As filed with the Securities and Exchange Commission on September 27, 1996
Registration No. 333-____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
PRECISION CASTPARTS CORP.
(Exact name of registrant as specified in its charter)
OREGON 93-0460598
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4600 S.E. HARNEY DRIVE WILLIAM D. LARSSON
PORTLAND, OREGON 97206 VICE PRESIDENT AND
(503) 777-3881 CHIEF FINANCIAL OFFICER
(Address, including zip code, and 4600 S.E. HARNEY DRIVE
telephone number, including area code, PORTLAND, OREGON 97206
of registrant's principal executive (503) 777-3881
offices) (Name, address, including zip code,
and telephone number, including
area code of agent for service)
--------------------
COPIES TO:
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)
--------------------
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. / /
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===============================================================================================================
PROPOSED
TITLE OF EACH CLASS PROPOSED MAXIMUM MAXIMUM
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 4,600,000 shares $48.13 $221,398,000 $76,345
===============================================================================================================
<FN>
(1) Includes 600,000 shares which the Underwriters have the option to
purchase to cover any over-allotments.
(2) Determined solely for the purpose of calculating the Registration
Fee pursuant to Rule 457 of the General Rules and Regulations
under the Securities Act of 1933.
</FN>
</TABLE>
--------------------
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 by 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.
- --------------------------------------------------------------------------------
PROSPECTUS (Subject to Completion)
Issued September 27, 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 September 26, 1996, the
reported last sale price of the Common Stock on the New York
Stock Exchange Composite Tape was $50 7/8.
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)....................... $ $ $
- --------------
<FN>
(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."
</FN>
</TABLE>
--------------------
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
Page
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
Risk Factors............................................................... 9
Use of Proceeds............................................................ 12
Price Range of Common Stock and Dividends.................................. 13
Capitalization............................................................. 14
Selected Historical Consolidated Financial Data............................ 15
Pro Forma Combined Financial Statements.................................... 17
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................................. 23
Business................................................................... 27
Management................................................................. 37
Description of Capital Stock............................................... 38
Certain United States Tax Consequences to Non-United States Holders........ 40
Underwriters............................................................... 43
Legal Matters.............................................................. 46
Experts.................................................................... 46
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 Report on Form 10-Q for the three months ended June 30,
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) and July 31, 1996 (and Amendment No. 1 thereto
on Form 8-K/A); 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 4600 S.E. Harney Drive,
Portland, Oregon 97206, Attention: Director of Corporate Communications
(telephone: (503) 777-3881).
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 expanding its
international sales, particularly for its fluid management and general
industrial product
3
<PAGE>
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 as well
as 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 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
4
<PAGE>
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 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" and "NEWCO" 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 total sales in
fiscal 1996 on a pro forma basis and were sold 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 to the automotive
and general industrial markets.
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.
5
<PAGE>
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
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........ 24,572,339 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
- ---------------
(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 September 26, 1996 at a weighted
average exercise price of $23.97 per share.
6
<PAGE>
<TABLE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA (In
thousands, except per share data and number of employees)
<CAPTION>
Three Months Pro Forma
Ended Three Months
Fiscal Years Pro Forma ------------------- Ended
------------------------------------------------ Fiscal July 2, June 30, June 30,
1992 1993 1994 1995 1996 1996(1) 1995 1996 1996(2)
-------- -------- -------- -------- -------- -------- -------- -------- ----------
<S> <C> <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 $137,200 $166,000 $255,900
Cost of goods sold 488,000 393,100 351,700 359,500 446,100 726,000 109,600 134,100 200,100
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 11,500 12,600 26,500
Interest expense (income), net 1,000 (600) 1,100 (1,500) 100 27,400 200 300 6,900
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before provision for
income taxes 53,300 (100) 37,400 46,800 63,700 76,600 15,900 19,000 22,400
Provision (benefit) for income taxes 6,800 (1,900) 12,300 17,800 22,600 30,600 6,500 7,700 9,600
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income before cumulative effect of
accounting change 46,500 1,800 25,100 29,000 41,100 46,000 9,400 11,300 12,800
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 $ 9,400 $ 11,300 $ 12,800
======== ======== ======== ======== ======== ======== ======== ======== ========
Income (charge) per share:
Before cumulative effect of
accounting change $ 1.75 $ 0.07 $ 1.29 $ 1.45 $ 2.02 $ 2.25 $ 0.46 $ 0.55 $ 0.62
Cumulative effect of change in
accounting for postretirement
benefits other than pensions -- -- (0.15) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income per common share(5) $ 1.75 $ 0.07 $ 1.14 $ 1.45 $ 2.02 $ 2.25 $ 0.46 $ 0.55 $ 0.62
======== ======== ======== ======== ======== ======== ======== ======== ========
Shares used in per share
calculations(5) 26,600 26,800 19,500 20,000 20,400 20,400 20,200 20,600 20,600
Pro Forma
Pro Forma As Adjusted
Three Months Three Three
Ended Months Months
Fiscal Years Ended ------------------- Ended Ended
------------------------------------------------ July 2, June 30, June 30, June 30,
1992 1993 1994 1995 1996 1995 1996 1996(3) 1996(4)
-------- -------- -------- -------- -------- -------- -------- -------- ----------
BALANCE SHEET DATA:
Working capital $187,100 $137,000 $125,700 $ 89,900 $125,800 $100,000 $146,500 $207,400 $ 247,100
Total assets 422,600 424,300 342,900 406,700 450,500 411,600 522,000 972,300 1,012,000
Total debt 26,200 19,400 15,700 26,000 13,900 17,100 50,200 422,900 268,700
Shareholders' investment 315,400 199,900 222,800 258,400 303,100 268,900 314,200 314,200 508,100
OTHER DATA:
Capital expenditures $ 28,800 $ 16,000 $ 7,400 $ 10,900 $ 19,700 $ 3,200 $ 8,600
Return on initial shareholders'
investment(6) 17.4% 0.6% 11.1% 13.0% 16.6% 14.6% 15.9%
Sales per employee(6) $ 92 $ 106 $ 105 $ 104 $ 105 $ 105 $ 112
Number of employees at end
of period 6,372 4,341 3,993 5,166 5,646 5,211 6,389
- -------------------------
<FN>
(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."
7
<PAGE>
(2) Pro forma to reflect the acquisitions of Olofsson, AETC and NEWFLO
(including Barber) as if they had occurred at the beginning of the period.
See "Pro Forma Combined Financial Statements."
(3) Pro forma to reflect the acquisitions of AETC and NEWFLO occurring
subsequent to June 30, 1996 and the borrowing by the Company of $272.2
million to fund such acquisitions. See "Pro Forma Combined Financial
Statements."
(4) 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 $50 7/8 per share
and the application of the estimated net proceeds therefrom. See "Use of
Proceeds."
(5) Adjusted to reflect a 3-for-2 Common Stock split effected in August 1994.
In fiscal 1994, the Company repurchased 7,350,000 shares of Common Stock.
(6) The return on initial shareholders' investment and sales per employee
reflect annualized results for acquisitions made within the period.
</FN>
</TABLE>
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
9
<PAGE>
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.
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 June 30, 1996, on a pro forma
basis, the Company's financial statements reflected total reserves of $7.6
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
10
<PAGE>
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.
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.
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the offering are estimated to be
approximately $193.9 million (approximately $223.0 million if the
Underwriters' over-allotment option is exercised in full). The Company
expects to use approximately $170.0 million of the net proceeds to repay
amounts outstanding under its revolving bank credit line and the remainder
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 6.1 percent per annum and are due in July 2001. These bank
borrowings were incurred by the Company in connection with recent
acquisitions. 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.
12
<PAGE>
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
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
Second Quarter (through September 26, 1996)............. $ 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 August 31, 1996, there were 2,302 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.
13
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated short-term debt and
consolidated capitalization of the Company as of June 30, 1996, pro forma
to reflect the acquisitions of AETC and PCC Flow Technologies after June
30, 1996 and pro forma 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>
June 30, 1996
------------------------------------------------------
Pro Forma
Actual Pro Forma(1) As Adjusted (1)(2)
-------- ----------- ------------------
(In thousands)
<S> <C> <C> <C>
Short-term debt:
Notes payable.................................................. $ 1,400 $ 1,400 $ 1,400
Current portion of long-term debt.............................. 1,900 12,200 12,200
-------- -------- --------
Total short-term debt..................................... $ 3,300 $ 13,600 $ 13,600
======== ======== ========
Long-term debt, excluding current portion:
Credit line.................................................... $ 32,000 $154,200 $ --
Term debt...................................................... -- 140,000 140,000
Subordinated debt.............................................. -- 100,000 100,000
Other debt..................................................... 14,900 15,100 15,100
-------- -------- --------
Total long-term debt...................................... 46,900 409,300 255,100
Shareholders' investment:
Preferred Stock, 1,000,000 shares authorized;
no shares issued and outstanding............................ -- -- --
Common Stock, 100,000,000 shares authorized;
20,572,339 shares issued and outstanding
actual and pro forma; 24,572,339 shares
issued and outstanding pro forma as
adjusted.................................................... 20,600 20,600 24,600
Additional paid-in capital..................................... 14,900 14,900 204,800
Retained earnings.............................................. 277,100 277,100 277,100
Cumulative translation adjustments............................. 1,600 1,600 1,600
-------- -------- --------
Total shareholders' investment............................ 314,200 314,200 508,100
-------- -------- --------
Total long-term debt and shareholders'
investment.......................................... $361,100 $723,500 $763,200
======== ======== ========
- ------------------------
<FN>
(1) Pro forma to reflect the acquisitions of AETC and PCC Flow
Technologies after June 30, 1996 and the borrowing by the Company of
$272.2 million to fund such acquisitions. See "Pro Forma Combined
Financial Statements."
(2) 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
$50 7/8 per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
</FN>
</TABLE>
14
<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 three months ended July 2,
1995 and June 30, 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 three months
ended June 30, 1996 are not necessarily indicative of results that may be
expected for the year ending March 30, 1997.
<TABLE>
<CAPTION>
Three Months Ended
Fiscal Years -----------------------
---------------------------------------------------------- July 2, June 30,
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 $137,200 $166,000
Cost of goods sold 488,000 393,100 351,700 359,500 446,100 109,600 134,100
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 11,500 12,600
Interest expense (income), net 1,000 (600) 1,100 (1,500) 100 200 300
-------- -------- -------- -------- -------- --------- --------
Income (loss) before provision for
income taxes 53,300 (100) 37,400 46,800 63,700 15,900 19,000
Provision (benefit) for income taxes 6,800 (1,900) 12,300 17,800 22,600 6,500 7,700
-------- -------- -------- -------- -------- --------- --------
Income before cumulative effect
of accounting change 46,500 1,800 25,100 29,000 41,100 9,400 11,300
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 $ 9,400 $ 11,300
======== ======== ======== ======== ======== ========= ========
Income (charge) per share:
Before cumulative effect of
accounting change $ 1.75 $ 0.07 $ 1.29 $ 1.45 $ 2.02 $ 0.46 $ 0.55
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 $ 0.46 $ 0.55
======== ======== ======== ======== ======== ========= ========
Shares used in per share
calculations(1) 26,600 26,800 19,500 20,000 20,400 20,200 20,600
15
<PAGE>
Three Months Ended
Fiscal Years -----------------------
---------------------------------------------------------- July 2, June 30,
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- -------- --------
(In thousands, except per share data and number of employees)
BALANCE SHEET DATA:
Working capital $187,100 $137,000 $125,700 $ 89,900 $125,800 $100,000 $146,500
Total assets 422,600 424,300 342,900 406,700 450,500 411,600 522,000
Total debt 26,200 19,400 15,700 26,000 13,900 17,100 50,200
Shareholders' investment 315,400 199,900 222,800 258,400 303,100 268,900 314,200
OTHER DATA:
Capital expenditures $ 28,800 $ 16,000 $ 7,400 $ 10,900 $ 19,700 $ 3,200 $ 8,600
Return on initial shareholders'
investment(2) 17.4% 0.6% 11.1% 13.0% 16.6% 14.6% 15.9%
Sales per employee(2) $ 92 $ 106 $ 105 $ 104 $ 105 $ 105 $ 112
Number of employees 6,372 4,341 3,993 5,166 5,646 5,211 6,389
- -------------------------
<FN>
(1) Adjusted to reflect a 3-for-2 Common Stock split effected August 1994.
In fiscal 1994, 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.
</FN>
</TABLE>
16
<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:
Company Acquisition Date
------- ----------------
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)
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. The unaudited pro forma balance sheet as of June 30, 1996
was prepared as if the acquisitions completed after June 30, 1996, AETC and
PCC Flow Technologies, had occurred at that date. 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 three months ended
June 30, 1996 was prepared as if the acquisitions of Olofsson, AETC, PCC
Flow Technologies and Barber had occurred at the beginning of that period.
The financial information of Olofsson, PCC Flow Technologies and Barber is
as of or for the period ended three months prior to the pro forma financial
statement dates described above. Data for AETC is as of or for the period
ended June 30, 1996. The financial information for Carmet included in the
pro forma combined financial statements for the year ended March 31, 1996
is for the period in fiscal 1996 prior to its acquisition by PCC. The
financial information of the acquired entities contains certain
reclassifications made to conform to PCC's classifications. The pro forma
financial statements do not include two immaterial acquisitions in the
second quarter of fiscal 1997.
These unaudited pro forma combined financial statements are not
necessarily indicative of the actual results or financial position that
would have occurred had the acquisitions been completed in accordance with
the assumptions set forth above, nor do they purport to indicate the future
results of operations or financial position of PCC.
These unaudited pro forma combined 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."
17
<PAGE>
<TABLE>
PRO FORMA COMBINED BALANCE SHEET
PRECISION CASTPARTS CORP.
AND ACQUISITIONS
JUNE 30, 1996
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
PRO APPLICATION
PCC FLOW PRO FORMA NOTE FORMA OF PRO FORMA
ASSETS PCC TECHNOLOGIES AETC ADJUSTMENTS REFERENCE COMBINED PROCEEDS(7) AS ADJUSTED
--- ------------ ---- ----------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,600 $ 1,000 $ -- $ 2,600 (1) $ 7,200 $ 39,700 $ 46,900
Accounts receivable 102,000 36,000 9,600 1,500 (2) 149,100 -- 149,100
Inventories 136,600 59,100 10,500 (100) (2) 206,100 -- 206,100
Prepaid expenses and other 2,300 600 600 -- 3,500 -- 3,500
Current deferred tax asset 9,800 2,100 1,100 6,200 (3) 19,200 -- 19,200
---------- ---------- -------- ---------- -------- --------- ----------
Total current assets 254,300 98,800 21,800 10,200 385,100 39,700 424,800
Property, plant and equipment 312,100 55,600 74,800 (68,000) (2) 374,500 -- 374,500
Less - accumulated depreciation (157,900) (23,800) (43,600) 67,400 (2) (157,900) -- (157,900)
---------- ---------- -------- ---------- -------- --------- ----------
Net property, plant and
equipment 154,200 31,800 31,200 (600) 216,600 -- 216,600
Goodwill, net and other assets 113,500 42,400 -- 214,700 (2), (4) 370,600 -- 370,600
---------- ---------- -------- ---------- -------- --------- ----------
$ 522,000 $ 173,000 $ 53,000 $ 224,300 $972,300 $ 39,700 $1,012,000
========== ========== ======== ========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Notes payable $ 1,400 $ -- $ -- $ -- $ 1,400 $ -- $ 1,400
Current portion of long-term
debt 1,900 8,800 -- 1,500 (5) 12,200 -- 12,200
Accounts payable 41,300 15,500 6,900 (100) (2) 63,600 -- 63,600
Accrued liabilities 51,000 12,900 7,400 16,900 (2) 88,200 -- 88,200
Income taxes payable 12,200 1,800 -- (1,700) (3) 12,300 -- 12,300
---------- ---------- -------- ---------- -------- --------- ----------
Total current liabilities 107,800 39,000 14,300 16,600 177,700 -- 177,700
Long-term debt, excluding
current portion 46,900 122,800 -- 239,600 (5) 409,300 (154,200) 255,100
Deferred tax liability 19,600 6,000 4,300 (16,800) (3) 13,100 -- 13,100
Accrued retirement benefits
obligation 13,400 6,500 -- 2,000 (2) 21,900 -- 21,900
Other long-term liabilities 20,100 1,800 -- 14,200 (2) 36,100 -- 36,100
Due to parent -- -- 34,400 (34,400) (6) -- -- --
Shareholders' investment:
Preferred stock -- 100 -- (100) (6) -- -- --
Convertible preferred stock -- 9,500 -- (9,500) (6) -- -- --
Common stock 20,600 -- -- -- 20,600 4,000 24,600
Paid-in capital 14,900 700 -- (700) (6) 14,900 189,900 204,800
Retained earnings 277,100 (12,200) -- 12,200 (6) 277,100 -- 277,100
Cumulative translation
adjustment 1,600 (1,200) -- 1,200 (6) 1,600 -- 1,600
---------- ---------- -------- ---------- -------- --------- ----------
Total shareholders' investment 314,200 (3,100) -- 3,100 314,200 193,900 508,100
---------- ---------- -------- ---------- -------- --------- ----------
$ 522,000 $ 173,000 $ 53,000 $ 224,300 $972,300 $ 39,700 $1,012,000
========== ========== ======== ========== ======== ========= ==========
See accompanying notes to pro forma combined balance sheet.
</TABLE>
18
<PAGE>
NOTES TO PRO FORMA COMBINED BALANCE SHEET
(1) Adjustment to eliminate $3.6 million cash balance of PCC and to
provide $6.2 million operating cash for AETC.
(2) Adjustment to record reported assets acquired and liabilities assumed
at fair market value. Historical objective data and management estimates
were used for the determination of these values.
(3) Adjustment to record the tax effect of the pro forma adjustments.
(4) Adjustment to record the estimated pro forma excess purchase price
paid and costs incurred of $197.1 million to acquire PCC Flow
Technologies and $24.6 million to acquire AETC.
(5) Adjustment to remove $31.1 million of debt retired upon completion of
the PCC Flow Technologies acquisition and to record $272.2 million in
borrowings for the purchase prices of PCC Flow Technologies and AETC.
(6) Adjustment to remove PCC Flow Technologies' shareholders' investment
and AETC's intercompany liability.
(7) Adjustment assumes 4,000,000 shares of Common Stock are sold at $50
7/8 per share and that $154.2 million outstanding under the revolving
credit line is repaid with the net proceeds from such sale.
19
<PAGE>
PRO FORMA COMBINED INCOME STATEMENT
FOR FISCAL 1996
PRECISION CASTPARTS CORP.
AND ACQUISITIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
PCC PRO PRO
FLOW FORMA NOTE FORMA
PCC TECHNOLOGIES BARBER AETC OLOFSSON CARMET ADJUSTMENTS REFERENCE COMBINED
--------- ------------ ------ ---- -------- ------ ----------- --------- ----------
<S> <C> <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) $ 929,500
Cost of goods sold 446,100 133,900 11,600 59,700 52,900 16,700 5,100 (1),(2),(3) 726,000
--------- ----------- --------- -------- --------- ---------- --------- ----------
Gross margin 110,700 65,900 4,700 13,400 11,600 5,000 (7,800) 203,500
Selling and administrative
expenses 46,900 40,200 2,200 7,400 4,000 1,700 (2,900) (1),(3) 99,500
Interest expense, net 100 17,600 900 6,600 2,700 200 (700) (4),(5) 27,400
--------- ----------- --------- -------- --------- ---------- --------- ----------
Income before provision
for income taxes 63,700 8,100 1,600 (600) 4,900 3,100 (4,200) 76,600
Provision for income taxes 22,600 2,400 700 (200) 2,000 1,200 1,900 (6) 30,600
--------- ----------- --------- -------- --------- ---------- --------- ----------
Net income $ 41,100 $ 5,700 $ 900 $ (400) $ 2,900 $ 1,900 $ (6,100) $ 46,000
========= =========== ========= ======== ========= ========== ========= ==========
Net income per common
share $ 2.02 $ 2.25
========= ==========
Average number of common
shares outstanding 20,400 20,400
- ---------------
</TABLE>
NOTES TO PRO FORMA COMBINED INCOME STATEMENT
FOR FISCAL 1996
(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.
20
<PAGE>
<TABLE>
PRO FORMA COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1996
PRECISION CASTPARTS CORP.
AND ACQUISITIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
PCC PRO
FLOW FORMA NOTE PRO FORMA
PCC TECHNOLOGIES BARBER AETC OLOFSSON ADJUSTMENTS REFERENCE COMBINED
-------- ------------ ------ ---- -------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $166,000 $ 56,800 $ 1,600 $ 19,700 $ 11,800 $ -- $255,900
Cost of goods sold 134,100 38,400 1,200 15,500 10,000 900 (1), (2) 200,100
-------- ---------- -------- --------- --------- ---------- --------
Gross margin 31,900 18,400 400 4,200 1,800 (900) 55,800
Selling and administrative
expenses 12,600 11,600 200 1,900 1,000 (800) (2) 26,500
Interest expense, net 300 4,300 -- 1,600 400 300 (3), (4) 6,900
-------- ---------- -------- --------- --------- ---------- --------
Income before provision
for income taxes 19,000 2,500 200 700 400 (400) 22,400
Provision for income
taxes 7,700 1,000 100 200 200 400 (5) 9,600
-------- ---------- -------- --------- --------- ---------- --------
Net income $ 11,300 $ 1,500 $ 100 $ 500 $ 200 $ (800) $ 12,800
======== ========== ======== ========= ========= ========== ========
$ 0.62
Net income per common share $ 0.55 ========
=======
Average number of common
shares outstanding 20,600 20,600
- --------------------
</TABLE>
NOTES TO PRO FORMA COMBINED INCOME STATEMENT
FOR THE THREE MONTHS ENDED JUNE 30, 1996
(1) Adjustment to increase amortization of intangibles $1.4 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 $0.5
million in cost of goods sold and a decrease of $0.7 million in
selling and administrative expenses to eliminate redundant costs.
(3) Adjustment to remove $4.7 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 $5.0 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: 6.9 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.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS OVERVIEW
In fiscal 1996 and the first quarter 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, and one acquisition in the
first quarter of fiscal 1997. In addition, the Company completed four
acquisitions subsequent to the first quarter of fiscal 1997.
PCC's aerospace business improved during fiscal 1996 and the first
quarter 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. Subsequent to June 30, 1996, the
Company acquired Balo Precision Parts, Inc., 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
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THE THREE MONTHS ENDED
JULY 2, 1995
Sales of $166.0 million for the first quarter of fiscal 1997 increased
$28.8 million, or 21 percent, compared to the first quarter a year ago. The
increase was due to improved sales in nearly all business operations and
the impact from the acquisitions of Carmet and Olofsson. Excluding the
effects of acquisitions in fiscal 1995 and 1996, sales increased $18.7
million, or 16 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 quarter of
fiscal 1997 was 81 percent, as compared with 80 percent reported in the
first quarter last year. The higher cost of sales as a percent
23
<PAGE>
of sales in the first quarter of fiscal 1997 resulted primarily from a
higher proportion of lower margin parts sold to automotive customers.
Selling and administrative costs were $12.6 million for the quarter,
or 7.6 percent of sales, compared to $11.5 million, or 8.4 percent of
sales, a year ago. The higher dollar level of selling and administrative
expenses primarily reflects the Carmet and Olofsson acquisitions and their
related advertising, trade show and sales commission costs.
Net interest expense in the first quarter of fiscal 1997 was $0.3
million, as compared with $0.2 million in the first quarter a year ago. The
slight 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 and Olofsson in the first quarter of fiscal 1997.
The effective tax rate in the first quarter of fiscal 1997 was 40.5
percent approximating last year's effective tax rate of 41.0 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
24
<PAGE>
percent of sales in 1995 and 21 percent in fiscal 1994. 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 $522.0 million at June 30, 1996 represented a $71.5
million increase from the $450.5 million balance at March 31, 1996. The
acquisition of Olofsson at the end of May 1996 accounted for nearly all of
the increase. Total capitalization at June 30, 1996 was $364.4 million,
consisting of $50.2 million of debt and $314.2 million of equity. The
debt-to-capitalization ratio was 0.14 compared with 0.04 at the end of the
prior fiscal year. Giving effect to the four acquisitions completed after
June 30, 1996, the Company's pro forma total capitalization at June 30,
1996 was $737.1 million, consisting of $422.9 million of total debt and
$314.2 million of equity, with a debt-to-capitalization ratio of 0.57. The
Company's pro forma as adjusted 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 three months ended June 30, 1996 of $16.1
million, plus cash of $1.1 million from the sale of Common Stock through
stock option exercises was less than cash requirements which consisted of
$42.2 million for the acquisition of Olofsson, $14.9 million of increased
working capital, $8.6 million of capital expenditures and $1.2 million of
cash dividends. The cash flow shortfall was funded from $26.2 million of
net borrowings and $22.6 million of available cash. At June 30, 1996, cash
and cash equivalents were $3.6 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 the quarter ended June
30, 1996, the Company borrowed $32.0 million of the $52.2 million purchase
price for its acquisition of Olofsson. In July 1996 the Company entered
into an amended and restated credit agreement ("Credit Agreement") with
Bank of America National Trust & Savings
25
<PAGE>
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.
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 August 31, 1996, $163.4 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 four acquisitions completed subsequent to June 30, 1996 were
financed with cash on hand, borrowings of $269.1 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 completed
after June 30, 1996. 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.
26
<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 currently 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."
27
<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 as well
as 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]
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,
28
<PAGE>
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.
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>
- ---------------------------------------------------------------------------------------------------------
GE CFMI PRATT & WHITNEY R-R
- ---------------------------------------------------------------------------------------------------------
<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
- ---------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------
MCDONNELL DOUGLAS
MD-80 Series JT8D
MD-11 CF6-80C2 PW4000
C-17 F117
F-15 F100
- ---------------------------------------------------------------------------------------------------------
LOCKHEED MARTIN
F-16 F110 F100
F-22 F119
- ---------------------------------------------------------------------------------------------------------
NORTHROP GRUMMAN
F/A-18 A/B F404
F/A-18 E/F F414
B-2 F118
- ---------------------------------------------------------------------------------------------------------
</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,
29
<PAGE>
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 increasingly 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 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
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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
generation and structural 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
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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" and "NEWCO" 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 total sales in
fiscal 1996 on a pro forma basis and were sold 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 the Company 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 and check valves, quarter turn industrial ball and plug valves,
double block and bleed dual expanding plug valves and four-way
diverter valves, valve operators and butt welding fittings and
flanges. 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
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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 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
34
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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 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 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
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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.
[Graphic pie chart depicting Fiscal 1995 Actual Net Sales]
[Graphic pie chart depicting Fiscal 1996 Actual Net Sales]
[Graphic pie chart depicting Fiscal 1996 Pro Forma Net Sales]
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,
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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 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 -- Structurals Division
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 the Structurals Division. 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.
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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.
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
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<PAGE>
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 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.
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<PAGE>
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.
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
ss. 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
40
<PAGE>
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 ss. 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 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
41
<PAGE>
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 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.
42
<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:
Number
Name of Shares
---- ---------
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
=========
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
43
<PAGE>
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 UnitedStates 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.
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.
44
<PAGE>
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.
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.
45
<PAGE>
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 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 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.
46
<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 by 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.
- --------------------------------------------------------------------------------
[Alternate page for International Prospectus]
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED SEPTEMBER 27, 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 Interna-
tional 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 September 26, 1996, the
reported last sale price of the Common Stock on
the New York Stock Exchange Composite Tape was
$50 7/8.
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)....................... $ $ $
- --------------
<FN>
(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."
</FN>
</TABLE>
--------------------
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.
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................................ 30,000
Legal fees and expenses..................................... 125,000
Transfer agent and registrar fees........................... 5,000
Printing and engraving...................................... 125,000
Miscellaneous............................................... 83,515
-------
Total.............................................. $500,000
========
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.
II-1
<PAGE>
(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 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
*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)
- -------------------------
* To be filed by Amendment.
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
II-2
<PAGE>
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 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 CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT
MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED
THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF PORTLAND, STATE OF OREGON, ON
SEPTEMBER 27, 1996.
PRECISION CASTPARTS CORP.
By: WILLIAM C. MCCORMICK
------------------------------------
William C. McCormick
Chairman, President and
Chief Executive Officer
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints William C. McCormick and
William D. Larsson, and each of them (with full power to each of them to
act alone), his true and lawful attorneys-in-fact and agents for him and on
his behalf and in his name, place and stead, and in any and all capacities,
to sign any and all amendments (including post-effective amendments) to
this registration statement and any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under
the Securities Act of 1933, and to file the same, with exhibits and any and
all other documents filed with respect thereto, with the Securities and
Exchange Commission (or any other governmental or regulatory authority),
granting unto said attorneys, and each of them, full power and authority to
do and to perform each and every act and thing requisite and necessary to
be done in and about the premises in order to effectuate the same as fully
to all intents and purposes as he himself might or could do if personally
present, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, may lawfully do or cause to be done by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
FOLLOWING CAPACITIES EFFECTIVE ON SEPTEMBER 27, 1996.
SIGNATURE TITLE
--------- -----
WILLIAM C. MCCORMICK Chairman of the Board,
- ---------------------------------- President and Chief
WILLIAM C. MCCORMICK Executive Officer
(Principal Executive Officer)
WILLIAM D. LARSSON Vice President and
- ---------------------------------- Chief Financial Officer
WILLIAM D. LARSSON (Principal Financial and
Accounting Officer)
PETER R. BRIDENBAUGH Director
- ----------------------------------
PETER R. BRIDENBAUGH
DON R. GRABER Director
- ----------------------------------
DON R. GRABER
DEAN T. DUCRAY Director
- ----------------------------------
DEAN T. DUCRAY
II-5
<PAGE>
SIGNATURE TITLE
--------- -----
ROY M. MARVIN Director
- ----------------------------------
ROY M. MARVIN
STEVEN G. ROTHMEIER Director
- ----------------------------------
STEVEN G. ROTHMEIER
DWIGHT A. SANGREY Director
- ----------------------------------
DWIGHT A. SANGREY
II-6
<PAGE>
INDEX TO EXHIBITS
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE NUMBER
- ----------- ------- -----------
*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)
- -------------------------
* To be filed by Amendment.
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 September 26, 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
September 26, 1996
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
September 24, 1996
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
September 24, 1996
