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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Under Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarter Ended October 1, 2006

Commission File No. 1-10348

Precision
Castparts Corp.

An Oregon Corporation

IRS Employer Identification No. 93-0460598

4650 S.W. Macadam Avenue

Suite 440

Portland, Oregon
97239-4254

Telephone: (503) 417-4800

Indicate by checkmark 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 check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer
and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x                             Accelerated filer ̈Non-accelerated filer ̈

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
November 1, 2006: 135,708,217

Note: This 10-Q was filed electronically via EDGAR with the Securities and Exchange Commission.



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PART 1: FINANCIAL INFORMATION



|Item 1. | Financial Statements
|------- | --------------------

Precision Castparts Corp. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

(In millions, except per share data)



|                                                       |  |                    |         |   |         |   |       |  
|------------------------------------------------------ |  | ------------------ | ------- | - | ------- | - | ----- | -
|                                                       |  | Three Months Ended |        
|                                                       |  | 10/1/06            |         |   | 10/2/05 |  
|Net sales                                              |  | $                  | 1,317.7 |   |         | $ | 869.3 |  
|Cost of goods sold                                     |  |                    | 999.4   |   |         |   | 675.3 |  
|Selling and administrative expenses                    |  |                    | 85.8    |   |         |   | 64.7  |  
|Interest expense, net                                  |  |                    | 15.1    |   |         |   | 10.4  |  
|                                                       |  |                    |         |   |         |   |       |  
|Income before income taxes and minority interest       |  |                    | 217.4   |   |         |   | 118.9 |  
|Income tax expense                                     |  |                    | 75.1    |   |         |   | 38.2  |  
|Minority interest in earnings of consolidated entities |  |                    | (0.3    | ) |         |   | (0.4  | )
|                                                       |  |                    |         |   |         |   |       |  
|Net income from continuing operations                  |  |                    | 142.0   |   |         |   | 80.3  |  
|Net income (loss) from discontinued operations         |  |                    | 12.8    |   |         |   | (1.2  | )
|                                                       |  |                    |         |   |         |   |       |  
|Net income                                             |  | $                  | 154.8   |   |         | $ | 79.1  |  
|                                                       |  |                    |         |   |         |   |       |  
|Net income per common share  basic:                   |  |                    |         |   |         |   |       |  
|Net income from continuing operations                  |  | $                  | 1.05    |   |         | $ | 0.60  |  
|Net income (loss) from discontinued operations         |  |                    | 0.09    |   |         |   | (0.01 | )
|                                                       |  |                    |         |   |         |   |       |  
|                                                       |  | $                  | 1.14    |   |         | $ | 0.59  |  
|                                                       |  |                    |         |   |         |   |       |  
|Net income per common share  diluted:                 |  |                    |         |   |         |   |       |  
|Net income from continuing operations                  |  | $                  | 1.03    |   |         | $ | 0.59  |  
|Net income (loss) from discontinued operations         |  |                    | 0.10    |   |         |   | (0.01 | )
|                                                       |  |                    |         |   |         |   |       |  
|                                                       |  | $                  | 1.13    |   |         | $ | 0.58  |  
|                                                       |  |                    |         |   |         |   |       |  
|Average common shares outstanding:                     |  |                    |         |   |         |   |       |  
|Basic                                                  |  |                    | 135.5   |   |         |   | 133.0 |  
|Diluted                                                |  |                    | 137.3   |   |         |   | 135.5 |  

See Notes to the Condensed Consolidated Financial Statements.



2



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Precision Castparts Corp. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

(In millions, except per share data)



|                                                       |  |                  |         |   |         |   |         |  
|------------------------------------------------------ |  | ---------------- | ------- | - | ------- | - | ------- | -
|                                                       |  | Six Months Ended |        
|                                                       |  | 10/1/06          |         |   | 10/2/05 |  
|Net sales                                              |  | $                | 2,430.1 |   |         | $ | 1,718.8 |  
|Cost of goods sold                                     |  |                  | 1,849.0 |   |         |   | 1,332.3 |  
|Selling and administrative expenses                    |  |                  | 160.9   |   |         |   | 127.8   |  
|Interest expense, net                                  |  |                  | 28.3    |   |         |   | 20.8    |  
|                                                       |  |                  |         |   |         |   |         |  
|Income before income taxes and minority interest       |  |                  | 391.9   |   |         |   | 237.9   |  
|Income tax expense                                     |  |                  | 134.6   |   |         |   | 78.2    |  
|Minority interest in earnings of consolidated entities |  |                  | (0.8    | ) |         |   | (0.7    | )
|                                                       |  |                  |         |   |         |   |         |  
|Net income from continuing operations                  |  |                  | 256.5   |   |         |   | 159.0   |  
|Net income (loss) from discontinued operations         |  |                  | 13.4    |   |         |   | (2.5    | )
|                                                       |  |                  |         |   |         |   |         |  
|Net income                                             |  | $                | 269.9   |   |         | $ | 156.5   |  
|                                                       |  |                  |         |   |         |   |         |  
|Net income per common share  basic:                   |  |                  |         |   |         |   |         |  
|Net income from continuing operations                  |  | $                | 1.89    |   |         | $ | 1.20    |  
|Net income (loss) from discontinued operations         |  |                  | 0.10    |   |         |   | (0.02   | )
|                                                       |  |                  |         |   |         |   |         |  
|                                                       |  | $                | 1.99    |   |         | $ | 1.18    |  
|                                                       |  |                  |         |   |         |   |         |  
|Net income per common share  diluted:                 |  |                  |         |   |         |   |         |  
|Net income from continuing operations                  |  | $                | 1.87    |   |         | $ | 1.18    |  
|Net income (loss) from discontinued operations         |  |                  | 0.10    |   |         |   | (0.02   | )
|                                                       |  |                  |         |   |         |   |         |  
|                                                       |  | $                | 1.97    |   |         | $ | 1.16    |  
|                                                       |  |                  |         |   |         |   |         |  
|Average common shares outstanding:                     |  |                  |         |   |         |   |         |  
|Basic                                                  |  |                  | 135.4   |   |         |   | 132.7   |  
|Diluted                                                |  |                  | 137.3   |   |         |   | 135.2   |  

See Notes to the Condensed Consolidated Financial Statements.



3



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Precision Castparts Corp. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(In millions)



|                                                     |  |         |         |   |         |   |         |  
|---------------------------------------------------- |  | ------- | ------- | - | ------- | - | ------- | -
|                                                     |  | 10/1/06 |         |   | 4/02/06 |  
|ASSETS                                               |  |         |         |   |         |   |         |  
|Current assets:                                      |  |         |         |   |         |   |         |  
|Cash and cash equivalents                            |  | $       | 108.7   |   |         | $ | 59.9    |  
|Receivables, net                                     |  |         | 740.5   |   |         |   | 495.4   |  
|Inventories                                          |  |         | 938.1   |   |         |   | 557.0   |  
|Prepaid expenses                                     |  |         | 19.4    |   |         |   | 28.6    |  
|Deferred income taxes                                |  |         | 63.2    |   |         |   | 65.2    |  
|Discontinued operations                              |  |         | 20.7    |   |         |   | 27.7    |  
|                                                     |  |         |         |   |         |   |         |  
|Total current assets                                 |  |         | 1,890.6 |   |         |   | 1,233.8 |  
|                                                     |  |         |         |   |         |   |         |  
|Property, plant and equipment, at cost               |  |         | 1,559.6 |   |         |   | 1,317.3 |  
|Less - accumulated depreciation                      |  |         | (697.7  | ) |         |   | (645.7  | )
|                                                     |  |         |         |   |         |   |         |  
|Net property, plant and equipment                    |  |         | 861.9   |   |         |   | 671.6   |  
|                                                     |  |         |         |   |         |   |         |  
|Goodwill                                             |  |         | 1,782.8 |   |         |   | 1,655.3 |  
|Acquired intangible assets, net                      |  |         | 9.4     |   |         |   | 4.5     |  
|Other assets                                         |  |         | 164.6   |   |         |   | 152.2   |  
|Discontinued operations                              |  |         | 4.0     |   |         |   | 32.4    |  
|                                                     |  |         |         |   |         |   |         |  
|                                                     |  | $       | 4,713.3 |   |         | $ | 3,749.8 |  
|                                                     |  |         |         |   |         |   |         |  
|LIABILITIES AND SHAREHOLDERS INVESTMENT             |  |         |         |   |         |   |         |  
|Current liabilities:                                 |  |         |         |   |         |   |         |  
|Short-term borrowings                                |  | $       | 140.3   |   |         | $ | 47.5    |  
|Long-term debt currently due                         |  |         | 20.7    |   |         |   | 21.3    |  
|Accounts payable                                     |  |         | 457.5   |   |         |   | 365.3   |  
|Accrued liabilities                                  |  |         | 401.7   |   |         |   | 283.4   |  
|Income taxes payable                                 |  |         | 51.8    |   |         |   | 33.1    |  
|Discontinued operations                              |  |         | 24.9    |   |         |   | 17.8    |  
|                                                     |  |         |         |   |         |   |         |  
|Total current liabilities                            |  |         | 1,096.9 |   |         |   | 768.4   |  
|Long-term debt                                       |  |         | 795.8   |   |         |   | 593.8   |  
|Pension and other postretirement benefit obligations |  |         | 263.3   |   |         |   | 174.9   |  
|Other long-term liabilities                          |  |         | 89.7    |   |         |   | 49.8    |  
|Deferred tax liability                               |  |         | 5.3     |   |         |   | 4.2     |  
|Discontinued operations                              |  |         | 3.9     |   |         |   | 18.2    |  
|                                                     |  |         |         |   |         |   |         |  
|Total liabilities                                    |  |         | 2,254.9 |   |         |   | 1,609.3 |  
|                                                     |  |         |         |   |         |   |         |  
|Shareholders investment:                            |  |         |         |   |         |   |         |  
|Common stock                                         |  |         | 135.5   |   |         |   | 135.1   |  
|Paid-in capital                                      |  |         | 801.6   |   |         |   | 780.2   |  
|Retained earnings                                    |  |         | 1,552.3 |   |         |   | 1,290.5 |  
|Accumulated comprehensive income (loss):             |  |         |         |   |         |   |         |  
|Foreign currency translation                         |  |         | 66.5    |   |         |   | 38.8    |  
|Derivatives qualifying as hedges                     |  |         | 5.8     |   |         |   | (0.8    | )
|Minimum pension liability                            |  |         | (103.3  | ) |         |   | (103.3  | )
|                                                     |  |         |         |   |         |   |         |  
|Total shareholders investment                       |  |         | 2,458.4 |   |         |   | 2,140.5 |  
|                                                     |  |         |         |   |         |   |         |  
|                                                     |  | $       | 4,713.3 |   |         | $ | 3,749.8 |  
|                                                     |  |         |         |   |         |   |         |  

See Notes to the Condensed Consolidated Financial Statements.



4



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Precision Castparts Corp. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In millions)



|                                                                                                     |  |                  |        |   |          |   |       |  
|---------------------------------------------------------------------------------------------------- |  | ---------------- | ------ | - | -------- | - | ----- | -
|                                                                                                     |  | Six Months Ended |       
|                                                                                                     |  | 10/01/06         |        |   | 10/02/05 |  
|Cash flows from operating activities:                                                                |  |                  |        |   |          |   |       |  
|Net income                                                                                           |  | $                | 269.9  |   |          | $ | 156.5 |  
|Net (income) loss from discontinued operations                                                       |  |                  | (13.4  | ) |          |   | 2.5   |  
|Non-cash items included in net income:                                                               |  |                  |        |   |          |   |       |  
|Depreciation and amortization                                                                        |  |                  | 54.1   |   |          |   | 48.2  |  
|Non-cash investigation adjustments                                                                   |  |                  |       |   |          |   | 1.3   |  
|Stock-based compensation expense                                                                     |  |                  | 10.2   |   |          |   |      |  
|Deferred income taxes                                                                                |  |                  | 0.5    |   |          |   | 14.6  |  
|Tax benefit from stock option exercises                                                              |  |                  |       |   |          |   | 10.3  |  
|Excess tax benefits on equity instruments issued under share-based payment arrangements              |  |                  | (6.4   | ) |          |   |      |  
|Changes in assets and liabilities, excluding effects of acquisitions and dispositions of businesses: |  |                  |        |   |          |   |       |  
|Receivables                                                                                          |  |                  | (59.4  | ) |          |   | (49.1 | )
|Inventories                                                                                          |  |                  | 20.8   |   |          |   | (17.7 | )
|Other current assets                                                                                 |  |                  | 0.8    |   |          |   | 8.5   |  
|Payables, accruals and current taxes                                                                 |  |                  | 18.8   |   |          |   | (47.2 | )
|Retirement benefit obligations                                                                       |  |                  | 13.6   |   |          |   | (21.4 | )
|Other non-current assets and liabilities                                                             |  |                  | (17.0  | ) |          |   | 3.5   |  
|Net cash provided (used) by operating activities of discontinued operations                          |  |                  | 5.5    |   |          |   | 0.1   |  
|                                                                                                     |  |                  |        |   |          |   |       |  
|Net cash provided by operating activities                                                            |  |                  | 298.0  |   |          |   | 110.1 |  
|                                                                                                     |  |                  |        |   |          |   |       |  
|Cash flows from investing activities:                                                                |  |                  |        |   |          |   |       |  
|Acquisitions of businesses                                                                           |  |                  | (542.0 | ) |          |   | (2.5  | )
|Capital expenditures                                                                                 |  |                  | (73.3  | ) |          |   | (39.7 | )
|Proceeds from the sale of businesses                                                                 |  |                  | 33.5   |   |          |   | 4.9   |  
|Other                                                                                                |  |                  | 22.0   |   |          |   | 2.7   |  
|Net cash used by investing activities of discontinued operations                                     |  |                  | (1.3   | ) |          |   | (0.6  | )
|                                                                                                     |  |                  |        |   |          |   |       |  
|Net cash used by investing activities                                                                |  |                  | (561.1 | ) |          |   | (35.2 | )
|                                                                                                     |  |                  |        |   |          |   |       |  
|Cash flows from financing activities:                                                                |  |                  |        |   |          |   |       |  
|Net change in short-term borrowings                                                                  |  |                  | 92.6   |   |          |   |      |  
|Net change in long-term debt                                                                         |  |                  | 199.6  |   |          |   | (24.4 | )
|Common stock issued                                                                                  |  |                  | 5.2    |   |          |   | 11.4  |  
|Excess tax benefits on equity instruments issued under share-based payment arrangements              |  |                  | 6.4    |   |          |   |      |  
|Cash dividends                                                                                       |  |                  | (8.1   | ) |          |   | (3.9  | )
|Other                                                                                                |  |                  | 6.6    |   |          |   | (3.2  | )
|Net cash provided (used) by financing activities of discontinued operations                          |  |                  | 2.7    |   |          |   | (0.8  | )
|                                                                                                     |  |                  |        |   |          |   |       |  
|Net cash provided (used) by financing activities                                                     |  |                  | 305.0  |   |          |   | (20.9 | )
|                                                                                                     |  |                  |        |   |          |   |       |  
|Effect of exchange rate changes on cash and cash equivalents                                         |  |                  | 6.9    |   |          |   | (5.9  | )
|                                                                                                     |  |                  |        |   |          |   |       |  
|Net increase in cash and cash equivalents                                                            |  |                  | 48.8   |   |          |   | 48.1  |  
|Cash and cash equivalents at beginning of period                                                     |  |                  | 59.9   |   |          |   | 153.9 |  
|                                                                                                     |  |                  |        |   |          |   |       |  
|Cash and cash equivalents at end of period                                                           |  | $                | 108.7  |   |          | $ | 202.0 |  
|                                                                                                     |  |                  |        |   |          |   |       |  

See Notes to the Condensed Consolidated Financial Statements.



5



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Notes to the Interim Consolidated Financial Statements

(Unaudited)

(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 or the Company), 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 of 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
representation 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
|--- | ------------------------

On April 2, 2006, PCC adopted
Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004) (123R), Share-Based Payment. SFAS No. 123(R) requires that the compensation cost relating to share-based payment transactions be
recognized in financial statements, with the cost measured based on the estimated fair value of the equity or liability instruments issued. PCC has elected the modified prospective transition method as permitted by SFAS No. 123(R) and therefore
has not restated the financial statements for prior periods.

Stock option plans

PCC has stock incentive plans for certain officers, key salaried employees and directors under three plans: the 1994 Stock Incentive Plan, the 1999 Nonqualified Stock Option Plan, and the 2001 Stock Incentive Plan.
Shares authorized under these plans totaled approximately 43,642,000 shares. The plans allow for the grant of stock options, stock bonuses, stock appreciation rights, cash bonus rights and sale of restricted stock. The Compensation Committee of the
Board of Directors determines awards under the officer and employee stock incentive plans. To date, all awards under the stock incentive plans have been nonqualified stock option grants. The Compensation Committee fixes the time limit within which
options may be exercised and other exercise terms. To date, option grant prices under the three stock incentive plans have been at the fair market value on the date of grant. Options become exercisable at a rate of 25% each year over four years from
the date of grant and expire ten years from the date of grant.

Employee stock purchase plan

PCC has an employee stock purchase plan whereby the Company is authorized to issue shares of common stock to its full-time employees, nearly all of whom are eligible to
participate. Under the terms of the plan, employees can choose to have up to 10 percent of their annual base earnings withheld to purchase the Companys common stock subject to limitations established in the Internal Revenue Code. The
purchase price of the stock is the lower of 85 percent of the fair market value of the stock on the date of grant or on the date of purchase.

Deferred compensation plan

The Company has a deferred compensation plan whereby eligible executives may elect to defer up to 100% of their
regular cash compensation and cash incentive awards, and non-employee Board members may elect to defer up to 100% of their cash compensation for Board service. The compensation deferred under this plan is credited with earnings and losses as
determined by the rate of return on investments selected by the plan participants. One investment election of the deferred compensation plan is Phantom Stock Units, an investment that tracks the value of PCC common stock. Investments in Phantom
Stock Units are permanent for the remaining period of employment at PCC. Payment of investments in Phantom Stock Units following retirement or termination of



6



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employment is made in either cash or shares of PCC common stock, at the individuals election. PCC accounts for the Phantom Stock Units as a liability
award. The expense is calculated based on the current market value and the liability associated with the deferred compensation is adjusted accordingly. Total expense recognized for the three and six months ended October 1, 2006 was
approximately $0.3 million and $0.4 million, respectively.

Periods prior to adoption of SFAS No. 123(R)

Prior to April 2, 2006, PCC accounted for stock-based compensation in accordance with the provisions of Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. No significant stock-based compensation expense was recognized prior to the adoption of SFAS No. 123(R) since options granted under the Companys plan had
an exercise price equal to the market value of the underlying stock on the date of grant.

The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based employee compensation for the three and six months ended October 2, 2005:



|                                                                                                         |  |                    |      |   |                  |   |       |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------ | ---- | - | ---------------- | - | ----- | -
|                                                                                                         |  | Three Months Ended |      |   | Six Months Ended |  
|                                                                                                         |  | 10/2/05            |      |   | 10/2/05          |  
|Net income as reported                                                                                   |  | $                  | 79.1 |   |                  | $ | 156.5 |  
|Deduct: Stock-based compensation, net of tax, as determined under fair value based method for all awards |  |                    | (2.7 | ) |                  |   | (5.4  | )
|                                                                                                         |  |                    |      |   |                  |   |       |  
|Pro forma net income                                                                                     |  | $                  | 76.4 |   |                  | $ | 151.1 |  
|                                                                                                         |  |                    |      |   |                  |   |       |  
|Net income per share  basic:                                                                            |  |                    |      |   |                  |   |       |  
|Reported                                                                                                 |  | $                  | 0.59 |   |                  | $ | 1.18  |  
|Pro forma                                                                                                |  | $                  | 0.57 |   |                  | $ | 1.14  |  
|Net income per share  diluted:                                                                          |  |                    |      |   |                  |   |       |  
|Reported                                                                                                 |  | $                  | 0.58 |   |                  | $ | 1.16  |  
|Pro forma                                                                                                |  | $                  | 0.56 |   |                  | $ | 1.12  |  

Current period expense

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



|                                                          |  |                     |      |   |                   |   |      |  
|--------------------------------------------------------- |  | ------------------- | ---- | - | ----------------- | - | ---- | -
|                                                          |  | Three Months10/1/06 |      |   | Six Months10/1/06 |  
|Cost of goods sold                                        |  | $                   | 1.8  |   |                   | $ | 3.6  |  
|Selling, general and administrative                       |  |                     | 3.5  |   |                   |   | 6.6  |  
|                                                          |  |                     |      |   |                   |   |      |  
|Stock-based compensation expense before income taxes      |  |                     | 5.3  |   |                   |   | 10.2 |  
|                                                          |  |                     |      |   |                   |   |      |  
|Income tax benefit                                        |  |                     | (1.3 | ) |                   |   | (2.6 | )
|                                                          |  |                     |      |   |                   |   |      |  
|Total stock-based compensation expense after income taxes |  | $                   | 4.0  |   |                   | $ | 7.6  |  
|                                                          |  |                     |      |   |                   |   |      |  

No stock-based compensation costs were capitalized as of October 1, 2006 as they were not material. As of
October 1, 2006, the Company had $26.7 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of 2.9 years.



7



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Valuation assumptions

The fair value of the stock-based awards, as determined under the Black-Scholes valuation model, was estimated using the weighted-average assumptions outlined below:

Stock Option Plans:



|                              |  |                    |   |  |                  |   |  |         |   |  |         |  
|----------------------------- |  | ------------------ | - |  | ---------------- | - |  | ------- | - |  | ------- | -
|                              |  | Three Months Ended |   |  | Six Months Ended |  
|                              |  | 10/1/06            |   |  | 10/2/05          |   |  | 10/1/06 |   |  | 10/2/05 |  
|Risk-free interest rate       |  | 4.6                | % |  | 4.1              | % |  | 4.6     | % |  | 4.1     | %
|Expected dividend yield       |  | 0.2                | % |  | 0.3              | % |  | 0.2     | % |  | 0.3     | %
|Expected volatility           |  | 35.6               | % |  | 38.6             | % |  | 35.6    | % |  | 38.6    | %
|Expected life (in years)      |  | 2.7-4.4            |   |  | 5.0              |   |  | 2.7-4.4 |   |  | 5.0     |  
|                              |  |                    |   | 
|Employee Stock Purchase Plan: |  |                    |   |  |                  |   |  |         |   |  |         |  
|                              |  |                   
|                              |  | Three Months Ended |   |  | Six Months Ended |  
|                              |  | 10/1/06            |   |  | 10/2/05          |   |  | 10/1/06 |   |  | 10/2/05 |  
|Risk-free interest rate       |  | 4.9                | % |  | 4.1              | % |  | 4.9     | % |  | 4.1     | %
|Expected dividend yield       |  | 0.2                | % |  | 0.2              | % |  | 0.2     | % |  | 0.2     | %
|Expected volatility           |  | 35.6               | % |  | 38.6             | % |  | 35.6    | % |  | 38.6    | %
|Expected life (in years)      |  | 0.9                |   |  | 0.9              |   |  | 0.9     |   |  | 0.9     |  

The Company uses the US Treasury (constant maturity) interest rate as the risk-free interest rate and uses 10-year
historical volatility as the expected volatility. The Companys determination of expected terms and estimated pre-vesting forfeitures is based on an analysis of historical and expected patterns.

The weighted-average fair value of stock-based compensation awards granted and the intrinsic value of options exercised during the period were:



|                                           |  |                    |       |                  |   |         |  |         |       |  |   |      
|------------------------------------------ |  | ------------------ | ----- | ---------------- | - | ------- |  | ------- | ----- |  | - | -----
|                                           |  | Three Months Ended |       | Six Months Ended
|                                           |  | 10/1/06            |       | 10/2/05          |   | 10/1/06 |  | 10/2/05
|Stock option awards:                       |  |                    |       |                  |   |         |  |         |       |  |   |      
|Grant date fair value per share            |  | $                  | 21.16 |                  | $ | 16.67   |  | $       | 21.31 |  | $ | 15.31
|Total fair value of awards granted         |  | $                  | 2.8   |                  | $ | 0.3     |  | $       | 3.0   |  | $ | 0.7  
|Total intrinsic value of options exercised |  | $                  | 10.2  |                  | $ | 20.0    |  | $       | 17.7  |  | $ | 27.1 
|                                           |  |                    |       |                 
|Employee stock purchase plan:              |  |                    |       |                  |   |         |  |         |       |  |   |      
|Grant date fair value per share            |  | $                  | 12.43 |                  | $ | 7.75    |  | $       | 12.43 |  | $ | 7.75 
|Total fair value                           |  | $                  | 1.0   |                  | $ | 0.8     |  | $       | 2.2   |  | $ | 1.8  

The total amount of cash received from the exercise of stock options in the three and six months ended
October 1, 2006 was $6.8 million and $12.2 million, respectively, and the related tax benefit was $3.8 million and $6.4 million, respectively.



8



---

Additional information with respect to stock option activity is as follows:



|                               |  |           |   |  |                                         |       |                                                 |      |                                       |   |      
|------------------------------ |  | --------- | - |  | --------------------------------------- | ----- | ----------------------------------------------- | ---- | ------------------------------------- | - | -----
|                               |  | Shares    |   |  | WeightedAverageExercisePrice(per share) |       | WeightedAverageRemainingContractualTerm (years) |      | AggregateIntrinsic Value(in millions)
|Outstanding at April 2, 2006   |  | 6,223,000 |   |  | $                                       | 26.29 |                                                 |      |                                       |   |      
|Granted                        |  | 140,000   |   |  |                                         | 59.61 |                                                 |      |                                       |   |      
|Exercised                      |  | (386,000  | ) |  |                                         | 14.72 |                                                 |      |                                       |   |      
|Forfeited or expired           |  | (82,000   | ) |  |                                         | 34.38 |                                                 |      |                                       |   |      
|                               |  |           |   |  |                                         |       |                                                 |      |                                       |   |      
|Outstanding at October 1, 2006 |  | 5,895,000 |   |  | $                                       | 27.73 |                                                 | 6.80 |                                       | $ | 186.9
|                               |  |           |   |  |                                         |       |                                                 |      |                                       |   |      
|Vested or expected to vest(1)  |  | 5,420,000 |   |  | $                                       | 26.65 |                                                 | 7.17 |                                       | $ | 177.7
|                               |  |           |   |  |                                         |       |                                                 |      |                                       |   |      
|Exercisable at October 1, 2006 |  | 1,763,000 |   |  | $                                       | 15.85 |                                                 | 5.51 |                                       | $ | 76.8 
|                               |  |           |   |  |                                         |       |                                                 |      |                                       |   |      



|(1) | Represents outstanding options reduced by expected forfeitures
|--- | --------------------------------------------------------------

The
outstanding options for stock incentive plan shares have expiration dates ranging from fiscal 2007 to fiscal 2017. At October 1, 2006, approximately 5,574,000 stock incentive plan shares were available for future grants.

There were no shares issued under the Employee Stock Purchase Plan during the three and six months ended October 1, 2006. There were approximately 2,367,000 shares
available for future issuances at October 1, 2006.



|(3) | Acquisition
|--- | -----------

On May 25, 2006, PCC completed the acquisition of
Special Metals Corporation (SMC), a leading manufacturer of high-performance nickel-based alloys and super alloys. SMC will provide PCC with an internal supply of nickel-based billet for its Forged Products operations, as well as
strengthen and diversify PCCs sales profile. The aggregate purchase price was $548.1 million, which principally includes $310.6 million for the purchase of shares and $240.1 million for the repayment of SMCs outstanding debt and related
termination costs, partially offset by $22.3 million of cash acquired. The transaction was funded through the Companys credit facilities. The financial results of SMC since the acquisition are reported in PCCs Forged Products segment.
The impact of this acquisition was not material to the Companys results of operations; consequently, pro forma information has not been included.

Because of the timing of the SMC acquisition, PCC is in the process of finalizing the allocation of the purchase price to certain inventories, intangibles, contingent liabilities and valuation allowances as of October 1, 2006; thus,
the allocation shown below is preliminary and subject to further refinement as analyses are completed.



|                                                 |  |         |      
|------------------------------------------------ |  | ------- | -----
|                                                 |  | 5/25/06
|Current assets                                   |  | $       | 613.6
|Property, plant and equipment                    |  |         | 165.3
|Goodwill                                         |  |         | 118.7
|Intangible assets                                |  |         | 5.5  
|Other assets                                     |  |         | 14.3 
|                                                 |  |         |      
|Total assets acquired                            |  |         | 917.4
|                                                 |  |         |      
|Notes payable and current portion long-term debt |  |         | 1.2  
|Accounts payable and other current liabilities   |  |         | 226.9
|Long-term debt                                   |  |         | 1.6  
|Other long-term liabilities                      |  |         | 139.6
|                                                 |  |         |      
|Total liabilities assumed                        |  |         | 369.3
|                                                 |  |         |      
|Net assets acquired                              |  | $       | 548.1
|                                                 |  |         |      



9



---

Acquired intangible assets of $5.5 million include patents totaling $5.2 million with an 8-year weighted average useful
life and a license agreement valued at $0.3 million with a 3-year useful life. The $118.7 million of goodwill was assigned to the Forged Products segment and is not deductible for tax purposes.

On January 6, 2006, PCC completed the acquisition of the Shur-Lok Group, which includes the Shur-Lok Corporation in Irvine, California, and Shur-Lok International
located in Petit-Rechain, Belgium, for approximately $113.0 million in cash. Shur-Lok is a leading manufacturer of highly engineered, critical aerospace fasteners, including inserts, barrel nuts, adjustable diameter bolts, fluid fittings and lock
nuts. The Shur-Lok product line significantly enhances the basket of fastener products the Company can offer to its commercial airframe customers, while increasing market reach into other critical fastener applications. The results of
Shur-Loks operations are included within the Fastener Products segment in the consolidated financial statements since the acquisition. Goodwill relating to this transaction of $85.2 million is assigned to the Fastener Product segment, of which
$78.8 million is deductible for tax purposes. The impact of this acquisition was not material to the Companys results of operations; consequently, pro forma information has not been included.

PCC is in the process of finalizing the allocation of the purchase price as of October 1, 2006; thus, the allocation shown below is preliminary and subject to
further refinement as analyses are completed.



|                                               |  |         |      
|---------------------------------------------- |  | ------- | -----
|                                               |  | 1/06/06
|Current assets                                 |  | $       | 27.1 
|Property, plant and equipment                  |  |         | 14.5 
|Goodwill                                       |  |         | 85.2 
|Other assets                                   |  |         | 1.1  
|                                               |  |         |      
|Total assets acquired                          |  |         | 127.9
|                                               |  |         |      
|Accounts payable and other current liabilities |  |         | 14.6 
|Other long-term liabilities                    |  |         | 0.3  
|                                               |  |         |      
|Total liabilities assumed                      |  |         | 14.9 
|                                               |  |         |      
|Net assets acquired                            |  | $       | 113.0
|                                               |  |         |      



|(4) | Discontinued Operations
|--- | -----------------------

In the second quarter of fiscal 2007, the
Company sold its interest in Wyman-Gordon FRISA to its 50% joint venture partner. PCC received $30.0 million in cash for the sale. In addition, the buyer assumed and subsequently paid off $17.4 million of debt upon closing. At the time of the
closing, the joint venture entity operated a manufacturing facility located in Mexico that was engaged in the manufacture of forged products using the ring rolling process. FRISA was reclassified from the Forged Products segment to discontinued
operations.

In the first quarter of fiscal 2007, the Company decided to sell the refiner rebuild business of J&L Fiber Services and to close its AFT
Composites business. These businesses were reclassified from the Industrial Products segment to discontinued operations.

These businesses meet the
criteria as a component of an entity under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, any operating results of these businesses are presented in the Companys Condensed
Consolidated Statements of Income as discontinued operations, net of income tax, and all prior periods have been reclassified. In addition, gains and losses on operations discontinued in prior periods are also included below. The components of
discontinued operations for the periods presented are as follows:



10



---

|                                                                   |  |                    |      |   |                  |   |      |         |  |         |      |  |   |      |  
|------------------------------------------------------------------ |  | ------------------ | ---- | - | ---------------- | - | ---- | ------- |  | ------- | ---- |  | - | ---- | -
|                                                                   |  | Three Months Ended |      |   | Six Months Ended |  
|                                                                   |  | 10/1/06            |      |   | 10/2/05          |   |      | 10/1/06 |  | 10/2/05 |     
|Net sales                                                          |  | $                  | 16.6 |   |                  | $ | 16.0 |         |  | $       | 31.5 |  | $ | 34.3 |  
|Cost of goods sold                                                 |  |                    | 12.5 |   |                  |   | 14.2 |         |  |         | 24.2 |  |   | 30.2 |  
|Selling and administrative expenses                                |  |                    | 1.7  |   |                  |   | 2.2  |         |  |         | 3.1  |  |   | 4.8  |  
|Interest expense                                                   |  |                    | 0.3  |   |                  |   | 0.2  |         |  |         | 0.5  |  |   | 0.4  |  
|                                                                   |  |                    |      |   |                  |   |      |         |  |         |      |  |   |      |  
|Net income (loss) from discontinued operations before income taxes |  |                    | 2.1  |   |                  |   | (0.6 | )       |  |         | 3.7  |  |   | (1.1 | )
|Income tax expense                                                 |  |                    | 3.8  |   |                  |   |     |         |  |         | 1.2  |  |   | 0.2  |  
|                                                                   |  |                    |      |   |                  |   |      |         |  |         |      |  |   |      |  
|Net (loss) income from discontinued operations                     |  |                    | (1.7 | ) |                  |   | (0.6 | )       |  |         | 2.5  |  |   | (1.3 | )
|Net gain (loss) on disposal                                        |  |                    | 14.5 |   |                  |   | (0.6 | )       |  |         | 10.9 |  |   | (1.2 | )
|                                                                   |  |                    |      |   |                  |   |      |         |  |         |      |  |   |      |  
|Net gain (loss) from discontinued operations                       |  | $                  | 12.8 |   |                  | $ | (1.2 | )       |  | $       | 13.4 |  | $ | (2.5 | )
|                                                                   |  |                    |      |   |                  |   |      |         |  |         |      |  |   |      |  

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:



|                                       |  |         |      |        |   |     
|-------------------------------------- |  | ------- | ---- | ------ | - | ----
|                                       |  | 10/1/06 |      | 4/2/06
|Assets of discontinued operations      |  |         |      |        |   |     
|Current assets                         |  | $       | 20.7 |        | $ | 27.7
|Net property, plant and equipment      |  |         | 3.7  |        |   | 30.3
|Other assets                           |  |         | 0.3  |        |   | 2.1 
|                                       |  |         |      |        |   |     
|                                       |  | $       | 24.7 |        | $ | 60.1
|                                       |  |         |      |        |   |     
|Liabilities of discontinued operations |  |         |      |        |   |     
|Short-term borrowings                  |  | $       |     |        | $ | 6.0 
|Long-term debt currently due           |  |         | 0.1  |        |   | 2.0 
|Other current liabilities              |  |         | 24.8 |        |   | 9.8 
|Long-term debt                         |  |         |     |        |   | 6.0 
|Other liabilities                      |  |         | 3.9  |        |   | 12.2
|                                       |  |         |      |        |   |     
|                                       |  | $       | 28.8 |        | $ | 36.0
|                                       |  |         |      |        |   |     



|(5) | Inventories
|--- | -----------

Inventories consisted of the following:



|                           |  |          |       |         |   |      
|-------------------------- |  | -------- | ----- | ------- | - | -----
|                           |  | 10/01/06 |       | 4/02/06
|Finished goods             |  | $        | 178.6 |         | $ | 125.7
|Work-in-process            |  |          | 482.6 |         |   | 269.8
|Raw materials and supplies |  |          | 276.1 |         |   | 129.5
|                           |  |          |       |         |   |      
|                           |  |          | 937.3 |         |   | 525.0
|LIFO provision             |  |          | 0.8   |         |   | 32.0 
|                           |  |          |       |         |   |      
|Total inventory            |  | $        | 938.1 |         | $ | 557.0
|                           |  |          |       |         |   |      



11



---

|(6) | Goodwill and Acquired Intangibles
|--- | ---------------------------------

The Company performs its annual
goodwill assessment test during the second quarter of each fiscal year. For fiscal 2007, it was determined that the fair value of the related operations 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 six months ended October 1, 2006, were as follows:



|                         |  |                  |         |          |   |                              |  |   |                   |   |  |   |        
|------------------------ |  | ---------------- | ------- | -------- | - | ---------------------------- |  | - | ----------------- | - |  | - | -------
|                         |  | Balance at4/2/06 |         | Acquired |   | CurrencyTranslationand Other |  |   | Balance at10/1/06
|Investment Cast Products |  | $                | 298.2   |          | $ |                             |  | $ | 1.6               |   |  | $ | 299.8  
|Forged Products          |  |                  | 507.7   |          |   | 118.7                        |  |   | 8.7               |   |  |   | 635.1  
|Fastener Products        |  |                  | 678.1   |          |   | 0.9                          |  |   | (2.5              | ) |  |   | 676.5  
|Industrial Products      |  |                  | 171.3   |          |   |                             |  |   | 0.1               |   |  |   | 171.4  
|                         |  |                  |         |          |   |                              |  |   |                   |   |  |   |        
|Total                    |  | $                | 1,655.3 |          | $ | 119.6                        |  | $ | 7.9               |   |  | $ | 1,782.8
|                         |  |                  |         |          |   |                              |  |   |                   |   |  |   |        

The gross carrying amount and accumulated amortization of the Companys acquired intangible assets were as
follows:



|                              |  |                     |      |                         |   |                     |  |                         |     |  |   |    
|----------------------------- |  | ------------------- | ---- | ----------------------- | - | ------------------- |  | ----------------------- | --- |  | - | ---
|                              |  | 10/1/06             |      | 4/2/06                 
|                              |  | GrossCarryingAmount |      | AccumulatedAmortization |   | GrossCarryingAmount |  | AccumulatedAmortization
|Patents                       |  | $                   | 8.2  |                         | $ | 1.7                 |  | $                       | 3.0 |  | $ | 1.2
|Proprietary technology        |  |                     | 2.3  |                         |   | 0.4                 |  |                         | 2.4 |  |   | 0.4
|Tradenames                    |  |                     | 1.2  |                         |   | 0.2                 |  |                         | 0.8 |  |   | 0.1
|Long-term customer agreements |  |                     | 0.2  |                         |   | 0.2                 |  |                         | 0.2 |  |   | 0.2
|                              |  |                     |      |                         |   |                     |  |                         |     |  |   |    
|                              |  | $                   | 11.9 |                         | $ | 2.5                 |  | $                       | 6.4 |  | $ | 1.9
|                              |  |                     |      |                         |   |                     |  |                         |     |  |   |    

Amortization expense for acquired intangible assets for the three and six months ended October 1, 2006 was
$0.4 million and $0.6 million, respectively. Amortization expense related to finite-lived intangible assets is projected to total $1.3 million for fiscal 2007. Projected amortization expense for the succeeding five fiscal years is as follows:



|            |  |                              |    
|----------- |  | ---------------------------- | ---
|Fiscal Year |  | EstimatedAmortizationExpense
|2008        |  | $                            | 1.4
|2009        |  | $                            | 1.3
|2010        |  | $                            | 1.1
|2011        |  | $                            | 0.9
|2012        |  | $                            | 0.7



12



---

|(7) | Guarantees
|--- | ----------

In the ordinary course of business, the Company
warrants certain of its products against defects in design, materials and workmanship over various time periods. The warranty accrual as of October 1, 2006 and April 2, 2006 is immaterial to the financial position of the Company, and the
change in the accrual for the current quarter is immaterial to the Companys results of operations and cash flows.

In conjunction with certain
transactions, primarily divestitures, the Company 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 in relation to obligations recorded as liabilities at the time of divestiture, the Company has not historically made significant payments for these indemnifications.



|(8) | Earnings per share
|--- | ------------------

The weighted
average number of shares outstanding used to compute earnings per share were as follows (in millions):



|                                             |  |                    |  |                  |  |         |  |        
|-------------------------------------------- |  | ------------------ |  | ---------------- |  | ------- |  | -------
|                                             |  | Three Months Ended |  | Six Months Ended
|                                             |  | 10/1/06            |  | 10/2/05          |  | 10/1/06 |  | 10/2/05
|Basic weighted average shares outstanding    |  | 135.5              |  | 133.0            |  | 135.4   |  | 132.7  
|Dilutive stock options                       |  | 1.8                |  | 2.5              |  | 1.9     |  | 2.5    
|                                             |  |                    |  |                  |  |         |  |        
|Average shares outstanding assuming dilution |  | 137.3              |  | 135.5            |  | 137.3   |  | 135.2  
|                                             |  |                    |  |                  |  |         |  |        

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 representing stock distributable under stock option and employee stock purchase plans computed using the treasury stock method.

For the three and six months ended October 1, 2006, stock options to purchase 1.2 million shares and 1.1 million shares of common stock, respectively,
were excluded from the computation of diluted earnings per share because to do so would have been antidilutive. These options could be dilutive in the future.



|(9) | Comprehensive Income
|--- | --------------------

Comprehensive income consisted of the following:



|                                                                                                                |  |                    |       |         |                  |      |         |  |         |       |  |   |       |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | ------- | ---------------- | ---- | ------- |  | ------- | ----- |  | - | ----- | -
|                                                                                                                |  | Three Months Ended |       |         | Six Months Ended |     
|                                                                                                                |  | 10/1/06            |       | 10/2/05 |                  |      | 10/1/06 |  | 10/2/05 |      
|Net income                                                                                                      |  | $                  | 154.8 |         | $                | 79.1 |         |  | $       | 269.9 |  | $ | 156.5 |  
|Other comprehensive income (loss) , net of tax:                                                                 |  |                    |       |         |                  |      |         |  |         |       |  |   |       |  
|Unrealized translation adjustments                                                                              |  |                    | 16.1  |         |                  | (3.5 | )       |  |         | 27.7  |  |   | (20.8 | )
|Minimum pension liability                                                                                       |  |                    |      |         |                  | 0.2  |         |  |         |      |  |   | (0.5  | )
|Unrealized gain (loss) on derivatives:                                                                          |  |                    |       |         |                  |      |         |  |         |       |  |   |       |  
|Periodic revaluations (net of income tax of $2.2, $0.1, $2.3 and $(0.9), respectively)                          |  |                    | 6.2   |         |                  | 0.4  |         |  |         | 6.5   |  |   | (2.7  | )
|Reclassification to net income of previously deferred gains and loss (net of income tax of $0, $0.2, $0 and $0) |  |                    |      |         |                  | (0.5 | )       |  |         | 0.1   |  |   |      |  
|                                                                                                                |  |                    |       |         |                  |      |         |  |         |       |  |   |       |  
|Other comprehensive income (loss)                                                                               |  |                    | 22.3  |         |                  | (3.4 | )       |  |         | 34.3  |  |   | (24.0 | )
|                                                                                                                |  |                    |       |         |                  |      |         |  |         |       |  |   |       |  
|Total comprehensive income                                                                                      |  | $                  | 177.1 |         | $                | 75.7 |         |  | $       | 304.2 |  | $ | 132.5 |  
|                                                                                                                |  |                    |       |         |                  |      |         |  |         |       |  |   |       |  



13



---

|(10) | Financing Arrangements
|---- | ----------------------

In connection with the acquisition of SMC
in the first quarter of fiscal 2007, the Company increased borrowings under its $1.0 billion revolving credit facility which matures in fiscal 2011. Outstanding amounts under this facility totaled $322.0 million and $105.5 million at October 1,
2006 and April 2, 2006, respectively. As the Company has the option to pay down and borrow debt under this facility through fiscal 2011, it has classified amounts outstanding as long-term.

Also available to the Company is a 364-day Credit and Security Agreement (Receivable Facility), under which allowable borrowings are based on the level of
eligible trade accounts receivable, which cannot exceed $150.0 million. This facility was also used in connection with the acquisition of SMC. Included in short-term borrowings were outstanding amounts under this Receivable Facility totaling $140.0
million and $47.0 million as of October 1, 2006 and April 2, 2006, respectively.



|(11) | Pensions and Other Postretirement Benefit Plans
|---- | -----------------------------------------------

The Company and
its subsidiaries sponsor many domestic and foreign defined benefit pension plans. In addition, the Company offers postretirement medical benefits for certain eligible employees. These plans are more fully described in the Notes to the
Consolidated Financial Statements included in the Companys Annual Report on Form 10-K for the year ended April 2, 2006.

The net periodic benefit cost for the Companys pension plans consisted of the following components:



|                                   |  |                    |       |   |                  |   |       |         |  |   |         |   |  |   |       |  
|---------------------------------- |  | ------------------ | ----- | - | ---------------- | - | ----- | ------- |  | - | ------- | - |  | - | ----- | -
|                                   |  | Three Months Ended |       |   | Six Months Ended |  
|                                   |  | 10/1/06            |       |   | 10/2/05          |   |       | 10/1/06 |  |   | 10/2/05 |  
|Service cost                       |  | $                  | 9.2   |   |                  | $ | 7.1   |         |  | $ | 17.9    |   |  | $ | 15.3  |  
|Interest cost                      |  |                    | 18.0  |   |                  |   | 14.8  |         |  |   | 35.2    |   |  |   | 31.1  |  
|Expected return on plan assets     |  |                    | (21.9 | ) |                  |   | (16.2 | )       |  |   | (42.8   | ) |  |   | (34.2 | )
|Recognized net actuarial loss      |  |                    | 4.5   |   |                  |   | 3.1   |         |  |   | 8.8     |   |  |   | 6.5   |  
|Amortization of prior service cost |  |                    | 0.6   |   |                  |   | 0.6   |         |  |   | 1.2     |   |  |   | 1.3   |  
|                                   |  |                    |       |   |                  |   |       |         |  |   |         |   |  |   |       |  
|Net periodic benefit cost          |  | $                  | 10.4  |   |                  | $ | 9.4   |         |  | $ | 20.3    |   |  | $ | 20.0  |  
|                                   |  |                    |       |   |                  |   |       |         |  |   |         |   |  |   |       |  

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



|                                   |  |                    |      |   |                  |   |      |         |  |   |         |   |  |   |      |  
|---------------------------------- |  | ------------------ | ---- | - | ---------------- | - | ---- | ------- |  | - | ------- | - |  | - | ---- | -
|                                   |  | Three Months Ended |      |   | Six Months Ended |  
|                                   |  | 10/1/06            |      |   | 10/2/05          |   |      | 10/1/06 |  |   | 10/2/05 |  
|Service cost                       |  | $                  | 0.3  |   |                  | $ | 0.1  |         |  | $ | 0.5     |   |  | $ | 0.2  |  
|Interest cost                      |  |                    | 1.7  |   |                  |   | 1.2  |         |  |   | 3.1     |   |  |   | 2.2  |  
|Recognized net actuarial loss      |  |                    | 0.3  |   |                  |   | 0.5  |         |  |   | 0.6     |   |  |   | 0.8  |  
|Amortization of prior service cost |  |                    | (0.1 | ) |                  |   | (0.1 | )       |  |   | (0.2    | ) |  |   | (0.2 | )
|                                   |  |                    |      |   |                  |   |      |         |  |   |         |   |  |   |      |  
|Net periodic benefit cost          |  | $                  | 2.2  |   |                  | $ | 1.7  |         |  | $ | 4.0     |   |  | $ | 3.0  |  
|                                   |  |                    |      |   |                  |   |      |         |  |   |         |   |  |   |      |  

The Company made required contributions to the defined benefit pension plans of $4.2 million and $7.5 million for
the three and six months ended October 1, 2006, respectively. Projected contributions are expected to total approximately $33.0 million for fiscal year 2007, of which $18.1 million will be voluntary.



|(12) | Commitments and contingencies
|---- | -----------------------------

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



14



---

|(13) | New Accounting Pronouncements
|---- | -----------------------------

In November 2005, the Financial
Accounting Standards Board (FASB) issued FSP No. 123(R)-3, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. This pronouncement provides an alternative method of calculating the
excess tax benefits available to absorb any tax deficiencies recognized subsequent to the adoption of SFAS No. 123(R). The Company, which is currently evaluating its available transition alternatives, has until March 30, 2007 to make its
one-time election.

In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes -
an Interpretation of FASB Statement No. 109. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that it has taken or expects to
take on a tax return. FIN 48 is effective beginning in our first quarter of fiscal 2008. PCC is currently evaluating the impact of this interpretation on the Companys financial statements.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements which is effective for fiscal years
beginning in our first quarter of fiscal 2009 and for interim periods within those years. This statement defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. PCC is currently
evaluating the potential impact of this statement.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158 (SFAS
158), Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of FASB Statements No. 87, 88, 106 and 132(R). This statement requires balance sheet recognition of the overfunded
or underfunded status of pension and postretirement benefit plans. Under SFAS 158, actuarial gains and losses, prior service costs or credits, and any remaining transition assets or obligations that have not been recognized under previous accounting
standards must be recognized in other comprehensive income, net of tax effects, until they are amortized as a component of net periodic benefit cost. In addition, the measurement date, the date at which plan assets and the benefit obligation are
measured, is required to be the companys fiscal year end. Presently, PCC uses a December 31 measurement date for its pension and postretirement benefit plans. SFAS 158 is effective for publicly-held companies for fiscal years ending after
December 15, 2006, except for the measurement date provisions, which are effective for fiscal years ending after December 15, 2008. PCC is currently evaluating the impact of this statement on the Companys financial statements.



15



---

|(14) | Segment Information
|---- | -------------------

The Companys operations are classified
into four reportable business segments: Investment Cast Products, Forged Products, Fastener Products and Industrial Products. The Companys four reportable business segments are identified separately based on fundamental differences in their
operations. The results of operations of SMC have been included within the Forged Products segment since the date of acquisition, as described in Note 3  Acquisitions.



|                                                 |  |                    |         |   |         |   |       |  
|------------------------------------------------ |  | ------------------ | ------- | - | ------- | - | ----- | -
|                                                 |  | Three Months Ended |        
|                                                 |  | 10/1/06            |         |   | 10/2/05 |  
|Net sales:                                       |  |                    |         |   |         |   |       |  
|Investment Cast Products                         |  | $                  | 441.0   |   |         | $ | 402.3 |  
|Forged Products                                  |  |                    | 573.2   |   |         |   | 209.4 |  
|Fastener Products                                |  |                    | 244.9   |   |         |   | 200.6 |  
|Industrial Products                              |  |                    | 58.6    |   |         |   | 57.0  |  
|                                                 |  |                    |         |   |         |   |       |  
|Total net sales                                  |  | $                  | 1,317.7 |   |         | $ | 869.3 |  
|                                                 |  |                    |         |   |         |   |       |  
|Operating income (loss):                         |  |                    |         |   |         |   |       |  
|Investment Cast Products                         |  | $                  | 97.1    |   |         | $ | 78.9  |  
|Forged Products                                  |  |                    | 92.5    |   |         |   | 27.6  |  
|Fastener Products                                |  |                    | 51.3    |   |         |   | 32.3  |  
|Industrial Products                              |  |                    | 11.0    |   |         |   | 4.9   |  
|Corporate expense(1)                             |  |                    | (19.4   | ) |         |   | (14.4 | )
|                                                 |  |                    |         |   |         |   |       |  
|Total operating income                           |  |                    | 232.5   |   |         |   | 129.3 |  
|Interest expense, net                            |  |                    | 15.1    |   |         |   | 10.4  |  
|                                                 |  |                    |         |   |         |   |       |  
|Income before income taxes and minority interest |  | $                  | 217.4   |   |         | $ | 118.9 |  
|                                                 |  |                    |         |   |         |   |       |  



|(1) | Results for the three months ended October 1, 2006 includes stock-based compensation expense of $5.3 million.
|--- | -------------------------------------------------------------------------------------------------------------



16



---

|                                                 |  |                  |         |   |         |   |         |  
|------------------------------------------------ |  | ---------------- | ------- | - | ------- | - | ------- | -
|                                                 |  | Six Months Ended |        
|                                                 |  | 10/1/06          |         |   | 10/2/05 |  
|Net sales:                                       |  |                  |         |   |         |   |         |  
|Investment Cast Products                         |  | $                | 869.1   |   |         | $ | 789.6   |  
|Forged Products                                  |  |                  | 958.4   |   |         |   | 409.9   |  
|Fastener Products                                |  |                  | 486.4   |   |         |   | 403.2   |  
|Industrial Products                              |  |                  | 116.2   |   |         |   | 116.1   |  
|                                                 |  |                  |         |   |         |   |         |  
|Total net sales                                  |  | $                | 2,430.1 |   |         | $ | 1,718.8 |  
|                                                 |  |                  |         |   |         |   |         |  
|Operating income (loss):                         |  |                  |         |   |         |   |         |  
|Investment Cast Products                         |  | $                | 189.0   |   |         | $ | 153.5   |  
|Forged Products                                  |  |                  | 146.4   |   |         |   | 51.0    |  
|Fastener Products                                |  |                  | 100.1   |   |         |   | 63.4    |  
|Industrial Products                              |  |                  | 20.9    |   |         |   | 16.9    |  
|Corporate expense(1)                             |  |                  | (36.2   | ) |         |   | (26.1   | )
|                                                 |  |                  |         |   |         |   |         |  
|Total operating income                           |  |                  | 420.2   |   |         |   | 258.7   |  
|Interest expense, net                            |  |                  | 28.3    |   |         |   | 20.8    |  
|                                                 |  |                  |         |   |         |   |         |  
|Income before income taxes and minority interest |  | $                | 391.9   |   |         | $ | 237.9   |  
|                                                 |  |                  |         |   |         |   |         |  



|(1) | Results for the six months ended October 1, 2006 includes stock-based compensation expense of $10.2 million.
|--- | ------------------------------------------------------------------------------------------------------------

Total assets for the Forged Products segment increased $959.8 million from the end of fiscal 2006, from $905.5 million at April 2, 2006 to $1,865.3 million at
October 1, 2006, including $882.7 million associated with SMC, which was acquired during the first quarter of fiscal 2007.



17



---

|(15) | Condensed Consolidating Financial Statements
|---- | --------------------------------------------

Certain of the
Companys subsidiaries guarantee the Companys registered securities consisting of $200 million 5.6% Senior Notes due 2013 and $150 million 6.75% Senior Notes due 2007, as well as the Companys private notes and bank credit
facilities. 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 and bank credit facilities, 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 October 1, 2006 and April 2, 2006 and for income statements for the fiscal periods ended October 1, 2006 and October 2, 2005. The Notes are fully and unconditionally guaranteed on a
joint and several basis by each guarantor subsidiary. The guarantor subsidiaries include the Companys domestic subsidiaries within the Investment Cast Products, Forged Products, Fastener Products and Industrial 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 Company. The
condensed consolidating financial statements are presented herein, rather than separate financial statements for each of the guarantor subsidiaries, because guarantors are wholly-owned and the guarantees are full and unconditional, joint and
several.



18



---

Condensed Consolidating Statements of Income

Three Months Ended October 1, 2006

(Unaudited)



|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|----------------------------------------------------- |  | ----------------------- | ----- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                                      |  | PrecisionCastpartsCorp. |       |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |       
|Net sales                                             |  | $                       |      |   |                       | $ | 1,055.7 |                           |  | $ | 296.7        |   |  | $     | (34.7  | ) |  | $ | 1,317.7 |  
|Cost of goods sold                                    |  |                         | 1.8   |   |                       |   | 801.4   |                           |  |   | 230.9        |   |  |       | (34.7  | ) |  |   | 999.4   |  
|Selling and administrative expenses                   |  |                         | 17.6  |   |                       |   | 47.9    |                           |  |   | 20.3         |   |  |       |       |   |  |   | 85.8    |  
|Other expense (income)                                |  |                         | 4.7   |   |                       |   |        |                           |  |   | (4.7         | ) |  |       |       |   |  |   |        |  
|Interest (income) expense, net                        |  |                         | (6.3  | ) |                       |   | 26.5    |                           |  |   | (5.1         | ) |  |       |       |   |  |   | 15.1    |  
|Equity in earnings of subsidiaries                    |  |                         | 189.4 |   |                       |   | 2.9     |                           |  |   |             |   |  |       | (192.3 | ) |  |   |        |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Income (loss) before income tax and minority interest |  |                         | 171.6 |   |                       |   | 182.8   |                           |  |   | 55.3         |   |  |       | (192.3 | ) |  |   | 217.4   |  
|Income tax (benefit) expense                          |  |                         | 16.8  |   |                       |   | 45.3    |                           |  |   | 13.0         |   |  |       |       |   |  |   | 75.1    |  
|Minority interest                                     |  |                         |      |   |                       |   |        |                           |  |   | (0.3         | ) |  |       |       |   |  |   | (0.3    | )
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Net income (loss) from continuing operations          |  |                         | 154.8 |   |                       |   | 137.5   |                           |  |   | 42.0         |   |  |       | (192.3 | ) |  |   | 142.0   |  
|Net (loss) income from discontinued operations        |  |                         |      |   |                       |   | (0.2    | )                         |  |   | 13.0         |   |  |       |       |   |  |   | 12.8    |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Net income (loss)                                     |  | $                       | 154.8 |   |                       | $ | 137.3   |                           |  | $ | 55.0         |   |  | $     | (192.3 | ) |  | $ | 154.8   |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  



19



---

Condensed Consolidating Statements of Income

Three Months Ended October 2, 2005

(Unaudited)



|                                                      |  |                         |      |   |                       |   |       |                           |  |   |              |   |  |       |       |   |  |   |       |  
|----------------------------------------------------- |  | ----------------------- | ---- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ----- | ----- | - |  | - | ----- | -
|                                                      |  | PrecisionCastpartsCorp. |      |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |      
|Net sales                                             |  | $                       |     |   |                       | $ | 700.9 |                           |  | $ | 184.9        |   |  | $     | (16.5 | ) |  | $ | 869.3 |  
|Cost of goods sold                                    |  |                         |     |   |                       |   | 541.6 |                           |  |   | 150.2        |   |  |       | (16.5 | ) |  |   | 675.3 |  
|Selling and administrative expenses                   |  |                         | 14.0 |   |                       |   | 38.4  |                           |  |   | 12.3         |   |  |       |      |   |  |   | 64.7  |  
|Other (income) expense                                |  |                         | (0.3 | ) |                       |   |      |                           |  |   | 0.3          |   |  |       |      |   |  |   |      |  
|Interest expense (income), net                        |  |                         | (1.9 | ) |                       |   | 17.3  |                           |  |   | (5.0         | ) |  |       |      |   |  |   | 10.4  |  
|Equity in earnings of subsidiaries                    |  |                         | 85.0 |   |                       |   | (1.9  | )                         |  |   |             |   |  |       | (83.1 | ) |  |   |      |  
|                                                      |  |                         |      |   |                       |   |       |                           |  |   |              |   |  |       |       |   |  |   |       |  
|Income (loss) before income tax and minority interest |  |                         | 73.2 |   |                       |   | 101.7 |                           |  |   | 27.1         |   |  |       | (83.1 | ) |  |   | 118.9 |  
|Income tax (benefit) expense                          |  |                         | (5.9 | ) |                       |   | 39.6  |                           |  |   | 4.5          |   |  |       |      |   |  |   | 38.2  |  
|Minority interest                                     |  |                         |     |   |                       |   |      |                           |  |   | (0.4         | ) |  |       |      |   |  |   | (0.4  | )
|                                                      |  |                         |      |   |                       |   |       |                           |  |   |              |   |  |       |       |   |  |   |       |  
|Net income (loss) from continuing operations          |  |                         | 79.1 |   |                       |   | 62.1  |                           |  |   | 22.2         |   |  |       | (83.1 | ) |  |   | 80.3  |  
|Net loss from discontinued operations                 |  |                         |     |   |                       |   | (0.1  | )                         |  |   | (1.1         | ) |  |       |      |   |  |   | (1.2  | )
|                                                      |  |                         |      |   |                       |   |       |                           |  |   |              |   |  |       |       |   |  |   |       |  
|Net income (loss)                                     |  | $                       | 79.1 |   |                       | $ | 62.0  |                           |  | $ | 21.1         |   |  | $     | (83.1 | ) |  | $ | 79.1  |  
|                                                      |  |                         |      |   |                       |   |       |                           |  |   |              |   |  |       |       |   |  |   |       |  



20



---

Condensed Consolidating Statements of Income

Six Months Ended October 1, 2006

(Unaudited)



|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|----------------------------------------------------- |  | ----------------------- | ----- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                                      |  | PrecisionCastpartsCorp. |       |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |       
|Net sales                                             |  | $                       |      |   |                       | $ | 1,948.8 |                           |  | $ | 541.2        |   |  | $     | (59.9  | ) |  | $ | 2,430.1 |  
|Cost of goods sold                                    |  |                         | 3.6   |   |                       |   | 1,480.6 |                           |  |   | 424.7        |   |  |       | (59.9  | ) |  |   | 1,849.0 |  
|Selling and administrative expenses                   |  |                         | 32.4  |   |                       |   | 93.8    |                           |  |   | 34.7         |   |  |       |       |   |  |   | 160.9   |  
|Other expense (income)                                |  |                         | 4.0   |   |                       |   |        |                           |  |   | (4.0         | ) |  |       |       |   |  |   |        |  
|Interest (income) expense, net                        |  |                         | (9.9  | ) |                       |   | 46.7    |                           |  |   | (8.5         | ) |  |       |       |   |  |   | 28.3    |  
|Equity in earnings of subsidiaries                    |  |                         | 287.8 |   |                       |   | 9.1     |                           |  |   |             |   |  |       | (296.9 | ) |  |   |        |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Income (loss) before income tax and minority interest |  |                         | 257.7 |   |                       |   | 336.8   |                           |  |   | 94.3         |   |  |       | (296.9 | ) |  |   | 391.9   |  
|Income tax (benefit) expense                          |  |                         | (12.2 | ) |                       |   | 122.1   |                           |  |   | 24.7         |   |  |       |       |   |  |   | 134.6   |  
|Minority interest                                     |  |                         |      |   |                       |   |        |                           |  |   | (0.8         | ) |  |       |       |   |  |   | (0.8    | )
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Net income (loss) from continuing operations          |  |                         | 269.9 |   |                       |   | 214.7   |                           |  |   | 68.8         |   |  |       | (296.9 | ) |  |   | 256.5   |  
|Net (loss) income from discontinued operations        |  |                         |      |   |                       |   | (3.8    | )                         |  |   | 17.2         |   |  |       |       |   |  |   | 13.4    |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Net income (loss)                                     |  | $                       | 269.9 |   |                       | $ | 210.9   |                           |  | $ | 86.0         |   |  | $     | (296.9 | ) |  | $ | 269.9   |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  



21



---

Condensed Consolidating Statements of Income

Six Months Ended October 2, 2005

(Unaudited)



|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|----------------------------------------------------- |  | ----------------------- | ----- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                                      |  | PrecisionCastpartsCorp. |       |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |       
|Net sales                                             |  | $                       |      |   |                       | $ | 1,381.3 |                           |  | $ | 374.9        |   |  | $     | (37.4  | ) |  | $ | 1,718.8 |  
|Cost of goods sold                                    |  |                         |      |   |                       |   | 1,064.7 |                           |  |   | 305.0        |   |  |       | (37.4  | ) |  |   | 1,332.3 |  
|Selling and administrative expenses                   |  |                         | 25.7  |   |                       |   | 76.1    |                           |  |   | 26.0         |   |  |       |       |   |  |   | 127.8   |  
|Other (income) expense                                |  |                         | (0.9  | ) |                       |   |        |                           |  |   | 0.9          |   |  |       |       |   |  |   |        |  
|Interest expense (income), net                        |  |                         | (3.6  | ) |                       |   | 34.4    |                           |  |   | (10.0        | ) |  |       |       |   |  |   | 20.8    |  
|Equity in earnings of subsidiaries                    |  |                         | 171.2 |   |                       |   | (4.4    | )                         |  |   |             |   |  |       | (166.8 | ) |  |   |        |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Income (loss) before income tax and minority interest |  |                         | 150.0 |   |                       |   | 201.7   |                           |  |   | 53.0         |   |  |       | (166.8 | ) |  |   | 237.9   |  
|Income tax (benefit) expense                          |  |                         | (6.5  | ) |                       |   | 70.0    |                           |  |   | 14.9         |   |  |       |       |   |  |   | 78.2    |  
|Minority interest                                     |  |                         |      |   |                       |   |        |                           |  |   | (0.7         | ) |  |       |       |   |  |   | (0.7    | )
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Net income (loss) from continuing operations          |  |                         | 156.5 |   |                       |   | 131.7   |                           |  |   | 37.6         |   |  |       | (166.8 | ) |  |   | 159.0   |  
|Net loss from discontinued operations                 |  |                         |      |   |                       |   | (0.3    | )                         |  |   | (2.2         | ) |  |       |       |   |  |   | (2.5    | )
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  
|Net income (loss)                                     |  | $                       | 156.5 |   |                       | $ | 131.4   |                           |  | $ | 35.4         |   |  | $     | (166.8 | ) |  | $ | 156.5   |  
|                                                      |  |                         |       |   |                       |   |         |                           |  |   |              |   |  |       |        |   |  |   |         |  



22



---

Condensed Consolidating Balance Sheets

October 1, 2006

(Unaudited)



|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|---------------------------------------------------- |  | ----------------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | -------- | - |  | - | ------- | -
|                                                     |  | PrecisionCastpartsCorp. |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |         
|Assets                                               |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Current assets:                                      |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Cash and cash equivalents                            |  | $                       | 10.0    |   |                       | $ |        |                           |  | $ | 98.7         |   |  | $     |         |   |  | $ | 108.7   |  
|Receivables                                          |  |                         | 1.2     |   |                       |   | 603.9   |                           |  |   | 679.4        |   |  |       | (544.0   | ) |  |   | 740.5   |  
|Inventories                                          |  |                         |        |   |                       |   | 730.2   |                           |  |   | 207.9        |   |  |       |         |   |  |   | 938.1   |  
|Prepaid expenses                                     |  |                         | 1.0     |   |                       |   | 8.3     |                           |  |   | 10.1         |   |  |       |         |   |  |   | 19.4    |  
|Income tax receivable                                |  |                         |        |   |                       |   |        |                           |  |   |             |   |  |       |         |   |  |   |        |  
|Deferred income taxes                                |  |                         | 0.1     |   |                       |   | 43.7    |                           |  |   | 19.4         |   |  |       |         |   |  |   | 63.2    |  
|Discontinued operations                              |  |                         |        |   |                       |   | 10.8    |                           |  |   | 56.9         |   |  |       | (47.0    | ) |  |   | 20.7    |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Total current assets                                 |  |                         | 12.3    |   |                       |   | 1,396.9 |                           |  |   | 1,072.4      |   |  |       | (591.0   | ) |  |   | 1,890.6 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Property, plant and equipment, net                   |  |                         | 9.8     |   |                       |   | 598.3   |                           |  |   | 253.8        |   |  |       |         |   |  |   | 861.9   |  
|Goodwill, net                                        |  |                         |        |   |                       |   | 1,352.6 |                           |  |   | 430.2        |   |  |       |         |   |  |   | 1,782.8 |  
|Deferred income taxes                                |  |                         | 19.9    |   |                       |   |        |                           |  |   | 23.8         |   |  |       | (43.7    | ) |  |   |        |  
|Investments in subsidiaries                          |  |                         | 3,713.4 |   |                       |   | 281.3   |                           |  |   | 5.0          |   |  |       | (3,999.7 | ) |  |   |        |  
|Other assets                                         |  |                         | 126.0   |   |                       |   | 33.4    |                           |  |   | 14.6         |   |  |       |         |   |  |   | 174.0   |  
|Discontinued operations                              |  |                         |        |   |                       |   |        |                           |  |   | 4.0          |   |  |       |         |   |  |   | 4.0     |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|                                                     |  | $                       | 3,881.4 |   |                       | $ | 3,662.5 |                           |  | $ | 1,803.8      |   |  | $     | (4,634.4 | ) |  | $ | 4,713.3 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Liabilities and Shareholders Investment              |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Current liabilities:                                 |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Short-term borrowings                                |  | $                       |        |   |                       | $ | 0.2     |                           |  | $ | 140.1        |   |  | $     |         |   |  | $ | 140.3   |  
|Long-term debt currently due                         |  |                         | 19.6    |   |                       |   | 0.9     |                           |  |   | 0.2          |   |  |       |         |   |  |   | 20.7    |  
|Accounts payable                                     |  |                         | 461.9   |   |                       |   | 332.6   |                           |  |   | 254.0        |   |  |       | (591.0   | ) |  |   | 457.5   |  
|Accrued liabilities                                  |  |                         | 33.1    |   |                       |   | 288.3   |                           |  |   | 81.4         |   |  |       | (1.1     | ) |  |   | 401.7   |  
|Income taxes payable                                 |  |                         | 45.5    |   |                       |   |        |                           |  |   | 6.3          |   |  |       |         |   |  |   | 51.8    |  
|Deferred income taxes                                |  |                         | 0.3     |   |                       |   |        |                           |  |   | (0.3         | ) |  |       |         |   |  |   |        |  
|Discontinued operations                              |  |                         |        |   |                       |   |        |                           |  |   | 24.9         |   |  |       |         |   |  |   | 24.9    |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Total current liabilities                            |  |                         | 560.4   |   |                       |   | 622.0   |                           |  |   | 506.6        |   |  |       | (592.1   | ) |  |   | 1,096.9 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Long-term debt                                       |  |                         | 786.0   |   |                       |   | 9.6     |                           |  |   | 0.2          |   |  |       |         |   |  |   | 795.8   |  
|Pension and other postretirement benefit obligations |  |                         | 76.6    |   |                       |   | 164.1   |                           |  |   | 22.6         |   |  |       |         |   |  |   | 263.3   |  
|Deferred tax liability                               |  |                         |        |   |                       |   | 49.0    |                           |  |   |             |   |  |       | (43.7    | ) |  |   | 5.3     |  
|Other long-term liabilities                          |  |                         |        |   |                       |   | 78.9    |                           |  |   | 10.8         |   |  |       |         |   |  |   | 89.7    |  
|Discontinued operations                              |  |                         |        |   |                       |   |        |                           |  |   | 3.9          |   |  |       |         |   |  |   | 3.9     |  
|Shareholders investment:                            |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Common stock and paid-in capital                     |  |                         | 937.1   |   |                       |   | 2,139.6 |                           |  |   | 1,113.4      |   |  |       | (3,253.0 | ) |  |   | 937.1   |  
|Retained earnings                                    |  |                         | 1,552.3 |   |                       |   | 655.6   |                           |  |   | 115.2        |   |  |       | (770.8   | ) |  |   | 1,552.3 |  
|Accumulated other comprehensive loss                 |  |                         | (31.0   | ) |                       |   | (56.3   | )                         |  |   | 31.1         |   |  |       | 25.2     |   |  |   | (31.0   | )
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|Total shareholders investment                       |  |                         | 2,458.4 |   |                       |   | 2,738.9 |                           |  |   | 1,259.7      |   |  |       | (3,998.6 | ) |  |   | 2,458.4 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  
|                                                     |  | $                       | 3,881.4 |   |                       | $ | 3,662.5 |                           |  | $ | 1,803.8      |   |  | $     | (4,634.4 | ) |  | $ | 4,713.3 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |         |  



23



---

Condensed Consolidating Balance Sheets

April 2, 2006

(Unaudited)



|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|---------------------------------------------------- |  | ----------------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | ------------ | ------- |  | ----- | -------- | - |  | - | ------- | -
|                                                     |  | PrecisionCastpartsCorp. |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | Eliminations |         |  | Total |         
|ASSETS                                               |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Current assets:                                      |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Cash and cash equivalents                            |  | $                       | 10.6    |   |                       | $ |        |                           |  | $            | 49.3    |  | $     |         |   |  | $ | 59.9    |  
|Receivables, net                                     |  |                         | 0.7     |   |                       |   | 584.8   |                           |  |              | 348.0   |  |       | (438.1   | ) |  |   | 495.4   |  
|Inventories                                          |  |                         |        |   |                       |   | 429.4   |                           |  |              | 127.6   |  |       |         |   |  |   | 557.0   |  
|Prepaid expenses                                     |  |                         | 14.4    |   |                       |   | 3.8     |                           |  |              | 10.4    |  |       |         |   |  |   | 28.6    |  
|Deferred income taxes                                |  |                         |        |   |                       |   | 49.2    |                           |  |              | 16.2    |  |       | (0.2     | ) |  |   | 65.2    |  
|Discontinued operations                              |  |                         |        |   |                       |   | 16.1    |                           |  |              | 51.9    |  |       | (40.3    | ) |  |   | 27.7    |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Total current assets                                 |  |                         | 25.7    |   |                       |   | 1,083.3 |                           |  |              | 603.4   |  |       | (478.6   | ) |  |   | 1,233.8 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Property, plant and equipment, net                   |  |                         | 7.8     |   |                       |   | 465.6   |                           |  |              | 198.2   |  |       |         |   |  |   | 671.6   |  
|Goodwill, net                                        |  |                         |        |   |                       |   | 1,235.6 |                           |  |              | 419.7   |  |       |         |   |  |   | 1,655.3 |  
|Deferred income taxes                                |  |                         | 20.6    |   |                       |   |        |                           |  |              | 20.4    |  |       | (41.0    | ) |  |   |        |  
|Investments in subsidiaries                          |  |                         | 3,050.6 |   |                       |   | 284.3   |                           |  |              |        |  |       | (3,334.9 | ) |  |   |        |  
|Other assets                                         |  |                         | 125.6   |   |                       |   | 16.6    |                           |  |              | 13.6    |  |       | 0.9      |   |  |   | 156.7   |  
|Discontinued operations                              |  |                         |        |   |                       |   | 1.9     |                           |  |              | 31.9    |  |       | (1.4     | ) |  |   | 32.4    |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|                                                     |  | $                       | 3,230.3 |   |                       | $ | 3,087.3 |                           |  | $            | 1,287.2 |  | $     | (3,855.0 | ) |  | $ | 3,749.8 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|LIABILITIES AND SHAREHOLDERS INVESTMENT             |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Current liabilities:                                 |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Short-term borrowings                                |  | $                       |        |   |                       | $ |        |                           |  | $            | 53.5    |  | $     |         |   |  | $ | 53.5    |  
|Long-term debt currently due                         |  |                         | 19.9    |   |                       |   | 1.2     |                           |  |              | 2.2     |  |       |         |   |  |   | 23.3    |  
|Accounts payable                                     |  |                         | 349.8   |   |                       |   | 384.6   |                           |  |              | 109.3   |  |       | (478.4   | ) |  |   | 365.3   |  
|Accrued liabilities                                  |  |                         | 21.4    |   |                       |   | 202.8   |                           |  |              | 60.3    |  |       | (1.1     | ) |  |   | 283.4   |  
|Income taxes payable                                 |  |                         | 22.9    |   |                       |   |        |                           |  |              | 10.2    |  |       |         |   |  |   | 33.1    |  
|Deferred income taxes                                |  |                         | 0.2     |   |                       |   |        |                           |  |              |        |  |       | (0.2     | ) |  |   |        |  
|Discontinued operations                              |  |                         |        |   |                       |   | 0.2     |                           |  |              | 9.6     |  |       |         |   |  |   | 9.8     |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Total current liabilities                            |  |                         | 414.2   |   |                       |   | 588.8   |                           |  |              | 245.1   |  |       | (479.7   | ) |  |   | 768.4   |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Long-term debt                                       |  |                         | 585.0   |   |                       |   | 8.7     |                           |  |              | 6.1     |  |       |         |   |  |   | 599.8   |  
|Pension and other postretirement benefit obligations |  |                         | 90.6    |   |                       |   | 83.0    |                           |  |              | 1.3     |  |       |         |   |  |   | 174.9   |  
|Deferred tax liability                               |  |                         |        |   |                       |   | 46.6    |                           |  |              |        |  |       | (42.4    | ) |  |   | 4.2     |  
|Other long-term liabilities                          |  |                         |        |   |                       |   | 34.1    |                           |  |              | 15.7    |  |       |         |   |  |   | 49.8    |  
|Discontinued operations                              |  |                         |        |   |                       |   |        |                           |  |              | 12.2    |  |       |         |   |  |   | 12.2    |  
|Shareholders investment:                            |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Common stock and paid-in capital                     |  |                         | 915.3   |   |                       |   | 1,941.4 |                           |  |              | 977.4   |  |       | (2,918.8 | ) |  |   | 915.3   |  
|Retained earnings                                    |  |                         | 1,290.5 |   |                       |   | 444.6   |                           |  |              | 29.3    |  |       | (473.9   | ) |  |   | 1,290.5 |  
|Accumulated other comprehensive loss                 |  |                         | (65.3   | ) |                       |   | (59.9   | )                         |  |              | 0.1     |  |       | 59.8     |   |  |   | (65.3   | )
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|Total shareholders investment                       |  |                         | 2,140.5 |   |                       |   | 2,326.1 |                           |  |              | 1,006.8 |  |       | (3,332.9 | ) |  |   | 2,140.5 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  
|                                                     |  | $                       | 3,230.3 |   |                       | $ | 3,087.3 |                           |  | $            | 1,287.2 |  | $     | (3,855.0 | ) |  | $ | 3,749.8 |  
|                                                     |  |                         |         |   |                       |   |         |                           |  |              |         |  |       |          |   |  |   |         |  



24



---

Condensed Consolidating Statements of Cash Flows

Six Months Ended October 1, 2006

(Unaudited)



|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|--------------------------------------------------------------------------------------- |  | ----------------------- | ------ | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - | ----- | - | - |  | - | ------ | -
|                                                                                        |  | PrecisionCastpartsCorp. |        |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   | Total |  
|Net cash provided (used) by operating activities                                        |  | $                       | 328.7  |   |                       | $ | 21.6  |                           |  | $ | (52.3        | ) |       | $ |  |  | $ | 298.0  |  
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|Acquisitions of businesses                                                              |  |                         | (564.3 | ) |                       |   | 12.9  |                           |  |   | 9.4          |   |       |   |  |  |   | (542.0 | )
|Capital expenditures                                                                    |  |                         | (2.4   | ) |                       |   | (53.5 | )                         |  |   | (17.4        | ) |       |   |  |  |   | (73.3  | )
|Proceeds from the sale of businesses                                                    |  |                         | 33.5   |   |                       |   |      |                           |  |   |             |   |       |   |  |  |   | 33.5   |  
|Other                                                                                   |  |                         |       |   |                       |   | 16.4  |                           |  |   | 5.6          |   |       |   |  |  |   | 22.0   |  
|Net cash used by investing activities of discontinued operations                        |  |                         |       |   |                       |   |      |                           |  |   | (1.3         | ) |       |   |  |  |   | (1.3   | )
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|Net cash used by investing activities                                                   |  |                         | (533.2 | ) |                       |   | (24.2 | )                         |  |   | (3.7         | ) |       |   |  |  |   | (561.1 | )
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|Net change in short-term borrowings                                                     |  |                         |       |   |                       |   |      |                           |  |   | 92.6         |   |       |   |  |  |   | 92.6   |  
|Issuance of long-term debt                                                              |  |                         | 200.7  |   |                       |   | (1.1  | )                         |  |   |             |   |       |   |  |  |   | 199.6  |  
|Common stock issued                                                                     |  |                         | 5.2    |   |                       |   |      |                           |  |   |             |   |       |   |  |  |   | 5.2    |  
|Excess tax benefits on equity instruments issued under share-based payment arrangements |  |                         | 6.4    |   |                       |   |      |                           |  |   |             |   |       |   |  |  |   | 6.4    |  
|Cash dividends                                                                          |  |                         | (8.1   | ) |                       |   |      |                           |  |   |             |   |       |   |  |  |   | (8.1   | )
|Other                                                                                   |  |                         | (0.3   | ) |                       |   | 3.7   |                           |  |   | 3.2          |   |       |   |  |  |   | 6.6    |  
|Net cash provided by financing activities of discontinued operations                    |  |                         |       |   |                       |   |      |                           |  |   | 2.7          |   |       |   |  |  |   | 2.7    |  
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|Net cash provided by financing activities                                               |  |                         | 203.9  |   |                       |   | 2.6   |                           |  |   | 98.5         |   |       |   |  |  |   | 305.0  |  
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|Effect of exchange rate changes on cash and cash equivalents                            |  |                         |       |   |                       |   |      |                           |  |   | 6.9          |   |       |   |  |  |   | 6.9    |  
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|Net (decrease) increase in cash and cash equivalents                                    |  |                         | (0.6   | ) |                       |   |      |                           |  |   | 49.4         |   |       |   |  |  |   | 48.8   |  
|Cash and cash equivalents at beginning of period                                        |  |                         | 10.6   |   |                       |   |      |                           |  |   | 49.3         |   |       |   |  |  |   | 59.9   |  
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  
|Cash and cash equivalents at end of period                                              |  | $                       | 10.0   |   |                       | $ |      |                           |  | $ | 98.7         |   |       | $ |  |  | $ | 108.7  |  
|                                                                                        |  |                         |        |   |                       |   |       |                           |  |   |              |   |       |   |   |  |   |        |  



25



---

Condensed Consolidating Statements of Cash Flows

Six Months Ended October 2, 2005

(Unaudited)



|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|---------------------------------------------------------------- |  | ----------------------- | ----- | - | --------------------- | - | ----- | ------------------------- |  | - | ------------ | - |  | ----- | ---- | - |  | - | ----- | -
|                                                                 |  | PrecisionCastpartsCorp. |       |   | GuarantorSubsidiaries |   |       | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |     
|Net cash provided (used) by operating activities                 |  | $                       | 49.8  |   |                       | $ | 21.6  |                           |  | $ | 39.2         |   |  | $     | (0.5 | ) |  | $ | 110.1 |  
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|Capital expenditures                                             |  |                         | (0.3  | ) |                       |   | (24.5 | )                         |  |   | (14.9        | ) |  |       |     |   |  |   | (39.7 | )
|Acquisitions of businesses                                       |  |                         | (2.5  | ) |                       |   |      |                           |  |   |             |   |  |       |     |   |  |   | (2.5  | )
|Disposition of businesses and other                              |  |                         | 5.0   |   |                       |   | 1.0   |                           |  |   | 1.6          |   |  |       |     |   |  |   | 7.6   |  
|Net cash used by investing activities of discontinued operations |  |                         |      |   |                       |   |      |                           |  |   | (0.6         | ) |  |       |     |   |  |   | (0.6  | )
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|Net cash provided (used) by investing activities                 |  |                         | 2.2   |   |                       |   | (23.5 | )                         |  |   | (13.9        | ) |  |       |     |   |  |   | (35.2 | )
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|Repayment of long-term debt                                      |  |                         | (23.4 | ) |                       |   | (0.8  | )                         |  |   | (0.2         | ) |  |       |     |   |  |   | (24.4 | )
|Proceeds from exercise of stock options                          |  |                         | 11.4  |   |                       |   |      |                           |  |   |             |   |  |       |     |   |  |   | 11.4  |  
|Cash dividends                                                   |  |                         | (3.9  | ) |                       |   |      |                           |  |   | (0.5         | ) |  |       | 0.5  |   |  |   | (3.9  | )
|Other financing activities, net                                  |  |                         | (2.0  | ) |                       |   | 0.2   |                           |  |   | (1.4         | ) |  |       |     |   |  |   | (3.2  | )
|Net cast used by financing activities of discontinued operations |  |                         |      |   |                       |   |      |                           |  |   | (0.8         | ) |  |       |     |   |  |   | (0.8  | )
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|Net cash (used) provided by financing activities                 |  |                         | (17.9 | ) |                       |   | (0.6  | )                         |  |   | (2.9         | ) |  |       | 0.5  |   |  |   | (20.9 | )
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|Effect of exchange rate changes on cash and cash equivalents     |  |                         |      |   |                       |   |      |                           |  |   | (5.9         | ) |  |       |     |   |  |   | (5.9  | )
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|Net increase (decrease) in cash and cash equivalents             |  |                         | 34.1  |   |                       |   | (2.5  | )                         |  |   | 16.5         |   |  |       |     |   |  |   | 48.1  |  
|Cash and cash equivalents at beginning of period                 |  |                         | 84.4  |   |                       |   | 2.5   |                           |  |   | 67.0         |   |  |       |     |   |  |   | 153.9 |  
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  
|Cash and cash equivalents at end of period                       |  | $                       | 118.5 |   |                       | $ |      |                           |  | $ | 83.5         |   |  | $     |     |   |  | $ | 202.0 |  
|                                                                 |  |                         |       |   |                       |   |       |                           |  |   |              |   |  |       |      |   |  |   |       |  



26



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Consolidated Results of Operations - Comparison Between Three Months Ended October 1, 2006 and October 2, 2005



|                                                          |  |                    |         |   |           |   |       |   |  |   |       |  |          |  
|--------------------------------------------------------- |  | ------------------ | ------- | - | --------- | - | ----- | - |  | - | ----- |  | -------- | -
|                                                          |  | Three Months Ended |         |   | Inc/(Dec) |  
|                                                          |  | 10/1/06            |         |   | 10/2/05   |   |       | $ |  | % |      
|Net sales                                                 |  | $                  | 1,317.7 |   |           | $ | 869.3 |   |  | $ | 448.4 |  | 51.6     | %
|Cost of goods sold                                        |  |                    | 999.4   |   |           |   | 675.3 |   |  |   | 324.1 |  | 48.0     |  
|Selling and administrative expenses                       |  |                    | 85.8    |   |           |   | 64.7  |   |  |   | 21.1  |  | 32.6     |  
|Interest expense, net                                     |  |                    | 15.1    |   |           |   | 10.4  |   |  |   | 4.7   |  | 45.2     |  
|                                                          |  |                    |         |   |           |   |       |   |  |   |       |  |          |  
|Income before income taxes and minority interest          |  |                    | 217.4   |   |           |   | 118.9 |   |  |   | 98.5  |  | 82.8     |  
|Income tax expense                                        |  |                    | 75.1    |   |           |   | 38.2  |   |  |   | 36.9  |  | 96.6     |  
|Effective tax rate                                        |  |                    | 34.5    | % |           |   | 32.1  | % |  |   |       |  |          |  
|Minority interest                                         |  |                    | (0.3    | ) |           |   | (0.4  | ) |  |   | 0.1   |  | (25.0    | )
|                                                          |  |                    |         |   |           |   |       |   |  |   |       |  |          |  
|Net income from continuing operations                     |  |                    | 142.0   |   |           |   | 80.3  |   |  |   | 61.7  |  | 76.8     |  
|Net loss from discontinued operations                     |  |                    | 12.8    |   |           |   | (1.2  | ) |  |   | 14.0  |  | (1,166.7 | )
|                                                          |  |                    |         |   |           |   |       |   |  |   |       |  |          |  
|Net income (loss)                                         |  | $                  | 154.8   |   |           | $ | 79.1  |   |  | $ | 75.7  |  | 95.7     | %
|                                                          |  |                    |         |   |           |   |       |   |  |   |       |  |          |  
|Net income per share from continuing operations  diluted |  | $                  | 1.03    |   |           | $ | 0.59  |   |  | $ | 0.44  |  | 74.6     | %
|Net loss per share from discontinued operations  diluted |  |                    | 0.10    |   |           |   | (0.01 | ) |  |   | 0.11  |  | (1,100.0 | )
|                                                          |  |                    |         |   |           |   |       |   |  |   |       |  |          |  
|Net income (loss) per share - diluted                     |  | $                  | 1.13    |   |           | $ | 0.58  |   |  | $ | 0.55  |  | 94.8     | %
|                                                          |  |                    |         |   |           |   |       |   |  |   |       |  |          |  

Sales for the second quarter of fiscal 2007 were $1,317.7 million, up $448.4 million, or 51.6 percent from $869.3
million in the same quarter last year. The year-over-year increase in sales was principally driven by the addition of Special Metals Corporation (SMC), which was acquired on May 25, 2006, and by improving conditions in PCCs
core aerospace and power generation markets. In addition, material pass-through pricing increased sales by approximately $88 million this year versus approximately $47 million last year. According to JSA Research as of December 2005, commercial
aircraft deliveries were forecast to increase approximately 21 percent in calendar year 2006 from calendar year 2005 and are forecast to continue to increase approximately 12 percent in calendar year 2007. Because of manufacturing lead times
required to support aircraft deliveries, PCC began realizing these forecasted increases during fiscal 2006.

Net income from continuing operations for the
second quarter of fiscal 2007 was $142.0 million, or $1.03 per share (diluted). By comparison, net income from continuing operations for the second quarter of fiscal 2006 was $80.3 million, or $0.59 per share (diluted). Net income (after
discontinued operations) for the second quarter of fiscal 2007 was $154.8 million, or $1.13 per share (diluted), compared with net income of $79.1 million, or $0.58 per share (diluted), in the same period last year.

Interest and Income Tax

Net interest expense for the second
quarter of fiscal 2007 was $15.1 million, compared with $10.4 million for the second quarter of last year. The higher expense is primarily due to increased debt levels associated with the acquisition of Special Metals in the first quarter of fiscal
2007 and higher interest rates compared to last year.

The effective tax rate for the second quarter of fiscal 2007 was 34.5 percent, 2.4 percentage points
higher than the 32.1 percent effective rate in the same quarter last year. The increase in the tax rate was driven by the phase-out of US export incentives and the second quarter true-up of last years year-to-date effective tax rate.



27



---

Restructuring

Taking into consideration current and forecasted conditions in markets served by the Company, PCC regularly assesses its cost structure to ensure that operations are properly sized for prevailing market conditions. Based on the
Companys most recent assessment, there are no current plans to restructure PCCs base businesses in fiscal 2007. In connection with the acquisition of SMC in the first quarter of fiscal 2007, reserves were established in purchase
accounting to provide for plans to eliminate duplicate positions and operations.

Business Acquisitions

On May 25, 2006, PCC completed the acquisition of SMC, a leading manufacturer of high-performance nickel-based alloys and super alloys. SMC will provide PCC with an
internal supply of nickel-based billet for its Forged Products operations, as well as strengthen and diversify PCCs sales profile. The aggregate purchase price was $548.1 million, which principally includes $310.6 million for the purchase of
shares and $240.1 million for the repayment of SMCs outstanding debt and related termination costs, partially offset by $22.3 million of cash acquired. The cash transaction was funded through the Companys credit facilities. SMC operates
as part of the Forged Products Segment.

On January 6, 2006, PCC completed the acquisition of the Shur-Lok Group, which includes the Shur-Lok
Corporation in Irvine, California, and Shur-Lok International located in Petit-Rechain, Belgium, for approximately $113.0 million in cash. Shur-Lok is a leading manufacturer of highly engineered, critical aerospace fasteners, including inserts,
barrel nuts, adjustable diameter bolts, fluid fittings and lock nuts. The Shur-Lok product line significantly enhances the basket of fastener products the Company can offer to its commercial airframe customers, while increasing market reach into
other critical fastener applications. Shur-Lok operates as part of the Fastener Products segment.

Discontinued Operations

The Companys financial statements were affected by activities relating to the planned divestiture of a number of PCCs businesses. These businesses have been
accounted for under Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Accordingly, any operating results of these businesses are presented in the
Companys Consolidated Statements of Operations as discontinued operations, net of tax, and all prior periods have been reclassified.

In the second
quarter of fiscal 2007, the Company sold its interest in Wyman-Gordon FRISA to its 50% joint venture partner. PCC received $30.0 million in cash for the sale. In addition, the buyer assumed and subsequently paid off $17.4 million of debt upon
closing. At the time of the closing, the joint venture entity operated a manufacturing facility located in Mexico that was engaged in the manufacture of forged products using the ring rolling process. FRISA was reclassified from the Forged Products
segment to discontinued operations.

In the first quarter of fiscal 2007, the Company decided to sell the refiner rebuild business of J&L Fiber
Services and to close its AFT Composites business. These businesses were reclassified from the Industrial Products segment to discontinued operations.

Net
income from discontinued operations was $12.8 million in the second quarter of fiscal 2007, or $0.10 per share (diluted), compared with a net loss of $1.2 million, or $(0.01) per share (diluted), in the same quarter last year. The net income from
discontinued operations in the current quarter consists primarily of the gain on the sale of Wyman-Gordons FRISA business. The net loss from discontinued operations in the second quarter of last year principally reflects operating results from
the pumps and valves businesses of PCC Flow Technologies.



28



---

Results of Operations by Segment  Comparison Between Three Months Ended October 1, 2006 and October 2,
2005



|                                                 |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  
|------------------------------------------------ |  | ------------------ | ------- | - | --------- | - | ----- | - |  | - | ----- | - |  | ----- | -
|                                                 |  | Three Months Ended |         |   | Inc/(Dec) |  
|                                                 |  | 10/1/06            |         |   | 10/2/05   |   |       | $ |  |   | %     |  
|Net sales:                                       |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  
|Investment Cast Products                         |  | $                  | 441.0   |   |           | $ | 402.3 |   |  | $ | 38.7  |   |  | 9.6   | %
|Forged Products                                  |  |                    | 573.2   |   |           |   | 209.4 |   |  |   | 363.8 |   |  | 173.7 |  
|Fastener Products                                |  |                    | 244.9   |   |           |   | 200.6 |   |  |   | 44.3  |   |  | 22.1  |  
|Industrial Products                              |  |                    | 58.6    |   |           |   | 57.0  |   |  |   | 1.6   |   |  | 2.8   |  
|                                                 |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  
|Consolidated net sales                           |  | $                  | 1,317.7 |   |           | $ | 869.3 |   |  | $ | 448.4 |   |  | 51.6  | %
|                                                 |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  
|Operating income (loss):                         |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  
|Investment Cast Products                         |  | $                  | 97.1    |   |           | $ | 78.9  |   |  | $ | 18.2  |   |  | 23.1  | %
|% of sales                                       |  |                    | 22.0    | % |           |   | 19.6  | % |  |   |       |   |  |       |  
|Forged Products                                  |  |                    | 92.5    |   |           |   | 27.6  |   |  |   | 64.9  |   |  | 235.1 |  
|% of sales                                       |  |                    | 16.1    | % |           |   | 13.2  | % |  |   |       |   |  |       |  
|Fastener Products                                |  |                    | 51.3    |   |           |   | 32.3  |   |  |   | 19.0  |   |  | 58.8  |  
|% of sales                                       |  |                    | 20.9    | % |           |   | 16.1  | % |  |   |       |   |  |       |  
|Industrial Products                              |  |                    | 11.0    |   |           |   | 4.9   |   |  |   | 6.1   |   |  | 124.5 |  
|% of sales                                       |  |                    | 18.8    | % |           |   | 8.6   | % |  |   |       |   |  |       |  
|Corporate expense(1)                             |  |                    | (19.4   | ) |           |   | (14.4 | ) |  |   | (5.0  | ) |  | 34.7  |  
|                                                 |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  
|Consolidated segment operating income            |  |                    | 232.5   |   |           |   | 129.3 |   |  |   | 103.2 |   |  | 79.8  | %
|% of sales                                       |  |                    | 17.6    | % |           |   | 14.9  | % |  |   |       |   |  |       |  
|Interest expense, net                            |  |                    | 15.1    |   |           |   | 10.4  |   |  |   |       |   |  |       |  
|                                                 |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  
|Income before income taxes and minority interest |  | $                  | 217.4   |   |           | $ | 118.9 |   |  |   |       |   |  |       |  
|                                                 |  |                    |         |   |           |   |       |   |  |   |       |   |  |       |  



|(1) | Results for the three months ended October 1, 2006 includes stock-based compensation expense of $5.3 million.
|--- | -------------------------------------------------------------------------------------------------------------

Investment Cast Products

Investment Cast Products sales
increased 9.6 percent from $402.3 million in the second quarter of fiscal 2006 to $441.0 million this year. Operating income increased 23.1 percent from $78.9 million in the second quarter of fiscal 2006 to $97.1 million in the same quarter this
year, while operating income as a percent of sales increased from 19.6 percent to 22.0 percent of sales. The increase in sales was driven by continued market share gains, ramped-up commercial aerospace OEM build schedules and strengthening demand in
the aerospace aftermarket business. The increase in operating income reflected the impact of the higher sales volume and operating improvements, partially offset by increased dilution from the pass-through of higher raw material costs, mainly nickel
and titanium, which have increased approximately 85 percent and 4 percent, respectively, on the London Metal Exchange (LME) and TI 6-4 Bulk Weldables Index (metalprices.com) compared to the same quarter last year. The improvement in operating
margins as a percentage of sales was mainly due to the leverage from higher sales volumes and improved manufacturing performance, partially offset by the impact of higher raw material costs and pass-through pricing.

Sales within this segment are expected to continue to benefit from improved conditions in the aerospace and power generation markets through the remainder of fiscal
2007. Operating margins as a percent of sales are also expected to continue to improve in fiscal 2007 as a result of leverage from higher sales volume and continued improvements in operating efficiencies, partially offset by the impact of
pass-through pricing.



29



---

Forged Products

Forged Products sales were $573.2 million for the quarter, an increase of 173.7 percent, compared to sales of $209.4 million in the second quarter of fiscal 2006. Operating income increased 235.1 percent from $27.6 million in the
second quarter of fiscal 2006 to $92.5 million in the same quarter this year, while operating income as a percent of sales increased from 13.2 percent to 16.1 percent of sales. The increase in sales reflects the addition of SMC, as well as increased
demand for commercial aerospace products and aftermarket growth, and continued penetration into the Asian power generation market with higher sales of extruded pipe. Current quarter sales also include $54.0 million of higher pricing related to
pass-through of increased raw material costs compared to $22.1 million last year. Operating income for the base Wyman-Gordon forging businesses improved in the current quarter compared to the second quarter of fiscal 2006, reflecting leverage from
increased sales volume of higher margin aircraft turbine components, partially offset by higher material costs, mainly nickel and titanium, which have increased approximately 85 percent and 4 percent, respectively, on the LME and TI 6-4 Bulk
Weldables Index (metalprices.com) since the second quarter of fiscal 2006, and by dilution resulting from pass-through pricing. These strong results in the base businesses were partially offset by expected dilution from lower margins at SMC even
though SMCs second quarter operating income included approximately $5.0 million of favorable, non-recurring purchase price adjustments, which added 0.9 percentage points to the segments operating income as a percent of sales.

Sales for the remainder of fiscal 2007 within the Forged Products segment are expected to benefit from continued growth in the aerospace and power generation markets
and from the addition of SMC. In the upcoming third quarter, operating income from the base Wyman-Gordon business is expected to be affected by unfavorable LIFO expense, as higher cost nickel and titanium alloys are delivered under new contracts.
These higher material costs will be recovered with higher selling prices as these parts are sold in the fourth quarter. In addition, the remainder of fiscal 2007 will be affected by dilution of segment operating margins resulting from lower
operating margins at SMC.

Fastener Products

The Fastener Products segment reported $244.9 million of sales with operating income of $51.3 million, or 20.9 percent of sales, in the second quarter of fiscal 2007, compared to sales of $200.6 million and operating income of $32.3
million, or 16.1 percent of sales, in the second quarter of fiscal 2006. The increase in sales was due to the favorable impact of strong aerospace sales as well as the addition of sales from Shur-Lok, which was acquired in the fourth quarter of
fiscal 2006, partially offset by weaker demand from the automotive industry. Operating income as a percent of sales benefited from the increased higher margin aerospace business and the impact of continued cost take-outs and improved manufacturing
processes.

Sales within this segment are expected to have modest growth during the remainder of fiscal 2007, but will be up significantly compared to last
year as a result of increased sales volume to the aerospace market and a full year of operations from Shur-Lok. Operating income as a percentage of sales is also expected to improve due to continuing cost take-outs and leverage from higher sales.

Industrial Products

Industrial Products
sales of $58.6 million for the second quarter of fiscal 2007 increased 2.8 percent from $57.0 million in the same period last year. Operating income increased to $11.0 million in the second quarter of fiscal 2007 compared with $4.9 million in the
same period last year, and operating income as a percent of sales increased to 18.8 percent in the second quarter of fiscal 2007 from 8.6 percent in the same period last year. The increase in sales compared to last year were driven by higher sales
in the electric power generation market, partially offset by a decline in the sewer system business due to funding cuts for municipal construction projects. The increase in operating income was primarily due to a previously disclosed cumulative
adjustment of $5.6 million recognized in the second quarter of fiscal 2006 to correct an understatement of expenses from fiscal 2003 through the second quarter of fiscal 2006.

For the remainder of fiscal 2007, sales within the Industrial Products segment are expected to show modest growth, while operating income as a percentage of sales is expected to increase through fiscal 2007 as a
result of performance improvements and leverage from higher sales volume.



30



---

Consolidated Results of Operations - Comparison Between Six Months Ended October 1, 2006 and October 2, 2005



|                                                          |  |                  |         |   |           |   |         |   |  |   |       |   |  |        |  
|--------------------------------------------------------- |  | ---------------- | ------- | - | --------- | - | ------- | - |  | - | ----- | - |  | ------ | -
|                                                          |  | Six Months Ended |         |   | Inc/(Dec) |  
|                                                          |  | 10/1/06          |         |   | 10/2/05   |   |         | $ |  |   | %     |  
|Net sales                                                 |  | $                | 2,430.1 |   |           | $ | 1,718.8 |   |  | $ | 711.3 |   |  | 41.4   | %
|Cost of goods sold                                        |  |                  | 1,849.0 |   |           |   | 1,332.3 |   |  |   | 516.7 |   |  | 38.8   |  
|Selling and administrative expenses                       |  |                  | 160.9   |   |           |   | 127.8   |   |  |   | 33.1  |   |  | 25.9   |  
|Interest expense, net                                     |  |                  | 28.3    |   |           |   | 20.8    |   |  |   | 7.5   |   |  | 36.1   |  
|                                                          |  |                  |         |   |           |   |         |   |  |   |       |   |  |        |  
|Income before income taxes and minority interest          |  |                  | 391.9   |   |           |   | 237.9   |   |  |   | 154.0 |   |  | 64.7   |  
|Income tax expense                                        |  |                  | 134.6   |   |           |   | 78.2    |   |  |   | 56.4  |   |  | 72.1   |  
|Effective tax rate                                        |  |                  | 34.3    | % |           |   | 32.9    | % |  |   |       |   |  |        |  
|Minority interest                                         |  |                  | (0.8    | ) |           |   | (0.7    | ) |  |   | (0.1  | ) |  | 14.3   |  
|                                                          |  |                  |         |   |           |   |         |   |  |   |       |   |  |        |  
|Net income from continuing operations                     |  |                  | 256.5   |   |           |   | 159.0   |   |  |   | 97.5  |   |  | 61.3   |  
|Net loss from discontinued operations                     |  |                  | 13.4    |   |           |   | (2.5    | ) |  |   | 15.9  |   |  | (636.0 | )
|                                                          |  |                  |         |   |           |   |         |   |  |   |       |   |  |        |  
|Net income (loss)                                         |  | $                | 269.9   |   |           | $ | 156.5   |   |  | $ | 113.4 |   |  | 72.5   | %
|                                                          |  |                  |         |   |           |   |         |   |  |   |       |   |  |        |  
|Net income per share from continuing operations  diluted |  | $                | 1.87    |   |           |   | 1.18    |   |  | $ | 0.69  |   |  | 58.5   | %
|Net loss per share from discontinued operations  diluted |  |                  | 0.10    |   |           |   | (0.02   | ) |  |   | 0.12  |   |  | (600.0 | )
|                                                          |  |                  |         |   |           |   |         |   |  |   |       |   |  |        |  
|Net income (loss) per share  diluted                     |  | $                | 1.97    |   |           | $ | 1.16    |   |  | $ | 0.81  |   |  | 69.8   | %
|                                                          |  |                  |         |   |           |   |         |   |  |   |       |   |  |        |  

Sales for the first six months of fiscal 2007 were $2,430.1 million, an increase of 41.4 percent from $1,718.8
million in the same period last year. The year-over-year increase in sales was principally driven by the addition of the SMC businesses, which were acquired in the first quarter of fiscal 2007, and by improving conditions in PCCs core
aerospace and power generation markets. In addition, material pass-through pricing increased sales by approximately $164 million this year versus approximately $90 million last year. According to JSA Research as of December 2005, commercial aircraft
deliveries were forecast to increase approximately 21 percent in calendar year 2006 from calendar year 2005 and are forecast to continue to increase approximately 12 percent in calendar year 2007.

Net income from continuing operations for the first six months of fiscal 2007 was $256.5 million, or $1.87 per share (diluted), compared to net income from continuing
operations for the first six months of fiscal 2006 of $159.0 million, or $1.18 per share (diluted). Net income for the first six months of fiscal 2007 was $269.9 million, or $1.97 per share (diluted), compared with net income of $156.5 million, or
$1.16 per share (diluted), in the same period last year.

Interest and Income Tax

Net interest expense for the six months ended October 1, 2006 was $28.3 million, as compared with $20.8 million for the same period last year. The increase in
expense is primarily due to increased debt levels associated with the acquisition of Special Metals in the first quarter of fiscal 2007 and higher interest rates compared to last year.

The effective tax rate for the first six months of fiscal 2007 was 34.3 percent, as compared with 32.9 percent for the six months ended October 2, 2005. The increase in the tax rate was driven by the phase-out of
US export incentives and the second quarter true-up of last years year-to-date effective tax rate.



31



---

Discontinued Operations

The net income from discontinued operations was $13.4 million, or $0.10 per share (diluted), for the six months ended October 1, 2006 compared with a net loss of $2.5 million, or $0.02 per share diluted), in the
same period last year. The net income from discontinued operations in the first six months of fiscal 2007 consists primarily of the gain on the sale of Wyman-Gordons FRISA business. The net loss from discontinued operations in the first half
of last year principally reflects operating results from the pumps and valves businesses of PCC Flow Technologies.



32



---

Results of Operations by Segment  Comparison Between Six Months Ended October 1, 2006 and October 2,
2005



|                                                 |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  
|------------------------------------------------ |  | ---------------- | ------- | - | --------- | - | ------- | - |  | - | ----- | - |  | ----- | -
|                                                 |  | Six Months Ended |         |   | Inc/(Dec) |  
|                                                 |  | 10/1/06          |         |   | 10/2/05   |   |         | $ |  |   | %     |  
|Net sales:                                       |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  
|Investment Cast Products                         |  | $                | 869.1   |   |           | $ | 789.6   |   |  | $ | 79.5  |   |  | 10.1  | %
|Forged Products                                  |  |                  | 958.4   |   |           |   | 409.9   |   |  |   | 548.5 |   |  | 133.8 |  
|Fastener Products                                |  |                  | 486.4   |   |           |   | 403.2   |   |  |   | 83.2  |   |  | 20.6  |  
|Industrial Products                              |  |                  | 116.2   |   |           |   | 116.1   |   |  |   | 0.1   |   |  | 0.1   |  
|                                                 |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  
|Consolidated net sales                           |  | $                | 2,430.1 |   |           | $ | 1,718.8 |   |  | $ | 711.3 |   |  | 41.4  | %
|                                                 |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  
|Operating income (loss):                         |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  
|Investment Cast Products                         |  | $                | 189.0   |   |           | $ | 153.5   |   |  | $ | 35.5  |   |  | 23.1  | %
|% of sales                                       |  |                  | 21.7    | % |           |   | 19.4    | % |  |   |       |   |  |       |  
|Forged Products                                  |  |                  | 146.4   |   |           |   | 51.0    |   |  |   | 95.4  |   |  | 187.1 |  
|% of sales                                       |  |                  | 15.3    | % |           |   | 12.4    | % |  |   |       |   |  |       |  
|Fastener Products                                |  |                  | 100.1   |   |           |   | 63.4    |   |  |   | 36.7  |   |  | 57.9  |  
|% of sales                                       |  |                  | 20.6    | % |           |   | 15.7    | % |  |   |       |   |  |       |  
|Industrial Products                              |  |                  | 20.9    |   |           |   | 16.9    |   |  |   | 4.0   |   |  | 23.7  |  
|% of sales                                       |  |                  | 18.0    | % |           |   | 14.6    | % |  |   |       |   |  |       |  
|Corporate expense(1)                             |  |                  | (36.2   | ) |           |   | (26.1   | ) |  |   | (10.1 | ) |  | 38.7  |  
|                                                 |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  
|Consolidated segment operating income            |  |                  | 420.2   |   |           |   | 258.7   |   |  |   | 161.5 |   |  | 62.4  | %
|% of sales                                       |  |                  | 17.3    | % |           |   | 15.1    | % |  |   |       |   |  |       |  
|Interest expense, net                            |  |                  | 28.3    |   |           |   | 20.8    |   |  |   |       |   |  |       |  
|                                                 |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  
|Income before income taxes and minority interest |  | $                | 391.9   |   |           | $ | 237.9   |   |  |   |       |   |  |       |  
|                                                 |  |                  |         |   |           |   |         |   |  |   |       |   |  |       |  



|(1) | Results for the six months ended October 1, 2006 includes stock-based compensation
expense of $10.2 million.
|--- | ------------------------------------------------------------------------------------------------------------

Investment Cast Products

Investment Cast Products sales increased 10.1 percent from $789.6 million in the first six months of fiscal 2006 to $869.1 million this year. Operating income for the segment increased 23.1 percent, from $153.5
million, or 19.4 percent of sales, a year ago to $189.0 million, or 21.7 percent of sales, in the first six months of fiscal 2007. The increase in sales was driven by continued strength in the aerospace and power generation markets, with improved
commercial aerospace build rates and solid aftermarket growth as well as market share gains. The increase in operating income reflected the impact of the higher sales volume and operating improvements, partially offset by higher raw material costs,
mainly nickel and titanium, which have increased approximately 53 percent and 19 percent, respectively, on the London Metal Exchange (LME) and TI 6-4 Bulk Weldables Index (metalprices.com) compared to the same period last year. The improvement in
operating margins as a percentage of sales was mainly due to the leverage from higher sales volume and improved manufacturing performance, partially offset by the impact of higher raw material costs and pass-through pricing.

Forged Products

Forged Products sales were $958.4
million for the first six months of fiscal 2007, an increase of 133.8 percent, compared to sales of $409.9 million in the same period last year. Operating income increased 187.1 percent from $51.0 million, or 12.4 percent of sales, in the first six
months of fiscal 2006 to $146.4 million, or 15.3 percent of sales, this year. The increase in sales is primarily due to the addition of SMC, in addition to increased demand for aerospace products and extruded pipe in the base businesses. The first
six months of fiscal 2007 also included approximately $98 million related to pass-through of higher material costs versus approximately $43 million in the same period last year. Operating income as a percent of sales benefited in the current quarter
from the higher volume, partially offset by higher material costs, mainly nickel and titanium, which have increased approximately 53 percent and 19 percent, respectively, on the LME and TI 6-4 Bulk Weldables Index (metalprices.com) since the first
half of fiscal 2006, and by dilution resulting from pass-through pricing.



33



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Fastener Products

The Fastener Products segment reported $486.4 million of sales with operating income of $100.1 million, or 20.6 percent of sales, in the first half of fiscal 2007, compared to sales of $403.2 million and operating income of $63.4 million,
or 15.7 percent of sales in the same period last year. The increase in sales was due to the addition of Shur-Lok, which was acquired in the fourth quarter of fiscal 2006, and the favorable impact of strong aerospace sales, partially offset by weaker
demand from the automotive industry. Operating income as a percent of sales benefited from the higher margin aerospace business and the impact of continued cost take-outs and improved manufacturing processes.

Industrial Products

Industrial Products sales of $116.2
million for the first six months of fiscal 2007 increased $0.1 million, or 0.1 percent, from $116.1 million in the comparable prior year period. Operating income was $20.9 million, or 18.0 percent of sales, in the first six months of fiscal 2007,
compared to operating income of $16.9 million, or 14.6 percent of sales, in the same period last year. The relatively flat sales compared to last year reflects improved conditions in the pulp and paper market and market share gains in the electric
power generation market, partially offset by softness in the automotive market. The year-over-year increase in operating margin as a percent of sales is primarily due to the impact of a cumulative charge of $5.6 million in the first half of fiscal
2006 to correct an understatement of expenses from fiscal 2003 through the first quarter of fiscal 2006.

Changes in Financial Condition and Liquidity

Total assets of $4,713.3 million at October 1, 2006 represented a $963.5 million increase from the $3,749.8 million balance at April 2, 2006.
This increase principally reflects the addition of SMC assets totaling $894.2 million (including assets from discontinued operations) and additional working capital assets required to support expected revenue growth. Total capitalization at
October 1, 2006 was $3,415.3 million, consisting of $956.9 million of debt and $2,458.4 million of equity. The debt-to-capitalization ratio was 28.0 percent at October 1, 2006 compared with 24.0 percent at the end of fiscal 2006,
reflecting the impact of increased debt to finance the acquisition of SMC, partially offset by the impact of higher equity resulting from record earnings during the first half of fiscal 2007.

Cash as of October 1, 2006 was $108.7 million, up $48.8 million from the end of fiscal 2006, and total debt increased from $676.6 million (including $14.0 million
related to discontinued operations) at April 2, 2006 to $956.9 million (including $0.1 million related to discontinued operations) at October 1, 2006, for a total increase of $280.3 million. Debt net of cash, which includes borrowings to
finance the acquisition of SMC, increased by $231.5 million during the first six months of fiscal 2007. Adjusting this increase in net debt to reflect $542.0 million of cash used to acquire SMC and $2.8 million of SMC debt assumed with the
acquisition, and excluding $17.4 million of FRISA debt that was sold, the Company generated $295.9 million of positive net cash flow during the first six months of fiscal 2007. This positive net cash flow consisted primarily of $298.0 million from
operating activities and $55.5 million from various asset dispositions and business divestitures, partially offset by capital expenditures of $73.3 million.

Capital spending during fiscal 2007, which is expected to exceed fiscal 2006 capital spending by more than $100.0 million, will principally provide for equipment maintenance and upgrades, capacity expansion, cost reduction and safety
projects. Company contributions to its defined benefit pension plans are expected to be approximately $33.0 million during fiscal 2007, of which $18.1 million will be voluntary.

Management believes that the Company can fund requirements for working capital, pension and other postretirement benefit obligations, capital spending, cash dividends, scheduled repayment of debt, and potential
acquisitions from cash generated from operations, borrowing from existing or new bank credit facilities, issuance of public or privately placed debt securities, or the issuance of equity instruments.



34



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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, automotive, and other general industrial
cycles; the relative success of the Companys entry into new markets; competitive pricing; the financial viability of the Companys significant customers; the availability and cost of energy, materials, supplies, and insurance, the cost of
pension and postretirement medical benefits; equipment failures; relations with the Companys employees; the Companys ability to manage its operating costs and to integrate acquired businesses in an effective manner; governmental
regulations and environmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; and implementation of new technologies and process improvements. Any forward-looking
statements should be considered in light of these factors. The Company undertakes no obligation to publicly release 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 the Companys market risk exposure since April 2, 2006.



35



---

|Item 4. | Controls and Procedures
|------- | -----------------------

PCC management, 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 were not 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. This conclusion was based on the inadvertent late filings of Form 8-K relating to the Companys press releases
disclosing financial results for the first and second quarters of fiscal 2007. The disclosure controls and procedures have been modified to ensure timely filings in future periods. There have been no changes in internal control over financial
reporting that occurred during the last fiscal quarter that has materially effected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

On May 25, 2006, PCC acquired SMC in a purchase business combination. Because of the timing of the acquisition, management has excluded SMC from its assessment of
internal control over financial reporting as of October 1, 2006.



36



---

PART II. OTHER INFORMATION



|Item 1. | Legal Proceedings
|------- | -----------------

None.



|Item 1A. | Risk Factors
|-------- | ------------

There has been no material change in the
Companys reported risk factors since the filing of the Companys Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on June 16, 2006.



|Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds
|------- | ----------------------------------------------------------

None.



|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.



|Item 4. | Submission of Matters to a Vote of Security Holders and Issuer Purchases of Securities
|------- | --------------------------------------------------------------------------------------



| | (a) | The Company held its Annual Meeting of Shareholders on August 16, 2006.
| | --- | -----------------------------------------------------------------------



| | (b) | The Shareholders voted as follows on the following matters:
| | --- | -----------------------------------------------------------



| | 1. | Election of Directors. The voting results for each nominee is as follows:
| | -- | -------------------------------------------------------------------------



|                  |  |             |  |               
|----------------- |  | ----------- |  | --------------
|Nominee           |  | Votes For   |  | Votes Withheld
|Mark Donegan      |  | 122,205,186 |  | 3,738,224     
|Vernon E. Oechsle |  | 120,165,354 |  | 5,778,056     

Mr. Donegan and Mr. Oechsle were elected to serve three-year terms.



| | 2 | Amending the Restated Articles of Incorporation to increase the authorized Common Stock to 450,000,000 shares. The voting result is as follows:
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------



|            |  |               
|----------- |  | --------------
|Votes For   |  | Votes Withheld
|123,102,349 |  | 2,841,061     



| | 3 | Reapproving the 2001 Stock Incentive Plan. The voting result is as follows:
| | - | ---------------------------------------------------------------------------



|            |  |               
|----------- |  | --------------
|Votes For   |  | Votes Withheld
|119,936,045 |  | 6,007,365     



|Item 5. | Other Information
|------- | -----------------

None.



|Item 6. | Exhibits
|------- | --------



|        |  |                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------
|(3) (i) |  | Articles of Amendment to Restated Articles of Incorporation of Precision Castparts Corporation.        
|        | 
|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.



37



---

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: November 8, 2006 |  |  |  | /s/ William D. Larsson                      
|                       |  |  |  | William D. Larsson                          
|                       |  |  |  | Senior Vice President and                   
|                       |  |  |  | Chief Financial Officer                     
|                       |  |  |  | (Principal Financial and Accounting Officer)



38