of metals. Can you give us a rough breakdown of internal sourcing versus external? The reason I ask the question is I figured the volumes do come under pressure at some point, you turn off the external in order to maintain utilization of your capacity?

Mark Donegan - Chairman and Chief Executive Officer

Yes, we are probably in the 35% to 40% range on internally supply number versus external.

Rob Spingarn - Credit Suisse

Okay, excellent. Thank you, Mark.

Mark Donegan - Chairman and Chief Executive Officer

Okay Rob.

Operator

Thank you. And we will take our next question from Ron Epstein with Merrill Lynch.

Mark Donegan - Chairman and Chief Executive Officer

Hey Ron.

Ron Epstein - Merrill Lynch

Hey Mark. How are you? Good morning. Quick question for you, actually a couple. In the press release you mentioned some discontinued, I think it was about $0.03 of earnings, what exactly is that?

Mark Donegan - Chairman and Chief Executive Officer

No.There was $0.03 of discontinued in the ops, but there was a business that we subsequent to Q3 sold, but it was immediately afterwards. The business was --

Unidentified Company Representative

Shape and memory alloys.

Mark Donegan - Chairman and Chief Executive Officer

Shape and memory alloys, which was the part of the Special Metals, which made no sense for us. So to give perspective, it makes some other things in glasses and that... it was that in the quarter was a easy was between a $0.005 to a $0.01, it's kind of where it ran. The other one, the remaining was on the --

Unidentified Company Representative

$0.03 deploy which is the tax benefits related to that sale that we had a valuation loan.

Mark Donegan - Chairman and Chief Executive Officer

Okay, you heard that one?

Ron Epstein - Merrill Lynch

Yes, got it. And then just a follow-up on I think it was Rob's question about M&A. With the pull back in the market, evaluations point back I mean is that opened up to your opportunities, set of things you guys could do?

Mark Donegan - Chairman and Chief Executive Officer

Well, the things that we wanted, we know what we want. Again, I think it has brought people to a realization that that the white knight is going to ride in and pay 15 times is kind of not there. So, I think what we're seeing is certainly much more realistic and reasonable positions for us to have conversations that we haven't had in the past.

Ron Epstein - Merrill Lynch

Okay. And then just one more if I may, your total... your debt to total capitalization now stands about 15% --

Mark Donegan - Chairman and Chief Executive Officer

Correct.

Ron Epstein - Merrill Lynch

Right. Where are you comfortable with that? That seems like you maybe a little bit under capitalized?

Mark Donegan - Chairman and Chief Executive Officer

Yes, we are. And again, if I can be successful in execute the things that we'd like to see, what I'm trying is to make sure we are positioned to do what we need to do. So, it is a little under now, but certainly we could use all of that and more if we are successful to do what we want to do.

Ron Epstein - Merrill Lynch

Okay, that's great. Thanks Mark.

Mark Donegan - Chairman and Chief Executive Officer

Okay.

Operator

Thank you. And we will take our next question from Joe Nadol with JP Morgan.

Joe Nadol - JP Morgan

Thanks. Good morning, Mark.

Mark Donegan - Chairman and Chief Executive Officer

Hi Joe.

Joe Nadol - JP Morgan

First question is on the manufacturing, I guess, output issues that you referenced in your press release, I guess is SMC.

Mark Donegan - Chairman and Chief Executive Officer

Yes.

Joe Nadol - JP Morgan

I guess could you quantify that in terms of sales foregone if that's --

Mark Donegan - Chairman and Chief Executive Officer

No, we probably in total last couple of days, it varied, some were more, some were less. But what we find ourselves we need to do is if some of these contracts we have won that will start getting into towards mid and the end of next year; we would upgrade the equipment to handle that. So we need to bring some of our bar mills down, we have to finish the overall repair on spec or mills to make sure that we had what we wanted. So, again it was a variation, but it was probably a couple of days.

Joe Nadol - JP Morgan

When you look at your Q4, because you had... some of this also made more maintenance stuff I think last quarter.

Mark Donegan - Chairman and Chief Executive Officer

Correct.

Joe Nadol - JP Morgan

When you look at to the fourth quarter, do you see any sort of similar, I guess, interruptions whether it's capacity growth or maintenance?

Mark Donegan - Chairman and Chief Executive Officer

We have one more that we are going to be doing, and again one of our Special Metals, it should probably be roughly in a day overall. The piece equivalent may be down long than that, but the overall impact will be that. But, again these are things if we don't do them, we certainly won't be successful as we want to be. So there are products that we've known about, they come in that, initial assessment we gave at the capital we're going to... want to spend, we're just trying to fit them in and amongst how we can get them. We would love to bring everything down one time shutting all place down for a couple of weeks, but we can't do that and still support our customers as we move forward.

Joe Nadol - JP Morgan

Right, understood. Okay. Second question, I just wanted to dig a little bit into some numbers in the pass-throughs, particularly I guess maybe starting with the $55 million that you've mentioned a couple of times, that's sequential. And do you have a year-over-year number that's along the similar line?

Mark Donegan - Chairman and Chief Executive Officer

We believe, year-over-year, Q3 to Q3 was relatively flat because if you think of what happened last year in Q3, materials were running up. And then they continue to run up and then they came back down. So the picture of bell curve was the same point I think inside of the bell curve year-over-year.

Joe Nadol - JP Morgan

Okay. So the $55 million that seems to be more than just a contractual pass-through. Does that also includes lower pricing on alloys of SMC, is that correct?

Mark Donegan - Chairman and Chief Executive Officer

What that is, is that is the effect of lower the whole blended out lower price of alloys at SMC is what that is.

Joe Nadol - JP Morgan

So that's an addition to whatever run off you have on the pass-throughs.

Mark Donegan - Chairman and Chief Executive Officer

Correct.

Joe Nadol - JP Morgan

Okay, and then on 55 then, when we think about that sequentially, how much... what's the EBIT impact?

Mark Donegan - Chairman and Chief Executive Officer

You know, it varies because it varies, I don't have the number off the top of my head. I will try to get the way I look at that. What happens is that depending on the type of contract we have, some there is none, some there is five, some there is ten. Some we have pricing effects, some we have long-term contracts, so I don't know the blended rate, but there is an impact... I have to think, given them all the way get back to you on that one.

Joe Nadol - JP Morgan

Okay, I appreciate that. And then, just another one final one here on the pass-throughs is you had a couple of different numbers within IGT on contractual pass-throughs, I guess the number you gave last year was around $35 million and this year you said it was $13 million year ago. Does that just changes in... you had pop ups in the underlying base price or how do we think about that?

Mark Donegan - Chairman and Chief Executive Officer

No, that's not the base price, what that is... the specifics we call out in casting and forging where we see the material pass through; that is just more or less a premium to the base prices that is related strictly to a material index, of which I know there is no margin on.

Joe Nadol - JP Morgan

Right.

Mark Donegan - Chairman and Chief Executive Officer

If you think about it, there is two elements to this. There is the contractual pass-throughs in castings and forging, which is really whining really in our casting business, which take a base price and then the material index is nickel, cobalt, titanium, aluminum whatever they may be, clean that out and the price goes up or down. There is in SMC which we called out, which is basically a sales overall sales price reduction that is $55 million. So those are the elements to the material pass-through.

Joe Nadol - JP Morgan

Right. No I just meant, it was in IGT specifically, the materials pass-through specifically, a year ago in your press release you said it was $35 million of material pass-throughs and in this press release it said it was $13 million a year ago. So the 35 went down to 13 and I wasn't sure what I was missing?

Mark Donegan - Chairman and Chief Executive Officer

I don't know the answer to that... I don't know, can you --

Joe Nadol - JP Morgan

Yes, we can do it off line.

Mark Donegan - Chairman and Chief Executive Officer

Can do I get back to you on that one?

Joe Nadol - JP Morgan

Yes absolutely. The final question is you already gave us some good numbers in 787 may be $15 million a quarter. Do you have a sense that's what the run rate, the scheduled run rate is over the next several quarters? How much you ramp up this quarter? Is it double that, is it triple?

Mark Donegan - Chairman and Chief Executive Officer

Right now, if we are looking at the ramp up for us, it didn't, we kind of held this rate and then before the latest announcement, the ramp up really started occurring in mid-year moving into the latter half of the year.

Joe Nadol - JP Morgan

Mid to calendar year of '08?

Mark Donegan - Chairman and Chief Executive Officer

Yes.

Joe Nadol - JP Morgan

Okay.

Mark Donegan - Chairman and Chief Executive Officer

So that was before and again, we looked at Q4 that was relatively flat to where Q3 was, Q1 started but really our Q2 and Q3 is when we start seeing it migrate its way up kind of the ramp occur.

Joe Nadol - JP Morgan

Okay. Thanks a lot Mark.

Mark Donegan - Chairman and Chief Executive Officer

Yes.

Operator

Thank you. And we'll take our next question from Cai von Rumohr with Cowen and Company.

Mark Donegan - Chairman and Chief Executive Officer

Hey Cai.

Cai von Rumohr - Cowen and Company

Yes Mark, thanks so much. Follow-up to Joe's question on the $55 million, basically as a producer... as a consumer as well as a producer of nickel, there are some potential positive benefits. And you said there was an EBIT impact from the $55 million sequential decline in sales that presumably was a negative EBIT impact, correct?

Mark Donegan - Chairman and Chief Executive Officer

Correct.

Cai von Rumohr - Cowen and Company

Okay. And given that you are a consumer, at some point do you get catch up where the prices are down so you are also down? And when --

Mark Donegan - Chairman and Chief Executive Officer

If you think about it Cai, in the casting/forging as material comes down, there is a catch up. And then why say forging, that's the Wyman-Gordon side. In the SMC side, it's more of a transparent as it is today. So, if you kind of go back to where we are experiencing on the way up, there is a lag in the formula. In other words, we're always paying a higher price and the average works up to be, that our formulas are calculated off of and if flips over, it moves the other way.

Cai von Rumohr - Cowen and Company

Okay. So there should be a positive impact?

Mark Donegan - Chairman and Chief Executive Officer

In the casting, in Wyman-Gordon segments.

Cai von Rumohr - Cowen and Company

Exactly. And then you had mentioned that a number of $50 million kind of internally sourcing for SMC, is that the number in the third quarter, and how does that compare with the second quarter?

Mark Donegan - Chairman and Chief Executive Officer

It was basically flat to second quarter, there was no real change Q2 to Q3. That was more the year-over-year impact.

Cai von Rumohr - Cowen and Company

Got it, okay. And is that number likely to be moving up, as we move forward?

Mark Donegan - Chairman and Chief Executive Officer

It will move up as we move forward.

Cai von Rumohr - Cowen and Company

Okay.

Mark Donegan - Chairman and Chief Executive Officer

It will definitely move up as we move forward.

Cai von Rumohr - Cowen and Company

And last question, you mentioned twice both in I Cast and Forging, 787 development, while essentially, your work is built to print. Should we assume that the profitability of these development shipments is quite a bit less or may be even an extent versus not keeping it under production?

Mark Donegan - Chairman and Chief Executive Officer

Not for us. For us, as we move down the development curve, again, since we are not a risk relishing partner, we normally have step down pricing in our models that more relate to our cost as we move down the curve.

Cai von Rumohr - Cowen and Company

Okay, terrific, thanks very much.

Mark Donegan - Chairman and Chief Executive Officer

Okay Cai. Thanks.

Operator

Thank you. And we will take our next question from Peter Arment with American Technology Group.

Mark Donegan - Chairman and Chief Executive Officer

Hey Peter.

Peter Arment - American Technology Research

Hey Mark. Just quick question, you mentioned the 787 on the fastener front. You are getting new qualification on some new part families. Could you give us a little more color like in terms of if there are other opportunities in other aircraft platforms that you are seeing, I know you've had quite a bit of market share gains last couple of years, but any insight there?

Mark Donegan - Chairman and Chief Executive Officer

Yes. There are two answers to that. The first one is there are additional contracts on base programs across both Airbus and Boeing and all of their partners and suppliers that come up. And we still think we have opportunity to grow and we spend a lot of time looking at the market share and those programs what does it take, what do we need. So yes, I think we can keep growing our overall aerospace market share.

On the second piece of the puzzle is that there is technology going into the 787 and some of our operations where it's being, it's new technology and it's being tested out in the 787 that could potentially move its way in to other platforms over time. So there is a couple of avenues of which we would expect and are going after additional share on the base programs.

Peter Arment - American Technology Research

Okay. And in terms of the time line on some of those other platforms, is that sort of the end of the decade where you see some changes there or?

Mark Donegan - Chairman and Chief Executive Officer

Yes, yes. I think that again with the focus so strongly on the 787, I think a lot of attention is being put on there. So I think that, that again to your point starts well I think the opportunities pop up, as we move to this year and then as the context open up. The other thing is certainly is going on is the desire of the European manufacturers to buy U.S. is certainly opening up additional opportunities. But again, by the time we'll get to that process and move our way, you'd be more in toward the latter half as you stated. But, there is a couple of really solid reasons to why some one can look the U.S. as a good point to manufacture now.

Peter Arment - American Technology Research

Right. Thanks again. Nice quarter Mark.

Mark Donegan - Chairman and Chief Executive Officer

Okay, thanks.

Operator

Thank you. And we'll take our next question from David Strauss with UBS.

Mark Donegan - Chairman and Chief Executive Officer

Hey David.

David Strauss - UBS

Hey Mark. Just want to let you know, the first person who identified him as myself was not me.

Mark Donegan - Chairman and Chief Executive Officer

I know.

David Strauss - UBS

Just wanted to make sure you know that for future call.

Mark Donegan - Chairman and Chief Executive Officer

That's what I like to say, he said the real David Strauss is on the house.

David Strauss - UBS

Exactly, those was must have been long lost twin.

Mark Donegan - Chairman and Chief Executive Officer

Well, maybe you got a twin brother, you don't know it.

David Strauss - UBS

Yes, exactly. We talked a lot about the demand environment. I just want to kind of ask the same thing a bit of a different way. How do you feel about the quality of the backlog that you have, maybe looking at by... looking at aerospace and looking at the power gen market, how do you feel about the sustainability of that backlog, if things actually do slow in terms of the end market demand?

Mark Donegan - Chairman and Chief Executive Officer

Well, I think from an IGT standpoint, I feel very good. Again, it's coming from parts of the world that make sense; China, India, Korea, the Middle East, so areas that I think we all can look and say, we understand clearly why they are putting the end they needed, it's part of their infrastructure to support all the growth plans. I mean, I think it's a good solid pace for us I feel very, very good about. Again today, I feel good about the pace backlog in aerospace, I would be naïve if I didn't tell you that kind of this whole global uneasiness, I don't know. Again right now, the demand is there, the orders are there, but at what point does they get some pull-back? I don't know, I couldn't begin to tell you.

The 87 I think is a solid, solid, solid program. I think the plane will be very successful. I just don't know what the impact will be on the build rates. So I think the overall future looks great. I think our position is phenomenal on it. We will have to adjust. If one of them move, so if I can't answer take that one, maybe one further step that the 87 gets pushed down a little bit overall and the overall demand stays there, we have tremendous demand on our backlog right now, I think we're okay. If the 87 stays kind of where it is, and is a little soft in the base programs, I think we're okay. If they both line up to some magnitude, we're up to adjust.

David Strauss - UBS

In terms of the 787, you talked about being a one a month today, in terms of what you've gone out and kind of entered into contractual rates for in terms of the ramp up. Where does that stand and is there an issue with taking some of that raw material that you might have lined up for 787 and using it for other platforms?

Mark Donegan - Chairman and Chief Executive Officer

Well, again, a lot of times we have a different relationship in that kind of what we are buying, we buy with our customers. So a lot of our raw material that we buy, we buy with our customers. We have put in capital to get to a rate of 60 though it's either in or it's coming in throughout the course of this year. And that's mainly the air force side. We put the second isothermal press and that will support and we did the growth at the Wyman [ph] facilities. So that's kind of in place and that was to support the base business plus and the incremental growth on the 87 as we moved our way through.

Certainly right now, if I look at the isothermal forge, we are using that capacity for the 87 on other products. So again, we have a delinquency there and we are driving that down, but we are using whatever would have been used on the 87 to make up our base business, same way in the titanium. So we have enough in the base business growth that through the sort of the course of this year, anything I think what I mean to say, more okay. When you get in to the ... later on into I think fiscal year '09, we get more air force fronts rolling in, that's when we need something happen on the 87. It doesn't have to be 6 to 8, but we need to see some movement on that.

David Strauss - UBS

Got it. And my last question, in thinking about SMC and the impact of nickel prices out in the third... in the next quarter, the fourth quarter, sequentially versus the third quarter, any idea what kind of maybe impact would have on revenues?

Mark Donegan - Chairman and Chief Executive Officer

It will come down and that will kind of be in SMC and I think we will also start seeing sequentially, it coming down in our base casting and forging business. Again right now, we have a blend of $22 output. We have $18, $16 and we will move our way in to the $16, $14, $13 range as we move through the next two quarters. So I think we would expect to see that top line affected by nickel moved out and titanium too.

David Strauss - UBS

Okay.

Mark Donegan - Chairman and Chief Executive Officer

There is some offset to that as cobalt, but you know we can't make on titanium, one of the majority of what we use. So as long as those are coming down, we would expect to see our sales volumes come down too.

David Strauss - UBS

Right. But given the nature of the pass-through you should see some positive effect on the operating income?

Mark Donegan - Chairman and Chief Executive Officer

Yes, more on the casting in Wyman-Gordon side, SMC again is more of immediate and bringing it in here is a price, it goes out that way. But certainly on the casting forging, there is a lag in the formula, correct.

David Strauss - UBS

Great. Thanks Mark.

Mark Donegan - Chairman and Chief Executive Officer

Thanks.

Operator

Thank you. And we are going to take our next question from Eric Hugel from Stephens, Inc.

Mark Donegan - Chairman and Chief Executive Officer

Hey Eric.

Eric Hugel - Stephens Inc.

Hey. Mark, how are you doing?

Mark Donegan - Chairman and Chief Executive Officer

How are you?

Eric Hugel - Stephens Inc.

Question with regards to aerospace demand. I mean, you guys get the production schedules from the engine OEMs about what, 18 months ahead. Looking at historic past downturns, when, I guess when things start to go south, how quickly I guess, first is what you actually deliver stuff, the things start to disappear off those productions schedules?

Mark Donegan - Chairman and Chief Executive Officer

We typically start to see it first in our airfoil businesses; it's where we see the leading indicators. And you'll see... you'll start seeing a contraction, historically see a contraction in the after market is where it starts to show its head. That happens probably 4 months to 6 months before we start seeing the overall impact across our business.

Eric Hugel - Stephens Inc.

Okay.

Mark Donegan - Chairman and Chief Executive Officer

But even though we have schedules, we'll start seeing push ups or slow downs and things like that in that side of the world.

Eric Hugel - Stephens Inc.

Okay. So something is already on your production schedule will drop off then the rate of things coming on, will also keep continue to keep slowing down?

Mark Donegan - Chairman and Chief Executive Officer

Correct.

Eric Hugel - Stephens Inc.

And I guess from just playing leveled down quickly on the IGT side, sort of what does that look like the last downturn, sort of the similar type of fashion, sort of similar types of contraction?

Mark Donegan - Chairman and Chief Executive Officer

Well, I think that, yes, it did except for the last time, when I think the whole industry was kind of sent back, sending you this bubble this doesn't feel like. We went to the E&Cs and they were building at 3% to 5%, and we saw this huge IGT bubble. So, I think that's the last one we all kind of start coming, but you got to support your customers from that standpoint. I think this one certainly feels a lot different. I mean there is a end point, so I go talk to my customers, they can point to a power plant that is going into. So they can say it's going to this place, this station and this country and this date. It's just not as an IGT, XX X on order which we don't know where it's going at this point in time. So, what this one feels to date is that there is a very quantifiable, touchable I know where the end is going at this point in time. The last downturn, we didn't... it was just kind of getting engine on order and then we'll figure where it's going to go.

Eric Hugel - Stephens Inc.

I guess maybe on the Fastener side, I guess sort of let's say, this cycle where we go now versus in the past, I mean I know stories where the cycle turns and then going starts calling up suppliers going move, what would your business look like, if you didn't deliver out your fasteners for the next six months. So what do you see as sort of the quantity of material in the supply chain, is it a lot less than it was sort of in the last cycle, it's what how do you think?

Mark Donegan - Chairman and Chief Executive Officer

I think overall this cycle is less period. I think everybody lean themselves out. Us, our customers, the time to build the plant, I think everything is just continue to lean itself out. What we spend a lot of time doing is working where we are looking at the number of bins that are laid, the number of bins that are full. What is it look like, how is it changing, what's our position, how much material is on the shelves. So we spend a lot of time in the fastener side, trying to get those answers, not just accepting an order, and order, and order and order.

Eric Hugel - Stephens Inc.

Great, good to hear. I guess my second question and I will get back in line is your margins in the Forged business, I mean after seeing pretty dramatic increases, last year have been again relatively flat year-to-date, particularly year-to-date, and then a lot of things going on your back and forth in terms of your investment, in terms of sort of what's going on with metal pricing. Just in sort of looking going forward of at all of these puts and takes, I mean would you expect to see continued margin expansion, or we sort of going to be staying around sort of were we are? When do we start to see the margins sort of all the efficiency improvements, and the yield improvements will overtake sort of the negative and get back on to that margin expansion track?

Mark Donegan - Chairman and Chief Executive Officer

Yes, I think that as we move through Q4 and Q1, it probably tend to... we keep finishing up on these things we have to do in the business. Certainly, I understand that we were delivering rapid expansion of our margins and there is good and bad to that. There is a good in that we delivered on, there is a bad in that we delivered on. So what I would expect is we need to finish the things we are doing to position ourselves to be able to handle the new work and continue to drive cost down. What I would expect to see after the next couple of quarters, those more like a casting, that type of growth and expansion in our margins, and we are not going to grow 100 basis points. But 20 to 25 basis points sequentially, I think that's a fair point to be as we continue to move forward.

Eric Hugel - Stephens Inc.

Great, thanks a lot

Mark Donegan - Chairman and Chief Executive Officer

Okay.

Operator

Thank you. And we'll take our next question from George Shapiro with Citi.

Mark Donegan - Chairman and Chief Executive Officer

Hey George.

George Shapiro - Citigroup

Hey Mark. Good morning. Mark, overall you continue a pretty strong trend if you ex-out the material pricing stuff of generating incremental margins around 40%, do you think that continues?

Mark Donegan - Chairman and Chief Executive Officer

There is nothing really abnormal. We face our challenges in various points, certainly in the casting side I feel real good about the type of margins we're dropping through. You know Fasteners; I think will probably slow little bit. There is certainly there is premium cost that's being associated, and we are getting a lot of demand and a lot of pull in. So I don't know whether we can support it, but you know we are also getting some pricing associated with that and then in the Forging side, again I feel that 30% is kind of a number that we should kind of be roughing at.

George Shapiro - Citigroup

Okay. And then but if you look at Forging just this quarter Mark, can you kind of ex-out the material pass-throughs that you talked about? I mean that incremental margin was like 60%. I didn't take out anything for the $55 million because you said that was about the same as last year and that's despite losing what you said a couple of days in SMC. So is there anything that happened this quarter that seems to make it somewhat stronger because the similar analysis last quarter would have got you around 50%?

Mark Donegan - Chairman and Chief Executive Officer

No, again it's nothing really there. My numbers are little bit less than your 60 but you know, there is nothing that's really out of the ordinary.

George Shapiro - Citigroup

Okay. Thanks very much.

Mark Donegan - Chairman and Chief Executive Officer

Okay George.

Operator

Thank you. And we'll take our next question from Howard Rubel with Jefferies.

Mark Donegan - Chairman and Chief Executive Officer

Hey Howard.

Howard Rubel - Jefferies & Company

Hi Mark, how are you? Thank you.

Mark Donegan - Chairman and Chief Executive Officer

Good.

Howard Rubel - Jefferies & Company

Just to cover two things. One, could you talk for a moment about the integration of many of these modest size deals you've done? We don't even... they look like they are seamless in the way they had been folded into the company. Are there any costs that will go away as you've completed the consolidations?

Mark Donegan - Chairman and Chief Executive Officer

No, I think that from a standpoint of let me kind of hit them in the fasteners, so let me look at the late... the faster ones we did between Santa Ana and AIs I mean in Cherry which were kind of latest one. I think that they've... has not been a real additional cost going in. We haven't added a whole lot to that process and we've been able to deal with the people that are there. I think they are doing, I think both of those operations have done a very fine job, so as long as we had a lot of costs going on in my time and Steve's time, which, doesn't... I am here anyways hopefully. So I think if any additional cost from that standpoint, so I don't think there has been anything going in, has not been anything really coming other than there's still efficiencies to be gained at all those.

McWilliams, there was not again any real additional cost. Again; that team pretty much sit on their own, we have moved in a PCC manager to take over from the original owners who have we moved on from working with us. So again, the cost there has been very minimal. Caledonian is probably where we have continued to put more of the effort to get additional positions and what I mean by that is, in order to really be efficient, we're going to have to put in facilities in the West Coast, down in Houston, Massachusetts to gather and capture all of the revert as quickly as possible. That's kind of the skills that is being very close to the source.

So as we move into the next few quarters, we are going to keep building additional as we build. You are looking at basically a lean 2, now that's, there is no real equivalent that goes along with this particular process as more of a gathering spot. But, we will have to source up and put resources in there. So that's where the only one I think we are continuing ongoing incremental cost to get ourselves positioned at where we need to be. But in the terms of everything it's going to be fairly benign to the total cost structure of PCC.

Howard Rubel - Jefferies & Company

And just a follow up with the Caledonian and then you've been able to generate some benefits into that. I mean how would we be able to quantify them outside looking at?

Mark Donegan - Chairman and Chief Executive Officer

Well, you probably can't. Now I mean that, it kind of blend itself out, we get the benefit in castings. So as you see margins expand in castings and forgings and even fasteners, that's part of Caledonian.

Howard Rubel - Jefferies & Company

Thank you very much.

Mark Donegan - Chairman and Chief Executive Officer

Okay.

Operator

Thank you. And we will take our next question from Gary Liebowitz with Wachovia Securities.

Mark Donegan - Chairman and Chief Executive Officer

Hi, Gary.

Gary Liebowitz - Wachovia Securities

Thanks. Good morning. Mark, given the strong demand that you continue to see in your end markets, are you contemplating anyway increasing your non-U.S. manufacturing footprint? And if so, what might be on the table?

Mark Donegan - Chairman and Chief Executive Officer

The only area that we will continue to look at is in the Czech Republic, well, I take that back. Mexico, we actually are expanding right now. And that is the machining side for our Houston disk manufacturing. So, we are actually going into a bigger facility right now to be able to do more. And then to that we are also looking at potentially increasing that footprint and increasing the Czech footprint to support non-forging product, and potentially maybe helping out with some of our airfoil businesses as we continue to grow the machine. Those are really the biggest areas we are looking to grow.

Gary Liebowitz - Wachovia Securities

Okay.And separately, how far out does your seamless pipe backlog run?

Mark Donegan - Chairman and Chief Executive Officer

18 months.

Gary Liebowitz - Wachovia Securities

Thank you.

Mark Donegan - Chairman and Chief Executive Officer

Okay.

Operator

Thank you. And we will take our final question from Brendan Hartman with Cramer Rosenthal.

Mark Donegan - Chairman and Chief Executive Officer

Hi Brendan.

Brendan J. Hartman - Cramer Rosenthal

How are you? Good and have enjoyed [ph]. Hey Mark, just a quick general question, I mean if you look at the other specialty metals companies and I know they are all different, but Carpenter or ATI, they all had a lot of issues with the inventory de-stocking in the aerospace end markets and I've heard their results this year. You guys don't really seem to be affected by that or maybe you aren't, and it just doesn't show up as strongly in the numbers. Can you just talk about that?

Mark Donegan - Chairman and Chief Executive Officer

Yes, we certainly have seen a pause as we came through the last six months of last calendar year. There seems to be with nickel kind of in that $13 to $14 range, it seems to be more people want that place large long-term contracts, big project work. So, we have seen some freeing up of that. But it got certainly what we viewed as opportunities and for us it's probably more opportunities. We view the opportunities, we knew where they where but we couldn't shake and loose towards the last six months, but... and we still have enough there to see growth that maybe the other guys don't have at this point in time.

Brendan J. Hartman - Cramer Rosenthal

But do you think if the Nickel prices come down a more maybe and I'll call it, normal level, then some of the more of the bigger project were to shake loose in the next 8 to 12 months?

Mark Donegan - Chairman and Chief Executive Officer

That would certainly be our expectation.

Brendan J. Hartman - Cramer Rosenthal

Thanks guys.

Mark Donegan - Chairman and Chief Executive Officer

Okay, I appreciate it.

Operator

Thank you. And on behalf of Precision Castparts, Mr. Donegan and PCC management, I would like to thank you for joining the call today. As a reminder, the webcast and call have 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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Source: Precision Castparts Corp. F3Q08 (Qtr. End 12/31/07) Earnings Call Transcript
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