<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-K/A
/X/ Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended March 30, 1997
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From _____ to _____
Commission File No. 1-10348
__________________
PRECISION CASTPARTS CORP.
(Exact name of registrant as specified in its charter)
OREGON 93-0460598
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or No.)
organization)
4650 S.W. Macadam Ave., Suite 440
Portland, OR 97201 97201-4254
___________________________ ___________________________
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number,
including area code: (503) 417-4800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, New York Stock Exchange
without par value
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
__________________
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<PAGE>
Indicate by check mark 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 / /
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of voting stock held by non affiliates
of the registrant as of June 12, 1997 was $1,476,332,454.
As of the close of business on June 12, 1997 Registrant had
24,103,387 shares of Common Stock, without par value,
outstanding.
Documents Incorporated by Reference
Exhibit 13, the "Financial Section of the 1997 Annual Report to
Shareholders of Precision Castparts Corp." for the year ended
March 30, 1997 is incorporated by reference in Parts II and IV
and appended hereto.
Portions of the Registrant's Proxy Statement dated June 25, 1997
in connection with the 1997 Annual Meeting of Shareholders are
incorporated by reference in Part III.
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<PAGE>
FORM 10-K
ANNUAL REPORT
TABLE OF CONTENTS
PART I PAGE
Item 1. BUSINESS 1
Products and Markets 1
Sales and Distribution 12
Backlog 13
Competition 14
Research and Development 15
Employees 15
Patents and Trade Secrets 15
Materials and Supplies 16
Government Regulations 16
International Operations 17
Environmental Compliance 17
Forward Looking Statements 18
Item 2. PROPERTIES 19
Item 3. LEGAL PROCEEDINGS 20
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 20
Executive Officers of the Registrant 21
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 22
Item 6. SELECTED FINANCIAL DATA 22
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 23
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 23
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 23
Item 11. EXECUTIVE COMPENSATION 24
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 24
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 24
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K 24
Financial Statement Schedule 25
Signatures 28
Report of Independent Accountants 31
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This amendment is submitted to correct some typographical errors
that occurred in the conversion process and do not represent any
material changes.
PART I
ITEM 1. BUSINESS
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 the 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.
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 the 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 Industrial Gas Turbine ("IGT") engines used for
power generation. In addition, PCC makes investment
castings for use in the automotive, medical prostheses,
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 the leading supplier of structural and airfoil
castings for jet aircraft engines and to increase its market
share of IGT airfoil castings. Investment castings
accounted for approximately 66 percent of the Company's net
sales in fiscal 1997, and a majority of these products were
sold to the aerospace market.
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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; formation of a ceramic
shell around the wax pattern followed by removal of the wax
from the ceramic shell by melting and draining the wax;
pouring of molten metal into the ceramic shell; shell
removal; and final processing and inspection.
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.
Large jet aircraft engines are manufactured by a small
number of suppliers, including GE, Pratt & Whitney,
Rolls-Royce ("R-R"), CFM International ("CFMI"), a joint
venture of GE and Snecma of France. 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.
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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"), a joint venture of Pratt & Whitney, R-R, Motoren-
und Turbinen-Union ("MTU") and Japanese Aero Engine
Corporation, for use on Airbus Industrie's A319/A320/A321
aircraft and 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>
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Aerospace Structural Castings
The Company's large, complex structural castings include the
largest diameter steel, nickel-based superalloys and
titanium investment castings in the world, as well as a
variety of smaller structural castings. These castings are
stationary components that form portions of the fan,
compressor, combustion and turbine sections of the jet
aircraft engine, where strength and structural integrity are
critical. Structural investment castings are sold primarily
as original equipment to jet aircraft engine manufacturers.
The Company believes that trends in the manufacturing of
aircraft jet engines will continue to increase PCC's
revenues per engine. As the design of new generation
aircraft engines has emphasized increased thrust, higher
fuel efficiency and reduction of noise and exhaust
emissions, engine operating temperatures and pressures have
increased. These conditions require the use of engine parts
made of alloys that are able to withstand these extreme
operating conditions and provide an optimum
strength-to-weight ratio. Many of these alloys are
particularly suited to investment casting. In addition,
titanium, a metal with a lower melting temperature than
stainless steel or superalloys, is used in all but the
hottest parts of the engine because of the considerable
weight savings. Titanium is an exceptionally difficult
metal to cast because of its reactivity to other elements.
The Company, however, has 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, for the new R-R Trent series of engines, the
intermediate case and the tail bearing housing. These are
the largest structural investment castings in the world for
aircraft jet engines.
Aerospace Airfoil Castings
The Company manufactures precision cast airfoils, which
include 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
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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.
The demand for aerospace airfoil castings is determined
primarily by the number and type of engines required for new
jet aircraft, the frequency of engine repairs and the
inventory levels of replacement parts maintained by the
principal jet aircraft engine manufacturers and repair
centers. A jet engine's airfoil components have shorter
useful lives than structural investment castings and are
replaced periodically during engine maintenance. As a
result, the Company's sales of aerospace airfoil castings
are less affected by the cyclical patterns of the aerospace
industry than are the Company's sales of structural
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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
airfoil castings 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 turbine
("IGT") engines. 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 of
airfoil castings used in large, land-based gas turbines
designed for electrical power generation. In addition, the
Company manufactures structural and airfoil castings for
aircraft-derivative gas turbine engines which are used for
power generation as well as other land and marine-based
applications. Sales of aircraft-derivative gas turbine
products are reported in the general industrial and energy
market area and are not combined with IGT product sales.
See Sales and Distribution section of this report.
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 that are 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.
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
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base. Gas turbine power generation has several advantages
over other power-generation methods, such as coal and
nuclear-powered facilities, including lower average capital
cost, shorter installation and regulatory approval time,
ease of adding a new industrial gas turbine engine to an
existing power plant to increase output and the
clean-burning characteristics of natural gas. The Company
believes these advantages have led to increased demand for
gas turbine engines.
Other Investment Casting Products
The Company's strategy for profitable growth also includes
the pursuit of new opportunities for the Company's existing
investment casting technology. The Company has been
expanding the application of its investment casting
technology in the automotive, medical prostheses, satellite
and general industrial markets by manufacturing such
products as turbocharger wheels, artificial hips and knees,
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, forging and fabricated
steel parts. These products are sold worldwide under
well-established brand names, including "General Valve,"
"NEWCO," "TECHNO," "Barber" and "OIC" valves, "Johnson,"
"PACO" and "Crown" 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, Inc. ("PCC Flow
Technologies") in July 1996. The manufacturing process for
fluid management products requires knowledge of multiple
metal-forming and processing technologies, including
casting, machining, welding, heat treating, assembly and
processing of metal components. Testing procedures,
material management and tractability, and quality control
are also important aspects of the Company's operations.
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Fluid management products accounted for approximately 17
percent of the Company's net sales in fiscal 1997 and were
sold primarily to the general industrial and energy markets.
The Company uses its substantial knowledge of fluid
management technologies, complex metal component
manufacturing and its end-user markets to develop engineered
valves, pumps and instruments that the Company believes
provide customer benefits superior to those of other
manufacturers. Many of the products offered by the Company
are customized to end-user requirements or designed for
specialized applications. The Company's maintenance, repair
and service centers, extensive distribution network and
inventory of products enable it to provide responsive
service and timely deliveries to customers, thereby
enhancing the marketability of the Company's products. The
Company believes its brand names, quality products and
responsive service network also lead to repeat orders,
stable demand and customer loyalty.
Valves
The Company manufactures and markets specialty industrial
and general purpose valves, fittings and flanges principally
for the chemical, refining, energy, pulp and paper and
marine markets. The Company's valve products consist
primarily of multi-turn industrial valves, check valves,
quarter turn industrial ball and plug valves, double block
and bleed dual expanding plug valves and four-way diverted
valves and valve operators. Many of the Company's valves
are manufactured under contract by ISO 9001-qualified
overseas suppliers to precise industry and end-user
standards and specifications. The valve designs are
developed and modified by the Company's engineering staff
for particular applications as determined by market
conditions and end-user specifications. The Company markets
its valve products under several brand names, including
"General Valve," "NEWCO," "TECHNO," "Barber" and "OIC." 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,
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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," "PACO" and "Crown" 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 a number of service, repair and
modification facilities as well as stocking warehouses in
the U.S. and Canada which provide aftermarket maintenance,
repair and pre-sale modification services and inventory
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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.
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
PCC Specialty Products, Inc. ("PCC Specialty Products").
The Company has since increased its presence in the
industrial metalworking tools and machines markets with two
additional acquisitions since 1995. The acquisitions of
Olofsson and Astro Punch complemented the Company's
capabilities as a leading manufacturer of highly engineered
products. Industrial metalworking tools and machines
include machine systems used for boring and turning
processes primarily in the automotive and general industrial
markets, cold forming dies and related machinery primarily
used in the fastener industry and other metalworking tools
and machinery for industrial manufacturers. The Company
believes it has been able to maintain its leading market
positions due to the quality of its products, the continued
development of new technologies to enable the high speed
manufacture of high quality fasteners, brand name
recognition and excellent customer service. Industrial
metalworking tools and machines accounted for approximately
10 percent of the Company's net sales in fiscal 1997 and
were sold primarily to the automotive and general industrial
markets.
Metalworking Tools
The Company designs, manufactures and distributes a wide
variety of precision metalworking tools to industrial
companies that serve the automotive, appliance,
construction, farm equipment, medical and aerospace
industries. The Company's industrial metalworking tools
consist primarily of heading, threading and gundrilling
tools. The Company markets its heading and threading tools,
which are used to form a variety of fasteners and threaded
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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,
connecting 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 powdered metal parts
manufactured by metal-injection-molding ("MIM"), and is a
leading manufacturer of specialty metal gears and tungsten
carbide cutting tools and wear parts that are made from
powdered metal using a metal compaction and sintering
process. In addition, the Company manufactures advanced
technology, lightweight, net shape metal-matrix-composite
parts that are made by combining aluminum and silicon
carbide ("AlSiC," a registered trademark of the Company)
using a patented 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 1997 and were sold primarily
to the general industrial and automotive markets.
The MIM 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. In
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addition, the Company manufactures powdered metal helical
gears and tungsten carbide cutting tools and wear parts
using a metal compaction and sintering process for various
industrial markets. The Company also manufactures advanced
technology, lightweight, net shape metal-matrix-composite
parts using a pressure infiltration casting process. Metal-
matrix-composite parts have high thermal conductivity and
tightly controlled thermal expansion characteristics, and
are used in electronic applications that require heat
dissipation, such as automotive, telecommunication,
aerospace and computer products. The Company also supplies
permanently lubricated metal bearings, bushings and radius
plates under the "Lubrite" brand name for offshore drilling,
hydroelectric, bridge, construction and marine applications.
The Company believes the broad range of products and highest
standards of craftsmanship offer it growth opportunities in
the numerous industry applications.
Sales and Distribution
The Company sells its complex metal components and products
into five major market areas: aerospace, general industrial
and energy, industrial gas turbines, automotive, and other
markets which include applications for markets such as
medical, firearms and ordnance. The relative size of sales
to these markets is shown below for fiscal years 1997, 1996
and 1995.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
FISCAL 1997
Net Sales $972.8 million
Aerospace 53%
General Industrial and Energy 28%
Industrial Gas Turbine 7%
Automotive 7%
Other 5%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
FISCAL 1996
Net Sales $556.8 million
Aerospace 68%
General Industrial and Energy 16%
Industrial Gas Turbine 4%
Automotive 6%
Other 6%
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
FISCAL 1995
Net Sales $436.4 million
Aerospace 79%
General Industrial and Energy 11%
Industrial Gas Turbines 4%
Automotive 1%
Other 5%
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The Company's dollar volume of sales to the aerospace market
increased 38 percent in fiscal 1997 to $517.3 million from
$376.0 million in fiscal 1996. Sales to the aerospace
market as a percentage of total net sales, however, declined
from 68 percent in fiscal 1996 to 53 percent in fiscal 1997,
reflecting the Company's diversification into non-aerospace
businesses. 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 IGT, general industrial,
energy and automotive markets will mitigate the impact of
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 orders.
Backlog
The backlog of unfilled orders believed to be firm at the end of
each of the Company's last three fiscal years was $739.0 million
as of March 30, 1997, $539.7 million as of March 31, 1996 and
$313.2 million as of April 2, 1995. The increase in fiscal 1997
backlog is primarily due to acquired backlog from fiscal 1997
acquisitions and increased orders from aerospace customers.
The majority of sales to customers are made on individual
purchase orders. Most of the Company's orders are subject to
termination by the customer upon payment of the cost of work in
process plus a related profit factor. Historically, the Company
has not experienced significant order cancellations.
Page 13
</Page>
<PAGE>
For fiscal 1998, the Company expects a continuation of the
increasing demand from the aerospace industry and further growth
in many of the non-aerospace markets served. The Company
continues to pursue growth through a three-tiered approach of
continuously improving operating efficiencies in its existing
businesses, expanding applications and markets for its current
metal-forming technologies and acquiring companies which are
synergistic with its existing businesses and core competencies.
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
advantages to its customers, 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 investment 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. Howmet is
believed to hold in excess of 50 percent of the total market
for cast airfoils, principally due to its substantial share
of the market for IGT castings. Howmet also manufactures
steel, nickel-based superalloys 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
Page 14
</Page>
<PAGE>
manufacturing parts using 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, performance characteristics, pricing and
product availability.
Research and Development
The Company maintains separate research and development
departments at PCC Structurals, Inc. ("PCC Structurals") and PCC
Airfoils, Inc. ("PCC Airfoils"). The research and development
effort at these locations is directed at the scientific aspects
of developing new and improved manufacturing processes. These
research and development expenditures amounted to $2.6 million in
1997, $3.5 million in 1996, and $3.1 million in 1995. A
substantial amount of the Company's technological capability is
the result of engineering work and experimentation performed in
connection with process development and production of new parts.
This engineering work is charged to the cost of production and is
not included in research and development expenditures.
Employees
At March 30, 1997, the Company employed 9,280 people, including
2,786 people at PCC Structurals, 3,509 people at PCC Airfoils,
1,154 at PCC Flow Technologies, 1,487 people at PCC Specialty
Products, 326 people at Advanced Forming Technologies ("AFT"),
and 18 people in corporate functions. Approximately 23 percent
of these employees have union affiliation or are covered by
collective bargaining agreements. Management believes that labor
relations in the Company have generally been satisfactory. The
Company's contract with the Metal Workers Alliance will expire on
June 30, 1997. Contract negotiations are currently underway.
Patents and Trade Secrets
Prior to 1988, the Company had not applied for patents covering
its structural investment casting processes in the belief that
Page 15
</Page>
<PAGE>
the processes are more securely protected by retaining the
information as trade secrets and avoiding the technical
disclosures required in patent applications. For similar
reasons, AFT has not applied for patents covering its MIM
process. The Company's trade secrets consist principally of
technology developed over years of experience in the manufacture
of complex investment castings and MIM parts. More recently, the
Company has applied for or been issued a number of patents
relating to new technology and processes developed at PCC
Structurals, PCC Airfoils and PCC Flow Technologies.
In connection with its acquisitions of PCC Airfoils, PCC
Composites (now part of AFT), PCC Specialty Products and PCC
Flow Technologies, the Company acquired a number of U.S. and
foreign patents. The Company also acquired certain rights
and obligations under license agreements. The Company
receives no significant royalty income from patents.
Materials & Supplies
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 investment 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.
Government Regulations
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.
Page 16
</Page>
<PAGE>
International Operations
The Company is both a purchaser of products from, and
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.
Environmental Compliance
The Company generates certain waste materials which must be
disposed of, including certain materials for which disposal
requires compliance with environmental protection laws and
regulations. The Company conducts its operations at industrial
sites where hazardous materials have been managed for many years,
including periods before careful management of these materials
was required or generally believed to be necessary.
Consequently, the Company is subject to various environmental
laws that impose compliance obligations and can create liability
for historical releases of hazardous substances.
During the period 1970-1973, the Company contracted for disposal
of certain industrial waste at the Pasco Landfill located near
Pasco, Washington. The Washington State Department of Ecology
("Ecology") notified the Company that it had determined that the
Company is a Potentially Liable Party ("PLP") for the
contamination at Pasco Landfill Superfund Site. The Company
joined with approximately 40 other PLPs that sent industrial
wastes to the site, as well as with the owners, operators and
other PLPs, to fund the initial Remedial Investigation and
Feasibility Study, which was completed and accepted by Ecology in
March 1994. In April, 1995, the PLPs and Ecology agreed on a
Phase II Remedial Investigation/ Feasibility Study Work Plan to
study potential remediation alternatives. As of March 30, 1997,
the Company had committed approximately $0.1 million to fund an
Interim Remedial Action measure. The Company's costs are
currently being paid by its insurers although they have reserved
the right to deny coverage for the remedial action costs.
In 1989, the Oregon Health Division ("Health Division") alleged
that the Company discharged low level radioactive material to the
Portland city sewer in violation of the Company's radioactive
materials license. The City of Portland also has alleged that
the discharges violated the Company's discharge permit. Although
the Company contested the alleged violations, it undertook
extensive cleaning of portions of the sewer system under a
consent agreement with the City and the Health Division. In
1994, the Health Division revived the alleged violation,
Page 17
</Page>
<PAGE>
asserting that the issue was not fully resolved by the cleaning.
The Health Division has accepted the Company's risk assessment
for the sewer and has indicated that limited additional sewer
cleaning will be necessary. The extent to which other
investigation or remedial work may be necessary, however, is
unknown. The Company continues to negotiate with the City of
Portland regarding its claim for certain related expenses.
In 1993, a lawsuit was filed in federal district court in
Connecticut against Quamco, Inc., a corporation that the Company
acquired in 1995 and which is now known as PCC Specialty
Products, Inc., (Marrone v. Quamco, Inc. U.S.D.C., Conn.). The
plaintiff has alleged that Quamco is liable for approximately
$1.0 million for damages to his property arising out of
contamination allegedly caused by Quamco. In March 1997, the
court granted the defendants' motion to dismiss this lawsuit for
lack of prosecution by the plaintiff, and the court entered a
judgment in favor of the defendants. The plaintiff has
petitioned the court to vacate or revise the judgment, and the
case is still pending.
As a result of inspections conducted in 1995 and 1996, the
Massachusetts Department of Environmental Protection ("MDEP") has
taken enforcement action against the Company's Merriman
operations for alleged violations of certain environmental laws
relating to waste management. Merriman is engaged in settlement
negotiations with MDEP, and the Company believes that the
enforcement action can be settled for penalties substantially
less than $0.2 million. MDEP is also requiring Merriman to
investigate possible contamination from the management of foundry
sands.
The Company has rights of recovery under insurance and indemnity
agreements that mitigate its potential loss under certain of the
matters described above. The Company believes that none of the
matters described above will have a material adverse effect on
the Company or its results of operations.
Forward Looking Statements
Information included within this section relating to projected
growth and future results and events constitutes 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
Page 18
</Page>
<PAGE>
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.
ITEM 2. PROPERTIES
The Company's manufacturing plants and administrative offices,
along with certain information concerning the products and
facilities are as follows:
<TABLE>
<CAPTION>
No. of Building Space (sq. ft.)
Division Facilities Leased Owned Total
_____________________________ __________ _______________________________
<S> <C> <C> <C> <C>
Executive & Corporate Offices
Domestic 1 7,300 -- 7,300
Foreign -- -- -- --
PCC Structurals:
Domestic 5 186,000 775,000 961,000
Foreign 1 -- 77,000 77,000
PCC Airfoils
Domestic 9 13,000 900,000 913,000
Foreign 3 153,000 249,000 402,000
PCC Flow Technologies
Domestic 35 482,400 748,000 1,230,400
Foreign 13 37,500 109,000 146,500
PCC Specialty Products
Domestic 14 201,000 778,300 979,300
Foreign -- -- -- --
Advanced Forming Technology
Domestic 4 73,000 18,000 91,000
Foreign -- -- -- --
Total Company
Domestic 68 962,700 3,219,300 4,182,000
Foreign 17 190,500 435,000 625,500
</TABLE>
Page 19
</Page>
<PAGE>
The Company continues to expand its manufacturing capacity to
meet anticipated market demand for its products. See
"Management's Discussion and Analysis," in Exhibit 13, the
"Financial Section of the 1997 Annual Report to Shareholders of
Precision Castparts Corp."
ITEM 3. LEGAL PROCEEDINGS
For a description of claims relating to environmental matters,
see "Item 1. Business -- Environmental Compliance."
Prior to its acquisition by the Company, PCC Flow Technologies,
Inc. (then known as NEWFLO Corporation) and its Canadian
subsidiary General Valve, Ltd. were named as defendants in
Marrello Valve Ltd. v. General Valve, Brian Warren, NEWFLO
Corporation, et. al. (Ontario Court of Justice, Ontario Canada 96-
CU-10728CM, filed July 9, 1996). The suit alleges that General
Valve breached the exclusivity terms of a distributor agreement
with Marrello Valve Ltd. and terminated the distributor agreement
without proper notice, and that NEWFLO Corporation and the other
defendants induced General Valve to commit a breach. The
complaint seeks damages from General Valve, NEWFLO Corporation,
H&H Valve Company and Newmans Valve Ltd relating to breach of
contract in an aggregate amount of Canadian $8 million and
punitive damages in an aggregate amount of Canadian $90 million.
The Company has filed a Statement of Defense denying the
allegations and has filed a counterclaim for collection of
accounts due from Marrello Valve Ltd. The Company believes that
the claims asserted by Marrello Valve Ltd. can be successfully
defended and that the matter will not have a material adverse
effect on the Company or the results of its operations.
Various lawsuits arising during the normal course of business are
pending against the Company. In the opinion of management, the
outcome of these lawsuits will have no significant effect on
PCC's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Page 20
</Page>
<PAGE>
Executive Officers of the Registrant (a)
<TABLE>
<CAPTION>
Officer Position Held
Name Since Age With the Registrant
<C> <C> <C> <C>
William C. McCormick (b) 1985 63 Chairman and
Chief Executive
Officer
Steven C. Riedel (c) 1997 51 President and
Chief Operating
Officer
William D. Larsson (d) 1980 52 Vice President and
Chief Financial
Officer
Mark Donegan (e) 1992 40 Executive Vice
President and
President -
PCC Structurals, Inc.
Peter G. Waite (f) 1980 53 Executive Vice
President and
President -
PCC Airfoils, Inc.
David W. Norris (g) 1996 45 Executive Vice
President and
President -
PCC Flow
Technologies, Inc.
John M. Prosser (h) 1995 58 Executive Vice
President and
President - PCC
Specialty Products,
Inc.
Istvan F.K. Vamos (i) 1997 30 President - Advanced
Forming Technologies,
Inc.
James A. Johnson (j) 1996 56 Treasurer and
Assistant Secretary
Donna C. Ragan (k) 1997 45 Director of Taxes and
Assistant Treasurer
<FN>
__________
(a) The officers serve for a term of one year and until their
successors are elected.
(b) Elected Chairman in 1994, President and Chief Executive
Officer in 1991 and Director in 1986. Served as President
from 1985-1997 and Chief Operating Officer from 1985-1991.
(c) Elected President and Chief Operating Officer in 1997.
Page 21
</Page>
<PAGE>
(d) Elected Vice President -- Finance in 1980. Named Vice
President and Chief Financial Officer in 1993.
(e) Elected Executive Vice President and President -- PCC
Structurals, Inc. in 1992.
(f) Elected Executive Vice President and President -- PCC
Airfoils, Inc. in 1986.
(g) Elected Executive Vice President and President -- PCC Flow
Technologies, Inc. in 1996.
(h) Elected Executive Vice President in 1996 and President --
PCC Specialty Products, Inc. in 1995
(i) Elected President -- Advanced Forming Technologies, Inc. in
1997.
(j) Named Treasurer in 1993. Appointed Assistant Secretary in
1996.
(k) Named Director of Taxes in 1997. Appointed Assistant
Treasurer in 1996.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of June 12, 1997 there were approximately 2,274 shareholders
of record of the Company's common stock. The Company's common
stock is listed on the New York Stock Exchange under the symbol
PCP. It is also traded on the Midwest Stock Exchange, the
Pacific Stock Exchange and the Philadelphia Stock Exchange.
Additional information with respect to Market for the
Registrant's Common Stock and Related Stockholder Matters,
including dividends, is incorporated herein by reference to the
Five-Year Summary of Selected Financial Data and the Quarterly
Financial Information in Exhibit 13, the "Financial Section of
the 1997 Annual Report to Shareholders of Precision Castparts
Corp." The Company expects to continue to pay quarterly cash
dividends, subject to its earnings, financial condition and other
factors.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to Selected Financial Data is
incorporated herein by reference to the "Five-Year Summary of
Selected Financial Data" in Exhibit 13, the "Financial Section of
the 1997 Annual Report to Shareholders of Precision Castparts
Corp."
Page 22
</Page>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information with respect to Management's Discussion and Analysis
of Financial Condition and Results of Operations is incorporated
herein by reference to "Management's Discussion and Analysis" in
Exhibit 13, the "Financial Section of the 1997 Annual Report to
Shareholders of Precision Castparts Corp."
Information included in "Management's Discussion & Analysis"
in Exhibit 13, the "Financial Section of the 1997 Annual Report
to Shareholders of Precision Castparts Corp." describing the
divisions relating to projected growth and future results and
events constitutes 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to Financial Statements and
Supplementary Data is incorporated herein by reference to pages
40 through 69 of Exhibit 13, the "Financial Section of the 1997
Annual Report to Shareholders of Precision Castparts Corp."
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is
incorporated herein by reference to "Proposal 1: Election of
Directors" continuing through "Report of the Compensation
Committee on Executive Compensation" in the Company's Proxy
Statement dated June 25, 1997 for the 1997 Annual Meeting of
Shareholders of the Registrant. The information required by this
item with respect to the Company's executive officers follows
Part I, Item 4 of this document.
Page 23
</Page>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation is
incorporated herein by reference to "Compensation of Executive
Officers" in the Proxy Statement dated June 25, 1997 for the 1997
Annual Meeting of Shareholders of the Registrant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to Security Ownership of Certain
Beneficial Owners and Management is incorporated herein by
reference to "Security Ownership of Certain Beneficial Owners"
and "Security Ownership of Directors and Executive Officers" in
the Proxy Statement dated June 25, 1997 for the 1997 Annual
Meeting of Shareholders of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to "Board
Compensation, Attendance and Committees, Certain Transactions" in
the Proxy Statement dated June 25, 1997, for the 1997 Annual
Meeting of Shareholders of the Registrant.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a)(1) Financial Statements
The following financial statements incorporated by
reference from Exhibit 13, the "Financial Section of the
1997 Annual Report to Shareholders of Precision
Castparts Corp.," are filed as part of this report.
Page 24
</Page>
<PAGE>
<TABLE>
<CAPTION>
Page in Exhibit 13,
the "Financial Section
of the 1997 Annual Report
to Shareholders
Statement of Precision Castparts Corp."
<S> <C> <C>
Consolidated Statements of Income 40-40
Consolidated Balance Sheets 41-42
Consolidated Statements of Cash Flows 42-43
Consolidated Statements of Shareholders'
Investment 44-44
Notes to Financial Statements 45-65
Report of Independent Accountants 65
</TABLE>
(a)(2) Financial Statement Schedule
The following schedule is filed as part of this report:
Schedule II -- Valuation and Qualifying Accounts
Report of Independent Accountants on Financial Statement
Schedule
(a)(3) Exhibits
<TABLE>
<S> <C> <C>
(3)A -- Restated Articles of Incorporation
of
Precision Castparts Corp. as
amended (Incorporated herein by reference to
Exhibit 3.1 to Amendment No. 3 to the
Company's Registration Statement on form
8A/A, Filed September 27, 1997.) (File
number 1-10348)
(3)B -- Bylaws of Precision Castparts Corp.
(Incorporated herein by reference to Exhibit
3.2 to Amendment No. 3 to the Company's
Registration Statement on form 8A/A, Filed
September 27, 1997.) (File number 1-10348)
(10)A -- Precision Castparts Corp.
Revised and Restated Stock Incentive Plan as
amended. (Incorporated herein by reference to
Exhibit (10)A in the Form 10-K dated April 3,
1994.) (File number 1-10348)
Page 25
</Page>
<PAGE>
(10)B -- Precision Castparts Corp. Non-
Employee Directors' Stock Option Plan.
(Incorporated herein by reference to Exhibit
(10)B in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(10)C -- Precision Castparts Corp. 1994
Stock Incentive Plan. (Incorporated herein
by reference to Appendix A in Registrant's
June 20, 1994 Proxy Statement to
Shareholders.) (File number 1-10348)
(10)D -- Precision Castparts Corp.
Nonemployee Directors' Deferred Compensation
Plan dated January 1, 1995. (Incorporated
herein by reference to Exhibit (10)D in the
Form 10-K dated April 2, 1995.) (File number
1-10348)
(10)E -- Precision Castparts Corp.
Executive Deferred Compensation Plan dated
January 1, 1995 (Incorporated herein by
reference to Exhibit (10)E in the Form 10-K
dated April 2, 1995.) (File number 1-10348)
(10)F -- Bank of America Credit
Agreement Dated July 31, 1996 among Precision
Castparts Corp.; Certain of its Subsidiaries;
Bank of America National Trust and Savings
Association, as Agent; Letter of Credit
Issuing Bank; and The Other Financial
Institutions Party Hereto Arranged by BA
Securities, Inc. (Incorporated herein by
reference to Exhibit (10)H in the Form 10-Q
dated October 25, 1996.)(File number 1-10348)
(10)G -- Precision Castparts Corp.
Corporate Bonus Program, FY1997 (Incorporated
herein by reference to Item 6(a) in the Form
10-Q dated August 14, 1996.) (File number 1-
10348)
(10)H Letter Agreements, dated
November 24, 1992, between the Company
(NEWFLO) and the Parties thereto with respect
to certain provisions in the 14% Notes with
survive the issuance of the 13.25% Notes,
previously filed as Exhibit 4.16, with
NEWFLO's S-4 filed with the Commission on
December 23, 1992, and herein incorporated by
reference. (File Number
33-56256).
Page 26
</Page>
<PAGE>
(10)I Form of Change of Control
Agreement and Indemnity Agreement for
Officers and Executives of Precision
Castparts Corp.
(10)J Form of Employment Agreement,
dated as of April 2, 1997 between Precision
Castparts Corp. and Steven C. Riedel.
(10)K Precision Castparts Corp.
Supplemental Retirement Plan for Executives,
Dated February 1, 1989, as amended.
(11) -- Statement re Calculation of
Earnings Per Share for the Year Ended March
30, 1997.
(13) -- Financial Section of the 1997
Annual Report to Shareholders of Precision
Castparts Corp. for the year ended March 30,
1997.
(21) -- Subsidiaries of Precision Castparts
Corp.
(23) -- Consent of Independent Accountants.
(27) -- Financial Data Schedule
(b)
(c) See (a) (3) above.
(d) See (a) (2) above.
</TABLE>
Page 27
</Page>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By /s/ WILLIAM C. MCCORMICK
_____________________________
William C. McCormick
Chairman of the Board,
Director and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title
____________________________________________________________
<S> <C>
As officers or directors of
PRECISION CASTPARTS CORP.
/s/ WILLIAM C. MCCORMICK Chairman of the Board,
___________________________ Director and Chief
William C. McCormick Executive Officer
/s/ STEVEN C. RIEDEL President and Chief
___________________________ Operating Officer
Steven C. Riedel
/s/ WILLIAM D. LARSSON Vice President and Chief
___________________________ Financial Officer
William D. Larsson (Principal Financial and
Accounting Officer)
/s/ PETER R. BRIDENBAUGH Director
___________________________
Peter R. Bridenbaugh
/s/ DEAN T. DUCRAY Director
___________________________
Dean T. DuCray
/s/ DON R. GRABER Director
___________________________
Don R. Graber
Page 28
</Page>
<PAGE>
/s/ ROY M. MARVIN Director
___________________________
Roy M. Marvin
/s/ VERNON E. OECHSLE Director
___________________________
Vernon E. Oechsle
/s/ STEVEN G. ROTHMEIER Director
___________________________
Steven G. Rothmeier
Page 29
</TABLE>
</Page>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
PRECISION CASTPARTS CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the years ended
(000's Omitted)
Column A Column B Column C Column D Column E Column F
________________________________________________________________________________
Additions Uncollectible Additions
Balance at Charged to Accounts due to Balance
Beginning Additions Written Business at End
Classification of Period at Cost Off Acquisitions of Period
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
April 2, 1995
Reserve for Doubtful
Accounts $ 700 $ 100 $ 100 $ 500 $ 1,200
======== ======== ======== ======== ========
March 31, 1996
Reserve for Doubtful
Accounts $ 1,200 $ -- $ 200 $ 100 $ 1,100
======== ======== ======== ======== ========
March 30, 1997
Reserve for Doubtful
Accounts $ 1,100 $ 900 $ 800 $ 1,400 $ 2,600
======== ======== ======== ======== ========
</TABLE>
Page 30
</Page>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Shareholders and Board of Directors of Precision
Castparts Corp.
Our audits of the consolidated financial statements
referred to in our report dated April 25, 1997 appearing
on page 31 of the Financial Section of the 1997 Annual
Report to Shareholders of Precision Castparts Corp.
(which report and consolidated financial statements are
included as Exhibit 13 in this Annual Report on Form 10-
K) also included an audit of the Financial Statement
Schedule listed in Item 14(a)(2) of this Form 10-K. In
our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
_________________________
PRICE WATERHOUSE LLP
Portland, Oregon
April 25, 1997
INDEX TO EXHIBITS
EXHIBITS
<TABLE>
<S> <C> <C>
(3)A -- Restated Articles of Incorporation
of
Precision Castparts Corp. as
amended (Incorporated herein by reference to
Exhibit 3.1 to Amendment No. 3 to the
Company's Registration Statement on form
8A/A, Filed September 27, 1997.) (File
number 1-10348)
(3)B -- Bylaws of Precision Castparts Corp.
(Incorporated herein by reference to Exhibit
3.2 to Amendment No. 3 to the Company's
Registration Statement on form 8A/A, Filed
September 27, 1997.) (File number 1-10348)
(10)A -- Precision Castparts Corp.
Revised and Restated Stock Incentive Plan as
amended. (Incorporated herein by reference to
Exhibit (10)A in the Form 10-K dated April 3,
1994.) (File number 1-10348)
Page 31
</Page>
<PAGE>
(10)B -- Precision Castparts Corp. Non-
Employee Directors' Stock Option Plan.
(Incorporated herein by reference to Exhibit
(10)B in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(10)C -- Precision Castparts Corp. 1994
Stock Incentive Plan. (Incorporated herein
by reference to Appendix A in Registrant's
June 20, 1994 Proxy Statement to
Shareholders.) (File number 1-10348)
(10)D -- Precision Castparts Corp.
Nonemployee Directors' Deferred Compensation
Plan dated January 1, 1995. (Incorporated
herein by reference to Exhibit (10)D in the
Form 10-K dated April 2, 1995.) (File number
1-10348)
(10)E -- Precision Castparts Corp.
Executive Deferred Compensation Plan dated
January 1, 1995 (Incorporated herein by
reference to Exhibit (10)E in the Form 10-K
dated April 2, 1995.) (File number 1-10348)
(10)F -- Bank of America Credit
Agreement Dated July 31, 1996 among Precision
Castparts Corp.; Certain of its Subsidiaries;
Bank of America National Trust and Savings
Association, as Agent; Letter of Credit
Issuing Bank; and The Other Financial
Institutions Party Hereto Arranged by BA
Securities, Inc. (Incorporated herein by
reference to Exhibit (10)H in the Form 10-Q
dated October 25, 1996.)(File number 1-10348)
(10)G -- Precision Castparts Corp.
Corporate Bonus Program, FY1997 (Incorporated
herein by reference to Item 6(a) in the Form
10-Q dated August 14, 1996.) (File number 1-
10348)
(10)H Letter Agreements, dated
November 24, 1992, between the Company
(NEWFLO) and the Parties thereto with respect
to certain provisions in the 14% Notes with
survive the issuance of the 13.25% Notes,
previously filed as Exhibit 4.16, with
NEWFLO's S-4 filed with the Commission on
December 23, 1992, and herein incorporated by
reference. (File Number
33-56256).
Page 32
</Page>
<PAGE>
(10)I Form of Change of Control
Agreement and Indemnity Agreement for
Officers and Executives of Precision
Castparts Corp.
(10)J Form of Employment Agreement,
dated as of April 2, 1997 between Precision
Castparts Corp. and Steven C. Riedel.
(10)K Precision Castparts Corp.
Supplemental Retirement Plan for Executives,
Dated February 1, 1989, as amended.
(11) -- Statement re Calculation of
Earnings Per Share for the Year Ended March
30, 1997.
(13) -- Financial Section of the 1997
Annual Report to Shareholders of Precision
Castparts Corp. for the year ended March 30,
1997.
(21) -- Subsidiaries of Precision Castparts
Corp.
(23) -- Consent of Independent Accountants.
(27) -- Financial Data Schedule
(b)
(c) See (a) (3) above.
(d) See (a) (2) above.
</TABLE>
Page 33
</Page>
<PAGE>
EXHIBIT 11
PRECISION CASTPARTS CORP.
CALCULATION OF EARNINGS PER SHARE(1)
FOR THE YEAR ENDED MARCH 30, 1997
<TABLE>
<CAPTION>
Fully
Primary Diluted
Earnings Earnings Per
Per Share Share
<S> <C> <C>
Weighted average number of shares
of common stock outstanding 21,773,737 21,773,737
Common stock equivalents:
Application of the "treasury stock"
method to stock option and purchase
plans -- --
__________ __________
Weighted average number of shares
outstanding 21,773,737 21,773,737
========== ==========
Rounded to 21,800,000 21,800,000
========== ==========
Net income $56,500,000 $56,500,000
=========== ===========
Net income per share $2.59 $2.59
===== =====
<FN>
__________
(1) Accounting Principles Board Opinion No. 15, "Earnings
Per Share," allows companies to disregard dilution of
less than 3 percent in the computation of earnings per
share. Therefore, shares used in computing earnings per
share for financial reporting purposes are 21,800,000
shares.
</TABLE>
Page 34
</Page>
<PAGE>
EXHIBIT 13
Financial Section of the 1996
Annual Report to Shareholders
of Precision Castparts Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS OVERVIEW AND OUTLOOK
Fiscal 1997 was a record year for PCC. During the year, we
completed seven acquisitions for a total purchase price of
$437.2 million. At the same time, the anticipated recovery
of the aerospace cycle occurred, resulting in significant
growth in sales to that market. We also continued our
efforts to improve margins and expand the applications and
markets for our existing technologies.
In last year's annual report, we stated our strategy for
profitable growth. This strategy focused on three key
areas, as summarized below:
1. Continuous improvement of operating efficiencies in
our existing businesses;
2. Expansion into additional worldwide markets through
development of new product applications based on our
current metal-forming technologies; and
3. Acquisition of companies which are synergistic with
our existing businesses and core competencies.
We made substantial progress in each of these key areas in
fiscal 1997.
The seven acquisitions completed in the year, along with
growth in our existing business operations, resulted in a
75 percent increase in fiscal 1997 sales compared with last
year. Sales in the fourth quarter of fiscal 1997, on an
annualized basis, were more than double the total sales
achieved in fiscal 1996. The acquisitions completed in
fiscal 1997 were accretive to earnings, and they
complemented our core competencies in metals, precision
metalworking and the management of complex manufacturing
processes. The acquisitions also added to our presence in
many of PCC's traditional markets, and in the case of NEWFLO
and the follow-on acquisitions of Crown Pump and OIC Valve,
they brought new applications and new markets to the
Company. PCC also enhanced its international presence, as
well as its position in the aerospace and IGT markets,
through its acquisition of AETC, a company located in the
United Kingdom.
Page 35
</Page>
<PAGE>
As anticipated, benefits of the aerospace industry recovery
were realized in fiscal 1997. Sales to aerospace customers
were up 38 percent in fiscal 1997 and were up 25 percent
before consideration of aerospace sales from acquired
businesses. In fiscal 1997, sales to aerospace companies
represented 53 percent of PCC's total sales as compared with
68 percent last year. While aerospace continues to be the
primary market served by PCC, the Company's diversification
into power generation, general industrial, energy and
automotive markets is expected to mitigate the impact of
future cyclical downturns in aerospace.
We continue to focus on improving the profitability of each
of our operations by becoming more efficient, by developing
new applications for our existing technologies and by
finding new ways to serve our customers' needs. In fiscal
1997, these efforts resulted in continued improvements in
our manufacturing processes and in significant expansion of
our market presence in industrial gas turbines. Sales of
products to the IGT market exceeded $68 million in fiscal
1997, more than double from fiscal 1996.
In fiscal 1998, we expect continuing strong demand from
aerospace and IGT customers. This demand will put pressure
on our current production capacity and will require further
expansion of our equipment and facilities. The demand for
products sold to the general industrial, energy and
automotive markets however, is expected to grow modestly
worldwide. Through additional market penetration and
development, PCC expects that its sales to these markets
will grow at rates above the underlying economic growth of
these markets.
We continue to pursue our strategy for profitable growth by
improving our existing operations, expanding our market
presence and developing new products based on our existing
technologies, and acquiring companies which are synergistic
with our existing businesses and competencies. Our goal
continues to be to grow profitably and increase shareholder
value. We exceeded our expectations in fiscal 1997, and
believe we are well-positioned to continue the pursuit of
our goal in fiscal 1998 and beyond.
Page 36
</Page>
<PAGE>
FINANCIAL RESULTS
Fiscal 1997 Compared with Fiscal 1996
Sales of $972.8 million were $416.0 million, or 75 percent,
higher than a year ago. Excluding the effects of fiscal
1997 acquisitions, sales would have increased approximately
25 percent from last year. The majority of the improvement
came from aerospace operations, which experienced
significant increases in demand during fiscal 1997.
Cost of sales as a percent of sales improved to 79 percent
in fiscal 1997 from 80 percent in fiscal 1996. This
improvement came from leveraging higher aerospace sales,
implementation of process improvements and the addition of
higher margin businesses as a result of the acquisitions,
partially offset by higher costs related to development of
new IGT parts.
In the fourth quarter of fiscal 1997, the Company recorded a
$3.4 million restructuring charge to provide for the cost of
moving people and equipment from PCC Composites in
Pennsylvania to AFT in Colorado. In addition, this
restructuring charge provided for the costs associated with
closing the Pennsylvania manufacturing facility. Combining
the marketing capabilities, technical expertise, and
manufacturing know-how of the two divisions is expected to
create a stronger, more cost-effective platform for growth
in both metal-matrix and metal-injection-molded products.
Selling and administrative expenses as a percent of sales
rose to 9 percent from 8 percent in the prior year. This
increase reflected the higher marketing requirements and
costs associated with distributor channels, commissioned
sales and trade shows of the acquired businesses.
Net interest expense in fiscal 1997 was $16.7 million,
compared with $0.1 million in fiscal 1996. This increase
reflected the higher level of debt incurred and assumed
during fiscal 1997 to finance acquisitions.
The effective tax rate for the year was 41 percent, compared
with 35 percent in the prior year. Fiscal 1997's rate
reflected the impact of non-deductible goodwill resulting
from the acquisitions, whereas the fiscal 1996 rate included
the favorable impact of $2.6 million of non-recurring tax
adjustments.
Page 37
</Page>
<PAGE>
Net income in fiscal 1997 was $56.5 million, or $2.59 per
share, based on 21.8 million average shares outstanding.
Net income was 37 percent higher than the $41.1 million
reported in fiscal 1996, and earnings per share were up 28
percent, reflecting the impact of fiscal 1997's higher
earnings from PCC's base businesses and accretion from
acquisitions, partially offset by a greater number of shares
outstanding. Excluding the effects of the restructuring
charge taken in fiscal 1997, earnings per share would have
been $2.69, or 33 percent higher than the prior year.
Fiscal 1996 Compared with Fiscal 1995.
Sales of $556.8 million represented a 28 percent increase
from the prior year. Excluding the effects of the
components of PCC Specialty Products which were acquired at
the end of fiscal 1995, sales increased $39.1 million, or 9
percent, from fiscal 1995.
Cost of sales as a percent of sales improved from 82 percent
in fiscal 1995 to 80 percent in fiscal 1996. This
improvement came from the addition of PCC Specialty
Products, which generated higher margins compared with other
PCC operations.
Selling and administrative costs increased to 8 percent in
fiscal 1996 from 7 percent in the prior year. This increase
was due to the addition of PCC Specialty Products, which
operated with relatively higher selling costs compared with
other Company operations.
For fiscal year 1996, the effective tax rate was 35 percent,
compared to 38 percent in fiscal 1995. The reduction from
the prior fiscal year was due to the favorable impact of
$2.6 million of non-recurring tax adjustments recorded in
the third quarter. These adjustments were comprised of $2.2
million from the settlement of a state tax issue and $0.4
million from research and development tax credits.
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, as compared with
$1.45 per share. Excluding the impact of the non-recurring
tax adjustments, net income in fiscal 1996 increased 30
percent to $1.89 per share.
Page 38
</Page>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Total capitalization at March 30, 1997 was $804.9 million,
consisting of $300.5 million of debt and $504.4 million of
equity. The debt-to-capitalization ratio at year-end was
0.37 compared with 0.04 at the end of the prior fiscal year.
The higher debt-to-capitalization ratio reflected the debt
incurred and assumed during fiscal 1997 to finance
acquisitions.
Cash requirements in fiscal 1997 included $329.1 million for
the acquisitions, $52.8 million for capital expenditures,
$42.1 million for working capital increases and $4.0 million
for dividends. The cash generated from earnings of $88.0
million and $4.3 million from the sale of stock resulting
from stock option exercises was insufficient to provide for
the cash requirements; therefore, the Company borrowed
$175.2 million and generated $146.1 million from a stock
offering of 3.3 million shares of common stock in November
1996. Cash and cash equivalents were $10.1 million at year-
end, down $16.1 million from the prior year's ending balance
of $26.2 million.
The net borrowings of $175.2 million in the year were
facilitated primarily by a committed line of credit. In
fiscal 1996, PCC entered into a $200.0 million committed
line of credit from a syndication of nine banks. During
fiscal 1997, this credit facility was expanded to $400.0
million, and the syndication group was extended to a total
of twelve banks. The Company also entered into swap and cap
agreements to hedge interest rate exposures on borrowings
under this facility.
Capital spending in fiscal 1997 principally provided for
increased IGT and aerospace capacity, as well as additional
manufacturing facilities for AFT's operations. Fiscal 1998
capital spending is expected to be significantly larger than
fiscal 1997 due to a full year of capital spending from
recently acquired businesses and a continuation of spending
for increased IGT and aerospace manufacturing capacity.
Management believes that the Company can fund the
requirements for capital spending, cash dividends and
potential acquisitions from cash balances, the existing line
of credit, additional borrowings or the issuance of stock.
Page 39
</Page>
<PAGE>
Consolidated Statements of Income
Precision Castparts Corp. and Subsidiaries
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Years Ended
______________________________
March 30, March 31, April 2,
1997 1996 1995
__________________________________________________________________
<S> <C> <C> <C>
Net Sales $972,800 $556,800 $436,400
Cost of Goods Sold 765,500 446,100 359,500
Provision for Restructuring 3,400 - -
Selling and Administrative Expenses 91,500 46,900 31,600
Interest Expense (Income), net 16,700 100 (1,500)
__________________________________________________________________
Income before Provision
for Income Taxes 95,700 63,700 46,800
Provision for Income
Taxes 39,200 22,600 17,800
__________________________________________________________________
Net Income $ 56,500 $ 41,100 $ 29,000
__________________________________________________________________
Net Income per Common Share $ 2.59 $ 2.02 $ 1.45
__________________________________________________________________
</TABLE>
See Notes to Consolidated Financial Statements on pages 45
through 65.
Page 40
</Page>
<PAGE>
Consolidated Balance Sheets
Precision Castparts Corp. and Subsidiaries
(In thousands, except share data)
<TABLE>
<CAPTION>
____________________
March 30, March 31,
Assets 1997 1996
__________________________________________________________________
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 10,100 $ 26,200
Receivables, net of reserves of
$2,600 in 1997 and $1,100 in 1996 178,200 82,000
Inventories 235,800 105,200
Prepaid expenses 6,200 2,100
Deferred income taxes 23,800 8,600
__________________________________________________________________
Total current assets 454,100 224,100
__________________________________________________________________
Property, Plant and Equipment, at cost:
Land 14,400 7,100
Buildings and improvements 76,000 50,200
Machinery and equipment 277,700 232,800
Construction in progress 30,700 14,900
__________________________________________________________________
398,800 305,000
Less-Accumulated depreciation (169,700) (161,200)
__________________________________________________________________
Net property, plant and equipment 229,100 143,800
__________________________________________________________________
Goodwill, net of amortization
of $10,900 in 1997 and $3,700 in 1996 379,500 80,800
Other Assets 7,400 1,800
__________________________________________________________________
$1,070,100 $450,500
__________________________________________________________________
Liabilities and Shareholders' Investment
__________________________________________________________________
Current Liabilities:
Notes payable $ 17,000 $ 400
Current portion of long-term debt 22,500 4,700
Accounts payable 84,400 38,200
Accrued liabilities 101,900 50,800
Income taxes payable 23,100 4,200
__________________________________________________________________
Total current liabilities 248,900 98,300
__________________________________________________________________
Long-Term Debt, excluding current portion 261,000 8,800
Deferred Income Taxes 12,200 19,700
Accrued Retirement Benefits Obligation 26,000 11,900
Other Long-Term Liabilities 17,600 8,700
Page 41
</Page>
<PAGE>
Shareholders' Investment:
Common stock, $1 stated value, shares
authorized 1997 - 100,000,000;
1996 - 50,000,000; issued and
outstanding 1997 - 23,981,174;
1996 - 20,532,318 24,000 20,500
Paid-in capital 160,800 13,900
Retained earnings 319,400 266,900
Cumulative translation adjustments 200 1,800
__________________________________________________________________
Total shareholders' investment 504,400 303,100
__________________________________________________________________
$1,070,100 $450,500
__________________________________________________________________
</TABLE>
See Notes to Consolidated Financial Statements on pages 45
through 65.
Consolidated Statements of Cash Flows
Precision Castparts Corp. and
Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
______________________
Fiscal Years Ended
__________________________________________________________________
March 30, March 31, April 2,
1997 1996 1995
__________________________________________________________________
Cash Flows from Operating Activities:
<S> <C> <C> <C>
Net income $56,500 $ 41,100 $ 29,000
Non-cash items included in income:
Depreciation and amortization 35,200 22,900 23,900
Deferred income taxes (3,700) 1,100 4,300
Changes in operating working capital,
excluding effects of acquisitions:
Receivables (37,100) 7,100 (3,300)
Inventories (30,500) (4,600) (4,300)
Payables, accruals and current taxes 36,600 3,100 (5,200)
Other operating activities, net (11,100) 1,300 (4,200)
__________________________________________________________________
Net cash provided by
operating activities 45,900 72,000 40,200
__________________________________________________________________
Page 42
</Page>
<PAGE>
Cash Flows from Investing Activities:
Business acquisitions, net of
cash acquired (329,100) (21,200) (87,500)
Acquisition of property,
plant and equipment (52,800) (19,700) (10,900)
Other investing activities, net 1,100 (500) 1,000
__________________________________________________________________
Net cash used by investing
activities (380,800) (41,400) (97,400)
__________________________________________________________________
Cash Flows from Financing Activities:
Proceeds of long-term debt 312,400 -- --
Payments of long-term debt (153,800) (5,600) (4,900)
Proceeds of notes payable 27,000 8,400 12,400
Payments of notes payable (10,400) (14,900) (6,500)
Sale of common stock 150,400 9,000 9,200
Cash dividends (4,000) (4,900) (4,400)
Other financing activities, net (2,800) (300) 100
__________________________________________________________________
Net cash provided by (used by)
financing activities 318,800 (8,300) 5,900
__________________________________________________________________
Net (Decrease) Increase in Cash (16,100) 22,300 (51,300)
Cash and Cash Equivalents at
Beginning of Year 26,200 3,900 55,200
__________________________________________________________________
Cash and Cash Equivalents at
End of Year $10,100 $26,200 $ 3,900
Cash Paid During the Year for:
Interest $23,700 $ 1,200 $ 1,100
Income taxes, net of refunds
received $29,000 $22,200 $21,500
See Notes to Consolidated Financial Statements on pages 45
through 65.
</TABLE>
Page 43
</Page>
<PAGE>
Consolidated Statements of Shareholders' Investment
Precision Castparts Corp. and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
___________________________________________________________________________
__________
Common Stock Cumulative
Outstanding Paid-in Retained Translation
Shares Amount Capital Earnings Adjustments
___________________________________________________________________________
__________
<S> <C> <C> <C> <C> <C>
Balance at April 3, 1994 19,650 $13,100 $3,100 $206,100 $500
Net income -- -- -- 29,000 --
Cash dividends -- -- -- (4,400) --
Sale of common stock 550 400 8,800 -- --
Stock split -- 6,700 (6,700) -- --
Translation adjustments -- -- -- -- 1,800
___________________________________________________________________________
__________
Balance at April 2, 1995 20,200 20,200 5,200 230,700 2,300
Net income -- -- -- 41,100 --
Cash dividends -- -- -- (4,900) --
Sale of common stock 300 300 8,700 -- --
Translation adjustments -- -- -- -- (500)
___________________________________________________________________________
__________
Balance at March 31, 1996 20,500 20,500 13,900 266,900 1,800
Net income -- -- -- 56,500 --
Cash dividends -- -- -- (4,000) --
Sale of common stock 3,500 3,500 146,900 -- --
Translation adjustments -- -- -- -- (1,600)
___________________________________________________________________________
__________
Balance at March 30, 1997 24,000 $24,000 $160,800 $319,400 $200
___________________________________
__________________________________________________
</TABLE>
See Notes to Consolidated Financial Statements on pages
45 through 65.
Page 44
</Page>
<PAGE>
Notes to Consolidated Financial Statements
(In thousands, except share and per share data)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts
of Precision Castparts Corp. ("PCC" or "the Company") and
its wholly-owned subsidiaries after elimination of
intercompany accounts and transactions. PCC's fiscal year
is based on a 52-53 week year ending the Sunday closest to
March 31.
Cash and Cash Equivalents
Cash and cash equivalents include short-term investments
with an original maturity of three months or less. These
investments are available-for-sale with market values
approximating cost.
Valuation of Inventories
The LIFO inventory cost method is used for inventories at
the majority of domestic operations. The FIFO method is
used for all other inventories. Costs utilized for
inventory valuation purposes include labor, material and
manufacturing overhead. Inventories valued at the lower of
current average cost or market would have been $4,300,
$5,200 and $5,300 higher than those reported at March 30,
1997, March 31, 1996 and April 2, 1995, respectively. PCC
uses the single pool dollar value method for computing LIFO
inventories; therefore, it is not possible to present the
breakdown of inventories between finished goods, work in
process and raw materials.
Depreciation and Capitalization
Depreciation of plant and equipment is computed on the
straight-line or declining balance method based on the
estimated service lives. Estimated lives used are 20-30
years for buildings and improvements and 5-10 years for
machinery and equipment.
Additions are recorded at cost. Expenditures for
maintenance, repairs and minor improvements are charged to
expense. Major improvements and additions are added to the
Page 45
</Page>
<PAGE>
property accounts. When property is sold or retired, the
cost and accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in
income.
Goodwill
Goodwill is computed on the straight-line method and is
amortized over 40 years. The future profitability and cash
flow of the operations to which it relates are reevaluated
annually. These factors, along with management's plans with
respect to the operations, are considered in assessing the
recoverability of goodwill.
Derivative Financial Instruments
At various times, the Company uses derivative financial
instruments to limit exposure to changes in foreign currency
exchange rates, interest rates and prices of strategic raw
materials. Gains or losses on these contracts, which are
designed as hedge transactions, are measured upon
settlement. The Company has controls in place that limit
the use of derivative financial instruments and ensure all
such transactions receive appropriate management attention.
As of March 30, 1997, two material derivative instruments
were in place. As discussed in the "Long-Term Debt" note,
the Company is committed to an interest rate swap related to
a term loan and an interest rate cap related to a revolving
credit facility. Immaterial instruments in place at year-
end included several foreign currency hedges and a no-cost
collar for the purchase of nickel metal, a commodity used in
the Company's aerospace products. At March 30, 1997 and
March 31, 1996, there were no material off-balance-sheet
risks from derivative financial instruments. The Company
does not hold or issue derivative financial instruments for
trading purposes.
Certain Risks and Uncertainties
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Page 46
</Page>
<PAGE>
Stock Split
In August 1994, the Company effected a three-for-two stock
split by means of a stock dividend. Accordingly, $6,700
representing the stated value for additional shares issued
was transferred from paid-in capital to common stock. The
number of shares and earnings per share for all prior
periods have been restated to reflect the effects of this
stock split.
Revenue Recognition
The Company recognizes revenues when product is shipped or
when title is passed to the customer.
Environmental Costs
Environmental liabilities are accrued when the Company
determines its responsibility for cleanup costs and such
amounts are reasonably estimable. When only a range of
amounts is established and no amount within the range is
better than another, the minimum amount of the range is
recorded. The Company does not anticipate and record
recoveries from insurance policies or indemnity agreements
before collection is probable.
Foreign Currency Translation
Adjustments resulting from translating foreign functional
currency financial statements into U.S. dollars are included
in the currency translation adjustments in shareholders'
investment.
Earnings per Share
Earnings per share have been computed based on the weighted
average number of shares of common stock and common stock
equivalents outstanding during the periods after giving
effect to the stock split discussed above. The number of
shares used for the earnings per share calculation was
21,800,000 in 1997, 20,400,000 in 1996 and 20,000,000 in
1995. Common stock equivalents were not material in these
years. Fully diluted earnings per share are not presented
because they are not materially different from amounts
shown.
Page 47
</Page>
<PAGE>
ACQUISITIONS
On March 8, 1995, PCC acquired 100 percent of the stock of
Quamco, Inc., a designer, manufacturer and marketer of
premium metalworking tools and machines, specialty powdered
metal parts and other specialty industrial components. The
purchase price of $89,900, which included the assumption or
retirement of outstanding debt, resulted in the recognition
of $57,700 of goodwill and other intangible assets. The
business operates as PCC Specialty Products.
PCC acquired 100 percent of the stock of the Carmet Company
on February 21, 1996. Carmet is a manufacturer of tungsten
carbide cutting tools and wear parts. The purchase price of
$21,200, which included the assumption or retirement of
debt, resulted in the recognition of $6,900 of goodwill.
The business operates as part of PCC Specialty Products.
On May 31, 1996, PCC purchased 100 percent of the stock of
The Olofsson Corporation, a manufacturer of computer-
controlled metalworking machine systems. The purchase price
of $52,200 included the assumption of debt. Goodwill of
$30,600 was recorded for the difference between the
acquisition cost and the fair value of net assets and
liabilities assumed. The business operates as part of PCC
Specialty Products.
On July 19, 1996, PCC purchased substantially all of the
assets of AE Turbine Components Limited ("AETC") which now
operates as part of PCC Airfoils. AETC is a manufacturer of
investment castings for the aircraft engine and industrial
gas turbine markets. The purchase price was 41,000 pounds
sterling, or $63,400 dollars, subject to adjustment, and
resulted in the recognition of $24,600 of goodwill and other
intangible assets.
PCC purchased 100 percent of the outstanding stock of the
NEWFLO Corporation ("NEWFLO")from its shareholders on July
31, 1996. NEWFLO, which is operated as PCC Flow
Technologies, is a designer and manufacturer of high-
quality, niche-oriented industrial fluid management
products. The transaction, valued at $300,000, included the
assumption of debt which included $100,000 of registered
subordinated notes, and resulted in the recognition of
$227,800 of goodwill and other intangible assets.
Page 48
</Page>
<PAGE>
The following represents the pro forma results of operations
of the Company, including the fiscal 1997 acquisitions of
Olofsson, AETC and NEWFLO for the years ended March 30, 1997
and March 31, 1996, assuming the acquisitions had taken
place at the beginning of each fiscal year:
<TABLE>
<CAPTION>
(Unaudited) Fiscal Years Ended
____________________________________________________________
March 30, March 31,
1997 1996
____________________________________________________________
<S> <C> <C>
Net sales $1,085,800 $907,800
Net income $57,700 $44,200
Net income per share $2.65 $2.17
</TABLE>
The pro forma presentation is not necessarily indicative of
either the results of operations that would have occurred
had the acquisitions taken place at the beginning of each
fiscal year or of future results of the combined companies.
The Company had four additional immaterial acquisitions
during fiscal 1997 that are not included in the pro forma
results presented above. All of the acquisitions were
accounted for by the purchase method of accounting.
PROVISION FOR RESTRUCTURING
During the fourth quarter of fiscal 1997, the Company
recorded a provision for restructuring of $3,400 for the
relocation of PCC Composites and its consolidation with AFT.
The tax-effected impact of the provision totaled $2,000, or
$0.10 per share.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, receivables, payables, accrued
liabilities and short-term borrowings are reflected in the
financial statements at cost which equals fair value because
of the short-term maturity of these instruments.
The fair value of long-term debt was estimated using the
Company's year-end incremental borrowing rate for similar
types of borrowing arrangements. The amounts reported in
the consolidated balance sheets for long-term debt
Page 49
</Page>
<PAGE>
approximate fair value. The fair value of interest rate
hedge instruments related to the long-term debt was
immaterial.
CONCENTRATION OF CREDIT RISK
Approximately 53 percent of PCC's business activity in
fiscal 1997 was with companies in the aerospace industry.
Accordingly, PCC is exposed to a concentration of credit
risk for this portion of receivables. The Company
has long-standing relationships with its aerospace
customers, and management considers the credit risk to be
low.
<PAGE>
ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
__________________________________________________________________
March 30, March 31,
1997 1996
__________________________________________________________________
<S> <C> <C>
Salaries and wages payable $ 44,800 $24,800
Accrued interest and call premium 15,800 200
Taxes other than income taxes 2,900 5,800
Other accrued liabilities 38,400 20,000
__________________________________________________________________
$101,900 $50,800
__________________________________________________________________
</TABLE>
Page 50
</Page>
<PAGE>
LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
__________________________________________________________________
March 30, March 31,
1997 1996
__________________________________________________________________
<S> <C> <C>
Term Loan, fixed rate of 6.6% under a
swap agreement, payable quarterly
in various amounts through fiscal
2002. $145,000 $ --
NEWFLO 13 1/4% Subordinated Notes
due fiscal 2003, recorded at PCC's
effective interest rate of 6.1% 100,000 --
Revolving Credit Facility, variable
interest rate based on LIBOR subject
to a 7.0% cap arrangement, 6.1% at
March 30, 1997, payable fiscal 2002. 22,800 --
Industrial Development Revenue Bonds,
variable interest rates, 3.3% to
3.5% at March 30, 1997, payable
annually through fiscal 2001. 14,400 6,800
Notes payable, unsecured, 8.3%,
payable $3,000 annually through fiscal
1998, repaid in fiscal 1997. -- 6,000
Other, 6.0% to 8.0%,
payable in various amounts
through fiscal 1999. 1,300 700
__________________________________________________________________
283,500 13,500
Less-Current portion 22,500 4,700
__________________________________________________________________
$261,000 $ 8,800
__________________________________________________________________
</TABLE>
In February 1996, the Company obtained a five-year $200,000
committed line of credit from a syndicate of nine banks.
There were no borrowings outstanding on this line as of
March 31, 1996. In July 1996, the Company entered into a
$400,000 amended and restated credit agreement (the "Credit
Agreement"), which was later syndicated to twelve banks.
The Credit Agreement replaced the $200,000 line of credit
and includes two facilities: an amortizing term loan
facility in the principal amount of $150,000 (the "Term
Page 51
</Page>
<PAGE>
Loan") and a revolving credit facility in the principal
amount of $250,000 (the "Credit Line"). The Credit
Agreement contains various standard financial covenants,
including maintenance of minimum net worth, fixed charge
coverage ratio and leverage ratio.
In July 1996, the full $150,000 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 with the first payment of $5,000 made in March
1997. The Term Loan may be prepaid, in whole or in part, at
any time.
The Company may borrow up to $250,000 under the Credit Line,
and amounts outstanding bear interest at interest rates of
a) an offshore rate equal to the effective LIBOR, as
defined, plus applicable margin of 0.30 percent to 0.875
percent based on the consolidated leverage ratio, as
defined, b) an overnight base rate equal to the higher of
the federal funds rate or the prime rate of the agent bank
plus 0.50 percent, or c) a rate negotiable between each bank
and the Company, as applicable. The Company is required to
pay a commitment fee of 0.10 percent to 0.25 percent, based
on the leverage ratio, on unborrowed amounts. The Credit
Line matures in July 2001.
The Company has obtained interest rate protection through a
cap arrangement for the first two years of the Credit Line
Facility. As of March 30, 1997, the cap covered borrowings
of up to $160,000, which declines to $135,000 during the
first two years of the facility. LIBOR is capped at
7.0 percent under this arrangement. The cost of the cap
arrangement is being amortized over the life of the cap.
PCC Flow Technologies, acquired by the Company in July 1996,
has outstanding, $100,000 principal amount of NEWFLO 13 1/4%
Subordinated Notes (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. Interest
on the Notes was recorded at PCC's effective
Page 52
</Page>
<PAGE>
interest rate of 6.1 percent. An accrual for the call
premium and rate differential was established under purchase
accounting at the date of acquisition.
The Company's debt agreements contain cross default
provisions. At March 30, 1997, the Company was in
compliance with all restrictive provisions of its loan
agreements.
Long-term debt is payable in each fiscal year as follows:
$22,500 in 1998, $31,500 in 1999, $31,300 in 2000, $50,400
in 2001, $47,800 in 2002 and $100,000 thereafter.
INCOME TAXES
Income (loss) before provision for income taxes was:
<TABLE>
<CAPTION>
___________________________________________________________
Fiscal Fiscal Fiscal
1997 1996 1995
<S> <C> <C> <C>
___________________________________________________________
Domestic $80,300 $66,400 $46,600
Foreign 15,400 (2,700) 200
___________________________________________________________
Total pretax income $95,700 $63,700 $46,800
___________________________________________________________
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
___________________________________________________________
Fiscal Fiscal Fiscal
1997 1996 1995
___________________________________________________________
<S> <C> <C> <C>
Currently payable:
Federal income taxes,
net of tax credits $32,000 $19,100 $10,000
State income taxes 7,000 3,600 2,700
Foreign 4,600 -- --
___________________________________________________________
43,600 22,700 12,700
Change in deferred
income taxes (4,400) (100) 5,100
___________________________________________________________
Provision for income taxes $39,200 $22,600 $17,800
___________________________________________________________
</TABLE>
Page 53
</Page>
<PAGE>
United States income taxes have not been provided on
undistributed earnings of international subsidiaries. The
Company's intention is to reinvest these earnings and
repatriate the earnings only when it is tax effective to do
so. Accordingly, the Company believes that any United
States tax on repatriated earnings would be substantially
offset by foreign tax credits.
The majority of PCC's fiscal 1997 acquisitions were stock
purchases. The tax impact of purchase accounting
adjustments was reflected in deferred taxes. The
amortization of nondeductible goodwill resulted in a 3
percentage point increase in the effective tax rate.
During the third quarter of fiscal 1996, PCC recorded a
$2,600 benefit, equal to $0.13 per share, for the settlement
of a state tax issue and research and development tax
credits claimed in 1992.
The income tax provision in certain years is different from
the amount computed by applying the federal statutory income
tax rate of 35 percent to income before income taxes. The
reasons for this difference are as follows:
<TABLE>
<CAPTION>
_______________________________________________________________
Fiscal Fiscal Fiscal
1997 1996 1995
_______________________________________________________________
<S> <C> <C> <C>
Statutory federal tax on income 35% 35% 35%
Increase (decrease) as a result of:
State income taxes, net of
federal tax benefit 4 3 4
State settlement -- (3) --
Research and development
tax credits -- (1) --
Valuation allowance (1) 2 --
Foreign Sales Corporation
tax benefit (1) (2) (2)
Amortization of goodwill 3 1 --
All other, net 1 -- 1
_______________________________________________________________
Provision for income taxes 41% 35% 38%
_______________________________________________________________
</TABLE>
Page 54
</Page>
<PAGE>
Deferred income taxes result from temporary differences in
the recognition of income and expenses for financial and
income tax reporting purposes, as well as from differences
between the fair value of assets acquired in business
combinations accounted for as purchases for financial
reporting purposes and their corresponding tax bases.
Deferred income taxes represent future tax benefits or costs
to be recognized when those temporary differences reverse.
Significant components of PCC's deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
___________________________________________________________
March 30, March 31,
1997 1996
___________________________________________________________
<S> <C> <C>
Deferred tax assets arising from:
Expense accruals $35,800 $16,900
Inventory reserves 8,000 2,600
Postretirement benefits other
than pensions 2,300 2,200
Advance payments 300 300
Interest accruals 4,600 --
Domestic and foreign net operating
and capital loss carryforwards 2,200 4,100
Foreign operations 1,600 --
Other 4,200 500
Valuation allowances (3,500) (4,100)
___________________________________________________________
Gross deferred tax assets 55,500 22,500
___________________________________________________________
Deferred tax liabilities arising from:
Depreciation/amortization 24,300 23,800
Inventory basis differences 12,600 9,600
State tax accrual 500 200
Foreign operations 2,000 --
Other 4,500 --
___________________________________________________________
Gross deferred tax liabilities 43,900 33,600
___________________________________________________________
Net deferred tax asset (liability) $11,600 $(11,100)
___________________________________________________________
</TABLE>
Page 55
</Page>
<PAGE>
The Company has provided valuation allowances for domestic
and foreign net operating and capital loss carryforwards to
reduce the related future income tax benefits to zero. In
addition, the Company has provided a valuation allowance
related to acquired net operating losses of $300 at
March 30, 1997 and $700 at March 31, 1996.
EMPLOYEE BENEFIT PLANS
Employee Pension Benefits
PCC has defined benefit pension plans covering certain
domestic employees. Benefits generally are based on years
of service and compensation. PCC's funding policy is to
satisfy the funding requirements of the Employee Retirement
Income Security Act.
In determining the actuarial present value of the projected
benefit obligation, the following assumptions were used: a
discount rate of 7.50 percent in 1997, 7.25 percent in 1996
and 8.50 percent in 1995; a future compensation increase
rate of 5.00 percent, and an expected long-term rate of
return on assets of 9.00 percent in all years. The year-to-
year fluctuations in the discount rate assumptions primarily
reflect changes in interest rates. The discount rates
represent the expected yield on a portfolio of high-grade
(AA rated or equivalent) fixed-income investments with cash
flow streams sufficient to satisfy benefit obligations under
the plans when due. All significant plans of the Company
are funded and are included below.
Net pension cost for each of the last three fiscal years was
as follows:
<TABLE>
<CAPTION>
__________________________________________________________________
Fiscal Fiscal Fiscal
1997 1996 1995
__________________________________________________________________
<S> <C> <C> <C>
Service costs of benefits earned $ 6,800 $ 4,500 $ 5,000
Interest cost on the projected
benefit obligation 10,000 7,500 5,200
Actual return on plan assets (14,800) (14,900) (4,300)
Net amortization and deferral
of items not reflected in earnings 3,300 6,300 (600)
__________________________________________________________________
Net pension cost $ 5,300 $ 3,400 $ 5,300
__________________________________________________________________
</TABLE>
Page 56
</Page>
<PAGE>
The pension liability as of March 30, 1997 included the
assumption of pension plan liabilities related to fiscal
1997 acquisitions. Reconciliation of the funded status of
the plans to the pension liability was as follows:
<TABLE>
<CAPTION>
___________________________________________________________
March 30, March 31,
1997 1996
___________________________________________________________
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $113,200 $ 87,600
___________________________________________________________
Accumulated benefit obligation $118,000 $ 90,200
Effects of estimated future
pay increases 29,000 28,200
___________________________________________________________
Projected benefit obligation 147,000 118,400
Plan assets at fair value 136,700 106,600
___________________________________________________________
Funded status (10,300) (11,800)
Unrecognized asset at
transition (1,800) (2,100)
Prior service cost not yet
recognized (400) (400)
Unrecognized net loss 2,300 9,100
___________________________________________________________
Accrued pension liability $(10,200) $ (5,200)
___________________________________________________________
</TABLE>
Postretirement Benefits Other Than Pensions
PCC provides postretirement medical benefits for eligible
employees who have satisfied plan eligibility provisions,
which include age and/or service requirements.
Assumptions used in determining the net periodic
postretirement benefit cost and the accrued postretirement
benefit obligation included a discount rate of 7.50 percent
in 1997, 7.25 percent in 1996 and 8.50 percent in 1995 and a
medical inflation rate of 8.00 percent in 1997, 9.00 percent
in 1996 and 10.00 percent in 1995, grading down to 5.00
percent after three years in 1997, four years in 1996 and
five years in 1995. All significant plans of the Company
are unfunded and are included below.
Page 57
</Page>
<PAGE>
The components of postretirement benefits cost were as
follows:
<TABLE>
<CAPTION>
__________________________________________________________
Fiscal Fiscal Fiscal
1997 1996 1995
___________________________________________________________
<S> <C> <C> (c)
Service cost $ 300 $100 $200
Interest cost 1,000 600 300
___________________________________________________________
Postretirement benefits cost $1,300 $700 $500
__________________________________________________________
</TABLE>
The accumulated postretirement benefits obligation was as
follows:
<TABLE>
<CAPTION>
____________________________________________________________
March 30, March 31,
1997 1996
____________________________________________________________
Accumulated postretirement benefits obligation:
<S> <C> <C>
Retirees $8,800 $3,000
Eligible active plan participants 2,100 1,500
Other active plan participants 4,800 3,200
____________________________________________________________
15,700 7,700
Unrecognized net (gain) loss (400) 400
____________________________________________________________
Accrued postretirement benefits
liability $16,100 $7,300
____________________________________________________________
</TABLE>
Page 58
</Page>
<PAGE>
A one percent increase in the annual health care trend rates
would have increased the accumulated postretirement benefits
obligation at March 30, 1997 by $1,500 and at March 31, 1996
by $800 and increased the postretirement benefits cost by
$200 in 1997, and $100 in both 1996 and 1995.
COMMITMENTS AND CONTINGENCIES
Various lawsuits arising during the normal course of
business are pending against PCC. In the opinion of
management, the outcome of these lawsuits will have no
significant effect on PCC's consolidated financial position.
SHAREHOLDERS' INVESTMENT
Authorized shares of common stock without par value
consisted of 100,000,000 shares at March 30, 1997 and
50,000,000 shares at March 31, 1996 and April 2, 1995.
Authorized and unissued series A no par serial preferred
stock consisted of 1,000,000 shares at March 30, 1997, March
31, 1996 and April 2, 1995.
In November 1996, the Company sold 3,300,000 shares of
common stock in a stock offering at a price of $46.50 per
share. The net proceeds to the Company totaled $146,100.
PCC translates the balance sheet of its foreign subsidiaries
using the exchange rate at the end of the year. The
statement of income is translated using the average exchange
rate for the year. The effects of such translations are
included in the shareholders' investment account "cumulative
translation adjustments."
STOCK-BASED COMPENSATION PLANS
PCC has stock incentive plans for certain officers, key
salaried employees and directors. The officer and employee
stock incentive plans allow for the grant of stock options,
stock bonuses, stock appreciation rights, cash bonus rights
and sale of restricted stock. Awards under the officer and
employee stock incentive plans are determined by the
Compensation Committee of the Board of Directors. The time
limit within which options may be exercised and other
exercise terms are fixed by the Committee. The directors'
plan grants options for 1,000 shares annually to each
outside director. Option prices of the plans to date have
been at the fair market value on the date of grant. The
options become exercisable in installments from one to four
Page 59
</Page>
<PAGE>
years from the date of grant and generally expire seven to
ten years from the date of grant. The outstanding options
for stock incentive plan shares have expiration dates
ranging from fiscal 1998 to fiscal 2006. At March 30, 1997,
1,032,000 stock incentive plan shares were available for
future grants.
Changes during fiscal 1997, 1996 and 1995 in stock incentive
plan shares outstanding were as follows:
<TABLE>
<CAPTION>
___________________________________________________________
Weighted
Average
Exercise
Shares Price
___________________________________________________________
<S>
<C> <C>
Outstanding at April 3, 1994 1,328,000 $17.43
Granted 208,000 22.98
Exercised (465,000) 16.44
Expired or cancelled (39,000) 20.18
___________________________________________________________
Outstanding at April 2, 1995 1,032,000 18.89
Granted 189,000 34.91
Exercised (357,000) 19.54
Expired or cancelled (38,000) 18.90
___________________________________________________________
Outstanding at March 31, 1996 826,000 22.31
Granted 251,000 45.91
Exercised (152,000) 19.19
Expired or cancelled (20,000) 32.88
___________________________________________________________
Outstanding at March 30, 1997 905,000 $29.20
___________________________________________________________
Exercisable at April 2, 1995 478,000 $19.58
Exercisable at March 31,1996 326,000 $18.45
Exercisable at March 30,1997 393,000 $19.61
</TABLE>
PCC also has an employee stock purchase plan whereby the
Company is authorized to issue up to 2,250,000 shares of
common stock to its full-time employees, nearly all of whom
Page 60
</Page>
<PAGE>
are eligible to participate. Under the terms of the plan,
employees can choose to have up to 10 percent of their
annual base earnings withheld to purchase the Company's
common stock. The purchase price of the stock is 85 percent
of the market price at the date of grant.
In fiscal 1997, PCC adopted the disclosure-only alternative
under Statement of Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation." The Company will
continue to apply the provisions of APB Opinion 25,
"Accounting for Stock Issued to Employees," and related
interpretations in accounting for the above plans.
Accordingly, no compensation cost has been recognized for
its plans. If the accounting provisions of SFAS No. 123 had
been adopted, PCC's net income and earnings per share would
have been as follows:
<TABLE>
<CAPTION>
____________________________________________________________
Fiscal Fiscal
1997 1996
____________________________________________________________
Net Income:
<S> <C> <C>
As Reported $56,500 $41,100
Pro Forma $55,900 $40,900
____________________________________________________________
Earning Per Share:
As Reported $ 2.59 $ 2.02
Pro Forma $ 2.56 $ 2.01
____________________________________________________________
</TABLE>
The weighted-average fair values of stock options granted in
fiscal 1997 and 1996 were $15.10 and $11.21 per share,
respectively. The weighted-average fair value of purchase
rights granted in fiscal 1997 under the employee stock
purchase plan was $10.64. In determining the effect of SFAS
No. 123, the fair value of each option or purchase right
granted is estimated on the date of grant using the Black-
Scholes option pricing model with the following weighted-
average assumptions:
Page 61
</Page>
<PAGE>
<TABLE>
<CAPTION>
____________________________________________________________
Fiscal Fiscal
1997 1996
____________________________________________________________
<S> <C> <C>
Risk-free interest rates 6.0% to 6.3% 5.8% to 6.4%
Dividend yield 0.6% 0.6%
Expected life 5 years 5 years
Expected volatility 25.5% 26.0%
____________________________________________________________
</TABLE>
The following table summarizes information about stock
options outstanding at March 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
__________________________________ ___________________
Weighted
Weighted Average
Range of Average Average Exercise
Exercise Prices Shares Life (a) Exercise Price Shares Price
___________________________________________________________________________
_
<S> <C> <C> <C> <C> <C>
$11.58 to $17.50 247,000 3.0 $14.77 200,000 $14.15
19.79 to 22.88 183,000 6.2 22.33 98,000 21.86
23.17 to 35.50 226,000 7.0 32.26 95,000 28.75
39.88 to 44.50 45,000 9.2 43.24 0 42.86
46.38 to 49.25 204,000 9.6 46.46 0 0.00
___________________________________________________________________________
_
$11.58 to $49.25 905,000 6.5 $29.20 393,000 $19.61
____________________________________________________________________________
</TABLE>
(a) Weighted average contractual life remaining in years
Page 62
</Page>
<PAGE>
SHAREHOLDER RIGHTS PLAN
In 1988, PCC adopted a shareholder rights plan and declared a
dividend distribution of one right for each outstanding share
of common stock. Under certain conditions, each right may be
exercised to purchase 1/100 of a share of series A no par
serial preferred stock at a purchase price of $135, subject
to adjustment. The rights will be exercisable only (i) if a
person or group has acquired, or obtained the right to
acquire, 20 percent or more of the outstanding shares of
common stock, (ii) following the commencement of a tender or
exchange offer for 20 percent or more of the outstanding
shares of common stock, or (iii) after the Board of Directors
of PCC declares any person who owns more than 10 percent of
the outstanding common stock to be an Adverse Person. Each
right will entitle its holder to receive, upon exercise,
common stock (or, in certain circumstances, cash, property or
other security of PCC) having a value equal to two times the
exercise price of the right. If, after a person acquires 20
percent or more of the outstanding shares of common stock,
PCC is acquired in a merger or other business combination in
which PCC does not survive or in which its common stock is
exchanged, each right will be adjusted to entitle its holder
to receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise price
of the right. The rights expire on December 16, 1998, and
may be redeemed by PCC for $0.01 per right at any time until
a determination is made that any person is an Adverse Person,
or 10 days following the time that a person has acquired 20
percent or more of the outstanding common stock, or in
connection with certain transactions approved by the Board of
Directors. The rights do not have voting or dividend rights
and, until they become exercisable, have no dilutive effect
on the earnings of PCC.
SEGMENT INFORMATION
PCC manufactures and markets complex metal components and
products in one industry segment. Principal customers are
manufacturers of aircraft jet engines, industrial gas turbine
engines and other industrial products, including pumps,
compressors, automotive components, devices for surgical bone
repair and replacement, electronics, fasteners, firearms,
ordnance and consumer appliances.
Page 63
</Page>
<PAGE>
Net sales included sales to General Electric in the amounts
of $150,500 in 1997, $121,600 in 1996 and $92,600 in 1995 and
sales to Pratt & Whitney in the amounts of $125,200 in 1997,
$90,800 in 1996 and $72,600 in 1995. No other customer
accounted for more than 10 percent of net sales.
The geographic distribution of net sales, earnings from
operations and identifiable assets are summarized as follows:
<TABLE>
<CAPTION>
Fiscal 1997
________________________________________________________
<S> <C>
Net sales to unrelated entities:
United States $ 842,800
Europe 104,700
Other 25,300
________________________________________________________
$ 972,800
________________________________________________________
Earnings from operations:
United States $ 99,100
Europe 14,000
Other 2,700
________________________________________________________
115,800
Less:
Provision for restructuring 3,400
Interest expense, net 16,700
________________________________________________________
Income before provision for income taxes $ 95,700
________________________________________________________
Assets:
United States $ 915,400
Europe 113,000
Other 32,700
Corporate, cash and eliminations 9,000
________________________________________________________
$1,070,100
________________________________________________________
</TABLE>
Total net sales and identifiable assets of PCC's foreign
subsidiaries represented less than 10 percent of
consolidated totals in 1996 and 1995.
Page 64
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<PAGE>
Export sales originating from the United States of $216,800
in 1997, $134,800 in 1996 and $108,900 in 1995 were made
principally to customers in Europe. Total net sales to
customers outside the United States were $346,800 in 1997,
$156,200 in 1996 and $126,800 in 1995 or 36 percent, 28
percent and 29 percent of the Company's sales in those years.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENTS
To the Shareholders and Board of Directors of Precision
Castparts Corp.
In our opinion, the accompanying consolidated balance sheets
and the related consolidated statements of income, cash flows
and shareholders' investment present fairly, in all material
respects, the financial position of Precision Castparts Corp.
and its subsidiaries at March 30, 1997 and March 31, 1996,
and the results of their operations and their cash flows for
each of the three years in the period ended March 30, 1997,
in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the
Company's management; our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ PRICE WATERHOUSE LLP
____________________________
Price Waterhouse LLP
Portland, Oregon
April 25, 1997
Page 65
</Page>
<PAGE>
REPORT OF MANAGEMENT
The management of PCC has prepared the consolidated financial
statements and related financial data contained in this
Annual Report. The financial statements were prepared in
accordance with generally accepted accounting principles
appropriate in the circumstances and reflect judgments and
estimates with appropriate consideration to materiality.
Management is responsible for the integrity and objectivity
of the financial statements and other financial data included
in the report.
PCC maintains a system of internal accounting controls to
provide reasonable assurance that assets are safeguarded and
that transactions are properly executed and recorded. The
system includes policies and procedures, internal audits and
reviews by Company officers.
Price Waterhouse LLP, certified public accountants, provides
an objective, independent review of management's discharge of
its obligation related to the fairness of reporting operating
results and financial condition. Price Waterhouse LLP
performs auditing procedures necessary in the circumstances
to render an opinion on the financial statements contained in
this report.
The Audit Committee of the Board of Directors is composed
solely of outside directors. The Committee meets
periodically and, when appropriate, separately with
representatives of the independent public accountants and the
internal auditors to monitor the activities of each.
/s/ WILLIAM C. MCCORMICK /s/ WILLIAM D. LARSSON
_________________________ _________________________
William C. McCormick William D. Larsson
Chairman, and Chief Vice President and Chief
Executive Officer Financial Officer
Page 66
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<PAGE>
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
(Unaudited)
(In thousands, except employee and per share data)
___________________________________________________________________________
__________
1997 1996 1995 1994 1993
___________________________________________________________________________
__________
<S> <C> <C> <C> <C> <C>
Net sales $ 972,800 $ 556,800 $ 436,400 $ 420,400 $ 461,400
Net income $ 56,500 $ 41,100 $ 29,000 $ 22,200 $ 1,800
Return on sales 5.8% 7.4% 6.6% 5.3% 0.4%
Return on beginning
shareholders' investment 18.6% 15.9% 13.0% 11.1% 0.6%
Net income per common share $ 2.59 $ 2.02 $ 1.45 $ 1.14 $ 0.07
Cash dividends declared
per common share $ 0.24 $ 0.24 $ 0.22 $ 0.12 $ 0.08
Average shares of common
stock outstanding (000) 21,800 20,400 20,000 19,500 26,800
Working capital $ 205,200 $ 125,800 $ 89,900 $ 125,700 $ 137,000
Total assets $1,070,100 $ 450,500 $ 406,700 $ 342,900 $ 424,300
Total debt $ 300,500 $ 13,900 $ 26,000 $ 15,700 $ 19,400
Total shareholders' investment $ 504,400 $ 303,100 $ 258,400 $ 222,800 $ 199,900
Total debt as a percent of total
debt and shareholders' investment 37.3% 4.4% 9.1% 6.6% 8.8%
Book value per share $ 21.03 $ 14.76 $ 12.80 $ 11.31 $ 10.27
Capital expenditures $ 52,800 $ 19,700 $ 10,900 $ 7,400 $ 16,000
Number of employees 9,280 5,646 5,166 3,993 4,341
Number of shareholders of record 2,267 2,327 2,480 2,750 2,580
___________________________________________________________________________
__________
</TABLE>
The Selected Financial Data have been restated, as
appropriate, to reflect the three-for-two stock split,
effective August 1994.
Page 67
</Page>
<PAGE>
Quarterly Financial Information
(Unaudited)
(In thousands, except per share data)
<TABLE>
______________________________________________________________________
__________
<CAPTION>
1997
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter(1)
______________________________________________________________________
__________
<S> <C> <C> <C> <C>
Net sales $166,000 $244,900 $274,600 $287,300
Gross profit $ 31,900 $ 51,700 $ 59,300 $ 64,400
Net income $ 11,300 $ 13,300 $ 15,300 $ 16,600
Net income per share $ 0.55 $ 0.64 $ 0.70 $ 0.70
Cash dividends per share $ 0.06 $ 0.06 $ 0.06 $ 0.06
Common stock prices:
High $ 44.50 $ 51.25 $ 50.63 $ 54.63
Low $ 38.50 $ 33.38 $ 45.38 $ 48.00
End $ 42.00 $ 50.88 $ 49.25 $ 52.00
______________________________________________________________________
__________
</TABLE>
Page 68
</Page>
<PAGE>
<TABLE>
<CAPTION>
1996
1st Quarter 2nd Quarter 3rd Quarter(2) 4th Quarter
______________________________________________________________________
__________
<S> <C> <C> <C> <C>
Net sales $137,200 $134,000 $127,700 $157,900
Gross profit $ 27,600 $ 27,300 $ 25,700 $ 30,100
Net income $ 9,400 $ 9,500 $ 11,800 $ 10,400
Net income per share $ 0.46 $ 0.47 $ 0.58 $ 0.51
Cash dividends per share $ 0.06 $ 0.06 $ 0.06 $ 0.06
Common stock prices:
High $ 35.25 $ 36.50 $ 40.00 $ 41.13
Low $ 25.88 $ 32.63 $ 34.25 $ 36.50
End $ 35.13 $ 36.50 $ 39.75 $ 40.00
______________________________________________________________________
__________
</TABLE>
[FN]
___________
(1) During the fourth quarter of fiscal 1997, the
Company recorded a provision for restructuring of
$3,400 for the relocation of PCC Composites and
its consolidation with AFT. The tax-effected
impact of the provision totaled $2,000, or $0.10
per share.
(2) During the third quarter of fiscal 1996, the
Company recorded a tax benefit of $2,200 from the
settlement of a state tax issue, and a $400
benefit from a research and development tax
credit. The impact from the two items was equal
to $0.13 per share.
Page 69
</Page>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF PRECISION CASTPARTS CORP.
<TABLE>
<CAPTION>
State or
Approximate Percentage Jurisdiction of
of Voting Securities Incorporation
Name of Subsidiary Owned or Organization
______________________________________________________________
___
<S> <C> <C>
PCC Structurals, Inc. 100% Oregon
PCC Airfoils, Inc. 100% Ohio
PCC Flow Technologies, Inc. 100% Delaware
PCC Specialty Products, Inc. 100% Delaware
Advanced Forming Technology, Inc. 100% Colorado
PCC-France, S.A. 100% France
PCC Composites, Inc. 100% Pennsylvania
AETC Limited 100% United Kingdom
</TABLE>
Page 70
</Page>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Precision
Castparts Corp.
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-3 No. 333-12971, to the incorporation by reference in
the Prospectus constituting part of the Registration Statement
on Form S-3 No. 2-95890, to the incorporation by reference in
the Prospectus constituting part of the Registration Statement
on Form S-3 No. 2-95855, to the incorporation by reference in
the Registration Statement on Form S-8 No. 333-14577, to the
incorporation by reference in the Registration Statement on
Form S-8 No. 333-20015, to the incorporation by reference in
the Registration Statement on Form S-8 No. 33-32367, and to
the incorporation by reference in the Registration Statement
on Form S-8, No. 33-40559 of Precision Castparts Corp. of our
report dated April 25, 1997 which appears on page 31 of the
Financial Section of the 1997 Annual Report to Shareholders of
Precision Castparts Corp., which is incorporated in this
Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial
Statement Schedule, which appears in Item 14(a)(2) in this
Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
______________________________
PRICE WATERHOUSE LLP
Portland, Oregon
June 27, 1997
Page 71
</Page>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
March 30, 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> 12-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-30-1997
<CASH> 10100
<SECURITIES> 0
<RECEIVABLES> 180800
<ALLOWANCES> 2600
<INVENTORY> 235800
<CURRENT-ASSETS> 454100
<PP&E> 398800
<DEPRECIATION> 169700
<TOTAL-ASSETS> 1070100
<CURRENT-LIABILITIES> 248900
<BONDS> 0
0
0
<COMMON> 24000
<OTHER-SE> 480400
<TOTAL-LIABILITY-AND-EQUITY> 1070100
<SALES> 972800
<TOTAL-REVENUES> 972800
<CGS> 765500
<TOTAL-COSTS> 765500
<OTHER-EXPENSES> 3400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16700
<INCOME-PRETAX> 95700
<INCOME-TAX> 39200
<INCOME-CONTINUING> 56500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56500
<EPS-PRIMARY> 2.59
<EPS-DILUTED> 2.59
</TABLE>
