<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)
May 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 Olofsson Corporation and Subsidiaries
Consolidated Balance Sheet - December 31,
1995
3. The Olofsson Corporation and Subsidiaries
Consolidated Statement of Operations for the
year ended December 31, 1995
4. The Olofsson Corporation and Subsidiaries
Consolidated Statement of Stockholders'
Equity - Year ended December 31, 1995
5. The Olofsson Corporation and Subsidiaries
Consolidated Statement of Cash Flows - Year
ended December 31, 1995
6. The Olofsson Corporation and Subsidiaries
Notes to Consolidated Financial Statements -
December 31, 1995
7. The Olofsson Corporation and Subsidiaries
Consolidated Balance Sheet - March 31, 1996
and March 31, 1995(unaudited)
8. The Olofsson Corporation and Subsidiaries
Consolidated Statement of Operations for the
three months ended March 31, 1996 and 1995
(unaudited)
(b) Pro Forma Financial Information
1. Pro Forma Combined Balance Sheet March 31,
1996 (unaudited)
2. Notes to Pro Forma Combined Balance Sheet
(unaudited)
3. Pro Forma Combined Income Statement for the
Year Ended March 31, 1996 (unaudited)
4. Notes to Pro Forma Combined Income Statement
(unaudited).
</Page>
<PAGE>
(c) Exhibits
(1) Stock Purchase Agreement by and among PCC
Specialty Products, Inc. and The Stockholders
of The Olofsson Corporation (Incorporated by
Reference to Exhibit 1 to Form 8-K dated
June 14, 1996 - File No. 1-10348)
(23) Consent of KPMG Peat Marwick LLP.
</Page>
<PAGE>
Item 7(a) Financial Statements of Business Acquisition
THE OLOFSSON CORPORATION AND SUBSIDIARIES
Table of Contents
Page(s)
Independent Auditors' Report i
Consolidated Balance Sheet 1
Consolidated Statement of Operations 3
Consolidated Statement of Stockholders' Equity 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 7-27
</Page>
<PAGE>
Independent Auditors' Report
The Board of Directors
The Olofsson Corporation:
We have audited the accompanying consolidated balance sheet
of The Olofsson Corporation and subsidiaries as of December
31, 1995, and the related consolidated statements of
operations, stockholders' equity, and cash flows for the
year then ended. These consolidated financial statements
are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit 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 audit provides
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 The Olofsson Corporation and
subsidiaries as of December 31, 1995, and the results of
their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting
principles.
As discussed in notes 2 and 9, the Company changed its
method of accounting for other postretirement benefits to
adopt the provisions of the Financial Accounting Standards
Board's Statement of Financial Accounting Standards (SFAS)
No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions.
/s/ KPMG PEAT MARWICK LLP
_______________________________
KPMG Peat Marwick LLP
March 22, 1996, except as to notes 3 and 5
which are as of April 9, 1996 and note 18
which is as of August 9, 1996
Page i
</Page>
<PAGE>
THE OLOFSSON CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements
December 31, 1995
</Page>
<PAGE>
THE OLOFSSON CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
December 31, 1995
(in thousands, except share data)
Assets (note 3)
Current assets:
Cash $ 83
Contract and trade accounts receivables
(note 11) 14,408
Unbilled revenue under customer commitments
(note 2) 7,121
Unbilled revenue from customer changes
(note 2) 317
Other receivables 153
Inventories:
Finished goods and work in process 14,373
Raw material and supplies 3,042
______
Total inventories 17,415
______
Prepaid expenses 134
______
Total current assets 39,631
______
Property, plant, and equipment:
Land and improvements 281
Buildings and improvements 4,322
Furniture and fixtures 2,539
Machinery and equipment (note 7) 11,005
______
18,147
Less accumulated depreciation 10,991
______
Net property, plant, and equipment 7,156
______
Deferred financing costs, less accumulated
amortization 171
Cash value of life insurance, less policy
loans of $392 115
Other assets, at cost, less accumulated amortization
(note 6) 143
______
$ 47,216
======
See accompanying notes to consolidated financial statements.
Page 1
</Page>
<PAGE>
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to lender (note 3) $ 8,684
Current installments of long-term debt
(note 4) 213
Current installments of subordinated
debt (note 5) 1,192
Current installments of obligations under
capital leases (note 7) 157
Trade accounts payable 9,360
Income taxes payable 483
Deferred compensation, current portion 31
Advances from customers (note 8) 2,429
Deferred income taxes (note 10) 214
Accrued expenses:
Accrued payroll, commissions, and
related costs 2,620
Interest (note 5) 254
Other (note 6) 1,089
______
Total accrued expenses 3,963
______
Total current liabilities 26,726
______
Long-term debt, excluding current installments
(note 4) 10,048
Subordinated debt, excluding current
installments (note 5) 4,780
Obligations under capital leases, excluding
current installments (note 7) 514
Deferred compensation, less current portion 503
Deferred income taxes (note 10) 303
______
Total liabilities 42,874
______
Stockholders' equity:
Common stock, $.01 par value. Authorized 2,600,000
shares; issued and outstanding 2,210,433
shares (note 17) 22
Additional capital 1,183
Retained earnings 3,137
______
Total stockholders' equity 4,342
______
Contingencies (notes 7 and 12)
$ 47,216
======
Page 2
</Page>
<PAGE>
THE OLOFSSON CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
For the year ended December 31, 1995
(in thousands)
Net sales $ 64,453
Cost of goods sold 52,846
______
Gross profit 11,607
______
Selling, general and administrative expenses 3,555
Nonrecurring charge (note 16) 433
______
3,988
______
Operating income 7,619
______
Other expenses (income):
Interest:
Subordinated debt (note 5) 828
Other 1,884
State business taxes 471
Miscellaneous, net 37
______
3,220
______
Income before income tax expense 4,399
Income tax expense (note 10) 1,550
______
Net income $ 2,849
======
See accompanying notes to consolidated financial statements.
Page 3
</Page>
<PAGE>
THE OLOFSSON CORPORATION AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
Year Ended December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
Retained Total
Common Additional Earnings Stockholders'
Stock Capital (Deficit) Equity
________________________________________________________________________________
___
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ 22 1,183 288 1,493
Net income - - 2,849 2,849
____ _____ _____ _____
Balance at December 31, 1995 $ 22 1,183 3,137 4,342
==== ===== ===== =====
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
</Page>
<PAGE>
THE OLOFSSON CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Year Ended December 31, 1995
(in thousands)
Cash flows from operating activities (note 14):
Net income $ 2,849
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization of
plant and equipment 1,384
Amortization of deferred financing costs 192
Loss on sale and disposals of equipment 29
Increase in deferred income taxes 386
Increase in accounts receivable and
unbilled revenue (7,343)
Increase in inventories (1,449)
Decrease in prepaid expenses 99
Increase in other assets (143)
Increase in cash value of life insurance,
net of policy loans (56)
Increase in trade accounts payable 1,035
Increase in deferred compensation 17
Decrease in advances from customers (298)
Increase in accrued expenses 1,168
Increase in income taxes payable 271
Net cash used in operating
activities (1,859)
______
Cash flows from investing activities
(note 14):
Capital expenditures (902)
Proceeds from sale of equipment 1
______
Net cash used in investing
activities (901)
______
Cash flows from financing activities:
Net proceeds from issuance of notes
payable to bank 3,701
Proceeds from issuance of long-term debt 200
Principal payments on long-term debt (375)
Principal payments on subordinated debt (697)
Principal payments under capital lease
obligations (120)
______
Net cash provided by financing
activities 2,709
______
Net decrease in cash (51)
Page 5
</Page>
<PAGE>
Cash at the beginning of year 134
______
Cash at end of year $ 83
======
Supplemental disclosures of cash flow information:
Interest paid $ 2,668
======
Taxes paid $ 911
======
See accompanying notes to consolidated financial statements.
Page 6
</Page>
<PAGE>
THE OLOFSSON CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995
(All amounts in thousands, except share data)
(1)Description of Business
The primary business of The Olofsson Corporation (which,
along with its subsidiaries, is defined herein as the
"Company") is the design and manufacture of a broad line
of computer-controlled, custom-engineered metal cutting
machine systems for critical machining operations where
high precision and volume are required. As of December
31, 1995, the Company operated four manufacturing sites
and an engineering center in the State of Michigan. The
Company's raw materials are readily available, and the
Company is not dependent on a single supplier or only a
few suppliers.
As a result of the acquisition of the Company from John
Brown, PLC on DecemberE6, 1985, the parent company of
the Company was Cordier Enterprises, Inc. ("CEI") with
Cordier Group Holdings, Inc. ("Holdings") being the
ultimate parent. Effective May 3, 1993, CEI was
separated from Holdings, with four of the former
stockholders of Holdings becoming stockholders of CEI
("new stockholders"). Such transaction was recorded on
a historical cost basis. In connection with the
separation, Holdings gave CEI a $50 receivable which was
treated as a contribution of capital. As a result,
subsequent to the separation, CEI was the ultimate
parent company of the Company.
On January 4, 1995, CEI changed its name to Metalcor,
Inc. ("Metalcor"). Effective July 26, 1995, Metalcor
was merged with and into the Company, with each share of
Metalcor's common stock being converted into one share
of the Company's common stock.
(2)Summary of Significant Accounting Policies
The significant accounting policies of the Company, as
summarized below, conform with generally accepted
accounting principles and reflect practices appropriate
to the business in which it operates.
Page 7
</Page>
<PAGE>
(a)Principles of Consolidation
The consolidated financial statements include the
accounts of the Company and its wholly owned
subsidiaries; Olofsson Machine Tools, Inc., Olofsson
Fabrication Services, Inc., and MCHS Precision, Inc.
All significant intercompany balances and
transactions have been eliminated in consolidation.
(b)Revenue Recognition
Revenue is reported on the percentage-of-completion
(POC) method for all long-term contracts (greater
than one year) and the completed-contract method for
all short-term contracts. Progress on POC contracts
is measured by definable milestones of the
engineering and manufacturing processes. Under the
completed contract method, revenue is recognized
upon the earlier of written customer acceptance or
shipment of the product to the customer.
Page 8
</Page>
<PAGE>
(2)Summary of Significant Accounting Policies, Continued
(b)Revenue Recognition, Continued
Costs of goods sold and related expenses to
manufacture the Company's products are recorded as
costs of sale when the related revenue is
recognized. Provision is made for the entire amount
of expected losses, if any, in the period in which
such losses are first determinable.
Customers are billed in accordance with the terms of
the contract. Unbilled receivables include amounts
recognized as revenue under the POC method but not
billed to the customer. These receivables are
classified as unbilled revenue under customer
commitments. Retainers are billed upon shipment and
are due upon customer acceptance. In addition,
unbilled revenue from customer changes represents
revenue from customer requests and modifications
performed during the assembly process.
(c)Inventories
Inventories are stated at the lower of cost or
market (net realizable value). Cost is determined
using the first-in, first-out method.
(d)Property, Plant, and Equipment
Property, plant, and equipment are stated at cost.
Equipment acquired under capital leases are stated
at the present value of minimum lease payments at
date of acquisition. When such assets are retired
or otherwise disposed of, the related cost and
accumulated depreciation or amortization are removed
from the respective accounts and any gain or loss on
disposition is included in earnings.
Depreciation on plant and equipment is calculated on
the straight-line method over the estimated useful
lives of the assets for financial statement
purposes. Accelerated methods of depreciation are
Page 9
</Page>
<PAGE>
generally used for income tax purposes. Equipment
held under capital leases is amortized on the
straight-line basis over the shorter of the lease
term or estimated useful life of the asset.
(e)Deferred Financing Costs
Various costs incurred in the securing of debt
financing have been deferred and are being amortized
over the terms of the related debt instruments.
(f)Pension and Other Postretirement Plans
The majority of the Company's employees are covered
by one of three noncontributory defined benefit
pension plans. Benefits under these plans are based
on years of service. The Company's funding policy
is to contribute amounts to the plans sufficient to
meet the minimum funding requirements set forth in
the Employee Retirement Income Security Act of 1974,
plus additional amounts as the Company may determine
to be appropriate from time to time.
Page 10
</Page>
<PAGE>
(2)Summary of Significant Accounting Policies, Continued
(f)Pension and Other Postretirement Plans, Continued
The Company also sponsors three defined contribution
plans covering substantially all employees.
Contributions to these plans are at the discretion
of the Company's Board of Directors. Effective
January 1, 1994, one plan was terminated and its
assets transferred to the participating employees'
401(k) accounts.
The Company also sponsors a defined benefit health
care plan for certain retirees and employees. The
Company measures the costs of its obligation based
on its best estimate. The net periodic costs are
recognized as employees render the services
necessary to earn the postretirement benefits.
Effective January 1, 1995, the Company adopted SFAS
No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions, as described in note
9.
(g)Income Taxes
Income taxes are accounted for under the asset and
liability method. Deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to differences between the
financial statement carrying amounts of existing
assets and liabilities and their respective tax
basis and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to
apply to taxable income in the years in which those
temporary differences are expected to be recovered
or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized
in income in the period that includes the enactment
date.
Page 11
</Page>
<PAGE>
(h)Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial
statements and the reported amounts of revenue and
expenses during the reporting period. Actual
results could differ from those estimates.
(i)Financial Instruments
Financial instruments consist primarily of accounts
receivable, accounts payable, accrued expenses and
debt. At December 31, 1995, the Company believes
the fair value of these financial instruments
approximates the carrying value because of the short
maturity of these instruments. The carrying value
of subordinated and long-term debt approximates fair
value as the effective rates for these instruments
are comparable to market rates at year-end.
Page 12
</Page>
<PAGE>
(3) Note Payable to Lender
The Company entered into a Loan and Security Agreement
(the "Loan Agreement") with a lender dated May 1990, to
borrow up to $15,000 which was inclusive of a letter of
credit supporting $9,000 of industrial development
revenue bonds (note 4). The remainder of the $15,000
was provided as either a term loan or revolving credit
loans.
The Loan Agreement contains various restrictive
covenants relative to, among other things, incurring
additional debt, granting additional liens, merging,
consolidating, selling or transferring its assets, and
guaranteeing obligations of others, as well as
requirements relative to the maintenance of minimum
levels of working capital and net worth, financial
ratios, profitability, and sales backlog. In addition,
the underlying agreements relative to both the
industrial development revenue bonds and the
subordinated notes payable contain certain covenants
and requirements which are similar to those pertaining
to the Loan Agreement. Substantially all of the
Company's properties, both tangible and intangible, as
well as real and personal, serve as collateral in
connection with the Loan Agreement, the industrial
development revenue bonds, and the subordinated notes
payable. Through a fifth amendment to the Loan
Agreement dated June 16, 1995, the lender established
certain new compliance criteria for future periods,
extended the Loan Agreement through May 2, 1997, and
increased the credit facility to $18,000.
The Loan Agreement provides for borrowings at an
interest rate equal to 1.75 percent above the lender's
base rate under revolving credit loans aggregating the
lesser of the sum of eligible trade accounts receivable
and eligible inventory, as defined in the Loan
Agreement, or $8,760. The revolving credit loans are
available through May 2, 1997. The revolving credit
loans are used for working capital purposes.
Page 13
</Page>
<PAGE>
For the year ended December 31, 1995, the Company was
not in compliance with certain of the restrictive
covenants. However, through a default waiver agreement
to the Loan Agreement dated April 9, 1996, the lender
waived these covenant violations through December 31,
1995.
At DecemberE31, 1995, the Company had borrowed $8,684
under the Loan Agreement as revolving credit loans and
$76 was available for additional borrowings by the
Company.
Generally, accrued interest is payable in monthly
installments on the first day of each month. The
interest rate for the revolving credit loans was 10.50
percent at DecemberE31, 1995.
Page 14
</Page>
<PAGE>
(4) Long-term Debt
Long-term debt consisted of the following at
December 31, 1995.
Industrial development revenue bonds payable with
a variable interest rate $ 9,000
Other notes payable, with interest rates ranging
from 6 percent to 11.25 percent 1,261
______
Total long-term debt 10,261
Less current installments 213
______
Long-term debt, excluding
current installments $ 10,048
======
The proceeds of the industrial development revenue bonds
payable were used to finance certain capital expenditures
and to pay down other long-term obligations. The bonds bear
interest at a variable rate which approximates rates
applicable to short-term tax exempt securities. The
interest rate was 4.53 percent at December 31, 1995.
Interest is payable monthly and principal on the bonds is
due December 1, 2000.
The bonds are secured by an irrevocable letter of credit
which expires on May 2, 1997 (note 3). The loan agreement
pertaining to the bonds contains certain warranties and
covenants that must be complied with on a continuing basis
and are similar to those discussed with respect to the Loan
Agreement.
The aggregate maturities of long-term debt for each of the
five years subsequent to December 31, 1995 are as follows:
1996, $213; 1997, $222; 1998, $225; 1999, $204; and 2000,
$9,124.
Page 15
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<PAGE>
(5) Subordinated Debt
Subordinated debt consisted of the following at December 31,
1995:
Note payable to former owner with interest
at 11 percent $ 3,343
Note payable to former owner with interest
at the lesser of 15 percent or 6.5 percent
above a base interest rate (amounting to 15
percent at December 31, 1995) 2,629
______
Total subordinated debt 5,972
Less current installments 1,192
______
Subordinated debt, excluding
current installments $ 4,780
======
Page 16
</Page>
<PAGE>
(5) Subordinated Debt, Continued
On June 30, 1994, the Parties entered into Amendment
No. 4. Under Amendment No. 4, total monthly principal
payments were reduced from $60 to $40 for the period
beginning on July 1, 1994, and ending on June 1, 1995.
As a result of Amendment No. 4, note 1 required monthly
principal payments of $34 (plus interest) through June
1, 1994, and $22 (plus interest) through June 1, 1995.
Note 2 required monthly principal payments of $26 (plus
interest) through June 1, 1994, and $18 (plus interest)
through June 1, 1995. Current installments and future
maturities of subordinated debt at December 31, 1994,
have been adjusted to reflect the amended terms.
On June 28, 1995, the Parties entered into Amendment
No. 5, which, among other things, acknowledged the
extension of debt under the Loan Agreement and waived
defaults by the Company and claims by the former owner
for late payment interest charges through the
respective amendment date. Under Amendment No. 5, no
principal payments are payable for the period June 2,
1995, through September 30, 1995. For the period
October 1, 1995, through September 1, 1996, monthly
principal payments of $33 and $42 (plus interest) are
required for note 1 and note 2, respectively, returning
to $26 and $34 through July 1, 1998. For the period
October 18, 1995, through September 18, 1996,
additional principal payments of $17 and $21,
respectively, are required.
The notes payable to the former owner are subordinated
to lender debt (note 3). The subordinated debt
agreements contain certain warranties and affirmative
and restrictive covenants that must be complied with on
a continuing basis similar to those discussed in note
3. As discussed in note 3, the Company was not in
compliance with certain of the restrictive covenants.
In a letter dated April 9, 1996, the former owner
waived these covenant violations through December 31,
1995. Also contained in the agreements are
prohibitions on principal and interest payments if the
Company is in default on lender debt or if "Aggregate
Adjusted Availability" (AAA) falls below $1,000. AAA
is calculated based on a borrowing base, eligible
Page 17
</Page>
<PAGE>
accounts receivable, inventory and debt outstanding.
In the past, the Company had not made certain scheduled
interest and principal payments. Scheduled payments
that remain unpaid for more than three days may result
in late payment charges of two percent. The late
payment charges for a principal or interest payment not
permitted under the AAA test commence 60 days and 20
days, respectively, after the payment due date.
The notes payable to the former owner also contain
contingent "Cash Flow Payment" requirements which
accelerate the principal payments. To the extent the
AAA test described above is met, annual principal
payments are scheduled to increase from $480 (under
Amendment No. 4) to $728, but not to exceed a "Cash
Flow Limit" on an annual basis. The annual "Cash Flow
Limit" is calculated based on the Company's net income,
depreciation, debt, and certain other factors. The
obligation to make a "Cash Flow Payment" is cumulative,
and a late payment charge of 2 percent may be assessed
commencing nine months after the non-payment was
required by the AAA or "Cash Flow Limit" tests. Such
contingent cash flow payments are not presently
determinable and, accordingly, the scheduled aggregate
maturities of subordinated debt below does not include
any contingent payments.
The related accrued interest payable on the notes
payable to the former owner approximated $68 at
DecemberE31, 1995, and is classified as accrued
expenses in the accompanying balance sheet. Interest
expense on these notes amounted to approximately $828
during 1995.
Page 18
</Page>
<PAGE>
(5) Subordinated Debt, Continued
The aggregate maturities of subordinated debt for each
of the three years subsequent to DecemberE31, 1995 are
as follows: 1996, $1,192; 1997, $720; and 1998,
$4,060.
(6) Pension Benefits
The Company has three defined benefit pension plans
covering the majority of its employees. The benefits
under the plans are based on years of service. The
following table sets forth the plans' funded status and
amounts recognized in the Company's consolidated
balance sheet at DecemberE31, 1995.
Assets Accumulated
exceed benefits
accumulated exceed
benefits assets
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 3,711 6,194
====== ======
Accumulated benefit
obligation $ 3,845 6,387
====== ======
Projected obligation $ 3,845 6,387
Plan assets at fair value 4,078 6,109
______ ______
Projected benefit obligation
(in excess of) or less than
plan assets 233 (278)
Unrecognized net gain (loss) (401) (260)
Page 19
</Page>
<PAGE>
Prior service cost not yet
recognized in net periodic
pension cost 119 96
Unrecognized net transition
obligation 115 157
______ ______
Prepaid pension cost (pension
liability) recognized in the
consolidated balance sheet $ 66 $ (285)
====== ======
The net pension liability was recognized in the
accompanying consolidated balance sheet:
Other accrued expenses $ (328)
Other assets 110
______
Net pension liability $
(218)
======
The plans' investment assets consist of participation
units in investment funds under group contracts and
mutual funds.
(6) Pension Benefits, Continued
Net pension expense for the defined benefit pension
plans for the year ended December 31, 1995 included the
following components:
Service cost-benefits earned during the year $ 188
Interest cost on projected benefit obligation 786
Actual return on plan assets (1,225)
Net amortization and deferral 546
______
Net pension cost $ 295
======
Assumptions used in accounting for the defined benefit
pension plans as of December 31, 1995 were:
Discount rates 8.0%
Rates of increase in compensation levels N/A
Expected long-term rate of return on assets 8.0%
Page 20
</Page>
<PAGE>
Certain employees participate in defined contribution
plans. Employee benefits expense with respect to the
defined contribution plans amounted to $123 for the
year ended December 31, 1995.
(7) Leases
The Company is obligated under five capital leases for
certain machinery and equipment that expire at various
dates during the next five years. At December 31,
1995, the gross amount of equipment and related
accumulated amortization recorded under capital leases
were as follows:
Machinery and equipment $ 794
Less accumulated amortization 104
______
$ 690
======
Amortization of assets held under capital leases is
included with depreciation expense.
Future minimum capital lease payments as of December
31, 1995 are:
Year ending December 31:
1996 $ 214
1997 202
1998 189
1999 173
2000 28
______
Total minimum lease payments 806
Less amount representing interest (at rates ranging
from 8.26% to 14.50%) 135
______
Present value of net minimum
capital lease payments 671
Page 21
</Page>
<PAGE>
Less current installments of obligations
under capital leases 157
______
Obligations under capital
leases, excluding current
installments $ 514
======
The Company also has several noncancelable operating
leases, primarily for land and buildings, that expire
at various dates during the next 35 years. The leases
require the Company to pay all executory costs such as
maintenance and insurance. Rental expense for
operating leases approximated $48 during fiscal 1995.
Future minimum operating lease payments as of December
31, 1995 are:
Year ending December 31:
1996 $ 29
1997 8
1998 1
1999 1
2000 1
Thereafter 64
______
Total minimum lease payments $ 104
======
(8) Advances from Customers
Advances from customers, representing advance
collections received on sales contracts, amounted to
$2,429 at December 31, 1995. Of these advances, $632
pertain to sales contracts accounted for on the
percentage-of-completion revenue method at December 31,
1995. The contracts require that the advances be used
specifically in the performance of such sales
contracts.
(9) Other Postretirement Benefits
In addition to providing pension benefits, the Company
provides health care benefits for certain retirees and
employees. Prior to January 1, 1995, postretirement
benefit expenses were recognized on a pay-as-you-go
basis.
Page 22
</Page>
<PAGE>
Effective January 1, 1995, the Company adopted SFAS No.
106, Employers' Accounting for Postretirement Benefits
Other Than Pensions (Statement No 106). The standard
requires the Company to accrue the expected cost of
postretirement benefits during the period of employee
eligible service rather than the prior policy of
charging the costs against earnings as the amounts were
paid. The Company elected to recognize the cumulative
effect of the change in accounting for postretirement
benefits of $1,187 as an expense on a straight-line
basis over five years for union employees, and
approximately ten years for non-union employees which
represents the accumulated postretirement benefit
obligation ("APBO") existing at January 1, 1995. The
amortization of such health care benefits amounted to
approximately $327 in 1995. The Company continues to
fund benefit cost principally on a pay-as-you-go basis.
The Company has accrued benefits for the union
employees in accordance with the union contract which
requires retiree coverage through the contract period,
and such contract expires July 1, 1999.
The accumulated postretirement benefit obligation was
comprised of the following at January 1, 1995:
Accumulated postretirement benefit obligation:
Retirees $ 975
Fully eligible active plan participants 143
Other active plan participants -
______
(1,118)
Unrecognized transition obligation 970
Unrecognized (gains)/losses 86
______
(Accrued) cost included in
other liabilities $ (62)
======
Net periodic postretirement benefit cost for the year
ended December 31, 1995 included the following
components:
Service cost for benefits earned during
the period $ 22
Interest cost on accumulated postretirement
benefit obligation 88
Net amortization and deferral 217
______
Page 23
</Page>
<PAGE>
Net periodic postretirement
benefit cost $ 327
======
The discount rate used in determining the APBO was 8
percent. The assumed health care cost trend rate used
in measuring the accumulated postretirement benefit
obligation was 8 percent in 1995, declining by 2
percent per year to an ultimate rate of 4 percent. A
one percent increase in the health care cost trend rate
assumptions would not have significant impact on the
APBO.
(10)Income Taxes
Federal income tax expense for 1995 consisted of the
following:
Current $ 1,164
Deferred 386
______
$ 1,550
======
Income tax expense differed from the amounts computed
by applying the U.S. federal income tax rate of 34
percent to income before income tax expense as a result
of the following:
Computed "expected" tax expense $ 1,496
Increase (decrease) in tax expense
resulting from:
Nondeductible expenses 33
Nontaxable income (6)
Other, net 27
______
$ 1,550
======
The tax effects of temporary differences that give rise
to significant portions of the deferred tax assets and
deferred tax liabilities at December 31, 1995 are as
follows:
Page 24
</Page>
<PAGE>
Deferred tax assets:
Accrued expenses, principally due to
employment costs and directors fees $ 312
Deferred compensation 182
Inventory reserves and uniform capitalization
of inventory costs 132
Deferred warranty costs 139
______
Total gross deferred tax assets 765
______
Deferred tax liabilities:
Tax depreciation in excess of book
depreciation (644)
Deferred pension (38)
Differences in revenue recognition for
book and tax purposes (600)
______
Total gross deferred tax
liabilities (1,282)
______
Net deferred tax liability $ (517)
======
The Company recorded no valuation allowance for
deferred tax assets as of December 31, 1995. In
assessing the realizability of deferred tax assets,
management considers whether it is more likely than not
that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of
future taxable income during the periods in which those
temporary differences become deductible. Management
considers the scheduled reversal of deferred tax
liabilities, projected future taxable income, and tax
planning strategies in making this assessment. Based
upon the level of historical taxable income and
projections for future taxable income, including
taxable income created through the reversal of deferred
tax liabilities, over the periods which the deferred
tax assets are deductible, management believes it is
more likely than not the Company will realize the
benefits of these deductible differences at December
31, 1995. Accordingly, no valuation allowance has been
provided.
Page 25
</Page>
<PAGE>
(11)Contract and Trade Accounts Receivables
Contract and trade accounts receivables consisted of
the following at December 31, 1995:
Trade $ 1,270
Contracts 11,336
Retainage 1,802
______
Total $ 14,408
======
(12)Contingencies
The Company is a party to several legal proceedings
arising in the ordinary course of business. The
Company believes that none of these actions,
individually or in the aggregate, will have a material
adverse effect on its financial condition or results of
operations or liquidity.
(13)Stock Option Plans
On July 30, 1993, the Company's president was granted
an incentive stock option to purchase 289,567 shares of
the Company's common stock. The president is the only
participant in such plan, and such option is the only
one granted options thereunder. The total option price
for such shares is $114. None of the shares have been
exercised as of December 31, 1995.
(14)Supplemental Cash Flow Information
Capital lease obligations of $272 were incurred during
1995 when the Company entered into leases for certain
equipment.
(15)Concentrations of Credit Risk
Three customers accounted for more than ten percent of
the Company's sales during 1995. Total sales to these
customers comprised approximately 70 percent of sales
during 1995. Five customers also had trade accounts
receivable balances which individually exceeded $500 at
December 31, 1995.
Page 26
</Page>
<PAGE>
(16)Nonrecurring Charge
During 1995, the Company recorded a nonrecurring charge
of $433 (pretax) related to the planned public stock
offering of the Company which did not succeed. The
charge consisted of legal, accounting, underwriting,
and other expenses related to the offering.
(17)Common Stock
On June 22, 1995, the Company authorized a 2,210.433-
for-1 share split. The total number of authorized
shares was increased to 11,000,000 and stated value was
changed to $.01 par value. On December 5, 1995, the
Company changed its existing capital structure,
decreasing the total number of authorized shares to
2,600,000.
(18)Subsequent Events
On May 31, 1996, the shareholders of the Olofsson
Corporation sold all of the outstanding common stock to
Precision Castparts Corp.
Page 27
</Page>
<PAGE>
Item 7(a) 7.
CONSOLIDATED BALANCE SHEET
THE OLOFSSON CORPORATION AND SUBSIDIARIES
March 31, 1996 and 1995
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 100 $ 100
Contract and trade receivables 13,500 13,400
Unbilled revenue under customer
commitments 6,700 -
Other receivables 500 -
Inventories 18,200 19,800
Prepaid expenses 100 100
Current deferred tax asset - 400
_________ _________
Total current assets 39,100 33,800
Property, Plant and Equipment 18,200 17,100
Less - Accumulated Depreciation (11,400) (10,100)
_________ _________
Net property, plant and equipment 6,800 7,000
_________ _________
Goodwill and Other Assets 1,300 600
_________ _________
$ 47,200 $ 41,400
========= =========
</TABLE>
Page 28
</Page>
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Notes payable $ 8,300 $ 4,700
Current portion of long-term debt 1,700 1,800
Accounts payable 8,400 7,700
Accrued liabilities 4,500 3,600
Advances from customers 1,900 4,500
_________ _________
Total current liabilities 24,800 22,300
Long-Term Debt, excluding current portion 15,100 16,000
Deferred Tax Liability 600 600
Other Long-Term Liabilities 1,300 500
Shareholders' Equity 5,400 2,000
_________ _________
$ 47,200 $ 41,400
========= =========
</TABLE>
Page 29
</Page>
<PAGE>
Item 7(a) 8.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
THE OLOFSSON CORPORATION AND SUBSIDIARIES
($ in thousands)
(Unaudited)
<CAPTION>
March 31, March 31,
1996 1995
<S> <C> <C>
Net Sales $ 16,200 $ 12,800
Cost of Goods Sold 12,800 10,600
_________ _________
Gross margin 3,400 2,200
Selling and Administrative Expenses 1,000 900
Interest Expense, net 700 600
_________ _________
Income before provision for income taxes 1,700 700
Provision for Income Taxes 700 300
_________ _________
Net income $ 1,000 $ 400
========= =========
</TABLE>
Page 30
</Page>
<PAGE>
Item 7(b) Pro Forma Financial Information
PRECISION CASTPARTS CORP.
PRO FORMA COMBINED BALANCE SHEET AND INCOME STATEMENT
On May 31, 1996, PCC Specialty Products, Inc., a wholly
owned subsidiary of Precision Castparts Corp. (PCC),
purchased 100% of the outstanding capital stock of The
Olofsson Corporation ("Olofsson") from Thomas H. Corson,
John L. Hobey, Thomas J. McGrath, W. Sydnor Settle, and The
W. Sydnor Settle 1996 Family Trust. Olofsson is a
manufacturer of computer-controlled metal working machine
systems. The acquisition of Olofsson was previously
reported on Form 8-K filed on June 14, 1996. The purchase
price of $52.2 million included the assumption or retirement
of existing debt. The transaction was financed from cash
balances, the assumption of $10.0 million of existing debt,
and $32.0 million of bank borrowings.
The unaudited pro forma combined income statement for
the year ended March 31, 1996 presents the combined results
of operations assuming the purchase of the stock of The
Olofsson Corporation had been consummated as of April 3,
1995. The unaudited pro forma combined balance sheet at
March 31, 1996 presents the combined financial position
assuming the purchase of the stock of The Olofsson
Corporation had been consummated as of that date. The
financial information of The Olofsson Corporation is as of
or for the period ended three months prior to the pro forma
financial statement dates as described above. The financial
information of Olofsson contains certain reclassifications
made to conform to PCC's classifications. In accordance
with SEC requirements, the proforma includes only the
results of ongoing operations and excludes such impacts as
the effect of changes in accounting principles.
The following unaudited pro forma combined financial
information should be read in conjunction with historical
statements of PCC, as reported in its annual report on Form
10-K and quarterly reports on Form 10-Q, and of The Olofsson
Corporation, as reported in this filing on Form 8-K/A. The
pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating
results or financial position that would have occurred had
the purchase of the stock of The Olofsson Corporation been
consummated in accordance with the assumptions set forth
above, nor is it necessarily indicative of future operating
results or financial position.
Page 31
</Page>
<PAGE>
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
PRECISION CASTPARTS CORP.
AND THE OLOFSSON CORPORATION
MARCH 31, 1996
($ in thousands)
(Unaudited)
<CAPTION>
Precision The
Castparts Olofsson Pro Forma Note Pro Forma
Corp. Corp. Adjustments Reference Combined
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 26,200 $ 100 $ (26,300) (2) $ -
Contract & trade receivables 82,000 14,400 4,800 (6) 101,200
Unbilled revenue under
customer commitments - 7,100 (7,100) (6) -
Unbilled revenue from customer
changes - 300 (300) (6) -
Other receivables - 200 - 200
Inventories 105,200 17,400 4,300 (3),(6) 126,900
Prepaid expenses 2,100 100 - 2,200
Current deferred tax asset 8,600 - 1,300 (7) 9,900
_________ _________ _________ _________
Total current assets 224,100 39,600 (23,300) 240,400
_________ _________ _________ _________
Property, Plant and Equipment 305,000 18,200 (11,500) (3) 311,700
Less - Accumulated Depreciation(161,200) (11,000) 11,000 (161,200)
_________ _________ _________ _________
Net property, plant
and equipment 143,800 7,200 (500) 150,500
_________ _________ _________ _________
Goodwill, net and Other Assets 82,600 400 28,200 (3),(4) 111,200
_________ _________ _________ _________
$ 450,500 $ 47,200 $ 4,400 $ 502,100
========= ========= ========= =========
Page 32
</Page>
<PAGE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 400 $ 8,700 $ (8,700) (1) $ 400
Current portion of
long-term debt 4,700 1,500 (1,300) (1) 4,900
Accounts payable 38,200 9,400 - 47,600
Accrued liabilities 50,800 4,000 1,300 (3) 56,100
Advances from customers - 2,400 - 2,400
Income taxes payable 4,200 700 (700) (7) 4,200
_________ _________ _________ _________
Total current liabilities 98,300 26,700 (9,400) 115,600
_________ _________ _________ _________
Long-Term Debt, excluding
current portion 8,800 10,100 14,800 (1),(2) 33,700
Subordinated debt, excluding
current portion - 4,800 (4,800) (1) -
Deferred Tax Liability 19,700 300 400 (7) 20,400
Accrued Retirement
Benefits Obligation 11,900 - 1,400 (3) 13,300
Other Long-Term Liabilities 8,700 1,000 6,300 (3) 16,000
Shareholders' Investment:
Common stock 20,500 - - 20,500
Paid-in capital 13,900 1,200 (1,200) (5) 13,900
Retained earnings 266,900 3,100 (3,100) (5) 266,900
Cumulative translation
adjustment 1,800 - - 1,800
_________ _________ _________ _________
Total shareholders'
investment 303,100 4,300 (4,300) 303,100
_________ _________ _________ _________
$ 450,500 $ 47,200 $ 4,400 $ 502,100
========= ========= ========= =========
See accompanying notes to pro forma combined balance sheet.
</TABLE>
Page 33
</Page>
<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
The Olofsson Corporation was assumed by PCC.
(2) Adjustment to eliminate cash balances and record
borrowings as needed to cover the purchase price of The
Olofsson Corporation.
(3) Adjustment to restate reported assets acquired and
liabilities assumed at fair market value.
(4) Adjustment to record $28.4 million, the estimated pro
forma excess purchase price paid and costs incurred to
acquire The Olofsson Corporation.
(5) Adjustment to remove The Olofsson Corporation's
shareholders' investment.
(6) Adjustment to change revenue recognition of The
Olofsson Corporation to completed contract method for
all contracts.
(7) Adjustment to record the tax effect of the above
proforma adjustments.
Page 34
</Page>
<PAGE>
<TABLE>
PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED MARCH 31, 1996
PRECISION CASTPARTS CORP.
AND THE OLOFSSON CORPORATION
($ in thousands, except per share data)
(Unaudited)
<CAPTION>
Precision The
Castparts Olofsson Pro Forma Note Pro Forma
Corp. Corp. Adjustments Reference Combined
<S> <C> <C> <C> <C>
<C>
Net Sales $ 556,800 $ 64,500 $ (2,700) (4) $ 618,600
Cost of Goods Sold 446,100 52,900 (600) (3),(4) 498,400
_________ _________ _________ _________
Gross Margin 110,700 11,600 (2,100) 120,200
Selling and Administrative
Expenses 46,900 4,000 (500) (4),(5) 50,400
Interest Expense, net 100 2,700 (1,100)(1),(2),(4) 1,700
_________ _________ _________ _________
Income Before Provision for
Income Taxes 63,700 4,900 (500) 68,100
Provision for Income Taxes 22,600 2,000 200 (6) 24,800
_________ _________ _________ _________
Net Income $ 41,100 $ 2,900 $ (700) $ 43,300
========= ========= ========= =========
Net Income per Common Share $ 2.02 $ 2.12
========= =========
Average number of common shares
outstanding (in thousands) 20,400 20,400
See accompanying notes to pro forma combined income statements.
</TABLE>
Page 35
</Page>
<PAGE>
PRECISION CASTPARTS CORP.
NOTES TO PRO FORMA COMBINED INCOME STATEMENT
(1) Adjustment to remove interest expense incurred by The
Olofsson Corporation related to debt retired upon
acquisition by PCC.
(2) Adjustment to remove interest income earned by PCC and
add estimated interest expense related to debt incurred
to acquire the stock of The Olofsson Corporation. 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
Olofsson. The incremental interest expense was
calculated at 6.0%, which represents PCC's borrowing
rate on uncommitted lines of credit during the period
presented.
(3) Adjustment 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.
(4) Adjustment to reflect change in accounting from
percentage of completion on certain contracts to
completed contract method for all contracts. (Refer to
Notes to Consolidated Financial Statements of The
Olofsson Corporation for December 31, 1995.)
(5) Adjustment to remove non-recurring expenses from The
Olofsson Corporation's operations.
(6) Adjustment to tax expenses based on the pro forma
changes above.
Page 36
</Page>
<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: August 13, 1996 /s/ W.D. Larsson
________________________
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 37
</Page>
<PAGE>
Exhibit (23)
The Board of Directors
Precision Castparts Corp.
We consent to the inclusion of our report dated March 22, 1996,
with respect to the consolidated balance sheet of The Olofsson
Corporation and subsidiaries as of December 31, 1995, and the
related consolidated statements of operations, stockholders'
equity, and cash flows for the year then ended, which report
appears in the Form 8-K of Precision Castparts Corp. dated August
13, 1996.
/s/ KPMG PEAT MARWICK LLP
_________________________________
KPMG Peat Marwick LLP
Lansing Michigan
August 9, 1996
Page 38
</Page>
