12
<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 September 28, 1997
Commission File No. 1-10348
_______________________________________
Precision Castparts Corp.
An Oregon Corporation
IRS Employer Identification No. 93-0460598
4650 S.W. Macadam Avenue
Suite 440
Portland, Oregon 97201-4254
Telephone: (503) 417-4800
_______________________________________
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 November 3, 1997: 24,186,202
Page 1 of 11 Pages
Note: This 10-Q was filed electronically via EDGAR with the
Securities and Exchange Commission.
</Page>
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
_____________________________________
September 28, 1997 September 29,
1996
_____________________________________
<S> <C> <C>
Net Sales $ 318,100 $244,900
Cost of Goods Sold 248,200 193,200
Selling and Administrative Expenses 30,900 23,400
Interest Expense, Net 4,500 5,500
_______ ________
Income Before Provision for
Income Taxes 34,500 22,800
Provision for Income Taxes 13,800 9,500
_______ ________
Net Income $ 20,700 $ 13,300
======= ========
Net Income Per Common Share (2) $ 0.86 $ 0.64
========
========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
_____________________________________
September 28, 1997 September 29,
1996
_____________________________________
<S> <C> <C>
Net Sales $ 635,100 $410,900
Cost of Goods Sold 497,300 327,300
Selling and Administrative Expenses 60,900 36,000
Interest Expense, Net 9,500 5,800
________ ________
Income Before Provision for
Income Taxes 67,400 41,800
Provision for Income Taxes 27,200 17,200
________ ________
Net Income $ 40,200 $ 24,600
======== ========
Net Income Per Common Share (2) $ 1.67 $ 1.19
======== ========
</TABLE>
See Notes to the Interim Financial Statements on page 6.
Page 2
</Page>
<PAGE>
Precision Castparts Corp. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 28,1997 March 30, 1997
_________________________________
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 8,700 $ 10,100
Receivables 203,400 178,200
Inventories 234,200 235,800
Prepaid expenses 5,300 6,200
Current deferred tax asset 30,800 23,800
__________ __________
Total current assets 482,400 454,100
__________ __________
Property, Plant and Equipment, at cost 430,000 398,800
Less -- Accumulated depreciation ( 184,900) ( 169,700)
__________ __________
Net property, plant and equipment 245,100 229,100
Goodwill, net of amortization 364,200 379,500
Other Assets, net 7,100 7,400
__________ __________
$1,098,800 $1,070,100
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 17,000 $ 17,000
Current portion of long-term debt 24,500 22,500
Accounts payable 69,800 84,400
Accrued liabilities 116,400 101,900
Income taxes payable 22,000 23,100
__________ __________
Total current liabilities 249,700 248,900
__________ __________
Long-Term Debt, excluding
current portion 242,500 261,000
Deferred Tax Liability 18,900 12,200
Accrued Retirement Benefits Obligation 31,800 26,000
Other Long-Term Liabilities 9,200 17,600
__________ __________
Total liabilities 552,100 565,700
__________ __________
</TABLE>
See Notes to the Interim Financial Statements on page 6.
Page 3
</Page>
<PAGE>
<TABLE>
<S> <C> <C>
Shareholders' Investment:
Common stock 24,200 24,000
Paid-in capital 167,100 160,800
Retained earnings 356,700 319,400
Cumulative translation adjustment (1,300) 200
__________ __________
Total shareholders' investment 546,700 504,400
__________ __________
$1,098,800 $1,070,100
========== ==========
</TABLE>
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
_____________________________________
September 28, 1997 September 29,
1996
_____________________________________
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 40,200 $ 24,600
Non-cash items included in income:
Depreciation and amortization 21,100 14,900
Deferred taxes 1,900 (5,600)
Changes in operating working capital,
excluding effects of acquisitions:
Receivables (23,300) (22,000)
Inventories 10,200 (12,700)
Prepaids 900 (1,300)
Other assets 400 (1,200)
Payables, accruals & current taxes (7,000) 4,400
Other operating activities, net 3,100 2,800
_________ ________
Net cash provided by
operating activities 47,500 3,900
_________ ________
Cash Flows from Investing Activities:
Business acquisitions, net of
cash acquired (5,300) (316,400
)
Acquisition of property, plant
and equipment (34,500) (16,800)
Other investing activities, net 3,300 300
_________ ________
Net cash used by investing
activities (36,500) (332,900
)
</TABLE>
Page 4
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<PAGE>
<TABLE>
<S> <C> <C>
Cash Flows from Financing Activities:
Proceeds of long-term debt 27,500 308,300
Payment of long-term debt (43,900) (6,900)
Proceeds of notes payable 4,000 13,800
Payment of notes payable (4,000) --
Sale of common stock 6,600 1,800
Cash dividends (2,900) (1,200)
Other financing activities, net 300 (1,000)
_________ ________
Net cash (used by) provided
by financing activities (12,400) 314,800
_________ ________
Net Decrease in Cash and
Cash Equivalents (1,400) (14,200)
Cash and Cash Equivalents at
Beginning of Period 10,100 26,200
_________ ________
Cash and Cash Equivalents at
End of Period $ 8,700 $ 12,000
========= ========
</TABLE>
See Notes to the Interim Financial Statements on page 6.
Page 5
</Page>
<PAGE>
Notes to the Interim Financial Statements
(1) Basis of Presentation
The consolidated interim financial statements have been
prepared by Precision Castparts Corp. ("PCC" or 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 reflect all
adjustments which are, in the opinion of management,
necessary for fair representation.
(2) Earnings per Share
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 24,100,000 shares outstanding for the six
months ended September 28, 1997, and 20,600,000 shares
outstanding for the six months ended September 29,
1996. Fully diluted amounts are not presented because
they are not materially different than amounts shown.
(3) Fiscal 1998 Acquisition
On July 7, 1997, the Company acquired certain of the
assets of Pittler GmbH of Langen, Germany, a
manufacturer of computer-controlled metalworking
machine systems. The business will operate as part of
PCC Specialty Products, Inc. This acquisition was
completed in a cash transaction for approximately $5.3
million. Purchase accounting yielded negative goodwill
of approximately $3.3 million.
(4) Fiscal 1997 Acquisitions
In the first quarter of last year, PCC acquired The
Olofsson Corporation ("Olofsson"). In the second
quarter of last year, the Company acquired Balo
Precision Parts, Inc. ("Balo"), AE Turbine Components,
Limited ("AETC"), NEWFLO Corporation (now operating as
Page 6
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<PAGE>
"PCC Flow Technologies") and Astro Punch Corporation
("Astro Punch"). In the third and fourth quarters of
last year, the Company acquired Crown Pump Corp.
("Crown Pump")and OIC Valve ("OIC"), respectively.
The following represents the pro forma results of
operations for the Company and its material fiscal 1997
acquisitions as though the acquisitions 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 acquisitions
occurred at the beginning of the periods presented, nor
is it necessarily indicative of future results.
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
_____________________________________
September 29, 1996 September 29,
1996
_____________________________________
<S> <C> <C>
Net Sales $ 268,000 $523,900
========= ========
Net Income $ 13,000 $ 25,800
========= ========
Earnings per share $ 0.63 $ 1.25
========= ========
</TABLE>
(5) Subsequent Events
On October 31, 1997, the Company purchased 100 percent
of the stock of J&L Fiber Services, Inc., a
manufacturer of refiner plates for the pulp and paper
industry. The purchase price of $108.0 million was
funded through an existing credit line. The business
is headquartered in Waukesha, Wisconsin.
The Company has issued a redemption notice and will
redeem its subordinated notes as of November 15, 1997
for $105.3 million including the call premium, which is
recorded as a current liability. Terms and conditions
of the subordinated notes restrict any call
transactions by the Company prior to November 15, 1997.
Page 7
</Page>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Sales for the second quarter of fiscal 1998 were $318.1
million, up 30 percent from $244.9 million in the same
quarter last year. Net income was $20.7 million, or $0.86
per share, for the quarter, compared with net income of
$13.3 million, or $0.64 per share in the same quarter last
year.
Results of Operations - Comparison Between Three Months
Ended September 28, 1997 and September 29, 1996
Sales increased $73.2 million as compared to the second
quarter a year ago, due primarily to acquisitions completed
during the second quarter of fiscal 1997 as well as the
acquisition of PCC Pittler completed during the current
quarter, coupled with strong demand in the aerospace market.
Cost of goods sold as a percent of sales for the second
quarter of fiscal 1998 was 78 percent, a slight improvement
from the 79 percent reported in the second quarter last
year. Reflected in the fiscal 1998 results are higher
margins contributed by the acquisitions made in fiscal 1997,
partially offset by higher costs related to development of
industrial gas turbine ("IGT") products.
Selling and administrative costs were $30.9 million for the
quarter, up $7.5 million from the $23.4 million a year ago.
The higher level of selling and administrative expenses
primarily reflects the addition of the new acquisitions
completed in fiscal 1997.
Net interest expense in the second quarter of fiscal 1998
was $4.5 million, as compared with $5.5 million in the
second quarter a year ago. The lower expense reflects lower
average borrowings during the current fiscal quarter,
coupled with interest income received from a purchase price
adjustment related to a fiscal 1997 acquisition.
The effective tax rate in the second quarter of fiscal 1998
was 39.8 percent. This compares to last year's effective
tax rate of 41.8 percent. The current fiscal year rate
reflects utilization of tax benefits related to prior period
operating losses of a foreign subsidiary and a state tax
refund, partially offset by higher amounts of non-deductible
goodwill amortization.
Page 8
</Page>
<PAGE>
Results of Operations - Comparison Between Six Months Ended
September 28, 1997 and September 29, 1996.
Sales of $635.1 million for the first six months of fiscal
1998 increased $224.2 million, or 55 percent, compared to
the first six months a year ago. The increase was due to
improved sales in nearly all business areas, particularly to
the aerospace industry, as well as the impact from
acquisitions made in both fiscal 1997 and 1998. Excluding
the effects of the acquisitions, sales increased $86.0
million or 27 percent.
Cost of goods sold as a percent of sales for the first half
of fiscal 1998 was 78 percent, representing an improvement
from the 80 percent from the first half of last year.
Reflected in the fiscal 1998 results are higher margins
contributed by a number of the acquisitions, partially
offset by higher costs related to the development of
industrial gas turbine products.
Selling and administrative costs were $60.9 million for the
first six months, or 10 percent of sales, compared to $36.0
million or 9 percent of sales, a year ago. This increase
reflects the effects of a full six months of fiscal 1997
acquisitions which operate with higher selling costs due to
their related advertising, trade show and sales commission
costs.
Net interest expense in the first half of fiscal 1998 was
$9.5 million, as compared with $5.8 million in the first
half a year ago. The increase reflects the lower cash
balances and higher debt this year compared with a year ago
as a result of borrowing to fund the fiscal 1997 and 1998
acquisitions, as well as debt assumed in connection with
these acquisitions.
The effective tax rate for the first six months of fiscal
1998 was 40.3 percent, slightly lower than the last year's
effective tax rate of 41.1 percent. The decrease reflects
the utilization of tax benefits related to prior period
operating losses of a foreign subsidiary and a state tax
refund, partially offset by higher amounts of non-deductible
goodwill amortization.
Page 9
</Page>
<PAGE>
Changes in Financial Condition and Liquidity
Total assets of $1,098.8 million at September 28, 1997
represented a $28.7 million increase from the $1,070.1
million balance at March 30, 1997. Higher accounts
receivable and property, plant and equipment balances were
partially offset by a decrease in goodwill as a result of
current year amortization and purchase price adjustments as
well as a decrease in cash. Total capitalization at
September 28, 1997, was $830.7 million, consisting of $284.0
million of debt and $546.7 million of equity. The debt-to-
capitalization ratio including short-term debt was 0.34
compared with 0.37 at the end of the prior fiscal year.
Cash from earnings for the six months ended September 28,
1997 of $63.2 million, plus cash of $6.6 million from the
sale of common stock through stock option exercises, was
slightly less than cash requirements which consisted of
$34.5 million of capital expenditures, $16.4 million of debt
repayment, $15.7 million of increased working capital, $5.3
million for the acquisition of PCC Pittler and $2.9 million
of cash dividends. The cash flow shortfall was funded from
available cash. As of September 28, 1997, cash and cash
equivalents were $8.7 million.
PCC believes that future capital requirements for property,
plant and equipment and cash dividends can be funded from
existing cash or additional borrowings. The Company
continues to evaluate potential acquisitions and believes
acquisition opportunities can be funded from cash,
additional borrowings and the issuance of stock.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Item 6.(a) Exhibits
(27) Financial Data Schedule
Item 6.(b) Reports on Form 8-K
None.
Page 10
</Page>
<PAGE>
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 fluctuations in the aerospace
cycle; the relative success of the Company's entry into new
markets, including the rapid ramp-up for industrial gas
turbine component production; competitive pricing; the
availability and cost of materials and supplies; relations
with the Company's employees; the Company's ability to
manage its operating costs and to integrate acquired
businesses in an effective manner; governmental regulations
and environmental matters; and risks associated with
international operations. 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: November 5, 1997 /s/ W.D. LARSSON
______________________________
W.D. Larsson
Vice President-Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 11
</Page>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
September 28, 1997, financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000079958
<NAME> PRECISION CASTPARTS CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> SEP-28-1997
<CASH> 8700
<SECURITIES> 0
<RECEIVABLES> 206500
<ALLOWANCES> 3100
<INVENTORY> 234200
<CURRENT-ASSETS> 482400
<PP&E> 430000
<DEPRECIATION> 184900
<TOTAL-ASSETS> 1098800
<CURRENT-LIABILITIES> 249700
<BONDS> 0
0
0
<COMMON> 24200
<OTHER-SE> 522500
<TOTAL-LIABILITY-AND-EQUITY> 1098900
<SALES> 635100
<TOTAL-REVENUES> 635100
<CGS> 497300
<TOTAL-COSTS> 497300
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 9500
<INCOME-PRETAX> 67400
<INCOME-TAX> 27200
<INCOME-CONTINUING> 40200
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<CHANGES> 0
<NET-INCOME> 40200
<EPS-PRIMARY> 1.67
<EPS-DILUTED> 1.67
</TABLE>
