<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)
July 31, 1996
______________________________________
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>
Item 7
Financial Statements and Exhibits
(a) Financial Statements of Business Acquisition
1. Report of Independent Public Accountants
2. The NEWFLO Corporation Consolidated Balance Sheet -
December 31, 1995 and December 31, 1994
3. The NEWFLO Corporation Consolidated Statement of
Operations for the year ended - December 31, 1995,
December 31, 1994 and December 31, 1993
4. The NEWFLO Corporation Consolidated Statement of
Common Stockholders' Equity (Deficit) - December 31,
1995, December 31, 1994 and December 31, 1993
5. The NEWFLO Corporation Consolidated Statement of
Cash Flows - Year ended - December 31, 1995,
December 31, 1994 and December 31, 1993
6. The NEWFLO Corporation Notes to Consolidated
Financial Statements
7. The NEWFLO Corporation Consolidated Balance Sheet -
March 31, 1996 and March 31, 1995 (unaudited)
8. The NEWFLO Corporation Consolidated Statement of
Operations for the three months ended March 31, 1996
and March 31, 1995 (unaudited)
9. The NEWFLO Corporation Notes to the Consolidated
Balance Sheet and Consolidated Statement of
Operations
Page 1
</Page>
(b) Pro Forma Financial Information
1. Pro Forma Combined Balance Sheet June 30, 1996
(unaudited)
2. Notes to Pro Forma Combined Balance Sheet
(unaudited)
3. Pro Forma Combined Income Statement for the year
Ended March 31, 1996 and the three months ended June
30, 1996 (unaudited)
4. Notes to Pro Forma Combined Income Statement
(unaudited)
(c) Exhibits
(1) Stock Purchase Agreement among NEWFLO Corporation,
the Selling Stockholders Listed on Schedule I and
Precision Castparts Corp., Dated as of June 28,
1996. Schedules that have been omitted will be
furnished supplementally to the Commission upon
request (Incorporated by Reference to Exhibit 1 to
Form 8-K dated July 31, 1996 - File No. 1-10348)
(2) Pursuant to Item 7(a)(7)&(8) of Form 8-K/A, the
following financial statements are incorporated by
reference from the NEWFLO Corporation Quarterly
Report on Form 10-Q for the quarter ended June 30,
1996. (File Number 33-56256):
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - June 30,
1996 and December 31, 1995
Condensed Consolidated Statements of Operations -
Three months ended June 30, 1996 and 1995, Six
months ended June 30, 1996, and 1995
Condensed Consolidated Statements of Cash Flows -
Six months ended - June 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
- June 30, 1996
(23) Consent of Ernst and Young LLP.
Page 2
</Page>
<PAGE>
Item 7(a) Financial Statements of Business Acquisition
NEWFLO Corporation and Subsidiaries
Report of Independent Auditors
The Board of Directors
NEWFLO Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of
NEWFLO Corporation and subsidiaries as of DecemberE31, 1995 and
1994, and the related consolidated statements of operations, common
stockholdersO equity (deficit) and cash flows for each of the three
years in the period ended DecemberE31, 1995. These financial
statements are the responsibility of the CompanyOs management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of NEWFLO Corporation and subsidiaries at DecemberE31,
1995 and 1994, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
DecemberE31, 1995 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
_________________________
Ernst & Young LLP
Austin, Texas
February 23, 1996
Page 3
</Page>
<PAGE>
NEWFLO Corporation and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1995 1994
(In Thousands)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 736 $ 638
Accounts receivable, less
allowance for doubtful accounts
of $905 (1994 - $1,041) 32,732 26,915
Inventories:
Finished goods 30,394 30,354
Work-in-process 6,104 5,355
Raw materials 13,603 11,466
________________________
Total inventories 50,101 47,175
Deferred tax asset, federal 1,962 2,055
Deferred tax asset, state 154 204
Other current assets 1,857 1,030
________________________
Total current assets 87,542 78,017
Property, plant and equipment:
Land 4,114 4,341
Buildings and improvements 17,721 18,768
Machinery and equipment 24,786 23,551
Rental equipment 2,818 2,607
________________________
49,439 49,267
Less accumulated depreciation (20,716) (16,784)
________________________
Net property, plant and equipment 28,723 32,483
Excess of purchase price over
net assets of acquired businesses,
net of $6,119
amortization (1994 - $4,708) 34,009 34,986
Noncompete agreements, net of $16,221
amortization (1994 - $13,959) 2,279 4,487
Loan fees, net of $3,142
amortization (1994 - $2,296) 4,466 5,312
Other assets 2,023 2,083
________________________
Total assets $159,042 $157,368
========================
</TABLE>
Page 4
</Page>
<PAGE>
<TABLE>
<CAPTION>
December 31
1995 1994
(In Thousands, except share
and per share amounts)
<C> <C> <C> <C> <C>
Liabilities and stockholdersO equity (deficit)
Current liabilities:
Accounts payable $ 11,973 $ 10,772
Accrued compensation and
related expenses 4,118 3,005
Accrued taxes payable 1,238 -
Accrued interest 1,716 1,718
Other accrued liabilities 5,299 5,872
Current portion of long-term debt 8,782 10,720
________________________
Total current liabilities 33,126 32,087
Deferred income taxes, federal 3,840 3,702
Deferred income taxes, state 822 872
Deferred income taxes, foreign 1,286 1,342
Long-term debt, less current portion115,452 119,810
Other liabilities 7,947 8,912
Minority interest 1,330 1,050
Redeemable preferred stock:
Preferred stock, Class A, $.01
par value, 450 shares
authorized and issued;
113 shares outstanding;
liquidation preference of
$113 in 1995 (1994 - $225) 113 225
Convertible preferred stock,
Class B, $.01 par value, 7,000
shares authorized, issued and
outstanding; liquidation preference
of $7,000 plus unpaid dividends 9,356 8,797
Common stockholdersO equity (deficit):
Common stock Class A, $.01 par value;
285,000 shares authorized;
196,638 shares issued
and outstanding 2 2
Common stock Class B nonvoting;
$.01 par value; 17,000 shares
authorized; none outstanding - D
Additional paid-in capital 732 732
Accumulated foreign currency
translation adjustment (1,390) (1,519)
Retained earnings (deficit) (13,574) (18,644)
________________________
Total common stockholdersO
equity (deficit) (14,230) (19,429)
________________________
Total liabilities and stockholdersO
equity (deficit) $159,042 $157,368
========================
</TABLE>
See accompanying notes.
Page 5
</Page>
<PAGE>
NEWFLO Corporation and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
(In Thousands, except share and
per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Product sales, net $199,791 $ 195,483 $ 199,478
Costs and expenses:
Cost of sales 126,708 125,685 131,240
Research and development 3,775 3,735 3,563
Sales and marketing 27,481 25,801 25,685
General and administrative 11,101 14,156 14,685
Amortization of intangible assets 3,812 5,040 5,601
Loss on sale of Flo-Bend assets - 5,535 D
Relocation costs - 342 812
_______________________________
Total costs and expenses 172,877 180,294 181,586
Income from operations 26,914 15,189 17,892
Interest expense (18,074) (19,394) (19,588)
Other expense (487) (599) (639)
_______________________________
Income (loss) before income
taxes and minority interests 8,353 (4,804) (2,335)
Income tax benefit (provision) (2,413) (221) 211
_______________________________
Income (loss) before
minority interest 5,940 (5,025) (2,124)
Minority interest in net income of
subsidiaries (280) (254) (158)
_______________________________
Net income (loss) $ 5,660 $ (5,279) $ (2,282)
===============================
Net income (loss) applicable
to common and common
equivalent shares $ 5,630 $ (5,883) $ (2,900)
===============================
Net income (loss) per common
and common equivalent share $ 22.17 $ (29.92) $ (14.75)
===============================
Shares used in calculation of
net income (loss) per common
and common equivalent share 253,938 196,638 196,638
===============================
See accompanying notes.
</TABLE>
Page 6
</Page>
<PAGE>
NEWFLO Corporation and Subsidiaries
Consolidated Statements of Common StockholdersO Equity (Deficit)
Years ended December 31, 1995, 1994 and 1993
(In Thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Accumulated Total
Foreign Common
Additional Currency RetainedStockholdersO
Common Stock Paid-In Unearned Translation Earnings Equity
Shares Amount Capital Compensation Adjustment (Deficit) (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1992 196,638 $2 $732 $(3) $(915) $ (9,861) $(10,045)
Dividends on
preferred stock,
$80 to $130
per share D D D D D (618) (618)
Compensation expense D D D 3 D D 3
Translation adjustment D D D D (288) D (288)
Net loss for the year D D D D D (2,282) (2,282)
_________________________
_____________________________________________
Balance at December
31, 1993 196,638 2 732 D (1,203) (12,761) (13,230)
Dividends on preferred
stock, $80 to $130
per share D D D D D (604) (604)
Translation adjustment D D D D (316) D (316)
Net loss for the year D D D D D (5,279) (5,279)
______________________________________________________________________
Balance at December
31, 1994 196,638 2 732 D (1,519) (18,644) (19,429)
Dividends on preferred
stock, $80 to $130
per share - - - - - (590) (590)
Translation adjustment - - - - 129 - 129
Net income for the year - - - - - 5,660 5,660
______________________________________________________________________
Balance at December
31, 1995 196,638 $2 $732 $- $(1,390) $(13,574) $(14,230)
======================================================================
See accompanying notes.
</TABLE>
Page 7
</Page>
<PAGE>
NEWFLO Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1995 1994 1993
(In Thousands)
_______________________________
<S> <C> <C> <C> <C> <C> <C>
Operating activities
Net income (loss) $ 5,660 $ (5,279) $ (2,282)
Adjustments to reconcile
net income (loss) to
net cash provided by
operating activities:
Depreciation and amortization 8,484 10,559 12,140
Loss on sale of Flo-Bend assets - 5,535 D
Deferred financing expense 846 846 834
Compensation expense - D 3
Deferred income taxes 175 (6) 850
Minority interest 280 254 158
(Gain) loss on disposal
of property and equipment (1,472) (249) 84
Changes in operating assets and
liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable (5,817) 2,522 (903)
Inventories (2,926) 1,633 4,658
Other current assets (827) 93 (88)
Accounts payable 1,201 (877) 2,264
Accrued compensation and
related expenses 1,113 (715) (1,042)
Other liabilities (926) (921) (1,302)
Income taxes payable 1,238 D (1,084)
_______________________________
Cash provided by operating
activities 7,029 13,395 14,290
Investing activities
Acquisitions, net of cash acquired:
Penberthy, Canada - D (1,818)
H & H Valve Company - D (982)
Proceeds from sale of
Flo-Bend assets - 5,542 D
Purchase of property
and equipment (2,220) (1,958) (3,659)
Proceeds from sale of
property and equipment 2,706 340 339
Payments for covenants not
to compete - D (300)
Change in other assets (1,089) 926 (162)
_______________________________
Cash provided by (used in)
investing activities (603) 4,850 (6,582)
</TABLE>
Page 8
</Page>
<PAGE>
NEWFLO Corporation and Subsidiaries
Consolidated Statements of Cash Flows (continued)
Year ended December 31
1995 1994 1993
_______________________________
(In Thousands)
Financing activities
Proceeds from issuance
of notes payable $ - $ D $ 400
Repayment of notes payable (10,728) (8,948) (4,478)
Net borrowings (repayments)
under bank line of credit 4,414 (9,019) (6,124)
Redemption of preferred stock (113) (225) D
Payment of preferred stock dividend (30) (44) (59)
_______________________________
Cash used in financing activities (6,457) (18,236) (10,261)
Effect of foreign exchange
rate changes on cash 129 (239) (256)
_______________________________
Net (decrease) increase in cash 98 (230) (2,809)
Cash, beginning of year 638 868 3,677
_______________________________
Cash, end of year $ 736 $ 638 $ 868
===============================
Cash paid during the year for:
Interest $ 16,812 $ 17,647 $ 17,628
===============================
Income taxes $ 1,107 $ D $ 214
===============================
Supplemental schedule of noncash
investing and financing activities:
Accrual of preferred stock Class
B dividends $ 560 $ 560 $ 560
===============================
In conjunction with business purchases,
liabilities were assumed as follows:
Fair value of assets acquired $ - $ D $ 3,857
Cash paid - D (2,909)
_______________________________
Liabilities assumed $ - $ D $ 948
===============================
See accompanying notes.
Page 9
</Page>
<PAGE>
NEWFLO Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1995
1. Accounting Policies
Company and Basis of Presentation
NEWFLO Corporation (NEWFLO) designs, manufactures, markets and
services a broad range of specialty and general purpose
valves, pumps, meters and related products for a variety of
industrial, commercial, utilities and municipal customers.
NEWFLO sells its products worldwide through direct sales,
distributors and manufacturersO representatives primarily to
chemical, petrochemical, construction contractors,
municipalities and other industrial companies. The Company
conducts ongoing credit evaluations to reduce its credit risk
and maintains an allowance for doubtful accounts. The Company
generally requires no collateral and historically has
experienced credit losses within managementOs expectations.
The accompanying consolidated financial statements include the
accounts of NEWFLO and its wholly owned and majority owned
subsidiaries.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions, in particular estimates of
excess and obsolete inventory reserves and allowances for
doubtful accounts related to accounts receivable, that affect
the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those
estimates.
Inventories
Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or estimated market value.
Property, Plant and Equipment
Page 10
</Page>
<PAGE>
Property, plant and equipment are recorded at cost and are
depreciated using the straight-line method over estimated
useful lives as follows:
Buildings and improvements 20 - 40 years
Machinery and equipment 3 - 15 years
Intangible Assets
The excess of purchase price over net assets of acquired
businesses is amortized on a straight-line basis over periods
ranging from 14 to 30 years. The carrying value of goodwill is
reviewed on an ongoing basis by management. If this review of
facts and circumstances suggests that goodwill may be
impaired, based on the undiscounted cash flows of the acquired
entity over the remaining amortization period, the CompanyOs
carrying value of the goodwill would be reduced by the
estimated shortfall of projected cash flows.
Noncompete agreements are amortized over the term of the
agreements (generally five years). On an ongoing basis,
management reviews the valuation of the noncompete agreements
and considers any events and circumstances which might
indicate diminished or impaired value.
Revenue Recognition
Sales and related cost of sales are recognized primarily upon
shipment of products.
Income Taxes
The Company reports income taxes in accordance with the
Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). SFAS 109 requires that deferred tax assets and
liabilities be determined based on the difference between the
financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the years in which the
differences are expected to reverse.
Foreign Currency Translation
The Company has determined that the functional currency of its
foreign operations is the local foreign currency. The
accumulated effects of foreign translation rate changes
Page 11
</Page>
<PAGE>
related to net assets located outside the United States are
included as a component of stockholdersO equity. Foreign
currency transaction gains or losses are included in other
income (expense) in the accompanying consolidated statement of
operations and amounted to $266,000, $669,000 and $631,000 for
the years ended DecemberE31, 1995, 1994 and 1993,
respectively.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed using the net
income (loss) applicable to common and common equivalent
shares. The weighted average number of shares consists of the
common stock outstanding and common stock equivalents. For the
year ended December 31, 1995, common equivalent shares include
stock warrants (valued at the latest stock transaction price,
$10.80) and Class B preferred stock. However, for the years
ended December 31, 1994 and 1993, the common equivalent shares
from stock warrants and preferred stock, Class B, are excluded
from common equivalent shares as their effect would be anti-
dilutive.
Recently Issued Accounting Standards
In March 1995, the FASB issued Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to
be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than
the assets' carrying amount. Statement No. 121 also addresses
the accounting for long-lived assets that are held for
disposition. NEWFLO will adopt Statement No. 121 in 1996 and,
based on current circumstances, does not expect a material
impact on the Company's results of operations or financial
position.
2. Acquisitions and Dispositions
On February 12, 1993, a subsidiary of the Company acquired
certain assets and liabilities of Axel Johnson Canada (Axel
Johnson) for a net cash payment of $1.8 million and the
assumption of $34,000 in liabilities. The assets acquired
primarily consisted of inventory and fixed assets of Axel
JohnsonOs Penberthy Canada business. The excess of acquisition
cost over the estimated fair value of the assets acquired
amounted to approximately $0.3 million and is being amortized
on a straight-line basis over 30 years. In
Page 12
</Page>
<PAGE>
connection with the acquisition, NEWFLO relocated and
consolidated Penberthy CanadaOs operations and charged $0.8
million to operations related to this consolidation.
On September 30, 1993, a subsidiary of the Company acquired
certain assets and liabilities of H&H Valve Co., Inc. for a
net cash payment of $1.1 million, the assumption of $0.5
million in liabilities and the assumption of a $0.4 million 8%
note payable, due in installments through 1998. The assets
acquired primarily consisted of trade receivables, inventory
and fixed assets. The excess of acquisition cost over the
estimated fair value of assets acquired amounted to
approximately $0.9 million and is being amortized on a
straight-line basis over 14 years. The Company has entered
into noncompete agreements with the former owners of H&H for
an additional cash payment of $0.3 million and an agreement to
pay $0.9 million in equal installments through 1999.
A subsidiary of NEWFLO acquired all of the assets and certain
liabilities of Penberthy on November 24, 1992 and of Techno on
December 3, 1992 for cash payments of $19.8 million and $6.9
million, respectively. The Company assumed liabilities in the
amounts of $1.6 million and $0.3 million for Penberthy and
Techno, respectively. In addition, the Company incurred
acquisition related expenses of $0.7 million and $0.6 million,
for Penberthy and Techno, respectively. The excess of
acquisition cost over the estimated fair values of assets
acquired amounted to $13.5 million for Penberthy and $1.7
million for Techno and is being amortized on a straight-line
basis over 30 years. The Company has entered into noncompete
agreements with certain key employees of Techno for additional
payments of $1.3 million. These amounts are being amortized on
a straight-line basis over the five-year term of the
agreements. In connection with the Techno acquisition, NEWFLO
has agreed to make additional purchase price payments to the
former owners of Techno equal to 20% of TechnoOs annual
operating profits through 1997, up to a maximum of $1.8
million. NEWFLO made payments of $350,000 for the years ended
DecemberE31, 1995, 1994 and 1993.
These acquisitions have been accounted for as purchases and
the results of operations of these entities are included in
the consolidated financial statements since their respective
acquisition dates.
Page 13
</Page>
<PAGE>
During the third quarter of 1994, the Company sold
substantially all of the assets and business of an operating
subsidiary, Flo-Bend, Inc. Proceeds of the sales were
approximately $5.5 million in cash and the transaction
resulted in a loss of approximately $5.5 million, including
the expenses related to the sale of assets. Subsequent to the
sale, the name Flo-Bend, Inc. was changed to FB, Inc. and
remains an inactive company containing only stockholder's
equity.
On October 10, 1995, the Company entered into a letter of
intent to acquire certain assets and liabilities of Barber
Industries Ltd. for a cash payment of approximately $9.2
million. This acquisition was consummated on January 31, 1996
with a borrowing under the line of credit and will be
accounted for as a purchase. The results of operations of this
entity will be included in the consolidated financial
statements for fiscal 1996 concurrent with the acquisition
date.
3. Financing Arrangements
Debt consists of the following:
1995 1994
_____________________
(In Thousands)
Borrowings (excess of payments
over borrowings) under a line
of credit with a financial
institution, principal due
February 1998 $ 7,394 $(5,020)
Term loan payable to a financial
institution, principal
and interest due in varying
quarterly installments
through 1998 15,964 34,190
Subordinated notes, interest
paid semi-annually at
13.25%, principal due
November 15, 2002 100,000 100,000
Note payable in annual
installments of $175,000,
through March 1, 1996,
plus interest at 8%, unsecured 175 350
Note payable in annual installments
of $80,000 for five
years commencing on
September 1994, plus interest
at 8% 240 320
Noninterest bearing note
payable in installments of
$180,000 for five years
commencing on September
1994, net of imputed interest
at 6% of $142,000 461 624
Other - 66
_____________________
124,234 130,530
Less current portion 8,782 10,720
_____________________
$ 115,452 $119,810
=====================
Page 14
</Page>
<PAGE>
The term loan and borrowings under the bank line of credit are
governed by an agreement with a financial institution which
terminates February 1998. Amounts outstanding bear interest at
2% above the bank's prime rate (prime rate of 7.75% at
December 31, 1995) or 2.25% above the bank's LIBOR rate (LIBOR
rate of 6.09375% at December 31, 1995) and are collateralized
by substantially all of the CompanyOs assets. At December 31,
1995, the Company had borrowings under the bank line of credit
of $3.9 million outstanding at a 9.75% interest rate. In
addition, the Company had $19.5 million of term loan and
borrowings under the line of credit outstanding at the
8.34375% interest rate. This credit agreement requires the
Company to maintain certain interest expense coverage debt
ratios and cash flow ratios.
The revolving line of credit facility allows borrowings of 85%
of eligible accounts receivable and 60% of eligible inventory
(as defined in the term loan agreement) up to $48 million. At
DecemberE31, 1995, there were no amounts outstanding under the
credit facility, and the Company had available borrowings
under the credit facility of approximately $32 million. This
facility expires at the earlier of the repayment of the term
loan or February 1998 and the unused credit facility is
subject to a fee of .5% per annum. The credit facility also
allows the issuance of letters of credit up to $15 million at
a fee of 2.0% of the letter of credit amounts. Outstanding
letters of credit reduce the amounts available under the
revolving credit facility. The Company is contingently liable
for outstanding letters of credit at December 31, 1995 of
approximately $8.2 million (1994 - $9.7 million).
Long-term debt at December 31, 1995 will mature as follows (in
thousands):
1996 $ 8,782
1997 6,903
1998 8,549
1999 -
2000 -
Thereafter 100,000
__________
$ 124,234
==========
Page 15
</Page>
<PAGE>
4. Fair Values of Financial Instruments
The following methods and assumptions were used by the Company
in estimating its fair value disclosures for financial
instruments:
Long-term debt: The carrying amounts of the CompanyOs
borrowings under its line of credit and term loans approximate
their fair value because the interest rate is variable and
resets frequently. The fair values of the CompanyOs other long-
term debt are estimated using discounted cash flow analyses
based on the CompanyOs current incremented borrowing rates for
similar types of borrowing arrangements.
The carrying amounts and fair values of the CompanyOs
financial instruments at DecemberE31, 1995 are as follows (in
thousands):
Carrying Fair
Value Value
__________________________
Current portion of
long-term debt $ 8,782 $ 8,014
Long-term debt 115,452 103,515
5. Redeemable Preferred Stock
During 1991, the Company issued $7,000,000 (7,000 shares) in
Class B preferred stock, that has a cumulative annual dividend
of $80 per share and a liquidation preference of $1,000 per
share (plus unpaid dividends). The stock is subject to
mandatory redemption at the liquidation preference on December
31, 2002, and the holders may require earlier redemption upon
a change in ownership of the Company (as defined). The Class B
preferred stock has voting rights on an as-if-converted basis
and is convertible at the option of the holder into Class A
common stock at 7.4 common shares for each preferred share.
The preferred stock is convertible at the option of the
Company upon an initial public offering of the CompanyOs stock
with net proceeds of at least $30 million or upon a sale of
the Company. Upon conversion of the Class B preferred stock,
all accrued and unpaid dividends on the Class B preferred
stock will be paid in cash by the Company. Dividends of
$560,000 were accrued on the Class B preferred stock in 1995,
1994 and 1993.
Page 16
</Page>
<PAGE>
The Class A preferred stock has a cumulative annual dividend
of $130 per share, a liquidation preference of $1,000 per
share (plus unpaid dividends). The stock is subject to
mandatory redemption, at the liquidation preference, in four
equal, annual installments beginning December 31, 1993.
Mandatory redemption payments of $112,500 were made in 1995.
The Class A preferred stock does not have voting rights unless
six consecutive dividend payments or two consecutive
redemption payments are not made. Dividends of $30,000 were
declared and paid in 1995 (1994 - $44,000).
6. Common StockholdersO Equity
The Class B common stock (none issued or outstanding) is non-
voting and is convertible at any time, at the option of the
holder, into Class A common stock on a one-for-one basis. The
Company has reserved 68,630 shares of Class A common stock for
the conversion of Class B preferred stock and Class B common
stock.
The Company has the right to repurchase 13,371 shares of Class
A common stock held by certain stockholders at $.01 per share.
The repurchase rights lapse at the earlier of conversion of
the Class B preferred stock or January 2003.
The Company has warrants outstanding to its term loan holders
to purchase 12,157 shares of Class B common stock at $5.91 per
share and 4,677 shares of Class B common stock at $10.80 per
share. The Company may call the warrants and/or any shares
issued upon exercise of the warrants at fair market value of
the related shares (less exercise price, with respect to the
warrants) until March 19, 2000. At the option of the holders,
the warrants and/or any shares issued upon exercise of the
warrants may be put to the Company at fair market value of the
related shares (less exercise price, with respect to the
warrants). This put option terminates March 19, 2000. Also,
beginning March 19, 1996, certain stockholders who hold
125,516 shares of Class A common stock and shares of Class B
preferred stock convertible into 36,812 shares of Class A
common stock have the right to put all such shares of common
stock to the Company at fair market value, upon a request from
a majority of these stockholders. This right terminates upon
an initial public offering of the Company's stock with net
proceeds of at least $30 million, or upon the liquidation or
sale of the Company. No amounts have been recorded in the
accompanying
Page 17
</Page>
<PAGE>
financial statements for any repurchase obligations relating
to the warrants or shares issuable thereunder or relating to
shares under the put options because, the Company's ability to
pay the repurchase price is significantly restricted by the
Company's debt agreements and the Company does not believe the
warrants and share repurchase agreements presently represent a
liability to the Company.
During 1992, the Company exercised its option to repurchase
the common shares of Paco Pumps owned by minority shareholders
for approximately $81,000. The Company also has the option to
purchase the common shares of Water Specialties, a majority-
owned subsidiary held by employees, upon the employeesO
termination, at a price to be determined at the repurchase
date based on the repurchase agreement.
7. Income Taxes
At December 31, 1995, the Company has net operating loss
carryforwards of approximately $550,000 for foreign income tax
purposes. The foreign net operating loss carryforward expires
in the year 1999. For financial reporting purposes, a
valuation allowance of $2,471,000 has been recognized to
offset deferred tax assets related to the foreign net
operating loss carryforward and uncertainties regarding the
realization of certain federal and state deferred tax assets.
In 1995, the valuation allowance decreased by $1,773,000
principally due to the utilization of federal and state NOL
carryforwards.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of the
CompanyOs deferred tax liabilities and assets as of December
31, 1995 and 1994 are as follows:
1995 1994
(In Thousands)
Deferred tax liabilities:
Effect of basis difference
for purchased assets $ 1,520 $ 1,881
Foreign operations 2,956 3,001
Accelerated tax depreciation
and amortization 3,424 3,344
Other 2,196 1,871
________________________
Total deferred tax liabilities 10,096 10,097
Page 18
</Page>
<PAGE>
Deferred tax assets:
Effect of basis difference for
purchased assets 1,305 1,683
Expenses not currently deductible
for tax purposes 2,781 3,086
Net operating loss carryforwards 200 1,881
Amortization of purchased intangibles 1,946 1,746
Other 2,503 2,288
________________________
Total deferred tax assets 8,735 10,684
Valuation allowance on
deferred tax assets (2,471) (4,244)
________________________
Net deferred tax assets 6,264 6,440
________________________
Net deferred tax liabilities $ 3,832 $ 3,657
========================
The following is a summary by taxing jurisdiction of deferred
tax assets and liabilities at December 31, 1995 and 1994 (in
thousands):
<TABLE>
<CAPTION>
1995 1994
______________________________________
Current Long-Term Current Long-Term
______________________________________
<S> <C> <C> <C> <C> <C><C> <C> <C>
Federal:
Deferred tax assets $ 2,709 $ 4,680$ 3,464 $
5,515
Valuation allowance (597) (1,031) (1,190)
(1,895)
______________________________________
Subtotal 2,112 3,649 2,274 3,620
Deferred tax
liabilities (150) (7,489) (219) (7,322)
______________________________________
Net deferred tax assets
(liabilities) $ 1,962 $(3,840) $2,055 $(3,702)
======================================
State:
Deferred tax assets $ 427 $ 719 $ 605 $
930
Valuation allowance (240) (403) (390)
(599)
______________________________________
Subtotal 187 316 215 331
Deferred tax
liabilities (33) (1,138) (11) (1,203)
______________________________________
Net deferred tax assets
(liabilities) $ 154 $ (822) $ 204 $ (872)
======================================
Foreign:
Deferred tax assets $ - $ 200 $ D $
170
Valuation allowance - (200) D
(170)
______________________________________
Subtotal - - D D
Deferred tax
liabilities - (1,286) D (1,342)
______________________________________
Net deferred tax
liabilities $ - $(1,286) $ D $(1,342)
======================================
</TABLE>
Page 19
</Page>
<PAGE>
For financial reporting purposes, loss before income taxes,
minority interest and extraordinary items attributable to
foreign operations were (in thousands) $(132), $(1,750) and
$(1,080) for the years ended December 31, 1995, 1994 and 1993,
respectively.
The (provision) benefit for income taxes for 1995, 1994 and
1993, is as follows:
1995 1994 1993
____________________________
(In Thousands)
Current:
Federal $(1,560) $ (373) $ 713
State (600) (173) (128)
Foreign (78) 319 476
___________________________
(2,238) (227) 1,061
Deferred:
Federal (231) D (713)
State - (43) 23
Foreign 56 49 (160)
___________________________
(175) 6 (850)
___________________________
$(2,413) $ (221) $ 211
===========================
Differences between the (provision) benefit for income taxes
and the federal statutory rate for 1995, 1994 and 1993, are as
follows:
1995 1994 1993
____________________________
(In Thousands)
Tax at statutory rate 34% (34)% (34)%
Effect of earnings of
foreign subsidiaries
taxed at different rates 1 (6) (12)
Intangible amortization 3 10 26
State income taxes,
net of federal benefit 7 4 4
Valuation allowance on
deferred tax assets (16) 21 4
Other - 10 3
______________________
Effective tax rate 29% 5% (9)%
======================
Page 20
</Page>
<PAGE>
8. Commitments and Contingencies
The Company is obligated under noncancelable operating leases
for buildings and equipment as follows (in thousands):
1996 $1,955
1997 1,643
1998 1,091
1999 414
2000 29
Thereafter -
______
$5,132
======
Rental expense was $2.4 million in 1995 ($2.3 million in 1994;
1993- $2.1 million).
The Company has agreed to pay an affiliate of certain
stockholders an annual consulting fee of 0.5% of consolidated
net revenues or $500,000, whichever is greater, but not more
than $500,000 such until all senior and subordinated debt
amounts are repaid. The Company also is required to pay
affiliate fees and expenses in the event of certain
transactions, including debt and equity financings. During
1995, the Company incurred $500,000 in fees (1994 - $610,000;
1993 - $700,000) under the consulting agreements.
The Company utilizes and has utilized property containing
hazardous materials which may require remediation. The Company
had made accruals in the accompanying December 31, 1995, 1994
and 1993 consolidated financial statements for all known
environmental issues based upon investigations conducted by
the Company, its environmental consultants and federal
regulatory agencies. Management believes the ultimate
resolution of these matters will not be significant to the
financial position or results of operations of the Company.
The Company has employment contracts with certain employees
that require annual payments of $2,213,000 in 1996, $126,700
in 1997 and $95,000 in 1998. Certain employee contracts are
subject to cost of living increases.
The Company has entered into stock appreciation rights (SARs)
agreements with certain management employees.
Page 21
</Page>
<PAGE>
The SARs agreements allow the management employees to
participate in a specified percentage of the appreciation in
value of one or several operating companies, as measured by a
stated valuation formula. The initial term of the SARs is five
years beginning on January 1, 1992 with one-year renewal terms
exercisable with the consent of the Company and the employees.
The SARs will be 40% vested after two years and an additional
20% will vest for each year thereafter. Compensation expense
resulting from the SARs is accrued quarterly by the Company
for value fluctuations based on the valuation formula. The
Company recognized compensation expense of $560,000 in 1995,
$154,000 in 1994 and $90,000 in 1993 in respect of the SARs.
NEWFLO is involved in various litigation arising in the
ordinary course of business. In managementOs opinion, the
resolution of these matters will not have a material effect on
the CompanyOs financial position or results of operations.
9. Employee Benefit Plans
NEWFLO has a defined contribution savings plan (the Plan)
which qualifies under the provision of Section 401(k) of the
Internal Revenue Code and covers all nonunion employees. Under
the terms of the Plan, member employees may contribute varying
amounts of their annual compensation (to a maximum of $9,240
in 1995). The Company makes contributions to the Plan equal to
those of the member employees, up to a maximum of 5% of any
individual employeeOs compensation, or as approved by the
Board of Directors. Company contributions of $1.5 million were
charged to operations in 1995 (1994 - $1.6 million, 1993 -
$1.5 million).
A subsidiary sponsored a noncontributory defined benefit
pension plan that provides benefits based upon specified
percentages of the participantsO salaries and the number of
months of continuous service as of the date of retirement.
This plan was suspended as of December 31, 1991. Assets of the
Plan are invested primarily in contracts with insurance
companies. Contributions are made to the Plan on an as-needed
basis, as determined by the actuaries.
Page 22
</Page>
<PAGE>
Another subsidiary sponsors a noncontributory defined benefit
plan for its hourly workers. The normal retirement benefit
under this plan is based upon the number of years of service
and a monthly benefit rate per year of service. Assets of this
plan are invested primarily in mutual funds which are held in
a separate trust account.
Assumptions used in the actuarial valuations for the two plans
are as follows:
1995 1994 1993
______________________________________
Assumptions used in
the actuarial valuation
included:
Discount rate for
actuarial present
values 7.5% 8.5% - 8.75% 7.75% - 8.0%
Expected long-term
rate of return
on assets 8.5% - 9.0% 9.0% - 10% 7.0% - 10%
The following table sets forth the plansO combined funded
status at December 31, 1995 and 1994 (in thousands):
1995 1994
______________________
Actuarial present value of
benefit obligations:
Vested benefits $5,950 $5,080
Non-vested benefits 316 262
______________________
Projected benefit obligation 6,266 5,342
Plan assets at fair value 5,513 4,836
______________________
Plan assets less than projected
benefit obligations (753) (506)
Unrecognized prior service cost 135 145
Unrecognized net loss 618 361
______________________
Accrued pension cost included
in accrued compensation
and related expenses $ - $ -
======================
The combined components of net periodic pension income for the
year ended DecemberE31, 1995, 1994 and 1993 are as follows (in
thousands):
Page 23
</Page>
<PAGE>
1995 1994 1993
____________________________
Service cost $ 68 $ 70 $ 63
Interest cost 447 437 407
Actual return on
plan assets (510) (84) (386)
Net amortization
and deferral 6 (381) (92)
____________________________
Net periodic pension
expense (income) $ 11 $ 42 $ (8)
============================
In addition to providing pension benefits, a subsidiary
provided noncontributory postretirement health care and life
insurance benefits for its employees. This benefit plan was
acquired by NEWFLO and terminated as of December 31, 1991
resulting in NEWFLO recording a liability for those employees
with vested benefits. The net periodic postretirement benefit
costs consist of interest accruals along with any experienced
gains or losses 1995 - $365,000, (1994 - $502,000, 1993 -
$487,000).
The reconciliation of the accumulated postretirement benefit
obligation to the accrued liability included in the CompanyOs
consolidated balance sheet at December 31, 1995 and 1994
follows (in thousands):
1995 1994
_________________________
Actuarial present value
of benefit obligations:
Retirees $(4,505) $(4,126)
Actives eligible (366) (311)
_________________________
Accumulated postretirement
benefit obligation (4,871) (4,437)
Unrecognized actuarial
net gains (1,495) (2,250)
_________________________
Accrued postretirement
cost included in
other liabilities $(6,366) $(6,687)
=========================
The weighted average discount rate used in determining the
accumulated postretirement benefit obligation was 7.5% for
1995 and 8.5% for 1994. A 11.6% annual rate of increase in
Page 24
</Page>
<PAGE>
the cost of health care benefits is assumed for 1996 and the
rate was assumed to decrease until 6% is reached by 2010;
thereafter the rate remains at 6%. An increase of 1% in the
health care trend rate would increase 1995 net periodic
postretirement benefit expense by approximately $17,400 and
the DecemberE31, 1995 accumulated postretirement benefit
obligation by approximately $225,900. The plan is funded on an
as-needed basis through insurance premiums.
10. Segment Data (Unaudited)
The Company operates in one segment and its business involves
the design, manufacture, marketing and servicing of a broad
range of products involving the control, handling and
measurement of a variety of fluids. The CompanyOs operations
by geographic location are as follows:
<TABLE>
<CAPTION>
United Foreign
States Subsidiaries Eliminations Consolidated
_______________________________________________________________
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Year ended
December 31, 1995
Net sales:
United States $ 160,275 $ - $ - $160,275
International 25,701 13,815 - 39,516
__________________________________________________________
Total $ 185,976 $ 13,815 $ - $199,791
==========================================================
Income (loss) from
operations $ 27,301 $ (387) $ $ 26,914
==========================================================
Identifiable assets $ 142,821 $ 16,221 $ $159,042
==========================================================
Year ended
December 31, 1994
Net sales:
United States $ 155,963 $ 476 $ (222) $156,217
International 25,889 13,377 D 39,266
__________________________________________________________
Total $ 181,852 $ 13,853 $ (222) $195,483
==========================================================
Income (loss) from
operations $ 15,538 $ (349) $ D $ 15,189
==========================================================
Identifiable assets $ 142,414 $ 14,954 $ D $157,368
==========================================================
Page 25
</Page>
<PAGE>
Year ended
December 31, 1993
Net sales:
United States $ 159,970 $ D $ (82) $159,888
International 24,184 15,406 D 39,590
__________________________________________________________
Total $ 184,154 $ 15,406 $ (82) $199,478
==========================================================
Income from operations $ 15,416 $ 2,476 $ D $ 17,892
==========================================================
Identifiable assets $ 162,557 $ 17,986 $ D $180,543
==========================================================
</TABLE>
Transfers between geographic areas are at negotiated
prices. Export sales to non-affiliated customers
principally in Canada, Europe and Asia were
$25,701,000, $25,889,000 and $24,184,000 in 1995, 1994
and 1993, respectively.
11. Valuation and Qualifying Accounts
For the years ended December 31, 1995, 1994 and 1993,
the allowance for doubtful accounts was $905, $1,041
and $847, respectively. Costs and expenses related to
the allowance for doubtful accounts were $(54,000),
$200,000 and $255,000 for the years ended December 31,
1995, 1994 and 1993, respectively. In addition,
$82,000, $6,000 and $226,000 accounted for
uncollectible accounts written off net of recoveries
for the years ended December 31, 1995, 1994 and 1993.
For the years ended December 31, 1995, 1994 and 1993,
the valuation allowance on deferred tax assets was
$2,471,000, $4,244,000 and $1,983,000, respectively.
For further discussion, see Note 7, "Income Taxes."
Page 26
</Page>
<PAGE>
Item 7(a) 7.
CONSOLIDATED BALANCE SHEET
NEWFLO CORPORATION
March 31, 1996 and 1995
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,000 $ 1,000
Accounts receivables, net 36,000 26,600
Inventories 59,100 48,600
Prepaid expense and other 600 400
Current deferred tax asset 2,100 2,300
__________ __________
Total current assets 98,800 78,900
Property, Plant and Equipment 55,600 66,000
Less -Accumulated Depreciation (23,800) (34,200)
__________ __________
Net property, plant and equipment 31,800 31,800
Goodwill and Other Assets 42,400 45,800
__________ __________
$ 173,000 $ 156,500
========== ==========
</TABLE>
Page 27
</Page>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt
and capital leases $ 8,800 $ 11,100
Accounts payable 15,500 9,800
Accrued liabilities 12,900 11,400
Income taxes payable 1,800 500
__________ __________
Total current liabilities 39,000 32,800
Long-Term Debt, excluding current portion 122,800 118,600
Deferred Tax Liability 6,000 5,900
Accrued Retirement Benefits Obligations 6,500 6,400
Other-Long-Term Liabilities 1,800 3,500
Shareholders' Equity (3,100) (10,700)
__________ __________
$ 173,000 $ 156,500
========== ==========
</TABLE>
Item 7(a) 8.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
NEWFLO CORPORATION
($ in thousands)
(Unaudited)
<CAPTION>
March 31, March 31,
1996 1995
<S> <C> <C>
Net Sales $ 56,800 $ 45,100
Cost of Goods Sold 38,400 30,200
_________ _________
Gross margin 18,400 14,900
Selling and Administrative Expenses 11,600 10,300
Interest Expense, net 4,300 4,700
_________ _________
Income before provision for income taxes 2,500 (100)
Provision for Income Taxes 1,000 200
_________ _________
Net income $ 1,500 $ (300)
========= =========
Page 28
</TABLE>
</Page>
<PAGE>
NEWFLO CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1996
1. Basis of Preparation
The accompanying condensed consolidated financial statements
of NEWFLO Corporation (the "Company") as of and for the
three-month period ended March 31, 1996, are unaudited, but
are prepared in accordance with generally accepted
accounting principles for interim financial information and
include all adjustments (consisting only of normal recurring
entries) which, in the opinion of management, are necessary
for a fair presentation of financial position, results of
operations and cash flows. The results of operations for
the three-month period ended March 31, 1996, are not
necessarily indicative of the results to be expected for the
full year. These unaudited condensed consolidated financial
statements should be read in conjunction with the audited
consolidated financial statements as of and for the year
ended December 31, 1995
2. Net Income (Loss) Per Common Share
Net income (loss) per common share is computed using the net
income (loss) after deducting preferred stock Series A. The
weighted average number of shares consists of the common
stock equivalents outstanding. The inclusion of warrants as
common stock equivalents are valued at the latest stock
transaction price. For the three-month period ended March
31, 1996, the common equivalent shares from stock warrants
and preferred stock, Series B, are included in the
computation of net income per common share. However, for
the three-month period ended March 31, 1995, the common
equivalent shares from stock warrants and preferred stock
Series B are excluded from the computation of net loss per
common share as their effect would be anti-dilutive.
3. Acquisitions
In January 1996, the Company acquired certain assets and
assumed liabilities of Barber Industries Ltd. ("Barber") for
a cash payment of approximately $9.3 million. Barber
manufactures wellhead equipment and emergency shut down
safety systems. The acquisition has been accounted for
Page 29
</Page>
<PAGE>
using the asset purchase method, and accordingly, the
purchase price and liabilities assumed ($1.7 million) have
been allocated to the assets acquired based on their
respective fair values at the date of acquisition.
4. Adoption of New Accounting Standards
In the three months ended March 31, 1996, the Company has
adopted the provision of FASB Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of", which required impairment losses
to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are
less than the assets' carrying amount. The adoption had no
impact on the Company's results of operations or financial
position.
5. Contingencies
The Company is involved in various litigation arising in the
ordinary course of business. In management's opinion, the
resolution of these matters will not have a material effect
on the Company's financial position or results of
operations.
The Company utilizes and has utilized property containing
hazardous materials which may require remediation. The
Company has made accruals in the accompanying condensed
consolidated financial statements for all known
environmental issues based upon investigations conducted by
the Company, its environmental consultants and federal
regulatory agencies. Management believes the ultimate
resolution of these matters will not be significant to the
financial position or results of operations of the Company.
6. Common Stockholders' Equity
The Class B common stock (none issued or outstanding) is non-
voting and is convertible at any time, at the option of the
holder, into Class A common stock on a one-for-one basis.
The Company has reserved 68,630 shares of Class A common
stock for the conversion of Class B preferred stock and
Class B common stock.
The Company has the right to repurchase 13,371 shares of
Class A common stock held by certain stockholders at $.01
per share. The repurchase rights lapse at the earlier of
conversion of the Class B preferred stock or January 2003.
Page 30
</Page>
<PAGE>
The Company has warrants outstanding to its term loan
holders to purchase 12,157 shares of Class B common stock at
$5.91 per share and 4,677 shares Class B common stock at
$10.80 per share. The Company may call the warrants and/or
any shares issued upon exercise of the warrants at fair
market value of the related shares (less exercise price,
with respect to the warrants) until March 19, 2000. At the
option of the holders, the warrants and/or any shares issued
upon the exercise of the warrants may be put to the Company
at fair market value of the related shares (less exercise
price, with respect to the warrants). This put option
terminates March 19, 2000. Also, beginning March 19, 1996,
certain stockholders who hold 125,516 shares of Class A
common and shares of Class B preferred stock convertible
into 36,812 shares of Class A common stock have the right to
put all such shares of common stock to the Company at fair
market value, upon request from a majority of these
stockholders. This right terminates upon an initial public
offering of the Company's stock with net proceeds of at
least $30 million or upon the liquidation or sale of the
Company. No amounts have been recorded in the accompanying
financial statements for any repurchase obligations relating
to the warrants or shares issuable thereunder or relating to
shares under the put options because, the Company's ability
to pay the repurchase price is significantly restricted by
the Company's debt agreements and the Company does not
believe the warrants and share repurchase agreements
presently represent a liability to the Company.
7. Subsequent Event
The Board of Directors of NEWFLO Corporation have approved
the engagement of an investment banking firm to investigate
strategic options to increase or realize shareholder value,
which may include a variety of potential transactions,
including: a recapitalization, a securities offering, or the
sale or merger of NEWFLO. NEWFLO is unable to predict the
outcome of this initiative at this time. Any such
transaction would be subject to a number of contingencies,
including approval by the Board of Directors.
Page 31
</Page>
<PAGE>
<PAGE>
Item 7(b) Pro Forma Financial Information
PRECISION CASTPARTS CORP.
PRO FORMA COMBINED BALANCE SHEET AND INCOME STATEMENT
On July 31, 1996, Precision Castparts Corp. ("PCC")
purchased 100% of the outstanding capital stock of the
NEWFLO Corporation ("NEWFLO") from its shareholders, who
consisted of individual and institutional investors.
NEWFLO, which will be operated as PCC Flow Technologies,
Inc., is a designer and manufacturer of high quality, niche-
oriented industrial fluid management products. The
transaction, valued at $300 million, was financed from $200
million borrowed under a Credit Agreement with Bank of
America National Trust & Savings Association, as Agent. In
addition, $100 million of subordinated debt registered under
the Securities Act of 1933 was retained.
The unaudited pro forma combined income statements for the
year ended March 31, 1996, and the three months ended June
30, 1996, present the combined results of operations
assuming the purchase of the stock of NEWFLO Corporation had
been consummated at the beginning of the period. The
unaudited pro forma combined balance sheet at June 30, 1996
presents the combined financial position assuming the
purchase of stock of NEWFLO Corporation had been consummated
as of that date. The financial information of NEWFLO
Corporation is as of or for the period ended three months
prior to the pro forma financial statement dates as
described above. The financial information of NEWFLO
Corporation contains certain reclassifications made to
conform to PCC's classifications. In accordance with SEC
requirements, the pro forma includes only the results of
ongoing operations and excludes such impacts as the effect
of changes in accounting principles.
The following unaudited pro forma combined financial
information should be read in conjunction with historical
statements of PCC, as reported in its annual report on Form
10-K and quarterly reports on Form 10-Q, and of NEWFLO
Corporation, as reported in this filing on Form 8-K/A. The
pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating
results or financial position that would have occurred had
the purchase of the stock of NEWFLO Corporation been
consummated in accordance with the assumptions set forth
above, nor is it necessarily indicative of future operating
results or financial position.
Page 32
</Page>
<PAGE>
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
PRECISION CASTPARTS CORP.
AND NEWFLO CORPORATION
JUNE 30, 1996
($ in thousands)
(Unaudited)
<CAPTION>
Precision
Castparts NEWFLO Pro Forma Note Pro Forma
Corp. Corp. Adjustments Reference Combined
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,600 $ 1,000$ (3,600) (2) $ 1,000
Accounts receivables 102,000 36,000 (100) (3) 137,900
Inventories 136,600 59,100 500 (3) 196,200
Prepaid expenses and other 2,300 600 - 2,900
Current deferred tax asset 9,800 2,100 6,200 (6) 18,100
_________ _________ _________ _________
Total current assets 254,300 98,800 3,000 356,100
_________ _________ _________ _________
Property, Plant and Equipment 312,100 55,600 (24,100) (3) 343,600
Less - Accumulated Depreciation(157,900) (23,800) 23,800 (3) (157,900)
_________ _________ _________ _________
Net property, plant
and equipment 154,200 31,800 (300) 185,700
_________ _________ _________ _________
Non-current deferred tax asset - - 5,600 (6) 5,600
Goodwill, net and Other Assets 113,500 42,400 190,100 (3),(4) 346,000
_________ _________ _________ _________
$ 522,000 173,000 198,400 893,400
========= ========= ========= =========
Page 33
</Page>
<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 1,400 - - $ 1,400
Current portion of
long-term debt 1,900 8,800 1,500 (1) 12,200
Accounts payable 41,300 15,500 - 56,800
Accrued liabilities 51,000 12,900 15,500 (3) 79,400
Income taxes payable 12,200 1,800 (1,700) (6) 12,300
_________ _________ _________ _________
Total current liabilities 107,800 39,000 15,300 162,100
_________ _________ _________ _________
Long-Term Debt, excluding
current portion 46,900 122,800 169,800 (1), (2) 339,500
Deferred Tax Liability 19,600 6,000 (6,000) (6) 19,600
Accrued Retirement
Benefits Obligation 13,400 6,500 2,000 (3) 21,900
Other Long-Term Liabilities 20,100 1,800 14,200 (3) 36,100
Shareholders' Investment
Preferred Stock - 100 (100) (5) -
Convertible preferred stock - 9,500 (9,500) (5) -
Common stock 20,600 - - 20,600
Paid-in capital 14,900 700 (700) (5) 14,900
Retained earnings 277,100 (12,200) 12,200 (5) 277,100
Cumulative translation
adjustment 1,600 (1,200) 1,200 (5) 1,600
_________ _________ _________ _________
Total shareholders'
investment 314,200 (3,100)` 3,100 314,200
_________ _________ _________ _________
$ 522,000 173,000 $ 198,400 $ 893,400
========= ========= ========= =========
See accompanying notes to pro forma combined balance sheet.
</TABLE>
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<PAGE>
PRECISION CASTPARTS CORP.
NOTES TO PRO FORMA COMBINED BALANCE SHEET
(1) Adjustment to remove certain debt and associated
accrued interest which was retired upon consummation of
the stock purchase transaction. The remaining debt of
NEWFLO was assumed by PCC.
(2) Adjustment to eliminate PCC cash balances and record
borrowings as needed to cover the purchase price of
NEWFLO.
(3) Adjustment to restate reported assets acquired and
liabilities assumed at fair market value.
(4) Adjustment to record the estimated pro forma excess
purchase price paid and costs incurred to acquire
NEWFLO Corporation of $197.1 million.
(5) Adjustment to remove NEWFLO's shareholders' investment.
(6) Adjustment to record the tax effect of the above
pro forma adjustments.
Certain reclassifications have been made to the NEWFLO
balance sheet to conform with the presentation used by PCC.
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</Page>
<PAGE>
<TABLE>
PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED MARCH 31, 1996
PRECISION CASTPARTS CORP.
AND NEWFLO CORPORATION
($ in thousands, except per share data)
(Unaudited)
<CAPTION>
Precision
Castparts NEWFLO Pro Forma Note Pro Forma
Corp. Corp. Barber Adjustments Reference Combined
<S> <C> <C> <C> <C> <C>
<C>
Net Sales $ 556,800 199,800 $16,300 - $772,900
Cost of Goods Sold 446,100 133,900 11,600 5,000 (3), (4) 596,600
_________ _________ _______ _________ _________
Gross Margin 110,700 65,900 4,700 (5,000) 176,300
Selling and
Administrative
Expenses 46,900 40,200 2,200 (1,900) (4) 87,400
Interest Expense, net 100 17,600 900 2,400 (1), (2) 21,000
_________ _________ _______ _________ _________
Income Before
Provision for
Income Taxes 63,700 8,100 1,600 (5,500) 67,900
Provision for
Income Taxes 22,600 2,400 700 1,100 (5) 26,800
_________ _________ _______ _________ _________
Net Income $ 41,100 $ 5,700 $ 900 $ (6,600) $ 41,100
========= ========= ======= ========= =========
Net Income per
Common Share $ 2.02 $ 2.02
========= =========
Average number
of common shares
outstanding
(in thousands) 20,400 20,400
See accompanying notes to pro forma combined income statements.
</TABLE>
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<PAGE>
<TABLE>
PRO FORMA COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1996
PRECISION CASTPARTS CORP.
AND NEWFLO CORPORATION
($ in thousands, except per share data)
(Unaudited)
<CAPTION>
Precision
Castparts NEWFLO Pro Forma Note Pro Forma
Corp. Corp. Barber Adjustments Reference Combined
<S> <C> <C> <C> <C> <C>
Net Sales $ 166,000 56,800 $1,600 - $224,400
Cost of Goods Sold 134,100 38,400 1,200 700 (3), (4) 174,400
_________ _________ ______ _________ _________
Gross Margin 31,900 18,400 400 (700) 50,000
Selling and
Administrative
Expenses 12,600 11,600 200 (700) (4) 23,700
Interest Expense, net 300 4,300 - 800 (1), (2) 5,400
_________ _________ ______ _________ _________
Income Before
Provision for
Income Taxes 19,000 2,500 200 (800) 20,900
Provision for
Income Taxes 7,700 1,000 100 300 (5) 9,100
_________ _________ _______ _________ _________
Net Income $ 11,300 $ 1,500 $ 100 $ (1,100) $ 11,800
========= ========= ======= ========= =========
Net Income per
Common Share $ 0.55 $ 0.57
========= =========
Average number of
common shares
outstanding
(in thousands) 20,600 20,600
See accompanying notes to pro forma combined income statements.
</TABLE>
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<PAGE>
PRECISION CASTPARTS CORP.
NOTES TO PRO FORMA COMBINED INCOME STATEMENT
(1) Adjustment to remove interest expense incurred by
NEWFLO related to debt retired upon acquisition by PCC.
(2) Adjustment to add estimated interest expense related to
debt incurred to acquire the stock of NEWFLO. The pro
forma adjustment to interest income and expense assumes
that PCC expended all available cash and acquired debt
as necessary to purchase the stock of NEWFLO. The
incremental interest expense was calculated at 6.9%
which represents PCC's borrowing rate under the Bank of
America Credit Facility, adjusted to reflect LIBOR
interest rates during the period presented.
(3) Adjustment to 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.
(4) Adjustment to reflect elimination of non-recurring
transactions and to reflect changes to operating costs
as a result of the acquisition.
(5) Adjustment to tax expense based on the pro forma
changes above.
Certain reclassifications have been made to conform to PCC's
reporting classifications.
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<PAGE>
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: September 26, 1996 /s/ W.D. Larsson
________________________
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the use of our report dated February 23, 1996,
with respect to the consolidated financial statements of
NEWFLO Corporation included in Amendment No. 1 to the
Current Report (Form 8-K) of Precision Castparts Corp.
(dated July 31, 1996) and incorporated by reference in the
Registration Statement on Form S-3 No. 2-95890, the
Registration Statement on Form S-3 No. 2-95855, the
Registration Statement on Form S-8 No. 33-32367 and the
Registration Statement on Form S-8 No. 33-40559 of Precision
Castparts Corp.
/s/ ERNST & YOUNG LLP
_____________________
Ernst & Young LLP
Austin, Texas
September 24, 1996
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