<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 25, 1996
REGISTRATION NO. 333-12971
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
PRECISION CASTPARTS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
OREGON 93-0460598
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4650 SW MACADAM AVENUE, SUITE 440 WILLIAM D. LARSSON
PORTLAND, OREGON 97201 VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
(503) 417-4800 4650 SW MACADAM AVENUE, SUITE 440
PORTLAND, OREGON 97201
(503) 417-4800
(Address, including zip code, and telephone number, (Name, address, including zip code, and telephone
including area code, of registrant's principal number, including area code of agent for service)
executive offices)
</TABLE>
---------------------
COPIES TO:
<TABLE>
<S> <C>
RUTH A. BEYER PAUL C. PRINGLE
ROBERT J. MOORMAN BROWN & WOOD LLP
JOHN R. THOMAS 555 California Street
Stoel Rives LLP San Francisco, California 94104
900 SW Fifth Avenue (415) 772-1200 (phone)
Portland, Oregon 97204 (415) 397-4621 (fax)
(503) 224-3380 (phone)
(503) 220-2480 (fax)
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE FOLLOWING THE EFFECTIVENESS OF THIS REGISTRATION
STATEMENT.
---------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment
plans, please check the following box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ----------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ----------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be used
in connection with the public offering of the Common Stock initially in the
United States and Canada (the "U.S. Prospectus") and one to be used in
connection with the concurrent public offering of the Common Stock initially
outside the United States and Canada (the "International Prospectus"). The two
forms of prospectus are identical except that they contain a different front
cover page. The form of U.S. Prospectus is included herein and is followed by
the page (marked "Alternate Page for International Prospectus") to be used in
the International Prospectus.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED OCTOBER 25, 1996
4,000,000 SHARES
PRECISION CASTPARTS CORP.
COMMON STOCK
-----------------
OF THE 4,000,000 SHARES OF COMMON STOCK OFFERED, 3,200,000 SHARES ARE BEING
OFFERED INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS
AND 800,000 SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED
STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS. SEE
"UNDERWRITERS." ALL OF THE SHARES OF COMMON STOCK OFFERED ARE
BEING SOLD BY THE COMPANY. THE COMPANY'S COMMON STOCK IS
LISTED ON THE NEW YORK, PHILADELPHIA, MIDWEST
AND PACIFIC STOCK EXCHANGES. ON OCTOBER
23, 1996, THE REPORTED LAST SALE
PRICE OF THE COMMON STOCK
ON THE NEW YORK
STOCK EXCHANGE
COMPOSITE
TAPE WAS
$48.
SEE "RISK FACTORS" AT PAGE 9 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
--------------- --------------- ---------------
<S> <C> <C> <C>
PER SHARE.................................................. $ $ $
TOTAL (3).................................................. $ $ $
</TABLE>
- ------------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $500,000.
(3) THE COMPANY HAS GRANTED TO THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
600,000 ADDITIONAL SHARES AT THE PRICE TO PUBLIC, LESS UNDERWRITING
DISCOUNTS AND COMMISSIONS, FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF
ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL
PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO
COMPANY WILL BE $ , $ AND $ , RESPECTIVELY. SEE
"UNDERWRITERS."
------------------------
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS, AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY BROWN &
WOOD LLP, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT THE DELIVERY OF THE
SHARES WILL BE MADE ON OR ABOUT , 1996, AT THE OFFICE OF MORGAN
STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR IN SAME DAY
FUNDS.
-------------------
MORGAN STANLEY & CO. GOLDMAN, SACHS & CO.
INCORPORATED
, 1996
<PAGE>
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER ANY
CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
DATE SUBSEQUENT TO THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information...................................................................................... 2
Incorporation of Certain Documents by Reference............................................................ 2
Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 9
Use of Proceeds............................................................................................ 11
Price Range of Common Stock and Dividends.................................................................. 11
Capitalization............................................................................................. 12
Selected Historical Consolidated Financial Data............................................................ 13
Pro Forma Combined Financial Statements.................................................................... 14
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 18
Business................................................................................................... 22
Management................................................................................................. 33
Description of Capital Stock............................................................................... 34
Certain United States Tax Consequences to Non-United States Holders........................................ 35
Underwriters............................................................................................... 39
Legal Matters.............................................................................................. 41
Experts.................................................................................................... 41
</TABLE>
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
-------------------
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: New York Regional Office, 7 World
Trade Center, New York, New York 10048; and Chicago Regional Office, 1400
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, the aforementioned material can also be inspected
at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005. The Commission maintains an Internet Web site at
http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is made to the Registration Statement, copies of which are available from the
Public Reference Section of the Commission at prescribed rates as described
above. Statements contained herein concerning the provisions of documents filed
with, or incorporated by reference in, the Registration Statement as exhibits
are necessarily summaries of such provisions and documents and each such
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by the Company, are
incorporated in this Prospectus by reference: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996; (ii) the Company's Quarterly
Reports on Form 10-Q for the quarters ended June 30, 1996 and September 29,
1996; (iii) the Company's Current Reports on Form 8-K dated May 31, 1996 (and
Amendment No. 1 thereto on Form 8-K/A), July 19, 1996 (and Amendment No. 1
thereto on
Form 8-K/A), July 31, 1996 (and Amendment No. 1 thereto on Form 8-K/A) and
October 14, 1996; and (iv) the description of the Company's Common Stock
contained in the Company's Registration Statement on Form 8-A filed under
Section 12 of the Exchange Act, including any amendment or report updating such
description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of the filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, on
written or oral request, a copy of any and all of the documents incorporated in
this Prospectus by reference, other than exhibits to such documents not
specifically incorporated by reference therein. Requests for such copies should
be directed to Precision Castparts Corp., at its principal executive offices
located at 4650 SW Macadam Avenue, Suite 440, Portland, Oregon 97201, Attention:
Director of Corporate Communications (telephone: (503) 417-4800).
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS THE CONTEXT INDICATES OTHERWISE, (I) THE INFORMATION CONTAINED IN THIS
PROSPECTUS ASSUMES THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT
EXERCISED, (II) THE TERMS "COMPANY" AND "PCC" REFER TO PRECISION CASTPARTS CORP.
AND ITS CONSOLIDATED SUBSIDIARIES AND (III) THE TERMS "PRO FORMA" AND "ON A PRO
FORMA BASIS," WITH RESPECT TO THE FINANCIAL INFORMATION FOR THE COMPANY'S FISCAL
YEAR ENDED MARCH 31, 1996, MEAN SUCH INFORMATION AS ADJUSTED TO GIVE EFFECT TO
THE ACQUISITION BY THE COMPANY OF CARMET COMPANY ("CARMET"), THE OLOFSSON
CORPORATION ("OLOFSSON"), THE BUSINESS OF AE TURBINE COMPONENTS, LIMITED
("AETC"), NEWFLO CORPORATION ("NEWFLO" OR "PCC FLOW TECHNOLOGIES") AND BARBER
INDUSTRIES, INC. ("BARBER") (ACQUIRED BY NEWFLO). THE COMPANY'S FISCAL YEAR ENDS
ON THE SUNDAY CLOSEST TO MARCH 31. THE COMPANY'S LAST FIVE FISCAL YEARS ENDED ON
MARCH 29, 1992 ("FISCAL 1992"), MARCH 28, 1993 ("FISCAL 1993"), APRIL 3, 1994
("FISCAL 1994"), APRIL 2, 1995 ("FISCAL 1995") AND MARCH 31, 1996 ("FISCAL
1996"), AND THE COMPANY'S CURRENT FISCAL YEAR WILL END ON MARCH 30, 1997
("FISCAL 1997").
THE COMPANY
Precision Castparts Corp. is a worldwide manufacturer of complex metal
components and products. The Company is the market leader in manufacturing
large, complex structural investment castings and is a leading manufacturer of
airfoil castings used in jet aircraft engines. In addition, the Company has
expanded into the industrial gas turbine, fluid management, industrial
metalworking tools and machines, powdered metal and other metal products
markets. The Company has experienced a sales increase in its aerospace business
of approximately 20 percent in fiscal 1996 on a pro forma basis compared with
fiscal 1995 actual, and believes its focus on this business will allow it to
participate in current favorable trends in the commercial aerospace sector. The
Company also believes its new businesses will reduce its exposure to the
cyclicality of the aerospace industry and provide opportunities for profitable
growth.
COMPANY STRATEGY
The Company's goal is to generate profitable growth and to enhance
shareholder value from continued investment in its aerospace and other existing
businesses and through the acquisition of new businesses. PCC targets
acquisitions that (i) complement the Company's core competencies in metals,
precision metalworking and the management of complex manufacturing processes,
(ii) have strong growth prospects and higher operating margins than the
Company's traditional product lines and (iii) have leading positions in
established market niches. The Company's strategy consists of the following key
elements:
INCREASE OPERATING EFFICIENCY AND TECHNOLOGICAL ADVANTAGE. Since fiscal
1993, the Company has significantly reduced overhead costs, improved worker
productivity, shortened production cycle times and enhanced operating
margins. This has primarily been achieved by investing in new technologies
and developing more efficient manufacturing processes. The Company believes
it maintains a proprietary technological advantage in the high quality, high
volume manufacturing of complex metal components and products. In
particular, the Company believes it is currently the only manufacturer in
the world that can precision cast large, complex parts from a variety of
metals and alloys in the volumes and of the qualities that customers
require. The Company strives to maintain its advantage by investing in new
technologies and developing new proprietary manufacturing processes which
are difficult for competitors to duplicate.
DEVELOP NEW PRODUCTS AND MARKETS. PCC is aggressively pursuing new
product and market opportunities using the Company's existing metalforming
technologies. The Company has identified attractive markets, such as
industrial gas turbines ("IGT"), where it believes its skills developed in
precision casting can be leveraged to enhance its market share. In addition,
the Company is pursuing growth opportunities in the manufacture of metal
injection molded products for applications including medical, sporting
goods, electronics, hand tools and automotive parts. PCC is also focusing on
3
<PAGE>
expanding its international sales, particularly for its fluid management and
general industrial product lines. The Company's strategy is to continue to
identify new products and markets where it can become the leading supplier
by utilizing its core competencies in metals, precision metalworking and the
management of complex manufacturing processes.
PURSUE SYNERGISTIC ACQUISITIONS. PCC's strategy of acquiring businesses
which leverage the Company's core competencies has led to the completion of
seven acquisitions since March 1995. The Company seeks to acquire businesses
with established market niches, proprietary technology and the potential for
significant growth and higher operating margins than the Company's
traditional product lines. The Company expects that recent acquisitions,
such as PCC Specialty Products (formerly Quamco, Inc.) and PCC Flow
Technologies, will enhance financial results and reduce the Company's
exposure to the aerospace cycle. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Business Overview."
The Company intends to continue focusing on increasing PCC's operating
efficiencies and technological advantage, developing new products and markets,
and pursuing synergistic acquisitions. There is no assurance that the Company's
strategy or any element thereof will be implemented successfully.
PRODUCTS AND MARKETS
The Company's manufacturing of complex metal components and products
includes operations in four principal business areas: precision investment
castings, fluid management products, industrial metalworking tools and machines,
and powdered metal and other metal products.
PRECISION INVESTMENT CASTINGS
The Company is the market leader in manufacturing large, complex structural
investment castings and is a leading manufacturer of airfoil castings used in
jet aircraft engines. The Company manufactures investment castings for every
major jet aircraft engine program in production or under development by its key
customers. The Company is leveraging its experience and expertise in large,
complex structural and airfoil investment castings to manufacture castings for
IGT engines used for power generation. In addition, PCC makes investment
castings for use in the automotive, medical prostheses, sporting goods,
satellite launch vehicle and general industrial markets.
Because of the complexity of the manufacturing process and the application
of proprietary technologies, PCC believes it currently is the only manufacturer
that can consistently produce the largest complex structural investment castings
in quantities sufficient to meet its customers' quality and delivery
requirements. The Company's emphasis on low cost, high quality products and
timeliness of delivery has enabled it to become one of the leading suppliers of
structural and airfoil castings for jet aircraft engines and to increase its
market share of IGT airfoil castings. Investment castings accounted for
approximately 57 percent of the Company's net sales in fiscal 1996 on a pro
forma basis, and a majority of these products were sold to the aerospace market.
Trends in the commercial aerospace market are a critical determinant of
demand for the Company's precision investment casting products. Beginning in
1995, demand for investment castings strengthened, primarily due to increased
demand from the commercial aerospace industry, which had been in a cyclical
downturn since 1991. The Company believes the principal causes of the recent
increase in new aircraft orders include increased demand for air travel in Asia,
the recent profitability of U.S. commercial airlines, which is being driven by
increased load factors, and government Stage III noise regulations that require
airlines to modernize their fleets. Airlines are responding to these regulations
by retrofitting existing aircraft or purchasing new jets. For the six months
ended June 30, 1996, orders for The Boeing Company, McDonnell Douglas
Corporation and Airbus Industrie, the major U.S. and international aircraft
4
<PAGE>
manufacturers, were 385 commercial aircraft, compared to 216 commercial aircraft
for the same period in 1995, an increase of 78 percent as reported by THE
AIRLINE MONITOR (an aerospace industry publication).
In fiscal 1994, the Company began to focus on the manufacture of airfoil
castings for industrial gas turbines. The Company targeted this market because
it believes (i) the performance and reliability standards PCC has developed in
the manufacture of aerospace airfoil castings are applicable to the manufacture
of IGT airfoils, (ii) the worldwide market is large, approximately $500 million,
and (iii) the market is principally serviced by a single supplier. The Company's
IGT products consist primarily of airfoil castings for gas turbines used in
power generation and structural and airfoil castings for aircraft-derivative gas
turbine engines used for power generation and other land and marine-based
applications.
FLUID MANAGEMENT PRODUCTS
The Company designs, manufactures, markets and services a broad range of
high quality, precision industrial fluid management products, including fluid
handling industrial valves, industrial pumps and fluid measuring instruments.
The Company's finished fluid management products are manufactured primarily from
castings, forgings and fabricated steel parts. These products are sold worldwide
under well-established brand names, including "General Valve", "NEWCO", "TECHNO"
and "Barber" valves, "Johnston" and "PACO" pumps, and "Water Specialties" and
"Penberthy" measuring instruments, to a wide range of end-user markets.
The Company entered the fluid management market with the acquisition of PCC
Flow Technologies in July 1996. The Company believes this acquisition leverages
its core competencies into the fluid management market. The manufacturing
process for fluid management products requires knowledge of multiple
metalforming and processing technologies, including casting, machining, welding,
heat treating, assembly and processing of metal components. Testing procedures,
material management and traceability, and quality control are also important
aspects of the Company's operations. PCC Flow Technologies generated compound
annual revenue growth of approximately 31 percent from calendar years 1989
through 1995, primarily through acquisitions. The fluid management market is
highly fragmented, and the Company believes it can continue to improve its
market position through acquisitions and internal growth opportunities. Fluid
management products accounted for approximately 23 percent of the Company's net
sales in fiscal 1996 on a pro forma basis and were sold primarily to the general
industrial and energy markets.
INDUSTRIAL METALWORKING TOOLS AND MACHINES
The Company maintains the number one or two position in its served markets
for industrial metalworking tools, and has leading market positions in the
manufacture of metalworking machines for general industrial markets. The Company
entered these markets in March 1995 with the acquisition of Quamco, Inc.
("Quamco", now "PCC Specialty Products" or "SPD"). The Company has since
increased its presence in the industrial metalworking tools and machines markets
with two additional acquisitions since 1995. The acquisitions of Olofsson and
Astro Punch Corporation ("Astro Punch") complemented the Company's capabilities
as a leading manufacturer of highly engineered products. Industrial metalworking
tools and machines include machine systems used for boring and turning processes
primarily in the automotive and general industrial markets, cold forming dies
and related machinery primarily used in the fastener industry and other
metalworking tools and machinery for industrial manufacturers. The Company
believes it has been able to maintain its leading market positions due to the
quality of its products, the continued development of new technologies to enable
the high speed manufacture of high quality fasteners, brand name recognition and
excellent customer service. Industrial metalworking tools and machines accounted
for approximately 13 percent of the Company's net sales in fiscal 1996 on a pro
forma basis and were sold primarily to the automotive and general industrial
markets.
5
<PAGE>
POWDERED METAL AND OTHER METAL PRODUCTS
The Company is the largest producer of metal parts manufactured by powdered
metal injection molding, and is a leading manufacturer of specialty metal gears
and tungsten carbide cutting tools and wear parts that are made using a powdered
metal compaction and sintering process. In addition, the Company manufactures
advanced technology, lightweight net shape metal-matrix composite parts using a
pressure infiltration casting process. The Company believes these businesses
have the potential for rapid growth and complement the Company's core
competencies in metals, precision metalworking and the management of complex
manufacturing processes. Powdered metal and other metal products accounted for
approximately 7 percent of the Company's net sales in fiscal 1996 on a pro forma
basis and were sold primarily to the general industrial and automotive markets.
FORWARD LOOKING STATEMENTS
The information set forth in this Prospectus under the captions "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Business Overview" and "Business" includes certain
forward looking statements which are necessarily subject to risk and
uncertainty. Factors that could cause results to differ materially from those
projected in the forward looking statements are set forth in "Risk Factors" and
"Business."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered
United States offering............................. 3,200,000 shares
International offering............................. 800,000 shares
Total............................................ 4,000,000 shares
Common Stock to be outstanding after the offering.... 24,598,031 shares(1)
Use of proceeds...................................... To repay bank credit line debt and
for other general corporate
purposes. See "Use of Proceeds."
New York Stock Exchange ("NYSE") Symbol.............. PCP
</TABLE>
- ---------
(1) Does not include 2,027,000 shares reserved for issuance under the Company's
1994 Stock Incentive Plan, of which 811,000 shares were subject to
outstanding options at October 18, 1996 at a weighted average exercise price
of $23.97 per share.
6
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF EMPLOYEES)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEARS PRO FORMA ----------------------
----------------------------------------------------- FISCAL OCT. 1, SEPT. 29,
1992 1993 1994 1995 1996 1996(1) 1995 1996
--------- --------- --------- --------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 583,300 $ 461,400 $ 420,400 $ 436,400 $ 556,800 $ 929,500 $ 271,200 $ 410,900
Cost of goods sold................. 488,000 393,100 351,700 359,500 446,100 726,000 216,300 327,300
Provision for:
Restructuring charges............ -- 27,200 -- -- -- -- -- --
Environmental charges............ -- 9,900 -- -- -- -- -- --
Facility closing and sale........ 2,700 -- -- -- -- -- -- --
Selling and administrative
expenses.......................... 38,300 31,900 30,200 31,600 46,900 99,500 22,800 36,000
Interest expense (income), net..... 1,000 (600) 1,100 (1,500) 100 27,400 200 5,800
--------- --------- --------- --------- --------- ----------- --------- -----------
Income (loss) before provision for
income taxes...................... 53,300 (100) 37,400 46,800 63,700 76,600 31,900 41,800
Provision (benefit) for income
taxes............................. 6,800 (1,900) 12,300 17,800 22,600 30,600 13,000 17,200
--------- --------- --------- --------- --------- ----------- --------- -----------
Income before cumulative effect of
accounting change................. 46,500 1,800 25,100 29,000 41,100 46,000 18,900 24,600
Cumulative effect of change in
accounting for postretirement
benefits other than pensions (net
of tax benefit of $1,800)......... -- -- (2,900) -- -- -- -- --
--------- --------- --------- --------- --------- ----------- --------- -----------
Net income......................... $ 46,500 $ 1,800 $ 22,200 $ 29,000 $ 41,100 $ 46,000 $ 18,900 $ 24,600
--------- --------- --------- --------- --------- ----------- --------- -----------
--------- --------- --------- --------- --------- ----------- --------- -----------
Income (charge) per share:
Before cumulative effect of
accounting change.............. $ 1.75 $ 0.07 $ 1.29 $ 1.45 $ 2.02 $ 2.25 $ 0.93 $ 1.19
Cumulative effect of change in
accounting for postretirement
benefits other than pensions... -- -- (0.15) -- -- -- -- --
--------- --------- --------- --------- --------- ----------- --------- -----------
Net income per common share(4)..... $ 1.75 $ 0.07 $ 1.14 $ 1.45 $ 2.02 $ 2.25 $ 0.93 $ 1.19
--------- --------- --------- --------- --------- ----------- --------- -----------
--------- --------- --------- --------- --------- ----------- --------- -----------
Shares used in per share
calculations(4)................... 26,600 26,800 19,500 20,000 20,400 20,400 20,300 20,600
<CAPTION>
PRO FORMA
SIX MONTHS
ENDED
SEPT. 29,
1996(2)
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................... $ 523,900
Cost of goods sold................. 411,000
Provision for:
Restructuring charges............ --
Environmental charges............ --
Facility closing and sale........ --
Selling and administrative
expenses.......................... 53,800
Interest expense (income), net..... 14,100
-----------
Income (loss) before provision for
income taxes...................... 45,000
Provision (benefit) for income
taxes............................. 19,200
-----------
Income before cumulative effect of
accounting change................. 25,800
Cumulative effect of change in
accounting for postretirement
benefits other than pensions (net
of tax benefit of $1,800)......... --
-----------
Net income......................... $ 25,800
-----------
-----------
Income (charge) per share:
Before cumulative effect of
accounting change.............. $ 1.25
Cumulative effect of change in
accounting for postretirement
benefits other than pensions... --
-----------
Net income per common share(4)..... $ 1.25
-----------
-----------
Shares used in per share
calculations(4)................... 20,600
</TABLE>
<TABLE>
<CAPTION>
AS ADJUSTED
SIX MONTHS SIX
ENDED MONTHS
FISCAL YEARS ENDED -------------------- ENDED
----------------------------------------------------- OCT 1, SEPT 29, SEPT 29,
1992 1993 1994 1995 1996 1995 1996 1996(3)
--------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................ $ 187,100 $ 137,000 $ 125,700 $ 89,900 $ 125,800 $ 111,000 $ 211,300 $ 233,600
Total assets........................... 422,600 424,300 342,900 406,700 450,500 412,500 1,010,700 1,019,100
Total debt............................. 26,200 19,400 15,700 26,000 13,900 15,200 440,300 267,700
Shareholders' investment............... 315,400 199,900 222,800 258,400 303,100 279,500 328,200 509,200
OTHER DATA:
Capital expenditures................... $ 28,800 $ 16,000 $ 7,400 $ 10,900 $ 19,700 $ 7,200 $ 16,800
Return on initial shareholders'
investment(5)......................... 17.4% 0.6% 11.1% 13.0% 16.6% 14.6% 20.8%
Sales per employee(5).................. $ 92 $ 106 $ 105 $ 104 $ 102 $ 106 $ 122
Number of employees at end of period... 6,372 4,341 3,993 5,166 5,646 5,135 8,631
</TABLE>
- ------------
(1) Pro forma to reflect the acquisitions of Carmet, Olofsson, AETC and NEWFLO
(including Barber) as if they had occurred at the beginning of the period.
See "Pro Forma Combined Financial Statements."
(2) Pro forma to reflect the acquisitions of Olofsson, AETC and NEWFLO as if
they had occurred at the beginning of the period. See "Pro Forma Combined
Financial Statements."
7
<PAGE>
(3) Adjusted to reflect the sale of 4,000,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $47 1/2 per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
(4) Adjusted to reflect a 3-for-2 Common Stock split effected in August 1994. In
fiscal 1993, the Company repurchased 7,350,000 shares of Common Stock.
(5) The return on initial shareholders' investment and sales per employee
reflect annualized results for acquisitions made within the period.
8
<PAGE>
RISK FACTORS
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY SHOULD CONSIDER THE SPECIFIC
FACTORS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS.
AEROSPACE AND OTHER INDUSTRY CYCLICALITY; CUSTOMER CONCENTRATION; REDUCED
GOVERNMENT PURCHASES
The commercial aerospace industry is cyclical in nature, and the demand by
commercial airlines for new aircraft historically has been closely related to
the state of the U.S. and world economies. The large number of aircraft
delivered in the early 1990s and the aerospace industry's widespread losses
created excess capacity in the air carrier system. During this period, airlines
and leasing companies deferred existing new aircraft orders and, to a lesser
degree, canceled orders. These deferrals and cancellations adversely affected
the volume and price of orders placed with the manufacturers of commercial
aircraft engine components, including the Company. Although the U.S. airline
industry has reported profits in 1994 and 1995, excess capacity has been reduced
and orders for new aircraft by major aircraft manufacturers have increased,
there is no assurance that the improved operating performance of the commercial
airlines will continue or that deliveries of large commercial aircraft will not
decline in the future. Any developments in the commercial aerospace market
resulting in a reduction in the rate of future aircraft deliveries, including
cancellations and deferrals of scheduled deliveries, could have a material
adverse effect on the Company.
A substantial portion of the Company's business is conducted with a
relatively small number of large aerospace customers, including General Electric
Company ("GE") and the Pratt & Whitney Aircraft operation of United Technologies
Corporation ("Pratt & Whitney"). GE accounted for approximately 22 percent (13
percent pro forma) of fiscal 1996 net sales, and Pratt & Whitney accounted for
approximately 16 percent (10 percent pro forma) of fiscal 1996 net sales. The
Company has made significant price concessions to aerospace customers in recent
years, and the Company expects customer pressure for pricing concessions will
continue.
U.S. military and defense contractor sales constituted approximately 18
percent (11 percent pro forma) of the Company's fiscal 1996 net sales. U.S.
defense spending in markets served by the Company has been declining since the
1980s, and continued reductions in defense budgets or military aircraft
procurement could adversely affect the Company.
AVAILABILITY AND COST OF RAW MATERIALS
The Company has no fixed price contracts or arrangements for some of the
supplies and raw materials it purchases, including certain metals and steel.
Commercial deposits of certain metals, such as cobalt, nickel, titanium, and
molybdenum, that are required for the alloys used in the Company's precision
castings, are found in only a few parts of the world. The availability and
prices of these metals may be influenced by private or governmental cartels,
changes in world politics, unstable governments in exporting nations and
inflation. Similarly, supplies of tool grade steel used by the Company may also
be subject to variation in availability and pricing. Shortages of, and price
increases for, certain raw materials used by the Company have occurred in the
past and may occur in the future. Future shortages or price fluctuations in raw
materials could have a material adverse effect on the Company.
RISKS ASSOCIATED WITH ACQUISITIONS; ENTRY INTO NEW MARKETS
Since March 1995, the Company has acquired seven businesses for aggregate
consideration of approximately $535 million. These acquisitions accounted for
approximately 50 percent of the Company's net sales in fiscal 1996 on a pro
forma basis. See "Pro Forma Combined Financial Statements." As a result of the
acquisitions, the Company added approximately 3,500 employees and 64 operating
locations. In addition, the Company has significantly increased the number of
markets it serves and has expanded the number of its customers from
approximately 300 to more than 2,000. The marketing efforts and strategies for
markets served by some of these acquired businesses are substantially different
than those associated with the Company's traditional businesses.
9
<PAGE>
While the Company's acquisition strategy places emphasis on the ability of
existing management of the acquired businesses to continue to operate
autonomously, certain changes may need to be made to integrate the acquired
businesses into the Company's operations, to assimilate many new employees and
to implement reporting, monitoring and forecasting procedures. In addition, the
integration of the acquired businesses into the operations of the Company may
divert management attention from the Company's existing businesses and may
result in additional administrative expense. Failure to successfully complete
this integration, assimilation or implementation could have a material adverse
effect on the Company's operations.
Most of the Company's acquisitions were stock purchase transactions. As a
result, PCC assumed all of the liabilities of these acquired businesses. There
is no assurance that the representations and warranties made by the sellers were
true and correct or that the Company's due diligence investigation discovered
all matters of a material nature relating to the acquisitions.
The Company is also seeking to expand into additional markets through the
development of new product applications based on its existing metalforming
technologies, including efforts to increase its presence in the industrial gas
turbine market. These efforts have required, and will continue to require,
substantial investments by the Company, including increased levels of research
and development expenditures and a significant amount of capital expenditures
for new, expanded or improved production facilities. There is no assurance the
Company will be able to successfully manage the expansion into new markets and
products or that these efforts will not have an adverse impact on the Company.
The Company continues to pursue and evaluate potential acquisitions as part
of its growth strategy. There is no assurance that the Company will complete any
additional acquisitions or that a future acquisition will not materially and
adversely affect the Company. See "Business -- Company Strategy."
GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS
Certain of the Company's products are manufactured and sold under U.S.
government contracts or subcontracts. Consequently, the Company is directly and
indirectly subject to various federal rules, regulations and orders applicable
to government contractors. Violation of applicable government rules and
regulations could result in civil liability, in cancellation or suspension of
existing contracts or in ineligibility for future contracts or subcontracts
funded in whole or in part with federal funds.
The Company is subject to federal, state and local environmental laws and
regulations concerning, among other things, wastewater, air emissions, toxic use
reduction and hazardous materials disposal. The Company owns properties or
conducts or has conducted operations at properties, including certain of the
properties acquired in the recent acquisitions, which have been assessed as
contaminated with hazardous or other controlled substances or otherwise
requiring remedial action. At September 29, 1996, the Company's financial
statements reflected total reserves of $7.5 million to cover future costs
arising from environmental issues relating to these properties. The Company's
actual future expenditures, however, for installation of and improvements to
environmental control facilities, remediation of environmental conditions
existing at its properties, including remediation in connection with the removal
of properties from service, and other similar matters cannot be conclusively
determined.
Environmental legislation and regulations and related administrative
policies have changed rapidly in recent years. It is likely that the Company
will be subject to increasingly stringent environmental standards in the future
(including those under the Clean Air Act Amendments of 1990, the Clean Water Act
Amendments of 1990, stormwater permit program and toxic use reduction programs)
and will be required to make additional expenditures, which could be
significant, relating to environmental matters on an ongoing basis. Furthermore,
although the Company has established certain reserves for environmental
remediation, there is no assurance regarding the cost of remedial measures that
might eventually be required by environmental authorities, or that additional
environmental hazards, requiring further remedial expenditures, might not be
asserted by such authorities or private parties. Accordingly, the costs of
remedial measures may exceed the amounts reserved. In addition, the Company may
be subject to legal proceedings brought by private parties or governmental
agencies with respect to environmental matters.
10
<PAGE>
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company is both a purchaser of products from, and a supplier to,
businesses located outside of the U.S. Certain risks are inherent in
international operations, including the risk of government financed competition,
changes in trade policies, tariff regulations and difficulties in obtaining U.S.
export and import licenses.
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $181.0 million (approximately $208.2 million if the Underwriters'
over-allotment option is exercised in full). The Company expects to use the net
proceeds to repay amounts outstanding under its revolving bank credit line of
approximately $171.4 million and approximately $1.2 million to repay an
uncommitted line of credit, and the remainder will be used for general corporate
purposes. Pending such use, the Company intends to invest the remainder of the
proceeds in short-term investments. Amounts outstanding under the revolving bank
credit line currently bear interest at approximately 6.2 percent per annum and
are due in July 2001. These bank borrowings were incurred by the Company in
connection with recent acquisitions. Amounts outstanding under the uncommitted
credit line bear interest at approximately 5.6 percent per annum. The Company is
reducing its bank borrowings to provide flexibility to fund general corporate
needs, including working capital, capital expenditures, potential future
acquisitions and the anticipated redemption of $100.0 million principal amount
of 13 1/4% Subordinated Notes due 2002 issued by NEWFLO and callable in November
1997. Although future acquisitions are part of the Company's strategic plan for
growth and the Company is regularly engaged in discussions about and
investigations of possible acquisitions, the Company currently has no
understandings, commitments or agreements for the acquisition of any material
businesses or assets.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed on the NYSE under the symbol "PCP." The following
table sets forth, for the periods indicated, the high and low per share sale
prices of the Common Stock as reported on the NYSE Composite Tape and the amount
of cash dividends declared.
<TABLE>
<CAPTION>
CASH DIVIDEND
HIGH LOW DECLARED
--------- --------- -----------------
<S> <C> <C> <C>
Fiscal 1997
Third Quarter (through October 18, 1996)..................................... $ 50.63 $ 46.63 $ --
Second Quarter............................................................... 51.25 33.38 .06
First Quarter................................................................ 44.50 38.50 .06
Fiscal 1996
Fourth Quarter............................................................... 41.13 36.50 .06
Third Quarter................................................................ 40.00 34.25 .06
Second Quarter............................................................... 36.50 32.63 .06
First Quarter................................................................ 35.25 25.88 .06
Fiscal 1995
Fourth Quarter............................................................... 26.50 19.63 .06
Third Quarter................................................................ 27.50 18.00 .06
Second Quarter............................................................... 26.88 20.67 .06
First Quarter................................................................ 24.25 20.58 .04
</TABLE>
As of October 18, 1996, there were 2,287 holders of record of the Common
Stock. A recent last reported sale price of the Common Stock on the NYSE
Composite Tape is set forth on the cover page of this Prospectus.
The Company has paid dividends on its Common Stock since fiscal 1978. The
amount of future dividends on the Common Stock will depend on the Company's
results of operations, capital requirements and financial condition and other
factors the Board of Directors deems relevant.
11
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
consolidated capitalization of the Company as of September 29, 1996, and as
adjusted to give effect to the issuance and sale of the 4,000,000 shares of
Common Stock offered hereby and the use of the net proceeds therefrom as set
forth under "Use of Proceeds." The table should be read in conjunction with the
consolidated financial statements of the Company and related notes thereto
incorporated by reference into this Prospectus. See "Use of Proceeds," "Pro
Forma Combined Financial Statements" and "Selected Historical Consolidated
Financial Data."
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996
--------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Notes payable....................................................................... $ 14,300 $ 400
Current portion of long-term debt................................................... 12,500 12,500
---------- --------------
Total short-term debt............................................................. $ 26,800 $ 12,900
---------- --------------
---------- --------------
Long-term debt, excluding current portion:
Credit line......................................................................... $ 158,700 $ --
Term debt........................................................................... 140,000 140,000
Subordinated debt................................................................... 100,000 100,000
Other debt.......................................................................... 14,800 14,800
---------- --------------
Total long-term debt.............................................................. 413,500 254,800
Shareholders' investment:
Preferred Stock, 1,000,000 shares authorized; no shares issued and outstanding...... -- --
Common Stock, 100,000,000 shares authorized; 20,598,031 shares issued and
outstanding; 24,598,031 shares issued and outstanding as adjusted................. 20,600 24,600
Additional paid-in capital.......................................................... 15,600 192,600
Retained earnings................................................................... 290,400 290,400
Cumulative translation adjustments.................................................. 1,600 1,600
---------- --------------
Total shareholders' investment.................................................... 328,200 509,200
---------- --------------
Total long-term debt and shareholders' investment................................. $ 741,700 $ 764,000
---------- --------------
---------- --------------
</TABLE>
- ---------
(1) Adjusted to reflect the sale of 4,000,000 shares of Common Stock offered by
the Company hereby at an assumed public offering price of $47 1/2 per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
12
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected historical consolidated financial data shown below for, and as
of the end of, each of the years in the five-year period ended March 31, 1996
have been derived from the audited consolidated financial statements of the
Company. The selected historical consolidated financial data shown below for,
and as of the end of, the six months ended October 1, 1995 and September 29,
1996 have been derived from the unaudited consolidated financial statements of
the Company which, in the opinion of management, include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
of such interim periods. The selected historical consolidated financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and the consolidated
financial statements of the Company incorporated by reference herein. The
results for the six months ended September 29, 1996 are not necessarily
indicative of results that may be expected for the year ending March 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS --------------------
----------------------------------------------------- OCT 1, SEPT 29,
1992 1993 1994 1995 1996 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND NUMBER OF EMPLOYEES)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................ $ 583,300 $ 461,400 $ 420,400 $ 436,400 $ 556,800 $ 271,200 $ 410,900
Cost of goods sold................................... 488,000 393,100 351,700 359,500 446,100 216,300 327,300
Provision for:
Restructuring charges.............................. -- 27,200 -- -- -- -- --
Environmental charges.............................. -- 9,900 -- -- -- -- --
Facility closing and sale.......................... 2,700 -- -- -- -- -- --
Selling and administrative expenses.................. 38,300 31,900 30,200 31,600 46,900 22,800 36,000
Interest expense (income), net....................... 1,000 (600) 1,100 (1,500) 100 200 5,800
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision for income taxes...... 53,300 (100) 37,400 46,800 63,700 31,900 41,800
Provision (benefit) for income taxes................. 6,800 (1,900) 12,300 17,800 22,600 13,000 17,200
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of accounting
change.............................................. 46,500 1,800 25,100 29,000 41,100 18,900 24,600
Cumulative effect of change in accounting for
postretirement benefits other than pensions (net of
tax benefit of $1,800).............................. -- -- (2,900) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income........................................... $ 46,500 $ 1,800 $ 22,200 $ 29,000 $ 41,100 $ 18,900 $ 24,600
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income (charge) per share:
Before cumulative effect of accounting change...... $ 1.75 $ 0.07 $ 1.29 $ 1.45 $ 2.02 $ 0.93 $ 1.19
Cumulative effect of change in accounting for
postretirement benefits other than pensions...... -- -- (0.15) -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income per common share(1)....................... $ 1.75 $ 0.07 $ 1.14 $ 1.45 $ 2.02 $ 0.93 $ 1.19
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Shares used in per share calculations(1)............. 26,600 26,800 19,500 20,000 20,400 20,300 20,600
BALANCE SHEET DATA:
Working capital...................................... $ 187,100 $ 137,000 $ 125,700 $ 89,900 $ 125,800 $ 111,000 $ 211,300
Total assets......................................... 422,600 424,300 342,900 406,700 450,500 412,500 1,010,700
Total debt........................................... 26,200 19,400 15,700 26,000 13,900 15,200 440,300
Shareholders' investment............................. 315,400 199,900 222,800 258,400 303,100 279,500 328,200
OTHER DATA:
Capital expenditures................................. $ 28,800 $ 16,000 $ 7,400 $ 10,900 $ 19,700 $ 7,200 $ 16,800
Return on initial shareholders' investment(2)........ 17.4% 0.6% 11.1% 13.0% 16.6% 14.6% 20.8%
Sales per employee(2)................................ $ 92 $ 106 $ 105 $ 104 $ 102 $ 106 $ 122
Number of employees at end of period................. 6,372 4,341 3,993 5,166 5,646 5,135 8,631
</TABLE>
- ------------
(1) Adjusted to reflect a 3-for-2 Common Stock split effected August 1994. In
fiscal 1993, the Company repurchased 7,350,000 shares of Common Stock.
(2) The return on initial shareholders' investment and sales per employee
reflect annualized results for acquisitions made within the period.
13
<PAGE>
PRO FORMA COMBINED FINANCIAL STATEMENTS
PRECISION CASTPARTS CORP.,
CARMET COMPANY, THE OLOFSSON CORPORATION,
AE TURBINE COMPONENTS, LIMITED, NEWFLO CORPORATION
(INCLUDING BARBER INDUSTRIES, INC.)
(UNAUDITED)
PCC acquired the following companies as of the dates indicated:
<TABLE>
<CAPTION>
COMPANY ACQUISITION DATE
- -------------------------------------------- --------------------
<S> <C>
Carmet February 21, 1996
Olofsson May 31, 1996
AETC July 19, 1996
NEWFLO (including Barber, which July 31, 1996
was acquired by NEWFLO before its
acquisition by PCC)
</TABLE>
Funding for the four acquisitions was provided by cash on hand and
borrowings in the aggregate amount of approximately $436.8 million.
Each of the acquisitions was accounted for using the purchase method of
accounting. All acquisitions are reflected in PCC's balance sheet as of
September 29, 1996; therefore, the adjusted balance sheet reflects only the
application of the proceeds from this offering. The unaudited pro forma combined
income statement for fiscal 1996 was prepared as if each of the listed
acquisitions had occurred at the beginning of that fiscal year. The unaudited
pro forma combined income statement for the six months ended September 29, 1996
was prepared as if the acquisitions of Olofsson, AETC, and PCC Flow Technologies
had occured at the beginning of that period. The financial information of
Olofsson, PCC Flow Technologies and Barber used in the preparation of the fiscal
1996 pro forma combined income statement described above is for the period ended
three months prior to the pro forma financial statement date. Data for AETC
included in the fiscal 1996 unaudited pro forma combined income statement is for
the period ended June 30, 1996. The financial information for Carmet included in
the pro forma combined income statement for the year ended March 31, 1996 is for
the period in fiscal 1996 prior to its acquisition by PCC. The pro forma
combined income statement for the six months ended September 29, 1996 reflects
the addition of each acquisition made after March 31, 1996 for the period from
April 1, 1996 until the date of the acquisition. The financial information of
the acquired entities contains certain reclassifications made to conform to
PCC's classifications. The pro forma financial statements do not reflect the
pre-acquisition results of two immaterial acquisitions made in the second
quarter of fiscal 1997.
These unaudited pro forma combined income statements are not necessarily
indicative of the actual results that would have occurred had the acquisitions
been completed in accordance with the assumptions set forth above; neither they
nor the adjusted balance sheet purport to indicate the future results of
operations or financial position of PCC.
These unaudited pro forma combined and adjusted financial statements should
be read in conjunction with the accompanying notes and the historical financial
statements and notes thereto of PCC, Olofsson, AETC and PCC Flow Technologies,
respectively, incorporated by reference in this Prospectus. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
14
<PAGE>
ADJUSTED BALANCE SHEET
PRECISION CASTPARTS CORP.
SEPTEMBER 29, 1996
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
APPLICATION
OF
PCC PROCEEDS(1) AS ADJUSTED
------------ ------------ -------------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 12,000 $ 8,400 $ 20,400
Accounts receivable.................................................. 162,100 -- 162,100
Inventories.......................................................... 215,900 -- 215,900
Prepaid expenses and other........................................... 4,700 -- 4,700
Current deferred tax asset........................................... 21,500 -- 21,500
------------ ------------ -------------
Total current assets............................................. 416,200 8,400 424,600
Property, plant and equipment.......................................... 381,500 -- 381,500
Less -- accumulated depreciation....................................... (161,800) -- (161,800)
------------ ------------ -------------
Net property, plant and equipment.................................... 219,700 -- 219,700
Goodwill, net and other assets......................................... 374,800 -- 374,800
------------ ------------ -------------
$ 1,010,700 $ 8,400 $ 1,019,100
------------ ------------ -------------
------------ ------------ -------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Notes payable........................................................ $ 14,300 $ (13,900) $ 400
Current portion of long-term debt.................................... 12,500 -- 12,500
Accounts payable..................................................... 64,500 -- 64,500
Accrued liabilities.................................................. 95,200 -- 95,200
Income taxes payable................................................. 18,400 -- 18,400
------------ ------------ -------------
Total current liabilities........................................ 204,900 (13,900) 191,000
Long-term debt, excluding current portion.............................. 413,500 (158,700) 254,800
Deferred tax liability................................................. 8,600 -- 8,600
Accrued retirement benefits obligation................................. 21,600 -- 21,600
Other long-term liabilities............................................ 33,900 -- 33,900
Shareholders' investment:
Common stock......................................................... 20,600 4,000 24,600
Paid-in capital...................................................... 15,600 177,000 192,600
Retained earnings.................................................... 290,400 -- 290,400
Cumulative translation adjustment.................................... 1,600 -- 1,600
------------ ------------ -------------
Total shareholders' investment................................... 328,200 181,000 509,200
------------ ------------ -------------
$ 1,010,700 $ 8,400 $ 1,019,100
------------ ------------ -------------
------------ ------------ -------------
</TABLE>
- ---------
(1) Adjustment assumes 4,000,000 shares of Common Stock are sold at $47 1/2 per
share and that $172.6 million outstanding under the revolving credit line
and an uncommitted line of credit is repaid with the net proceeds from such
sale.
15
<PAGE>
PRO FORMA COMBINED INCOME STATEMENT
FOR FISCAL 1996
PRECISION CASTPARTS CORP.
AND ACQUISITIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PCC FLOW PRO FORMA NOTE
PCC TECHNOLOGIES BARBER AETC OLOFSSON CARMET ADJUSTMENTS REFERENCE
--------- ------------ --------- --------- ----------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales....................... $ 556,800 $ 199,800 $ 16,300 $ 73,100 $ 64,500 $ 21,700 $ (2,700) (1)
Cost of goods sold.............. 446,100 133,900 11,600 59,700 52,900 16,700 5,100 (1),(2),(3)
--------- ------------ --------- --------- ----------- --------- -------------
Gross margin.................. 110,700 65,900 4,700 13,400 11,600 5,000 (7,800)
Selling and administrative
expenses....................... 46,900 40,200 2,200 7,400 4,000 1,700 (2,900) (1),(3)
Interest expense, net........... 100 17,600 900 6,600 2,700 200 (700) (4),(5)
--------- ------------ --------- --------- ----------- --------- -------------
Income before provision for
income taxes................ 63,700 8,100 1,600 (600) 4,900 3,100 (4,200)
Provision for income taxes...... 22,600 2,400 700 (200) 2,000 1,200 1,900 (6)
--------- ------------ --------- --------- ----------- --------- -------------
Net income.................. $ 41,100 $ 5,700 $ 900 $ (400) $ 2,900 $ 1,900 $ (6,100)
--------- ------------ --------- --------- ----------- --------- -------------
--------- ------------ --------- --------- ----------- --------- -------------
Net income per common share..... $ 2.02
---------
---------
Average number of common shares
outstanding.................... 20,400
<CAPTION>
PRO FORMA
COMBINED
-----------
<S> <C>
Net sales....................... $ 929,500
Cost of goods sold.............. 726,000
-----------
Gross margin.................. 203,500
Selling and administrative
expenses....................... 99,500
Interest expense, net........... 27,400
-----------
Income before provision for
income taxes................ 76,600
Provision for income taxes...... 30,600
-----------
Net income.................. $ 46,000
-----------
-----------
Net income per common share..... $ 2.25
-----------
-----------
Average number of common shares
outstanding.................... 20,400
</TABLE>
- ------------
(1) Adjustment to reflect change in accounting from percentage of completion on
certain Olofsson contracts to completed contract for all Olofsson contracts.
This change reduced pro forma net sales, cost of goods sold, and selling and
administrative expenses by $2.7 million, $1.3 million, and $0.1 million,
respectively.
(2) Adjustment to add $6.3 million for amortization of intangibles as a result
of PCC's purchase price allocation. Goodwill arising from the acquisitions
is amortized over forty years, and other intangibles acquired are amortized
over their remaining useful lives.
(3) Adjustments to cost of goods sold to reflect the elimination of $1.3 million
of non-recurring transactions which had reduced cost of goods sold and $1.2
million to reflect elimination of redundant operating costs as a result of
the acquisitions. Similar adjustments made to reduce selling and
administrative expenses for $0.6 million of non-recurring expenses and $2.2
million for changes resulting from the acquisitions.
(4) Adjustment to remove $20.3 million of interest expense incurred by the
acquired companies related to debt which was not acquired by PCC or which
was retired upon acquisition.
(5) Adjustment to add $19.6 million estimated interest expense related to debt
incurred on borrowings used to fund the acquisitions. This adjustment
assumes all cash held by PCC was expended and debt incurred as necessary.
The interest expense was calculated based upon the nature of borrowings used
by PCC to fund the acquisitions, adjusted to reflect prevailing interest
rates during the period. The following annual interest rates were used: 6.9
percent for PCC Flow Technologies, 6.6 percent for AETC and 6.0 percent for
Olofsson.
(6) Adjustment to provision for income taxes based on the pro forma changes
above.
16
<PAGE>
PRO FORMA COMBINED INCOME STATEMENT
FOR THE SIX MONTHS ENDED SEPTEMBER 29, 1996
PRECISION CASTPARTS CORP.
AND ACQUISITIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PCC FLOW PRO FORMA NOTE
PCC TECHNOLOGIES AETC OLOFSSON ADJUSTMENTS REFERENCE
--------- ------------- --------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales..................................... $ 410,900 $ 81,500 $ 19,700 $ 11,800 $ --
Cost of goods sold............................ 327,300 57,200 15,500 10,000 1,000 (1),(2)
--------- ------------- --------- ----------- -------------
Gross margin................................ 83,600 24,300 4,200 1,800 (1,000)
Selling and administrative expenses........... 36,000 15,500 1,900 1,000 (600) (2)
Interest expense, net......................... 5,800 5,700 1,600 400 600 (3),(4)
--------- ------------- --------- ----------- -------------
Income before provision for income taxes...... 41,800 3,100 700 400 (1,000)
Provision for income taxes.................... 17,200 1,400 200 200 200 (5)
--------- ------------- --------- ----------- -------------
Net income................................ $ 24,600 $ 1,700 $ 500 $ 200 $ (1,200)
--------- ------------- --------- ----------- -------------
--------- ------------- --------- ----------- -------------
Net income per common share................... $ 1.19
---------
---------
Average number of common shares outstanding... 20,600
<CAPTION>
PRO FORMA
COMBINED
----------
<S> <C>
Net sales..................................... $ 523,900
Cost of goods sold............................ 411,000
----------
Gross margin................................ 112,900
Selling and administrative expenses........... 53,800
Interest expense, net......................... 14,100
----------
Income before provision for income taxes...... 45,000
Provision for income taxes.................... 19,200
----------
Net income................................ $ 25,800
----------
----------
Net income per common share................... $ 1.25
----------
----------
Average number of common shares outstanding... 20,600
</TABLE>
- ------------
(1) Adjustment to increase amortization of intangibles $1.8 million as a result
of PCC's purchase price allocation. Goodwill arising from the acquisitions
is amortized over forty years, and other intangibles acquired are amortized
over their remaining useful lives.
(2) Adjustment to reflect the elimination of $0.1 million non-recurring selling
and administrative expenses and to reflect a decrease of $0.8 million in
cost of goods sold and a decrease of $0.5 million in selling and
administrative expenses to eliminate redundant costs.
(3) Adjustment to remove $5.6 million of interest expense incurred by acquired
companies related to debt which was not assumed by PCC or was retired upon
acquisition.
(4) Adjustment to add $6.2 million estimated interest expense related to debt
incurred on borrowings used to fund the acquisitions. This adjustment
assumes all cash held by PCC was expended and debt was acquired as
necessary. The interest expense was calculated based upon the nature of
borrowings used by PCC to fund the acquisitions, adjusted to reflect
prevailing interest rates during the period. The following annual interest
rates were used: 6.8 percent for PCC Flow Technologies, 6.6 percent for AETC
and 6.0 percent for Olofsson.
(5) Adjustment to provision for income taxes based on the pro forma changes
above.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS OVERVIEW
In fiscal 1996 and the first six months of fiscal 1997, PCC experienced
substantial growth in sales and profits from the prior year. This growth
resulted from the strong performance of the Company's existing aerospace
business and from one acquisition at the end of fiscal 1995, one acquisition in
the last quarter of fiscal 1996, one acquisition in the first quarter of fiscal
1997 and four acquisitions in the second quarter of fiscal 1997.
PCC's aerospace business improved during fiscal 1996 and the first six
months of fiscal 1997 due to stronger demand for new aircraft components and
spares, reflecting a general recovery in the aerospace industry. With 68 percent
of fiscal 1996 sales coming from aerospace, PCC historically has been exposed to
the cyclical nature of this market. During the aerospace downturn which began in
1991, the Company undertook major efforts to increase manufacturing efficiencies
and lower costs in its core aerospace businesses. In addition, it began to
diversify its operations by expanding the product lines manufactured with its
existing metalforming technologies and by acquiring businesses that complement
the Company's core competencies in metals, precision metalworking and the
management of complex manufacturing processes. The Company has looked for
synergistic acquisitions that have strong growth prospects, leading positions in
established market niches and higher operating margins than the Company's
traditional product lines. The Company believes these initiatives will enhance
its prospects as the aerospace cycle strengthens and will mitigate the impact of
future downturns. There is no assurance, however, that these initiatives will
have these results.
The Company acquired Quamco (now "PCC Specialty Products" or "SPD") in March
1995, Carmet in February 1996 and Olofsson in May 1996. Both Carmet and Olofsson
operate as part of SPD. In July 1996, the Company acquired Balo Precision Parts,
Inc. ("Balo"), AETC, Astro Punch and NEWFLO. Each of these acquisitions
leverages PCC's core competencies in manufacturing complex metal components and
products. Although a portion of AETC's business is subject to the aerospace
cycle, the markets served by the other acquired businesses are subject to
different business cycles, which tend to be less pronounced and are often
counter to the aerospace cycle. See "Pro Forma Combined Financial Statements."
As part of its product diversification initiative, the Company has
undertaken to significantly increase its market share in industrial gas
turbines. This business, which is based on investment casting technology,
provides opportunities for both new parts and spares sales to a large customer
base. The Company expects further growth from investment casting operations to
come from applications in medical prostheses, sporting goods and other
industrial markets.
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 29, 1996 COMPARED WITH THE SIX MONTHS ENDED OCTOBER
1, 1995
Sales of $410.9 million for the first six months of fiscal 1997 increased
$139.7 million, or 52 percent, compared to the first six months a year ago. The
increase was due to improved sales in nearly all business areas and the impact
from the acquisitions made in the last year. Excluding the effects of
acquisitions in fiscal 1995 and 1996, sales increased $44.2 million, or 19
percent. The most significant sales increase was to aerospace customers,
reflecting the upswing in that industry's cycle.
Cost of goods sold as a percent of sales for the first half of fiscal 1997
was 80 percent, unchanged from the first half of last year. Reflected in the
fiscal 1997 results are higher margins contributed by the acquisitions made in
the year, offset by higher costs in the traditional operations due to costs
associated with IGT development programs and training costs from the addition of
new employees to support increased demand for the Company's aerospace products.
18
<PAGE>
Selling and administrative expenses were $36.0 million for the first six
months, or 8.8 percent of sales, compared to $22.8 million, or 8.4 percent of
sales, a year ago. This increase reflects the effect of fiscal year 1997
acquisitions which operate with higher selling costs due to their related
advertising, trade show and sales commission costs and reflects increased
expenses relating to the Company's successful efforts against union organizing
activities at its Oregon operations.
Net interest expense in the first half of fiscal 1997 was $5.8 million, as
compared with $0.2 million in the first half a year ago. The increase reflects
the lower cash balances and higher debt this year compared with a year ago, due
to the acquisitions of Carmet in the fourth quarter of fiscal 1996, Olofsson in
the first quarter of fiscal 1997, and Balo, AETC, Astro Punch and PCC Flow
Technologies in the second quarter of fiscal 1997.
The effective tax rate in the first six months of fiscal 1997 was 41.1
percent approximating last year's effective tax rate of 40.8 percent.
FISCAL 1996 COMPARED WITH FISCAL 1995
Sales of $556.8 million for fiscal 1996 increased $120.4 million, or 28
percent, from the prior year. Excluding the effects of SPD, sales increased
$39.1 million or 9 percent. Aerospace and aircraft gas turbine engines
represented 68 percent, or $376.0 million of total sales in fiscal 1996 compared
to 79 percent, or $343.0 million, of total sales in fiscal 1995. The lower
percentage of aerospace sales reflects the addition of SPD's sales volume in
fiscal 1996. Sales to United States government end-users were 18 percent of
total sales in 1996, slightly lower than the 19 percent in the prior year,
reflecting the impact of SPD, which has minimal sales to governmental end-users.
Cost of goods sold as a percentage of sales improved from 82 percent in
fiscal 1995 to 80 percent in fiscal 1996. This improvement came from the
addition of SPD, which generates higher margins compared with other PCC
operations.
Selling and administrative costs increased to 8 percent of sales in fiscal
1996 from 7 percent of sales in the prior year. This increase was due to the
addition of SPD, which operates with higher selling costs due to advertising,
trade shows and sales commissions compared with other Company operations.
For the year, the effective tax rate was 35 percent, compared to 38 percent
in fiscal 1995. The reduction was due to the favorable impact of $2.6 million of
non-recurring tax adjustments recorded in the third quarter. These benefits
included the settlement of a state tax issue for $2.2 million and $0.4 million
from research and development tax credits. The effective tax rate in fiscal 1997
is expected to increase, reflecting non-deductible goodwill amortization from
acquisitions and the absence of non-recurring adjustments which provided tax
benefits in fiscal 1996.
Net income in fiscal 1996 of $41.1 million was 42 percent higher than fiscal
1995's earnings of $29.0 million and resulted in earnings per share of $2.02
based on 20.4 million average shares outstanding, compared to $1.45 per share
based on 20.0 million average shares outstanding in fiscal 1995. Excluding the
impact of the non-recurring tax adjustments, net income in fiscal 1996 increased
30 percent to $1.89 per share.
FISCAL 1995 COMPARED WITH FISCAL 1994
Sales of $436.4 million for fiscal 1995 increased $16.0 million, or 4
percent, from the prior year. Nearly half of the increase in sales resulted from
the acquisitions of PCC Composites in April 1994 and SPD in March 1995.
Aerospace and aircraft gas turbine sales represented 79 percent of total sales,
down $9.4 million compared with fiscal 1994, while sales of other industrial and
commercial products increased by $25.4 million, or 37 percent, reflecting the
Company's continued diversification into non-aerospace markets. Sales to U.S.
government end-users were 19 percent of sales in 1995 and 21 percent in fiscal
1994.
19
<PAGE>
This decline reflects both the impact of lower military spending levels and the
increasing diversification of PCC's customer base.
Cost of goods sold as a percentage of sales improved to 82 percent in 1995
from 84 percent in the prior year. This improvement came largely from the higher
volume of sales to non-aerospace markets, which yield relatively higher margins.
These higher margins were partially offset by increased manufacturing costs
related to development of new parts for industrial gas turbine applications,
metal-matrix composite applications, and turbocharger wheels for the trucking
industry.
Selling and administrative costs remained constant at 7 percent of sales in
fiscal 1995.
In fiscal 1995, the effective tax rate was 38 percent as compared with an
effective tax rate of 33 percent in 1994. The fiscal 1994 effective tax rate
included a 6 percentage point reduction, reflecting the net effect of a $2.7
million benefit for research and development tax credits, partially offset by
$0.6 million of tax expense related to adjustment of deferred taxes to reflect
the increase in federal tax rates from 34 percent to 35 percent.
Net income of $29.0 million in fiscal 1995 was 31 percent higher than the
$22.2 million earned in the prior year. Income in fiscal 1994 reflected the $2.9
million after tax expense due to the effect of the accounting change for
postretirement benefits. Earnings per share in fiscal 1995 were $1.45 based on
20.0 million shares outstanding compared to $1.14 based on 19.5 million shares
outstanding in the prior year. These earnings per share results reflect a
three-for-two stock split effective in August 1994.
LIQUIDITY AND CAPITAL RESOURCES
Total assets of $1,010.7 million at September 29, 1996 represented a $560.2
million increase from the $450.5 million balance at March 31, 1996. The
acquisitions since the beginning of fiscal year 1997 accounted for nearly all of
the increase. Total capitalization at September 29, 1996 was $768.5 million,
consisting of $440.3 million of debt and $328.2 million of equity. The
debt-to-capitalization ratio was 0.57 compared with 0.04 at the end of the prior
fiscal year. The Company's debt-to-capitalization ratio is 0.35, reflecting the
sale of 4,000,000 shares of Common Stock and the application of the estimated
net proceeds.
Cash from earnings for the six months ended September 29, 1996 of $33.9
million, plus cash of $1.8 million from the sale of Common Stock through stock
option exercises was less than cash requirements which consisted of $316.4
million for the acquisitions of Olofsson, Balo, AETC, PCC Flow Technologies and
Astro Punch, $30.0 million of increased working capital, $16.8 million of
capital expenditures and $1.2 million of cash dividends. The cash flow shortfall
was funded from $315.2 million of net borrowings and $14.2 million of available
cash. At September 29, 1996, cash and cash equivalents were $12.0 million.
For fiscal 1996, earnings generated $65.1 million of cash, and working
capital reductions provided an additional $6.9 million. Capital expenditures
totaled $19.7 million, and $21.2 million was spent for the acquisition of
Carmet. The sale of $9.0 million of Common Stock through the exercise of stock
options was more than offset by cash dividends of $4.9 million and debt
repayments of $12.1 million.
In fiscal 1996, PCC obtained a five-year $200.0 million committed line of
credit from a syndicate of nine banks. There were no borrowings outstanding on
this line as of March 31, 1996. In July 1996, the Company entered into an
amended and restated credit agreement ("Credit Agreement") with Bank of America
National Trust & Savings Association ("Bank of America") that was later
syndicated to twelve commercial banks. The Credit Agreement replaced the $200.0
million line of credit and includes two facilities: an amortizing term loan
facility in the principal amount of $150.0 million (the "Term Loan") and a
revolving credit facility in the amount of $250.0 million (the "Credit Line").
The Credit Agreement contains various standard financial covenants, including
maintenance of minimum net worth, fixed charge coverage ratio and leverage
ratios.
20
<PAGE>
In July 1996, the full $150.0 million was borrowed under the Term Loan, and
the Company entered into a fixed rate swap agreement for the entire term of the
loan, resulting in an interest rate of 6.6 percent per annum plus a margin based
on the Company's leverage ratio. The Term Loan has a five year maturity, and the
principal amount is repayable quarterly commencing in March 1997. The Term Loan
may be prepaid, in whole or in part, at any time.
The Company may borrow up to $250.0 million under the Credit Line, and
amounts outstanding bear interest at a fluctuating rate based on Bank of
America's reference rate or LIBOR, plus in each case a margin based on the
Company's leverage ratio. The Credit Line matures in July 2001. The Company has
obtained interest rate protection through a cap arrangement for up to $160.0
million of borrowings under the Credit Line for the first two years of the
facility. At September 29, 1996, $171.4 million principal amount was outstanding
under the Credit Line. After application of the estimated net proceeds from this
offering, the entire Credit Line will be available for future borrowings.
PCC Flow Technologies, acquired by PCC in July 1996, has outstanding, in
addition to other indebtedness, $100.0 million principal amount of NEWFLO
13 1/4% Subordinated Notes due 2002 (the "Notes"). The Notes are redeemable at
the option of the Company, in whole or in part, at any time on or after November
15, 1997 at redemption prices declining from 105.25 percent of the stated
principal amount. The indenture governing the Notes limits, among other things,
the ability of PCC Flow Technologies and certain of its subsidiaries to (i)
incur additional indebtedness, (ii) pay dividends and other distributions,
including dividends and distributions to PCC, and make certain investments and
(iii) pledge their assets.
The five acquisitions completed in fiscal 1997 were financed with cash on
hand, borrowings of $301.1 million under the Credit Agreement and $100.0 million
principal amount of the Notes.
Capital spending in fiscal 1997 is expected to be approximately $70 million,
which is significantly higher than prior years. This amount includes capital
spending requirements related to acquisitions made in the year. The majority of
the anticipated expenditures is for capacity expansion to accommodate expected
growth in aerospace and industrial gas turbine markets. The Company believes it
can fund the requirements for capital spending, cash dividends, and potential
acquisitions from cash balances, the existing Credit Line, additional borrowings
and the net proceeds of this offering.
21
<PAGE>
BUSINESS
INTRODUCTION
Precision Castparts Corp. is a worldwide manufacturer of complex metal
components and products. The Company is the market leader in manufacturing
large, complex structural investment castings and is a leading manufacturer of
airfoil castings used in jet aircraft engines. In addition, the Company has
expanded into the industrial gas turbine, fluid management, industrial
metalworking tools and machines, powdered metal and other metal products
markets. The Company has experienced a sales increase in its aerospace business
of approximately 20 percent in fiscal 1996 on a pro forma basis compared with
fiscal 1995 actual, and believes its focus on this business will allow it to
participate in current favorable trends in the commercial aerospace sector. The
Company also believes its new businesses will reduce its exposure to the
cyclicality of the aerospace industry and provide opportunities for profitable
growth.
COMPANY STRATEGY
The Company's goal is to generate profitable growth and to enhance
shareholder value from continued investment in its aerospace and other existing
businesses and through the acquisition of new businesses. PCC targets
acquisitions that (i) complement the Company's core competencies in metals,
precision metalworking and the management of complex manufacturing processes,
(ii) have strong growth prospects and higher operating margins than the
Company's traditional product lines and (iii) have leading positions in
established market niches. The Company's strategy consists of the following key
elements:
INCREASE OPERATING EFFICIENCY AND TECHNOLOGICAL ADVANTAGE. Since fiscal
1993, the Company has significantly reduced overhead costs, improved worker
productivity, shortened production cycle times and enhanced operating
margins. This has primarily been achieved by investing in new technologies
and developing more efficient manufacturing processes. The Company believes
it maintains a proprietary technological advantage in the high quality, high
volume manufacturing of complex metal components and products. In
particular, the Company believes it is currently the only manufacturer in
the world that can precision cast large, complex parts from a variety of
metals and alloys in the volumes and of the qualities that customers
require. The Company strives to maintain its advantage by investing in new
technologies and developing new proprietary manufacturing processes which
are difficult for competitors to duplicate.
DEVELOP NEW PRODUCTS AND MARKETS. PCC is aggressively pursuing new
product and market opportunities using the Company's existing metalforming
technologies. The Company has identified attractive markets, such as
industrial gas turbines ("IGT"), where it believes its skills developed in
precision casting can be leveraged to enhance its market share. In addition,
the Company is pursuing growth opportunities in the manufacture of metal
injection molded products for applications including medical, sporting
goods, electronics, hand tools and automotive parts. PCC is also focusing on
expanding its international sales, particularly for its fluid management and
general industrial product lines. The Company's strategy is to continue to
identify new products and markets where it can become the leading supplier
by utilizing its core competencies in metals, precision metalworking and the
management of complex manufacturing processes.
PURSUE SYNERGISTIC ACQUISITIONS. PCC's strategy of acquiring businesses
which leverage the Company's core competencies has led to the completion of
seven acquisitions since March 1995. The Company seeks to acquire businesses
with established market niches, proprietary technology and the potential for
significant growth and higher operating margins than the Company's
traditional product lines. The Company expects that recent acquisitions,
such as PCC Specialty Products and PCC Flow Technologies, will enhance
financial results and reduce the Company's exposure to the aerospace cycle.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Business Overview."
22
<PAGE>
The Company intends to continue focusing on increasing PCC's operating
efficiencies and technological advantage, developing new products and markets,
and pursuing synergistic acquisitions. There is no assurance that the Company's
strategy or any element thereof will be implemented successfully.
PRODUCTS AND MARKETS
The Company's manufacturing of complex metal components and products
includes operations in four principal business areas: precision investment
castings, fluid management products, industrial metalworking tools and machines,
and powdered metal and other metal products.
PRECISION INVESTMENT CASTINGS
The Company is the market leader in manufacturing large, complex structural
investment castings and is a leading manufacturer of airfoil castings used in
jet aircraft engines. The Company manufactures investment castings for every
major jet aircraft engine program in production or under development by its key
customers. The Company is leveraging its experience and expertise in large,
complex structural and airfoil investment castings to manufacture castings for
IGT engines used for power generation. In addition, PCC makes investment
castings for use in the automotive, medical prostheses, sporting goods,
satellite launch vehicle and general industrial markets.
Because of the complexity of the manufacturing process and the application
of proprietary technologies, PCC believes it currently is the only manufacturer
that can consistently produce the largest complex structural investment castings
in quantities sufficient to meet its customers' quality and delivery
requirements. The Company's emphasis on low cost, high quality products and
timeliness of delivery has enabled it to become one of the leading suppliers of
structural and airfoil castings for jet aircraft engines and to increase its
market share of IGT airfoil castings. Investment castings accounted for
approximately 57 percent of the Company's net sales in fiscal 1996 on a pro
forma basis, and a majority of these products were sold to the aerospace market.
The Company's investment casting technology involves a technical, multi-step
process that uses ceramic molds in the manufacture of metal components with more
complex shapes, closer tolerances and finer surface finishes than parts
manufactured using other casting methods. The investment casting process
involves the creation of a wax pattern of the part to be cast along with
pathways through which molten metal flows into the ceramic mold (Figure 1);
formation of a ceramic shell around the wax pattern (Figure 2) followed by
removal of the wax from the ceramic shell by melting and draining the wax;
pouring of molten metal into the ceramic shell (Figure 3); shell removal (Figure
4); and final processing and inspection (Figure 5).
[Five schematic drawings illustrating the investment casting process]
23
<PAGE>
Trends in the commercial aerospace market are a critical determinant of
demand for the Company's precision investment casting products. Beginning in
1995, demand for investment castings strengthened, primarily due to increased
demand from the commercial aerospace industry, which had been in a cyclical
downturn since 1991. The Company believes the principal causes of the recent
increase in new aircraft orders include increased demand for air travel in Asia,
the recent profitability of U.S. commercial airlines, which is being driven by
increased load factors, and government Stage III noise regulations that require
airlines to modernize their fleets. Airlines are responding to these regulations
by retrofitting existing aircraft or purchasing new jets. For the six months
ended June 30, 1996, orders for The Boeing Company, McDonnell Douglas
Corporation and Airbus Industrie, the major U.S. and international aircraft
manufacturers, were 385 commercial aircraft, compared to 216 commercial aircraft
for the same period in 1995, an increase of 78 percent as reported by THE
AIRLINE MONITOR (an aerospace industry publication).
Large jet aircraft engines are manufactured by a small number of suppliers,
including GE, Pratt & Whitney, Rolls-Royce ("R-R") and CFM International, a
joint venture of GE and Snecma of France ("CFMI"). As a result, the Company
believes a high level of customer service and strong long-term customer
relationships will continue to be important to achieving its goals. The Company
has been supplying castings for jet engines to GE for more than 25 years, and
has been supplying Pratt & Whitney with castings for more than 20 years for its
military jet engines and more than 15 years for its commercial jet engines. In
addition, the Company has supplied small structural investment castings to R-R
for more than 10 years, and has more recently begun supplying R-R with large,
structural castings for use in its new Trent series of aircraft jet engines.
CFMI has used the Company's castings in its CFM56 jet engines for more than 20
years. As the Company has been able to cast larger and more complex parts,
manufacturers of large jet aircraft engines have made increasing use of the
Company's structural castings.
24
<PAGE>
The following table identifies major jet aircraft engines currently in
production that incorporate investment castings produced by the Company. In
addition to the items shown below, PCC manufactures investment castings for the
V2500 engine program produced by International Aero Engines ("IAE") for use on
Airbus Industrie's A319/A320/A321 aircraft and for the McDonnell Douglas MD-90
aircraft.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
GE CFMI PRATT & WHITNEY R-R
<CAPTION>
<S> <C> <C> <C> <C>
BOEING
737-300/400/500 CFM56-3
737-600/700/800 CFM56-7
747-400 CF6-80C2 PW4000 RB211-524
757 PW2037 RB211-535
767-300/300ER CF6-80C2 PW4000 RB211-524
777 GE90 PW4084, 4090, 4098 Trent 800
<CAPTION>
<S> <C> <C> <C> <C>
AIRBUS INDUSTRIE
A300-600 CF6-80C2 PW4000
A310-300 CF6-80C2 PW4000
A319/A320/A321 CFM56-5A/B
A330 CF6-80E1 PW4000 Trent 700
A340 CFM56-5C
<CAPTION>
<S> <C> <C> <C> <C>
MCDONNELL DOUGLAS
MD-80 Series JT8D
MD-11 CF6-80C2 PW4000
C-17 F117
F-15 F100
<CAPTION>
<S> <C> <C> <C> <C>
LOCKHEED MARTIN
F-16 F110 F100
F-22 F119
<CAPTION>
<S> <C> <C> <C> <C>
NORTHROP GRUMMAN
F/A-18 A/B F404
F/A-18 E/F F414
B-2 F118
<CAPTION>
</TABLE>
AEROSPACE STRUCTURAL CASTINGS. The Company's large, complex structural
castings include the largest diameter steel and titanium investment castings
in the world, as well as a variety of smaller structural castings. These
castings are stationary components that form portions of the fan,
compressor, combustion and turbine sections of the jet aircraft engine,
where strength and structural integrity are critical. Structural investment
castings are sold primarily as original equipment to jet aircraft engine
manufacturers.
The Company believes that trends in the manufacturing of aircraft jet
engines will continue to increase PCC's revenues per engine. As the design
of new generation aircraft engines has emphasized increased thrust, higher
fuel efficiency and reduction of noise and exhaust emissions, engine
operating temperatures and pressures have increased. These conditions
require the use of engine parts made of alloys that are able to withstand
these extreme operating conditions and provide an optimum strength-to-weight
ratio. Many of these alloys are particularly suited to investment casting.
In addition, titanium, a metal with a lower melting temperature than
stainless steel or superalloys, is used in all but the hottest parts of the
engine because of the considerable weight savings. Titanium is an
exceptionally difficult metal to cast because of its reactivity to other
elements. The Company, however, has
25
<PAGE>
developed the necessary technology and manufacturing processes to cast
large, complex investment castings in titanium alloys. Many of these new
generation engines, which are expected to be built through the next decade
and beyond, make significantly greater use of the Company's products than
did prior engine designs. The Company manufactures structural investment
castings for all three jet aircraft engines used on the newer Boeing 777
aircraft and is the sole supplier of structural investment castings for the
new GE90 jet engine. PCC also manufactures the intermediate case and the
tail bearing housing for the new R-R Trent series of engines, which are the
largest structural investment castings in the world for aircraft jet
engines.
AEROSPACE AIRFOIL CASTINGS. The Company manufactures precision cast
airfoils, including the stationary vanes and rotating blades used in the
turbine section of aircraft jet engines. This engine section is considered
the "hot" section, where temperatures may exceed 2,400 degrees Fahrenheit.
These conditions require use of superalloys and special casting techniques
to manufacture airfoil castings with internal cooling passageways that
provide both high performance and longer engine life.
The Company uses various casting technologies to produce its turbine
airfoils. Conventional casting processes are employed to produce equiaxed
airfoil castings, in which the metal grains are oriented randomly throughout
the casting. A more advanced process enables the Company to produce
directionally solidified ("DS") airfoil castings, in which the metal grains
are aligned longitudinally. This alignment decreases the internal stress on
the weakest portion of a metal part where the various grains adjoin, thereby
providing increased strength and improved efficiencies in engine performance
over equiaxed parts. An even more advanced process enables the Company to
produce single crystal ("SX") airfoil castings, which consist of one large
superalloy crystal without grain boundaries. SX castings provide greater
strength and performance characteristics than either equiaxed or DS
castings, as well as longer engine life.
As engine sizes grow to generate greater thrust for larger aircraft, and
the turbine sections of these engines must work harder and burn hotter, the
major aircraft engine manufacturers have increasingly been designing their
engines with DS and SX blades. The DS and SX cast airfoils, with their
complex cooling passages, have been instrumental in enabling these engines
to operate at gas temperatures frequently in excess of 2,400 degrees
Fahrenheit. SX cast airfoils are used both in new and redesigned engines,
particularly in jet engines used in military applications where performance
requirements are highest and blade life is shorter than in commercial
engines. To manage the increased demand for DS and SX cast airfoils, the
Company is installing five new furnaces during fiscal 1997 with DS and SX
casting capability.
The demand for aerospace airfoil castings is determined primarily by the
number and type of engines required for new jet aircraft, the frequency of
engine repairs and the inventory levels of replacement parts maintained by
the principal jet aircraft engine manufacturers and repair centers. A jet
engine's airfoil components have shorter useful lives than structural
investment castings and are replaced periodically during engine maintenance.
As a result, the Company's sales of aerospace airfoil castings are less
affected by the cyclical patterns of the aerospace industry than are the
Company's sales of structural investment castings. The replacement market
for aerospace airfoil castings principally depends on the engine's time in
service and the expected life of the airfoil casting. Based upon estimates
provided by its major customers, the Company believes that approximately 50
percent of its sales of airfoils are used as replacement parts.
INDUSTRIAL GAS TURBINES. In fiscal 1994, the Company began to focus on
the manufacture of airfoil castings for industrial gas turbines ("IGT"). The
Company targeted this market because it believes (i) the performance and
reliability standards PCC has developed in the manufacture of aerospace
airfoil castings are applicable to the manufacture of IGT airfoils, (ii) the
worldwide market is large, approximately $500 million, and (iii) the market
is principally serviced by a single supplier. The Company's IGT products
consist primarily of airfoil castings for gas turbines used in power
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generation and structural and airfoil castings for aircraft-derivative gas
turbine engines used for power generation and other land and marine-based
applications.
IGT manufacturers have significantly improved the efficiency and reduced
the pollution profiles of industrial gas turbines, principally by
incorporating component-level advances which are included not only in new
engines but also in the refurbishing and upgrading of existing turbines. PCC
has leveraged its DS and SX airfoil casting knowledge from the aerospace
market into the IGT market to produce IGT airfoil blades and vanes better
able to withstand the extreme heat and stresses of the new
higher-temperature gas turbines. IGT engines are built with investment
castings that are similar, but generally larger, than blades and vanes
manufactured by the Company for the aerospace market. Because of their size,
IGT airfoils are more difficult to cast than smaller aerospace airfoils with
the same properties.
The Company is working with several major manufacturers, including ASEA
Brown Boveri, GE Power Systems, Nuovo Pignone, Siemens, European Gas Turbine
and Westinghouse, to develop the components necessary to meet their
efficiency and environmental standards. The Company believes its success
with IGT customers will be built largely on the combination of its
traditional investment casting skills and with new technology such as its
proprietary thermally controlled solidification furnace. The Company is
experiencing more demand for airfoil castings for industrial gas turbines
than its current production facilities can supply and is therefore adding
93,000 square feet to its production facilities.
Since industrial gas turbines are primarily used in electrical power
generation, airfoil casting sales for new industrial gas turbine engines are
tied to the growth of global electricity consumption, while demand for
replacement parts depends on the size and usage rate of the installed base.
Between 1982 and 1994, the net installed capacity of electric generating
plants increased worldwide by 2.6 percent on an annual basis, while
worldwide electricity consumption grew at 3.4 percent annually. Industrial
gas turbines represent a significant portion of electricity generating
capacity additions, constituting 23 percent of capacity added worldwide from
1992 to 1994. Although overall electrical generating capacity grew at an
annual rate of only 0.6 percent in the mature U.S. market from 1988 to 1994,
industrial gas turbine electrical generating capacity in the U.S. grew at
3.8 percent annually. Gas turbine power generation has several advantages
over other power-generation methods, such as coal and nuclear-powered
facilities, including lower average capital cost, shorter installation and
regulatory approval time, ease of adding a new industrial gas turbine engine
to an existing power plant to increase output and the clean-burning
characteristics of natural gas. The Company believes these advantages have
led to increased demand for gas turbine engines.
OTHER INVESTMENT CASTING PRODUCTS. The Company's strategy for
profitable growth also includes the pursuit of new opportunities for the
Company's existing investment casting technology. The Company has been
expanding the application of its investment casting technology to the
automotive, medical prostheses, sporting goods, satellite and general
industrial markets by manufacturing such products as turbocharger wheels,
artificial hips and knees, titanium golf club heads, parts for satellite
launch vehicles and impellers for pumps and compressors. Some components of
the Company's fluid management products are manufactured using investment
casting as well as other casting technologies.
FLUID MANAGEMENT PRODUCTS
The Company designs, manufactures, markets and services a broad range of
high quality, precision industrial fluid management products, including fluid
handling industrial valves, industrial pumps and fluid measuring instruments.
The Company's finished fluid management products are manufactured primarily from
castings, forgings and fabricated steel parts. These products are sold worldwide
under well-established brand names, including "General Valve," "NEWCO," "TECHNO"
and "Barber" valves,
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"Johnston" and "PACO" pumps, and "Water Specialties" and "Penberthy" measuring
instruments, to a wide range of end-user markets.
The Company entered the fluid management market with the acquisition of PCC
Flow Technologies in July 1996. The Company believes this acquisition leverages
its core competencies into the fluid management market. The manufacturing
process for fluid management products requires knowledge of multiple
metalforming and processing technologies, including casting, machining, welding,
heat treating, assembly and processing of metal components. Testing procedures,
material management and traceability, and quality control are also important
aspects of the Company's operations. PCC Flow Technologies generated compound
annual revenue growth of approximately 31 percent from calendar years 1989
through 1995, primarily through acquisitions. The fluid management market is
highly fragmented, and the Company believes it can continue to improve its
market position through acquisitions and internal growth opportunities. Fluid
management products accounted for approximately 23 percent of the Company's net
sales in fiscal 1996 on a pro forma basis and were sold primarily to the general
industrial and energy markets.
The Company uses its substantial knowledge of fluid management technologies,
complex metal component manufacturing and its end-user markets to develop
engineered valves, pumps and instruments that the Company believes provide
customer benefits superior to those of other manufacturers. Many of the products
offered by the Company are customized to end-user requirements or designed for
specialized applications. The Company's maintenance, repair and service centers,
extensive distribution network and inventory of products enable it to provide
responsive service and timely deliveries to customers, thereby enhancing the
marketability of the Company's products. The Company believes its brand names,
quality products and responsive service network also lead to repeat orders,
stable demand and customer loyalty.
VALVES. The Company manufactures and markets specialty industrial and
general purpose valves, fittings and flanges principally for the chemical,
refining, energy, pulp and paper and marine markets. The Company's valve
products consist primarily of multi-turn industrial valves, check valves,
quarter turn industrial ball and plug valves, double block and bleed dual
expanding plug valves and four-way diverter valves and valve operators. Many
of the Company's valves are manufactured under contract by ISO
9001-qualified overseas suppliers to precise industry and end-user standards
and specifications. The valve designs are developed and modified by the
Company's engineering staff for particular applications as determined by
market conditions and end-user specification. The Company markets its valve
products under several brand names, including "General Valve," "NEWCO,"
"TECHNO" and "Barber." The Company believes its General Valve positive
shut-off, double block and bleed valve and its Technocheck hinged check
valves are among the most technologically advanced products sold in the
fluid control market.
PUMPS. The Company manufactures and markets a complete line of general
purpose and specialty pumps for power, cogeneration, geothermal, municipal
and industrial (including petroleum, chemical, mining, marine and pulp and
paper) applications. The Company also supplies repair parts and service for
pumps. The Company's pump products consist primarily of single and double
suction centrifugal pumps, submersible and non-clog pumps, booster pump
systems, vertical turbine, mixed flow and axial flow pumps. The Company is
one of the few pump manufacturers that produces large vertical pumps over 36
inches in diameter. The capacities of certain of the Company's pumps extend
up to heads of 3,400 feet and flows up to 230,000 gallons per minute. The
Company markets its pump products under several brand names, including
"Johnston Pump" and "PACO Pumps." The Company believes its Johnston vertical
turbine pumps and its PACO booster systems and "Smart Pumps" are among the
leading products sold in the fluid handling market.
INSTRUMENTS. The Company manufactures, markets and distributes
propeller meters, turbine meters and fluid measurement equipment for the
municipal, irrigation and industrial markets. The Company manufactures five
types of propeller meters (main line, low pressure, open flow, vertical
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flow and high pressure), turbine meters and three general types of
measurement devices that are used to read, record and transmit data
generated by the meters. The Company's meters and fluid measurement devices
meter a wide range of fluids, such as fresh or salt water, treated waste
water, diesel and jet fuel, bore hole slurry, light oils, food processing
fluids and slurries and other liquid and chemical applications. Meters are
sold in 44 different models varying in size from 1 1/2 inches to 120 inches,
in service pressures up to 3,000 pounds per square inch, in flow rates from
4 to 300,000 gallons per minute and in operating temperature ranges from 35
to 350 degrees Fahrenheit. The Company markets its fluid measurement
products under several brand names, including "Water Specialties" and
"Penberthy." The Company believes its Water Specialties line of propeller
meters is one of the leading lines of propeller meters in the U.S.,
primarily due to its superior product design and manufacturing.
SERVICES. The Company maintains 19 service, repair and modification
facilities and 12 stocking warehouses in the U.S. and Canada which provide
aftermarket maintenance, repair and pre-sale modification services and
inventory availability for the Company's large installed base of fluid
management products, as well as repair and replacement of fluid management
products of other manufacturers. The market for replacement units, repair
parts and repair services generally offers the Company higher margins and is
less dependent on industry economic conditions than the market for equipment
for new industrial facilities. The Company believes its emphasis on
providing end-users with comprehensive and responsive maintenance,
modification and repair services and inventory availability enhances the
Company's reputation and creates customer loyalty. In calendar 1995,
approximately 50 percent of the Company's net sales of fluid management
products and services were derived from its aftermarket sales of replacement
units, repair parts, service, modification and rental activities.
INDUSTRIAL METALWORKING TOOLS AND MACHINES
The Company maintains the number one or two position in its served markets
for industrial metalworking tools, and has leading market positions in the
manufacture of metalworking machines for general industrial markets. The Company
entered these markets in March 1995 with the acquisition of SPD. The Company has
since increased its presence in the industrial metalworking tools and machines
markets with two additional acquisitions since 1995. The acquisitions of
Olofsson and Astro Punch complemented the Company's capabilities as a leading
manufacturer of highly engineered products. Industrial metalworking tools and
machines include machine systems used for boring and turning processes primarily
in the automotive and general industrial markets, cold forming dies and related
machinery primarily used in the fastener industry and other metalworking tools
and machinery for industrial manufacturers. The Company believes it has been
able to maintain its leading market positions due to the quality of its
products, the continued development of new technologies to enable the high speed
manufacture of high quality fasteners, brand name recognition and excellent
customer service. Industrial metalworking tools and machines accounted for
approximately 13 percent of the Company's net sales in fiscal 1996 on a pro
forma basis and were sold primarily to the automotive and general industrial
markets.
METALWORKING TOOLS. The Company designs, manufactures and distributes a
wide variety of precision metalworking tools to industrial companies that
serve the automotive, appliance, construction, farm equipment, medical and
aerospace industries. The Company's industrial metalworking tools consist
primarily of heading, threading and gundrilling tools. The Company markets
its heading and threading tools, which are used to form a variety of
fasteners and threaded parts, under the "Reed-Rico" and "Astro Punch" brand
names. The Company's gundrilling tools, which are distributed under the
"Eldorado" brand name, are used to drill high quality holes to very close
tolerances in such products as turbine engines, engine blocks, cylinder
heads, transmission shafts, connection rods and medical prostheses.
METALWORKING MACHINES. The Company designs, manufactures and
distributes several types of metalworking machines primarily for the
automotive industry. The Company's industrial
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metalworking machines include threading machines and attachments,
gundrilling machines and computer-controlled specialized machine systems for
boring and turning applications. The Company markets its threading machines
and attachments, which are used to form a variety of threaded parts and
fasteners, under the "Reed-Rico" brand name. The Company's gundrilling
machines, like its gundrilling tools, are distributed under the "Eldorado"
brand name. The Company's specialized machine systems for boring and turning
processes are sold under the "Olofsson" brand name.
POWDERED METAL AND OTHER METAL PRODUCTS
The Company is the largest producer of metal parts manufactured by powdered
metal injection molding, and is a leading manufacturer of specialty metal gears
and tungsten carbide cutting tools and wear parts that are made using a powdered
metal compaction and sintering process. In addition, the Company manufactures
advanced technology, lightweight net shape metal-matrix composite parts using a
pressure infiltration casting process. The Company believes these businesses
have the potential for rapid growth and complement the Company's core
competencies in metals, precision metalworking and the management of complex
manufacturing processes. Powdered metal and other metal products accounted for
approximately 7 percent of the Company's net sales in fiscal 1996 on a pro forma
basis and were sold primarily to the general industrial and automotive markets.
The powdered metal injection molding process is particularly well-suited to
high volume production of small, complicated metal parts for numerous
industries, including computer peripherals, medical, electronics, automotive,
power tools and firearms. The Company believes it can apply its powdered metal
injection molding process to new market opportunities, including specialty hand
tools and bicycle parts and further penetration of the automotive industry. In
addition, the Company manufactures helical gears and tungsten carbide cutting
tools and wear parts using a powdered metal compaction and sintering process for
various industrial markets. The Company also manufactures advanced technology,
lightweight net shape metal-matrix composite parts using a pressure infiltration
casting process. Metal-matrix composite parts have high thermal conductivity and
tightly controlled thermal expansion characteristics, and are used in electronic
applications that require heat dissipation, such as automotive,
telecommunication, aerospace and computer products. The Company also supplies
permanently lubricated metal bearings, bushings and radius plates under the
"Lubrite" brand name for offshore drilling, hydroelectric, bridge, construction
and marine applications. The Company believes the broad range of products and
highest standards of craftsmanship offer it growth opportunities in the numerous
industry applications.
SALES AND DISTRIBUTION
The Company sells its metal components and products into five major market
areas: aerospace, general industrial, power generation and energy, automotive
and other markets, including medical, firearms, ordnance and sporting goods. The
relative size of sales to these markets is shown below for fiscal 1995, 1996,
and 1996 pro forma.
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EDGAR REPRESENTATION OF DATA POINTS USED
IN PRINTED GRAPHIC
FISCAL 1995 ACTUAL
Net Sales $436.4 million
Aerospace 79%
Power Generation and Energy 8%
General Industrial 7%
Automotive 1%
Other 5%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FISCAL 1996 ACTUAL
<S> <C>
Net Sales $556.8 million
Aerospace 68%
Power Generation and Energy 7%
General Industrial 13%
Automotive 6%
Other 6%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
FISCAL 1996 PRO FORMA
<S> <C>
Net Sales $929.5 million
Aerospace 45%
Power Generation and Energy 18%
General Industrial 25%
Automotive 9%
Other 3%
</TABLE>
The Company's dollar volume of sales to the aerospace market increased in
fiscal 1996 on a pro forma basis to $410.5 million from $343.0 million in fiscal
1995 actual, an increase of approximately 20 percent. Sales to the aerospace
market as a percentage of net sales, however, declined from 79 percent in fiscal
1995 to 45 percent in fiscal 1996 on a pro forma basis, primarily as a result of
the Company's acquisitions. The Company continues to benefit from the strength
of the commercial aerospace sector and sales to this industry remain
significant; however, the Company believes its diversification into the power
generation and energy, general industrial and automotive markets will mitigate
the impact to the Company during cyclical downturns in the aerospace industry.
The Company's sales of investment castings are made through a relatively
small number of direct sales personnel located in each business operation and
through field sales representatives located at U.S. and international locations
near the Company's major customers. Industrial metalworking tools, industrial
metalworking machines and powdered metal parts are sold by both the Company's
sales forces and sales representatives in the U.S., Europe and Southeast Asia.
The Company's fluid management products and services are also sold by a direct
sales and marketing staff, and through a worldwide network of independent sales
representatives and distributors. Due to the sophisticated nature of the
Company's products, the Company's sales efforts require technical personnel to
work closely with customers to identify and assist in the development of new
products and product modifications and to provide other services that are
necessary to obtain new and repeat production orders.
Sales to GE accounted for approximately 23 percent, 21 percent, 22 percent
and 13 percent of the Company's net sales in fiscal 1994, 1995, 1996 and 1996 on
a pro forma basis, respectively. Sales to Pratt & Whitney accounted for
approximately 23 percent, 17 percent, 16 percent and 10 percent of the Company's
net sales in fiscal 1994, 1995, 1996 and 1996 on a pro forma basis,
respectively. See "Risk Factors -- Aerospace and Other Industry Cyclicality;
Customer Concentration; Reduced Government Purchases."
COMPETITION
The Company is subject to substantial competition in all of the markets it
serves. Components and products similar to those made by the Company can be made
by competitors using either the same types of manufacturing processes or other
forms of manufacturing. Although the Company believes its manufacturing
processes, technology and experience provide its customers advantages, such as
high quality, competitive prices and physical properties which often meet more
stringent demands, alternative forms of manufacturing can be used to produce
many of the components and products made by the Company. Despite intense
competition, the Company believes it is the number one or two supplier in most
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of its principal markets. Several factors, including long-standing customer
relationships, technical expertise, state-of-the-art facilities and dedicated
employees, aid the Company in maintaining its competitive advantages.
In its precision casting business, the Company's principal competitor is the
Howmet Corporation ("Howmet"). Howmet, which is a joint venture owned by Thiokol
Corporation and The Carlyle Group, has traditionally supplied blades, vanes and
other airfoil castings for aircraft jet engines and industrial gas turbines, and
is believed to hold in excess of 50 percent of the total market for cast
airfoils. Howmet also manufactures steel and titanium structural investment
castings. The Company believes that Howmet is capable of producing structural
castings comparable to all but the largest and most complex of the Company's
structural investment castings. The Company also believes Howmet has the
financial and technical resources to produce castings as large and complex as
those produced by the Company should it decide to do so. The Company's
competitors for large structural castings also include companies engaged in
manufacturing parts through metal forgings, machining and fabrication methods.
Investment casting produces many types of parts at significantly lower cost than
do these alternate production methods.
In its other major business areas, which include fluid management products,
industrial metalworking tools and machines, powdered metal and other metal
products, the Company generally competes with a large number of companies in
each of the markets served. The major competitive factors affecting these other
business areas include product design and quality, product performance, pricing
and product availability.
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MANAGEMENT
The following table sets forth certain information regarding the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- -------------------------------------------------------------------
<S> <C> <C>
William C. McCormick................... 62 Chairman, President and Chief Executive Officer
William D. Larsson..................... 51 Vice President and Chief Financial Officer
Mark Donegan........................... 40 Executive Vice President, President -- PCC Structurals, Inc.
Peter G. Waite......................... 52 Executive Vice President, President -- PCC Airfoils, Inc.
J. Jack Watson......................... 68 Executive Vice President, President -- PCC Flow Technologies, Inc.
John M. Prosser........................ 57 Executive Vice President, President -- PCC Speciality Products,
Inc.
Robert P. Reed......................... 39 President -- Advanced Forming Technology, Inc.
Ty W. Eggemeyer........................ 37 President -- PCC Composites, Inc.
Karen K. Clark......................... 36 Corporate Controller
James A. Johnson....................... 55 Treasurer
Don R. Graber.......................... 52 Director
Roy M. Marvin.......................... 65 Director
Dean T. DuCray......................... 55 Director
Dwight A. Sangrey...................... 56 Director
Peter R. Bridenbaugh................... 56 Director
Steven G. Rothmeier.................... 49 Director
</TABLE>
WILLIAM C. MCCORMICK joined the Company in 1985 as its President and Chief
Operating Officer. He became Chief Executive Officer in 1991 and Chairman in
1994. Prior to joining the Company, Mr. McCormick served in various management
positions with GE.
WILLIAM D. LARSSON has served as Vice President and Chief Financial Officer
of the Company since 1993. He joined the Company in 1980 as Vice President --
Finance. Mr. Larsson was previously employed by the American Motors Corporation
and the Ford Motor Company.
MARK DONEGAN is Executive Vice President of the Company and President of PCC
Structurals, Inc. Mr. Donegan manages the Company's structural aerospace and
certain other investment casting operations in the U.S. and in France. Mr.
Donegan joined the Company in 1985. He was previously employed by GE.
PETER G. WAITE is Executive Vice President of the Company and President of
PCC Airfoils, Inc. Mr. Waite manages the Company's airfoils and certain other
investment casting operations in the U.S. and in England. Mr. Waite joined the
Company in 1980. He was previously employed by AETC in Leeds, UK.
J. JACK WATSON is Executive Vice President of the Company and President of
PCC Flow Technologies, Inc. Mr. Watson manages the Company's fluid management
operations. Mr. Watson served as Chairman, President and Chief Executive Officer
of NEWFLO until its acquisition by the Company in July 1996.
JOHN M. PROSSER is Executive Vice President of the Company and President of
PCC Specialty Products, Inc. Mr. Prosser manages the Company's operations in
industrial metalworking tools and machines, and certain powdered metal
operations. Mr. Prosser served as President of Quamco, Inc. from 1988 until its
purchase by the Company in March 1995.
ROBERT P. REED is President of Advanced Forming Technology, Inc. ("AFT"),
the Company's metal injection molding operation. Before Mr. Reed joined AFT in
1991, he was employed in the Company's structural castings business operations.
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TY W. EGGEMEYER is President of PCC Composites, Inc., the Company's metal
matrix composite operation. Before assuming this position in 1995, Mr. Eggemeyer
served as the Company's Corporate Director of Business Development.
KAREN K. CLARK joined the Company in 1994 as Corporate Controller. Prior to
her employment by the Company, Ms. Clark served as corporate planning manager at
Tektronix, Inc.
JAMES A. JOHNSON has been employed by the Company since 1986, first as
Manager of Accounting and Taxation and since 1993 as Treasurer.
DON R. GRABER has served as a director since 1995 and is President and Chief
Operating Officer of Huffy International. Until July 1996, he was President of
Worldwide Household Products Group of The Black & Decker Corporation.
ROY M. MARVIN has served as a director of the Company since 1967. Mr. Marvin
was Vice President -- Administration of the Company from 1980 until his
retirement in June 1996.
DEAN T. DUCRAY has served as a director since 1996 and is Vice President and
Chief Financial Officer of York International Corporation, a manufacturer of
heating, air conditioning, ventilation and refrigeration equipment.
DWIGHT A. SANGREY has served as a director since 1990 and is President and
Chief Executive Officer of Fraction Biologies, L.L.C., a manufacturer and
distributor of pharmaceutical products. Mr. Sangrey is also a director of
Northwest Natural Gas Company.
PETER R. BRIDENBAUGH has served as a director since 1995 and is Executive
Vice President -- Automotive of Aluminum Co. of America, an integrated producer
of aluminum and other products for the packaging, aerospace, automotive,
building and construction, and commercial and industrial markets.
STEVEN G. ROTHMEIER has served as a director since 1994 and is Chairman and
Chief Executive Officer of Great Northern Capital, a private investment and
merchant banking firm. Mr. Rothmeier is also a director of Honeywell, Inc., E.W.
Blanch Holdings, Inc. and Department 56, Inc.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock and 1,000,000 shares of Preferred Stock.
COMMON STOCK
Holders of Common Stock are entitled to receive dividends as may from time
to time be declared by the Board of Directors of the Company out of funds
legally available therefor. See "Price Range of Common Stock and Dividends."
Holders of Common Stock are entitled to one vote per share on all matters on
which the holders of Common Stock are entitled to vote and do not have any
cumulative voting rights. Holders of Common Stock have no preemptive,
conversion, redemption or sinking fund rights. In the event of a liquidation,
dissolution or winding up of the Company, holders of Common Stock are entitled
to share equally and ratably in the assets of the Company, if any, remaining
after the payment of all liabilities of the Company and the liquidation
preference of any outstanding class or series of Preferred Stock. The
outstanding shares of Common Stock are, and the shares of Common Stock offered
by the Company hereby when issued will be, fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to any
series of Preferred Stock that the Company may issue in the future, as described
below. The Company's Restated Articles of Incorporation limit the personal
liability of a director to the Company or its shareholders for monetary damages
for conduct as a director, except such limitation does not apply to (i) any
breach of the director's duty of loyalty to the Company or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a
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knowing violation of law, (iii) any unlawful distribution or (iv) any
transaction from which the director derived an improper personal benefit.
PREFERRED STOCK
The Board of Directors has the authority to issue Preferred Stock in one or
more series and to fix the number of shares constituting any such series and the
preferences, limitations and relative rights, including dividend rights,
dividend rate, voting rights, terms of redemption, redemption price or prices,
conversion rights and liquidation preferences of the shares constituting any
series, without any further vote or action by the shareholders of the Company.
The issuance of Preferred Stock by the Board of Directors could adversely affect
the rights of holders of Common Stock.
The potential issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company, may discourage bids for the
Common Stock at a premium over the market price of the Common Stock and may
adversely affect the market price of, and the voting and other rights of the
holders of, Common Stock. The Company has no plans to issue shares of Preferred
Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is the Bank of New
York.
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
GENERAL
The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a holder who is not a United States person or entity (a "Non-U.S.
Holder"). For purposes of this discussion, a "Non-U.S. Holder" is any person or
entity that is, as to the United States, a foreign corporation, a non-resident
alien individual, a foreign estate or trust, or a foreign partnership. An alien
individual is treated as a resident of the United States during a calendar year
if the individual (i) is a lawful permanent resident of the United States at any
time during the calendar year, (ii) meets the substantial presence test, or
(iii), if certain conditions are satisfied, elects to be treated as a resident.
The substantial presence test is met if an individual is present in the United
States on at least 31 days in the calendar year and for an aggregate of at least
183 days during the current calendar year and the two preceding calendar years
(counting for such purposes all of the days present in the United States during
the current year, one-third of the days present in the United States during the
immediately preceding year, and one-sixth of the days present in the United
States during the second preceding year). Resident aliens are subject to United
States federal tax as if they were United States citizens.
This discussion does not address all aspects of United States federal income
and estate taxes or consider any specific facts or circumstances that may apply
to a particular Non-U.S. Holder. This discussion does not take into account
provisions of income tax treaties that may be applicable in certain
circumstances, nor does it deal with foreign, state and local consequences that
may be relevant to Non-U.S. Holders. Furthermore, this discussion is based on
current provision of the Internal Revenue Code of 1986, as amended (the "IRC"),
existing and proposed regulations promulgated thereunder, and public
administrative and judicial interpretations thereof, all of which are subject to
changes, which could be applied retroactively. Each prospective purchaser of
Common Stock is advised to consult a tax advisor with respect to current and
possible future tax consequences of acquiring, holding and disposing of Common
Stock.
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DIVIDENDS
Except as described below, dividends paid to a Non-U.S. Holder of Common
Stock will be subject to withholding of United States federal income tax at a 30
percent rate or such lower rate as may be specified by an applicable income tax
treaty, unless the dividends are effectively connected with the conduct of a
trade or business by the Non-U.S. Holder within the United States. If the
dividend is effectively connected with the conduct of a trade or business of the
Non-U.S. Holder within the United States, the dividend generally will be subject
to United States federal income tax on a net income basis at applicable
graduated individual or corporate rates and will be exempt from the 30 percent
withholding tax described above (assuming the necessary certification and
disclosure requirements are met). Any such effectively connected dividends
received by a foreign corporation may, in certain circumstances, be subject to
an additional "branch profits tax" at a 30 percent rate or such lower rate as
may be specified by an applicable income tax treaty. If a dividend is
effectively connected with conduct of a trade or business by a nonpublicly
traded partnership, and any portion of the dividend is allocable under IRC
Section 704 to a foreign partner, United States federal income tax is withheld
at the highest individual rate (if the foreign partner is not a corporation) and
at the highest corporate rate (if the foreign partner is a corporation),
regardless of whether the dividend is distributed to the foreign partner. A
publicly traded partnership is required to withhold tax on such a dividend only
upon actual distribution to a foreign partner, unless it elects to be subject to
the withholding rules applicable to nonpublicly traded partnerships.
Under current United States Treasury regulations, dividends paid to an
address outside the United States are presumed to be paid to a resident of such
country (i) for purposes of the withholding discussed above (unless the payor
has knowledge to the contrary), and (ii), under the current interpretation of
United States Treasury regulations, for purposes of determining the
applicability of a tax treaty rate. Under proposed United States Treasury
regulations not currently in effect, however, a Non-U.S. Holder of Common Stock
who wishes to claim the benefit of an applicable treaty rate would be required
to file certain forms and meet other certification requirements.
A Non-U.S. Holder of Common Stock who is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate, timely claim for
refund with the United States Internal Revenue Service ("Service").
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United States federal
income tax on any gain recognized on a disposition of a share of Common Stock
unless (i) subject to the exception discussed below, the Company is or has been
a "United States real property holding corporation" (a "USRPHC") within the
meaning of IRC Section 897(c)(2) at any time within the shorter of the five-year
period preceding such disposition or the period during which such Non-U.S.
Holder held the Common Stock (the "Required Holding Period"), (ii) the gain is
effectively connected with the conduct of a trade or business within the United
States of the Non-U.S. Holder and, if a tax treaty applies, attributable to a
permanent establishment maintained by the Non-U.S. Holder, (iii) the Non-U.S.
Holder is an individual who holds the share of Common Stock as a capital asset
and is present in the United States for 183 days or more in the taxable year of
the disposition and either (a) such individual has a "tax home" (as defined for
United States federal income tax purposes) in the United States or (b) the gain
is attributable to an office or other fixed place of business maintained in the
United States by such individual, or (iv) the Non-U.S. Holder is subject to tax
pursuant to the Code provisions applicable to certain United States expatriates.
If an individual Non-U.S. Holder falls under clause (ii) or (iv) above, he or
she will be taxed on his or her net gain derived from the sale under regular
United States federal income tax rates. If the individual Non-U.S. Holder falls
only under clause (iii) above, he or she will be subject to a flat 30 percent
tax on the gain derived from the sale which may be offset by losses, allocable
to sources within the United States, from sale or exchange of capital assets at
any time during the year (notwithstanding the fact that he or she is not
considered a resident of the United States). If a Non-U.S. Holder that is a
foreign corporation falls under
36
<PAGE>
clause (ii) above, it will be taxed on its gain under regular graduated United
States federal income tax rates and, in addition, will under certain
circumstances be subject to the branch profits tax equal to 30 percent of its
"effectively connected earnings and profits" within the meaning of the Code for
the taxable year, as adjusted for certain items, unless it qualifies for a lower
rate under an applicable income tax treaty.
A corporation is generally a USRPHC if the fair market value of its United
States real property interests equals or exceeds 50 percent of the sum of the
fair market value of its worldwide real property interests plus its other assets
used or held for use in a trade or business. The Company believes that it is not
currently a USRPHC; however, even if the Company met the test for a USRPHC, a
Non-U.S. Holder would generally not be subject to tax, or withholding in respect
of such tax, on gain from a sale or other disposition of Common Stock solely by
reason of the Company's USRPHC status if the Common Stock is regularly traded on
an established securities market ("regularly traded") during the calendar year
in which such sale or disposition occurs, provided that such holder does not
own, actually or constructively, Common Stock with a fair market value in excess
of 5 percent of the fair market value of all Common Stock outstanding at any
time during the Required Holding Period. The Company believes that the Common
Stock will be treated as regularly traded.
If the Company is or has been a USRPHC within the required Holding Period,
and if a Non-U.S. Holder owns or, at any time during the Required Holding
Period, owned in excess of 5 percent of the fair market value of Common Stock
(as described in the preceding paragraph), such Non-U.S. Holder of Common Stock
would be subject to United States federal income tax at regular graduated rates
under certain rules ("FIRPTA tax") on gain recognized on a sale or other
disposition of such Common Stock. In addition, if the Company is or has been a
USRPHC within the Required Holding Period and if the Common Stock is not treated
as regularly traded, a Non-U.S. Holder (without regard to its ownership
percentage) would be subject to withholding in respect to FIRPTA tax at a rate
of 10 percent of the amount realized on a sale or other disposition of Common
Stock and would be further subject to FIRPTA tax in excess of the amounts
withheld. Any amount withheld pursuant to such withholding tax would be
creditable against such Non-U.S. Holder's United States federal income tax
liability. Non-U.S. Holders are urged to consult their tax advisors concerning
the potential applicability of these provisions.
FEDERAL ESTATE TAXES
Common Stock owned, or treated as owned, by an individual Non-U.S. Holder at
the time of his or her death will be included in such holder's gross estate for
United States federal estate tax purposes, unless an applicable estate tax
treaty provides otherwise.
UNITED STATES INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The Company must report annually to the Service and to each Non-U.S. Holder
of the amount of dividends paid to such holder and the tax withheld with respect
to such dividends. These information reporting requirements apply regardless of
whether withholding is required. Copies of the information returns reporting
such dividends and the withholding may also be made available to the tax
authorities in the country in which the Non-U.S. Holder resides under the
provisions of an applicable income tax treaty or other agreement with the tax
authorities in that country.
Backup withholding of United States federal income tax (which, in general,
is a withholding tax imposed at the rate of 31 percent on certain payments to
persons that fail to furnish certain information under the United States
information requirements) generally will not apply to (i) the payment of
dividends paid on Common Stock to a Non-U.S. Holder at an address outside the
United States or (ii) the payment of the proceeds of the sale of Common Stock to
or through the foreign office of a broker. Under temporary regulations, backup
withholding is not required with respect to payment of proceeds from a sale of
Common Stock through a foreign office of a broker that is a United States person
or a "U.S. related person," although, the Service has issued proposed
regulations that appear to require backup withholding
37
<PAGE>
unless the broker is not required to file an information return with respect to
the payment. In the case of the payment of proceeds from a sale of Common Stock
through a foreign office of a broker that is a United States person or a "U.S.
related person," information reporting is required with respect to the payment
unless the broker has documentary evidence in its files that the owner is a
Non-U.S. Holder (and has no actual knowledge to the contrary) and certain other
requirements are met or the holder otherwise establishes an exemption. As used
above, a "U.S. related person" is (i) a "controlled foreign corporation" for
United States federal income tax purposes, or (ii) a foreign person 50 percent
or more of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment (or for such part of
the period that the broker has been in existence) is derived from activities
that are effectively connected with the conduct of a United States trade or
business. The payment of the proceeds of a sale of shares of Common Stock to or
through a United States office of a broker is subject to information reporting
and possible backup withholding unless the owner certifies its Non-U.S. Holder
status under penalties of perjury or otherwise establishes an exemption. Any
amounts withheld under the backup withholding rules from a payment to a Non-U.S.
Holder will be allowed as a refund or a credit against such Non-U.S. Holder's
United States federal income tax liability, provided that the required
information is furnished to the Service.
These information reporting and backup withholding rules are under review by
the United States Treasury, and their application to the Common Stock could be
changed prospectively by future regulations.
38
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof, the U.S. Underwriters named below have severally agreed
to purchase, and the Company has agreed to sell to them, and the International
Underwriters named below have severally agreed to purchase, and the Company has
agreed to sell to them, the respective number of shares of the Company's Common
Stock set forth opposite the names of such Underwriters below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated..............................................
Goldman, Sachs & Co............................................................
----------
Subtotal..................................................................... 3,200,000
International Underwriters:
Morgan Stanley & Co. International Limited.....................................
Goldman Sachs International....................................................
----------
Subtotal..................................................................... 800,000
----------
Total........................................................................ 4,000,000
----------
----------
</TABLE>
The U.S. Underwriters and the International Underwriters are collectively
referred to as the "Underwriters." The Underwriting Agreement provides that the
obligations of the several Underwriters to pay for and accept delivery of the
shares of Common Stock offered hereby are subject to the approval of certain
legal matters by their counsel and to certain other conditions. The Underwriters
are obligated to take and pay for all of the shares of Common Stock offered
hereby (other than those covered by the over-allotment option described below)
if any such shares are taken.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions, (i)
it is not purchasing any U.S. Shares (as defined below) for the account of
anyone other than a United States or Canadian Person (as defined below) and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any U.S. Shares or distribute any prospectus relating to the U.S. Shares outside
the United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement Between U.S. and International Underwriters,
each International Underwriter has represented and agreed that, with certain
exceptions, (i) it is not purchasing any International Shares (as defined below)
for the account of any United States or Canadian Person and (ii) it has not
offered or sold, and will not offer or sell, directly or indirectly, any
International Shares or distribute any prospectus relating to the International
Shares within the United States or Canada or to any United States or Canadian
Person. With respect to any Underwriter that is a U.S. Underwriter and an
International Underwriter, the foregoing representations and agreements (i) made
by it in its capacity as a U.S. Underwriter shall apply only to shares of Common
Stock purchased by it in its capacity as a U.S. Underwriter, (ii) made by it in
its capacity as an International Underwriter shall apply only to shares of
Common Stock purchased by it in its capacity as an International Underwriter and
(iii) shall not restrict its ability to distribute any prospectus relating to
the shares of Common Stock to any person. The foregoing limitations do not apply
to stabilization transactions or to certain other transactions specified in the
Agreement between U.S. and International Underwriters. As used herein, "United
States or Canadian Person" means any national or resident of the United States
or Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the laws of the United States or Canada or any political
subdivision thereof (other than a branch located outside the United States and
Canada of any United States or Canadian Person) and includes any United States
or Canadian branch of a person who is otherwise not a United States or Canadian
Person. All shares of Common Stock to be purchased by the U.S. Underwriters and
the International Underwriters are referred to herein as the U.S. Shares and the
International Shares, respectively.
39
<PAGE>
Pursuant to the Agreement Between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and the International Underwriters of
any number of shares of Common Stock to be purchased pursuant to the
Underwriting Agreement as may be mutually agreed. The per share price and
currency of any shares sold shall be the Price to Public set forth on the cover
page hereof, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.
Pursuant to the Agreement Between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any shares of Common Stock, directly or indirectly, in any
province or territory of Canada or to, or for the benefit of, any resident of
any province or territory of Canada in contravention of the securities laws
thereof and has represented that any offer of Common Stock in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus in
the province or territory of Canada in which such offer is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
shares of Common Stock a notice stating in substance that, by purchasing such
Common Stock, such dealer represents and agrees that it has not offered or sold,
and will not offer or sell, directly or indirectly, any of such Common Stock in
any province or territory of Canada or to, or for the benefit of, any resident
of any province or territory of Canada in contravention of the securities laws
thereof and that any offer of Common Stock in Canada will be made only pursuant
to an exemption from the requirement to file a prospectus in the province or
territory of Canada in which such offer is made, and that such dealer will
deliver to any other dealer to whom it sells any of such Common Stock a notice
to the foregoing effect.
Each International Underwriter has agreed that: (i) it has not offered or
sold and will not offer or sell any shares of Common Stock to persons in the
United Kingdom ("U.K.") except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the U.K.
within the meaning of the Public Offers of Securities Regulations 1995 (the
"Regulations"); (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the Regulations with respect
to anything done by it in relation to the Common Stock in, from or otherwise
involving the U.K.; and (iii) it has only issued or passed on, and will only
issue or pass on, to any person in the U.K. any document received by it in
connection with the issue of the Common Stock, if that person is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise lawfully be issued or passed on.
The Underwriters propose to offer part of the Common Stock directly to the
public at the Price to Public set forth on the cover page hereof and part to
certain dealers at a price which represents a concession not in excess of $
per share under the public offering price. The Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ a share to other
Underwriters or to certain dealers.
Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of the Prospectus,
to purchase up to 600,000 additional shares of Common Stock at the Price to
Public set forth on the cover page hereof, less underwriting discounts and
commissions. The U.S. Underwriters may exercise such option to purchase solely
for the purpose of covering over-allotments, if any, made in connection with the
offering of the shares of Common Stock offered hereby. To the extent such option
is exercised, each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of such additional
shares as the number set forth next to such U.S. Underwriter's name in the
proceeding table bears to the total number of U.S. Shares as offered hereby.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
40
<PAGE>
The Company and directors and executive officers of the Company have agreed
in the Underwriting Agreement, with certain exceptions, not to (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise, except for the shares to be sold in the
offerings, for a period of at least 90 days from the date of this Prospectus
without the prior written consent of Morgan Stanley & Co. Incorporated, on
behalf of the several Underwriters. If any such consent is given it would not
necessarily be preceded or followed by a public announcement thereof.
LEGAL MATTERS
Certain legal matters in connection with the shares of Common Stock offered
hereby will be passed upon for the Company by Stoel Rives LLP, Portland, Oregon.
Brown & Wood LLP, San Francisco, California, will act as counsel for the
Underwriters.
EXPERTS
The consolidated financial statements of the Company incorporated in this
prospectus by reference to the Annual Report on Form 10-K of Precision Castparts
Corp. for the year ended March 31, 1996 have been so incorporated in reliance on
the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
The consolidated financial statements of The Olofsson Corporation and
subsidiaries as of December 31, 1995, and for the year ended December 31, 1995
included in Amendment No. 1 to the Current Report on Form 8-K/A of PCC dated May
31, 1996 and incorporated by reference in this Prospectus and Registration
Statement of which this Prospectus is a part have been incorporated by reference
herein and therein in reliance on the report of KPMG Peat Marwick LLP,
independent certified public accountants, given on the authority of that firm as
experts in accounting and auditing.
The consolidated financial statements of NEWFLO Corporation at December 31,
1995 and 1994, and for each of the three years in the period ended December 31,
1995, included in Amendment No. 1 to the Current Report on Form 8-K/A of PCC
dated July 31, 1996 and incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon, incorporated by reference
herein, and are incorporated by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
The balance sheet as of June 30, 1996 and the statements of income and cash
flows for the year then ended of AE Turbine Components, Limited incorporated in
this Prospectus by reference to Amendment No. 1 to the Current Report on Form
8-K/A of Precision Castparts Corp. dated July 19, 1996 have been so incorporated
in reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
41
<PAGE>
[LOGO]
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED OCTOBER 25, 1996
4,000,000 SHARES
PRECISION CASTPARTS CORP.
COMMON STOCK
-----------------
OF THE 4,000,000 SHARES OF COMMON STOCK OFFERED, 800,000 SHARES ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS AND 3,200,000 SHARES ARE BEING OFFERED INITIALLY IN THE
UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE
"UNDERWRITERS." ALL OF THE SHARES OF COMMON STOCK OFFERED ARE
BEING SOLD BY THE COMPANY. THE COMPANY'S COMMON STOCK IS
LISTED ON THE NEW YORK, PHILADELPHIA, MIDWEST
AND PACIFIC STOCK EXCHANGES. ON OCTOBER
23, 1996, THE REPORTED LAST SALE
PRICE OF THE COMMON STOCK ON THE
NEW YORK STOCK
EXCHANGE COMPOSITE
TAPE WAS
$48.
SEE "RISK FACTORS" AT PAGE 9 FOR INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
PRICE $ A SHARE
-------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
--------------- --------------- ---------------
<S> <C> <C> <C>
PER SHARE.................................................. $ $ $
TOTAL (3).................................................. $ $ $
</TABLE>
- ------------
(1) THE COMPANY HAS AGREED TO INDEMNIFY THE UNDERWRITERS AGAINST CERTAIN
LIABILITIES, INCLUDING LIABILITIES UNDER THE SECURITIES ACT OF 1933.
(2) BEFORE DEDUCTING EXPENSES PAYABLE BY THE COMPANY ESTIMATED AT $500,000.
(3) THE COMPANY HAS GRANTED TO THE U.S. UNDERWRITERS AN OPTION, EXERCISABLE
WITHIN 30 DAYS OF THE DATE HEREOF, TO PURCHASE UP TO AN AGGREGATE OF
600,000 ADDITIONAL SHARES AT THE PRICE TO PUBLIC, LESS UNDERWRITING
DISCOUNTS AND COMMISSIONS, FOR THE PURPOSE OF COVERING OVER-ALLOTMENTS, IF
ANY. IF THE U.S. UNDERWRITERS EXERCISE SUCH OPTION IN FULL, THE TOTAL
PRICE TO PUBLIC, UNDERWRITING DISCOUNTS AND COMMISSIONS AND PROCEEDS TO
COMPANY WILL BE $ , $ AND $ , RESPECTIVELY. SEE
"UNDERWRITERS."
------------------------
THE SHARES ARE OFFERED, SUBJECT TO PRIOR SALE, WHEN, AS AND IF ACCEPTED BY
THE UNDERWRITERS, AND SUBJECT TO APPROVAL OF CERTAIN LEGAL MATTERS BY BROWN &
WOOD LLP, COUNSEL FOR THE UNDERWRITERS. IT IS EXPECTED THAT THE DELIVERY OF THE
SHARES WILL BE MADE ON OR ABOUT , 1996, AT THE OFFICE OF MORGAN
STANLEY & CO. INCORPORATED, NEW YORK, N.Y., AGAINST PAYMENT THEREFOR IN SAME DAY
FUNDS.
-------------------
MORGAN STANLEY & CO. GOLDMAN SACHS INTERNATIONAL
INTERNATIONAL
, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by registrant in connection with
the sale of the Common Stock being registered. All amounts are estimates except
the registration fee, the NYSE Listing Fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee.......................................... $ 76,345
NYSE listing fee.......................................... 17,500
NASD filing fee........................................... 22,640
Blue Sky fees and expenses, including legal fees.......... 15,000
Accounting fees and expenses.............................. 80,000
Legal fees and expenses................................... 125,000
Transfer agent and registrar fees......................... 5,000
Printing and engraving.................................... 125,000
Miscellaneous............................................. 33,515
---------
Total................................................. $ 500,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article VI of the Company's Restated Articles of Incorporation (the
"Articles"), authorizes indemnification of current or former directors or
officers of the Registrant to the fullest extent permitted by law. In addition,
the Company has entered into indemnity agreements with certain of its officers
and directors. The Bylaws of the Company require indemnification of officers and
directors to the fullest extent permitted by the Oregon Business Corporation Act
(the "Act"). The effects of the Articles, the Bylaws, the Act, and the indemnity
agreements (the "Indemnification Provisions") are summarized as follows:
(a) The Indemnification Provisions grant a right of indemnification in
respect of any action, suit or proceeding (other than an action by or in the
right of the Company) against expenses (including attorney fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred, if
the person concerned acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
Company, was not adjudged liable on the basis of receipt of an improper
personal benefit and, with respect to any criminal action or proceeding, had
no reasonable cause to believe the conduct was unlawful. The termination of
an action, suit or proceeding by judgment, order, settlement, conviction or
plea of nolo contendere does not, of itself, create a presumption that the
person did not meet the required standards of conduct.
(b) The Indemnification Provisions grant a right of indemnification in
respect of any action or suit by or in the right of the Company against the
expenses (including attorney fees) actually and reasonably incurred if the
person concerned acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the Company,
except that no right of indemnification will be granted if the person is
adjudged to be liable to the Company.
(c) Every person who has been wholly successful on the merits of a
controversy described in (a) or (b) above is entitled to indemnification as
a matter of right.
(d) Because the limits of permissible indemnification under Oregon law
are not clearly defined, the Indemnification Provisions may provide
indemnification broader than that described in (a) and (b).
(e) The Company may advance to a director or officer the expenses
incurred in defending any action, suit or proceeding in advance of its final
disposition if the director or officer affirms in good
II-1
<PAGE>
faith that he or she has met the standard of conduct to be entitled to
indemnification as described in (a) or (b) above and undertakes to repay any
amount advanced if it is determined that the person did not meet the
required standard of conduct.
The Registrant may obtain insurance for the protection of its directors and
officers against any liability asserted against them in their official
capacities.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
4.1 Restated Articles of Incorporation, as amended (incorporated by reference to
Exhibit 3.1 to Amendment No. 3 to the Company's Registration Statement on Form
8A/A, filed September 27, 1996 (the "Form 8A/A"))
4.2 Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 to
the Company's Form 8A/A)
5.1 Opinion of Stoel Rives LLP
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Stoel Rives LLP (contained in their opinion filed as Exhibit 5.1).
*24.1 Power of Attorney of the directors and certain officers of the Company (included
on Page II-5 of the Registration Statement)
</TABLE>
- ---------
* Filed September 27, 1996.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, (the "Securities Act") the information omitted from the
form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b) (1) or (4) or 497 (h) under the Securities Act shall
be deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934, as amended, (the "Exchange Act") (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
II-2
<PAGE>
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PORTLAND,
STATE OF OREGON, ON OCTOBER 25, 1996.
PRECISION CASTPARTS CORP.
By: /s/ WILLIAM C. MCCORMICK
-----------------------------------
William C. McCormick
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
FOLLOWING CAPACITIES EFFECTIVE ON OCTOBER 25, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------- --------------------------------------------
<S> <C>
Chairman of the Board,
/s/ WILLIAM C. MCCORMICK President and Chief
- ------------------------------------------- Executive Officer
William C. McCormick (Principal Executive Officer)
/s/ WILLIAM D. LARSSON Vice President and
- ------------------------------------------- Chief Financial Officer
William D. Larsson (Principal Financial and Accounting Officer)
*/s/ PETER R. BRIDENBAUGH
- ------------------------------------------- Director
Peter R. Bridenbaugh
*/s/ DON R. GRABER
- ------------------------------------------- Director
Don R. Graber
*/s/ DEAN T. DUCRAY
- ------------------------------------------- Director
Dean T. DuCray
*/s/ ROY M. MARVIN
- ------------------------------------------- Director
Roy M. Marvin
*/s/ STEVEN G. ROTHMEIER
- ------------------------------------------- Director
Steven G. Rothmeier
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------------- --------------------------------------------
<S> <C>
*/s/ DWIGHT A. SANGREY
- ------------------------------------------- Director
Dwight A. Sangrey
*By: /s/ WILLIAM C. MCCORMICK
- -------------------------------------------
William C. McCormick
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE NUMBER
- ------------- --------------------------------------------------------------------------------------- -------------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
4.1 Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit
3.1 to Amendment No. 3 to the Company's Registration Statement on Form 8A/A, filed
September 27, 1996 (the "Form 8A/A"))
4.2 Bylaws of the Company, as amended (incorporated by reference to Exhibit 3.2 to the
Company's Form 8A/A)
5.1 Opinion of Stoel Rives LLP
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Ernst & Young LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of Stoel Rives LLP (contained in their opinion filed as Exhibit 5.1).
*24.1 Power of Attorney of the directors and certain officers of the Company (included on
Page II-5 of the Registration Statement)
</TABLE>
- ---------
* Filed September 27, 1996.
<PAGE>
4,000,000 Shares
PRECISION CASTPARTS CORP.
COMMON STOCK
UNDERWRITING AGREEMENT
November , 1996
<PAGE>
November , 1996
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Morgan Stanley & Co. International Limited
Goldman Sachs International
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
Precision Castparts Corp., an Oregon corporation (the "Company"), proposes
to issue and sell to the several Underwriters (as defined below) 4,000,000
shares of the Common Stock of the Company (the "Firm Shares").
It is understood that, subject to the conditions hereinafter stated,
3,200,000 Firm Shares (the "U.S. Firm Shares") will be sold to the several U.S.
Underwriters named in Schedule I hereto (the "U.S. Underwriters") in connection
with the offering and sale of such U.S. Firm Shares in the United States and
Canada to United States and Canadian Persons (as such terms are defined in the
Agreement Between U.S. and International Underwriters of even date herewith),
and 800,000 Firm Shares (the "International Shares") will be sold to the several
International Underwriters named in Schedule II hereto (the "International
Underwriters") in connection with the offering and sale of such International
Shares outside the United States and Canada to persons other than United States
and Canadian Persons. Morgan Stanley & Co. Incorporated and Goldman, Sachs &
Co. shall act as representatives (the "U.S. Representatives") of the several
U.S. Underwriters, and Morgan Stanley & Co. International Limited and Goldman
Sachs International shall act as representatives (the "International
Representatives") of the several International Underwriters. The
U.S. Underwriters and the International Underwriters are hereinafter referred to
as the "Underwriters."
The Company also proposes to issue and sell to the several U.S.
Underwriters not more than an additional 600,000 shares of its Common Stock (the
"Additional Shares") if and to the extent that the U.S. Representatives shall
have determined to exercise, on behalf of the U.S. Underwriters, the right to
purchase such shares of Common Stock granted to the U.S. Underwriters in
Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter
1
<PAGE>
collectively referred to as the "Shares." The shares of Common Stock of the
Company to be outstanding after giving effect to the sales contemplated hereby
are hereinafter referred to as the "Common Stock."
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement relating to the Shares. The registration
statement contains two prospectuses to be used in connection with the offering
and sale of the Shares: the U.S. prospectus, to be used in connection with the
offering and sale of Shares in the United States and Canada to United States and
Canadian Persons, and the international prospectus, to be used in connection
with the offering and sale of Shares outside the United States and Canada to
persons other than United States and Canadian Persons. The international
prospectus is identical to the U.S. prospectus except for the outside front
cover page. The registration statement as amended at the time it becomes
effective, including the information (if any) deemed to be part of the
registration statement at the time of effectiveness pursuant to Rule 430A under
the Securities Act of 1933, as amended (the "Securities Act"), is hereinafter
referred to as the "Registration Statement." If the Company has filed an
abbreviated registration statement to register additional shares of Common Stock
pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement. The U.S.
prospectus and the international prospectus in the respective forms first used
to confirm sales of Shares are hereinafter collectively referred to as the
"Prospectus." All references herein to the Registration Statement and the
Prospectus include the documents incorporated therein by reference.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect,
and no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, (ii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all material
respects with the Securities Act and the applicable rules and regulations
of the Commission thereunder and (iii) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph 1(b) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
2
<PAGE>
(c) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may
be, conformed in all material respects to the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as applicable, and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents become effective or are filed with the Commission, as
the case may be, will conform in all material respects to the requirements
of the Securities Act or the Exchange Act, as applicable, and the rules and
regulations of the Commission thereunder and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(d) The accountants who have audited certain financial statements
included in the Registration Statement and the Prospectus are independent
public accountants as required by the Securities Act and the rules and
regulations thereunder.
(e) The financial statements (together with the related notes
thereto) included in the Registration Statement and the Prospectus present
fairly the financial position of the Company and its consolidated
subsidiaries as of and at the dates indicated and the results of their
operations for the periods specified, except as otherwise disclosed
therein; and except as otherwise stated therein or in the Registration
Statement and the Prospectus, said financial statements have been prepared
in conformity with generally accepted accounting principles in the United
States applied on a consistent basis; and the PRO FORMA consolidated
financial data of the Company and its subsidiaries and the related notes
thereto included in the Registration Statement and Prospectus have been
prepared in accordance with the Commission's rules and regulations with
respect to PRO FORMA financial data, have been and will be properly
compiled on the bases described therein and the assumptions used in the
preparation thereof are and will be reasonable and the adjustments used
therein are and will be appropriate to give effect to the transactions and
circumstances referred to therein.
(f) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(g) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its
3
<PAGE>
incorporation, has the corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.
(h) This Agreement has been duly authorized, executed and delivered
by the Company.
(i) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(j) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and
non-assessable.
(k) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights.
(l) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene
any provision of applicable law or the certificate of incorporation or by-
laws of the Company or any agreement or other instrument binding upon the
Company or any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except
such as may be required by the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.
(m) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that
set forth in the Prospectus (exclusive of any amendments or supplements
thereto subsequent to the date of this Agreement).
(n) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or
the Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
4
<PAGE>
(o) No labor dispute with the employees of the Company or any of its
subsidiaries exists or, to the best of the Company's knowledge, is imminent
which is reasonably likely to have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(p) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in
all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(q) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended.
(r) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(s) In the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates associated costs and
liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties). On the basis of such review, the Company has reasonably
concluded that, other than as disclosed in the Registration Statement, such
associated costs and liabilities would not, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(t) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such property by the
Company and its subsidiaries; and any real property and buildings held
under lease by the Company and its subsidiaries which is material to the
business of
5
<PAGE>
the Company and its subsidiaries are held by them under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries, in each case except as
described in or contemplated by the Prospectus.
(u) The Company, directly or through its subsidiaries, owns or
possesses or believes it can acquire or obtain the right to use on
reasonable terms all material trademarks, service marks, trade names,
patents, patent rights, licenses, inventions, copyrights and know-how
employed by them in connection with the business now operated by them and
(i) neither the Company nor any of its subsidiaries has received any notice
of infringement of or conflict with asserted rights of others with respect
to any of the foregoing which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would result in any material
adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its subsidiaries, taken
as a whole, and (ii) the Company and each of its subsidiaries has fulfilled
and performed all of its material obligations with respect to any of the
foregoing and no event has occurred which allows, or after notice or lapse
of time would allow, revocation, termination thereof or results in any
other material impairment of the rights of the holder of any of the
foregoing.
(v) The Company and its subsidiaries possess such certificates,
authorizations or permits issued by the appropriate state, federal or
foreign regulatory agencies or bodies necessary to conduct their respective
businesses, and neither the Company nor any of its subsidiaries has
received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a material adverse change in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole.
(w) The Company and each of its subsidiaries (including, without
limitation, real property, assets, equipment and personal property owned or
held under lease by the Company or its subsidiaries) are insured by
recognized financially sound and reputable insurance companies in such
amounts with such deductibles and covering such losses and risks as are
prudent and customary in the businesses in which they are engaged; and
neither the Company nor any subsidiary believes that it will not be able to
renew its existing insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not materially and adversely
affect the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, except as
described in or contemplated by the Prospectus.
(x) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to file
6
<PAGE>
a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement.
(y) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or
with any person or affiliate located in Cuba.
2. Any certificate signed by any officer of the Company and delivered to
the U.S. Representatives, the International Representatives or to counsel for
the Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
3. AGREEMENTS TO SELL AND PURCHASE. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedules I and II
hereto opposite its names at U.S. $ a share (the "Purchase Price").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the U.S. Underwriters the Additional Shares, and the U.S. Underwriters shall
have a one-time right to purchase, severally and not jointly, up to 600,000
Additional Shares at the Purchase Price. If the U.S. Representatives, on behalf
of the U.S. Underwriters, elect to exercise such option, the U.S.
Representatives shall so notify the Company in writing not later than 30 days
after the date of this Agreement, which notice shall specify the number of
Additional Shares to be purchased by the U.S. Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 5 hereof solely for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each U.S. Underwriter agrees, severally
and not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as the U.S. Representatives may
determine) that bears the same proportion to the total number of Additional
Shares to be purchased as the number of U.S. Firm Shares set forth in Schedule I
hereto opposite the name of such U.S. Underwriter bears to the total number of
U.S. Firm Shares.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 90 days after the date of the Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock (whether such shares or any such securities are now owned by such
Seller or are
7
<PAGE>
hereafter acquired) or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Shares to be sold hereunder, (B) the issuance by the Company of shares of
Common Stock upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof of which the Underwriters have been
advised in writing or as disclosed in the Registration Statement and (C) the
grant of stock options or other rights to purchase stock pursuant to the
Company's employee stock purchase plan or any stock option or other compensation
plan of the Company disclosed in the Registration Statement.
4. TERMS OF PUBLIC OFFERING. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at $ a
share (the "Public Offering Price") and to certain dealers selected by you at a
price that represents a concession not in excess of $ a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $ a share, to any Underwriter or to
certain other dealers.
5. PAYMENT AND DELIVERY. Payment for the Firm Shares to be sold by the
Company shall be made to the Company in Federal or other funds immediately
available in New York City against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 A.M., New York City
time, on , 1996, or at such other time on the same or such other date, not
later than , 1996, as shall be designated in writing by you. The time and date
of such payment are hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several U.S. Underwriters
at 10:00 A.M., New York City time, on the date specified in the notice described
in Section 3 or at such other time on the same or on such other date, in any
event not later than , 1996, as shall be designated in writing by the U.S.
Representatives. The time and date of such payment are hereinafter referred to
as the "Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
8
<PAGE>
6. CONDITIONS TO THE UNDERWRITERS' OBLIGATIONS. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any of the Company's
securities by any "nationally recognized statistical rating
organization," as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement) that, in your judgment, is
material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner
contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in clause (a)(i) above and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the best
of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an opinion of
Stoel Rives LLP, counsel for the Company, dated the Closing Date, to the effect
that:
(i) the Company has been duly incorporated, is validly existing
as a corporation under the laws of the jurisdiction of its incorporation,
has the corporate power and authority to own its property and to conduct
its business as described in the Prospectus and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to be so
qualified or be in good
9
<PAGE>
standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(ii) each subsidiary of the Company which is a "significant
subsidiary" (as such term is defined in Regulation S-X promulgated by the
Commission) and any subsidiary of the Company included by name in the Pro
Forma Combined Financial Statements contained in the Registration Statement
has been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole;
(iii) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(iv) the shares of Common Stock outstanding prior to the issuance
of the Shares have been duly authorized and are validly issued, fully paid
and non-assessable;
(v) the Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will
not be subject to any preemptive or similar rights;
(vi) this Agreement has been duly authorized, executed and
delivered by the Company;
(vii) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will
not contravene any provision of applicable law or the certificate of
incorporation or by-laws of the Company or, to the best of such counsel's
knowledge, any agreement or other instrument binding upon the Company or
any of its subsidiaries that is material to the Company and its
subsidiaries, taken as a whole, or, to the best of such counsel's
knowledge, any judgment, order or decree of any governmental body, agency
or court having jurisdiction over the Company or any subsidiary, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company
of its obligations under this Agreement, except such as may be required by
the securities or Blue Sky laws of the various states in connection with
the offer and sale of the Shares by the U.S. Underwriters;
(viii) the statements (A) in the Prospectus under the captions
"Certain United States Tax Consequences to Non-United States Holders" and
"Description of Capital Stock" and (B) in the Registration Statement in
Item 15, in each case insofar as such statements constitute summaries of
the legal matters, documents or proceedings
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<PAGE>
referred to therein, fairly present the information called for with respect
to such legal matters, documents and proceedings and fairly summarize the
matters referred to therein;
(ix) each document incorporated by reference in the Prospectus or
any further amendment or supplement thereto made by the Company prior to
the Closing Date (other than the financial statements and other financial
and statistical data and related schedules therein, as to which such
counsel need express no opinion), when it became effective or was filed
with the Commission, as the case may be, appeared on its face to comply as
to form in all material respects with the requirements of the Securities
Act or the Exchange Act, as applicable, and the rules and regulations of
the Commission thereunder;
(x) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any
of its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required;
(xi) the Company is not and, after giving effect to the offering
and sale of the Shares and the application of the proceeds thereof as
described in the Prospectus, will not be an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended; and
(xii) (A) such counsel is of the opinion that the Registration
Statement and Prospectus (except for financial statements and schedules and
other financial and statistical data included therein as to which such
counsel need not express any opinion) comply as to form in all material
respects with the Securities Act and the applicable rules and regulations
of the Commission thereunder, (B) nothing has come to such counsel's
attention that has caused such counsel to believe that (except for
financial statements and schedules and other financial and statistical data
as to which such counsel need not express any belief) the Registration
Statement and the prospectus included therein at the time the Registration
Statement became effective contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (C) nothing has
come to such counsel's attention that has caused such counsel to believe
that (except for financial statements and schedules and other financial
and statistical data as to which such counsel need not express any belief)
the Prospectus contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) The Underwriters shall have received on the Closing Date an opinion
of Brown & Wood LLP, counsel for the Underwriters, dated the Closing Date,
covering the
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<PAGE>
matters referred to in subparagraphs (v), (vi), (viii) (but only as to the
statements in the Prospectus under "Description of Capital Stock") and (xii) of
paragraph (c) above.
With respect to subparagraph (xii) of paragraph (c) above, Stoel Rives LLP
and Brown & Wood LLP may state that their opinion and belief are based upon
their participation in the preparation of the Registration Statement and
Prospectus and any amendments or supplements thereto and review and discussion
of the contents thereof, but are without independent check or verification,
except as specified.
The opinion of Stoel Rives LLP described in paragraph (c) above shall be
rendered to the Underwriters at the request of the Company and shall so state
therein.
(e) The Underwriters shall have received, on each of the date hereof and
the Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form, and substance satisfactory to the Underwriters, from Price
Waterhouse LLP, independent public accountants, containing statements and
information of the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus; PROVIDED
that the letter delivered on the Closing Date shall use a "cut-off date" not
earlier than the date hereof.
(f) The "lock-up" agreements, each substantially in the form of Exhibit A
hereto, between you and certain officers and directors of the Company relating
to sales and certain other dispositions of shares of Common Stock or certain
other securities, delivered to you on or before the date hereof, shall be in
full force and effect on the Closing Date.
(g) At the date of this Agreement, the Company shall have furnished for
review by the U.S. Representatives and the International Representatives copies
of such further information, certificates and documents as they may reasonably
request.
The several obligations of the U.S. Underwriters to purchase Additional
Shares hereunder are subject to the delivery to the U.S. Underwriters on the
Option Closing Date of such documents as they may reasonably request with
respect to the good standing of the Company, the due authorization and issuance
of the Additional Shares and other matters related to the issuance of the
Additional Shares.
7. COVENANTS OF THE COMPANY. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, three signed copies of the
Registration Statement (including exhibits thereto and documents incorporated by
reference) and for delivery to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto) and to furnish to you in New
York City, without charge, prior to 10:00 A.M. New York City time on the
business day next succeeding the date of this Agreement and during the period
mentioned in paragraph (c) below, as many copies of the Prospectus, any
documents incorporated therein by reference, and any supplements and amendments
thereto or
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<PAGE>
to the Registration Statement as you may reasonably request. The terms
"supplement" and "amendment" or "amend" as used in this Agreement shall include
all documents subsequently filed by the Company with the Commission pursuant to
the Exchange Act that are deemed to be incorporated by reference in the
Prospectus.
(b) Before amending or supplementing the Registration Statement or the
Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public offering of
the Shares as in the opinion of counsel for the Underwriters the Prospectus is
required by law to be delivered in connection with sales by an Underwriter or
dealer, any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to comply
with applicable law, forthwith to prepare, file with the Commission and furnish,
at its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been sold by
you on behalf of the Underwriters and to any other dealers upon request, either
amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and to
you as soon as practicable an earnings statement covering the twelve-month
period ending , 1997 that satisfies the provisions of Section 11(a) of the
Securities Act and the rules and regulations of the Commission thereunder.
8. EXPENSES. Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, the Company agrees to
pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with
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the offer and sale of the Shares under state securities laws and all expenses in
connection with the qualification of the Shares for offer and sale under state
securities laws as provided in Section 7(d) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky or Legal
Investment memorandum, (iv) all filing fees and disbursements of counsel to the
Underwriters incurred in connection with the review and qualification of the
offering of the Shares by the National Association of Securities Dealers, Inc.,
(v) the cost of printing certificates representing the Shares, (vi) the costs
and charges of any transfer agent, registrar or depositary, (vii) the costs and
expenses of the Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the Shares,
including, without limitation, expenses associated with the production of road
show slides and graphics, fees and expenses of any consultants engaged in
connection with the road show presentations with the prior approval of the
Company, travel and lodging expenses of the representatives and officers of the
Company and any such consultants, and the cost of any aircraft chartered in
connection with the road show, and (viii) all other costs and expenses incident
to the performance of the obligations of the Company hereunder for which
provision is not otherwise made in this Section. It is understood, however,
that except as provided in this Section, Section 9 entitled "Indemnity and
Contribution", and the last paragraph of Section 11 below, the Underwriters will
pay all of their costs and expenses, including fees and disbursements of their
counsel, stock transfer taxes payable on resale of any of the Shares by them and
any advertising expenses connected with any offers they may make.
9. INDEMNITY AND CONTRIBUTION. (a) The Company agrees to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein; PROVIDED, HOWEVER, that the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting any such losses, claims, damages or
liabilities purchased Shares, or any person controlling such Underwriter, if a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such losses, claims, damages or
liabilities.
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<PAGE>
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, the directors of the Company, the officers of the
Company who sign the Registration Statement and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) of this Section 9, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (i) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Underwriters and all persons, if any, who
control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and (ii) the fees and expenses
of more than one separate firm (in addition to any local counsel) for the
Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of either such
Section, and that all such fees and expenses shall be reimbursed as they are
incurred. In the case of any such separate firm for the Underwriters and such
control persons of any Underwriters, such firm shall be designated in writing by
Morgan Stanley & Co. Incorporated. In the case of any such separate firm for
the Company, and such directors, officers and control persons of the Company,
such firm shall be designated in writing by the Company. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and
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against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) To the extent the indemnification provided for in paragraph (a) or
(b) of this Section 9 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party or parties on the other hand from the offering of the Shares
or (ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the indemnifying party or parties on the one hand and of the indemnified party
or parties on the other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other hand in connection
with the offering of the Shares shall be deemed to be in the same respective
proportions as the net proceeds from the offering of the Shares (before
deducting expenses) received by the Company and the total underwriting discounts
and commissions received by the Underwriters, in each case as set forth in the
table (including the footnotes thereto) on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Shares. The relative fault of the
Company on the one hand and the Underwriters on the other hand shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Underwriters' respective obligations to contribute pursuant to this Section 9
are several in proportion to the respective number of Shares they have purchased
hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just or
equitable if contribution pursuant to this Section 9 were determined by PRO RATA
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in paragraph (d) of
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this Section 9. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this Section 9 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this Section 9
and the representations, warranties and other statements of the Company
contained in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter, or
the Company, its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Shares.
10. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, the New York
Stock Exchange, the American Stock Exchange or the National Association of
Securities Dealers, Inc., (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter market, (iii) a
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your judgment, is material
and adverse and (b) in the case of any of the events specified in clauses (a)(i)
through (iv), such event, singly or together with any other such event, makes
it, in your judgment, impracticable to market the Shares on the terms and in the
manner contemplated in the Prospectus.
11. EFFECTIVENESS; DEFAULTING UNDERWRITERS. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I or II, as the case may be, bears
to the
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aggregate number of Firm Shares set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as you may specify, to
purchase the Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase on such date; PROVIDED that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 11 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Firm Shares and the aggregate number of Firm Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Firm Shares to be purchased, and arrangements satisfactory
to you and the Company for the purchase of such Firm Shares are not made within
36 hours after such default, this Agreement shall terminate without liability on
the part of any non-defaulting Underwriter or the Company. In any such case
either you or the Company shall have the right to postpone the Closing Date, but
in no event for longer than seven days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. If, on the Option Closing Date, any
U.S. Underwriter or Underwriters shall fail or refuse to purchase Additional
Shares and the aggregate number of Additional Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Additional
Shares to be purchased, the non-defaulting U.S. Underwriters shall have the
option to (i) terminate their obligation hereunder to purchase Additional Shares
or (ii) purchase not less than the number of Additional Shares that such non-
defaulting U.S. Underwriters would have been obligated to purchase in the
absence of such default. Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
12. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
13. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
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14. HEADINGS. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very Truly Yours,
PRECISION CASTPARTS CORP.
By
-----------------------------------
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Acting severally on behalf of themselves and the
several U.S. Underwriters named in
Schedule I hereto.
By Morgan Stanley & Co. Incorporated
By
------------------------------------
Name:
Title:
Morgan Stanley & Co. International Limited
Goldman Sachs International
Acting severally on behalf of themselves and the
several International Underwriters named in
Schedule II hereto
By Morgan Stanley & Co. International Limited
By
------------------------------------
Name:
Title:
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SCHEDULE I
U.S. UNDERWRITERS
Number of Firm Shares
Underwriter To Be Purchased
- ----------- --------------------------
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
---------
Total U.S. Firm Shares . . . . . . . . . . . . 3,200,000
---------
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SCHEDULE II
INTERNATIONAL UNDERWRITERS
Number of Firm Shares
Underwriter To Be Purchased
- ----------- --------------------------
Morgan Stanley & Co. International Limited
Goldman Sachs International
-------
Total International Firm Shares . . . . . . . 800,000
-------
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EXHIBIT A
FORM OF LOCK-UP LETTER
, 1996
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Morgan Stanley & Co. International Limited
Goldman Sachs International
c/o Morgan Stanley & Co. International Limited
25 Cabot Square
Canary Wharf
London E14 4QA
England
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Morgan Stanley & Co. International Limited ("MSIL") propose to
enter into an Underwriting Agreement (the "Underwriting Agreement") with
Precision Castparts Corp., an Oregon corporation (the "Company"), providing for
the public offering (the "Public Offering") by the several Underwriters,
including Morgan Stanley and MSIL (the "Underwriters"), of up to 4,600,000
shares (the "Shares") of the Common Stock, without par value, of the Company
(the "Common Stock").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 90 days after the date of the final prospectus relating
to the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly (except to donees who agree to be
similarly bound), any shares of Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock (whether such shares or any such
securities are now owned by the undersigned or are hereafter acquired), or (2)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of the Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall
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not apply to the sale of any Shares to the Underwriters pursuant to the
Underwriting Agreement. In addition, the undersigned agrees that, without the
prior written consent of Morgan Stanley on behalf of the Underwriters, it will
not, during the period commencing on the date hereof and ending 90 days after
the date of the Prospectus, make any demand for or exercise any right with
respect to, the registration of any shares of Common Stock or any security
convertible into or exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
--------------------------------
(Name)
--------------------------------
(Address)
A-2
<PAGE>
[LETTERHEAD]
EXHIBIT 5.1
October 25, 1996
Board of Directors
Precision Castparts Corp.
4650 SW Macadam Avenue, Suite 440
Portland, Oregon 97201
We have acted as counsel for Precision Castparts Corp., an Oregon
corporation, (the "Company") in connection with the preparation and filing of a
Registration Statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended, covering 4,600,000 shares of Common Stock of
the Company (the "Shares"), including 600,000 shares that are subject to an
option granted to the underwriters solely to cover overallotments, if any. We
have reviewed the corporate action of the Company in connection with this matter
and have examined the documents, corporate records and other instruments we
deemed necessary for the purpose of this opinion.
Based on the foregoing, it is our opinion that:
(1) The Company is a corporation existing under the laws of the state of
Oregon; and
(2) The Shares have been duly authorized and, when issued and sold in the
manner described in the Registration Statement and in accordance with
resolutions adopted by the Board of Directors of the Company, and when payment
therefor shall have been received by the Company, will be legally issued, fully
paid and nonassessable.
We consent to the use of our name in the Registration Statement and in
the Prospectus filed as a part thereof and to the filing of this opinion as an
exhibit to the Registration Statement.
Very truly yours,
/s/ Stoel Rives LLP
STOEL RIVES LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
April 25, 1996 except as to Note "Subsequent Event," which is as of May 31,
1996, which appears on page 27 of the 1996 Annual Report to Shareholders of
Precision Castparts Corp., which is incorporated by reference in Precision
Castparts Corp.'s Annual Report on Form 10-K for the year ended March 31, 1996.
We also consent to the incorporation by reference of our report on the Financial
Statement Schedules, which appears on page 26 of such Annual Report on Form
10-K. We also consent to the incorporation by reference of our report dated
September 18, 1996 relating to the financial statements of AE Turbine
Components, Ltd. (a branch of T&N plc), for the twelve months ended June 30,
1996, which appears on page 4 of the Current Report on Form 8-K/A dated July 19,
1996. We also consent to the references to us under the headings "Experts" and
"Selected Financial Data" in such Prospectus. However, it should be noted that
Price Waterhouse LLP has not prepared or certified such "Selected Financial
Data."
PRICE WATERHOUSE LLP
Portland, Oregon
October 25, 1996
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Precision Castparts
Corp. for the registration of 4,600,000 shares of its common stock and to the
incorporation by reference therein of our report dated February 23, 1996, with
respect to the consolidated financial statements of NEWFLO Corporation included
in its Annual Report (Form 10-K) for the year ended December 31, 1995, filed
with the Securities and Exchange Commission.
Ernst & Young LLP
Austin, Texas
October 25, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Precision Castparts Corp.:
We consent to the incorporation by reference in this registration statement
and prospectus on Form S-3 of Precision Castparts Corp. of our report dated
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, 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 ended December 31, 1995, which report appears in the
Form 8-K/A of Precision Castparts Corp. dated May 31, 1996.
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in this Registration
Statement and Prospectus.
KPMG Peat Marwick LLP
Lansing, Michigan
October 25, 1996
