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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 January 2, 1994
Commission File No. 1-10348
_______________________________________
Precision Castparts Corp.
An Oregon Corporation
IRS Employer Identification No. 93-0460598
4600 S.E. Harney Drive
Portland, Oregon 97206-0898
Telephone: (503) 777-3881
_______________________________________
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
Number of shares of Common Stock, no par value, outstanding
as of February 8, 1994: 13,091,504
Exhibit Index at Page 11
Page 1 of 12 Pages
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Page 2
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Income (1)
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
Three Months Ended
___________________________
Jan. 2, 1994 Dec. 27, 1992
____________ _____________
<S> <C> <C>
Net Sales $ 103,600 $ 107,900
Cost of Goods Sold 86,000 94,400
Restructuring and
Environmental Charges (2) --- 37,100
Selling and Administrative
Expenses 7,400 7,800
Interest (Income) Expense, Net 100 (100)
Income (Loss) before Provision
for Income Taxes 10,100 (31,300)
Provision (Benefit) for
Income Taxes 4,100 (12,600)
____________ ____________
Net Income (Loss) $ 6,000 $ (18,700)
============ ============
Net Income (Loss) Per
Common Share $ 0.46 $ (1.06)
============ ============
Nine Months Ended
___________________________
Jan. 2, 1994 Dec. 27, 1992
____________ _____________
Net Sales $ 312,900 $ 350,400
Cost of Goods Sold 263,100 297,500
Restructuring and
Environmental Charges (2) --- 37,100
Selling and Administrative
Expenses 22,500 24,500
Interest Expense, Net 1,000 ---
____________ ____________
Income (Loss) before
Provision for Income Taxes 26,300 (8,700)
Provision (Benefit) for
Income Taxes (3) 7,800 (4,700)
____________ ____________
Income (Loss) before Cumulative
Effect of Accounting Change 18,500 (4,000)
Cumulative Effect of Change in
Accounting for Postretirement
Benefits Other Than Pensions
(net of income tax benefit
of $1,800) (4) (2,900) ---
____________ ____________
Net Income (Loss) $ 15,600 $ (4,000)
============ ============
Income (Charge) Per Share: (6)
Before cumulative effect
of accounting change $ 1.42 $ (0.23)
Cumulative effect of change
in accounting for postretirement
benefits other than pensions (0.22) ----
____________ ____________
Net Income (Loss) Per
Common Share $ 1.20 $ (0.23)
============ ===========
</TABLE>
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Precision Castparts Corp. and Subsidiaries
Consolidated Balance Sheets (1)
(In thousands)
<TABLE>
<CAPTION>
Jan. 2, 1994 March 28, 1993
(as adjusted)
____________ ______________
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 12,500 $ 68,900
Receivables 79,100 89,600
Inventories 80,900 114,200
Prepaid expenses 1,800 900
Current deferred tax asset (5) 3,900
2,300
___________ ____________
Total current assets 178,200 275,900
___________ ____________
Property, Plant and
Equipment, at cost 247,500 248,700
Less -- accumulated
depreciation (127,000) (113,400)
___________ ____________
Net property, plant
and equipment 120,500 135,300
Goodwill and Other Assets 14,900 13,100
___________ ____________
Total assets $ 313,600 $ 424,300
=========== ============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 200 $ 800
Current portion of
long-term debt 3,900 3,900
Current portion of stock
repurchase liability --- 67,000
Accounts payable 13,400 14,800
Accrued liabilities 51,800 57,100
Income taxes payable (5) 3,900 2,400
___________ ____________
Total current liabilities 73,200 146,000
Long-Term Debt, excluding
current portion 10,900 14,700
Stock Repurchase Liability,
excluding current portion --- 50,000
Noncurrent deferred tax
liability (5) 9,400 13,700
Postretirement Benefit
Obligation (4) 4,700 ---
___________ ____________
Total liabilities 98,200 224,400
___________ ____________
Shareholders' Investment:
Common stock 13,100 13,000
Paid-in capital 2,300 ---
Stock subscription receivable (500) ---
Retained earnings (5) 200,200 186,200
Cumulative translation
adjustment 300 700
___________ ____________
Total shareholders'
investment 215,400 199,900
___________ ____________
Total liabilities and
shareholders' investment $ 313,600 $ 424,300
=========== ============
</TABLE>
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Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Cash Flows (1)
(In thousands)
Cash Flows from Operating Activities:
<TABLE>
<CAPTION>
Nine Months Ended
___________________________
Jan. 2, 1994 Dec. 27, 1992
____________ _____________
<S> <C> <C>
Net income (loss) $ 15,600 $ ($4,000)
Non-cash items included in income:
Depreciation and amortization 19,300 16,000
Deferred taxes 3,000 (10,700)
Cumulative effect of
accounting change (4) 4,700 ---
Restructuring and
environmental charges --- 37,100
Net (increase) decrease
in receivables, inventories
and prepaids over payables
and accruals 28,300 (7,800)
___________ ____________
Net cash provided by
operating activities 70,900 30,600
___________ ____________
Cash Flows from Investing Activities:
Acquisition of property,
plant and equipment (6,200) (13,300)
Other investing
activities, net (200) 400
___________ ____________
Net cash (used by)
investing activities (6,400) (12,900)
___________ ____________
Cash Flows from Financing Activities:
Proceeds of long-term debt 50,000 ---
Payment of long-term debt (53,700) (4,000)
Payments of notes
payable, net (500) (1,600)
Repurchase of common stock (117,000) ---
Increase in short-term
investments --- (18,800)
Sale of common stock 1,900 1,800
Cash dividends (7) (1,600) (1,600)
___________ ____________
Net cash (used by)
financing activities (120,900) (24,200)
___________ ____________
Net (Decrease) in Cash
and Cash Equivalents (56,400) (6,500)
Cash and Cash Equivalents
at Beginning of Period 68,900 25,300
___________ ____________
Cash and Cash Equivalents
at End of Period $ 12,500 $ 18,800
=========== ============
</TABLE>
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Page 5
Notes to the Interim Financial Statements
(1) The consolidated interim financial statements have been
prepared by the Company, without audit and subject to
year-end adjustment, in accordance with generally
accepted accounting principles, except that certain
information and footnote disclosures made in the latest
annual report 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
consolidated financial statements reflected all
adjustments which are, in the opinion of management,
necessary for fair representation.
(2) During the third quarter of fiscal 1993, the Company
recorded a provision for restructuring charges of
$27,200, equal to ($0.95) per share, and a provision
for environmental charges of $9,900, equal to ($0.34)
per share. The restructuring charges, which were in
response to a significant and continuing industry
decline in demand for aerospace components, provided
for the estimated cost of employee severances, plant
and office consolidations and rearrangements, and other
operating asset write-offs at the Company's Structurals
and Airfoils Divisions. The environmental charge
provided for the elimination and clean-up of a
hazardous material used at one of the Company's
manufacturing sites in Oregon.
(3) During the first quarter of fiscal 1994, the Company
recorded a $2.4 million tax benefit, equal to $0.18 per
share, as a result of reaching agreement with the
Internal Revenue Service concerning research and
development tax credits for fiscal years 1990 and 1991.
(4) In the first quarter of fiscal 1994, the Company
adopted Statement of Financial Accounting Standards
(SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Under
SFAS No. 106, the costs of retiree health care are
accrued over relevant service periods. Previously,
these costs were charged to expense as claims were
paid. The Company elected to immediately recognize the
transition obligation, resulting in a one-time charge
of $4.7 million, equal to $2.9 million after tax, or
$0.22 per share. The expense to be accrued in fiscal
1994 is not expected to be materially different from
the amount under the previous accounting method.
(5) In the first quarter of fiscal 1994, the Company
retroactively adopted SFAS No. 109, "Accounting for
Income Taxes," and the financial statements of prior
years have been restated to apply the new method
retroactively. The cumulative effect of this
retroactive adoption resulted in a decrease to retained
earnings of $3.4 million as of March 28, 1993. This
retroactive adoption had no effect on previously
reported net income for fiscal year 1993.
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(6) Net income per share is based on 13,000,000 shares
outstanding for the nine months ended January 2, 1994,
and 17,900,000 shares outstanding for the nine months
ended December 27, 1992.
(7) For the quarters ended September 26, 1993, and December
27, 1992, the Company paid dividends of $0.03 per share
on its common stock. On October 26, 1993, the
Company's Board of Directors approved an increase in
the quarterly dividend on the Company's common stock to
$0.06 per share, effective with the dividend payable on
January 3, 1994, to shareholders of record on December
3, 1993.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Sales for the third quarter of fiscal 1994 were $103.6
million, down 4.0% from $107.9 million in the third quarter
of last year. Net income for the quarter increased to $6.0
million, or $0.46 per share, from a net loss of ($18.7)
million, or ($1.06) per share, in the same quarter a year
ago.
The reported results for the third quarter of last year
included a provision of $23.0 million ($37.1 million pre-
tax), or $1.29 per share, for restructuring and
environmental charges. Excluding the provision for
restructuring and environmental charges, net income would
have been $4.3 million, or $0.23 per share, in the third
quarter of last year.
Results of Operations - Comparison between three months
ended January 2, 1994 and December 27, 1992
Sales decreased $4.3 million (4.0%) during the third quarter
of fiscal 1994 compared with the same period a year ago.
The decline resulted from continued delays and cancellations
of commercial aircraft delivery dates due to the slow
economy and weak financial condition of the airline
companies, cutbacks in domestic and foreign military
spending programs, and price reductions to customers in
response to competitive pressures in the aerospace industry.
Sales of castings for aerospace and aircraft jet engines,
which were 85.7% of sales for the quarter, decreased $2.9
million (4%). Sales of non-aerospace castings decreased
$1.4 million (9%) due to decreased sales of castings for
general industrial applications and industrial gas turbines.
Cost of sales (as a percentage of sales) decreased to 83.0%
during the third quarter of fiscal 1994 from 87.5% in the
same period a year ago. This improvement reflects the
results of the Company's restructuring activities, initiated
in the third and fourth quarters of last year, which have
reduced both fixed and variable manufacturing costs.
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Page 7
Selling and administrative expenses decreased $0.4 million
primarily due to workforce reductions and cost reduction
efforts. Net interest expense increased $0.2 million as a
result of lower interest income. Ending cash and short-term
investment balances were $12.5 million in the third quarter
of fiscal 1994 compared with $37.6 million in the third
quarter a year ago.
Results of Operations - Comparison between Nine Months Ended
January 2, 1994 and December 27, 1992
Sales decreased by $37.5 million (11.0%) during the first
nine months of fiscal 1994, compared with the same period a
year ago. Sales of castings for aerospace and aircraft jet
engines, which made up 85.0% of sales for the nine months,
decreased $43.2 million (14.0%). The decline resulted from
continued delays and cancellations of commercial aircraft
delivery dates due to the slow economy and the weak
financial condition of the airline companies, cutbacks in
domestic and foreign military spending programs, and price
reductions to customers in response to competitive pressures
in the aerospace industry. Sales of non-aerospace castings
increased by $5.7 million (15.0%), primarily due to
increased sales of castings for industrial gas turbines and
metal injection molded products for electronic and computer
component manufacturers.
Cost of sales (as a percentage of sales) decreased to 84.1%
during the first nine months of fiscal 1994 from 84.9% in
the same period a year ago. This improvement was primarily
due to savings from restructuring activities initiated in
the third and fourth quarters of last year. Cost of sales
(as a percentage of sales) have decreased for the last four
consecutive quarters, from 87.5% in the third quarter of
last year to 83.0% in the third quarter of fiscal 1994.
Selling and administrative expenses decreased $2.0 million
(8.1%) primarily due to workforce reductions and cost
reduction efforts. Net interest expense increased $1.0
million as a result of higher debt balances early in fiscal
1994, lower capitalized interest and reduced interest income
due to lower cash and short-term investment balances during
fiscal 1994.
The provision for income taxes for the first nine months of
fiscal 1994 included a $2.4 million tax benefit, equal to
$0.18 per share, as a result of reaching agreement with the
Internal Revenue Service concerning research and development
tax credits for fiscal years 1990 and 1991. The effective
tax rate for the first nine months of fiscal 1994, before
the $2.4 million tax benefit, was 38.5% as compared to
32.7%, before unusual items, in the first nine months of the
previous year. The higher tax rate in fiscal 1994 reflects
the increase in the federal tax rate from 34.0% to 35.0% and
lower expected tax credits from current research and
development activities.
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Results for the first nine months included the adoption of
SFAS No. 106 in the first quarter of fiscal 1994. As
allowed by SFAS No. 106, the Company elected to recognize
immediately its transition obligation, resulting in a one-
time charge of $2.9 million after tax, or ($0.22) per share.
The expense to be accrued in fiscal 1994 is not expected to
be materially different from the amount under the previous
accounting method. In addition, the cumulative effect of
the retroactive adoption of SFAS No. 109, as of March 28,
1993, resulted in a decrease to retained earnings of $3.4
million. This retroactive adoption had no effect on
previously reported net income for fiscal 1993, nor is it
expected to have a significant ongoing financial impact on
the Company.
Liquidity and Capital Resources
Total capitalization at January 2, 1994, of $230.4 million
consisted of $15.0 million of debt and $215.4 million of
equity. The debt-to-equity ratio at January 2, 1994, was
0.07 compared with 0.095 at the end of the prior fiscal
year.
During April of fiscal 1994, the Company paid $117.0 million
to shareholders to repurchase approximately 5 million
shares, or 28%, of its common stock. The repurchase was
funded by using $67.0 million of cash on hand as of March
28, 1993, and by borrowing $50.0 million from a bank. This
debt was repaid as of September 26, 1993, primarily using
cash generated from operations, and subsequently the
committed line of credit was canceled and the interest rate
swap on the bank debt was terminated. The Company
anticipates that future cash needs can be funded by cash
from operations and the Company's uncommitted lines of
credit.
The Company expects to spend approximately $2.0 million
during the fourth quarter of fiscal 1994 to improve
efficiencies of domestic and foreign manufacturing
facilities. The expenditures will be funded by cash from
operations.
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Page 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
Item 6.(a) Exhibits
Exhibit (11) Statement regarding
Computation of Per Share
Earnings for the Nine
Months Ended January 2,
1994.
Item 6.(b) No reports on Form 8-K have been filed during
the quarter.
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Page 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
PRECISION CASTPARTS CORP.
Registrant
DATE: February 14, 1994 /s/W.D. Larsson
______________________________
W.D. Larsson
Vice President-Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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Page 11
EXHIBIT INDEX
Exhibits
Exhibit (11) Statement re Computation of
Per Share Earnings for the
Nine Months Ended
January 2, 1994 12
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Page 12
Exhibit 11
PRECISION CASTPARTS CORP.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
FOR THE NINE MONTHS ENDED JANUARY 2, 1994
<TABLE>
<CAPTION>
Computation of Number of Shares of Common Stock
<S> <C>
Primary Earnings Per Share:
Weighted average number of shares 13,000,000
Stock option plan shares to be
issued at a price range of $7.40
to $28.75 per share 600,000
Less: Assumed purchase at average
market price during the period
using proceeds received upon
exercise of options and purchase
of stock and using tax benefits of
compensation due to premature
dispositions (600,000)
Total Primary Shares 13,000,000
Fully Diluted Earnings Per Share:
Weighted average number of shares 13,000,000
Stock option plan shares to be
issued at a price range of $7.40
to $28.75 per share 600,000
Less: Assumed purchase at the
higher of ending or average market
price during the period using
proceeds received upon exercise of
options and purchase of stock and
using tax benefits of compensation
due to premature dispositions (500,000)
Total Diluted Shares 13,100,000
</TABLE>
Note: The effect upon the primary and fully diluted
earnings per share calculation is less than 3%; therefore,
earnings per share are based on the weighted average number
of shares outstanding during the period.
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