<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1996
Commission File No. 1-10348
_______________________________________
Precision Castparts Corp.
An Oregon Corporation
IRS Employer Identification No. 93-0460598
4600 S.E. Harney Drive
Portland, Oregon 97206-0898
Telephone: (503) 777-3881
_______________________________________
Indicate by checkmark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of Common Stock, no par value, outstanding
as of August 12, 1996: 20,590,718
Page 1 of 10 Pages
Note: This 10-Q was filed electronically via EDGAR with the
Securities and Exchange Commission.
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PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Income (1)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
___________________________
June 30, 1996 July 2, 1995
___________________________
<S> <C> <C>
Net Sales $166,000 $
137,200
Cost of Goods Sold 134,100 109,600
Selling and Administrative Expenses 12,600 11,500
Interest Expense, Net 300 200
________
________
Income Before Provision for Income Taxes19,000 15,900
Provision for Income Taxes 7,700 6,500
________
________
Net Income $ 11,300 9,400
======== ========
Net Income Per Common Share (2) $ 0.55 $ 0.46
======== ========
</TABLE>
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Precision Castparts Corp. and Subsidiaries
Consolidated Balance Sheets (1)
(In thousands)
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1996
____________________________
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,600 $ 26,200
Receivables 102,000 82,000
Inventories 136,600 105,200
Prepaid expenses 2,300 2,100
Current deferred tax asset 9,800 8,600
________ _________
Total current assets 254,300 224,100
________ _________
Property, Plant and Equipment, at cost 312,100 305,000
Less -- Accumulated depreciation (157,900) (161,200)
_________ _________
Net property, plant and equipment 154,200 143,800
Goodwill and Other Assets 113,500 82,600
_________ _________
$ 522,000 $ 450,500
========= =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 1,400 $ 400
Current portion of long-term debt 1,900 4,700
Accounts payable 41,300 38,200
Accrued liabilities 51,000 50,800
Income taxes payable 12,200 4,200
_________ _________
Total current liabilities 107,800 98,300
_________ _________
Long-Term Debt, excluding
current portion 46,900 8,800
Deferred Tax Liability 19,600 19,700
Accrued Retirement Benefits Obligation 13,400 11,900
Other Long-Term Liabilities 20,100 8,700
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Page 4
Shareholders' Investment:
Common stock 20,600 20,500
Paid-in capital 14,900 13,900
Retained earnings 277,100 266,900
Cumulative translation adjustment 1,600 1,800
_________ _________
Total shareholders' investment 314,200 303,100
_________ _________
$ 522,000 $ 450,500
========= =========
</TABLE>
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Cash Flows (1)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
___________________________
June 30, 1996July 2, 1995
___________________________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 11,300 $ 9,400
Non-cash items included in income:
Depreciation and amortization 6,100 5,700
Deferred taxes (1,300) --
Changes in operating working capital:
Receivables (8,900) (3,500)
Inventories (5,300) (5,400)
Prepaids (100) 400
Payables, accruals & current taxes (4,400) 2,100
Other 3,800 1,000
_________ _________
Net cash provided by
operating activities 1,200 9,700
_________ _________
Cash Flows from Investing Activities:
Purchase of The Olofsson Corporation(42,200) --
Acquisition of property, plant
and equipment (8,600) (3,200)
Other investing activities, net 200 200
_________ _________
Net cash (used by) investing
activities (50,600) (3,000)
_________ _________
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Page 5
Cash Flows from Financing Activities:
Payment of long-term debt (6,500) (3,700)
Proceeds of long-term debt 32,000 --
Proceeds of notes payable 700 800
Payment of notes payable -- (6,000)
Sale of common stock 1,100 2,500
Cash dividends (1,200) (1,200)
Other financing activities, net 700 --
_________ _________
Net cash provided (used) by
financing activities 26,800 (7,600)
_________ _________
Net (Decrease) in Cash and
Cash Equivalents (22,600) (900)
Cash and Cash Equivalents at
Beginning of Period 26,200 3,900
_________ _________
Cash and Cash Equivalents at
End of Period $ 3,600 $ 3,000
======== =========
</TABLE>
Notes to the Interim Financial Statements
(1) The consolidated interim financial statements have been
prepared by the Company, without audit and subject to
year-end adjustment, in accordance with generally
accepted accounting principles, except that certain
information and footnote disclosures made in the latest
annual report have been condensed or omitted for the
interim statements. Certain costs are estimated for
the full year and allocated in interim periods based on
estimates of operating time expired, benefit received,
or activity associated with the interim period. The
consolidated financial statements reflected all
adjustments which are, in the opinion of management,
necessary for fair representation.
(2) Earnings per share have been computed based on the
weighted average number of shares of common stock
outstanding during the periods. Net income per share
is based on 20,600,000 shares outstanding for the three
months ended June 30, 1996, and 20,200,000 shares
outstanding for the three months ended July 2, 1995.
Fully diluted amounts are not presented because they
are not materially different than amounts shown.
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Page 6
(3) On May 31, 1996, PCC acquired 100 percent of the stock
of The Olofsson Corporation ("Olofsson"), a
manufacturer of computer-controlled metalworking
machine systems for a purchase price of $52.2 million.
The Company accounted for this acquisition using the
purchase method. Accordingly, goodwill of $30.6
million was recorded for the difference between the
acquisition cost and the fair value of the assets
acquired and liabilities assumed.
The following represents the pro forma results of
operations for the Company and Olofsson as though the
acquisition had occurred at the beginning of the
periods shown. However, the pro forma information is
not necessarily indicative of the results which would
have resulted had the acquisition occurred at the
beginning of the periods presented, nor is it
necessarily indicative of future results.
Three Months Ended
___________________________
June 30, 1996 July 2, 1995
___________________________
[S] [C] [C]
Revenues $177,800 $152,300
======== ========
Net Income 11,800 10,100
======== ========
Earnings per share $ 0.57 $ 0.50
======== ========
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Sales for the first quarter were $166.0 million, up 21% from
$137.2 million in the same quarter last year. Net income
was $11.3 million, or $0.55 per share, for the quarter,
compared with net income of $9.4 million, or $0.46 per share
in the same quarter last year.
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Page 7
In the fourth quarter last year, PCC acquired 100% of the
stock of the Carmet Company and on May 31, 1996, acquired
100% of the stock of The Olofsson Corporation ("Olofsson").
Both acquisitions operate as part of PCC Specialty Products,
Inc.
Results of Operations - Comparison Between Three Months
Ended June 30, 1996 and July 2, 1995
Sales increased $28.8 million as compared to the first
quarter a year ago. The increase was due to improved sales
in nearly all business operations and the impact of the new
acquisitions. 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 80.8%, as compared with 79.9%
reported in the first quarter last year. The higher cost of
sales as a percent of sales in the first quarter of fiscal
1997 resulted primarily from lower margin mix of parts being
sold to automotive customers.
Selling and administrative costs were $12.6 million for the
quarter, up $1.1 million from the $11.5 million a year ago.
The higher level of selling and administrative expenses
primarily reflects the addition of the two new acquisitions.
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 as compared with a
year ago, resulting from the acquisitions, both in the
fourth quarter of fiscal 1996 and during the current
quarter.
The effective tax rate in the first quarter of fiscal 1997
was 40.5% approximating last year's effective tax rate of
41.0%.
Changes in Financial Condition and Liquidity
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 accounted for nearly all of the increase.
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 was less than cash
requirements which consisted of $42.2 million for the
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Page 8
acquisition of Olofsson, $14.9 million of increased working
capital, $8.6 million of capital expenditures and $1.2
million of cash dividends. The shortfall was funded from
$26.2 million of net borrowings and $22.6 million of
available cash.
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-equity ratio was 0.16 compared with
0.05 at the end of the prior fiscal year.
At quarter end, the Company had several pending
acquisitions, as discussed in 6(b), below. These
acquisitions were completed after quarter end. The Company
used cash on hand and borrowings on an existing bank credit
facility. PCC believes it can fund future requirements for
capital spending and cash dividends from cash or additional
borrowings. The Company continues to evaluate potential
acquisitions and believes acquisition opportunities can be
funded from cash, additional borrowings or the issuance of
stock.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1996 Annual Meeting of Shareholders of the Company
was held on August 7, 1996. At that meeting, the
shareholders elected three directors to serve terms of
three years; amended the Restated Article of
Incorporation of the Company to increase the authorized
Common Stock of the Company to 100,000,000 shares; and
ratified the appointment of Price Waterhouse LLP as
auditors of the Company for the 1997 fiscal year. The
number of votes cast for, against or withheld, as well
as the number of abstentions and broker non-votes is
included in the table below:
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<PAGE>
<TABLE>
<CAPTION>
Votes
_________________________________________________________________________
Against Broker
Cast or Absten- Non-
Matter Voted Upon For Withheld tions Votes Total
________________________________________________________________________________
________________
<S> <C> <C> <C> <C> <C>
1. To elect three
directors to
serve terms of
three years.
Dean T. DuCray 18,449,018 136,231 -- -- 18,585,249
Don R. Graber 18,457,063 128,186 -- -- 18,585,249
Roy M. Marvin 18,453,031 132,218 -- -- 18,585,249
2. To amend the Restated
Articles of
Incorporation of
the Company to
increase the
authorized Common
Stock of the
Company to
100,000,000 shares 15,814,163 2,737,214 33,872 18,585,249
3. To ratify the
appointment of
Price Waterhouse LLP
as auditors of
the Company for
the 1997 fiscal year 18,544,958 19,066 21,225 -- 18,585,249
</TABLE>
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Item 6. Exhibits and Reports on Form 8-K
Item 6.(a) Exhibits
<PAGE>
PRECISION CASTPARTS CORP.
CORPORATE BONUS PROGRAM
FY 1997
PURPOSE OF THE PROGRAM
The purpose of the Corporate Bonus Program is to use a
combination of performance elements to focus Corporate
officers, executives and staff on various objectives to
improve shareholder value and to reward participants for
achieving these objectives.
OPERATION OF THE PROGRAM
I. Eligibility
A. Corporate officers, executives and staff, as listed
on Attachment I, who are continuously employed from
the beginning of each fiscal year through the date
of payment of bonus are eligible to participate in
the Corporate Bonus Program.
B. Corporate officers, executives and staff whose
employment in that capacity starts after the
beginning of the fiscal year or whose employment in
that capacity terminates prior to the date of
payment of the bonus are eligible to participate in
the Corporate Bonus Program only if approved by the
Chairman and Chief Executive Officer and in the
case of new hires, the 90 day probationary period
has been satisfactorily completed prior to the date
of bonus payment.
II. Basis of Distribution
A. Bonus Opportunity Levels
Bonus opportunity levels are established for each
participant at the beginning of the fiscal year, or
on a subsequent date if employment as a Corporate
employee starts after the beginning of the fiscal
year. Bonus opportunity levels are assigned to
each participant and approved by the Compensation
Committee of the Board of Directors based on many
elements, including competitive rates of pay,
internal equity and the ability to influence
Corporate results.
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Bonus awards as a percentage of base salary are
established based on the following Bonus
Opportunity Levels:
<TABLE>
<CAPTION>
Bonus Opportunity Levels
--------------------------
100% of
Threshold Midpoint Potential
_____________________________
<S> <C> <C> <C>
President and CEO 30% 60% 100%
Chief Operating Officer 27 54 90
Vice President and CFO 27 54 90
Corporate Executives 18 36 60
Corporate Managers and Staff 3-12 6-24 10-40
</TABLE>
The Midpoint Bonus Percent for each participant is
set at 60% of the 100% of Potential Bonus Percent,
and the Threshold Percent is set at 50% of the
Midpoint.
B. Performance Elements
The Company's performance will be measured based on
four Performance Elements which will be assigned
expected results and weightings. The Compensation
Committee of the Board of Directors shall approve
each year the Performance Elements, and the
expected results and weightings for each
Performance Element.
The four Performance Elements designated for fiscal
1997 and the assigned weightings are provided
below, along with the method of calculating each
Performance Element:
Weighting
1. Earnings per Share. Net income 40%
divided by the weighted average number
of shares outstanding.
2. Operating Working Capital per Sales Dollar.
The sum of accounts receivable 20
and FIFO inventories as of year-end,
less accounts payables, divided by
annualized Q4 sales.
Page 2
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<PAGE>
3. Gross Margin Percent. Total sales 20
less cost of goods sold, divided
by total sales.
4. Return on Equity. Net income, 20
divided by the beginning of the
year total shareholders' equity. ___
100%
===
For achievement of each Performance Element, points
are awarded which reflect the relative weighting of
the four Performance Elements.
Attachment II summarizes for fiscal 1997 the
expected results for each Performance Element and
Bonus Opportunity Level (Threshold, Midpoint and
100% of Potential), and summarizes the points
awarded for achievement of the expected results.
C. Eligible Compensation
Eligible Compensation reflects each participant's
annual base salary paid during the fiscal year, or
paid during the period of eligibility if employment
as a Corporate employee started after the beginning
of the fiscal year. See Attachment I for Eligible
Compensation estimates, based on salary rates at
the beginning of the fiscal year.
III. Determination of Initial Bonus Award
A. Actual results for each Performance Element will be
determined based on year-end financial results as
reflected in the audited financial statements. The
initial bonus award for each participant will be
determined as follows.
1. If the actual Return on Equity is less than
10%, no points are awarded for any Performance
Element, resulting in an initial bonus award of
zero.
2. If the actual Return on Equity is greater than
or equal to 10%, actual results are measured
for each Performance Element and points are
awarded for performance which falls at or above
the Threshold Bonus Opportunity Level. When
actual results fall between the Threshold and
Page 3
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<PAGE>
Midpoint or between the Midpoint and the 100%
of Potential Objective, the points to be
awarded are interpolated on a straight-line
basis between the two nearest Bonus Opportunity
Levels. Results in excess of the 100% of
Potential Objectives are awarded points on a
straight line basis based on the points awarded
for performance between the Midpoint and the
100% of Potential Objective.
3. Points for each Performance Element are summed
and the total is divided by 100 to yield a
Bonus Factor. The Bonus Factor is applied to
each participants' 100% of Potential Bonus
Percent to reflect the Initial Bonus Percent
Earned.
4. The Initial Bonus Award reflects the Initial
Bonus Percent Earned multiplied by each
participant's Eligible Compensation.
Attachment III provides illustrative calculations
of Initial Bonus Awards for each participant based
on fiscal 1997 budgeted results. The exhibit shows
the level to which each calculation will be
rounded.
B. The computation of the Initial Bonus Award is an
annual computation. Overperformance or
underperformance in any year cannot be carried
forward or carried backward for use in another
year's computation.
IV. Individual Performance Adjustment
The Board of Directors may adjust the Initial Bonus
Award upward or downward by up to 25% to reflect
individual performance. The Bonus Award for any
participant may range from 75% to 125% of the Initial
Bonus Award.
V. Discretionary Bonus Awards and Determination of Bonus
Pool
The Board of Directors may approve Discretionary Bonuses
as special awards to outstanding performers. A
Discretionary Bonus Pool equal to 25% of the total 100%
of Potential Bonus Opportunity amount for all
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participants included in the Corporate Bonus Program
will be accrued each year. Amounts not awarded from the
Discretionary Bonus Pool may be carried over to
subsequent fiscal years.
VI. Payment of Bonus Awards and Discretionary Bonuses
Bonus Awards and any Discretionary Bonuses will be paid
within 60 days following the end of the Company's fiscal
year and after receipt of audited financial statements.
VII. Unexpected Changes in Operations or Unusual Adjustments
In the event of major unexpected changes in operations
or unusual adjustments during the fiscal year, Company
management may recommend adjustments or changes to the
approved bonus program. The Board of Directors will
have final approval on any adjustments or changes to the
approved program.
VIII. General Provisions
A. The Corporate Bonus Program is implemented solely
at the discretion of the Company, subject to
approval by the Board of Directors who reserve the
right to amend, modify, suspend, or terminate the
Corporate Bonus Program.
B. Bonus Awards and Discretionary Bonuses are totally
separate from all other Company benefits with the
exception of the SERP and Long Term Disability
programs. They will not be used as a basis for
determining levels of any other benefit such as
vacation pay, life insurance coverage, future bonus
pay, etc.
C. Establishment of the Corporate Bonus Program shall
not be construed as conferring any legal rights
upon any employee or any person for continuation of
employment, nor shall it interfere with the rights
of the Company to discharge any employee without
regard to the effect such discharge might have upon
the employee's eligibility or receipt of benefits
through the Corporate Bonus Program.
Page 5
</Page>
27 Financial Data Schedule
Item 6.(b) Reports on Form 8-K
On July 1, 1996 the Company filed a current
report on Form 8K reporting under Item 5 thereof
announcing that it had entered into an agreement
to acquire 100% of the outstanding stock of the
NEWFLO Corporation.
On August 5, 1996 the Company filed a current
report on Form 8K reporting under Item 2 thereof
the acquisition of AE Turbine Components
Limited.
On August 13, 1996 the Company filed Form 8K/A
amending Items 7(a) and 7(b) of its previously
filed Current Report on Form 8K to include the
financial statements of The Olofsson Corporation
at and for the year ended December 31, 1995,
interim financial statements of The Olofsson
Corporation at March 31, 1996 and March 31, 1995
and for the three months then ended, proforma
financial information at March 31, 1996 and for
the year then ended reflecting the acquisition
of The Olofsson Corporation, and certain
exhibits.
Forward Looking Statements
Information included within this filing describing the
projected growth and future results and events constitutes
forward-looking statements. Actual results in future
periods may differ materially from the forward-looking
statements because of a number of risks and uncertainties,
including but not limited to the rate of recovery in the
aerospace cycle; the relative success of the Company's entry
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Page 10
into new markets, including the rapid ramp-up for industrial
gas turbine component production; competitive pricing; the
availability and costs of metals; relations with the
Company's employees; and the Company's ability to manage its
operating costs and integrate acquired businesses in an
effective manner. Any forward-looking statements should be
considered in light of these factors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
PRECISION CASTPARTS CORP.
Registrant
DATE: August 14, 1996 /s/ W.D. Larsson
______________________________
W.D. Larsson
Vice President-Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</Page>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
June 30, 1996, financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3600
<SECURITIES> 0
<RECEIVABLES> 103100
<ALLOWANCES> 1100
<INVENTORY> 136600
<CURRENT-ASSETS> 254300
<PP&E> 312100
<DEPRECIATION> 157900
<TOTAL-ASSETS> 522000
<CURRENT-LIABILITIES> 107800
<BONDS> 0
0
0
<COMMON> 20600
<OTHER-SE> 293600
<TOTAL-LIABILITY-AND-EQUITY> 522000
<SALES> 166000
<TOTAL-REVENUES> 166000
<CGS> 134100
<TOTAL-COSTS> 134100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 300
<INCOME-PRETAX> 19000
<INCOME-TAX> 7700
<INCOME-CONTINUING> 11300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11300
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
