<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended December 29, 1996
Commission File No. 1-10348
_______________________________________
Precision Castparts Corp.
(Exact name of registrant as specified in its charter)
Oregon 1-10348 93-0460598
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation of File No.) Identification No.)
organization)
4650 S.W. Macadam Avenue
Suite #440
Portland, Oregon 97201-4254
Registrant's telephone number,
including area code: Telephone: (503) 417-4800
_______________________________________
Indicate by checkmark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No ______
_________
Number of shares of Common Stock, no par value, outstanding
as of February 10, 1997: 23,975,282
Exhibit Index at Page 11
Page 1 of 12 Pages
Note: This 10-Q was filed electronically via EDGAR with the
Securities and Exchange Commission.
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Page 2
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
Precision Castparts Corp. and Subsidiaries
(In thousands, except share and per share data)
Consolidated Statements of Income
<TABLE>
<CAPTION>
Dec. 29, Dec. 31,
Three Months Ended 1996 1995
____________________________________________________________
<S> <C> <C>
Net Sales $274,600 $127,700
Cost of Goods Sold 215,300 102,000
Selling and Administrative Expenses 26,800 10,900
Interest Expense (Income), net 6,400 (100)
____________________________________________________________
Income Before Provision for Income Taxes26,100 14,900
Provision for Income Taxes (1) 10,800 3,100
____________________________________________________________
Net Income $ 15,300 $ 11,800
============================================================
Net Income Per Common Share $ 0.70 $ 0.58
============================================================
</TABLE>
<TABLE>
<CAPTION>
Dec. 29, Dec. 31,
Nine Months Ended 1996 1995
____________________________________________________________
<S> <C> <C>
Net Sales $685,500 $398,900
Cost of Goods Sold 542,600 318,300
Selling and Administrative Expenses 62,800 33,700
Interest Expense, net 12,200 100
____________________________________________________________
Income Before Provision for Income Taxes67,900 46,800
Provision for Income Taxes (1) 28,000 16,100
____________________________________________________________
Net Income $ 39,900 $ 30,700
============================================================
Net Income Per Common Share $ 1.89 $ 1.51
============================================================
</TABLE>
See Notes to Financial Statements on page 5.
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Page 3
Precision Castparts Corp. and Subsidiaries
(In thousands)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Dec. 29, Mar 31,
ASSETS 1996 1996
____________________________________________________________
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 12,800 $ 26,200
Receivables 177,200 82,000
Inventories 222,300 105,200
Prepaid expenses 5,700 2,100
Current deferred tax asset 21,800 8,600
____________________________________________________________
Total current assets 439,800 224,100
____________________________________________________________
Property, Plant and Equipment, at cost 395,700
305,000
Less - Accumulated depreciation (164,100) (161,200)
____________________________________________________________
Net property, plant and equipment 231,600 143,800
____________________________________________________________
Goodwill, net of amortization 378,400 80,800
Other Assets, net 3,100 1,800
____________________________________________________________
$1,052,900 $450,500
============================================================
</TABLE>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
____________________________________________________________
<S> <C> <C>
Current Liabilities:
Notes payable $ 10,700 $ 400
Current portion of long-term debt 19,800 4,700
Accounts payable 69,600 38,200
Accrued liabilities 97,400 50,800
Income taxes payable 21,700 4,200
____________________________________________________________
Total current liabilities 219,200 98,300
____________________________________________________________
Long-Term Debt, excluding
current portion 276,800 8,800
Deferred Tax Liability 8,700 19,700
Accrued Retirement Benefits Obligation 25,000
11,900
Other Long-Term Liabilities 31,300 8,700
____________________________________________________________
Total liabilities 561,000 147,400
____________________________________________________________
Shareholders' Investment:
Common stock 23,900 20,500
Paid-in capital 159,300 13,900
Retained earnings 304,400 266,900
Cumulative translation adjustment 4,300 1,800
____________________________________________________________
Total shareholders' investment 491,900 303,100
____________________________________________________________
$1,052,900 $450,500
============================================================
See Notes to Financial Statements on page 5.
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Precision Castparts Corp. and Subsidiaries
(In thousands)
Consolidated Statements of Cash Flows
<CAPTION>
Dec. 29, Dec. 31,
Nine Months Ended 1996 1995
____________________________________________________________
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $39,900 $30,700
Non-cash items included in income:
Depreciation and amortization 25,200 17,000
Deferred taxes (5,300) (300)
Changes in operating working capital,
excluding effects of acquisitions:
Receivables (36,200) 300
Inventories (17,700) (9,600)
Prepaids (2,300) 1,300
Other assets (2,900) --
Payables, accruals & current taxes 14,100 (13,000)
Other liabilities 3,400 600
____________________________________________________________
Net cash provided by
operating activities 18,200 27,000
____________________________________________________________
Cash Flows from Investing Activities:
Business Acquisitions, net of cash acquired
(322,700) --
Acquisition of property,
plant and equipment (35,000) (11,400)
Other investing activities, net (500) 800
____________________________________________________________
Net cash used by investing
activities (358,200) (10,600)
____________________________________________________________
Cash Flows from Financing Activities:
Proceeds of long-term debt 308,300 --
Payment of long-term debt (138,100) (4,900)
Proceeds of notes payable 10,200 1,400
Payments of notes payable -- (7,300)
Sale of common stock 148,800 6,700
Cash dividends (2,500) (3,600)
Other financing activities, net (100) --
____________________________________________________________
Net cash provided (used) by
financing activities 326,600 (7,700)
____________________________________________________________
Net (Decrease) Increase in Cash
and Cash Equivalents (13,400) 8,700
Cash and Cash Equivalents at
Beginning of Period 26,200 3,900
____________________________________________________________
Cash and Cash Equivalents at
End of Period $12,800 $12,600
============================================================
See Notes to Financial Statements on page 5.
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Notes to the Interim Financial Statements
(1) The consolidated interim financial statements have been
prepared by Precision Castparts Corp. ("PCC" or the
"Company"), without audit and subject to year-end
adjustment, in accordance with generally accepted
accounting principles, except that certain information
and footnote disclosures made in the latest annual
report have been condensed or omitted for the interim
statements. Certain costs are estimated for the full
year and allocated in interim periods based on
estimates of operating time expired, benefit received,
or activity associated with the interim period. The
consolidated financial statements reflected all
adjustments which are, in the opinion of management,
necessary for fair representation.
(2) Earnings per share have been computed based on the
weighted average number of shares of common stock
outstanding during the periods. Net income per share
is based on 21,100,000 shares outstanding for the nine
months ended December 29, 1996, and 20,300,000 shares
outstanding for the nine months ended December 31,
1995. Fully diluted amounts are not presented because
they are not materially different than amounts shown.
(3) On November 21, 1996, PCC sold 3.3 million shares of
common stock in a secondary stock offering at a price
of $46.50 per share. The net proceeds to the Company
totaled $146.1 million
(4) On May 31, 1996, PCC acquired 100 percent of the stock
of The Olofsson Corporation ("Olofsson"), for a
purchase price of $52.2 million. The Company accounted
for this acquisition using the purchase method.
Accordingly, goodwill of $30.6 million was recorded for
the difference between the acquisition cost and the
fair value of the assets acquired and liabilities
assumed.
On July 1, 1996, PCC Composites acquired the stock of
Balo Precision Parts, Inc. ("Balo"), for $3.0 million.
Purchase accounting yielded goodwill of approximately
$3.2 million.
On July 19, 1996, PCC Airfoils acquired the assets of
AE Turbine Components, Limited ("AETC"), located in
Yeadon, England, from T&N plc for $63.4 million.
Purchase accounting yielded goodwill of approximately
24.6 million.
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Page 6
On July 31, 1996, the Company acquired all of the stock
of NEWFLO Corporation ("NEWFLO", now operating as "PCC
Flow Technologies"), for $300.0 million, including
assumed debt. Purchase accounting yielded goodwill of
approximately $229.1 million.
On July 31, 1996, PCC Specialty Products purchased the
stock of California based Astro Punch Corporation
("Astro Punch"), for $6.1 million including assumed
debt. Purchase accounting yielded goodwill of
approximately $4.9 million.
On December 23, 1996, PCC Flow Technologies purchased
the stock of Crown Pump Corp. ("Crown Pump"), a Texas
based company, for $6.2 million. Purchase accounting
yielded goodwill of approximately $5.0 million.
The following represents the pro forma results of
operations for the Company and the acquisitions for the
nine months ended December 29, 1996, as though the
acquisitions had occurred at the beginning of the
fiscal year. Results for the three months ended
December 29, 1996 include the full quarter's results
from the acquisitions. The pro forma information is
not necessarily indicative of the results which would
have resulted had the acquisition occurred at the
beginning of the fiscal year, nor is it necessarily
indicative of future results.
</TABLE>
<TABLE>
<CAPTION>
Nine
Months
Ended
___________________
December 29, 1996
_____________________
<S> <C>
Revenues $ 798,500
===========
Net Income $ 41,100
==========
Earnings per share $ 1.95
==========
</TABLE>
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Page 7
(5) PCC Flow Technologies, acquired in July, 1996, has
outstanding, $100 million principal amount of NEWFLO
Subordinated Notes due 2002. 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 or
other distributions, including dividends and
distributions to PCC, and make certain investments and
(iii) pledge their assets.
(6) During the third quarter of fiscal 1996, the Company
recorded a tax benefit of $2.2 million from the
settlement of a state tax issue, and a $0.4 million
benefit from a research and development tax credit.
These tax benefits equaled $0.13 per share.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Sales for the third quarter were $274.6 million, up 115%
from $127.7 million in the same quarter last year. Net
income was $15.3 million, or $0.70 per share, for the
quarter, compared with net income of $11.8 million , or
$0.58 per share in the same quarter last year.
In the fourth quarter of last year, PCC acquired 100 percent
of the stock of the Carmet Company, in the first quarter of
this year, PCC acquired Olofsson, in the second quarter, the
Company acquired Balo, AETC, PCC Flow Technologies and Astro
Punch and in the third quarter the Company acquired Crown
Pump.
Results of Operations
Comparison between Three Months Ended December 29, 1996 and
December 31, 1995
Sales increased $146.9 million compared with the third
quarter a year ago. The majority of the increase since last
year resulted from the acquisitions. Without these
acquisitions, sales would have been approximately 40 percent
higher than a year ago, reflecting overall improvement in
the aerospace industry as well as growth in non-aerospace
sales.
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Page 8
Cost of goods sold, as a percent of sales, for the third
quarter of fiscal 1997 was 78 percent, an improvement from
the 80 percent reported in the third quarter last year.
Reflected in the fiscal 1997 results are higher margins
contributed by the acquisitions made in the year, partially
offset by higher costs in the traditional operations due to
costs associated with IGT development programs and training
costs from the addition of new employees to support
increased demand for the Company's aerospace products.
Selling and administrative expenses increased $15.9 million
from the $10.9 million a year ago to $26.8 million in the
third quarter of fiscal 1997. The higher level of selling
and administrative expenses reflects the effect of fiscal
1997 acquisitions which operate with higher selling costs
due to their related advertising, trade show and sales
commission costs.
In the third quarter of fiscal 1997, net interest expense
was $6.4 million as compared with $0.1 million of net
interest income for the same period in fiscal 1996. The
higher expenses reflect lower cash balances and higher debt
this year as compared to the third quarter of last year as a
result of borrowings to fund the acquisitions.
The effective tax rate for the third quarter of fiscal 1997
was 41.4 percent. This compares to last year's effective
tax rate of 20.8 percent which reflected a tax benefit of
$2.2 million from the settlement of a state tax issue and a
$0.4 million benefit from a research and development tax
credit. The current fiscal year rate also reflects higher
amounts of non-deductible goodwill amortization.
Results of Operations - Comparison Between Nine Months Ended
December 29, 1996, and December 31, 1995.
Sales of $685.5 million for the first nine months of fiscal
1997, increased $286.6 million, or 72 percent, compared to
the first nine months a year ago. The increase was due to
improved sales in nearly all business areas and the impact
from the acquisitions made in the last year. Excluding the
effects of acquisitions in fiscal 1997, sales increased
approximately 25 percent. The most significant sales
increase was to aerospace customers, reflecting the upswing
in that industry's cycle.
Cost of goods sold as a percent of sales for the first nine
months of fiscal 1997 was 79 percent, one percentage point
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Page 9
lower than the first nine months of last year. Reflected in
the fiscal 1997 results are higher margins contributed by
the acquisitions made in the year, offset by higher costs in
the traditional operations due to costs associated with IGT
development programs and training costs from the addition of
new employees to support increased demand for the Company's
aerospace products.
Selling and administrative expenses were $62.8 million for
the first nine months, or 9.2 percent of sales, compared to
$33.7 million, or 8.5 percent of sales, a year ago. The
higher level of selling and administrative expenses reflects
the effect of fiscal year 1997 acquisitions which operate
with higher selling costs due to their related advertising,
trade show and sales commission costs and reflects increased
expenses relating to the Company's successful efforts
against union organizing activities in its Oregon
operations.
Net interest expense in the nine months of fiscal 1997, was
$12.2 million, as compared with $0.1 million in the first
nine months a year ago. The increase reflects the lower
cash balances and higher debt this year compared with a year
ago, due to the acquisitions.
The effective tax rate in the first nine months of fiscal
1997 was 41.2 percent as compared to last year's effective
tax rate of 34.4 percent. The increase is due to non-
recurring tax benefits totaling $2.6 million in the first
nine months of the last fiscal year coupled with higher non-
deductible goodwill related to fiscal 1997 acquisitions.
Changes in Financial Condition and Liquidity
Total assets of $1,052.9 million at December 29, 1996
represented a $602.4 million increase from the $450.5
million balance at March 31, 1996. The acquisitions since
the beginning of fiscal 1997 accounted for the majority of
the increase. Total capitalization at December 29, 1996,
was $799.2 million, consisting of $307.3 million of debt and
$491.9 million of equity. The debt-to-capitalization ratio
was 0.38 compared with 0.04 at the end of the prior fiscal
year.
Cash from earnings for the nine months ended December 29,
1996, of $59.8 million, plus cash of $148.8 million from the
sale of Common Stock through the secondary stock offering
</Page>
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Page 10
and stock option exercises was less than cash requirements
which consisted of $322.7 million for acquisitions, $41.6
million of increased working capital, $35.0 million of
capital expenditures and $2.5 million of cash dividends.
The cash flow shortfall was funded from $180.4 million of
net borrowings and $13.4 million of available cash. At
December 29, 1996, cash and cash equivalents were $12.8
million.
PCC believes that future capital requirements for property,
plant and equipment and dividend payments can be funded from
existing cash or additional borrowings. The Company
continues to evaluate potential acquisitions and believes
acquisition opportunities can be funded from cash and
additional borrowings.
</Page>
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Page 11
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Item 6. Exhibits and Reports on Form 8-K
None.
</Page>
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Page 12
Forward Looking Statements
Information included within this filing describing the
projected growth and future results and events constitutes
forward-looking statements. Actual results in future
periods may differ materially because of a number of risks
and uncertainties, including but not limited to the rate of
recovery in the aerospace cycle; the relative success of the
Company's entry into new markets, including the rapid ramp-
up for industrial gas turbine component production;
competitive pricing; the availability and costs of metals;
relations with the Company's employees; and the Company's
ability to manage its operating costs and integrate acquired
businesses in an effective manner. Any forward-looking
statements should be considered in light of these factors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
PRECISION CASTPARTS CORP.
Registrant
DATE: February 12, 1997 /s/ W.D. Larsson
______________________________
W.D. Larsson
Vice President Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
December 29, 1996, financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-29-1996
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<RECEIVABLES> 184500
<ALLOWANCES> 7300
<INVENTORY> 222300
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<PP&E> 395700
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0
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