<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 8-K/A
AMENDMENT NO. 1
Current Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported)
March 8, 1995
______________________________________
PRECISION CASTPARTS CORP.
(Exact name of registrant as specified in its charter)
State of Oregon 1-10348 93-0460598
(State or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation of
organization)
4600 S.E. Harney Drive
Portland, OR 97206-0898
Registrant's telephone number,
including area code: Telephone: (503) 777-3881
No Change
(Former name or address, if changed since last report)
______________________________________
</Page>
<PAGE>
Page 1
Item 7
Financial Statements and Exhibits
(a) Financial Statements of Business Acquisition
1. Report of Independent Public Accountants
2. Quamco, Inc. Consolidated Balance Sheets - October
30, 1994 and October 31, 1993
3. Quamco, Inc. Consolidated Statements of Operations
for the Years Ended October 30, 1994 and October
31, 1993
4. Quamco, Inc. Consolidated Statements of Cash Flows
for the Years Ended October 30, 1994 and October
31, 1993
5. Quamco, Inc. Notes to Consolidated Financial
Statements
Interim Financial Statements
1. Quamco, Inc., Consolidated Balance Sheet - January
29, 1995 (unaudited)
2. Quamco, Inc. Consolidated Statement of Operations
for the Three Months Ended January 29, 1995
(unaudited)
3. Quamco, Inc. Consolidated Statement of Cash Flows
for the Three Months Ended January 29, 1995
(unaudited)
(b) Pro Forma Financial Information
1. Pro Forma Combined Balance Sheet January 1,1995
(unaudited)
2. Notes to Pro Forma Combined Balance Sheet
(unaudited)
3. Pro Forma Combined Income Statements for the Year
Ended April 3, 1994 (unaudited) and the Nine
Months Ended January 1, 1995 (unaudited).
4. Notes to Pro Forma Combined Income Statements
(unaudited).
(c) Exhibits
(1) Agreement and Plan of Merger Among Quamco, Inc.,
Precision Castparts Corp. and the Shareholders
named herein (Shareholders of Quamco, Inc.), as
amended (Incorporated by Reference to Exhibit 1 to
Form 8-K dated March 23, 1995 - File No. 1-10348)
(23) Consent of Arthur Andersen & Co.
</Page>
<PAGE>
Page 2
Item 7(a) Financial Statements of Business Acquisition
Report of Independent Public Accountants
To the Board of Directors of Quamco, Inc.:
We have audited the accompanying consolidated balance sheets
of Quamco, Inc. (a Delaware corporation) as of October 31, 1993
and October 30, 1994, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years
then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the
financial position of Quamco, Inc. as of October 31, 1993 and
October 30, 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
December 12, 1994 (except with respect
to the matter discussed in Note 13, as to
which the date is January 19, 1995)
</Page>
<PAGE>
Page 3
Quamco, Inc.
Consolidated Statements of Operations
(Dollar Amounts and Shares in Thousands)
<TABLE>
<CAPTION>
For the
For the Years Ended Three-month Periods Ended
October 31, October 30, January 30, January 29,
1993 1994 1994 1995
(Unaudited)
<S> <C> <C> <C> <C>
Net Sales $ 64,931 $ 78,775 $ 17,488 $ 19,447
Cost of Sales 45,615 54,374 12,432 13,739
________ ________ ________ ________
Gross profit 19,316 24,401 5,056 5,708
________ ________ ________ ________
Provision for
Facilities
Closing 1,149 - - -
Selling, General
and Administrative
Expenses 11,923 11,393 2,821 2,957
Management Fee to
Related Party 367 400 100 100
________ ________ ________ ________
Income from
Operations 5,877 12,608 2,135 2,651
Interest Expense
(Including
Contingent Interest
Expense of $6,000 in
Fiscal 1994) 5,170 11,381 1,267 1,415
________ ________ ________ ________
Income before
provision for
income taxes 707 1,227 868 1,236
Provision for Income
Taxes 743 3,100 476 589
________ ________ ________ ________
Net income
(loss) $ (36) $ (1,873) $ 392 $ 647
======== ======== ======== ========
Net Income (Loss)
Per Share $ - $ (.20) $ .04 $ .07
======== ======== ======== ========
</Page>
<PAGE>
Page 4
Weighted Average
Shares
Outstanding 9,450 9,414 9,450 9,414
===== ===== ===== =====
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
</Page>
<PAGE>
Page 5
<TABLE>
Quamco, Inc.
Consolidated Balance Sheets
(Dollar Amounts in Thousands)
<CAPTION>
October 31, October 30, January 29,
Assets 1993 1994 1995
(Unaudited)
<S> <C> <C> <C>
Current Assets:
Cash $ 556 $ 577 $ 124
Accounts receivable, less
allowance for doubtful
accounts of $165 and
$290 in 1993 and 1994,
respectively 10,096 12,523 11,963
Inventories 10,373 11,743 13,083
Prepaid expenses 178 123 191
__________ __________ __________
Total current assets 21,203 24,966 25,361
__________ __________ __________
Property, Plant and
Equipment, at Cost:
Machinery and
equipment 13,542 15,988 16,464
Buildings 11,748 11,783 11,783
Land 3,306 3,306 3,306
Furniture and
fixtures 1,148 1,338 1,348
Construction-in-process 236 545 810
__________ __________ __________
29,980 32,960 33,711
Less-Accumulated
depreciation 8,132 10,608 11,320
__________ __________ __________
21,848 22,352 22,391
__________ __________ __________
</Page>
<PAGE>
Page 6
<S> <C> <C> <C>
Other Assets:
Deferred financing
costs, net of
accumulated
amortization of
$1,465 and $1,870
in 1993 and 1994,
respectively 588 182 125
Goodwill, net of
accumulated
amortization of
$2,621, $3,394
and $3,587 in 1993,
1994 and 1995,
respectively 28,242 27,470 27,277
Noncompete agreements,
net of accumulated
amortization of
$168, $280 and $308
in 1993, 1994 and 1995,
respectively 616 504 476
Other 270 223 220
__________ __________ __________
$ 72,767 $ 75,697 $ 75,850
========== ========== ==========
Liabilities and Shareholders' Equity
<CAPTION>
October 31, October 30, January 29,
Current Liabilities: 1993 1994 1995
(Unaudited)
<S> <C> <C> <C>
Current portion of
long-term
obligations $ 2,451 $ 3,127 $ 3,122
Current portion of
noncompete
obligations 286 286 286
Accounts payable 4,481 4,379 4,180
Accrued expenses 5,131 5,529 4,817
Deferred taxes 652 719 719
Contingent interest
payable - 6,000 6,000
__________ __________ __________
Total current
liabilities 13,001 20,040 19,124
__________ __________ __________
</Page>
<PAGE>
Page 7
Long-term Obligations,
Less Current Portion 48,351 46,511 46,992
__________ __________ __________
Other Noncurrent
Liabilities:
Deferred taxes 3,222 3,187 3,187
Pension 1,114 1,213 1,213
Other accrued employee
benefits 2,579 2,579 2,579
Noncompete obligations,
less current
portion 591 387 328
Severance 184 - -
__________ __________ __________
7,690 7,366 7,307
__________ __________ __________
Commitments and Contingencies (Notes 4, 6 and 7)
Shareholders' Equity:
Preferred stock, $0.01 par value-
Authorized - 1,000 shares
Issued and
outstanding-None - - -
Common stock, $0.01 par value-
Authorized-12,500,000 shares
Issued-9,500,000 shares 95 95 95
Capital in excess of par 3,780 3,780 3,780
Accumulated deficit (100) (1,973) (1,326)
Treasury stock, at cost (50) (122) (122)
__________ __________ __________
3,725 1,780 2,427
__________ __________ __________
Total shareholders'
equity $ 72,767 $ 75,697 $ 75,850
========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
</Page>
<PAGE>
Page 8
<TABLE>
Quamco, Inc.
Consolidated Statements of Shareholders' Equity
(Dollar Amounts in Thousands)
<CAPTION>
Treasury
Common Stock Capital Stock Cumulative
Number $0.1 in Number Translation Total
of Par Excess Accumulated of Adjust- Shareholders'
Shares Value of Par Deficit Shares Cost ment Equity
<S>
Balance, November 1, 1992
<C> <C> <C> <C> <C> <C>` <C> <C>
9,500,000 $ 95 $ 3,780 $ (64) 50,000 $ (50) $ 36 $ 3,797
Net loss
- - - (36) - - - (36)
Change in cumulative translation
adjustment due to sale of
Reed Limited
- - - - - - (36) (36)
_________ _____ _______ _______ _______ ______ _____ _______
Balance, October 31, 1993
9,500,000 95 3,780 (100) 50,000 (50) - 3,725
Net loss
- - - (1,873) - - - (1,873)
Purchase of treasury stock,
at cost
- - - - 214,976 (215) - (215)
Sale of treasury stock,
at cost
- - - - (142,468) 143 - 143
_________ _____ _______ _______ _______ ______ _____ _______
Balance, October 30, 1994
9,500,000 95 3,780 (1,973) 122,508 (122) - 1,780
Net income (unaudited)
- - - 647 - - - 647
_________ _____ _______ _______ _______ ______ _____ _______
Balance, January 29, 1995 (Unaudited)
9,500,000 $ 95 $ 3,780 $ (1,326) 122,508 $ (122) $ - $ 2,427
========= ===== ======= ======== ======= ====== ===== =======
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
</Page>
<PAGE>
Page 9
Quamco, Inc.
Consolidated Statements of Cash Flows
(Dollar Amounts in Thousands)
<TABLE>
<CAPTION>
For the
For the Years Ended Three-month Periods Ended
October 31, October 30, January 30, January 29,
1993 1994 1994 1995
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income
(loss) $ (36) $(1,873) $ 392 $ 647
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities-
Depreciation
and amortization 3,500 3,811 941 990
Change in contingent
interest payable - 6,000 - -
Change in deferred
taxes (661) 32 - -
</Page>
<PAGE>
Page 10
Change in cumulative
translation adjustment (36) - - -
Change in pension 310 99 (81) -
Change in assets and
liabilities-
Accounts receivable (1,019) (2,427) (902)
560
Inventories (934) (1,370) (365) (1,340)
Prepaid
expenses 116 55 (205) (68)
Accounts
payable 995 (102) (149) (199)
Accrued
liabilities (184) 214 (66) (712)
_________ _________ _________ _________
Net cash
provided
by (used
in) operating
activities 2,051 4,439 (435) (122)
_________ _________ _________ _________
Cash Flows From Investing Activities:
Acquisition of
property, plant
equipment, net (578) (3,025) (297) (751)
Increase (decrease)
in other assets (57) 47 37 3
_________ _________ _________ _________
</Page>
<PAGE>
Page 11
Net cash
used in
investing
activities (635) (2,978) (260) (748)
_________ _________ _________ _________
Cash Flows From Financing Activities:
Net proceeds under
revolving line of
credit 1,937 1,090 1,198 996
Proceeds from long-term
obligations 347 198 - 79
Payments of long-term
obligations (3,614) (2,452) (598) (594)
Payment of noncompete
obligation - (204) (155) (64)
Purchase of treasury
stock, at cost - (215) - -
Proceeeds from sale of
treasury stock, at
cost - 143 50 -
_________ _________ _________ _________
Net cash provided
by (used in)
financing
activities (1,330) (1,440) 495 417
_________ _________ _________ _________
Net Increase (Decrease)
In Cash 86 21 (200) (453)
Cash, Beginning of Period 470 556 556 577
_________ _________ _________ _________
Cash, End of Period $ 556 $ 577 $ 356 $ 124
========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
</Page>
<PAGE>
Page 12
QUAMCO, INC.
Notes to Consolidated Financial Statements
(Including Notes Applicable To Unaudited Periods)
(1) Organization
Quamco, Inc. (the Company), through its principal operating
divisions, is engaged in the manufacture of rolled thread
dies, header tools, precision gun drills, machine tools and
other products for use in various manufacturing industries.
The Company's fiscal year ends on the Sunday nearest October
31 of each year.
(2) Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned
subsidiaries after elimination of intercompany accounts and
transactions.
Interim Financial Statements
The financial statements as of January 29, 1995 and for the
three-month periods ended January 30, 1994 and January 29,
1995 are unaudited. In management's opinion, these
unaudited consolidated financial statements have been
prepared on the same basis as the audited consolidated
financial statements and include all adjustments, consisting
only of normal recurring adjustments, necessary for the fair
presentation of the financial data for such periods. The
unaudited results for the three-months ended January 29,
1995 are not necessarily indicative of the results expected
for any future period.
Inventories
Inventories are stated at the lower of cost or market. Cost
for a substantial portion of the inventories is determined
by the last-in, first-out (LIFO) method. If inventories
were valued under the first-in, first-out (FIFO) method,
inventories would have been $316,000 and $298,000 greater at
October 31, 1993 and October 30, 1994, respectively. Net
income (loss) under the FIFO method would have been
</Page>
<PAGE>
Page 13
approximately $47,000 and $(1,884,000) in fiscal 1993 and
1994, respectively.
Property, Plant and Equipment and Depreciation
Property, plant and equipment are recorded at cost and are
depreciated using the straight-line method over the
estimated useful lives of 20 years for buildings and 4 to 12
years for machinery and equipment, and furniture and
fixtures.
Other Assets
Other assets consist primarily of goodwill and deferred
financing costs, which are amortized on a straight-line
basis over 40 years and 5 years, respectively. Goodwill and
deferred financing costs arose from the following business
acquisitions:
<TABLE>
<CAPTION>
Deferred
Description Date Goodwill Financing
<S> <C> <C> <C>
Acquisition of Quamco December 13, 1989 $24,795,000 $1,797,000
Acquisition of Rico April 28, 1992 6,069,000 255,000
Less-Accumulated
amortization 3,394,000 1,870,000
_________ __________
$27,470,000 $ 182,000
=========== ==========
</TABLE>
Goodwill amortization included in selling, general and
administrative expenses was approximately $770,000 in each
of fiscal 1993 and 1994, an $193,000 in each of the three
months ended January 30, 1994 and January 29, 1995,
respectively.
Deferred financing cost amortization included in interest
expense was approximately $405,000 in each of fiscal 1993
and 1994, and $101,000 and $57,000 in the three months
ended January 30, 1994 and January 29, 1995, respectively.
</Page>
<PAGE>
Page 14
The Company evaluates the realizability of goodwill and
other intangible assets based on estimated cash flows to
be generated from each of such assets as compared to the
original estimates used in measuring the assets. To the
extent an impairment is identified, the Company recognizes
a write-down. To date, the Company has not had any such
impairments.
Income Taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No.
109, Accounting for Income Taxes, issued in February 1992.
This standard requires, among other things, recognition of
future tax effect, measured by enacted tax rates,
attributable to temporary differences between the
financial statement and income tax bases of assets and
liabilities.
The Company maintains a Foreign Sales Corporation (FSC).
No provision has been recorded for federal income taxes on
a portion of the earnings of the FSC since it is exempt
under the Tax Reform Act of 1984.
Facilities Closings
Included in the statement of operations for the third
quarter of fiscal 1993 are charges related to the
consolidation of certain operations. The Company sold the
assets of its UK subsidiary, Reed Ltd., resulting in a
loss of approximately $534,000. In addition, the Company
relocated its corporate management from Rockland,
Massachusetts, to Holden, Massachusetts. In connection
with the relocation, the Company incurred officer and
employee severance charges of $615,000.
Net Income (Loss) Per Share
Net income (loss) per share has been computed based on the
weighted average number of shares of common stock
outstanding during the periods.
</Page>
<PAGE>
Page 15
(3) Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
October 31, October 30, January 29,
1993 1994 1995
<S> <C> <C> <C>
Raw materials $ 2,924,000 $ 2,837,000 $ 2,515,000
Work-in-process 2,759,000 3,960,000 4,668,000
Finished goods 5,006,000 5,244,000 6,273,000
___________ ___________ ___________
10,689,000 12,041,0000 13,456,000
Less-LIFO reserve 316,000 298,000 373,000
___________ ___________ ___________
$10,373,000 $11,743,000 $13,083,000
=========== =========== ===========
</TABLE>
</Page>
<PAGE>
Page 16
(4) Long-Term Obligations
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
October 31, October 30, January 29,
1993 1994 1995
<S> <C> <C> <C>
Revolving line
of credit (due on
January 1, 1997) $12,110,000 $13,200,000 $14,191,000
Senior term
loan A 10,008,000 9,008,000 8,758,000
Senior term
loan B 12,000,000 12,000,000 12,000,000
Series A Industrial
Development Revenue
Bonds 6,140,000 5,280,00 5,065,000
Series B Industrial
Development Revenue
Bonds 4,040,00 3,550,000 3,427,000
Note payable to a
shareholder 2,846,00 3,043,000 3,122,000
Notes payable 3,500,000 3,500,000 3,500,000
Capital lease
obligations 158,000 57,000 51,000
___________ ___________ ___________
50,802,000 49,638,000 50,114,000
Less-Current portion 2,451,000 3,127,000 3,122,000
___________ ___________ ___________
$48,351,000 $46,511,000 $46,992,000
=========== =========== ===========
</TABLE>
</Page>
<PAGE>
Page 17
Principal payments required in each of the next five
fiscal years and thereafter are as follows:
1995 $ 3,127,000
1996 7,130,000
1997 32,807,000
1998 3,144,000
1999 1,350,000
Thereafter 2,080,000
___________
$49,638,000
===========
Credit Agreement
The Company's revolving line of credit and senior term
loans are covered by a credit agreement dated as of April
28, 1992 (updated and amended through December 21, 1993).
The credit agreement requires, among other things, that
the Company maintain minimum levels of net worth and net
earnings. Additionally, the agreement requires limits on
debt service and capital expenditures and places certain
restrictions on the Company's payment of management fees
to a financial adviser (see Note 9). Loans under the
credit agreement are secured by substantially all assets
of the Company.
Under the terms of a support agreement entered into
between the Company's senior lender and its principal
shareholder, the Company's principal shareholder is
required to make subordinated loans of up to $1,000,000 to
the Company in the event that cash flows are insufficient
to meet its secured payment obligations, as defined.
Revolving Line of Credit
The Company has a $15,000,000 bank revolving line of
credit maturing at the earlier of the repayment of the
senior term loans or January 1, 1997. Interest accrues
based on the prime rate (7.75% at October 30, 1994) plus
2%. Upon the occurrence of certain conditions, the
interest rate may be adjusted to prime plus 1.5%.
Interest payments are due monthly. At October 31, 1993,
October 30, 1994 and January 29, 1995, $12,110,000,
$13,200,000 and $14,191,000, respectively, were
outstanding under this line of credit. An availability
fee of .5% is charged on the unused portion of the line
of credit.
</Page>
<PAGE>
Page 18
Senior Term Loans
The Company has a senior term loan A with an outstanding
principal balance of $9,008,000 at October 30, 1994 and
$8,758,000 at January 29, 1995. Interest accrues based
on the prime rate plus 2%. Interest payments are due
monthly. Quarterly payments of principal commenced in
April 1990 and are payable through January 1997. The
Company also has a senior term loan B with an
outstanding principal balance of $12,000,000, which
matures in a single payment on January 1, 1997.
Interest accrues at a fixed rate of 13.82% and is
payable monthly.
After the end of each fiscal year, the Company is
required to apply excess cash flows, as defined, against
the senior term notes, until repaid, and subsequently
the revolver. The prepayments, if any, are applied to
scheduled maturities in inverse order.
Letter of Credit Guaranty
The credit agreement provides a guaranty of up to
$10,356,454 through January 1997 on the letter of
credit, which secures the Industrial Development Revenue
Bonds (see below). An annual guaranty fee is charged
based on .5% of the outstanding letter of credit
balance.
Shadow Warrants
In order to induce the lender to enter into the credit
agreement, the Company issued 2,837,662 shadow warrants
to the lender at an original base price of $.8675. The
shadow warrants are exercisable from December 1994
through December 1999 or upon the sale or liquidation of
the Company or a significant portion of its assets.
Upon exercise, the holder of the shadow warrants is
entitled to a cash payment equal to the increase in
value of the Company's common stock over the base price
of the shadow warrants. The number of shadow warrants
is adjustable for certain dilutive events.
As of October 30, 1994, the Company estimates the
contingent interest payable, represented by the shadow
warrants, to be approximately $6,000,000 based on the
proposed sale price of the Company, as discussed in Note
13. The value of the shadow warrants is accounted for
as contingent interest payable. Any prospective changes
to the contingent interest payable will be reflected as
charges (credits) to interest expense in future periods.
</Page>
<PAGE>
Page 19
Industrial Development Revenue Bonds
In connection with its leveraged acquisition in 1989, the
Company assumed $12,660,000 of Series A and Series B
Industrial Development Revenue Bonds payable to the
Massachusetts Industrial Finance Agency. These bonds bear
interest at a variable rate set periodically by the
underwriter, not to exceed a maximum rate of 12%; however,
the Company has the option to fix the interest rate at any
time at the current rate for a period of no less than 20
days. The Company is required to make quarterly sinking
fund installments of $337,500 on each September 1, with a
final payment of $730,000 on September 1, 2001. The bonds
are secured by a $10,356,434 letter of credit with a bank.
The interest rate in effect at October 30, 1994 was 3.25%.
Notes Payable to a Shareholder
In 1992, the Company acquired Rico Header Tools, Inc.
(Rico) in a purchase transaction. The Rico acquisition
was partially financed through a $2,500,000 note issued to
a shareholder of the Company. The note bears interest at
prime (7.75% at October 30, 1994) plus 2.5%, payable on a
quarterly basis. The note matures in equal installments
of $1,250,000 on April 28, 1997 and 1998. The Company may
prepay the note any time prior to or on April 28, 1995
without premium or penalties, provided that the prepayment
installments are at least $1,250,000 plus all accrued and
unpaid interest. The note is subordinated to the senior
term loans. In connection with this borrowing, the
Company granted the shareholder 447,480 common stock
purchase warrants exercisable at $0.01 per share. The
warrants are exercisable at any time after April 30, 1995.
If repayment of all principal and interest on the original
note and any additional notes occurs before April 30,
1995, other than as a result of a sale of the Company, the
warrants will automatically expire. During fiscal 1993
and 1994 and the three months ended January 29, 1995,
accrued interest of approximately $346,000, $197,000 and
$79,000, respectively, was converted into additional
notes, which mature April 30, 1998, upon terms similar to
the original note as described above.
</Page>
<PAGE>
Page 20
Notes Payable
The Company issued $3,500,000 of notes payable to the
sellers of Rico. These notes mature on April 30, 1997.
Interest is payable quarterly at 10% per annum for the
first two years and 12% thereafter. The notes are
subordinated to outstanding borrowings under the credit
agreement described above.
Capital Lease Obligations
Capital lease obligations relate primarily to the
acquisition of machinery and equipment. These leases bear
interest at various rates between 10% and 12% and mature
at various dates through 1996.
(5) Federal and State Income Taxes
The following is a summary of the provision for income
taxes in the accompanying consolidated statements of
operations for the years ended October 31, 1993 and
October 30, 1994.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Federal State Total
1993-
Current $1,075,000 $329,000 $1,404,000
Deferred (454,000) (207,000) (661,000)
__________ ________ _________
$ 621,000 $122,000 $ 743,000
========== ======== ==========
1994-
Current $2,348,000 $720,000 $3,068,000
Deferred 25,000 7,000 32,000
__________ ________ __________
$2,373,000 $727,000 $3,100,000
========== ======== ==========
</Page>
<PAGE>
Page 21
The Company's income tax provision exceeds the amount that
would result from applying the federal statutory rate of
34% as a result of the following tax-effected difference.
</TABLE>
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Statutory federal tax
on income $240,000 $ 417,000
Increase (decrease) as
a result of -
Reserves for
contingencies 337,000 2,040,000
State income taxes,
net of federal benefit 101,000 480,000
Nondeductible
amortization 310,000 310,000
Foreign sales corporation
benefit (102,000) (122,000)
Other (143,000) (25,000)
________ __________
Provision for
income taxes $743,000 $3,100,000
======== ==========
</TABLE>
The components of the Company's deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Deferred tax assets from-
Deferred employment
benefits $1,095,000 $1,095,000
Pension reserves 446,000 485,000
Accrued expenses 533,000 345,000
Inventory reserves 290,000 314,000
Bad debt reserve 66,000 116,000
Deferred financing costs 56,000 97,000
Noncompetition amortization 104,000 68,000
Other reserves 154,000 44,000
Accrued loss on sale of
Reed Ltd. 214,000 -
Other 8,000 22,000
_________ ________
</Page>
<PAGE>
Page 22
Gross deferred tax
assets 2,966,000 2,586,000
__________ __________
Deferred tax liabilities from-
Depreciation and other 5,299,000 4,954,000
LIFO reserves 1,541,000 1,538,000
__________ __________
Gross deferred tax
liabilities 6,840,000 6,492,000
__________ __________
Net deferred tax
liability $3,874,000 $3,906,000
========== ==========
</TABLE>
(6) Leasing Arrangements
The Company leases certain equipment under operating
leases. The following is a schedule of future minimum
rental payments under these noncancelable operating
leases.
1995 $255,000
1996 215,000
1997 46,000
1998 10,000
1999 6,000
________
$532,000
========
Total rent expense related to these leases was
approximately $284,000 and $289,000 for the years ended
October 31, 1993 and October 30, 1994, respectively.
(7) Commitments and Contingencies
The Company enters into raw material purchase commitments.
As of October 30, 1994, the Company had outstanding
noncancelable raw material purchase commitments,
aggregating approximately $2,500,000, with three
suppliers. These commitments are expected to be fulfilled
during fiscal 1995 and represent less than one year's
expected usage.
</Page>
<PAGE>
Page 23
Claims have been filed against the Company alleging
potential responsibility for environmental contamination
at two superfund sites and a state-designated site.
Management has obtained estimates of the costs necessary
to clean up and restore the contaminated sites and has
provided reserves for these estimated costs in the
accompanying consolidated financial statements.
(8) Employee Benefits
Retirement Plans
The Company has a defined benefit pension plan covering
substantially all of its U.S. employees. The plan
provides benefits of stated amounts for each year of
service. The Company contributes such amounts as is
necessary on an actuarial basis to provide the plan with
assets sufficient to meet the benefits to be paid to
participants.
The Company's net periodic pension expense for its defined
benefit plans for 1994 and 1993 consists of the following
components:
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Service cost-benefits earned
during period $ 224,000 $ 339,000
Interest cost on projected
benefit obligation 2,087,000 2,168,000
Actual return on plan
assets (5,089,000) (422,000)
Net amortization and
deferred items 3,088,000 (1,991,000)
__________ __________
Net periodic pension
expense $ 310,000 $ 94,000
========== ==========
</TABLE>
</Page>
<PAGE>
Page 24
Assumptions used in the accounting are as follows:
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Discount rate 7.5% 8.5%
Rates of increase in
compensation levels 5.5 3.0-5.0 graded
Expected long-term rate of
return on assets 9.0 9.0
</TABLE>
The following table sets forth the funded status for the
Company's defined benefit plan and amounts recognized in the
accompanying consolidated balance sheets at October 31, 1993
and October 30, 1994:
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Actuarial present value of
benefit obligations-
Vested benefit
obligation $25,566,000 $24,812,000
Nonvested benefit
obligation 292,000 226,000
___________ __________
Accumulated benefit
obligation 25,858,000 25,038,000
Effect of future salary
increases 3,096,000 2,427,000
__________ ___________
Projected benefit
obligation 28,954,000 27,465,000
Plan assets at fair value (27,462,000) (27,042,000)
__________ ___________
Projected benefit obligation
in excess of plan
assets 1,492,000 423,000
Unrecognized net gain (loss) (134,000) 906,000
Unrecognized prior service
cost (244,000) (116,000)
___________ ___________
Pension liability $ 1,114,000 $ 1,213,000
=========== ===========
</TABLE>
</Page>
<PAGE>
Page 25
The Company also maintains two separate defined
contribution plans for the benefit of employees. Under
the defined contribution plans, the Company recorded
expenses of approximately $446,000 and $490,000 in fiscal
1993 and 1994, respectively, in the form of matching
401(k) contributions.
The Company provides a portion of health care and life
insurance benefits for certain employees. These benefits
are provided through an insurance company whose premiums
are based on the benefits paid during the year. The
Company provided for the estimated cost of those benefits
for persons retired prior to 1987. Postemployment
benefits to be paid to employees retiring after 1987 are
recognized on a pay-as-you-go basis.
In December 1990, the Financial Accounting Standards Board
issued SFAS No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions, requiring
that the expected cost of these benefits be charged to
expense during the years the employees render service.
The Company is required to adopt the provisions of SFAS
No. 106 no later than the first fiscal year beginning
after December 15, 1994. The Company anticipates that
adoption of this standard will not have a material impact
on its financial condition.
(9) Related Party Transaction
The Company pays a monthly management fee to an
independent financial adviser of the principal shareholder
for certain financial and administrative services. The
accompanying consolidated statements of operations include
$367,000 and $400,000 of expenses and the accompanying
consolidated balance sheets include $125,000 and $275,000
of liabilities related to these services for 1993 and
1994, respectively.
(10) Employee Stock Option Plan
On April 30, 1994, the Board of Directors and stockholders
approved the 1994 Employee Stock Option Plan (the Plan)
pursuant to which options to purchase up to 122,485 shares
of common stock may be granted to officers and employees
of the Company at an exercise price of $1.00. The
employees' rights to exercise such options are subject to
future operating performance goals established by the
</Page>
<PAGE>
Page 26
Board of Directors. Vesting is automatic upon a sale of
the business.
As of October 30, 1994, the options had not vested. In
connection with the potential sale of the business (Note
13), these options will vest, upon which the Company will
incur a onetime charge to earnings of approximately
$250,000.
(11) Supplemental Cash Flow Disclosures
Cash payments for interest and income taxes for the years
ended October 31, 1993, October 30, 1994 and the three-
month periods ending January 30, 1994 and January 29, 1995
are as follows:
<TABLE>
<CAPTION>
Three-month
Years Ended Periods Ended
October 31, October 30, January 30, January 29,
1993 1994 1994 1995
<S> <C> <C> <C> <C>
Interest $4,035,000 $4,439,000 $1,114,000 $1,139,000
========== ========== ========== ==========
Income taxes
paid, net of
refunds $2,045,000 $2,513,000 $ 312,000 $ 842,000
========== ========== ========== ==========
</TABLE>
The following noncash transactions occurred during
the years ended October 31, 1993, October 30, 1994
and the three-month periods ending January 30, 1994
and January 29, 1995:
</Page>
<PAGE>
Page 27
<TABLE>
<CAPTION>
Three-month
Years Ended Periods Ended
October 31, October 30, January 30, January 29,
1993 1994 1994 1995
<S> <C> <C> <C> <C>
Short-term note receivable
due from sale of
Reed Ltd.
assets $ 148,000 $ - $ - $ -
======== ======== ======== ========
Conversion of accrued
interest to
debt $ 346,000 $ 197,000 $ 62,000 $ 79,000
======== ======== ======== ========
</TABLE>
(12) Segment and Other Information
The Company manufactures and markets similar
products to various manufacturers within one
industry segment.
No single customer accounted for greater than 10%
of sales in fiscal 1993 or 1994.
Export sales from the United States of $10,484,000
and $14,493,000 in fiscal 1993 and 1994 were made
principally to customers in western Europe.
(13) Sale of Company
On January 19, 1995, the Company entered into an
Agreement and Plan of Merger with Precision
Castparts Corp. (PCC) pursuant to which PCC
intends to acquire 100% of the Company for
$89,900,000, including the assumption of debt.
The sale is expected to be consummated in March
1995.
</Page>
<PAGE>
Page 28
Item 7(b) Pro Forma Financial Information
PRECISION CASTPARTS CORP.
PRO FORMA COMBINED BALANCE SHEET AND INCOME STATEMENTS
On March 8, 1995, Precision Castparts Corp. (PCC) purchased
100% of the outstanding capital stock of Quamco, Inc. (Quamco)
from Columbus II Limited Partnership, an investor group led by
Overseas Partners, Inc., and other shareholders. Quamco, renamed
PCC Specialty Products, Inc., is a designer, manufacturer and
marketer of premium, metal working tools and machines, specialty
powdered metal parts, and other specialty industrial components.
The acquisition of Quamco was previously reported on Form 8-K
filed on March 23, 1995. The purchase price of $89.9 million
included the assumption or retirement or existing debt. The
transaction was financed from cash balances, the assumption of
$8.2 million of existing debt, and $12.2 million of bank
borrowings .
The unaudited pro forma combined income statements for the
year ended April 3, 1994 and for the nine months ended January 1,
1995 present the combined results of operations assuming the
purchase of the stock of Quamco had been consummated as of March
29, 1993. The unaudited pro forma combined balance sheet at
January 1, 1995 presents the combined financial position assuming
the purchase of the stock of Quamco had been consummated as of
that date. Quamco's results and financial position have been
derived from Quamco's annual financial statements and quarterly
results in order to present them on fiscal periods equivalent
with those of PCC. The financial information of Quamco is as of
or for the period ended two months prior to the pro forma
financial statement dates as described above. The financial
information of Quamco contains certain reclassifications made to
conform to PCC's classifications. In accordance with SEC
requirements, the proforma includes only the results of ongoing
operations and excludes such impacts as the effect of changes in
accounting principles.
The following unaudited pro forma combined financial
information should be read in conjunction with historical
statements of PCC, as reported in its annual report on Form 10-K
and quarterly reports on Form 10-Q, and of Quamco, as reported in
this filing on Form 8-K/A. The pro forma information is
presented for illustrative purposes only and is not necessarily
indicative of the operating results or financial position that
would have occurred had the purchase of the stock of Quamco been
consummated in accordance with the assumptions set forth above,
nor is it necessarily indicative of future operating results or
financial position.
</Page>
<PAGE>
Page 29
<TABLE>
PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED APRIL 3, 1994
PRECISION CASTPARTS CORP.
AND QUAMCO, INC.
($ in thousands, except per share data)
(Unaudited)
<CAPTION>
Precision
Castparts Quamco, Pro Forma Note Pro Forma
Corp. Inc. Adjustments Reference Combined
<S> <C> <C> <C> <C>
<C>
Net Sales $ 420,400 $ 67,700 $ - $ 488,100
Cost of Goods Sold 351,700 49,600 -(3),(4),(5) 401,300
_________ _________ _________ _________
Gross Margin 68,700 18,100 - 86,800
Selling and Administrative
Expenses 30,200 11,500 (200) (4) 41,500
Interest Expense, net 1,100 5,200 (1,500) (1),(2) 4,800
_________ _________ _________ _________
Income Before Provision for
Income Taxes 37,400 1,400 1,700 40,500
Provision for Income Taxes 12,300 1,100 1,000 (6) 14,400
_________ _________ _________ _________
Net Income $ 25,100 $ 300 $ 700 $ 26,100
========= ========= ========= =========
Net Income per Common Share $ 1.29 $ 1.34
========= =========
Average number of common shares
outstanding (in thousands) 19,500 19,500
See accompanying notes to pro forma combined income statements.
</TABLE>
</Page>
<PAGE>
Page 30
<TABLE>
PRO FORMA COMBINED INCOME STATEMENT
FOR THE NINE MONTHS ENDED JANUARY 1, 1995
PRECISION CASTPARTS CORP.
AND QUAMCO, INC.
($ in thousands, except per share data)
(Unaudited)
<CAPTION>
Precision
Castparts Quamco, Pro Forma Note Pro Forma
Corp. Inc. Adjustments Reference Combined
<S> <C> <C> <C> <C>
<C>
Net Sales $ 315,400 $ 61,300 $ - $ 376,700
Cost of Goods Sold 260,000 42,500 1,000 (3),(4) 303,500
_________ _________ _________ _________
Gross Margin 55,400 18,800 (1,000) 73,200
Selling and Administrative
Expenses 22,400 8,300 (200) (4) 30,500
Interest (Income) Expense, net (1,100) 10,200 (7,700) (1),(2) 1,400
_________ _________ _________ _________
Income Before Provision
for Income Taxes 34,100 300 6,900 41,300
Provision for Income Taxes 13,000 2,600 1,000 (6) 16,600
_________ _________ _________ _________
Net Income $ 21,100 $( 2,300) $ 5,900 $ 24,700
========= ========= ========= =========
Net Income per Common Share $ 1.06 $ 1.24
========= =========
Average number of common shares
outstanding (in thousands) 19,900 19,900
See accompanying notes to pro forma combined income statements.
</TABLE>
</Page>
<PAGE>
Page 31
PRECISION CASTPARTS CORP.
NOTES TO PRO FORMA COMBINED INCOME STATEMENTS
(1) Adjustment to remove interest expense incurred by Quamco
related to debt retired upon acquisition by PCC. During the
nine month period ended January 1, 1995, the interest
expense incurred by Quamco included $6 million for
contingent interest which was paid at acquisition. See Note
4 to the Quamco, Inc. Consolidated Financial Statements
filed with this Form 8-K/A.
(2) Adjustment to remove interest income earned by PCC and add
estimated interest expense related to debt incurred to
acquire the stock of Quamco. The proforma adjustment to
interest income and expense assumes that PCC expended all
available cash and acquired short-term debt as necessary to
purchase the stock of Quamco. The incremental interest
expense was calculated at 4.55%, the rate on uncommitted
lines of credit available to PCC during the periods
presented.
(3) Adjustment to reflect the removal of Quamco's amortization
of intangibles and to add amortization of intangibles as a
result of PCC's purchase price allocation. The amortization
of goodwill arising from the purchase transaction is
amortized over forty years. Other intangibles arising from
the purchase transaction are amortized over two years.
(4) Adjustment to reflect the estimated impact on operating
costs due to the rationalization of the combined business
operations.
(5) Adjustment to remove non recurring expenses from Quamco's
operations.
(6) Adjustment to tax expense based on the proforma changes
above.
</Page>
<PAGE>
Page 32
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
PRECISION CASTPARTS CORP.
AND QUAMCO, INC.
JANUARY 1, 1995
($ in thousands)
(Unaudited)
<CAPTION>
Precision
Castparts Quamco, Pro Forma Note Pro Forma
Corp. Inc. Adjustments Reference Combined
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 59,400 $ 600 $ (60,000) (2) $ -
Receivables 74,100 12,500 (100) (3) 86,500
Inventories 78,400 11,700 500 (3) 90,600
Prepaid expenses 1,600 100 - 1,700
Current deferred tax asset 11,900 3,700 (1,500) (6) 14,100
_________ _________ _________ _________
Total current assets 225,400 28,600 (61,100) 192,900
_________ _________ _________ _________
Property, Plant and Equipment 250,300 33,000 (3,600) (3) 279,700
Less - Accumulated Depreciation(142,400) (10,600) 10,600 (142,400)
_________ _________ _________ _________
Net property, plant
and equipment 107,900 22,400 7,000 137,300
_________ _________ _________ _________
Goodwill and Other Assets 24,800 28,400 30,500(3),(4),(6) 83,700
_________ _________ _________ _________
$ 358,100 $ 79,400 $ (23,600) $ 413,900
========= ========= ========= =========
</Page>
<PAGE>
Page 33
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 700 $ 300 $ 22,300 (2) $ 23,300
Current portion of
long-term debt 3,500 3,100 (1,800) (1) 4,800
Accounts payable 15,400 4,400 - 19,800
Accrued liabilities 50,900 5,400 1,200 (1),(3) 57,500
Income taxes payable 5,300 5,900 (2,200) (6) 9,000
Contingent interest payable 6,000 (6,000) (1) -
_________ _________ _________ _________
Total current liabilities 75,800 25,100 13,500 114,400
_________ _________ _________ _________
Long-Term Debt, excluding
current portion 6,800 46,500 (39,000) (1) 14,300
Deferred Tax Liability 12,000 1,700 2,400 (6) 16,100
Accrued Retirement
Benefits Obligation 5,000 3,900 900 (3) 9,800
Other Long-Term Liabilities 8,100 400 400 (3) 8,900
Shareholders' Investment:
Common stock 20,200 100 (100) (5) 20,200
Paid-in capital 5,000 3,800 (3,800) (5) 5,000
Retained earnings 224,000 (2,000) (2,000) (5) 224,000
Treasury stock - (100) 100 (5) -
Cumulative translation
adjustment 1,200 - - 1,200
_________ _________ _________ _________
Total shareholders'
investment 250,400 1,800 (1,800) 250,400
_________ _________ _________ _________
$ 358,100 $ 79,400 $ (23,600) $ 413,900
========= ========= ========= =========
See accompanying notes to pro forma combined balance sheet.
</TABLE>
</Page>
<PAGE>
Page 34
PRECISION CASTPARTS CORP.
NOTES TO PRO FORMA COMBINED BALANCE SHEET
(1) Adjustment to remove certain debt and associated accrued
interest and contingent interest of Quamco which was retired
upon consummation of the stock purchase transaction. The
remaining debt of Quamco was assumed by PCC.
(2) Adjustment to eliminate cash balances and record short-term
borrowings as needed to cover the purchase price of Quamco.
(3) Adjustment to restate reported assets acquired and
liabilities assumed at fair market value and to record
accruals related to the rationalization costs of the
combined business operations. Adjustment also reflects the
allocation of the purchase price to certain assets not
previously reported by Quamco.
(4) Adjustment to reflect elimination of goodwill and other
intangible assets recorded by Quamco in connection with
prior acquisitions and to record $58.1 million, the
estimated pro forma excess purchase price paid and costs
incurred to acquire Quamco.
(5) Adjustment to remove Quamco's shareholders' investment.
(6) Adjustment to record the tax effect of the above proforma
adjustments. The pro forma tax adjustment includes
adjustment to reflect the estimated effective tax rate
assuming the acquisition had occurred on March 29, 1993.
</Page>
<PAGE>
Page 35
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: May 22, 1995 /s/ W.D. Larsson
______________________________
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</Page>
<PAGE>
Page 36
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC
ACCOUNTANTS
As independent public accountants, we hereby consent to the
inclusion of our report dated December 12, 1994 (except with
respect to the matter discussed in Note 13, as to which the
date is January 19, 1995) with respect to certain financial
statements of Quamco, Inc., included in the Form 8-K A,
filed by Precision Castparts Corp. dated March 8, 1995.
DATE: May 18, 1995 /s/ Arthur Andersen LLP
_________________________
Arthur Andersen LLP
Boston, Massachusetts
May 18, 1995
</Page>
