10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended January 2, 2011

Commission File Number 1-10348

Precision Castparts Corp.
	An Oregon Corporation IRS Employer Identification No. 93-0460598 4650 S.W. Macadam Avenue Suite 400 Portland, Oregon 97239-4262 Telephone: (503) 946-4800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [x]  No [  ]

Indicate by che ck mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  [x] Yes  [  ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	[x]	Acce lerated filer	[  ]
Non-accelerated filer	[  ] (Do not check if a smaller reporting company)	Smaller reporting& nbsp;company	[  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [x]

Number of shares of Common Stock, no par value, outstanding as of February 2, 2011: 143,451,159

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Precision Castparts Corp. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

(In millions, except per share data)

	Three Months Ended
	1/2/11				12/27/09
Net sales	$	1,590.3			$	1,364.6
Operating costs and expenses:
Cost of goods sold	1,101.7				921.6
Selling and administrative expenses	101.7			&n bsp;	88.6
Interest expense	3.7				4.3
Interest income	(1.3		)		(0.6		)
Total operating costs and expenses	1,205.8				1,013.9
Income before income tax expense and equity in earnings of unconsolidated affiliates	384.5				350.7
Income tax expense	(127.9	)		(121.8		)
Equity in earnings of unconsolidated affiliates	2.5				—
Net income from continuing operations	259.1				228.9
Net (loss) i ncome from discontinued operations	(2.2		)		4.3
Net income	256.9				233.2
Net income attributable to noncontrolling interests	(0.4		)		(0.3		)
Net income attributab le to Precision Castparts Corp. (“PCC”)	$	256.5			$	232.9
Net income (loss) per common share attributable to PCC shareholders - basic:
Net income from continuing operations	$	1.81			$	1.62
Net (loss) income from discontinued operations	(0.01		)		0.03
	$	1.80			$	1.65
Net income (loss) per common share attributable to PCC shareholders - diluted:
Net income from continuing operations	$	1.80			$	1.61
Net (loss) income from discontinued operations	(0.02		)		0.03
	$	1.78			$	1.64
Weighted average common s hares outstanding:
Basic	142.8				140.8
Diluted	144.1				142.3

See Notes to the Condensed Consolidated Financial Statements.

1

Precision Castparts Corp. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

(In millions, except per share data)

< tr>

	Nine Months Ended
	1/2/11			12/27/09
Net sales	$	4,545.2		$	4,025.5
Operating costs and expenses:
Cost of goods sold	3,145.6			2,690.3
Selling and administrative expenses	298.2			272.8
Interest expense	10.5			12.4
Interest income	(2.9		)	(2.3		)
Total operating costs and expenses	3,451.4			2,973.2
Income before income tax expense and equity in earnings of unconsolidated affiliates	1,093.8			1,052.3
Income tax expense	(368.8		)	(364.0		)
Equity in earnings of unconsolidated affiliates	14.5			—
Net income from continuing operations	739.5			688.3
Net income (loss) from discontinued operations	4.1			(7.2		)
Net income	743.6			681.1
Net income attributable to noncontrolling interests	(1.1		)	(0.5		)
Net income attributable to Precision Castparts Corp. (“PCC”)	$	742.5		$	680.6
Net income (loss) per common share attributable to PCC shareholders - basic:
Net income from continuing operations	$	5.19		$	4.90
Net income (loss) from discontinued operations	0.02			(0.05		)
	$	5.21		$	4.85
Net income (loss) per common share attributable to PCC shareholders - diluted:
Net income from continuing operations	$	5.14		$	4.85	&n bsp;
Net income (loss) from discontinued operations	0.03			(0.05		)
	$	5.17		$	4.80
Weighted average common shares outstanding:
Basic	142.4			140.4
Diluted	143.7			141.8

See Notes to the Condensed Consolidated Financial Statements.

2

Precision Castparts Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In millions)

	1/2/11			3/28/10
Assets
Current assets:
Cash and cash equivalents	$	822.8		$	112.4
Receivables, net	853.3			846.6
Inventories	1,520.5			1,435.3
Prepaid expenses and other current assets	23.0			21.7
Income tax receivable	18.2			78.7
Deferred income taxes	6.7			3.4
Discontinued operations	10.6			24.0
Total current assets	3,255.1			2,522.1
Property, plant and equipment, at cost	2,314.8			2,220.6
Accumulated depreciation	(1,124.5		)	(1,014.1		)
Net property, plant and equipment	1,190.3			1,206.5
Goodwill	2,874.2			2,835.9
Acquired intangible assets, net	459.7			468.4
Investment in unconsolidated affiliates	399.5			372.4
Other assets < /td>	328.7			203.6
Discontinued operations	46.3			51.8
	$	8,553.8 < /td>		$	7,660 .7
Liabilities and Equity
Current liabilities:
Long-term debt currently due and short-term borrowings	$	14.8		$	15.1
Accounts payable	554.3			581.8		&n bsp;
Accrued liabilities	291.4			285.8
Discontinued operations	5.9			11.1
Total current liabilities	866.4			893.8
Long-term debt	222.1			234.9
Pension and other postretirement benefit obligations	250.0			284.4
Other long-term liabilities	207.0			212.2
Deferred income taxes	192.9			137.6
Discontinued operations	2.5			6.1
Commitments and contingencies (See Notes)
Shareholders' equity:
Preferred stock	—			—
Common stock	143.1			141.9
Paid-in capital	1,390.2			1,263.8
Retained earnings	5,530.0			4,800.3
Accumulated other comprehensive loss	(253.5		)	(317.2		)
Total PCC shareholders' equity	6,809.8			5,888.8
Noncontrolling interest	3.1			2.9
Total equity	6,812.9			5,891.7
	$	8,553.8		$	7,660.7

See Notes to the Condensed Consolidated Financial Statements.

3

Precision Castparts Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In millions)

< td colspan="2" style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;">

7.2

	Nine Months Ended
	1/2/11			12/27/09
Operating activities:
Net income	$	743.6		$	681.1
Net (income) loss from discontinued operations	(4.1		)
Non-cash items:
Depreciation and amortization	122.6			112.7
Deferred income taxes	47.4			33.2
Stock-based compensation expense	35.8			30.0
Excess tax benefits from share-based payment arrangements	(23.1		)	(16.6		)
Other non-cash adjustments	(4.1		)	0.3
Changes in asset s and liabilities, excluding effects of acquisitions and dispositions of businesses:
Receivables	0.3			220.0		< font style="font-family:inherit;font-size:10pt;">
Inventories	(70.9		)	(54.6		)
Prepaid expenses and other current assets	(1.1		)	(8.1		)
Income tax receivable and payable	83.6			(19.9		)
Payables and accruals	(26.9		)	(181.7	)
Pension and other postretirement benefit plans	(143.0		)	(181.5		)
Other non-cu rrent assets and liabilities	(22.6		)	10.3
Net cash (used) provided by operating activities of discontinued operations	(5.5		)	5.5
Net cash provided by operating activities	732.0			637.9
Investing activities:
Acquisitions of businesses	(37.2		)	(867.3		)
Investment in unconsolidated affiliates	(4.1		)	—
Capital expenditures	(83.7		)	(137.9		)
Dispositions of businesses	17.6			—
Other investing activities	8.8			(18.4		)
Net cash provided (used) by investing activities of discontinued operations	2.2			(0.3		)
Net cash used by investing activities	(96.4		)	(1,023.9		)
Financing activities:
Net change in long-term debt	(14.5		)	(16.2		)
Common stock issued	69.1			54.5
Excess tax benefits from share-based payment arrangements	23.1			16.6
Cash dividends	(12.8		)< /font>	(12.7		)
Other financing activities	(0.9		)	—		< /font>
Net cash used by financing activities of discontinued operations	—			(0.2		)
Net cash provided by financing activities	64.0		&nb sp;	42.0
Effect of exchange rate changes on cash and cash equivalents	10.8			7.9
Net increase (decrease) in cash and cash equivalents	710.4			(336.1		)
Cash and cash equivalents at beginning of period	112.4			554.5
Cash and cash equivalents at end of period	$	822.8		$	218.4

See Notes to the Condensed Consolidated Financial Statements.

4

Notes to the Condensed Consolidated Financial Statements

(Unaud ited)

(In millions, except share and per share data)

(1) Basis of Presentation

The condensed consolidated financial statements have been prepared by Precision Castparts Corp. (“PCC”, the “Company”, or “we”), without audit and subject to year-end adjustment, in accordance with accounting principles generally accepted in the United States of America, except that certain information and footnote disclosures made in the latest annual report on Form 10-K have been condensed or omitted for the interim statements. Certain costs are estimated for the full year and allocated in interim periods based on estimates of operating time expired, benefit received, or activity associated with the interim period. The condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

(2) Stock-based Compensation

During the three and nine months ended January 2, 2011 and December 27, 2009, we recorded stock-based compensation expense under our stock option, employee stock purchase, deferred stock unit and deferred compensation plans. A detailed description of the awards under these plans and the respective accounting treat ment is included in the “Notes to the Consolidated Financial Statements” included in our Annual Report on Form 10-K for the year ended March 28, 2010.

The following table sets forth total stock-based compensation expense and related tax benefit recognized in our Condensed Consolidated Statements of Income:

	Three Months Ended							&n bsp;	Nine Months Ended
	1/2/11			< /font>	12/27/09				1/2/11			12/27/09
Cost of goods sold	$	4.5			$	3.4			$	12.8		$	9.4
Selling and administrative expenses	8.1				7.2				23.0			20.6
Stock-based compensation expense before income taxes	12.6				10.6				35.8			30.0
Income tax benefit	(3.8		)		(3.1		)		(10.1		)	(9.0		)
Total stock-based compensation expense after income taxes	$	8.8			$	7.5			$	25.7		$	21.0

(3) Acquisitions

Fiscal 2010

On January 15, 2010, we acquired a 49% equity interest in Yangzhou Chengde Steel Tube Co., Ltd (“Chengde”) for approximately $355 million in cash, comprised of approximately $115 million of cash on hand and the proceeds of approximately $240 million of commercial paper debt issuance (subsequently repaid). This investment is accou nted for under the equity method as we have significant influence over, but not control of, the major operating and financial policies of Chengde. The carrying value of this investment as of January 2, 2011 was $382.3 million and was included in investment in unconsolidated affiliates in our consolidated balance sheet. The carrying value of our investment in Chengde exceeded the amount of underlying equity in net assets of Chengde by approximately $175 million as of the date we acquired Chengde. This difference arose through the valuation process that was applied t o the assets acquired. Chengde is a leading manufacturer of seamless, extruded pipe for boiler applications in coal-fired power plants, as well as pipe and tubing for other energy-related applications, such as compressed natural gas. The company operates from one facility with a manufacturing footprint of nearly 6 million square feet, in the Jiangsu Province of China. Chengde has built a leading position in the Chinese boiler pipe market and has begun to make inroads into export markets. Refer to Subsequent Events footnote for further discussion.

On September 30, 2009, we completed the acquisition of Carlton Forge Works and a related entity (“Carlton”) for approximately $847 million in cash, comprised of approximately $502 million of cash on hand (reduced $3 million due to working capital adjustments) and the proceeds of approximately $345 million of commercial paper debt issuance (subsequently repaid). Carlton, a leading manufacturer of seamless rolled rings for critical aerospace applications, offers nickel, titanium, and steel rolled rings across the widest range of product sizes in the industry. Carlton broadens our forgin g capabilities and enables us to provide a full range of forged products to our aerospace engine customers. The Carlton acquisition is an asset purchase for tax purposes and operates as part of our Forged Products segment. This transaction resulted in $400.1 million of goodwill (which is deductible for tax purposes) and $336.7 million of other intangible assets, including tradenames with indefinite lives valued at $89.1 million, customer relationships with indefinite lives valued at $204.8 million, customer relationships with finite

5

lives valued at $3.7 million, backlog valued at $10.2 million and revenue sharing agreements valued at $28.9 million. We also recorded a long-term liability related to the fair value of a pre-existing revenue sharing agreement valued at $92.0 million. The impact of this acquisition was not material to our consolidated results of operations; consequently, pro forma information has not been included.

The preceding business acquisition was accounted for under the acquisition method of accounting and, accordingly, the results of operations have been included in the Consolidated Statements of Income since the acquisition date.

&nbs p;

(4) Discontinued Operations

During the second quarter of fiscal 2011, we sold an automotive fastener business. The transaction resulted in a gain of approximately $6.4 million (net of tax).

During the first quarter of fiscal 2011, we decided to divest a small non-core business in the Fastener Products segment and reclassified it to discontinued operations.

The components of discontinued operations for the periods presented are as follows:

	Three Months Ended						Nine Months Ended
	1/2/11			12/27/09			1/2/11			12/27/09
Net sales	$	7.0		$	21.2		$	39.4		$	62.6
Cost of goods sold	6.7			18.3			37.3			55.0
Selling and administrative expenses	0.9			2.8			4.0			19.9
(Loss) income from operations before income taxes	(0.6		)	0.1			(1.9		)	(12.3		)
Interest income	(0.1		)	—			(0.1		)	(0.1		)
Income tax benefit	(0.1		)	(4.9		)	(0.3		)	(7.7		)
Net (loss) income from operations	(0.4		)	5.0			(1.5		)	(4.5		)
(Loss) gain on disposal, net of $0.0, $0.4, $2.6, and $(0.3) tax expense (benefit), respectively	(1.8		)	(0.7		)	5.6			(2.7		)
Net (loss) income from discontinued oper ations	$	(2.2	)	$	4.3		$	4.1		$	(7.2	)

Included in the Condensed Consolidated Balance Sheets are the following major classes of assets and liabilities associated with the discontinued operations after adjustment for write-downs to fair value less cost to sell:

14.6

	1/2/11			3/28/10
Assets of discontinued operations:
Current assets	$	10.6		$	24.0
Net property, plant and equipment	31.7			37.0
Other assets			14.8
	$	56.9		$	75.8
Liabilities of discontinued operations:
Other current liabilities	$	5.9		$	11.1
Other long-term liabilities	2.5			6.1
	$	8.4		$	17.2

6

(5) Inventories

Inventories consisted of the following:

	1/2/11		3/28/10
Finished goods	$	321.8	$	287.2
Work-in-process	546.7		509.6
Raw materials and supplies	465.7		441.9
	1,3 34.2		1,238.7
LIFO provision	186.3		196.6
Total inventory	$	1,520.5	$	1,435.3

(6) Goodwill and Acquired Intangibles

We perform our annual goodwill impairment test during the second quarter of each fiscal year. For fiscal 2011, it was determined that the fair value of the related reporting units was greater than book value and that there was no impairment of goodwill.

The changes in the carrying amount of goodwill by reportable segment for the nine months ended January 2, 2011 were as follows:

	Balance at				Currency Translation and Other		Balance at
	3/28/10		Acquired				1/2/11
Investment Cast Products	$	336.6	$	17.5	$	0.8	$	354.9
Forged Products	1,249.8		—		11.4		1,261.2
Fastener Products	1,249.5		8.4		0.2		1,258.1
Total	$	2,835.9	$	25.9	$	12.4	$	2,874.2

The gross carrying amount and accumulated amortization of our acquired intangible assets were as follows:

< td style="vertical-align:bottom;border-top:1px solid #000000;border-bottom:3px double #000000;">

	January 2, 2011							March 28, 2010 < /td>
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization				Net Carrying Amount
Amortized intangible assets:
Patents	$	14.8 < /td>	$	(7.2	)	$	7.6	$	14.8	$	(6.0	)		$	8.8
Proprietary technology	2.3		(1.1		)	1.2		2.3		(1.0		)		1.3
Tradenames	0.4		(0.4		)	—		0.4		(0.4		)		—
Long-term customer relationships	34.7 < /td>		(13.0		)	21.7		33.0		(8.9		)		24.1
Backlog	18.6		(15.4		)	3.2		18.6		(10.7		)		7.9
Revenue sharing agreements	28.9		(0.3		)	28.6		28.9		—				28.9
	$	99.7	$	(37.4	)	62.3		$	98.0	$	(27.0	)		71.0
Unamortized intangible assets:
Tradenames						192.6								192.6
Long-term customer relationships						204.8								204.8
Acquired intangibles, net						$	459.7						$	468.4	;

7

Amortization expense for acquired intangible assets for the three and nine months ended January 2, 2011 was $3.5 million< font style="font-family:inherit;font-size:10pt;"> and $10.4 million, respectively. Amortization expense related to finite-lived intangible assets is projected to total $13.9 million for fiscal 2011. Projected amortization expense for the succeeding five fiscal years is as follows:

Fiscal Year	Estimated Amortization Expense
2012	$	8.4
2013	6.8
2014	6.9
2015	4.9
2016	3.6

The amortization will change in future periods if other intangible a ssets are acquired, existing intangibles are disposed or impairments are recognized.

(7) Guarantees

In the ordinary course of business, we generally warrant that our products will conform to our customers' specifications over various time periods. The warranty accrual as of January 2, 2011 and March 28, 2010 is immaterial to our financial position, and the change in the accrual for the current quarter and year to date is immaterial to our results of operations and cash flows.

In conjunction with certain transactions, primarily divestitures, we may provide routine indemnifications (e.g., retention of previously existing environmental and tax liabilities) with terms that range in duration and often are not explicitly defined. Where appropriate, an obligation for such indemnifications is recorded as a liability. Because the obligated amounts of these types of indemnifications often are not explicitly stated, the overall maximum amount of the obligation under such indemnifications cannot be reasonably estimated. Other than obligations recorded as liabilities at the time of divestiture, we have not historically made significant payment s for these indemnifications.

(8) Earnings per Share

Net income and weighted average number of shares outstanding used to compute earnings per share were as follows:

	Three Months Ended					&nb sp;	Nine Months Ended
	1/2/11			12/27/09			1/2/11		12/27/09
Amounts attributable to PCC:
Net income from continuing operations	$	258.7		$	228.6		$	738.4	$	687.8
Net (loss) income from discontinued operations	(2.2		)	4.3			4.1		(7.2		)
Net income attributable to PCC	$	256.5		$	232.9		$	742.5	$	680.6

	Three Months Ended		Nine Months Ended
	1/2/11	12/27/09	1/2/11	12/27/09
Basic weighted average shares outstanding	142.8	140.8	142.4	140.4
Dilutive stock options	1.3	1.5	1.3	1.4
Average shares outstanding assuming dilution	144. 1	142.3	143.7	141.8

Basic earnings per share are calculated based on the weighted average number of shares outstanding. Diluted earnings per share are computed based on that same number of shares plus additional dilutive shares (if any) representing stock distributable under stock option, employee stock purchase, and phantom stock plans computed using the treasury stock method .

For the three and nine months ended January 2, 2011, stock options to purchase 1.6 million and 2.1 million shares of common stock were excluded from the computation of diluted earnings per share, respectively, because they would have been antidilutive. For the three and < font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">nine months ended December 27, 2009, stock options to purchase 1.6 million and 1.3 million shares of common stock were excluded from the computation of diluted earnings per share, respectively, because they would have been antidilutive. These options could be dilutive in the future.

8

(9) Comprehensive Income

Total comprehensive income consisted of the following:

	Three Months Ended						Nine Months Ended
	1/2/11			12/27/09			1/2/11			12/27/09
Net income	$	256.9		$	233.2		$	743.6		$	681.1
Other comprehensive income ("OCI"), net of tax:
Unrealized translation adjustments	2.5			(4.3		)	57.2			97.9
Pension and postretirement obligations	—			0.1			6.9			4.2
Unrealized gain (loss) on derivatives:
Periodic revaluations (net of income tax (benefit) expense of $(0.5), $0.3, $0.1, and $4.0, respectively)	0.4			0.6			3.0			5.0
Reclassification to net income of previously deferred (gains) losses (net of income tax expense (ben efit) of $0.7, $0.0, $1.5 and $(2.2), respectively)	(1.5		)	—			(3.4		)	6.3
Other comprehensive income (loss)	1.4			(3.6		)	63.7			113.4
Comprehensive income attributable to noncontrolling interests	(0.4		)	(0.3		)	(1.1		)	(0.5		)
Total comprehensive income attributable to PCC	$	257.9		$	229.3		$	806.2		$	794.0

Accumulated other compr ehensive loss consisted of the following:

	1/2/11			3/28/10
Cumulative unrealized foreign currency translation losses	$	(19.6	)	< font style="font-family:inherit;font-size:10pt;">$	(76.8	)
Pension and postretirement obligations	(235.8		)	(242.7		)
Unrealized gain on derivatives	1.9			2.3
Accumulated other comprehensive loss	$	(253.5	)	$	(317.2	)

(10) Derivatives and Hedging Activities

We hold and issue derivative financial instruments for the purpose of hedging the risks of certain identifiable and anticipated transactions and to protect our investments in foreign subsidiaries. In general, the types of risks hedged are those relating to the variability of future earnings and cash flows caused by movements in foreign currency exchange rates and changes in commodity prices and interest rates. We document our risk m anagement strategy and hedge effectiveness at the inception of and during the term of each hedge.

Derivative financial instruments are recorded in the financial statements and measured at fair value. Changes in the fair value of derivative financial instruments are either recognized periodically in income or shareholders' equity (as a component of accumulated other comprehensive income (loss)) depending on whether the derivative is being used to hedge changes in fair value, cash flows, or a net investment in a foreign operation. In the normal course of business, we execute the following types of hedge transactions:

Fair value hedges

We have sales and purchase commitments denominated in foreign currencies. Foreign currency forward contracts are used to hedge against the risk of change in the fair value of these commitments attributable to fluctuations in exchange rates. We also have exposure from fluctuations in interest rates. Interest rate swaps are used to hedge against the risk of change in the fair value of fixed rate borrowings attributable to changes in interest rates. Changes in the fair value of the derivative instrument are offset in the income statement by changes in the fair value of the item being hedged.

Net investment hedges

We use foreign currency forward contracts de signated as net investment hedges to hedge net investments in certain foreign subsidiaries whose functional currency is the local currency. The effective portion of the gains and losses on net investment hedge transactions are reported in cumulative translation adjustment as a component of shareholders' equity.

Cash flow hedges

We have exposure from fluctuations in foreign currency exchange rates. Foreign currency forward contracts and options are

9

used to hedge the variability in cash flows from forecast receipts or expenditures denominated in currencies other than the functional currency. We also have exposure from fluctuations in commodity prices. Commodity swaps are used to hedge against the variability in cash flows from forecasted commodity purchases. For cash flow hedge transactions, changes in the fair value of the derivative instruments are reported in accumulated other comprehensive income (loss). The gains and losses on cash flow hedge transactions that are reported in accumulated other comprehensive income (loss) are reclassified to earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portions of all hedges are recognized in current period earnings.

We formally assess, both at the hedge's inception and on an ongoing basis, whether the derivatives that are designated as hedging instruments have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. When it is determined that a derivative is not, or has ceased to be, highly effective as a hedge, we discontinue hedge accounting prospectively.

As of January 2, 2011, there were $2.8 million of deferred net gains (pre-tax) relating to derivative activity in accumulated other comprehensive loss that is expected to be transferred to net earnings over the next twelve months when the forecasted transactions actually occur. As of January 2, 2011, the maximum term over which we are hedging exposures to the variability of cash flows for all forecasted and recorded transactions is 15 months. The amount of net notional foreign exchange contracts outstanding as of January 2, 2011 was approximately $375 million. We believe that there is no significant credit risk associated with the potential failure of any counterparty to perform under the terms of any derivative financial instrument.

The following table presents the fair values of derivative instruments included within the consolidated balance sheet as of January 2, 2011:

	Asset Derivatives			Liability Derivatives
Derivative instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fa ir Value
Foreign exchange contracts	Accounts receivable	$	2.9	Accounts payable	$	2.5
Commodity swap contracts	Accounts receivable	2.9
Interest rate swap contracts	Other assets	1.4
		$	7.2		$	2.5

The following table presents the effect of derivatives not designated as hedging instruments in the consolidated statements of income for the three and nine months ended January 2, 2011:

Derivatives not designated as hedging instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		Three Months Ended		Nine Months Ended
		1/2/11		1/2/11
Foreign exchange contracts	Selling and administrative expense	$	0.8	$	3.1

10

The following table presents the effect of derivatives designated as hedging instruments in the consolidated balance sheet as of January 2, 2011 and the consolidated state ment of income for the three months ended January 2, 2011:

< td style="vertical-align:bottom;background-color:#cceeff;border-top:1px solid #000000;">

Derivatives designated as hedging instruments	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) in Pre-tax Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Pre-tax Income			Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and AmountExcluded from Effectiveness Testing)			Amount of Gain (Loss) Recognized in Income on Derivative				Total Amount of Gain (Loss) Recognized in Pre-tax Income
					(Effective Portion)			(Ineffective Portion)			(Effective Portion)
Cash Flow Hedges: Foreign exchange contracts	$	0.3		Net sales	$	0.7	$	—	&n bsp;	$	—			$	0.7
				Cost of goods sold	0.6			—			—				0.6
				Selling and administrative expense	0.1			—			—				0.1
				Interest income (expense), net	—			0.1			—				0.1
Cash Flow Hedges: Commodity swap contracts	2.5			Cost of goods sold	0.6			—			—				0.6
Net Investment Hedges: Foreign exchange contracts	(0.6		)	Interest income (expense), net	—			—			—				—
Fair Value Hedges: Interest rate swap contracts	—			Selling and administrative expense	—			—			(0.7		)		(0.7		)
				Interest income (expense), net	—			—			0.3				0.3
	$	2.2		Total Pre-tax	$	2.0		$	0.1		$	(0.4	)		$	1.7

11

The following table presents the effect of derivatives designated as hedging instruments in the consolidated balance sheet as of January 2, 2011 and the consolidated statement of income for the nine months ended January 2, 2011:

< tr>< td colspan="2" style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;">

—

Derivatives designated as hedging instruments	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)			Location of Gain (Loss) in Pre-tax Income	Amount of Gain (Loss) Reclassified from Accumulated OCI into Pre-tax Income			Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and AmountExcluded from Effectiveness Testing)			Amount of Gain (Loss) Recognized in Income on Derivative			Total Amount of Gain (Loss) Recognized in Pre-tax Income
					(Effective Portion)			(Ineffective Portion)			(Effective Portion)
Cash Flow Hedges: Foreign exchange contracts	$	0.3		Net sales	$	2.8		$	0.1		$	—		$	2.9
				Cost of goods sold	2.8			(0.1		)	—			2.7
				Selling and administrative expense	0.1			(0.1		)	—			—
				Interest income (expense), net	—			0.3			—			0.3
Cash Flow Hedges: Commodity swap contracts	2.5			Cost of goods sold	0.6		;	—			—			0.6
Net Investment Hedges: Foreign exchange contracts	(0.6		)	Interest income (expense), net	—			—			—			—
Fair Value Hedges: Interest rate swap contracts	—			Selling and administrative expense	—					1.4			1.4
				Interest income (expense), net	—			—			0.8			0.8
	$	2.2		Total Pre-tax	$	6.3		$	0.2		$	2.2		$	8.7

(11) Fair Value Measurements

Fair value guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and e xpands disclosures about fair value measurements. Fair value guidance defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Fair value guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1	Quoted prices in active markets for identical assets or liabilities.
Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following table presents the assets and liabilities measured at fair value on a recurring basis as of January 2, 2011:

	Fair Value Measurements Using							Assets/Liabilities at Fair Value
	Level 1		Level 2		Level 3
Assets:
Trading securities	$	371.9	$	55.0	$	—		$	426.9
Derivative instruments	$	—	$	7.2	$	—		$	7.2
Liabilities:
Derivative instruments	$	—	$	2.5	$	—	&nbs p;	$	2.5

12

The following table presents the assets and liabilities measured at fair value on a recurring basis as of March 28, 2010:

	Fair Value Measurements Using							Assets/Liabilities at Fair Value
	Level 1		Level 2			Level 3
Assets:
Trading securities	$	31.6	$	—		$< /font>	—	$	31.6
Derivative instruments	$	—	$	5.4	;	$	—	$	5.4
Liabilities:
Derivative instruments	$	—	$	2.9		$	—	$	2.9

Trading securities consist of money market funds, commercial paper, and other highly liquid short-term instruments with maturities of three months or less at the time of purchase. These investments are readily convertible to cash with market value approximating cost. There were no transfers between Level 1 and Level 2 fair value measurements during the first nine months of fiscal 2011 and fiscal 2010.

Derivative instruments consist of fair value hedges, net investment hedges, and cash flow hedges. Foreign exchange, commodity swap and interest rate swap contracts' values are determined using pricing models with inputs that are observab le in the market or can be derived principally from or corroborated by observable market data. There were no changes in our valuation techniques used to measure assets and liabilities at fair value on a recurring basis.

We estimate that the fair value of our long-term fixed rate debt instruments was $260.4 million compared to a book value of $236.4 million at January 2, 2011. At March 28, 2010, the estimated fair value of our long-term fixed rate debt instruments was $264.9 million compared to a book value of $249.3 million. The fair value of long-term debt was estimated using our borrowing rate at quarter-end for similar types of borrowing arrangements. The estimated fair value of our miscellaneous long-term debt approximates book value.

(12) Pensions and Other Postretirement Benefit Plans

We sponsor many domestic and foreign defined benefit pension plans. In addition, we offer postretirement medical benefits for certain eligible employees. These plans are more fully described in the “Notes to the Consolidated Financial Statements” included in our Annual Report on Form 10-K for the fiscal year ended March 28, 2010.

The net periodic benefit cost for our pension plans consisted of the following components:

	Three Months Ended						Nine Months Ended
	1/2/11			12/27/09			1/2/11			12/27/09
Service cost	$	9.0		$	7.6		$	27.0		$	24.2
Interest cost	21.8			21.0			65.6			67.5
Expected return on plan assets	(29.8		)	(25.4		)	(89.4		)	(8 1.6		)
Recognized net actuarial loss	4.7			1.0			14.1			3.2
Amortization of prior service cost	0.8			2.9			2.4			9.4
Net periodic benefit cost	$	6.5		$	7.1		$	19.7		$	22.7

The net periodic benefit cost of postretirement benefits other than pensions consisted of the following components:

	Three Months Ended							Nine Months Ended
	1/2/11				12/27/09			1/2/11			12/27/09
Service cost	$	0.1			$	0.3		$	0.6		$	0.9
Interest cost	1.1				2.1			4.3			6.3
Recognized net actuarial loss (gain)	0.1				(0.2		)	0.5			(0.4		)
Amortization of prior service (benefit) cost	(0.1		)		0.2			(0.4		)	0.6
Net periodic benefit cost	$	1.2		< font style="font-family:inherit;font-size:7pt;">	$	2.4		$	5.0		$	7.4

During the three and nine months ended January 2, 2011, we contributed $2.5 million and $107.5 million, respectively, to the defined benefit pension plans, of which $100.0 million was voluntary. We expect to contribute approximately $2.5 million of additional required contributions in fiscal 2011, for total contributions to the defined benefit pension plans of approximately $110.0 million in fiscal 2011. We expect to contribute approximately $10.8 million to the other postretirement benefit plans during fiscal 2011. In addition, we paid $38.3 million in July 2010 to one of our postretirement medical benefit plans that was

13

jointly administered with a union. This payment and the related administrative changes remove PCC and its affiliates from any further financial, administrati ve or fiduciary responsibilities to this plan, and we therefore accounted for these events as a settlement of the plan and reversed the related liability. There was no significant gain or loss associated with the settlement.

(13) Commitments and Contingencies

Various lawsuits arising during the normal course of business are pending against us. In the opinion of management, the outcome of these lawsuits, either individually or in the aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows.

(14) New Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance which requires new disclosures and clarifies existing disclosure requirements for fair value measurements. Specifically, the changes require disclosure of transfers into and out of “Level 1” and “Level 2” (as defined in the accounting guidance) fair value measurements, and also require more detailed disclosure about the activity within “Level 3” (as defined) fair value measurements. This guidance was effective for the Company in the fo urth quarter of fiscal 2010, except for disclosures about purchases, sales, issuances and settlements of Level 3 assets and liabilities, which will be effective in the first quarter of fiscal 2012. As this guidance only requires expanded disclosures, the adoption did not and will not impact our consolidated financial position, results of operations or cash flows.

In October 2009, the FASB issued amendments to the accounting and disclosure for revenue recognition for multiple element arrangements. These amendments modify the criteria for recognizing revenue and require enhanced disclosures for multiple element-deliverable revenue arrangements. This guidance will be effective in the first quarter of fiscal 2012. The adoption of this guidance is not expected to have a significant impact on our consolidated financial position, results of operations or cash flows.

In June 2009, the FASB issued guidance to require an enterprise to perform an analysis to determine whether the enterprise's variable interest gives it a controlling financial interest in a variable interest entity. This guidance was effective in the first quarter of fiscal 2011. The adoption of this guidance did not impact our consolidated financial position, results of operations or cash flows.

(15) Segment Information

Information regarding segments is presented in accordance with segment disclosure guidance. Based on the criteria outlined in this guidance, our operations are classified into three reportable business segments: Investment Cast Products, Forged Products and Fastener Products. The Investment Cast Products and Forged Products segments are each comprised of two operating segments, which are aggregated in accordance with segment disclosure guidance in our determination of reportable segments.

	Three Months Ended						Nine Months Ended
	1/2/11			12/27/09			1/2/11			12/27/09
Net sales:
Investment Cast Products	$	537.7		$	454.7		$	1,536.7		$	1,3 84.4
Forged Products	708.5			587.0			2,008.4			1,642.7
Fastener Products	344.1			322.9			1,000.1			998.4
Consolidated net sales	$	1,590.3		$	1,364.6		$	4,545.2		$	4,025.5
Segment operating income (loss):
Investment Cast Products	$	170.8		$	137.5		$	488.4		$	414.7
Forged Products	141.8			136.4			392.1			397.6
Fastener Products	104.8			105.8			306.0			332. 1
Corporate expenses	(30.5		)	(25.3		)	(85.1		)	(82.0		)
Total segment operating income	386.9			354.4			1,101.4			1,062.4
Interest expense	3.7			4.3			10.5			12.4
Interest income	(1.3		)	(0.6		)	(2.9		)	(2.3		)
Consolidated income before income tax expense and equity in earnings of unconsolidated affiliates	$	384.5		$	350.7		$	1,093.8		$	1,052.3

14

(16) Subsequent Events

On January 3, 2011, we acquired an additional 1% equity interest in Yangzhou Chengde Steel Tube Co., Ltd (“Chengde”) for approximately $7 million in cash, increasing our equity interest to 50%. Chengde is a leading manufacturer of seamless, extruded pipe for boiler applications in coal-fired power plants, as well as pipe and tubing for other energy-related applications, such as compressed natural gas.

(17) Condensed Consolidating Financial Information

Certain of our subsidiaries guarantee our registered securities consisting of $200 million of 5.6% Senior Notes due 2013, as well as our private notes, bank credit facilities and commercial paper (“CP”), when applicable. The following condensed consolidating financial statements present, in separate columns, financial information for (i) Precision Castparts Corp. (on a parent only basis) with its investment in its subsidiaries recorded under the equity method, (ii) guarantor subsidiaries that guarantee the Company's public and private notes, bank credit facilities and CP on a combined basis, with any investments in non-guarantor subsidiaries recorded under the equity method, (iii) direct and indirect non-guarantor subsidiaries on a combined basis, (iv) the eliminations necessary to arrive at the information for the Company and its subsidiaries on a consolidated basis, and (v) the Company on a consolidated basis, in each case for balance sheets as of January 2, 2011 and March 28, 2010, statements of income for the three and nine months ended January 2, 2011 and December 27, 2009, and statements of cash flows for the nine months ended January 2, 2011 and December 27, 2009. The public and private notes, bank facility and CP are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantor subsidiaries include our domestic subsidiaries within the Investment Cast Products, Forged Products and Fastener Products segments that are 100% owned, directly or indirectly, by the Company within the meaning of Rule 3-10(h)( 1) of Regulation S-X. There are no contractual restrictions limiting transfers of cash from guarantor and non-guarantor subsidiaries to the parent company, Precision Castparts Corp. The condensed consolidating financial information is presented herein, rather than separate financial statements for each of the guarantor subsidiaries, because guarantors are 100% owned and the guarantees are full and unconditional, joint and several.

The parent company had positive cash flows from operations for the nine months ended January 2, 2011. The positive operating cash flows are due to a variety of factors, including the application of tax overpayments from the prior year's tax returns to reduce quarterly estimated tax payments, the tax benefit on the book expense recorded for stock based compensation expense, and timing differences on intercompany charges from the parent to the subsidiaries as those charges are often settled with subsidiaries prior to the payment to our third party vendors. In addition, a significant portion of the parent company’s expenses, such as stock based compensation expense, do not result in a current period cash outflow.

15

Condensed Consolidating Statements of Income

Three Months Ended January 2, 2011

(Unaudited)

(In millions)

	Precision Castparts Corp.				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Total
Net sales	$	—			$	1,305.8			$	352.1			$	(67.6	)		$	1,590.3
Operating costs and expenses:
Cost of goods sold	4.5				881.8				283.0				(67.6		)		1,101.7
Selling and administrative expenses	23.6				56.5				21.6				—				101.7
Other (income) expense	(0.3		)		(0.1		)		0.4				—				—
Interest (income) expense, net	(12.9	)		16.3				(1.0		)		—				2.4
Equity in earnings of subsidiaries< /div>	(265.1		)		4.1				—				261.0				—
Total operating costs and expenses	(250.2		)		958.6				304.0				193.4				1,205.8
Income (loss) before income tax and equity in earnings of unconsolidated affiliates	250.2				347.2				48.1				< font style="font-family:inherit;font-size:10pt;">(261.0		)		384.5
Income tax benefit (expense)	6.3				(117.2		)		(17.0		)		—				(127.9		)
Equity in earnings of unconsolidated affiliates	—				0.2				2.3				—				2.5
Net income (loss) from continuing operations	256.5				230.2				33.4				(261.0		)		259.1
Net loss from discontinued operations	—				(0.3		)		(1.9		)		—			(2.2		)
Net income (loss)	256.5			&nbs p;	229.9				31.5				(261.0		)		256.9
Net income attributable to noncontrolling interests	—				—				(0.4		)		—				(0.4		)
Net income (loss) attributable to PCC	$	256.5			$	229.9			$	31.1			$	(261.0	)		$	256.5

Condensed Consolidating Statements of Income

Three Months Ended December 27, 2009

(Unaudited)

< font style="font-family:inherit;font-size:10pt;">(In millions)

Precision Castparts Corp.

Guarantor Subsidiaries

Non- Guarantor Subsidiaries

Eliminations

Total

Net sales

$

—

$

1,134.4

$

270.7

$

(40.5

)

$

1,364.6

Operating costs and expenses:

Cost of goods sold

3.4

761.8

196.9

(40.5

)

921.6

Selling and administrative expenses

19.4

47.4

21.8

—

88.6

Other (income) expense

(0.5

)

—

0.5

—

—

Interest (income) expense, net

(10.3

)

14.4

(0.4

)

—

3.7

Equity in earnings of subsidiaries

(241.4

)

(10.3

)

—

251.7

—

Total operating costs and expenses

(229.4

)

813.3

218.8

211.2

1,013.9

Income (loss) before income tax and noncontrolling interest

229.4

321.1

51.9

(251.7

)

350.7

Income tax benefit (expense)

3.5

(114.8

)

(10.5

)

—

(121.8

)

Net income (loss) from continuing operations

232.9

206.3

41.4

(251.7

)

228.9

Net income (loss) from discontinued operations

—

6.2

(1.9

)

—

4.3

Net income (loss)

232.9

212.5

39.5

(251.7

)

233.2

Net income attributable to noncontrolling interests

—

(0.2

)

(0.1

)

—

(0.3

)

Net income (loss) attributable to PCC

$

232.9

$

212.3

$

39.4

$

(251.7

)

$

232.9

16

Condensed Consolidating Statements of Income

Nine Months EndedJanuary 2, 2011

(Unaudited)

(In millions)

	Precision Castparts Corp.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Total
Net sales	$	—		$	3,837.4		$	916.8		$	(209.0	)	$	4,545.2
Operating costs and expenses:
Cost of goods sold	12.8			2,616.5			725.3			(209.0		)	3,145.6
Selling and administrative expenses	65.4			171.1			61.7			—			298.2
Other expense (income)	3.8			(1.8		)	(2.0		)	—			—
Interest (income) expense, net	(35.9		)	45.7			(2.2		)	—			7.6
Equity in earnings of subsidiaries	(769.6		)	(26.3		)	—			795.9			—
Total operating costs and expenses	(723.5		)	2,805.2			782.8			586.9			3,451.4
Income (loss) before income tax and equity in earnings of unconsolidated affiliates	723.5			1,032.2			134.0			(795.9		)	1,093.8
Income tax benefit (expense)	19.0			(348.2		)	(39.6		)	—			(368.8		)
Equity in earnings of unconsolidated affiliates	—			0.9			13.6			—			14.5
Net income (loss) from continuing operation s	742.5			684.9			108.0			(795.9		)	739.5
Net income (loss) from discontinued operations	—			6.5			(2.4		)	—			4.1
Net income (loss)	742.5			691.4			105.6			(795.9		)	743.6
Net income attributable to noncontrolling interests	—			—			(1.1		)	—			(1.1		)
Net income (loss) attributable to PCC	$	742.5		$	691.4		$	104.5		$	(795.9	)	$	742.5

Condensed Consolidating Statements of Income

Nine Months EndedDecember 27, 2009

(Unaudited)

(In millions)

< td colspan="2" style="vertical-align:bottom;padding-left:2px;padding-top:2px;padding-bottom:2px;border-bottom:1px solid #000000;">

588.1

	Precision Castparts Corp.			Guarantor Subsidiaries			Non- < font style="font-family:inherit;font-size:8pt;font-weight:bold;">Guarantor Subsidiaries				Eliminations			Total
Net sales	$	—		$	3,326.7		$	844.3			$	(145.5	)	$	4,025.5
Operating costs and expenses:
Cost of goods sold	9.2			2,200.0			626.6				(145.5		)	2,690.3
Selling and administrative expenses	65.9			141.6			65.3				—			272.8
Other (income) expense	(1.5		)	(1.7		)	3.2				—			—
Interest (income) expense, net	(35.0		)	46.9			(1.8		)		—			10.1
Equity in earnings of subsidiaries	(707.4		)	(26.2		)	—				733.6			—
To tal operating costs and expenses	(668.8		)	2,360.6			693.3						2,973.2
Income (loss) before income tax and noncontrolling interest	668.8			966.1			151.0		&n bsp;		(733.6		)	1,052.3
Income tax benefit (expense)	11.8			(336.2		)	(39.6		)		—			(364.0		)
Net income (loss) from continuing operations< /font>	680.6			629.9			111.4				(733.6		)	688.3
Net loss from discontinued operations	—			(0.6		)	(6.6		)		—			(7.2		)
Net income (loss)	680.6			629.3			104.8				(733.6		)	681.1
Net (income) loss attributable to noncontrolling interests	—			(0.7		)	0.2				—			(0.5		)
Net income (loss) attributable to PCC	$	680.6		$	628.6		$	105.0		& nbsp;	$	(733.6	)	$	680.6

17

Condensed Consolidating Balance Sheets

January 2, 2011

(Unaudited)

(In millions)

	Precision Castparts Corp.		Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Total
Assets
Current assets:
Cash and cash equivalents	$	659.0			$	—			$	166.5			$	(2.7	)		$	822.8
Receivables, net	46.0				3,348.7				59.5				(2,600.9		)		853.3
Inventories	—				1,241.2				279.3				—				1,520.5
Prepaid expenses and other current assets	1.5				11.2				10.3				—				23.0
Income tax receivable	33.1				—				—				(14.9		)		18.2
Deferred income taxes	6.6				—				5.7				(5.6		)		6.7
Discontinued operations	—				5.9				99.6				(94.9		)		10.6
Total current assets	746.2			4,607.0				620.9				(2,719.0		)		3,255.1
Property, plant and equipment, net	1.4				846.7				342.2				—				1,190.3
Goodwill	—			;	2,323.6				550.6				—				2,874.2		< font style="font-family:inherit;font-size:10pt;">
Deferred income taxes	17.1				—				—				(17.1		)		—
Investments in subsidiaries	8,953.1				418.0				—				(9,371.1		)		—
Other assets	186.3				519.5				482.1				—				1,187.9
Discontinued operations	—				29.9				16.4				—			;	46.3
	$	9,904.1			$	8,744.7			$	2,012.2			$	(12,107.2	)		$	8,553.8
Liabilities and Equity	< /div>
Current liabilities:
Long-term debt currently due and short-term borrowings	$	14.5			$	0.1			$	0.2			$	—			$	14.8
Accounts payable	2,651.0				436.9				150.7				(2,684.3		)		554.3
Accrued liabilities	22.9				224.9				44.7				(1.1		)		291.4
Income taxes payable	—				—				14.9< /font>				(14.9		)		—
Deferred income taxes	—				5.6				—				(5.6		)		—
Discontinued operations	—				19.4				0.7				(14.2		)		5.9
Total current liabilities	2,688.4				686.9				211.2				(2,720.1		)		866.4
Long-term debt	215.9				0.2				6.0				—				222.1
Deferred income taxes	—				153.5				56.5				(17.1		)		192.9
Pension and other postretirement benefit obligations	160.7				83.0				6.3				—		;		250.0
Other long-term liabilities	26.2				172.7				8.1				—				207.0
Discontinued operations	—				2.1				0.4				—				2.5
Commitments and contingencies
Shareholders' equity:
Common stock and paid-in capital	1,533.3				3,544.9				1,108.0				(4,652.9		)		1,533.3
Retained earnings	5,530.0				4,194.9				693.4				(4,888.3		)		5,530.0
Accumulated other comprehensive (loss) income	(250.4		)		(93.5		)		(80.8		)		171.2				(253.5		)
Total PCC shareholders' equity	6,812.9				7,646.3				1,720.6				(9,370.0		)	&nb sp;	6,809.8
Noncontrolling interest	—				—				3.1				—				3.1
Total equity	6,812.9				7,646.3				1,723.7				(9,370.0		)		6,812.9
	$	9,904.1			$	8,744.7			$	2,012.2			$	(12,107.2	)		$	8,553.8

18

Condensed Consolidating Balance Sheets

March 28, 2010

(Unaudited)

(In millions)

	Precision Castparts Corp.				Guarantor Subsidiaries			& nbsp;	Non- Guarantor Subsidiaries				Eliminations				Total
Assets
Current assets:
Cash and cash equivalents	$	14.8			$	1.3	&nbs p;		$	96.3			$	—			$	112.4
Receivables, net	46.1				2,777.6				74.1				(2,051.2		)		846.6
Inventories	—				1,183.3				252.0				—				1,435.3
Prepaid expenses and other current assets	3.2				7.4				11.1				—				21.7
Income tax receivable	85.3				—				—				(6.6		)		78.7
Deferred income taxes	5.6				—				3.3				(5.5		)		3.4
Discontinued operations	—			34.5				87.6				(98.1		)		24.0
Total current assets	155.0				4,004.1				524.4				(2,161.4		)		2,522.1
Property, plant and equipment, net	1.8				871.6				333.1				—				1,206.5
G oodwill	—				2,323.2				512.7				—				2,835.9
Deferred income taxes	62.3				—				—				< font style="font-family:inherit;font-size:10pt;">(62.3		)		—
Investments in subsidiaries	8,104.2				435.9				—				(8,540.1		)		—
Other assets	118.8				483.9				441.7				—				1,044.4
Discontinued operations	—				32.2				19.6				—				51.8
	$	8,442.1			$	8,150.9			$	1,831.5		$	(10,763.8	)		$	7,660.7
Liabilities and Equity
Current liabilities:
Long-term debt currently due and short-term borrowings	$	14.7			$	0.2			$	0.2			$	—			$	15.1
Accounts payable	2,110.0				458.8				162.3				(2,149.3		)		581.8
Accrued liabilities	23.5				216.4				47.0				(1.1		)		285.8
Income taxes payable	—				—				6.6				(6.6	)		—
Deferred income taxes	—				< div style="text-align:right;font-size:10pt;">5.5				—				(5.5		)		—
Discontinued operations	—				8.5				2.6				—				11.1
Total current liabilities	2,148.2				689.4				218.7				(2,162.5		)		893.8
Long-term debt	228.6				0.3				6.0				—				234.9
Deferred income taxes	—				144.8				55.1				(62.3		)		137.6
Pension and other postretirement benefit obligations	147.0				130.7				6.7				—				284.4
Other long-term liabilities	26.6				177.9				7.7				—				212.2
Discontinued operations	—				5.7				0.4				—				6.1
Commitments and contingencies													& nbsp;
Shareholders' equity:
Common stock and paid-in capital	1,405.7				3,654.8				1,072.2				(4,727.0		)		1,405.7
Retained earnings	4,800.3				3,454.8				594.2				(4,049.0		)		4,800.3
Accumulated other comprehensive (loss) income	(314.3		)		(108.0		)		(131.9		)		237.0				(317.2		)
Total PCC shareholders' equity	5,891.7				7,001.6				1,534.5				(8,539.0		)		5,888.8
Noncontrolling interest	—				0.5				2.4				—				2.9
Total equity	5,891.7				7,002.1				1,536.9				(8,539.0		)		5,891.7
	$	8,442.1			$	8,150.9			$	1,831.5			$	(10,763.8	)		$	7,660.7

19

Condensed Consolidating Statements of Cash Flows

Nine Months EndedJanuary 2, 2011

(Unaudited)

(In millions)

	Precision Castparts Corp.			Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Total
Net cash provided (used) by operating activities	$	63.1		$	606.4			$	65.2			$	(2.7	)		$	732.0
Acquisitions of businesses	(25.0		)	(12.2		)		—				—				(37.2		)
Investment in unconsolidated affiliates	— < /td>			—				(4.1		)		—				(4.1		)
Capital expenditures	—			(58.0		)		(25.7		)		—				(83.7		)
Intercompany advances	—			(555.3		)		18.7				536.6				—
Intercompany loans	(7.2		)	—				—				7.2				—
Dispositions of businesses and other	14.9			19.2				(7.7		)		—				26.4
Net cash provided (used) by investing activities of discontinued operations	—			0.2				5.3				(3.3		)		2.2
Net cash (used) provided by investing activities	(17.3		)	(606.1		)		(13.5		)		540.5				(96.4		)
Net change in long-term debt	(14.3		)	(0.2		)		—				—				(14.5		)
Common stock issued	69.1			—				—				&mdas h;				69.1
Excess tax benefits from share-based payment arrangements	23.1			—				—				&mdas h;				23.1
Cash dividends	(12.8		)	—				—				—				(12.8		)
Intercompany advances	533.3			—				—				(533.3		)		—
Intercompany loans	—			(1.4		)		8.6				(7.2		)		—
Other financing activities	—		< /font>	—				(0.9		)		—				(0.9		)
Net cash provided (used) by financing activities	598.4			(1.6		)		7.7				(540.5		)		64.0
Effect of exchange rate changes on cash and cash equivalents	—			—				10.8				—				10.8
Net increase (decrease) in cash and cash equivalents	644.2			(1.3		)		70.2				(2.7		)		710.4
Cash and cash equivalents at beginning of period	14.8			1.3			96.3				—				112.4
Cash and cash equivalents at end of period	$	659.0		$	—			$	166.5			$	(2.7	)		$	822.8

20

Condensed Consolidating Statements of Cash Flows

Nine Months EndedDecember 27, 2009

(Unaudited)

(In millions)

< /tr>

	Precision Castparts Corp.				Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations				Total
Net cash (used) provided by operating activities	$	(76.4	)		$	568.3		$	146.0		$	& mdash;			$	637.9
Acquisitions of businesses	(867.3		)		—			—			—				(867.3		)
Capital expenditures	(0.3		)		(65.5		)	(72.1		)	&m dash;				(137.9		)
Intercompany advances	—				(494.7		)	36.6			458.1				—
Intercompany loans	10.1				—			—			(10.1	)		—
Dispositions of businesses and other	—				(4.7		)	(13.7		)	—				(18.4		)
Net cash (used) provided by investing activities of discontinued operations	—				(3.8		)	(14.2		)	17.7				(0.3		)
Net cash (used) provided by investing activities	(857.5		)		(568.7		)	(63.4		)	465.7				(1,023.9		)
Net change in long-term debt	(21.1		)		(0.2		)	5.1			—				(16.2		)
Common stock issued	54.5				—			—			—				54.5
Excess tax benefits from share-based payment arrangements	16.6				—			—			—				16.6
Cash dividends	(12.7		)	&nbs p;	—			—			—				(12.7		)
Intercompany advances	475.8				—			—			(475.8		)		—
Intercompany loans	—				—			(10.1		)	10.1				—
Net cash used by financing activities of discontinued operations	—				(0.2		)	—			—				(0.2		)
Net cash provided (used) by financing activities	513.1				(0.4		)	(5.0		)	(465.7		)		42.0
Effect of exchange rate changes on cash and cash equivalents	—				—			7.9			—				7.9
Net (decrease) increase in cash and cash equivalents	(420.8		)		(0.8		)	85.5			—				(336.1		)
Cash and cash equivalents at beginning of period	423.2			< /td>	1.9			129.4			—				554.5
Cash and cash equivalents at end of period	$	2.4			$	1.1		$	214.9		$	—			$	218.4

21

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Consolidated Results of Operations - Comparison Between Three Months Ended January 2, 2011 and December 27, 2009

	Three Months Ended							Increase/(Decrease)
(in millions, except per share and per pound data)	1/2/11				12/27/09			$			%
Net sales	$	1,590.3			$	1,364.6		$	225.7		16.5	%
Operating costs and expenses:
Cost of goods sold	1,101.7				921.6			180.1			19.5
Selling and administrative expenses	101.7				88.6			13.1			14.8
Interest expense, net	2.4				3.7			(1.3		)	(35.1	)
Total operating costs and expenses	1,205.8				1,013.9			191.9			18.9
Income before income tax expense and equity in earnings of unconsolidated affiliates	384.5				350.7		&nbs p;	33.8			9.6
Income tax expense	(127.9		)		(121.8		)	(6.1		)	5.0
Effective tax rate	33.3		%		34.7		%
Equity in earnings of unconsolidated affiliates	2.5				—			2.5			100.0
Net income from continuing operations	259.1				228.9			30.2			13.2
Net (loss) income from discontinued operations	(2.2		)		4.3			(6.5		)	(151.2	)
Net income	256.9				233.2			23.7			10.2
Net income attributable to noncontrolling interests	(0.4		)		(0.3		)	(0.1		)	33.3
Net income attributable to Precision Castparts Corp. (“PCC”)	$	256.5			$	232.9		$	23.6		10.1	%
Net income (loss) per common share attributable to PCC shareholders - diluted:				& nbsp;
Net income per share from continuing operations - diluted	$	1.80			$	1.61		$	0.19		11.8	%
Net (loss) income per share from discontinued operations - diluted	(0.02		)		0.03			(0.05		)	(166.7	)
Net income per share - diluted	$	1.78			$	1.64		$	0.14		8.5	%

Average market price of key metals (per pound)	Three Months Ended				Increase/(Decrease)
	1/2/11		12/27/09		$			%
Nickel	$	10.70	$	7.95	$	2.75		35	%
London Metal Exchange1
Titanium	$	4.71	$	1.84	$	2.87		156	%
Ti 6-4 bulk, Metalprices.com
Cobalt	$	18.83	$	19.61	$	(0.78	)	(4	)%
Metal Bulletin COFM.8 Index1

¹  Source: Bloomberg

Intercompany sales1	Three Months Ended				Increase/(Decrease)
	1/2/11		12/27/09		$			%
Investment Cast Products2	$	56.6	$	45.4	$	11.2		25	%
Forged Products3	173.6		19 1.0		(17.4		)	(9	)
Fastener Products4	25.3		19.2		6.1			32
Total intercompany sales	$	255.5	$	255.6	$	(0.1	)	(0	)%

1	Intercompany sales consist of each segment's total intercompany sales, including intercompany sales within a segment and between segments.
2	Investment Cast Products: Includes sales between segments of $6.8 million and $4.5 million for the third quarter of fiscal 2011 and 2010, respectively.
3	Forged Products: Includes sales between segments of $15.5 million and $13.7 million for the third quarter of fiscal 2011 and 2010, respectively.
4	Fastener Products: Includes sales between segments of $1.0 million and $0.3 million for the third quarter of fiscal 2011 and 2010, respectively.

22

Sales for the third quarter of fiscal 2011 were $1,590.3 million, up $225.7 million, or 16.5% from $1,364.6 million in the same quarter last year. The increase in sales was driven by strong aerospace recovery of approximately $158 million, or 21%, as our aerospace customer order schedules have aligned with aircraft delivery schedules, driving higher volumes and better operating leverage. General industrial sales increased approximately $69 million, or 27%, due to market strength and market share gains. Industrial gas turbine (“IGT”) sales also contributed to the increase over the prior year. These increases were partially offset by lower seamless pipe sales in the current quarter, decreasing approximately $47 million, or 34%, year over year. Contractual material pass-through pricing increased sales by approximately $55 million in the current quarter versus approximately $60 million in the same quarter last year. Contractual material pass-through pricing adjustments are calculated based on average market prices as shown in the above table in trailing periods ranging from approximately one to twelve months. Higher external selling prices of nickel alloy from the Forged Products segment's three primary mills, which increased 35 % on the London Metal Exchange (LME) compared to the same quarter last year, added approximately $27 million to top-line revenues in the current quarter versus a year ago.

With regard to growth in the commercial aircraft industry, based on data from the Airline Monitor as of January 2011, Boeing and Airbus aircraft deliveries are expected to moderately increase through calendar year 2011 as compared to 2010. Due to manufacturing lead times and scheduled build rates, our production volumes are generally 6 to 9 months ahead of aircraft deliveries. The Airline Monitor is projecting further growth in aircraft deliveries in calendar year 2012, and therefore we anticipate that our aerospace sales will continue to increase modestly through the fourth quarter of fiscal 2011 and into fiscal 2012.

Net income from continuing operations attributable to PCC for the third quarter of fiscal 2011 was $258.7 million, or $1.80 per share (diluted) compared to net i ncome from continuing operations attributable to PCC for the third quarter of fiscal 2010 of $228.6 million, or $1.61 per share (diluted). Net income attributable to PCC (including discontinued operations) for the third quarter of fiscal 2011 was $256.5 million, or $1.78 per share (diluted), compared with net income attributable to PCC of $232.9 million, or $1.64 per share (diluted), in the same period last year.

Interest and Income Tax

Net interest expense for the third quarter of fiscal 2011 was $2.4 million, compared with $3.7 million for the third quarter last year. The lower net expense is primarily due to reduced interest expense resulting from lower debt balances and increased interest income resulting from higher cash balances.

The effective tax rate for the third quarter of fiscal 2011 was 33.3%, 1.4 percentage points lower than the 34. 7% effective rate in the same quarter last year. The lower effective rate in the current quarter is primarily due to increased benefits from the federal manufacturing deduction and the extension of the research and development tax credit that had previously expired on December 31, 2009.

Acquisitions

Fiscal 2010

On January 15, 2010, we acquired a 49% equity interest in Yangzhou Chengde Steel Tube Co., Ltd (“Chengde”) for approximately $355 million in cash, comprised of approximately $115 million of cash on hand and the proceeds of approximately $240 million of commercial paper debt issuance (subsequently repaid). This investment is accounted for under the equity method as we have significant influence over, but not control of, the major operating and financial policies of Chengde. The carrying value of this investment as of January 2, 2011 was $382.3 million and was included in investment in unconsolidated affiliates in our consolidated balance sheet. The carrying value of our investment in Chengde exceeded the amount of underlying equity in net assets of Chengde by approximately $175 million as of the date we acquired Chengde. This difference arose through the valuation process that was applied to the assets acquired. Chengde is a leading manufacturer of seamless, extruded pipe for boiler applications in coal-fired power plants, as well as pipe and tubing for other energy-related applications, such as compressed natural gas. The company operates from one facility with a manufacturing footprint of nearly 6 million square feet, in the Jiangsu Province of China. Chengde has built a l eading position in the Chinese boiler pipe market and has begun to make inroads into export markets. Refer to Subsequent Events section for further discussion.

On September 30, 2009, we completed the acquisition of Carlton Forge Works and a small, related entity for approximately $847 million in cash, comprised of approximately $502 million of cash on hand (reduced $3 million due to subsequent working capital adjustments) and the proceeds of approximately $345 million of commercial paper debt issuance (subsequently repaid). Carlton, a leading manufacturer of seamless rolled rings for critical aerospace applications, offers nickel, titanium, and steel rolled rings across the widest range of product sizes in the industry. Carlton broadens our forging capabilities and enables us to provide a full range of forged products to our aerospace engine customers. The Carlton acquisition is an asset purchase for tax purposes and operates as part of our Forged Products segment. This transaction resulted in $400.1 million of goodwill (which is deductible for tax purposes) and $336.7 million of other intangible assets, including tradenames with indefinite lives valued at $89.1 million, customer relationships with indefinite lives valued at $204.8 million, customer relationships with finite lives

23

valued at $3.7 million, backlog valued at $10.2 million and revenue sharing agreements valued at $28.9 million. We also recorded a long-term liability related to the fair value of a pre-existing revenue sharing agreement valued at $92.0 million. The impact of this acquisition was not material to our consolidated results of operations; consequently, pro forma information has not been included.

The preceding business acquisition was accounted for under the acquisition method of accounting and, accordingly, the results of operations have been included in the Consolidated Statements of Income since the acquisition date.

Discontinued Operations

Net loss from discontinued operations was $2.2 million, or $0 .02 per share (diluted), for the third quarter of fiscal 2011 compared with net income of $4.3 million, or $0.03 per share (diluted), in the same period last year. Net loss from discontinued operations in the current quarter primarily includes the release of the accumulated currency translation adjustment component of equity for entities which have been substantially liquidated. Net income from discontinued operations in the same quarter of last year includes an income tax benefit related to the reversal of a U.S. capital loss valuation allowance associated with a capital gain that was recognized on the sale of a small non-core business in the Investment Cast Products segment.

Impacts of the Global Economic Recession and Program Delays

Economic events created recessionary economic conditions around the world in many industries in fiscal 2009 and 2010. Although many countries and industries are recovering, weakness persists in certain areas. While we are not immune to impacts from the global recession, we believe our strong financial position enables us to take advantage of opportunities in our markets served, continue to make operational improvements in our businesses and benefit from the economic recovery.

During fiscal 2010 and the first nine months of fiscal 2011, approximately 54 percent and 57 percent, respectively, of our sales were to customers in the global aerospace markets. Until the recession occurred and aerospace program delays were announced, customer schedules indicated that the aerospace production rates would continue to experience growth throughout fiscal 2010 and possibly beyond, particularly due to anticipated build rates of major new aerospace programs such as the Boeing 787 and Airbus A380, each of which contains significant per-ship-set revenue for PCC. Aerospace production rates have begun to recover in the first nine months of fiscal 2011 as compared with fiscal 2010 levels, and we have seen a realignment of component build rates and aircraft production schedules indicating an end to destocking in the supply chain. We expect to see further order increases as Boeing 787 production starts to ramp up in the latter half of fiscal 2012, as well as increased build rates on other commercial aircraft model production during fiscal 2012. Our most significant customers in the aerospace industry are primarily large, well-financed businesses that we believe have the ability to weather economic downturns. Therefore, while there is still significant uncertainty as to the direction of the economy in future periods, we have not experienced and do not anticipate significant collection issues with our accounts receivable or marketability of our i n-process inventories. However, our customers depend on demand from their end-use customers, as well as the end-use customers' financial viability, of which we are unable to make an assessment. We must rely on the forecasted information provided from time to time by our customers as guidance with regard to the impacts from the current and future economic environment.

During fiscal 2010 and the first nine months of fiscal 2011, approximately 27 percent and 22 percent, respectively, of our sales were to customers in the global power markets, which include our IGT business as well as sales of our seamless extruded pipe. Demand in our original equipment manufacturer (“OEM”) IGT markets has softened, and during the latter half of fiscal 2010, we experienced the beginning of destocking by our European customers, which continued through the first half of our fiscal 2011. Starting in the fourth quarter of fiscal 2010 and continuing through the first nine months of fiscal 2011, we have experienced significant sales declines in our seamless pipe products as Chinese customers utilize existing inventory. Our most significant customers in the power markets are primarily large, well-financed businesses that we believe should have the ability to weather economic downturns or are customers for which sales are backed by letters of credit on which we believe there is little risk of default. Therefore, we have not experienced and do not anti cipate significant collection issues with our accounts receivable or marketability of our in-process inventories. However, our customers depend on demand from their end-use customers, as well as the end-use customers' financial viability, of which we are unable to make an assessment. We must rely on the forecasted information provided from time to time by our customers as guidance with regard to the impacts from the current and future economic environment.

The remaining 19 percent and 21 percent of our respective sales in fiscal 2010 and the first nine months of fiscal 2011 were into general industrial markets. It is difficult to summarize the opportunities and challenges in these markets, because the circumstances vary widely from one individual market to another. We have taken, and will continue to take, precautionary measures with customers in these markets to limit our exposure, to the extent possible, to potential bankruptcies and other financial issues experienced by these customers which, although lessening, continued through the first nine months of fiscal 2011. These measures include shortening cash collection terms, regular updating of credit profiles, discontinuance of further business with customers not paying in a timely manner and the requirement of cash in advance of shipments, among others.

24

Due to the diversity of markets and customer profiles in these businesses and the precautionary steps referred to previously, we have not experienced and do not anticipate severe impacts on our business or significant exposure to credit losses in these markets. However, it is possible that we may experience unanticipated unfavorable impacts.

Impact on Pension Plans and Investments

We follow an investment philosophy of diversified investing and risk mitigation in managing our pension plans. The investments in our pension plans totaled approximately $1.5 billion at the end of fiscal 2010. During the first nine months of fiscal 2011, we contributed $107.5 million to our defined benefit pension plans, including voluntary contributions of $100.0 million. We believe our financial position and liquidity will allow us to make all required pension contributions as well as any additional voluntary contributions that management deems advisable.

See the Changes in Financial Condition and Liquidity section for a discussion of the impact of the global financial climate and current financial market conditions.

Subsequent Events

On January 3, 2011, we acquired an additional 1% equity interest in Yangzhou Chengde Steel Tube Co., Ltd (“Chengde”) for approximately $7 million in cash, increasing our equity interest to 50%. Chengde is a leading manufacturer of seamless, extruded pipe for boiler applications in coal-fired power plants, as well as pipe and tubing for other energy-related applications, such as compressed natural gas.

25

Results of Operations by Segment - Comparison Between Three Months Ended January 2, 2011 and December 27, 2009

< td style="vertical-align:bottom;background-color:#cceeff;padding-left:2px;padding-top:2px;padding-bottom:2px;padding-right:2px;">

(in millions)	Three Months Ended								Increase/(Decrease)
	1/2/11				12/27/09				$				%
Net sales:
Investment Cast Products	$	537.7			$	454.7			$	83.0			18.3	%
Forged Products	708.5				587.0				121.5				20.7
Fastener Products	344.1				322.9				21.2				6.6
Consolidated net sales	$	1,590.3			$	1,364.6			$	225.7			16.5	%
Segment operating income (loss):
Investment Cast Products	$	170.8			$	137.5			$	33.3			24.2	%
% of sales	31.8		%		30.2		%
Forged Products	141.8				136.4				5.4				4.0
% of sales	20.0		%		23.2		%
Fastener Products	104.8				105.8				(1.0		)		(0.9	)
% of sales	30.5		%		32.8		%
Corporate expenses	(30.5		)	(25.3		)	< /td>	(5.2		)		20.6
Total segment operating income	386.9				354.4				$	32.5			9.2	%
% of sales	24.3		%		26.0		%
Interest expense, net	2.4				3.7
Consolidated income before income tax expense and equity in earnings of unconsolidated affiliates	$	384.5			$	350.7						&n bsp;

Investment Cast Products

Investment Cast Products' sales increased 18.3% from $454.7 million in the third quarter of fiscal 2010 to $537.7 million this year. Operating income increased 24.2% from $137.5 million in the third quarter of fisca l 2010 to $170.8 million in the same quarter this year. Operating income as a percent of sales increased from 30.2% to 31.8% of sales. Year-over-year, aerospace sales increased approximately $81 million, or 31%, due to increasing volume on long-lead time castings for the base commercial aircraft programs after an extended period of customer destocking. IGT sales were relatively flat year over year. The segment's operating income as a percent of sales increased by 1.6 percentage points over the prior year driven by aerospace volume growth, combined with strong productivity and other variable cost improvements in the segment's manufacturing operations, decreased labor rates and increased utilization of lower cost manufacturing in Mexico. Contractual pricing related to pass-through of increased material costs was approximately $13 million in the third quarter of fiscal 2011 as compared to approximately $10 million in the same period last year. Contractual material pass-through pricing diluted operating margins by 0.8 percentage points in the third quarter of fiscal 2011 compared to 0.7 percentage points in the third quarter of fiscal 2010.

Investment Cast Products' segment sales will continue to benefit from further strength in base aerospace programs. We anticipate modest aerospace OEM and aftermarket sales growth in the fourth quarter of fiscal 2011, improving in fiscal 2012 as Boeing 787 production ramps up in the latter half of the fiscal year and delivery schedules of base commercial narrow-body and wide-body programs increase.

Forged Products

Forged Products' sales were $708.5 million for the quarter, an increase of 20.7%, compared to sales of $587.0 million in the third quarter of fiscal 2010. Operating income increased 4.0% from $136.4 million in the third quarter of fiscal 2010 to $141.8 million in the same quarter this year, while operating income as a percent of sales decreased from 23.2% to 20.0%. Similar to Investment Cast Products, this segment continues to see a recovery of aerospace customer order schedules, signaling an end to customer destocking, as sales improved by approximately $69 million, or 27%, year-over-year. General industrial sales showed significant improvemen t from last year's lows, increasing approximately $56 million, or 49%, over the prior year, due to both improving world economies and market share gains. IGT sales also increased year over year in this segment. Offsetting these increases was a significant decline in seamless pipe sales of approximately $47 million, or 34%, as Chinese customers continue to utilize existing inventory. Contractual material pass-through pric ing contributed approximately $39 million of sales in the third quarter of fiscal 2011 compared to approximately $48 million of sales in the prior year. Higher external selling prices of nickel alloy from the segment's three primary mills, which increased 35% on the London Met al Exchange (LME) compared to the same quarter last year, added approximately $27 million to top-line revenues in the current quarter versus a year ago. Operating income as a percent of sales decreased 3.2 percentage points compared to a year ago due to the negative impact of reduced seamless pipe volume coupled with growth in the segment's lower margin general industrial markets. Contractual pass-

26

th rough of higher raw material costs diluted operating margins by 1.2 percentage points in the current quarter compared to 2.1 percentage points the same period a year ago.

Seamless pipe shipments are expected to begin to recover by the end of the fourth quarter of fiscal 2011 as shipments to India and China increase and then build through fiscal 2012 as new construction projects in these countries get underway. Forged Products' segment sales will also continue to benefit from increases in general industrial and aerospace volumes in the fourth quarter of fiscal 2011 and beyond as narrow-body and wide-body schedules start to accelerate and in the latter half of fiscal 2012 as Boeing 787 production starts to ramp up.

Fastener Products

The Fastener Products segment reported $344.1 million of sales with operating income of $104.8 million, or 30.5% of sales, in the third quarter of fiscal 2011, compared to sales of $322.9 million and operating income of $105.8 million, or 32.8% of sales, in the third quarter of fiscal 2010. General industrial sales grew by approximately 14% as a result of market share gains. Aerospace sales also grew by approximately 4% primarily due to increasing share in new product families, along with aerospace OEM orders coming into line with aircraft build rates and slightly improved aftermarket activity. While distributor demand is holding steady, it is showing minimal signs of growth. Despite continued performance improvements throughout the Fastener Products' operations, margins decreased year over ye ar due to the lower margins on the increased volume of less complex fasteners sold and growth in the general industrial markets.

Fastener Products' segment sales are expected to hold steady in the fourth quarter of fiscal 2011 and grow modestly in fiscal 2012 as demand starts to return for the segment's core product lines. We also foresee demand recovering in structural fasteners during the middle of calendar year 2011 as fastener distribution schedules begin to accelerate and 787 production starts to ramp up. This recovery, coupled with additional opportunities for further market penetration across its product families, is expected to drive improved performance.

27

Consolidated Results of Operations - Comparison Between Nine Months EndedJanuary 2, 2011 and December 27, 2009< /font>

Nine Months Ended

Increase/(Decrease)

(in millions, except per share and per pound data)

1/2/11

12/27/09

$

%

Net sales

$

4,545.2

$

4,025.5

$

519.7< /font>

12.9

%

Operating costs and expenses:

Cost of goods sold

3,145.6

2,690.3

455.3

16.9

Selling and administrative expenses

298.2

272.8

25.4

9.3

Interest expense, net

7.6

10.1

(2.5

)

&n bsp;

(24.8

)

Total operating costs and expenses

3,451.4

2,973.2

478.2

16.1

Income before income tax expense and equity in earnings of unconsolidated affiliates

1,093.8

1,052.3

41.5

3 .9

Income tax expense

(368.8

)

(364.0

)

(4.8

)

1.3

Effective tax rate

33.7

%

34.6

%

Equity in earnings of unconsolidated affiliates

14.5

—

14.5

100.0

Net income from continuing operations

739.5

688.3

51.2

7.4

Net income (loss) from discontinued operations

4.1

(7.2

)

11.3

(156.9

)

Net income

743.6

681.1

62.5

9.2

Net income attributable to noncontrolling interests

(1.1

)

(0.5

)

(0.6

)

120.0

Net income attributable to Precision Castparts Corp. (“ PCC”)

$

742.5

$

680.6

$

61.9

9.1

%

Net income (loss) per common share attributable to PCC shareholders - diluted:

Net income per share from continuing operations - diluted

$

5.14

$

4.85

$

0.29

6.0

%

Net income (loss) per share from discontinued operations - diluted

0.03

(0.05

)

0.08

160.0

Net income per share - diluted

$

5.17

$

4.80

$

0.37

7.7

%

Average market price of key metals (per pound)	Nine Months Ended				Increase/(Decrease)
	1/2/11		12/27/09		$		%
Nickel	$	10.19	$	7.31	$	2.88	39	%
London Metal Exchange1
Titanium	$	4.69	$	1.06	$	3.63	342	%
Ti 6-4 bulk, Metalprices.com
Cobalt	$	20.18	$	17.95	$	2.23	12	%
Metal Bulletin COFM.8 Index1

¹  Source: Bloomberg

Intercompany sales¹

Nine Months Ended

Increase/(Decrease)

1/2/11

12/27/09

$

%

Investment Cast Products²

$

174.8

$

143.3

$

31.5

22

%

Forged Products3

< /td>

557.1

524.0

33.1

6

Fastener Products⁴

74.2

60.8

13.4

22

Total intercompany sales

$

806.1

$

728.1

$

78.0

11

%

1	Intercompany sales consist of each segment's total intercompany sales, including intercompany sales within a segment and between segments.
2	Investment Cast Products: Includes sales between segments of $27.2 million and $16.4 million for the first nine months of fiscal 2011 and 2010, respectively.
3	Forged Products: Includes sales between segments of $47.4 million and $49.6 million for the first nine months of fiscal 2011 and 2010, respectively.
4	Fastener Products: Includes sales between segments of $3.1 million and $1.5 million for the first nine months of fiscal 2011 and 2010, respectively.

28

Sales for the first nine months of fiscal 2011 were $4,545.2 million, up $519.7 million, or 12 .9% from $4,025.5 million in the same period last year. The increase in sales was driven by strong aerospace recovery of approximately $426 million, or 20%, as our aerospace customer order schedules have aligned with aircraft delivery schedules, driving higher volumes and better operating leverage. Carlton, which was acquired in the third quarter of fiscal 2010, accounted for approximately 38% of the increase in aerospace sales. General industrial sales increased approximately $220 million, or 30%, due to market strength and market share gains. These increases were partially offset by lower seamless pipe sales in the current period, decreasing approximately $168 million, or 42%, year over year. European IGT destocking also partially offset the increase in sales. Contractual material pass-through pricing increased sales by approximately $165 million in the first nine months of fiscal 2011 versus approximately $189 million in the same period last year. Contractual material pass-through pricing adjustments are calculated based on average market prices as shown in the above table in trailing periods ranging from approximately one to twelve months. As a result of increased nickel prices on the London Metal Exchange (LME), which increased 39% compared to the same period last year, external selling prices of nickel alloy from the Forged Products segme nt's three primary mills added approximately $60 million to top-line revenues in the first nine months of fiscal 2011, versus the same period a year ago.

With regard to growth in the commercial aircraft industry, based on data from the Airline Monitor as of January 2011, Boeing and Airbus aircraft deliveries are expected to moderately increase through calendar year 2011 as compared to 2010. Due to manufacturing lead times and scheduled build rates, our production volumes are generally 6 to 9 months ahead of aircraft deliveries. The Airline Monitor is projecting further growth i n aircraft deliveries in calendar year 2012, and therefore we anticipate that our aerospace sales will continue to increase modestly through the fourth quarter of fiscal 2011 and into fiscal 2012.

Net income from continuing operations attributable to PCC for the first nine months of fiscal 2011 was $738.4 million, or $5.14 per share (diluted) compared to net income from continuing operations attributable to PCC for the first nine months of fiscal 2010 of $687.8 million, or $4.85 per share (diluted). Net income attributable to PCC (including discontinued operations) for the first nine months of fiscal 2011 was $742.5 million, or $5.17 per share (diluted), compared with net income attributable to PCC of $680.6 million, or $4.80 per share (diluted), in the same period last year.

Interest and Income Tax

Net interest expense for the first nine months of fiscal 2011 was $7.6 million, compared with $10.1 million for the first nine months last year. The lower net expense is primarily due to reduced interest expense resulting from lower debt balances and increased interest income resulting from higher cash balances.

The effective tax rate for the first nine months of fiscal 2011 was 33.7%, 0.9 percentage points lower than the 34.6% effective rate in the same period last year. The lower effective rate in the current period is primarily due to increased benefits from the federal manufacturing deduction and a reduction in the United Kingdom tax rate.

Discontinued Operations

Net income from discontinued operations was $4.1 million, or $0.03 per share (diluted), for the first nine months of fiscal 2011 compared with a net loss of $7.2 million, or $0.05 per share (diluted), in the same period last year. Net income from discontinued operations for the first nine months of fiscal 2011 primarily includes a gain from the sale of an automotive fastener operation of approximately $6.4 million (net of tax), partially offset by the release of the accumulated currency translation adjustment component of equity for entities which have been substantially liquidated. The net loss from discontinued operations in the same period of last year includes an impairment charge of approximately $8.7 million (net of tax) related to the automotive fastener businesses which were held for sale, partially offset by the income tax benefit related to the revers al of a U.S. capital loss valuation allowance associated with a capital gain that was recognized on the sale of a small non-core business in the Investment Cast Products segment.

29

Results of Operations by Segment - Comparison Between Nine Months EndedJanuary 2, 2011 and December 27, 2009

(in millions)	Nine Months Ended						Increase/(Decrease)
	1/2/11			12/27/09			$			%
Net sales:
Investment Cast Products	$	1,536.7		$	1,384.4		$	152.3		11.0	%
Forged Products	2,008.4			1,642.7			365.7			22.3
Fastener Products	1,000.1			998.4			1.7			0.2
Consolidated net sales	$	4,545.2		$	4,025.5		$	519.7		12.9	%
Segment operating income (loss):
Investment Cast Products	$	488.4		$	414.7		$	73.7		17.8	%
% of sales	31.8		%	30.0		%
Forged Products	392.1			397.6			(5.5		)	(1.4	)
% of sales	19.5		%	24.2		%
Fastener Products	306.0			332. 1			(26.1		)	(7.9	)
% of sales	30.6		%	33.3		%
Corporate expenses	(85.1		)	(82.0		)	(3.1		)	< font style="font-family:inherit;font-size:10pt;">3.8
Total segment operating income	1,101.4			1,062.4			$	39.0		3.7	%
% of sales	24.2		%	26.4		%
Interest expense, net	7.6			10.1
Consolidated income before income tax expense and equity in earnings of unconsolidated affiliates	$	1,093.8		$	1,052.3

Investment Cast Products

Investment Cast Products' sales increased 11.0% from $1, 384.4 million in the first nine months of fiscal 2010 to $1,536.7 million this year. Operating income increased 17.8% from $414.7 million in the first nine months of fiscal 2010 to $488.4 million in the same period this year. Operating income as a percent of sales increased from 30.0% to 31.8% of sales. During the first nine months of fiscal 201 1, aerospace sales increased approximately $183 million, or 24%, due to increasing volume on long-lead time castings for the base commercial aircraft programs after an extended period of customer destocking. Countering this strong growth was weakness in the segment's European IGT customer base, which resulted in a decrease in sales of approximately 10%. The segment's operating income as a percent of sales increased by 1.8 percentage points over the prior year driven by aerospace volume growth, combined with strong productivity and other variable cost improvements in t he segment's manufacturing operations, decreased labor rates and increased utilization of lower cost manufacturing in Mexico. Contractual pricing related to pass-through of increased material costs was approximately $33 million in the first nine months of fiscal 2011 compared to $30 million in the same period last year. Contractual material pass-through pricing diluted operating margins by 0.7 percentage points in both the first nine months of fiscal 2011 and fiscal 2010.

Forged Products

Forged Products' sales were $2,008.4 million in the first nine months of fiscal 2011, an increase of 22.3%, compared to sales of $1,642.7 million in the first nine months of fiscal 2010. Operating income decreased 1.4% from $397.6 million in the first nine months of fiscal 2010 to $392.1 million in the same period this year, and operating income as a percent of sales decreased from 24.2% to 19.5%. Similar to Investment Cast Products, this segment continues to see a recovery of aerospace customer order schedules, signaling an end to customer destocking, as sales improved by approximately $289 million, or 44%, compared to the prior year. Carlton, which was acquired in the third quarter of fiscal 2010, accounted for approximately 56% of the increase in aerospace sales. General industrial sales also showed significant improvement from last year's lows, increasing approximately $167 million, or 51%, over the prior year, due to both improving world economies and market share gains. Higher external selling prices of nickel alloy from the segment's three primary mills, which increased 39% on the London Metal Exchange (LME) compared to the same period last year, added approximately $60 million to top-line revenues in the first nine months of fiscal 2011 versus a year ago. Offsetting these increases was a significant decline in seamless pipe sales of approximately $168 million, or 42%, as Chinese customers continue to utilize existing inventory. Contractual material pass-through pricing contributed approximately $123 million of sales in the first nine months of fiscal 2011 compared to $154 million in the same period last year. Operating income as a percent of sales decreased 4.7 percentage points compared to a year ago due to the negative impact of reduced seamless pipe volume coupled with growth in the segment's lower margin general industrial markets. Contractual pass-through of higher raw material costs diluted operating margins by 1.3 percentage points in the current quarter compared to 2.5 percentage points the same period a year ago.

30

Fastener Products

The Fastener Products segment reported $1,000.1 million of sales with operating income of $306.0 million, or 30.6% of sales, in the first nine months of fiscal 2011, compared to sales of $998.4 million and operating income of $332.1 million, or 33.3%, in the first nine months of fiscal 2010. General industrial sales grew by approximately $48 million, or 21%, as a result of market shares gains and strengthening d emand. A decline in aerospace sales of approximately $46 million, or 6%, reflects destocking in the first half of fiscal 2011 throughout the supply chain as aerospace OEM and distributors reduced inventory levels to meet their requirements, partially offset by market share gains in less complex, lower margin aerospace products. Operating income as a percentage of sales was negatively impacted by decreased leverage on lower aerospace sales volume coupled with the impact of increased sales of non-core products.

Changes in Financial Condition and Liquidity

Total assets of $8,553.8 million at January 2, 2011 represented a $893.1 million increase from the $7,660.7 million balance at March 28, 2010, principally reflecting higher cash balances from earnings and increased inventories resulting from new product development and committed metal purchases. Total capitalization at January 2, 2011 was $7,049.8 million, consisting of $236.9 million of debt and $6,812.9 million of equity. The debt-to-capitalization ratio declined to 3.4% at January 2, 2011 from 4.1% at the end of fiscal 2010.

Cash as of January 2, 2011 was $822.8 million, an increase of $710.4 million from the end of fiscal 2010 after debt payments of $14.5 million. Positive cash flow of $710.4 million primarily reflects cash generated by operations of $732.0 million (after $100.0 million of cash paid for voluntary pension contributions and $38.3 million paid to a postretirement medical benefit plan), $17.6 million of cash received from the sale of operations held for sale, and $92.2 million from the issuance of common stock and related tax benefits, partially offset by capital expenditures of $83.7 million and business acquisitions of $37.2 million.

The capital spending plan for fiscal 2011 is targeted for equipment upgrades and cost reduction and productivity projects throughout the Company. The capital spending level in fiscal 2011 is anticipated t o be modestly lower than the capital spending level in fiscal 2010 as our current capacity levels are sufficient for our major markets served.

In the first nine months of fiscal 2011, we contributed $107.5 million to the defined benefit pension plans, of which $100.0 million was voluntary. We expect to contribute approximately $2.5 million of additional required contributions in fiscal 2011, for total contributions to the defined benefit pension plans of approximately $110.0 million in fiscal 2011. We expect to contribute approximately $10.8 million to the other postretirement benefit plans during fiscal 2011. In addition, we paid $38.3 million in July 2010 to one of our postretirement medical benefit plans that was jointly administered with a union. This payment and the related administrative changes remove PCC and its affiliates from any further financial, administrative or fiduciary responsibilities to this plan, and we therefore accounted for these events as a settlement of the plan and reversed the related liability. There was no significant gain or loss associated with the settlement.

We believe we will be able to meet our short- and longer-term liquidity needs for working capital, pension and other postretirement benefit obligations, capital spending, cash dividends, scheduled repayment of debt and potential acquisitions with the cash generated from operations, borrowing from our existing $1.0 billion revolving credit facility or new bank credit facilities, the issuance of public or privately placed debt securities, or the issuance of equity instruments.

As noted above, our revolving bank credit facility (“Credit Agreement”) provides available borrowing up to $1.0 billion through May 2012. Our unused borrowing capacity as of January 2, 2011 was $983.4 million under the Credit Agreement reduced only by a $16.6 million workers' compensation letter of credit issued in the fourth quarter of fiscal 2009. The Credit Agreement contains various standard financial covenants, including maintenance of minimum net worth, an interest coverage ratio and a leverage ratio. The financial covenants in the Credit Agreement are our most restrictive covenants.

Our covenant requirements and actual ratios as of January 2, 2011 were as follows (dollars in millions):

	Covenant Requirement			Actual
Consolidated minimum net worth (1)	$	3,451.2	(minimum)	$	6,812.9
Consolidated interest coverage ratio (1)	2.25:1.00		(minimum)	107.98:1.00
Consolidated leverage ratio (1)	3.25:1.00		(maximum)	0.14:1.00

⁽¹⁾  Terms are defined in the Amended and Restated Credit Agreement.

As of January 2, 2011, we were in compliance with all financial covenants of our loan agreements.

31

Historically, we have also issued commercial paper as a method of raising short-term liquidity. We believe we continue to have the ability to issue commercial paper and have issued commercial paper to cover acquisitions and short-term cash requirements in recent quarters. During the first nine months of fiscal 2011, the largest daily balance of outstanding commercial paper borrowings was $210 million early in the first quarter with all borrowings repaid prior to the end of the second quarter. We do not anticipate any changes in our ability to borrow under our current credit facility, but changes in the financial condition of the participating financial institutions could negatively impact our ability to borrow funds in the future. Should that circumstance arise, we believe that we would be able to arrange any needed financing, although we are not able to predict what the terms of any such borrowings would be, or the source of the borrowed funds.

Critical Accounting Policies

For a discussion of our critical accounting policies, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K filed on May 27, 2010.

Forward-Looking Statements

Information included within this Form  ;10-Q describing the projected growth and future results and events constitutes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to fluctuations in the aerospace, power generation, and general industrial cycles; the relative success of our entry into new markets; competitive pricing; the financial viability of our significant customers; the impact on the Company of customer or supplier labor disputes; demand, timing and market acceptance of new commercial and military programs; the availability and cost of energy, raw materials, supplies, and insurance; the cost of pension and postretirement medical benefits; equipment failures; relations with our employees; our ability to manage our operating costs and to integrate acquired businesses in an effective manner; governmental regulations and envi ronmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; the impact of adverse weather conditions or natural disasters; the availability and cost of financing; and implementation of new technologies and process improvements. Any forward-looking statements should be considered in light of these factors. We undertake no obligation to update any forward-looking information to reflect anticipated or unanticipated events or circumstances after the date of this document.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes to our market risk exposure since March 28, 2010.

Item 4. Controls and Procedures

PCC manage ment, including the Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures as of the end of the period covered by this report pursuant to Exchange Act Rule 13a-15(b). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and is accumulated and communicated to Company management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. There have been no changes in internal control over financial reporting that occurred during the last fiscal quarter that have materially affecte d, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

32

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In December 2010, SPS Technologies, LLC paid penalties in the amount of $0.1 million to the United States Environmental Protection Agency to settle allegations that the Greer Stop Nut location in Nashville, Tennessee violated the Emergency Planning and Community Right-to-Know Act by failing over several years to submit certain chemical inventory forms to various government agencies.

In January 2010, the Company determined that a subsidiary, Caledonian Alloys, had two facilities in North Carolina and West Virginia operating trichloroethylene vapor degreasers out of compliance with state and federal environmental laws. Both degreasers ceased operation in January 2010 and were decommissioned shortly thereafter. The Company has disclosed the non-compliance issues to state and federal regulatory authorities. On December 14, 2010, the North Carolina Department of Environment and Natural Resources assessed a final penalty in the amount of $0.1 million. On August 27, 2010, the West Virginia Department of Environmental Protection assessed a final penalty in the amount of $0.3 million. The resulting settlement did not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors

Our growth stra tegy includes business acquisitions with associated risks.

Our growth strategy includes the acquisition of strategic operations. In recent years, we have completed a number of acquisition transactions. We expect that we will continue to seek acquisitions of complementary businesses, products and technologies to add products and services for our core customer base and for related markets, and to expand each of our businesses geographically. Our ability to complete acquisitions may be limited if necessary financing is difficult to access, unavailable or too costly to support a transaction. The success of completed transactions will depend on our ability to integrate assets and personnel and to apply our manufacturing processes and controls to the acquired businesses. Although our acquisition strategy generally emphasizes the retention of key management of the acquired bus inesses and an ability of the acquired business to continue to operate independently, various changes may be required to integrate the acquired businesses into our operations, to assimilate new employees and to implement reporting, monitoring and forecasting procedures. Business acquisitions entail a number of other risks, including:

•     inaccurate assessment of liabilities;

•     entry into markets in which we may have limited or no experience;

< td>

diversion of management's attention from our existing businesses;

•    

•     difficulties in realizing projected efficiencies, synergies and cost savings; and

•     decrease in our cash or an increase in our indebtedness and a limitation in our ability to access additional capital when needed.

Our failure to adequately address these acquisition risks could cause us to incur increased expenses or to fail to realize the benefits we anticipated from the transactions.

We operate in cyclical markets.

A significant portion of our revenues are derived from the highly cyclical aerospace and power generation markets. Our sales to the aerospace industry constituted 54 percent of our total sales in fiscal 2010. Our power sales constituted 27 percent of our total sales in fiscal 2010.

The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft. The U.S. and international commercial aviation industries continue to face challenges arising from competitive pressures and fuel costs. Demand for commercial aircraft is influenced by airline industry profitability, trends in airline passenger traffic, the state of U.S. and world economies, the ability of aircraft purchasers to obtain required financing and numerous other factors including the effects of terrorism, health and safety concerns and environmental constraints imposed upon aircraft operators. The military aerospace cycle is highly dependent on U.S. and foreign government funding; however, it is also driven by the effects of terrorism, a changing global political environment, U.S. foreign policy, the retirement of older aircraft and technological improvements to new engines that increase reliability. Accordingly, the timing, duration and severity of cyclical upturns and downturns cannot be forecast with certainty. Downturns or reductions in demand could have a material adverse effect on our business.

The power generation market is also cyclical in nature. Demand for power generation produ cts is global and is affected by the

33

state of the U.S. and world economies, the availability of financing to power generation project sponsors, the political environments of numerous countries and environmental constraints imposed upon power project operators. The availability of fuels and related prices also have a large impact on demand. Reductions in demand for our power generation products could have a material adverse effect on our business.

We also sell products and services to customers in the automotive, chemical and petrochemical, medical, industrial process, and other general industrial markets. Each of these markets is cyclical in nature. Customer demand for our products or services in these markets may fluctuate widely depending upon U.S. and world economic conditions, the availability of financing and industry-specific factors. Cyclical declines or sustained weakness in any of these markets could have a material adverse effect on our business.

Our business is dependent on a small number of direct and indirect customers.

A substantial portion of our business is conducted with a relatively small number of large direct customers, including General Electric Company, United Technologies Corporation, Rolls Royce plc, and The Boeing Company. General Electric accounted for approximately 13.9 percent of our total sales for fiscal 2010. No other customer directly accounted for more than 10 percent of total sales; however, United Technologies, Rolls Royce and Boeing are also considered key customers. A financial hardship experienced by any one of these four customers, the loss of any of them, or a reduction in or substantial delay of orders from any of them, could have a material adverse effect on our business.

Additionally, a significant portion of our aerospace products are ultimately used in the production of new commercial aircraft. There are only two primary manufacturers of large commercial aircraft in the world, Boeing and Airbus. A significant portion of our aerospace sales are dependent on the number of new aircraft built by these two manufacturers, which is in turn dependent on a number of factors over which we have little or no control. Those factors include the demand for new aircraft from airlines around the globe and factors that impact manufacturing capabilities such as the availability of raw materials and manufactured components, changes in the regulatory environment and labor relations between the aircraft manufacturers and their work forces. A significant interruption or slow down of the number of new aircraft built by aircraft manufacturers could have a material adverse effect on our business.

Sales to the military sector constituted approximately 16 percent of our fiscal 2010 sales. Defense spending is subject to appropriations and to political pressures that influence which programs are funded and those wh ich are cancelled. Reductions in domestic or foreign defense budgets or military aircraft procurement, delays in funding, or reprioritization of government spending away from defense programs in which we participate could adversely affect our business.

Our business depends, in part, on the success of new commercial and military aircraft programs.

The success of our business will depend, in part, on the success of new commercial and military aircraft programs including the Boeing 787, Airbus A350, Airbus A380, and F-35 programs. We are currently under contract to supply components for a number of new commercial, general aviation, and military aircraft programs. Cancellation, reductions or del ays of orders or contracts by our customers on any of these programs could have a material adverse effect on our business.

The competitive nature of our business results in pressure for price concessions to our customers and increased pressure to reduce our costs.

We are subject to substantial competition in all of the markets we serve, and we expect this competition to continue. As a result, we have made significant long term price concessions to our customers in the aerospace and power generation markets from time to time, and we expect customer pressure for further long term price concessions to continue. Maintenance of our market share will depend, in part, on our ability to sustain a cost st ructure that enables us to be cost-competitive. If we are unable to adjust our costs relative to our pricing, our profitability will suffer. Our effectiveness in managing our cost structure will be a key determinate of future profitability and competitiveness.

Our business is dependent on a number of raw materials that are subject to volatility in price and availability.

We use a number of raw materials in our products, including certain metals such as nickel, titanium, cobalt, tantalum and molybdenum and various rare earth elements, which are found in only a few parts of the world and are available from a limited number of suppliers. The availability and costs of these metals and elements may be influenced by private or government cartels, changes in world politics, labor relations between the producers and their work forces, unstable governments in exporting nations, export quotas imposed by governments in countries with rare earth supplies, market forces of supply and demand, and inflation. These metals and rare earth elements are required for the alloys or processes used or manufactured in our investment castings, forged products and fasteners segments. We have escalation clauses for nickel, titanium and other metals in a number of our long-term contracts with major customers, but we are not usually able to fully offset the effects of changes in raw material costs. We also employ “price-in-effect” metal pricing in our alloy production businesses to lock-in the current cost of metal at the time of production or time of shipment. The ability of key metal suppliers to meet quality and delivery requirements can also impact our ability to meet commitments to customers. Future shortages or price fluctuations in

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raw materials could result in decreased sales as well as margins, or otherwise adversely affect our business. The enactment of new or increased import duties on raw materials imported by us could also increase the costs to us of obtaining the raw materials and might adversely affect our business.

Our business is affected by federal rules, regulations and orders applicable to government contractors.

A number of our products are manufactured and sold under U.S. government contracts or subcontracts. Consequently, we are directly and indirectly subject to various federal rules, regulations and orders applicable to government contractors. From time to time, we are also subject to government inquiries and investigations of our business practices due to our participation in government programs. These inquiries and investigations are costly and consuming of internal resources. Violation of applicable government rules and regulations could result in civil liability, in cancellation or suspension of existing contracts or in ineligibility for future contracts or subcontracts funded in whole or in part with federal funds, any of which could have a material adverse effect on our business.

Our business is subject to environmental regulations and related liabilities and liabilities associated with chemicals and substances in the workplace.

We are subject to various federal, state and foreign environmental laws and regulations concerning, among other things, water discharges, air emissions, hazardous material and waste management and environmental cleanup. Environmental laws and regulations continue to evolve and we may become subject to increasingly stringent environmental standards in the future, particularly under air quality and water quality laws and standards related to climate change issues, such as reporting of greenhouse gas emissions. We are required to comply with environmental laws and the terms and conditions o f multiple environmental permits. Failure to comply with these laws or permits could result in fines and penalties, interruption of manufacturing operations, or the need to install pollution control equipment that could be costly. We also may be required to make additional expenditures, which could be significant, relating to environmental matters on an ongoing basis. We also own properties, or conduct or have conducted operations at properties, where hazardous materials have been used for many years, including during periods before careful management of these materials was required or generally believed to be necessary. Consequently, we will continue to be subject to environmental laws that impose liability for historical releases of hazardous substances.

Our financial statements include reserves for future costs arising from environmental issues relating to our proper ties and operations. Our accruals for known environmental liabilities represent our best estimate of our probable future obligations for the investigation and remediation of known contaminated sites. Our accruals include asserted and unasserted claims. The estimates of our environmental costs are based on currently available facts, present laws and regulations and current technology and take into consideration our prior experience in site investigation and remediation, the data available for each site, and the professional judgment of our environmental specialists and consultants. Although recorded liabilities include our best estimate of all probable costs, our total costs for the final settlement of each site cannot be predicted with certainty due to the variety of factors that make potential costs associated with contaminated sites inherently uncertain, such as: the nature and extent of site contamination, available remediation alternatives, the extent to which remedial actions will be required, the time period over which costs will be incurred, the number and economic viability of other responsible parties, and whether we have any opportunity of contribution from third parties, including recovery from insurance policies. In addition, sites that are in the early stages of investigation are subject to greater uncertainties than mature sites that are close to completion. Although the sites we identify vary across the spectrum, approximately half of our sites could be considered at an early stage of the investigation and remediation process. Therefore, our cost estimates and the accruals associated with those sites are subject to greater uncertainties. Environmental contingent liabilities are often resolved over a long period of time and the timing of expenditures depends on a number of factors that vary by site. We expect that we will expend present accruals over many years and that remediation of all currently known sites will be completed within 30 years. While it is possible that a significant portion of th e accrued costs may be paid out over the next ten years, we anticipate that no individual site will be considered to be material. We cannot ensure that our reserves are adequate to cover the total cost of remedial measures that may eventually be required by environmental authorities with respect to known environmental matters or the cost of claims that may be asserted in the future with respect to environmental matters about which we are not yet aware. Accordingly, the costs of environmental remediation or claims may exceed the amounts reserved.

We have been named as a PRP at sites identified by the EPA and state regulatory agencies for investigation and remediation under CERCLA and similar state statutes. Under common law, as applied in the environmental remediation context, potentially responsible parties may be jointly and severally liable, and therefore we may be po tentially liable to the government or third parties for the full cost of remediating contamination at our facilities or former facilities or at third-party sites where we have been designated a PRP. In estimating our current reserves for environmental matters, we have assumed that we will not bear the entire cost of remediation of every site to the exclusion of other PRPs who may be jointly and severally liable. It is also possible that we will be designated a PRP at additional sites in the future.

Like many other industrial companies in recent years, we are defendants in lawsuits alleging personal injury as a result of

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exposure to chemicals and substances in the workplace, including asbestos. To date, we have been dismissed from a number of these suits and have settled a number of others. The outcome of litigation such as this is difficult to predict and a judicial decision unfavorable to us could be rendered, possibly having a material adverse effect on our business.

Our business is subject to risks associated with international operations.

We purchase products from and supply products to businesse s located outside of the United States. We also have significant operations located outside the United States. In fiscal 2010, approximately 18 percent of our total sales were attributable to our non-U.S. subsidiaries. A number of risks inherent in international operations could have a material adverse effect on our results of operations, including:

•     currency fluctuations;

•     difficulties in staffing and managing multi-national operations;

general economic and political uncertainties and potential for social unrest in countries in which we operate;

•    

•     limitations on our ability to enforce legal rights and remedies;

•     restrictions on the repatriation of funds;

•     changes in trade policies;

•     tariff regulations;

•     difficulties in obtaining export and import licenses; and

•     the risk of government financed competition.

A majority of our sales of extruded pipe for the power generation market have been exported to power generation customers in China and India. These sales are subject to the risks associated with international sales generally. In addition, changes in demand could result from a reduction of power plant build rates in China or India due to economic conditions or otherwise, or increased competition from local manufacturers who have cost advantages or who may be preferred suppliers. Also, with respect to China, Chinese commercial laws, regulations and interpretations applicable to non-Chinese market participants such as us are rapidly changing. These laws, regulations and interpretations could impose restrictions on our ownership or operations of our interests in China and have a material adverse effect on our business.

Any lower than expected rating of our bank debt and debt securities could adversely affect our business.

Two rating agencies, Moody's and Standard & Poor's (“S&P”), rate our debt securities. Both agencies upgraded our debt rating during fiscal 2011. If the rating agencies were to reduce their current ratings, our interest expense may increase and the instruments governing our indebtedness could impose additional restrictions on our ability to make capital expenditures or otherwise limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate or our ability to take advantage of potential business opportunities. These modifications also could require us to meet more stringen t financial ratios and tests or could require us to grant a security interest in our assets to secure the indebtedness. Our ability to comply with covenants contained in the instruments governing our existing and future indebtedness may be affected by events and circumstances beyond our control. If we breach any of these covenants, one or more events of default, including cross-defaults between multiple components of our indebtedness, could result. These events of default could permit our creditors to declare all amounts owing to be immediately due and payable, and terminate any commitments to make further extensions of credit.

Our production may be interrupted due to equipment failures or other events affecting our factories.

Our manufacturing processes depend on certain sophisticated and high-value equipment, such as some of our forging presses for which there may be only limited or no production alternatives. Unexpected failures of this equipment could result in production delays, revenue loss and significant repair costs. In addition, our factories rely on the availability of electrical power and natural gas, transportation for raw materials and finished product, and employee access to our workplace that are subject to interruption in the event of severe weather conditions or other natural or manmade events. While we maintain backup resources to the extent practicable, a severe or prolonged equipment outage or other interruptive event affecting areas where we have significant manufacturing operations may result in loss of manufacturing or shipping days which could have a material adverse effect on our business.

We could be faced with labor shortages, disruptions or stoppages if our relations with our employees were to deteriorate.

Our operations rely heavily on our skilled employees. Any labor shortage, disruption or stoppage caused by any deterioration in

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employee relations or difficulties in the renegotiation of labor contr acts could reduce our operating margins and income. Approximately 22 percent of our employees are affiliated with unions or covered by collective bargaining agreements. Failure to negotiate a new labor agreement when required could result in a work stoppage. Although we believe that our labor relations have generally been satisfactory, it is possible that we could become subject to additional work rules imposed by agreements with labor unions, or that work stoppages or other labor disturbances could occur in the future, any of which could reduce our operating margins and income and place us at a disadvantage relative to non-union competitors.

Product liability and product warranty risks could adversely affect our operating results.

We produce many critical parts for commercial and military aircraft and for high pressure applications in power plants. Failure of our parts could give rise to substantial product liability claims. We maintain insurance addressing this risk, but there can be no assurance that the insurance coverage will be adequate or will continue to be available on terms acceptable to us. We manufacture our parts to strict contractually-established standards and tolerances using complex manufacturing processes. If we fail to meet the contractual requirements for a product we may be subject to product warranty costs and claims. Product warranty costs are generally not insured.

We could be required to make additional contributions to our defined benefit pension and postretirement benefit plans as a result of advers e changes in interest rates and pension investments.

Our estimates of liabilities and expenses for pensions and other postretirement benefits incorporate significant assumptions including the rate used to discount the future estimated liability, the long-term rate of return on plan assets and assumptions relating to the employee workforce including salary increases, medical costs, retirement age and mortality. Our results of operations, liquidity, or shareholders' equity in a particular period could be affected by a decline in the rate of return on plan assets, the rate used to discount the future estimated liabilities, or changes in employee workforce assumptions. We may have to contribute more cash to various pension plans and record higher pension-related expenses in future periods as a result of decreases in the value of investments held by these plans.

A global recession or disruption in global financial markets could adversely affect us.

A global recession or disruption in the global financial markets presents risks and uncertainties that we cannot predict. Recently, we have seen a moderate decline in demand for our products due to global economic conditions. However, our access to credit to finance our operations has not been materially limited. If conditions worsen or persist, we face risks that may include:

•     declines in revenues and profitability from reduced or delayed orders by our customers;

•     supply problems a ssociated with any financial constraints faced by our suppliers;

•     restrictions on our access to short-term commercial paper borrowings or other credit sources;

•     reductions to our banking group or to our committed credit availability due to combinations or failures of financial institutions; and

•     increases in corporate tax rates to finance government spending programs.

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Item 6. Exhibits

(a) Exhibits

31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		PRECISION CASTPARTS CORP. Registrant
DATE:	February 11, 2011	/s/ Shawn R. Hagel
		Shawn R. Hagel Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

In connection with the Quarterly Report on Form 10-Q of Precision Castparts Corp. (the “Company”) for the fiscal quarter ended January 2, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark Donegan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 11, 2011

/s/ Mark Donegan

Mark Donegan

Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

In connection with the Quarterly Report on Form 10-Q of Precision Castparts Corp. (the “Company”) for the fiscal quarter ended January 2, 2011 as filed with the Securities and Exc hange Commission on the date hereof (the “Report”), I, Shawn R. Hagel, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1)     The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 11, 2011

/s/ Shawn R. Hagel

Shawn R. Hagel

Senior Vice President and

Chief Financial Officer