Precision Castparts Management Discusses Q1 2013 Results - Earnings Call Transcript

Jul.26.12 | About: Precision Castparts (PCP)

Precision Castparts (BATS:PCP)

Q1 2013 Earnings Call

July 26, 2012 10:00 am ET

Executives

Mark Donegan - Chairman and Chief Executive Officer

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

Analysts

Robert Stallard - RBC Capital Markets, LLC, Research Division

Robert Spingarn - Crédit Suisse AG, Research Division

Jason M. Gursky - Citigroup Inc, Research Division

Richard Tobie Safran - The Buckingham Research Group Incorporated

Seth M. Seifman - JP Morgan Chase & Co, Research Division

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

David E. Strauss - UBS Investment Bank, Research Division

Amit Mehrotra - Deutsche Bank AG, Research Division

Gautam Khanna - Cowen and Company, LLC, Research Division

Noah Poponak - Goldman Sachs Group Inc., Research Division

Stephen E. Levenson - Stifel, Nicolaus & Company, Incorporated, Research Division

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

Ronald J. Epstein - BofA Merrill Lynch, Research Division

Operator

Good morning, and welcome to the Precision Castparts Webcast and Conference Call to discuss its first 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 by members of PCC management, the dial-in access line will be open for your questions. [Operator Instructions] Now I will turn the floor over to Mr. Mark Donegan, Chairman and Chief Executive Officer of Precision Castparts. Please go ahead, sir.

Mark Donegan

Thank you, operator. I'm sure you're all very familiar with the forward-looking statement. You need to take consideration when you're analyzing the following information. If I look at Q1 in total, I think it provided a solid expansion on both the top and bottom line versus last year. But looking at our company performance in total, we saw sales increase by 17.6%, going from roughly $1.68 billion last year to roughly $1.97 billion this year.

We saw operating income increase by almost 23%, going from roughly $419 million last year to $515 million this year. We saw operating margins expand from 25% last year to 26.2% this year, and we saw EPS increase from $1.97 last year to $2.35 this year.

If I look at the key drivers on sales versus last year, certainly, as you'd expect, we had strong aerospace growth of roughly 30%, with 12% coming organically, driven by a 10% increase in OEM and a 25% increase in spares. IGT was also a very strong contributor for us, growing by roughly 15%, but the majority of that coming organically at 13%, and the primary drivers is spares, but we did see growth to a lesser degree on the OEM side.

And even though at a smaller base, an area that we want to diversify into, we saw oil and gas sales increase by 35% versus last year, with 15% coming organically. And as we've talked the last couple of quarters, we had lower general industrial sales of 3% versus last year. And again, the significant component in this is coming from the value of the revert nickel that we got last year versus this year. And then you'll see, when we get in the cast, we also had alloy sales going into general industrial, were down versus last year. And all this was partially offset by the acquisitions.

Contractual material pass-through was basically flat, and the selling price from our 3 primary mills was down roughly $10 million. And quick update, I'm sure you've seen in the press release that we had a 29,000-ton unplanned outage in Wyman-Gordon. The outage impacted roughly 3 weeks in Q1. You're going to see, it goes into 5 weeks into Q2. We had all the spares needed to complete the repair. And then repairs are going as planned at this point in time, but it was certainly an unplanned outage in the quarter.

If I look sequentially, the 2 significant changes where we did have a slight increase in aerospace, we did have more upside in the aerospace. But certainly, the press outage had an impact on the ability to capture as much of that upside as we wanted to. And we also add in the quarter, sequentially. We got the benefit of RathGibson versus Q4.

If I look operationally, we've kind of talked about this, we did have some headwinds. We talked last quarter about the additional pension expense. It's the last time we're going to kind of give a baseline to this, but if I compare it to last year and, again, to Q4, it was roughly an $8-million impact in the quarter. And the current estimate of the cost of the 29K outage in Q1, we estimate to be $4 million to $5 million in the quarter. And this was more from the lost absorption. Certainly, the initial maintenance and certainly some lost sales all played into that number.

And even though we did get contribution from both Centra and Rath, up from the margin standpoint, certainly, we're dilutive as most of our acquisitions are on the day we take them over, but certainly, the number of opportunities to move that forward. I think, counting all this, we saw a very solid incremental drop-through in our base businesses, upgraded them 50%. We continued to find numerous opportunities, productivities, scrap and rework, revert utilization, and we're by no means at the end of that. But we did see a strong year-on-year improvement in terms of that performance aspect.

And from a dollar standpoint, we obviously did see the additional benefit from the acquisitions. And from a Primus standpoint, we're not only seeing the impact of not being in Q1 last year and in the Q1 this year, but they've also seen strong operational improvements as they've gone through the last 12 months. So from that standpoint, we're kind of getting a double hit, positive hit as we get with Primus.

If I look at sequentially, the same headwinds being the pension -- 2 primary headwinds being the pension and the outage, certainly wanted to put pressure in that. But we did see strong operational improvement from our operations to overcome that headwind, and we were able to drive margins up by 0.7 percentage points.

If I look forward, for the company in total, I think we have very solid positions on the base programs. We're on all the key platforms. Certainly, it's something we worked long and hard at for the last 4 or 5 years, to make sure we are properly represented in the right platforms. And with that, we certainly will expect to get a benefit as we move into the next rate increases on the base platforms, and we'd expect to see acceleration from the 787 as it ramps up through next year.

We've had good penetration on oil and gas. We started delivering. But having said that, there is a significant amount of product that needs to come through the system in the next 3 to 4 quarters. And we continue to see upside on share opportunities in both aerospace and IGT. And I think if we go back and look at kind of the Wyman-Gordon transaction years ago and the SPS transaction, I think we see the same type of opportunity in terms of getting that aerostructures platforms together, create the business and then certainly go and grow market share in those particular areas.

I think even though we did have quite a view -- quite a bit of action on the acquisition front in the course of the last quarter, we are still not an end of opportunities, and I think we'll still expect to see movement on this over the course of the -- again, the next 3 or 4 quarters.

We obviously have to manage our way through a number of challenges. We've kind of talked about the pension, that was significant. It's behind us. We were able to overcome that. I think we've been able to manage the growth appropriately, still leaving opportunity at the table. But if I look at the future growth, the nickel position, we'll handle that. If you look at items like the maintenance and 29,000, kind of what you pay us to do is be able to be prepared and respond quickly and be able to take care of our customers through those challenges. So from that standpoint, I think we're -- got lots of opportunity.

If I move on and look at our sales by market versus last year, aerospace has gone from 58% to 64% this year. And as you saw on the earlier pages, that was impacted by both organic and the acquisitions.

Power moved from 23% to 20%. I think a key piece of this is just the size of the aerospace growth that's occurred over the course of the last year. And as the general industrial has gone from 19% to 16%, and I think we will continue to be selective in what we do in that particular area.

Moving on to the segments, Investment Cast Products saw sales growth of just under 9%, going from roughly $569 million last year to roughly $620 million this year. Operating income increased by roughly 10%, going from $187 million last year to $206 million this year. Operating margins expanded from 32.9% last year to 33.3% this year.

If I look at the key drivers in Investment Cast, we saw a continued aerospace growth of roughly 10% versus last year. Our current demand today matches up very well to the current schedules on both the base and the 787 platforms, and we do have in position now, on the 787 Investment Cast, the demand to go up to 5 as we move through the end of the year.

We saw solid increases in our spares, growing roughly 40% versus last year. And IGT was also a significant contributor, growing by 15% versus last year. And in Investment Cast, we did see general industrial decline by roughly 15%. And it's a much smaller base, and the primary driver of this was the lower alloy sales into the automotive and medical world out of Cannon.

If I look sequentially, aerospace sales saw an additional 2% versus Q4, and IGT continued its strong run, where we saw a roughly 5% versus Q4, mainly driven by spares. But we did see some additional growth in OEM.

If I look operationally on growth, we saw solid incremental drop-through in Investment Cast of roughly 40%. The operations continued to identify and execute on a number of fronts. Certainly, in Investment Cast, you're going to be looking at productivity, scrap and revert as being the primary drivers. Having said all that, to me, sitting through the reviews, we still have a lot more opportunity. We're still leaving opportunity on the table.

And in these numbers, we've talked about the furnaces on airflows, the DS-ing of just the furnaces. We do actually have 6 that have come in, been installed and are now in qualification. We have 2 more that'll be coming in, in the end of Q3, but all these numbers reflect the ability of bringing that equipment in, putting it in and bringing it up through qualification.

When I look forward, certainly continue to see upside from the aerospace side, reporting the rate increases. On the base programs, 787, as it moves from its current rate up to 7 and moving down that, certainly see a big catalyst available to us as we move within this 12, 16 months. And IGT right now continues to provide more upside as we move through the balance of this fiscal year. So the schedules are holding very strong in that IGT front force.

Moving on to Investment Cast, on the Forged Products. Forged sales increased by 13% versus last year, going from roughly $750 million last year to $857 million this year. We saw operating income increase by 25%, going from roughly $156 million last year to roughly $196 million this year. And we saw good margin expansion from 20.6% last year to 22.8% this year.

If I look at the key drivers of Forged Products, first to put this on an apples-to-apples comparison, we had lower material selling prices at 3 primary mills of roughly $10 million. Contractual material pass-through was basically flat versus last year. And again, we've kind of talked about that outage, it did begin to affect sales at the very end of the quarter.

With that, we saw solid aerospace growth of 20% versus last year, with organic growth of 10%, primary drivers being the same, benefiting from the current build rates and the movement of the 787. And as with Investment Cast, IGT sales saw a 15% increase versus last year.

We've talked about the oil and gas. Even though on a smaller base, we saw a 35% increase from last year. And in general industrial, we saw a 5% increase, but this was mainly driven by Rath in the Forged Products segment. And certainly, our acquisitions in the Forged Products segments were a contributor, strong contributor versus last year.

If I look at sequentially, we're basically flat versus Q4. I'd say that, again, there was more opportunity that existed, but the outage of that 29,000-ton press certainly did not let us benefit from as much as we would've liked to see with the opportunities we had. Operationally, we've seen strong operational performance from our base businesses and saw contributions from the acquisitions over the year. And all this is dropping through at roughly 40%, which, in Forged Products, certainly tends to be at the higher end of the -- kind of that range. But again, with all of our operations, there is certainly a large amount of opportunity still to go get. And we've talked -- we did see additional headwinds we had overcome, and the 29,000, and we talked about this in the beginning. We view that as a roughly $4 million to $5 million impact.

If I look at sequentially on flat sales, we're able to overcome the impact of the press outage and increase operating income. And as with our -- most of our acquisitions, which kind of talk about this, we did have a dilutive effect, but we overcame that in terms of Rath Gibson, in terms of the margins.

Looking forward in Forged Products, they have the same positive dynamics as Investment Cast in the aerospace. They support the future base rate increases, which were already announced, and we also have the catalyst that would exist from the 787 moving beyond its current ramp rate.

On power, we've begun to ship the first large oil and gas orders, but they certainly will and need to accelerate over the next 4 quarters. And we still have numerous opportunities to continue market penetration after them in the oil and gas world.

We'll also be coming down the learning curve. Any new product we bring through our factories, certainly there is a learning curve going through in terms of operationally and the test requirements. We have added a large amount of that. We've talked about some of the numbers. But as we begin to move forward and move down through production, we'd expect to see that cost model be able to benefit. But we have been absorbing those type of numbers in our results over the last couple of quarters.

And then we have added Dickson and Aerocraft in the portfolio in the course of the last quarter. It certainly allows us to attack a significant piece of our cost. If I take a quick look at Dickson and Aerocraft, I think Dickson is an outstanding test facility. It's capable of testing mechanical, metallurgical, chemical, low-cycle fatigue. So basically all of the requirements in the Forged Products. This allows us to consolidate over time the bulk of our testing. It's a big cost associated certainly in all of our operations and outside testing cost. And I think that -- certainly, overtime, this will allows us to really go after that cost model, really across all of our operations.

Aerocraft, same basic reasoning. After testing outside heat treating, there'll be no significant cost for us. Aerocraft is a large heat treater capable of doing both castings and forgings and Ti and nickel. And this also allows us the ability to attack that cost model. And not only across our current businesses, but I look -- if I look at the latest acquisitions that we basically have announced in terms of Pro and Klune, this allows us to integrate all of those and choose the most cost-effective model to move back and forth between testing and heat treating, and then inside our particular assets, what we want to do. So again, I think that Dickson and Aerocraft really provides us a solid platform to move forward with.

Moving on to Fasteners. As you'd expect, Fasteners had sales growth of roughly 41.6%, going from $348 million last year to roughly $493 million this year. We saw operating income increase 37%, going from roughly $107 million last year to $146 million this year. And we saw operating margins go from 30.7% last year, 29.7% this year.

If I look at the key drivers, saw very strong aerospace growth of 65%. We did see organic growth of 15%. And we've continued to close that long disconnect that we've had in the Fasteners, full of opportunity to close it, but we are seeing that -- kind of that steady rate we've been talking about, we are seeing that kind of come in on the base programs. The 787, we are at roughly 3 months, so that's on average. But we still got some room to close compared to the other operations. But there are still some disconnects inside various product lines. So we may have some that are at, we have other ones that are not, but again, we are seeing some of that pick up on the 787. And we have seen significant benefits from the acquisitions in this segment which compared to last year, Primus and PB providing strong sales over the entire quarter, and we did receive in the quarter a partial benefit from Centra. We did see -- we talked about this, we did see a decrease of 10% in general industrial and in Fasteners. That's mainly our operation in Brazil, which is kind of driven by the automotive and the truck in Brazil.

If I look sequentially, we have flat aerospace sales in Fasteners. However, we did have additional demand that was available to us. The orders were received late in the quarter. We weren't able to turn them around. It will fall into Q2 in terms of kind of that available opportunity that's out there. And we did see additional benefit in the quarter from Primus and a limited contribution from what we had in Centra in the quarter.

Operationally, seeing good incremental drop-through on our base businesses of roughly 40%, and we've been talking about being able to drive that long weighted volume across a lower cost structure. I think the Fasteners group in the last couple of years has certainly positioned themselves with a much more effective cost structure, and that volume going over that tends to drop through at a fairly solid level.

In Primus, again not only a contributor on the face. So going back from where we were, it would have been a contributor, but that team has also done an extremely good job of driving through that operational improvement across our operations, which has kind of given us, again, a double hit in terms of the base and the operational improvement moving through. And Centra was a contributor in operating dollars. But as with our other acquisitions, certainly was below our margin levels. But we certainly have a lot of opportunity to move forward.

Sequentially, continue to see strong performance across our operations in terms of margin expansion. We're able to drop through 110 basis points from Q4. So pretty sizable performance improvement. If I look forward, I think we continue to see a steady, controlled, upward slope in base business. We still have more gap to close and more on the 787 side. And I think Primus still has plenty of upside in terms of improvements, and we have tremendous amount of opportunity of integrating our latest acquisitions into the entire performance in the Fastener aerostructures world.

If I take a quick look at the last 3 acquisitions, Centra, what it does for us -- first of all, it's an extremely well-capitalized company. It expands both our machining size capabilities in aluminum and expands our complexity in assemblies. They do very large assemblies, complex assemblies with the 787. It significantly expands our presence at Boeing Canada, and it -- as with the other ones, it allows us to deploy our capital for internal supply, as we did with Primus. We can look at providing castings and forgings into that world, and it also has very good presence on the growth platforms.

Klune fills a number of holes for us that we had. It provides us with the capability we hadn't had in metal forming, which, in some of our assemblies, certainly, sheet metal capabilities has been something we've been lacking. They have excellent casting machining capabilities, so we'll be able to utilize them on 2 ways, machining our -- some of our castings do require finished machining capabilities, which Klune will be able to do; and provides us an opportunity of providing castings from our operations into that particular platform. So it allows us quite a bit of cross-functional capability and positions us certainly on -- they're also on very solid growth platforms. And again, that's a key -- when we look at these acquisitions, is what platforms are they on?

Heroux-Devtek does a number of things for us. It takes us up substantially in terms of size to even larger capability. They do parts such as bulkhead, wings spars, ribs. So very large. It allows us to attack a big piece of our cost in terms of large machining. Currently, you have machining in some of our facilities that is less than often from a cost standpoint. We were actually planning to establish ourselves a better, low-cost machining capability. They have the assets that enable us to do that. So we'll be able to have a significant reduction in the capital investment we're going to make. It provides us with a lower cost for assemblies. Again, one of the other areas in the aerostructures world we're looking at was to be able to identify a position or a place to do some assembling and some lower-cost alternatives. Their facility in Mexico, really in a aero park, allows us to really go after that capability. So it fills another hole for us.

And if I look at moving forward, it allows us to interchange on a number of fronts between our operations in terms of being able to grow our capabilities.

So with that, I'm going to move off segments. On the cash, we drew down our cash on hand by $506 million, increased our debt by $28 million in the quarter. But in that, we deployed $859 million of cash to acquisitions. We made a voluntary contribution to pension of $50 million. That gives us roughly $375 million worth of cash in the quarter, excluding acquisitions and the pension contributions.

So with that, I'll turn it over to Shawn for inventory right now. Shawn?

Shawn R. Hagel

Thank you, Mark. We saw a fairly large increase in inventory during the quarter, growing from $1.82 billion at fiscal year end to $1.98 billion to close this quarter. That represents a $158-million increase in inventory values.

There are several items that really drove that increase, and I want to walk through those. The first was the contribution that the first quarter acquisitions made to the inventory balance. The acquisition of Rath, Centra and Dickson Aerocraft added $52 million of inventory to our balance sheet.

The second item we saw was significant raw material purchases that we needed to make primarily for the Forged Products segment to position ourselves to be able to hit our Q3 shipment profile given the shutdowns that we were going to do in Q2. We needed to get that inventory in ahead of those shutdowns so that we wouldn't run short as we came out of Q2 and into Q3. And we'll see that move its way through, except in Q3 and, to a certain extent, in Q4 as well.

The Saudi Aramco and ADNOC oil and gas orders that we have previously announced added an additional $33 million of inventory into the balance this quarter, bringing the total amount in the pipeline to a little over $80 million. With that, that wasn't unanticipated from us. We knew that was coming, and that's primarily due to the fact that our oil and gas products has such a long lead time, running about 40 weeks. So as we entered into these projects, we had a long runway to build that inventory and get it ready to go out the door, starting in Q3, Q4 and beyond.

We estimate that the impact of the 29K '10 press outage at Houston added about $15 million to $20 million of inventory as we had to focus on bringing that thing back up and running and left some opportunity of getting inventory out the door.

And finally, we had about $8 million worth of customer delays. Not an issue with regard to quality or anything, it was just 2 projects that we thought would ship in Q1 that, given timing with our customer, are going to move to Q2 and potentially, slightly into Q3. And so that left some inventory on the balance sheet. That really kind of explains the change from Q4 to Q1, but there is another item I wanted to highlight with regard to the change in our LIFO balance, which increased by $15 million during the quarter. $4 million of that relates to the fair value uplift of inventory we had with regard to the acquisition, and the remaining $11 million really represents the material deflation that occurred during the quarter, which basically drives the inventory valuation out of FIFO, which is raw material with unfinished goods, and into LIFO. So it's not a change in inventory, it's just a reallocation of where that's represented in the valuation stream and didn't hit our P&L.

And with that, Mark, I think I'll hand it back to you.

Mark Donegan

Okay. Thanks, Shawn. So if I look in summary, for Q1, in Investment Cast Products, we saw good, continued momentum from aerospace end markets. We also saw positive trends from the IGT, both in terms of spares and, to a lesser degree, the OEM.

Operationally, we saw good leverage and higher demand. But as always, we still have opportunity left on the table.

Forgings saw similar dynamics to Investment Cast Products in aerospace, and we saw similar benefits in IGT. We began to see our deliveries of the diversification of oil and gas. And we, as with castings, got good leverage on the additional volume. Had to deal with some headwinds from the unplanned outage of 29,000. That's life, and we'll have to -- we will manage our way through it. And we certainly began to integrate Rath and Dickson, but we just are in the beginning phases of that.

In Fasteners, we continue to see the steady ramp up of Fasteners but still have opportunity to close that gap. We saw solid top and bottom line performance from Primus. And again, it's an area that, I think, in the quarter we continue to aggressively acquire in.

As I look forward, in aerospace, Investment Cast, we are in line today with current rates in terms of demand. But with the change in rates in both the base coming in through '13 and the 787, certainly expect to see more acceleration from that. And we will have, as we get to the end of our fiscal Q3 into Q4, we'll have the new furnaces in place and airfoils to be able to handle that additional demand.

We began to integrate Dickson and Aerocraft, but there is a tremendous amount of opportunity in that world to attack our cost structure. In Q2, this is moving off of Q1 on the 29,000-ton, we'll be down for an additional 5 weeks to complete the repairs. Repairs are on track, but we are looking at 5 weeks. We've talked about the 50K being out all Q2. Again, repairs are on track, but we will be out for the entire Q2. And then we do have the normal maintenance on the balance of our large forging equipment. They'll be down for roughly 2 weeks.

If I look at the effect of that in forging, kind of talked about the value of the last quarter of the 50 in that 5 to 7. As I look at the 29,000 plus the other presses being down, you're looking right now at about $15 million to $17 million impact in forging compared to Q1. But Q3 gets back to full and normal production. And again, right now, things are on track, and we certainly have the load to handle that -- what we need to do once we get back on the growth curve that we all expect us to be on.

Fasteners. Continues to be a positive trend in Fasteners, and our bookings and core products stands good. Steady, continue to grow. Still lagging the 787. But look at kind of right now, I think that final close in the 787 appears to take place in more our Q4. That's what it looks like today. Having said that, we are seeing some pull-ins that pop in now, which is usually a leading indicator. But that's about what we look like today.

I think aerostructures continues to provide us a long runway in a number of fronts. Primus is currently exceeding initial operational synergies. Still much more to do, and I think there's a tremendous amount of opportunity on integrating, getting the latest of our acquisitions in terms of both performance and growing market share. I think it's still an area that's ripe for consolidation.

In power, on Investment Cast and Forged, certainly continue to see an upward momentum in IGT, mainly driven by the spares business. And we'd expect to see, with the high utilization right now, additional demand coming from that. And we are seeing a moderate upswing in OEM. And in Forged Products, we're going to be moving into more of the delivery of the Saudi Aramco and ADNOC orders and move to this year. There's a number of opportunities that will certainly fall in the backside of that in terms of growing market share. And this is also another area that I would expect to see ripe for acquisitions, to be able to continue moving, deploying capital into this area.

And in general industrial, as we were talking about for the last 3 or 4 quarters, I think we'll be selective of what we do in general industrial and utilize our assets in the proper manner.

So with that, that's the end of the presentation. We'll certainly open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Robert Stallard with Royal Bank of Canada.

Robert Stallard - RBC Capital Markets, LLC, Research Division

On the Fastener division, last quarter, you'd set a target of getting to 30% by the end of this fiscal year. You're pretty close to that already. Do you think there's a better chance that you're going to beat that number now?

Mark Donegan

Yes. If I look at that -- the base businesses, certainly, as we bring in Klune and Heroux, there is -- going to put more pressure on that. But if I take the businesses that we have today, yes, we certainly will go through and exceed that 30%. Yes.

Robert Stallard - RBC Capital Markets, LLC, Research Division

Any sort of comment [ph] on how much you might be doing?

Mark Donegan

No. I think that last quarter, sequentially, was a good quarter, but I don't think it was anything out of the ordinary. So if I look moving forward, I would expect to move certainly much through that 31% type of number on those base businesses.

Operator

And we'll take our next question from Robert Spingarn with Credit Suisse.

Robert Spingarn - Crédit Suisse AG, Research Division

I can't resist with the wealth of information that you just provided and, given the outages, both in this past quarter and the coming outage, can you speak to the quarterly earnings profile this year with regard to the weakness in Q2 and the strength in Qs 3 and 4?

Mark Donegan

Yes. In terms of Q2, I think that castings and the fasteners should continue to maintain kind of the directional movement they've been getting. And then to that, we'd add the acquisitions. Forged Product, I look at previous years, even though we're off 2 weeks, we still have the ability -- the 2 biggest workhorses we have in the company, the largest workhorse, the 29,000, that puts the most product out, puts the most sales value out. Second-largest one is going to be the 50,000. So our ability to push or move around and utilize those assets, we don't have them available to us the way we want to have. We're not going to sit back idly in Q2 and just say "woe is us". So I will do everything in our power to -- try to overcome to some degree that -- the impact of that Forged and the other divisions, but it's going to be a challenge to other divisions. But I think that certainly, we'll have the opportunity to try to attack that very aggressively.

Robert Spingarn - Crédit Suisse AG, Research Division

It sounds like you're going to try and smooth it as much as possible, but is it fair to assume that whatever you miss in Q2, you'll recover this year?

Mark Donegan

Yes. I mean, my customers need the product. So I will -- I am and will build delinquencies. I'm sure of that. My customers are listening at the other end of the line. That 29,000 going down, every day that it's down, I am not shipping product that the customer wants. Do not anticipate hurting lines, but they want more product. So I have got to figure out a way to get it out as we move through Q3 and Q4. I'm obviously not going to be able to turn it on and magically top it out the day after it gets, but yes, I got to figure out how to move that product through. So it's not as though my customers are pushing product out to me. They want the product, they need the product. I got to figure out a way to ship it. So as I move into Q3, certainly you'd expect to see us start to recover that. Now Q3 has its own dilemma that we pick up, Thanksgiving and Christmas in that time frame, but I got to find a way to overcome some of that. And then certainly, we come into Q4, we're a full number of days. But yes, my customer needs the product. I got to give them the product. And every day that my press is down is a day that I'm falling further behind.

Robert Spingarn - Crédit Suisse AG, Research Division

I'll jump back in.

Mark Donegan

You can make -- are you still on?

Robert Spingarn - Crédit Suisse AG, Research Division

Yes.

Mark Donegan

You can -- go ahead, ask another one if you want. I'll take [indiscernible] we can go a couple, rather than you got to go in and go out.

Robert Spingarn - Crédit Suisse AG, Research Division

Okay. Mark, just quickly, can you reconcile then -- you've had nice spares growth in aerospace, particularly in castings. But meanwhile, your 2 largest customers are showing weakness there. How do we figure to that?

Mark Donegan

Well, I can only kind of answer our demand we're seeing. We, all-in, kind of going back to where we were 10 years ago, we certainly went after a number of the very high-demand products. So I'd say that kind of where our sweet spot has lied is where a lot of the current platforms are flying.

Robert Spingarn - Crédit Suisse AG, Research Division

So it's mixed.

Mark Donegan

Yes. I mean, we didn't have a lot of -- we did a lot of growing on the later, more current platforms that are flying. Certainly, if we had done a lot of our growing on some of the platforms that are being retired, we probably wouldn't be seeing as much of a robust that we're seeing in the aerospace business. But right now -- and again, our customers have wanted more product out of airfoils. We needed the furnaces. So we've actually been building a delinquency in airfoils that, when a new furnace has come online, we'll purge that out. So we've also had more demand than we could supply. We're bringing on 8 furnaces in 2 quarters. That's not a small number.

Robert Spingarn - Crédit Suisse AG, Research Division

So this is about inventories as well?

Mark Donegan

Right.

Operator

And we'll take our next question from Jason Gursky with Citi.

Jason M. Gursky - Citigroup Inc, Research Division

Mark, I want to just step back and ask a question about strategy. And I know it's something that you've addressed in the past, but it would be nice to get your updated thoughts here. And that has to do with the aerostructures business. And just to the extent that -- or how far you're willing to take this business, both upstream and downstream, and kind of where you think the end game is here on the aerostructures, given the flurry of activity that we've seen on the M&A front here over the last year?

Mark Donegan

Yes. What we do, we can just look at general acquisitions, is we very rarely do we buy something on a stand-alone. We typically try to find a base platform and then grow it aggressively sideways. So if I look at what we do with Wyman-Gordon, then we add a number of acquisitions there to give them more capabilities, provide a more robust portfolio and, as a result, tend to provide a more complete solution to our customers. And then we did it in Fasteners. So I'd say that the value we have seen all along in this aerostructures world, it was very fragmented. There was a number of very solid players that were in there but didn't have the ability to put themselves together into a very robust, full portfolio. So I would certainly see ourselves moving -- continue to aggressively sideways, picking up capability, picking up capacity, platforms. But -- and I also, if you look at an Aerocraft or a Dickson, that fills a hole in terms of being able to handle kind of the cost structure. I think there is still some opportunity I'd like to get. We have the ability to supply nickel, we have the ability to supply titanium, we have the ability to supply castings into our aerostructures business. We do not have the ability to supply aluminum to any great degree in terms of forgings. We do have casting capability. So I think that looking over the next 12 to 16 months, it just continues to be an area that makes sense for us. And I think Primus reaffirms for us that when we get an asset, it follows the same ability to drive cost out at that Fasteners and Forgings and SMC and all the other products did, too. So I'd say that it will be a primary focus for us over the course of the next 12 to 16 months.

Jason M. Gursky - Citigroup Inc, Research Division

Yes, that's great. And then just one quick follow-up and clarification. On the 29,000-ton press down in Houston and the customers that are waiting for supply, contractually, will you face any penalties for not getting product out to them in a timely manner?

Mark Donegan

No, because -- no. I mean, what we typically work with our customers -- I mean, we will be moving product around, we'll be moving tools around. So I think that our customers understands that we're doing everything possible that we need to do to make sure that their schedules can be protected. But I don't want to ever say never, never, never, but it's very, very, very rare that our customers, given this type of outage, would ever come back and look for anything. And again, right now, we have the ability not to shut down lines by mix and match and moving tools around. So I'd say it's highly unlikely that we'd see any financial impact from that.

Operator

We'll take our next question from Richard Safran with Buckingham Research.

Richard Tobie Safran - The Buckingham Research Group Incorporated

A bit of a broad question for you, Mark. I wanted to know if you see a point, either in the near future or in the midterm, where you might shift how you balance deploying capital from acquiring assets to possibly making investments internally in new manufacturing technology into the facilities. Or do you think that you can obtain technology you need by acquiring assets? And this is -- the reason why I asked this is because there just seems to be a lot of advancements in things like titanium manufacturing and other metals, et cetera.

Mark Donegan

Yes. We constantly are working with our customers. So if I look at all of the latest development in all of the engines, we've been working with our customer for up to -- we worked ti-aluminides. I ran structures in 1993. We were working ti-aluminides. So that was a 10-year -- a 15-year program that we worked and developed, built a facility and capability. So we continue to invest in any front our customers need us to invest from a technical standpoint and our base businesses. So rarely do we go out and buy technology from a standpoint when we need to do, to compete in our castings, forgings, fasteners business. So a lot of -- first of all, if I look at the latest end user that are on the board, be it the GTF [ph] or the leap, which are kind of the most advanced technology that's out there, we've already made investments, either with or alone, to put ourselves and technological standpoint to support all of the needs that would come out of our operations in that. And again, it could be ti-aluminides. There's a number of other projects, some I'm free to talk about, some are not due to our relationship with our customers. But all of the technology needed resides in our existing facilities today. We're always looking what's out there. But our customers, one of the things they expect out of a company of our size, with our financial capability, is that we do whatever is required to make sure they are protected either in capacity or future events, modern technology, and we do, do that.

Operator

And we'll go next to Joe Nadol with JPMorgan.

Seth M. Seifman - JP Morgan Chase & Co, Research Division

Actually, it's Seth on for Joe this morning. Just a quick question, Mark. You alluded last quarter for the potential for organic growth to accelerate from last year's 10% level in fiscal '13. And given what we've seen in the first quarter and what you expect in this outage, I wonder if you still have that view.

Mark Donegan

Yes. I think that the demand on our customers, that are putting us right now, is we get -- assuming to the backside, we've got rate increase on the narrow-body, we got rate increases on the wide-body, we got 787 kind of as an independent line of sight there that has to go from its current 3 to 5, has to move through 5 to 7. And certainly, Boeing has set their desires to get to 10. But I think that there are catalysts out there to continue our growth. The outages that we're experiencing and again kind of going back to one of the initial questions, I still got to figure out a way to get the product out. My customer is not going to say, "I understand you got an outage. Therefore, just push everything out that I wanted." When it comes back up to speed, we certainly have to figure out how to move the product through. So I don't think the dynamics at this point in time have changed for us. Certainly, as I look into the very back half of this year and then start going into next year, we still see a lot of demand sitting on top of us right now. We've seen no -- it moves sometimes quarter to quarter, but all in, we still got to support the rate increases.

Seth M. Seifman - JP Morgan Chase & Co, Research Division

Okay. And just as a quick follow-up in oil and gas, not to minimize at all what you've gotten and what lies ahead, but it has been several months since you've announced a major order, and there is a long lead time for these orders, as you pointed out. Is anything changing with respect to the growth trajectory here and your expectations, either for the market or your place in it?

Mark Donegan

No, I think what's important for us to do is we have to make sure that we stack up the projects in a manner in which we can deliver them out. So if I look at the 2 big orders, we have Saudi Aramco and ADNOC, they only utilize our facilities for a solid 3 quarters, solid 3 quarters. So are we in conversations? Yes, but we also need to make sure that we don't throw another large order that would come in and step on top of the requirements. So we're really -- we're going to be looking for additional demand to start coming into play 3, 3.5 quarters from now. But we got -- our assets are fully utilized right now on getting out those 2 large orders, plus there's a number of other orders in there. They're just not of the magnitude of an Aramco or an ADNOC. But we got orders, multiple orders that are in the $2 million to $5 million range that stack in on top of that. They just aren't as large as that.

Operator

And we'll go next to Peter Arment with Sterne Agee.

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

A question back on the aerostructures and all the acquisitions. When -- do you envision this fiscal year that you'll be breaking that out at all out of the Fastener segment, given you've built up so much scale there? How are you thinking about that?

Mark Donegan

Not really. Honestly, we continue to evaluate the way we want to manage that. If I look at the -- kind of the castings, forgings -- let me take the castings, for instance. The castings has got the same customer base, same end markets, same contracts, same negotiations. What we're seeing is that the overlap in fasteners and aerostructures really starts coming into play in terms of same customer base, same contracts, same point of contact from a buyer. So I think the question is do we really want to look at managing it in a different manner as that -- that we tend -- we may want to look at creating kind of ahead in a same world and call it aerostructures and something else. I think calling it fasteners is a little misleading. But we frequently go to the customer and talk to the same point of contact, whether it's an aerostructure or fastener. What we'll continue to try to do, I think, is I think we'll talk about it and try to give you clarity to both piece of the puzzle, same way, in some cases, you do on the engine side. But I think we're almost going the opposite way of saying it really is the same end markets, so it may make more sense to keep it together. But I think I will try to find a way. And again, if you had a question [ph] , I'm willing to listen. You want to call Dwight or myself of what you'd like to see given more clarity. But I think from a coding or a segment, it's probably -- almost go the opposite way because there's just so much overlap in terms of how we deal with the customer.

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

No, that's helpful. And then just regarding Airbus' announcement regarding Alabama, how do you think about that? Is there an opportunity there for you? Or do you have to buy your way onto that platform?

Mark Donegan

Well, certainly, the closer the better. Airbus has been, I think, fairly open about wanting to get more dollar content. We've seen -- before the announcement, we have seen interfaces with Airbus trying to look at our operations we have across PCC, in terms of what do we have. And we've done a lot of meetings and positioning with Airbus to see what can we do across our U.S.-based operations. So I would certainly think that from that standpoint, having it here kind of closer to where sort of our primary operations are, that will continue to provide more opportunity. And I'd say the conversations with Airbus have been consistent with that.

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

Okay. And then just one follow-up. On the press outage, the 50,000 or the planned press outage. You originally -- I think you indicated it was kind of a 70- to 90-day kind of planning and outage process. Is there any -- have you -- you've been planning this for quite some time. Is there any opportunity where you see -- you actually could shorten that window at all? Or is it just too big of a project?

Mark Donegan

I did the review there last week. It was interesting. The first thing they did was bring me in a room with 3,000 [indiscernible] charts literally that they wanted me to look through line item by line item to understand the complexity of what test they were going to do. Having said that, I looked and said "gut it. I need it faster". I think we're probably more towards the 70 than we are at the 90. But to take any substantial steps out of that, there's just -- it's just such a major -- and it's not from the standpoint of not knowing what to do. We just have to take a 50,000-ton press and strip it down to its core. So everything comes out. There's just too many moving pieces to get done. But they're on track. And again, I think we're closer to the 70 than we were the 90. But can we go to 50 and get it up and running this quarter? No. There's just way too much work to do on it. Yes, this is something we've been planning for -- we started buying the components 3.5 years ago. I mean, it's a major press overhaul and repair.

Operator

We'll take our next question from David Strauss with UBS.

David E. Strauss - UBS Investment Bank, Research Division

Mark, did timing on Saudi Aramco slip to the right? I think that I read in -- maybe it was in your K, that you're now talking about shipping there late, late first half of this year rather than end of last year, is that right?

Mark Donegan

Well, I think it was always originally slated to start the first half. I mean, it was probably the very end of Q4. To answer your question though, the testing requirements have been more extensive, and there is not the availability that we have to move it to any number of labs. So we've actually come up against the ability to move the amount of testing through a single source to get testing. And yes, it did move us to the right. We're moving our way through that now, but I'd say we probably got pushed to the right 2 to 3 months as a backup of that testing area.

David E. Strauss - UBS Investment Bank, Research Division

Okay. So this quarter, you obviously saw no benefit or very little benefit from it?

Mark Donegan

Very little. Very little. And it were -- it's an external testing source that we're limited to. So it's -- if it was internal, obviously, we can get in and aggressively figure out and cut Q time out. But you have less availability when it's an outside source.

David E. Strauss - UBS Investment Bank, Research Division

Okay. On the IGT side, obviously you're benefiting there from what's going on with natural gas prices. Could you size your IGT aftermarket business at this point?

Mark Donegan

I may be able to. I'm looking, so I don't want you to think I'm just staring at the phone. So give -- because I've been known to make some curt comments before, but this is not one of those. Yes, it's probably in that $80 million to $100 million range is what it is.

David E. Strauss - UBS Investment Bank, Research Division

Okay. And then last one for me, the Boeing Fastener contract, how are you progressing there? I think you'd talked about a 6-month transition period. Are you up to kind of steady-state rate now? Or x, obviously, what's going on with 787? But how is that progressing?

Mark Donegan

No, we are not up steady-state yet, and I'd say we're probably in the 65% to 70% range of where we are. So there's still more part numbers and volume. And the part numbers we already have do come through. Certainly, they've been bleeding off the transitional parts. But no, like I said, on average, we're probably 70% there. But we're not where the contract is positioned to be in the long haul. So there's still more to come through on that.

Operator

We'll take our next question from Myles Walton with Deutsche Bank.

Amit Mehrotra - Deutsche Bank AG, Research Division

It's Amit Mehrotra here for Myles, actually. Mark, can you just update us on Europe? Back in mid-June, you said you were seeing no impact from the concerns over there. Can you just reaffirm that or maybe update us? It just looks like the general activity over there appears to have slowed since then.

Mark Donegan

I can only look at my backlog and my schedules. I just -- I've not seen any significant reductions that are taken out of our order book. I do see 2 months' slide right here, one month's slide pulling to the left there. But if I look over the 6-month horizon or 2- to 3-quarter horizon, the product is all residing still in that horizon. So I've not seen any significant erosion from where we thought we'd be -- from we were last quarter.

Amit Mehrotra - Deutsche Bank AG, Research Division

And just a follow-up, could you just comment on the M&A pipeline? You mentioned that there was still a lot more opportunities, but maybe one way to help us out is how much do you think maybe you could deploy per year over the next several years on M&A?

Mark Donegan

Yes, well, I told you I'd deploy, a couple quarters ago, $1 billion. I think I've far exceeded that. If I take where we are again right now, I think there's certainly another billion dollars sitting in front of us in terms of opportunities. So I think the opportunity, if you go back a year ago and look out a year, I think we're probably going to be in that $2.2 billion to $3 billion over that period of time.

Amit Mehrotra - Deutsche Bank AG, Research Division

Okay, okay. And just a couple of housekeeping questions. One, can you just provide us with the organic growth, consolidated organic growth in the quarter and the corresponding sales associated with the 20,000 -- the press outage in the quarter?

Mark Donegan

Let me start with the last question, because I'm -- the sales impact is probably somewhere in the 15-ish plus or minus range in the quarter. On the total organic -- we had this conversation to some degree yesterday -- I don't look at the organic standpoint of the whole company. What we try to call out is the thing that I thought were valid to you in terms of the organic growth by segment and by end market. So at this point in time, that's kind of where I want to keep that organic growth conversation

Operator

And we'll go next to Gautam Khanna with Cowen & Company.

Gautam Khanna - Cowen and Company, LLC, Research Division

I'm in for Cai. I think I have 3 questions. One, related to the aftermarket, just a follow-up on the earlier question, but related to Fasteners because you had a distributor report earlier in the week, citing weakness in the aftermarket. I just want to get your sense. Do you think your results there maybe reflect the channel shift because Boeing's buying more directly, and that would outweigh any aftermarket slowdown where the distributors may not be able to have that ability to offset it? Or do you think -- what explains your results relative to kind of what others are saying in that channel?

Mark Donegan

Yes, well, obviously, I do not want to ever be in a position of saying what another company does or doesn't do. But from our standpoint, we certainly are seeing a larger component of Boeing direct. So if I go back to where I was a year ago, it's where it was today. There certainly is a larger component of Boeing that's in there than there has been. And we're also seeing upticks from a wider array of distributors. So I'd say that what -- the reason why we're seeing growth is we are seeing more from Boeing direct, and we are seeing more from a number of other distributors.

Gautam Khanna - Cowen and Company, LLC, Research Division

Okay. And a follow-up to that, you mentioned 65%, 70% up on the Boeing Fastener LTA. Can you maybe talk about what kind of advanced visibility you have on the contract now, how many months forward they're actually ordering and how that's changed maybe over the last 6 months?

Mark Donegan

What happens is that we actually supply in what's called a min/max. So what happens is that they will enter on a min/max program and then we supply into that. And I don't have the exact number, but what we'll see is an increase in either the parts we're tracking from a min/max or an increase in the part numbers that are in the min/max formula for Boeing. So it's not necessarily discrete orders as it is our ability to impact that. I don't know the exact number. We have seen an increase in the min/max that we follow, and we have seen increase in the min/max part numbers that are on the Boeing list. So again, I don't -- if we see a discrete order, it's typically going to be for something that is not in a contract. That's an opportunity, is how we get a discrete order. To answer -- I guess maybe to answer the question in a roundabout way, we've had seen an increase in the orders as through the number of min/maxes we track and the number of min/maxes that have been put into Boeing's min/max system.

Gautam Khanna - Cowen and Company, LLC, Research Division

Okay. So it's rolling out on the Boeing end, and that's why you're seeing kind of a bigger addressable SKU count. Okay. Maybe...

Mark Donegan

Right. I'm sorry, go ahead.

Gautam Khanna - Cowen and Company, LLC, Research Division

No problem. And then just 2 others, I guess. One, in your comment on Fastener metal lead times, something you mentioned have extended in that past, have those kind of stabilized?

Mark Donegan

Yes, they've stabilized, but they've stabilized at a fairly long position. So going back to that comment, if I look -- when we get an order in the quarter, if we have the inventory on hand, great. If we don't have the inventory on hand, it lets -- puts us in a position where we have to delay the benefit of the order. So I'd say that it's stabilized, it's not gone longer, but it hasn't come down either.

Gautam Khanna - Cowen and Company, LLC, Research Division

Okay. And last one, one of your competitors, which bought a small forger yesterday, talked about destocking due to declining surcharges in the engine supply chain. They were referring to both nickel billet and some forged products. Do you see that phenomenon where -- if those people are concerned about the macros or managing inventory levels to gain the surcharge in your business Forged Products?

Mark Donegan

No, I think that -- I've not seen a situation where our customers have had an abundance of inventory in their systems. So I mean, if I look at our end customers, they've been pretty lean. They've not overbuilt to any great degree to the current build bill rates. That's something we track very aggressively with them. So I don't think, in our end markets today, there is an abundance of inventory sitting out there. Again, the fact that our 29,000 went down and we are very tightly connected to our customers and what they need tells me that there's very little slack in the system. So we're not finding ourselves with our customers sitting back, saying "hey don't worry, we got 4 weeks in the system, it's no big deal, let's just get inventory out. What we're getting in the 29,000-ton presses take -- I need to stop, I need it running, I need these parts. How are you going to get them out?" So I do not see the abundance of inventory that somebody else may say is out there.

Operator

And we'll take our next question from Noah Poponak with Goldman Sachs.

Noah Poponak - Goldman Sachs Group Inc., Research Division

Mark, I just wanted to go back to that balance sheet utilization question. Last year was your largest amount of acquisitions on a dollar basis ever, but you ended the year in a net cash position. And even if you did another billion, like you just referred to this year, you'd still end the year actually fairly close to a net cash position. So just kind of wondering how you think about what the right balance sheet metrics are? And do we actually see that total acquisition number step up in the years behind 2013? And if not, are you starting to think about other methodologies with which to utilize your very good cash generation and balance sheet?

Mark Donegan

Yes. At this point in time, obviously, we spend a lot of time with the board, and the board meeting is kind of showing what our acquisition strategy is. It looks out a fairly long period of time. We -- today, the drive would be to continue to acquire and redeploy cash in that manner. So I would say that's certainly for the next 2 years, 2 to 3. That would be our primary goal. If we saw pipeline dry up or something happened that would warrant us not to continue the path we're on. We would deal with that, but I'd say, right now, with the acquisition candidates we have, we're busy and we're active. I think we're in good shape to deploy the cash we have and don't really need to do something different. But again, I'm not going to sit here and tell you that. We don't ever think if the world dries up and acquisitions, what will we do?

Noah Poponak - Goldman Sachs Group Inc., Research Division

It just seems like you could do close to $2 billion a year in acquisitions and still run -- and still actually run kind of close to a net cash position, or barely in a net debt position, which one could argue is underutilizing the balance sheet. It seems like there's room to be very active in M&A and maybe also do other things.

Mark Donegan

Yes. Well, again, I think you're right. We've spent a large amount of money in -- if everything goes as planned, we'll continue to spend a large amount of money. The M&A world right now is -- from our standpoint, it's extremely active. It's going both ways. It's products we want, and it's also calls from people that are saying, "Hey, listen, we're seeing what you're doing. Why don't you come look at us?" But we are very -- I want to make sure right now, with everything sitting in front of us, that we have the cash on hand given whatever what happened in the marketplace or the global economy, we can still pull the trigger on acquisitions. And I don't want to find myself -- if I kind of look at Carlton there, I know that's an extreme case. But we're able to pull the trigger on Carlton in an environment that almost nobody else could put the trigger. I'm not saying that, that environment's coming again, but there's enough there that I don't want to find myself, if something melts down, of not being able to say, "Yes, let's go, let's move." There's that much in front of us right now in terms of M&A work.

Noah Poponak - Goldman Sachs Group Inc., Research Division

I understand. And just one other thing, following up on the oil and gas topic. It sort of sounds like you're saying there's potentially more work to go after faster, but you don't have the capital in place and maybe are hesitant to put the capital in place. Is that the case or not? Or how are you thinking about that?

Mark Donegan

No, I used to put it -- yes, it depends on what capital you're talking about. You can put certain capital in place, which -- it could be back-end processing. So grinding, finishing. Inspection, no. We'll put whatever capital is required. But if you go back to the main capital, which would be a -- the large press, you're 3 to 4 years out from the time you kick it off to getting the benefit of that. Now I will say that we've had a press of 29,000 -- excuse me, a 12,000-ton press that we have been taking down and upgrading. That will give us quite a bit more capacity in the pipe world. That's due to come up in Q -- mid-Q4, Q1. That lets us start moving product like the ADNOC over that press. So that's a major capital project we've been working for the last 2 quarters, and the press is nearing completion. But to go and put a brand-new 35 in the ground, you'd be 4 years off, probably $600 million, $700 million. So it's not going to help us in the short haul.

Noah Poponak - Goldman Sachs Group Inc., Research Division

Is that something that you could foresee the company needing to do at some point, though?

Mark Donegan

Well, then I think you start -- as we continue to move up that world, now you start coming back into the Chengde conversation that, over time, we'd start moving the lower end of work into Chengde. We wouldn't be able to -- honestly wouldn't be able to move the oil and gas work, but there's still other work that we can move over there at some point in time. But I don't -- I think the answer is never say never. Right now, our goal is to bring the 12 up and to utilize the assets. But I think we would look long and hard at putting $700 million into the ground, and I think we'd make sure we have longstanding contracts, something in play. And again, if we need to, we would obviously.

Operator

And we'll take our next question from Steve Levenson with Stifel, Nicolaus.

Stephen E. Levenson - Stifel, Nicolaus & Company, Incorporated, Research Division

Are you or any of the acquired companies parties to long-term agreements with subcontractors that could hinder the ability to take advantage of the synergies for some time? Or are you able to pretty much put things in and out when you're ready?

Mark Donegan

No. For the most part, there's nothing contractual that wouldn't allow us to get some of the benefit. There is certainly -- so if you look at supply and castings and forgings, there would be existing agreements in place. But we try to match up. We can't just flip the switch on. We have a situation right now that we're going to be -- we're building a tool in our aluminum casting that we'll supply into Primus, and we'll match up the contracts to our ability to do that. So in most cases, when we're going to transition to supplying our own, we would just line the existing contracts up to that. But there's nothing in the long haul that precludes us from doing that. And so far, we've been able to match up fairly well the timing it would take us to supply into there versus with the contracts. On the flip side, areas like Fasteners or whatever we've been able to get a benefit, either directly from ours or working with the existing supplier that gives us the same type of impact, so we've been able to get those types of synergies right away and then revert, which would be another one we pick up the day we take over.

Stephen E. Levenson - Stifel, Nicolaus & Company, Incorporated, Research Division

And in terms of M&A, given the weakness of the euro, would you look in Europe? Or is that sort of too much a mess?

Mark Donegan

I think we look at the assets that make sense. Obviously, depending on where -- Europe, Western Europe is a tough place to do business, so we'd have to see an asset that was really, really valuable to us because there's such limitations on the way we would want to run the business. Certainly, if you go to the kind of the old Eastern block or some of the low -- we've certainly made penetration into the Czech Republic and done very well in the Czech Republic. I think we'd certainly be more willing to look at additional opportunities in there. But when I -- we have to find a very, very, very good asset in Western Europe to say, "yes, I want to go buy that asset outright".

Operator

We'll go next to Sam Pearlstein with Wells Fargo.

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

Can you just talk a little bit more about this strategy on aerostructures? I mean, I certainly remember back years ago with forging, you had holds like ring rolling and other things. I mean, when you think about what you've put together now, what are the capabilities or the products or the types of things that are missing from what you're trying to put together?

Mark Donegan

Well, there are -- I need to take my time and think this thing through, because I obviously can't tell you where we are and what -- I mean, there are expansions to existing product lines that we don't have. So they could be considered similar products, but they're manufactured in a different manner. Again, if I kind of told you what they were, it would potentially kind of leap from that standpoint. Certainly, I'd like to find some more hard metal machining. I think Heroux moves us in that world. A lot of Primus, Centra, are high-speed aluminum. So I think finding more in the nickel world. I think more in some of those assemblies. There's certainly a drive or desire of the customers for us to provide a more complete assembly. Centra moves us down that road, but I think there's still more in that. There are businesses out there that have a stronger presence in that, that do their own machining and then assemble them into a more complex assembly that we have. I think that would be good. I think that there is a need to supply. But like I said, we can supply nickel, titanium, castings. We do not have forged aluminum. I'd love to find a forged aluminum capability. A lot of what Primus and Centra uses as input stock is a forged component in aluminum that we don't have. So those would be the type of things I'd say we're looking for.

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

Okay. And then just on the Heroux-Devtek acquisition, I guess -- it seemed to me you have a lot of defense exposure. So what is your content, I guess, on the F-35 now? And then how do you think of foreign exchange with respect to adding in that Canadian dollar exposure? And I guess, related to that, what's your overall mix of commercial and military within that 64% that's aerospace?

Mark Donegan

You can answer -- somebody can answer the parent military.

Unknown Executive

Military in FY '12 was about 10% to 12% I think. Heroux-Devtek is about 56% military, but it's a small asset.

Mark Donegan

Now the value to us -- the equipment that is there for the military side is equipment that we can use to machine our existing commercial properties. So the real value in terms of that equipment is not only what do they have on those platforms but more importantly is, it is a real value to us in terms of a capital avoidance [ph] where we're looking to go invest in almost the same exact same equipment to handle our machining cost on that large commercial aircraft [ph] that they now can do.

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

Okay. And then just one last small question, on the corporate expense line, it looks like it's jumped from, I guess, $30 million last year to $32.5 million, and it's been running kind of $31 million. How should we think about what that line looks like for this year?

Mark Donegan

That's basically the pension step up. Part of that sits in there. So that would establish a new baseline. You can move forward with that. Almost all changes, almost all pension.

Operator

And we'll go next to Ronald Epstein with Bank of America Merrill Lynch.

Ronald J. Epstein - BofA Merrill Lynch, Research Division

Maybe just a follow-up to one of Sam's questions. When we think and step back about the broader strategy with the company, right, where you've got the aerostructures and all the different businesses that you've built, maybe it's too soon to ask this, but where could the company go next? I mean should we think about things like titanium composites or anything? How should we think about that?

Mark Donegan

Well, let me start with the back half of your question first. I think from what we would consider composites, I think, as a general rule, we don't consider ourselves necessarily a commodity type of guy. And I think that there is a segment of that composites market, simple layup where there's just an endless number of people that kind of do that composite work. So let me start saying what else is out there, what's interesting, then you start getting into the real big composite components and then you find that those pretty much reside inside the prize themselves. So I'd say that composites today would not be a big desire for us. I don't think it's been a secret that we've said over and over again. What I'd like -- if you look out -- when we control our costs and make our own cast material or the forging impact, you look at what the margins have done from a forging standpoint by controlling our own value stream, we get a bang out of that. So the one hole we do have in that materials world is forged titanium input products. So yes, would I like to see some of that? Sure. But that's something you've heard on me for a long period of time. I think that there is a lot more opportunity in the oil and gas. There's a number of manufacturing capabilities that would hit the cost model and provide additional high-end, nickel-based type of product and that power world that we're not in. And then I think that the aerostructures is certainly a platform that we would kind of like to fall the same pattern that Fasteners did. I think Fasteners' been a home run hit for us. It was able to do operationally tremendous improvement. When we consolidated, we got economies of scale. We were able to attack market share. Fasteners has been a good use of our cash deployment, and I would expect that the aerostructures would again be something in that world. And it just kind of feels to me to be an area consistent with that. So those -- that's probably what I'd say. I probably wouldn't say -- I would say, today, we're not looking at any great entry point into composites. We love to get Forged teaming [ph] capability in terms of input stock. We'd love to continue to expand the aerostructures, and we'd love to get a better presence in that power pipe world.

Operator

And we'll take our last question from Noah Poponak with Goldman Sachs.

Noah Poponak - Goldman Sachs Group Inc., Research Division

Just one other quick one. Can you give us the latest 787 dollar content per aircraft for the total company? A few of the recent acquisitions have highlighted good exposure there.

Mark Donegan

Yes. We're probably in the -- on the GE base, we're probably in that $8-ish million range. And on the Rolls-Royce variant, we're probably in that $7.5 million-ish range.

Operator

Thank you. 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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