<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-K
/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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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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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 SAX airfoil casting knowledge from
the aerospace market into the IT market to produce IT
airfoil blades and vanes that are better able to withstand
the extreme heat and stresses of the new higher-temperature
gas turbines. IT 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, IT 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,"
"NERCO," "TECHNO," "Barber" and "OIL" 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," "NERCO," "TECHNO," "Barber" and "OIL." 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 68 961,800 3,219,300 4,181,100
Foreign 17 191,400 435,000 626,400
</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.
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>
<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
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</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>
<PAGE>
Form of Change of Control Agreement
[Date]
[Name]
[Address]
Dear [ ]:
Precision Castparts Corp. (the "Company") considers it
essential to the best interests of its stockholders to
foster the continuous employment of key management
personnel. In this connection, the Board of Directors of
the Company (the "Board") recognizes that, as is the case
with many publicly held corporations, the possibility of a
change in control of the Company may exist and that such
possibility, and the uncertainty and questions which it may
raise among management, may result in the departure or
distraction of management personnel to the detriment of the
Company and it stockholders.
The Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention
and dedication of members of the Company's management,
including yourself, to their assigned duties without
distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in
control of the Company.
In order to induce you to remain in the employ of the
Company, the Company agrees that you shall receive the
severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Company
is terminated under the circumstances described below
subsequent to a "change in control of the Company" (as
defined in Section 2).
1. Term of Agreement. This Agreement shall commence
on January 1, 1997, and shall continue in effect through
December 31, 1997; provided, however, that commencing on
January 1, 1998, and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one
Page 1
</Page>
<PAGE>
additional year unless, not later than September 30 of the
preceding year, the Company shall have given notice that it
does not wish to extend this Agreement (provided that no
such notice may be given during the pendency of a potential
change in control of the Company, as defined in Section 2);
and provided, further, that if a change in control of the
Company, as defined in Section 2, shall have occurred during
the original or extended term of this Agreement, this
Agreement shall continue in effect for a period of
twenty-four (24) months beyond the month in which such
change in control occurred. Notwithstanding anything
provided herein to the contrary, the term of this Agreement
shall not extend beyond the end of the month in which you
attain "normal retirement age" under the provisions of the
Precision Castparts Corp. Retirement Plan Restatement (or
any successor thereto) or any other tax-qualified retirement
plan of the Company or any of its subsidiaries in which you
are participating (any such plan being referred to herein as
the "Company Pension Plan").
2. Change in Control; Potential Change in Control.
(i) No benefits shall be payable hereunder unless there
shall have been a change in control of the Company, as set
forth below. For purposes of this Agreement, a "change in
control of the Company" shall be deemed to have occurred if:
(a) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any
Company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities;
(b) during any period of two consecutive
years (not including any period prior to the execution of
this Agreement), individuals who at the beginning of such
period constitute the Board, and any new director (other
than a director designated by a person who has entered into
an agreement with the Company to effect a transaction
described in clause (a), (c) or (d) of this Section) whose
election by the Board or nomination for election by the
Page 2
</Page>
<PAGE>
Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a
majority thereof;
(c) the stockholders of the Company approve
a merger or consolidation of the Company with any other
company, other than (1) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation
or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more
than 20% of the combined voting power of the Company's then
outstanding securities; or
(d) the stockholders of the Company approve
a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
Notwithstanding the foregoing, unless
otherwise determined by the Board, no change in control of
the Company shall be deemed to have occurred if (i) you are
a member of a management group which first announces a
proposal which constitutes a Potential Change in Control (as
defined in this Section 2) which proposal (including any
modifications thereof) is ultimately successful or (ii) you
acquire an equity interest in the entity which ultimately
acquires the Company pursuant to the transaction described
in (i) of this paragraph.
(ii) For purposes of this Agreement, a "potential
change in control of the Company" shall be deemed to have
occurred if:
(a) the Company enters into an agreement,
the consummation of which would result in the occurrence of
a change in the control of the Company;
Page 3
</Page>
<PAGE>
(b) any person (including the Company)
publicly announces an intention to take or to consider
taking actions which if consummated would constitute a
change in control of the Company;
(c) any person, other than a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company (or a company owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of
stock of the Company), who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of
the Company's then outstanding securities, increases his
beneficial ownership of such securities by 3 percentage
points or more over the percentage so owned by such person
on the date hereof; or
(d) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a potential
change in control of the Company has occurred.
(iii) You agree that, subject to the terms and
conditions of this Agreement, in the event of a potential
change in control of the Company, you will remain in the
employ of the Company until the earliest of (a) a date which
is 270 days from the occurrence of such potential change in
control of the Company, (b) the termination by you of your
employment by reason of Disability as defined in Section
3(ii), or (c) the date on which you first become entitled
under this Agreement to receive the benefits provided in
Section 4(iii) below.
3. Termination Following Change in Control. (i)
General. If any of the events described in Section 2
constituting a change in control of the Company shall have
occurred, you shall be entitled to the benefits provided in
Section 4(iii) upon the subsequent termination of your
employment during the term of this Agreement unless such
termination is (a) because of your death or Disability,
(b) by the Company for Cause, or (c) by you other than for
Good Reason. In the event your employment with the Company
is terminated for any reason and subsequently a change in
control of the Company should have occurred, you shall not
be entitled to any benefits hereunder.
(ii) Disability. If, as a result of your
incapacity due to physical or mental illness, you shall have
Page 4
</Page>
<PAGE>
been absent from the full-time performance of your duties
with the Company for six (6) consecutive months, and within
thirty (30) days after written notice of termination is
given you shall not have returned to the full-time
performance of your duties, your employment may be
terminated for "Disability."
(iii) Cause. Termination by the Company of
your employment for "Cause" shall mean termination (a) upon
the willful and continued failure by you to substantially
perform your duties with the Company (other than any such
failure resulting from your incapacity due to physical or
mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination (as defined in
Subsection 3(v)) by you for Good Reason (as defined in
Subsection 3(iv)), after a written demand for substantial
performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board
believes that you have not substantially performed your
duties, or (b) the willful engaging by you in conduct which
is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of this Subsection,
no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, you shall not be deemed to
have been terminated for Cause unless and until there shall
have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of
the Board you were guilty of conduct set forth above in this
Subsection and specifying the particulars thereof in detail.
(iv) Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean, without your
express written consent, the occurrence after a change in
control of the Company of any of the following circumstances
unless, in the case of paragraphs (a), (e), (f), (g) or (h),
such circumstances are fully corrected prior to the Date of
Termination (as defined in Section 3 vi)) specified in the
Notice of Termination (as defined in Section 3(v)) given in
Page 5
</Page>
<PAGE>
respect thereof:
(a) the assignment to you of any duties
inconsistent (except in the nature of a promotion) with the
position in the Company that you held immediately prior to
the change in control of the Company, or an adverse
alteration in the nature or status of your position or
responsibilities or the conditions of your employment from
those in effect immediately prior to such change in control;
(b) a reduction by the Company in your
annual base salary as in effect on the date hereof or as the
same may be increased from time to time except for across-
the-board salary reductions similarly affecting all
management personnel of the Company and all management
personnel of any person in control of the Company;
(c) the Company's requiring you to be based
more than 200 miles from the Company's offices at which you
are principally employed immediately prior to the date of
the change in control except for required travel on the
Company's business to an extent substantially consistent
with your present business travel obligations;
(d) the failure by the Company to pay to you
any portion of your current compensation or compensation
under any deferred compensation program of the Company
within seven (7) days of the date such compensation is due;
(e) the failure by the Company to continue
in effect any material compensation or benefit plan in which
you participate immediately prior to the change in control
of the Company, unless an equitable arrangement (embodied in
an ongoing substitute or alternative plan) has been made
with respect to such plan, or the failure by the Company to
continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, than existed at the time of the change in
control of the Company;
(f) the failure by the Company to continue
to provide you with benefits substantially similar to those
enjoyed by you under any of the Company's life insurance,
medical, dental, accident, or disability plans in which you
were participating at the time of the change in control of
the Company, the taking of any action by the
Page 6
</Page>
<PAGE>
Company which would directly or indirectly materially reduce
any of such benefits, or the failure by the Company to
provide you with the number of paid vacation days to which
you are entitled on the basis of your years of service with
the Company in accordance with the Company's normal vacation
policy in effect at the time of the change in control of the
Company;
(g) the failure of the Company to obtain a
satisfactory agreement from any successor to assume and
agree to perform this Agreement, as contemplated in Section
5 hereof; or
(h) any purported termination of your
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Subsection
(v) hereof (and, if applicable, the requirements of
Subsection (iii) hereof), which purported termination shall
not be effective for purposes of this Agreement.
Your right to terminate your employment pursuant
to this Subsection shall not be affected by your incapacity
due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good
Reason hereunder.
(v) Notice of Termination. Any purported
termination of your employment by the Company or by you
shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 6.
"Notice of Termination" shall mean a notice that shall
indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision
so indicated.
(vi) Date of Termination, Etc. "Date of
Termination" shall mean (a) if your employment is terminated
for Disability, thirty (30) days after Notice of Termination
is given (provided that you shall not have returned to the
full-time performance of you duties during such thirty (30)-
day period), and (b) if your employment is terminated
pursuant to Subsection (iii) or (iv) hereof or for any other
reason (other than Disability), the date specified in the
Notice of Termination (which, in the case
Page 7
</Page>
<PAGE>
of a termination for Cause shall not be less than thirty
(30) days from the date such Notice of Termination is given,
and in the case of a termination for Good Reason shall not
be less than fifteen (15) nor more than sixty (60) days from
the date such Notice of Termination is given); provided,
however, that if within fifteen (15) days after any Notice
of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this proviso),
the party receiving such
Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is
finally Determined, either by mutual written agreement of
the parties or by a binding arbitration award; and provided,
further, that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith
and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the
pendency of any dispute, the Company will continue to pay
you your full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited
to, base salary and continue you as a participant in all
compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance
with this Subsection. Amounts paid under this Subsection
are in addition to all other amounts due under this
Agreement, and shall not be offset against or reduce any
other amounts due under this Agreement and shall not be
reduced by any compensation earned by you as the result of
employment by another employer.
4. Compensation Upon Termination or During
Disability. Following a change in control of the Company,
you shall be entitled to the following benefits during a
period of disability, or upon termination of your
employment, as the case may be, provided that such period or
termination occurs during the term of this Agreement:
(i) During any period that you fail to perform
your full-time duties with the Company as a result of
incapacity due to physical or mental illness, you shall
continue to receive your base salary at the rate in effect
at the commencement of any such period, together with all
compensation payable to you under the Company's disability
plan or program or other similar plan during such period,
until this Agreement is terminated pursuant to Section 3(ii)
hereof. Thereafter, or in the event your employment shall
Page 8
</Page>
<PAGE>
be terminated by reason of your death, your benefits shall
be determined under the Company's retirement, insurance and
other compensation programs then in effect in accordance
with the terms of such programs.
(ii) If your employment shall be terminated by the
Company for Cause or by you other than for Good Reason, the
Company shall pay you your full base salary through the Date
of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company at
the time such payments are due, and the Company shall have
no further obligations to you under this Agreement.
(iii) If your employment by the Company should
be terminated by the Company other than for Cause or
Disability or if you should terminate your employment for
Good Reason, you shall be entitled to the benefits provided
below:
(a) the Company shall pay to you your full
base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given plus all
other amounts to which you are entitled under any
compensation plan of the Company, at the time such payments
are due;
(b) in lieu of any further salary payments
to you for periods subsequent to the Date of Termination,
the Company shall pay as severance pay to you, at the time
specified in Subsection (v), a lump sum severance payment
(together with the payments provided in paragraphs (d), (e)
and (f) below, the "Severance Payments") equal to 3 times
(or such lesser number of years and partial years as may
then be remaining until your normal retirement age under the
Company Pension Plan) the sum of (1) the greater of (i) your
annual rate of base salary in effect on the Date of
Termination or (ii) your annual rate of base salary in
effect immediately prior to the change in control of the
Company and (2) the greater of (i) the average of the last
three annual bonuses (annualized in the case of any bonus
paid with respect to a partial year) paid to you preceding
the Date of Termination or (ii) the average of the last
three annual bonuses (annualized in the case of any bonus
paid with respect to a partial year) paid to you preceding
such change in control;
Page 9
</Page>
<PAGE>
(c) the Company shall pay to you all legal
fees and expenses incurred by you as a result of such
termination, including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or
in seeking to obtain or enforce any right or benefit
provided by this Agreement (other than any such fees or
expenses incurred in connection with any such claim which is
determined to be frivolous) or in connection with any tax
audit or proceeding to the extent attributable to the
application of section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"); and
(d) for a thirty-six (36) month period after
such termination, the Company shall arrange to provide you
with life, accident and health insurance benefits
substantially similar to those which you were receiving
immediately prior to the change in control of the Company.
Notwithstanding the foregoing, the Company shall not provide
any benefit otherwise receivable by you pursuant to this
paragraph (d) to the extent that a similar benefit is
actually received by you from a subsequent employer during
such thirty-six (36) month period, and any such benefit
actually received by you shall be reported to the Company;
(e) in addition to the retirement benefits
to which you are entitled under the Company Pension Plan and
any supplemental or excess benefit pension plan maintained
by the Company or any of its subsidiaries (collectively, the
"Plans"), the Company shall pay you a lump sum, in cash,
equal to the actuarial equivalent of the excess of (i) the
retirement pension (determined as a straight life annuity
commencing at age 65) which you would have accrued under the
terms of the Plans (without regard to the limitations
imposed by section 401(a)(17) of the Code or any amendment
to the Plans made subsequent to a change in control of the
Company and on or prior to the Date of Termination, which
amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if you were
fully vested thereunder and had continued to be employed by
the Company (after the Date of Termination) for three
additional years and as if you had accumulated three
additional calendar years of compensation (for purposes of
determining your pension benefits thereunder), each in an
amount equal to the amount determined under clause (i) of
Section 4(iii)(b) hereof, but in no event shall you be
deemed to have continued to be employed by the Company after
your normal retirement age over (ii) the vested retirement
Page 10
</Page>
<PAGE>
pension (determined as a straight life annuity commencing at
age 65), which you had then accrued pursuant to the
provisions of the Plans. For purposes of this Subsection,
"actuarial equivalent shall be determined using the same
methods and assumptions utilized under the Company Pension
Plan immediately prior to the change in control of the
Company; and
(f) should you move your residence in order
to pursue other business opportunities within one (1) year
of the Date of Termination, the Company will pay you, at the
time specified in Subsection (v), an amount equal to the
expenses incurred by you in connection with such relocation
(including expenses incurred in selling your home to the
extent such expenses were customarily reimbursed by the
Company to transferred executives prior to the change in
control of the Company) and which are not reimbursed by
another employer.
(iv) Notwithstanding anything in this Agreement to
the contrary, whether or not you become entitled to the
Severance Payments, if any of the Severance Payments or any
other payment or benefit received or to be received by you
in connection with a change in control of the Company or the
termination of your employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result
in a change in control of the Company or any person
affiliated with the Company or such person) (collectively
with the Severance Payments, "Total Payments") will be
subject to the tax (the "Excise Tax") imposed by section
4999 of the Code (or any similar tax that may hereafter be
imposed) the Company shall pay to you at the time specified
in Subsection (v), below, an additional amount (the "Gross-
Up Payment") such that the net amount retained by you, after
deduction of any Excise Tax on the Total Payments and any
federal, state and local income tax and Excise Tax upon the
payment provided for by this subsection, shall be equal to
the Total Payments. For purposes of determining whether any
amounts will be subject to the Excise Tax and the amount of
such Excise Tax, (a) all amounts representing the Total
Payments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the
Company's independent auditors and acceptable to you the
Page 11
</Page>
<PAGE>
Total Payments (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered within the meaning of section
280G(b)(4) of the Code in excess of the base amount within
the meaning of section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (b) the amount of
the Total Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (1) the total
amount of the Total Payments or (2) the amount of excess
parachute payments within the meaning of section 280G(b)(1)
of the Code (after applying clause (a), above), and (c) the
value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent
auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining
the amount of the Gross-Up Payment, you shall be deemed to
pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state
and locality of your residence on the Date of Termination,
net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local
taxes. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account
hereunder at the time of termination of your employment, you
shall repay to the Company at the time that the amount of
such reduction in Excise Tax is finally determined the
portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and
local income tax imposed on the Gross-Up Payment being
repaid by you if such repayment results in a reduction in
Excise Tax and/or a federal and state and local income tax
deduction) plus interest on the amount of such repayment at
the rate provided in section 1274(b)(2)(B) of the Code. In
the event that the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the
termination of your employment (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company
shall make an additional gross-up payment in respect of such
excess (plus any interest payable with respect to such
excess) at the time that the amount of such excess is
finally determined.
Page 12
</Page>
<PAGE>
(v) The payments provided for in Subsections
(iii) and (iv) shall be made not later than the fifth day
following the Date of Termination; provided, however, that
if the amounts of such payments cannot be finally determined
on or before such day, the Company shall pay to you on such
day an estimate, as determined in good faith by the Company,
of the minimum amount of such payments and shall pay the
remainder of such payments (together with interest at the
rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination.
In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to you
payable on the fifth day after demand therefor by the
Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code).
(vi) Except as provided in Subsection (iii)(d)
hereof, you shall not be required to mitigate the amount of
any payment provided for in this Section 4 by seeking other
employment or otherwise, nor shall the amount of any payment
or benefit provided for in this Section 4 be reduced by any
compensation earned by you as the result of employment by
another employer, by retirement benefits, by offset against
any amount claimed to be owed by you to the Company, or
otherwise.
5. Successors; Binding Agreement. (i) The Company
will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such
succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of
this Agreement and shall entitle you to compensation from
the Company in the same amount and on the same terms to
which you would be entitled hereunder if you terminate your
employment for Good Reason following a change in control of
the Company, except that for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used
in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business
Page 13
</Page>
<PAGE>
and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of
and be enforceable by you and your personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should
die while any amount would still be payable to you hereunder
had you continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your
estate.
6. Notice. For purposes of this Agreement, notices
and all other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly
given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Board with
a copy to the Secretary of the Company, or to such other
address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed
by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with,
any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Oregon without regard to its conflicts of law principles.
All references to sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be
paid net of any applicable withholding required under
Page 14
</Page>
<PAGE>
federal, state or local law. The obligations of the Company
under Section 4 shall survive the expiration of the term of
this Agreement.
8. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
9. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and
the same instrument.
10. Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration, conducted before a panel of
three arbitrators in the State of Oregon, in accordance with
the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that
you shall be entitled to seek specific performance of your
right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in
connection with this Agreement.
11. Entire Agreement. This Agreement sets forth the
entire agreement of the parties hereto in respect of the
subject matter contained herein and during the term of the
Agreement supersedes the provisions of all prior agreements,
promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by
any officer, employee or representative of any party hereto
with respect to the subject matter hereof.
Page 15
</Page>
<PAGE>
12. Effective Date. This Agreement shall become effective
as of the date set forth above. If this letter sets forth
our agreement on the subject matter hereof, kindly sign and
return to the Company the enclosed copy of this letter,
which will then constitute our agreement on this subject.
Sincerely,
By _____________________
Name:
Title:
Agreed as of the ___________ day
of ____________, 199_.
________________________________
Executive
Page 16
</Page>
</Page>
INDEMNITY AGREEMENT
THIS AGREEMENT is made as of____________, 19__ by and
between Precision Castparts Corp., an Oregon corporation
(Company), and _________________________ (Indemnitee), an
officer of the Company.
RECITALS
A. It is essential to the Company to retain and
attract as directors and officers the most capable persons
available.
B. The increase in corporate litigation subjects
directors and officers to expensive litigation risks at the
same time that the availability and coverage of directors'
and officers' liability insurance has been reduced.
C. It is now and always has been the express policy
of the Company to indemnify its directors and officers so as
to provide them with the maximum possible protection
permitted by law.
D. The bylaws of the Company require indemnification
of the directors and officers of the Company to the fullest
extent permitted by the Oregon Business Corporation Act
(Act). The Act expressly provides that the indemnification
provisions set forth in the Act are not exclusive, and
thereby contemplates that contracts may be entered into
between the Company and members of the board of directors
and officers with respect to indemnification of directors
and officers.
E. Indemnitee does not regard the protection
available under the Company's bylaws and insurance adequate
in the present circumstances, and may not be willing to
serve as a director or officer without adequate protection,
and the Company wants Indemnitee to serve in that capacity.
NOW, THEREFORE, the Company and Indemnitee agree as
follows:
1. Services to the Company. Indemnitee will serve or
continue to serve, at the will of the Company, as a director
or officer of the Company for so long as Indemnitee is duly
elected or appointed or until Indemnitee tenders a
resignation in writing.
</Page>
<PAGE>
2. Definitions. As used in this Agreement:
(a) The term "Proceeding" shall include any
threatened, pending or completed action, suit or
proceeding, whether brought in the right of the Company
or otherwise and whether of a civil, criminal,
administrative or investigative nature, in which
Indemnitee is or was a director or officer of the
Company or is or was serving at the request of the
Company as a director, officer, or agent of another
corporation, partnership, joint venture, trust or other
enterprise, whether or not serving in such capacity at
the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under
this Agreement.
(b) The term "Expenses" includes, without
limitation, expense of investigations, judicial or
administrative proceedings or appeals, attorneys' fees
and disbursements and any expenses of establishing a
right to indemnification under Section 11 of this
Agreement, but shall not include amounts paid in
settlement by Indemnitee or the amount of judgments or
fines against Indemnitee.
(c) References to "other enterprise" shall
include employee benefit plans; references to "fines"
shall include any excise tax assessed with respect to
any employee benefit plan; reference to "serving at the
request of the Company" shall include any service as a
director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an
employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and
in a manner reasonably believed to be in the best
interest of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best
interests of the Company" as referred to in this
Agreement.
3. Indemnity in Third-Party Proceedings. The Company
shall indemnify Indemnitee in accordance with the provisions
of this Section 3 if Indemnitee is a party to or threatened
to be made a party to any Proceeding (other than a
Proceeding by or in the right of the Company to procure a
judgment in its favor) against all Expenses, judgments,
fines and amounts paid in settlement actually and reasonably
Page 2
</Page>
<PAGE>
incurred by Indemnitee in connection with the Proceeding,
but only if Indemnitee acted in good faith and in a manner
which Indemnitee reasonably believed to be in or not opposed
to the best interests of the Company and, in the case of a
criminal proceeding, in addition, had no reasonable cause to
believe that Indemnitee's conduct was lawful.
4. Indemnity in Proceedings by or in the Right of the
Company. The Company shall indemnify Indemnitee in
accordance with the provisions of this Section 4 if
Indemnitee is a party to or threatened to be made a party to
any Proceeding by or in the right of Company to procure a
judgment in its favor against all Expenses actually and
reasonably incurred by Indemnitee in connection with the
defense or settlement of the Proceeding, but only if
Indemnitee acted in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to
the best interests of the Company. No indemnification for
Expenses shall be made under this Section 4 in respect of
any claim, issue or matter as to which Indemnitee shall have
been finally adjudged by a court to be liable to the
Company, unless and only to the extent that any court in
which the Proceeding was brought shall determine upon
application that, despite the adjudication of liability but
in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity.
5. Indemnification of Expenses of Successful Party.
Notwithstanding any other provisions of this Agreement, to
the extent that Indemnitee has been successful, on the
merits or otherwise, in defense of any Proceeding or in
defense of any claim, issue or matter therein, including the
dismissal of an action without prejudice, the Company shall
indemnify Indemnitee against all Expenses incurred in
connection therewith.
6. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3,
4 or 5, the Company shall indemnify Indemnitee to the
fullest extent permitted by law if Indemnitee is a
party to or threatened to be made a party to any
Proceeding (including a Proceeding by or in the right
of the Company to procure a judgment in its favor)
against all Expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by
Indemnitee in connection with the Proceeding. No
indemnity shall be made under this Section 6(a) on
Page 3
</Page>
<PAGE>
account of Indemnitee's conduct which constitutes a
breach of Indemnitee's duty of loyalty to the Company
or its shareholders or is an act or omission not in
good faith or which involves intentional misconduct or
a knowing violation of the law.
(b) Notwithstanding any limitation in Sections 3,
4, 5 or 6(a), the Company shall indemnify Indemnitee to
the fullest extent permitted by law if Indemnitee is a
party to or threatened to be made a party to any
Proceeding (including a Proceeding by or in the right
of the Company to procure a judgment in its favor)
against all Expenses, judgments, fines and amounts paid
in settlement actually and reasonably incurred by
Indemnitee in connection with the Proceeding.
(c) For purposes of Sections 6(a) and 6(b), the
meaning of the phrase "to the fullest extent permitted
by law" shall include, but not be limited to:
(i) to the fullest extent permitted by the
provision of the Act that authorizes or
contemplates additional indemnification by
agreement, or the corresponding provision of any
amendment to or replacement of the Act, and
(ii) to the fullest extent authorized or
permitted by any amendments to or replacements of
the Act adopted after the date of this Agreement
that increase the extent to which a corporation
may indemnify its officers and directors.
7. Exclusions. Notwithstanding any provision in this
Agreement, the Company shall not be obligated under this
Agreement to make any indemnity in connection with any claim
made against Indemnitee:
(a) for which payment has actually been made to
or on behalf of Indemnitee under any insurance policy
or other indemnity provision, except with respect to
any excess beyond the amount paid under any insurance
policy or other indemnity provision;
(b) for any transaction from which Indemnitee
derived an improper personal benefit;
Page 4
</Page>
<PAGE>
(c) for an accounting of profits made from the
purchase and sale (or sale and purchase) by Indemnitee
of securities of the Company within the meaning of
Section 16(b) of the Securities Exchange Act of 1934,
as amended, or similar provisions of state statutory
law or common law;
(d) if a court having jurisdiction in the matter
shall finally determine that such indemnification is
not lawful under any applicable statute or public
policy (and, in this respect, both the Company and
Indemnitee have been advised that the Securities and
Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws
is against public policy and is, therefore,
unenforceable and that claims for indemnification
should be submitted to appropriate courts for
adjudication); or
(e) in connection with any Proceeding (or part of
any Proceeding) initiated by Indemnitee, or any
Proceeding by Indemnitee against the Company or its
directors, officers, employees or other indemnitees,
unless (i) the Company is expressly required by law to
make the indemnification, (ii) the Proceeding was
authorized by the Board of Directors of the Company,
(iii) the Company provides the indemnification, in its
sole discretion, pursuant to the powers vested in the
Company under applicable law, or (iv) Indemnitee
initiated the Proceeding pursuant to Section 11 of this
Agreement and Indemnitee is successful in whole or in
part in the Proceeding.
8. Advances of Expenses. The Company shall pay the
expenses incurred by Indemnitee in any Proceeding in advance
at the written request of Indemnitee, if Indemnitee:
(a) furnishes the Company a written affirmation
of the Indemnitee's good faith belief that Indemnitee
is entitled to be indemnified by the Company under this
Agreement; and
(b) furnishes the Company a written undertaking
to repay the advance to the extent that it is
ultimately determined that Indemnitee is not entitled
to be indemnified by the Company. Advances shall be
Page 5
</Page>
<PAGE>
made without regard to Indemnitee's ability to repay
the expenses and without regard to Indemnitee's
ultimate entitlement to indemnification under the other
provisions of this Agreement.
9. Notification and Defense of Claim. Not later than
thirty (30) days after receipt by Indemnitee of notice of
the commencement of any Proceeding, Indemnitee will, if a
claim in respect of the Proceeding is to be made against the
Company under this Agreement, notify the Company of the
commencement of the Proceeding. The omission to notify the
Company will not relieve the Company from any liability
which it may have to Indemnitee otherwise than under this
Agreement. With respect to any Proceeding as to which
Indemnitee notifies the Company of the commencement:
(a) The Company will be entitled to participate
in the Proceeding at its own expense.
(b) Except as otherwise provided below, the
Company may, at its option and jointly with any other
indemnifying party similarly notified and electing to
assume such defense, assume the defense of the
Proceeding, with legal counsel reasonably satisfactory
to the Indemnitee. Indemnitee shall have the right to
use separate legal counsel in the Proceeding, but the
Company shall not be liable to Indemnitee under this
Agreement, including Section 8 above, for the fees and
expenses of separate legal counsel incurred after
notice from the Company of its assumption of the
defense, unless (i) Indemnitee reasonably concludes
that there may be a conflict of interest between the
Company and Indemnitee in the conduct of the defense of
the Proceeding or (ii) the Company does not use legal
counsel to assume the defense of such Proceeding. The
Company shall not be entitled to assume the defense of
any Proceeding brought by or on behalf of the Company
or as to which Indemnitee shall have made the
conclusion provided for in (i) above.
(c) If two or more persons who may be entitled to
indemnification from the Company, including the
Indemnitee, are parties to any Proceeding, the Company
may require Indemnitee to use the same legal counsel as
the other parties. Indemnitee shall have the right to
use separate legal counsel in the Proceeding, but the
Company shall not be liable to Indemnitee under this
Agreement, including Section 8 above, for the fees and
Page 6
</Page>
<PAGE>
expenses of separate legal counsel incurred after
notice from the Company of the requirement to use the
same legal counsel as the other parties, unless the
Indemnitee reasonably concludes that there may be a
conflict of interest between Indemnitee and any of the
other parties required by the Company to be represented
by the same legal counsel.
(d) The Company shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding effected without its
written consent, which shall not be unreasonably
withheld. Indemnitee shall permit the Company to
settle any Proceeding the defense of which it assumes,
except that the Company shall not settle any action or
claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written
consent, which may be given or withheld in Indemnitee's
sole discretion.
10. Procedure Upon Application for Indemnification.
Any indemnification under Sections 3, 4, 5 or 6 of this
Agreement shall be made no later than 90 days after receipt
of the written request of Indemnitee for indemnification and
shall not require that a determination be made in accordance
with the Act by the persons specified in the Act that
indemnification is required under this Agreement. However,
unless it is ordered by a court in an enforcement action
under Section 11 of this Agreement, no such indemnification
shall be made if a determination is made within such 90-day
period by (a) the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to the
Proceeding, or (b) independent legal counsel in a written
opinion (which counsel shall be appointed if a quorum is not
obtainable), that the Indemnitee is not entitled to
indemnification under this Agreement.
11. Enforcement. The Indemnitee may enforce any right
to indemnification or advances granted by this Agreement to
Indemnitee in any court of competent jurisdiction if (a) the
Company denies the claim for indemnification or advances, in
whole or in part, or (b) the Company does not dispose of the
claim within 90 days of a written request for
indemnification or advances. Indemnitee, in the enforcement
action, if successful in whole or in part, shall be entitled
to be paid also the expense of prosecuting the claim. It
shall be a defense to any such enforcement action (other
than an action brought to enforce a claim for advancement of
Page 7
</Page>
<PAGE>
expenses pursuant to Section 8 above, if Indemnitee has
tendered to the Company the required affirmation and
undertaking) that Indemnitee is not entitled to
indemnification under this Agreement, but the burden of
proving this defense shall be on the Company. Neither a
failure of the Company (including its Board of Directors or
its shareholders) to make a determination prior to the
commencement of the enforcement action that indemnification
of Indemnitee is proper in the circumstances, nor an actual
determination by the Company (including its Board of
Directors or its shareholders) that indemnification is
improper shall be a defense to the action or create a
presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise. The
termination of any Proceeding by judgment, order of court,
settlement, conviction or upon a plea of nolo contendere, or
its equivalent, shall not, of itself, create a presumption
that Indemnitee is not entitled to indemnification under
this Agreement or otherwise.
12. Partial Indemnification. If Indemnitee is
entitled under any provisions of this Agreement to
indemnification by the Company for some or part of the
Expenses, judgments, fines and amounts paid in settlement
actually and reasonably incurred by Indemnitee in the
investigation, defense, appeal or settlement of any
Proceeding but not, however, for the total amount, the
Company shall indemnify Indemnitee for the portion of the
Expenses, judgments, fines and amounts paid in settlement to
which Indemnitee is entitled.
13. Nonexclusivity and Continuity of Rights. The
indemnification provided by this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may
be entitled under the articles of incorporation, the bylaws,
any other agreement, any vote of shareholders or directors,
the Act, or otherwise, both as to action in Indemnitee's
official capacity and as to action in other capacity while
holding office. The indemnification under this Agreement
shall continue as to Indemnitee even though Indemnitee
ceases to be a director or officer and shall inure to the
benefit of the heirs and personal representatives of
Indemnitee.
14. Severability. If this Agreement or any portion of
it is invalidated on any ground by any court of competent
jurisdiction, the Company shall indemnify Indemnitee as to
Expenses, judgments, fines and amounts paid in settlement
Page 8
</Page>
<PAGE>
with respect to any Proceeding to the full extent permitted
by any applicable portion of this Agreement that is not
invalidated or by any other applicable law.
15. Subrogation. In the event of payment under this
Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee.
Indemnitee shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to
enable the Company effectively to bring suit to enforce such
rights.
16. Modification and Waiver. No supplement,
modification or amendment of this Agreement shall be binding
unless executed in writing by both parties. No
waiver of any of the provisions of this Agreement shall
constitute a waiver of any other provisions of this
Agreement (whether or not similar) nor shall any waiver
constitute a continuing waiver, unless expressly stated in
any waiver.
17. Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and
shall be deemed to have been duly given (a) upon delivery if
delivered by hand to the party to whom the notice or other
communication shall have been directed or (b) if mailed by
certified or registered mail with postage prepaid, on the
third business day after the date on which it is so mailed:
(i) If to Indemnitee, at the address indicated on
the signature page of this Agreement.
(ii) If to the Company to
Precision Castparts Corp.
Executive Office, Suite 440
4650 SW Macadam
Portland, Oregon 97201
Attention: Chief Executive Officer
or to any other address as may have been furnished
to Indemnitee by the Company.
18. Counterparts. The parties may execute this
Agreement in two counterparts, each of which shall
constitute the original.
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</Page>
<PAGE>
19. Applicable Law. This Agreement shall be governed
by and construed in accordance with the law of the state of
Oregon.
20. Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be signed as of the day and year first above
written.
PRECISION CASTPARTS CORP. INDEMNITEE
By:______________________________By:________________________
Signature Signature
By:______________________________By:________________________
Type or Print Name Type or Print Name
By:______________________________By:________________________
Title Title
Page 10
</Page>
</Page>
April 2, 1997
Mr. Steve Riedel
7501 Chestnut Hill Road
Prospect, KY 40059
Dear Steve:
I am delighted to extend to you the position of President
and Chief Operating Officer of Precision Castparts Corp.
(PCC). Following our earlier meetings and discussions over
the recent weeks, the Board and I feel strongly that you are
the right person to join the company and assume a senior
management role. We are enthusiastic about you joining the
company.
The following terms and conditions of this offer, which you
have orally accepted are as follows.
1. Position and Title:
__________________
President and Chief Operating Officer
Responsible for operations and activities outlined in
our discussions.
2. Base Salary:
___________
$375,000 per year.
Opportunity for future merit increases, based on annual
reviews.
3. Sign On Bonus:
_____________
PCC to provide lump sum cash payments of $500,000,
$400,000 and $300,000 on the first, second, and third
anniversary dates respectively. This payment
represents compensation for stock and bonuses left
behind as well as an incentive for you to join the
company.
If you voluntarily resign from PCC or are terminated
for cause during the first three (3) years of
employment you will not be entitled to any remaining
payments from the company.
</Page>
<PAGE>
Steve Riedel
Offer Letter
April 2, 1997
Page 2
4. Annual Incentive Bonus:
______________________
You will participate in the Corporate Executive Bonus
Program administered by the Compensation Committee of
the Board of Directors. This plan provides for an
annual incentive bonus with a potential for 100% of
base salary.
You will be eligible for a full incentive bonus for the
fiscal year ending March 31, 1998 regardless of your
start date. In other words, the bonus will not be
prorated to the length of your employment during the
first fiscal year.
5. Stock Option Plan:
_________________
You will receive an initial grant of 40,000 shares of
common stock.
All option grants vest in 25% increments over a four
(4) year period following the grant.
You will be eligible to participate in future stock
options as determined by the Board of Directors or the
Compensation Committee of the Board.
6. Severance:
_________
If you are terminated for reasons other than cause or
your voluntary resignation during your first two years
of employment, you will be entitled to the following:
Two years of the supplemental signing bonus, i.e.
$500,000 plus $400,000; and six (6) months of base
salary.
For purposes of this agreement, "cause" will be defined
as any willful breach of duty by the employee in the
course of his employment, or in the case of his
habitual neglect of his duty or continued incapacity to
perform assigned tasks.
</Page>
<PAGE>
Steve Riedel
Offer Letter
April 2, 1997
Page 3
7. Change of Control:
_________________
In the event there is a change of control you will be
entitled to all benefits and provisions currently in
place for senior executives.
8. Real Estate/Relocation:
______________________
You and I are still discussing relocation. However,
the company's policy for permanent relocation will
provide reimbursement of standard escrow and incidental
costs on the sale of your present home plus moving
expenses and other directly related escrow and
incidental costs attributable to the purchase of a new
residence in the Portland area.
The company will provide temporary housing for a period
of six (6) months, until you find permanent residence
in the area. The company will also provide 2 to 3
house hunting trips for your wife, Sharon.
For items listed above, the company will gross up your
income so as to result in no tax impact to you.
9. Benefits:
________
Unless otherwise stated, you will be eligible to
participate in all programs and benefits as currently
provided by the company's policies and bylaws. This
will include:
Life insurance.
Health, Medical, and Dental plans.
Long Term disability.
401(k) savings plan, pension and retirement plans.
Initiation fees, dues and assessments for membership at
a local country club in the Portland area.
Other benefits in place, but not enumerated.
</Page>
<PAGE>
Steve Riedel
Offer Letter
April 2, 1997
Page 4
10. Other:
_____
An American-made 4-door automobile, with normal
maintenance, insurance and operating expenses.
Reimbursement for reasonable financial/tax consulting.
Reimbursement for an annual physical exam.
PCC standard executive vacation which is currently four
(4) weeks annually.
11. Arbitration Agreement:
_____________________
Any claim or controversy arising out of or related to
this letter agreement, the employment relationship or
the subject matter hereof shall be settled by binding
arbitration before one arbitrator in Portland, Oregon
in accordance with the Commercial Arbitration Rules of
the American Arbitration Association; and judgment upon
any award rendered by the arbitrator(s) may be entered
as a judgment in any court having competent
jurisdiction. The parties shall have rights to
discovery as provided in the Oregon Code of Civil
Procedures. The prevailing party in any dispute shall
recover all of its costs and expenses, including
reasonable attorney's fees.
12. Starting Date:
_____________
You will begin employment at the earliest reasonable
date. This recognizes that you will make a genuine
effort to attend selective management meetings during
April, 1997.
</Page>
<PAGE>
Steve Riedel
Offer Letter
April 2, 1997
Page 5
Steve, this offer and terms and conditions included
represent a formal offer of employment. We are delighted
that you are joining Precision Castparts Corp. and look
forward to working with you to continue our efforts to build
a strong and successful company.
Personal regards,
/s/ William C. McCormick
_________________________________
WILLIAM C. MCCORMICK
Chairman, President and Chief Executive Officer
cc: Gary B. Walburger, Korn/Ferry International
Please acknowledge your acceptance of the terms and
conditions of this offer by signing and returning one copy
of this letter.
BY: /s/ Steven C. Riedel
_______________________________
STEVEN C. RIEDEL
DATE: April 3, 1997
________________________________
</Page>
<PAGE>
PRECISION CASTPARTS CORP.
SUPPLEMENTAL RETIREMENT PLAN FOR EXECUTIVES
February 1, 1989, as amended
Precision Castparts Corp., an Oregon corporation (the
Company) wishes to provide supplemental retirement benefits
for certain key employees as an incentive for them to
develop careers with the Company and to perform with a
degree of excellence that will promote the best interests of
the Company. Therefore, the Company adopts the following
Supplemental Retirement Plan for Executives (the Plan)
effective as of February 1, 1989.
1. Eligibility and Participation
1.1 Eligible Employees. Participation shall be
limited to a select group of designated officers of the
Company and of its Subsidiaries. "Subsidiary" means a
corporation more than 50 percent of the outstanding voting
stock of which is owned by the Company.
1.2 Selection of Participants. Participants
shall be selected by the Compensation Committee of the Board
of Directors of the Company (the Committee). An officer may
be selected for participation at any time. The Committee
may also remove a participant from the plan on a prospective
basis, with or without cause. Any such removal shall only
affect future accruals of benefits, and shall not, in
itself, cause a forfeiture of benefits already accrued.
1.3 Enrollment. When selected, the officer shall
be notified and given a Statement of Participation signed by
the Company. The officer shall enroll for participation by
completing the Statement of Participation, including all
required benefit elections, signing it and returning it to
the Administrator of the Plan appointed by the Committee
(the Administrator). The Statement of Participation shall
be effective on the date signed by the officer.
2. Supplemental Benefits
2.1 Normal Retirement Benefit
</Page>
<PAGE>
2.1-1 Subject to 2.1-2, the basic
supplemental benefit on normal retirement with 25 Years of
Benefit Service (YBS) shall be a monthly pension for life
equal to 55 percent of Final Average Pay (FAP) minus the
Retirement Plan Benefit (RPB) and the Primary social
Security Benefit (PSSB).
2.1-2 The basic supplemental benefit for
any participant who is a Five Percent Shareholder of the
Company shall be half the amount otherwise provided under
2.1-1 and related provisions. If a participant stops being
a Five Percent Shareholder, the foregoing restriction shall
not apply to additional benefits accrued for Benefit Service
after the Five Percent Shareholder status ends. A
participant shall be considered a Five Percent Shareholder
if:
(a) The person owns, directly or
indirectly, securities of the Company representing 5 percent
or more of the combined voting power of the Company's then
outstanding securities, and
(b) The person has owned securities
meeting the requirements of (a) for 20 or more years while
an employee of the Company.
2.1-3 For a participant with less than 25
Years of Benefit Service at normal retirement, the basic
benefit shall be reduced by 1/25th for each year less than
25. The benefit for each Year of Benefit Service over 25
shall be one-half of one percent (.5 percent) of Final
Average Pay, minus any portion of the Retirement Plan
Benefit and Primary Social Security Benefit that exceeds the
basic benefit under 2.1-1 for the first 25 Years of Benefit
Service. The benefit for a partial year at the end of a
participant's period of service shall be prorated based on
the number of months in which the participant performs
services during the year.
2.1-4 The basic supplemental benefit can
be expressed as follows:
(a) (55% of FAP) ((YBS up to 25)/25)
PLUS
(b) (.5% of FAP) (YBS over 25)
Page 2
</Page>
<PAGE>
MINUS
(c) (RPB + PSSB)
2.2 Definitions
2.2-1 The "Final Average Pay' and
"Primary Social Security Benefit" amounts are the amounts
determined under the Precision Castparts Corp. Retirement
Plan (the Retirement Plan) sections 7.02-4 through 7.02-6
(as set out in the attached Addendum) to fix the Retirement
Plan Benefit, except as follows:
(a) Half of any bonuses and all of any
deferred compensation shall be included in determining Final
Average Pay, and
(b) Section 7.02-6(d) shall not apply.
2.2-2 "Retirement Plan Benefit" means the
sum of the following amounts:
(a) The monthly benefit under the
Retirement Plan (excluding any Prior Profit Sharing Plan
Benefit) for the participant upon normal retirement at age
65 in the form of a straight life annuity.
(b) The monthly benefit for the
participant under any defined benefit pension plan other
than the Retirement Plan from Service counted for benefits
under this Plan, expressed as a normal retirement benefit at
age 65 in the form of a straight life annuity using the
actuarial equivalency factors applicable to the Retirement
Plan, and disregarding any benefit derived from employee
contributions to such plan or rollovers to such plan derived
from a source other than employer contributions relating to
the period of Service counted for benefits under this Plan.
If benefits are provided for a participant under the
foregoing sentence with respect to more than one plan, all
such benefits shall be combined.
(c) The monthly benefit for the participant
a defined contribution pension plan relating to Service
counted for benefits under this Plan, expressed as a normal
retirement benefit at age 65 in the form of a straight life
annuity using the actuarial equivalency factors applicable
to the Retirement Plan, and disregarding any benefit derived
from employee pre-tax or after-tax contributions to such
plan or rollovers to such plan derived from a source other
Page 3
</Page>
<PAGE>
than employer contributions relating to the period of
Service counted for benefits under this Plan. If benefits
are provided for a participant under the foregoing sentence
with respect to more than one plan, all such benefits shall
be combined. If the defined contribution plan is a plan
under which employer contributions are made to match, wholly
or partly, employee pre-tax or after-tax contributions under
the plan, then the offset for the defined contribution plan
shall be calculated assuming the employee's account has been
credited with the maximum matching contributions the
employee could have had credited by making employee
contributions, carried forward at the interest rate
applicable for the relevant period of Service for purposes
of actuarial equivalencies under the Retirement Plan.
2.2-3 "Normal Retirement" means
retirement under the Retirement Plan at or after age 65.
2.2-4 "Year of Benefit Service" means a
period of 12 months based on the anniversary of the date the
employee first performs an hour of service as an employee of
the company or a Subsidiary. No service for a business
before the date it becomes a Subsidiary shall be counted as
Benefit Service. Except for periods of disability as
described below, periods of employment other than as a
regular full-time employee shall be disregarded and service
credit shall be reduced accordingly. If a person becomes
totally and permanently disabled while a participant
accruing Benefit service and qualifies for disability income
payments under Social Security, the participant shall
continue to accrue Years of Benefit Service during
disability up to age 65 or earlier retirement if:
(a) The disability was directly related
to and arose from the participant's employment, or
(b) The participant had 10 Years of
Eligibility Service before the disability occurred.
2.2-5 "Years of Eligibility Service"
means Years of Benefit Service as defined in 2.2-4 plus any
Years of Service (as defined in the Retirement Plan)
performed for a business before the date it became a
Subsidiary.
Page 4
</Page>
<PAGE>
2.3 Early Retirement Benefit
2.3-1 An early retirement supplemental
benefit shall be payable for a participant who terminates
employment before normal retirement but after age 55 with at
least 10 Years of Eligibility Service. The benefit shall be
the normal retirement basic supplemental benefit reduced as
described in 2.3-2 by 6 percent for each year by which the
termination date precedes the date the participant would
have first qualified for normal retirement as defined in
2.2. The reduction for partial years shall be prorated
monthly, based on calendar months with a partial month at
the beginning or end of the period disregarded if the
affected portion of the month is less than 15 days.
2.3-2 The early retirement reduction
described in 2.3-1 shall be applied after calculating a
participant's benefit as for normal retirement, based on
service and compensation to actual retirement, as follows:
(a) (55% of FAP) ((YBS up to 25)/25)
+ (.5% of FAP) (YBS over 25)-(RPB + PSSB)
TIMES
(b) (1-.06(65-age at actual retirement))
2.2-3 No benefit shall be paid with
respect to a participant whose employment terminates before
early retirement except under 2.4 or 4.
2.4 Accelerated Vested Benefit. Subject to 2.5,
an accelerated vested benefit shall be payable for a
participant whose employment is terminated by the Company if
the termination follows a Change in Control of the Company
as defined in 10 and the termination occurs before the
participant qualifies for normal or early retirement. The
benefit shall be a lump sum payment in an amount equal to
the actuarially determined present value of the
participant's basic supplemental benefit on normal
retirement, based on Final Average Pay and Years of Benefit
Service as of the date of termination.
2.5 Forfeiture of Benefit
2.5-1 No benefit (other than a spouses
death benefit under 4) shall be payable with respect to a
participant who terminates employment, regardless of cause,
Page 5
</Page>
<PAGE>
before qualifying for a normal retirement benefit, an early
retirement benefit or an accelerated vested benefit or to
any participant whose employment is terminated for
misconduct during employment. Moreover, no normal or early
retirement benefit or spouses death benefit shall be payable
with respect to any participant who, after termination,
engages in competition with the Company or a Subsidiary, as
determined by the Committee in accordance with 2.5-3.
2.5-2 "Misconduct during employment"
means:
(a) Committing a fraudulent or
otherwise dishonest act related to employment;
(b) Making an unauthorized disclosure
of confidential information related to the Company or
Subsidiary if the information was obtained during
employment; or
(c) Engaging in competition while
employed. Competition is defined in 2.5-3(a) and (b).
2.5-3 Competition means doing either of
the following within three years after termination of
employment:
(a) Making an unauthorized disclosure
of confidential information related to the Company or any
Subsidiary if the information was obtained during
employment; or
(b) Engaging either as an employee,
partner, proprietor or otherwise, in a business in
competition with the Company or any Subsidiary in the United
States in the manufacture or sale of investment castings.
2.5-4 No forfeiture or absence of a
forfeiture shall constitute a waiver of or bar any other
remedy that may be available to the Company or a Subsidiary
under applicable law on account of the misconduct or
competition.
2.6 Deferred Retirement Benefit. If a
participant's employment with the Company or a Subsidiary
continues past age 65, Years of Benefit Service shall
continue to accrue and Final Average Pay shall be adjusted
Page 6
</Page>
<PAGE>
to actual retirement as provided in the Retirement Plan for
deferred retirement. The benefit shall be based on the
regular formula for normal retirement and no actuarial
adjustment shall be made for starting benefits after age 65.
3. Payment of Benefits
3.1 Start of Benefits. Benefits shall start on
the first day of the second month after termination of
employment, in the case of normal, deferred, accelerated
vested or early retirement benefits, and on the first day of
the second month after the participant's death in the case
of a spouses death benefit under 4.
3.2 Form of Benefit
3.2-1 The normal form for payment of
benefits shall be a monthly annuity for the life of the
participant.
3.2-2 A participant may elect on
enrollment in the plan to receive benefits in the form of an
actuarially equivalent contingent annuity with payment
continued to the participant's spouse in full or at one-
half. Such elections shall be irrevocable. Actuarial
equivalency shall be determined based on the assumptions
applicable to determining comparable benefits under the
Retirement Plan. A benefit selection under this provision
shall be void if the participant is not married on the date
benefits are to start, and the benefit shall be paid in the
normal form under 3.2-1. If a participant selects a spouses
contingent annuity and on the date benefits start is married
to a person other than the spouse on the enrollment date,
the spouse on the benefit starting date shall be the
contingent annuitant under the spouses contingent annuity
and no benefit shall be payable to the person who was the
spouse on the enrollment date.
3.2-3 Accelerated vested benefits under
2.4 shall be paid in a lump sum.
4. Death Benefits
4.1 Subject to 2.5, if a participant dies after
starting to receive benefits, or dies after retiring under
2.2-3 or 2.3-1 but before starting benefits under 3.1, no
death benefit shall be paid except as may be provided under
Page 7
</Page>
<PAGE>
the spouses contingent annuity benefit form if selected by
the deceased participant under 3.2 above upon enrollment in
this plan.
4.2 Except as provided in 4.3 and 4.4, if a
participant dies before starting to receive benefits or
qualifying under 4.1, no benefit shall be paid.
4.3 The surviving spouse of a participant who
dies while employed and after meeting the age and service
requirements for early or normal retirement shall receive a
death benefit as follows:
(a) The benefit shall be a monthly
payment for the surviving spouses life, starting on the
first day of the month after the participant's death.
(b) The amount shall be determined as
though the participant had retired on the date of death with
benefits payable in the form of a contingent annuity with
payments continued to the participant's spouse at one-half,
except as provided in (c).
(c) If a participant elected under 3.2-
2 on enrollment to receive benefits in the form of a
contingent annuity with payments continued to the
participant's spouse in full, then the amount under (b)
shall be determined using that benefit form.
4.4 If a participant dies after qualifying for an
accelerated vested benefit under 2.4 but before receiving
the benefit, the surviving spouse shall receive the
participant's accelerated vested benefit in a lump sum on
the first day of the second month after the participant's
termination of employment. If there is no surviving spouse,
no benefit shall be paid under this provision.
5. No Advance Funding
Benefits shall be paid from the general assets of
the Company. The Company may, but shall not be required to
set aside funds in advance for payment of benefits under the
Plan. Even if funds are set aside, that shall not cause
this to be a funded employee benefit plan. Participants'
rights under this Plan shall be only as general creditors of
the Company.
Page 8
</Page>
<PAGE>
6. Amendment and Termination
The Board of Directors of the Company may amend
or terminate this plan on the first day of any month by
notice to the participants, but may not revoke benefits
accrued by any participant (a) without adequate compensation
or (b) after the occurrence of a Change in Control of the
Company. If the Board of Directors decides to revoke
accrued benefits for some or all participants, the accrued
benefits of all affected participants shall be revoked in
exchange for adequate compensation and such participants
shall have no right to defer receipt of such compensation.
7. Not Contract of Employment
This Plan shall not be a contract of employment
between the Company or a subsidiary and any participant. No
participant may object to termination of the Plan under
paragraph 6 above. The Plan shall not prevent the Company
or a Subsidiary from discharging any participant from
employment at any time.
8. Claims Procedure
8.1 Filing Procedure. Any person claiming a
benefit, requesting an interpretation or ruling under the
Plan, or requesting information under the Plan shall present
the request to the Administrator who shall respond in
writing as soon as practicable. Verbal claims must be
confirmed in writing by the claimant within a reasonable
time. If no written confirmation is received within two
weeks of a verbal claim, the Administrator may state the
claim in writing communicated to the claimant and then
proceed on that basis.
8.2 Notice of Denial. If the claim or request is
denied, the written notice of denial shall state:
(a) The reasons for the denial, with
specific reference to the Plan provisions on which the
denial is based;
(b) A description of any additional
material or information required and an explanation of why
it is necessary; and
Page 9
</Page>
<PAGE>
(c) An explanation of the Plan's claim
review procedure.
8.3 Review Procedure. Any person whose claim or
request is denied or who has not received a response within
30 days may request review by notice in writing to the
Administrator, who shall inform the Committee. The original
decision shall be reviewed by the Committee, which may, but
shall not be required to, grant the claimant a hearing. On
review, whether or not there is a hearing, the claimant may
have representation, examine pertinent documents and submit
issues and comments in writing.
8.4 Decision on Review. The decision on review
shall ordinarily be made within 60 days. If an extension of
time is required for a hearing or other special
circumstance, the claimant shall be so notified and the time
shall be 120 days. The decision shall be expressed in
writing and shall state the reasons and the relevant Plan
provisions. All decisions on review shall be final and bind
all parties concerned.
9. General Provisions
9.1 If suit or action is instituted to enforce
any rights under the Plan, the prevailing party may recover
from the other party reasonable attorneys' fees at trial and
on any appeal.
9.2 Any notice under this plan shall be in
writing and shall be effective when actually delivered or,
if mailed, when deposited as registered or certified mail
directed to the Company at the address stated in the
Statement of Participation or to such other address as
either party may specify by notice to the other party.
Unless otherwise designated, notices to the Committee or the
Administrator shall be sent to the address specified for the
Company.
9.3 The rights of a participant under this
agreement are personal. Except for amounts owing to or
claimed by the Company or a Subsidiary and except for the
limited provisions of 3.2 above, no interest of a
participant or any beneficiary or representative of a
participant may be directly or indirectly transferred,
encumbered, seized by legal process or in any other way
subjected to the claims of any creditor.
Page 10
</Page>
<PAGE>
9.4 Following termination of employment, a
participant shall not be an employee of the Company or a
Subsidiary for any purpose and payments under Section 3
shall not constitute salary or wages. A participant shall
receive such payments as retirement benefits, not as
compensation for performance of any substantial services.
9.5 Except as provided in 9.3 above, this Plan
shall be binding upon and inure to the benefit of the
parties, their successors and assigns. If the Company or a
Subsidiary merges, consolidates or otherwise reorganizes, or
its assets or business are acquired by another company, this
Plan shall be binding upon the successor company and shall
apply to any employment of participants by the successor
company.
10. Definition of Change in Control
For purposes of this Plan, a "change in control
of the company" shall be deemed to have occurred if:
(a) Any "person," as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 20 percent or more of the combined
voting power of the Company's then outstanding securities;
(b) During any period of two
consecutive years (not including any period prior to the
execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors
of the Company (the Board), and any new director (other than
a director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in clause (a), (c) or (d) of this Section) whose election by
the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
Page 11
</Page>
<PAGE>
directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;
(c) The stockholders of the Company
approve a merger or consolidation of the Company with any
other company, other than (1) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than 50 percent of the combined voting power of the
voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation
or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more
than 20 percent of the combined voting power of the
Company's then outstanding securities; or
(d) The stockholders of the Company
approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets.
11. Effective Date
This Plan shall be effective February 1, 1989.
Company PRECISION CASTPARTS CORP.
By: /s/ WILLIAM C. MCCORMICK
___________________________
William C. McCormick
Page 12
</Page>
<PAGE>
ADDENDUM TO
PRECISION CASTPARTS CORP. SUPPLEMENTAL RETIREMENT PLAN
FOR EXECUTIVES
Excerpts from Precision Castparts Corp. Retirement Plan
February 1, 1989
7.02-4 "Final Average Pay' means the
participant's average monthly compensation in the five
consecutive calendar years of highest compensation while
employed by the Company or an affiliate. If a participant
has fewer than five full calendar years of compensation, the
first months (up to 60) shall be used, divided by the number
of months actually used. Years separated by a period when
the participant is not in such employment shall be treated
as consecutive. Additional compensation paid at retirement
or other termination of employment, such as for periods of
unused vacation or sick leave, shall be attributed to
calendar years by assuming that employment continued during
the period based on which the compensation is measured.
7.02-5 "Compensation" shall be determined as
follows:
(a) All non-deferred compensation
reportable on Form W-2 shall be counted
except commissions, bonuses, overtime
pay, cash profit sharing distributions,
cost-of-living allowances and imputed
income from expense reimbursement or
fringe benefits.
(b) During periods of reduced
compensation because of such causes as
illness, disability or leave of absence,
compensation shall be figured at the
last regular rate before the start of
the period.
(c) Full-time equivalent pay shall
be used for persons working part time.
Addendum Page 1
</Page>
<PAGE>
7.02-6 "Primary Social Security Benefit" means
the primary insurance amount estimated for the participant
on retirement at or after age 65 under the federal Social
Security Act determined as follows:
(a) The amount may be estimated
from the regular pay rate under rules
established by the committee assuming a
standard pay progression over a full
working career.
(b) The amount shall not be
changed by amendments to the Social
Security Act or cost-of-living index
adjustments after the participant's
actual termination date or age 65,
whichever is first.
(c) If a participant retires
early, the Primary Social Security
Benefit shall be the amount that would
be received at age 65 assuming level
earnings at the participant's final rate
of pay and no change in the Social
Security Act.
(d) A participant may elect to
have the amount calculated on the basis
of actual pay history for the period up
to separation from Service with Employer
by submitting adequate proof of such
history to the Administrator. The
election must be made and the proof
submitted within a reasonable period
after separation has occurred and the
participant has been notified of the
amount of benefit and the right to elect
under this provision.
Note: 7.02-6(d) is not applicable to SERP calculations of
PSSB.
Addendum Page 2
</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
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<NET-INCOME> 56500
<EPS-PRIMARY> 2.59
<EPS-DILUTED> 2.59
</TABLE>
