<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 28, 1998
Commission File No. 1-10348
_______________________________________
Precision Castparts Corp.
An Oregon Corporation
IRS Employer Identification No. 93-0460598
4650 S.W. Macadam Avenue
Suite 440
Portland, Oregon 97201-4254
Telephone: (503) 417-4800
_______________________________________
Indicate by checkmark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of Common Stock, no par value, outstanding
as of August 5, 1998: 24,346,949
Page 1 of 13 Pages
Note: This 10-Q was filed electronically via EDGAR with the
Securities and Exchange Commission.
</Page>
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Page 2
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
___________________________
6/28/98 6/29/97
___________________________
<S> <C> <C>
Net Sales $370,000 $ $
317,000
Cost of Goods Sold 284,400 249,100
Selling and Administrative Expenses 38,000 30,000
Interest Expense, Net 6,900 5,000
________
________
Income Before Provision for
Income Taxes 40,700 32,900
Provision for Income Taxes 16,300 13,400
________
________
Net Income $ 24,400 $ 19,500
======== ========
Net Income Per Common Share (Basic) $ 1.00 $ 0.81
======== ========
Net Income per Common Share (Diluted) $ 1.00 $ 0.80
======== ========
</TABLE>
See Notes to the Interim Financial Statements on page 7.
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Page 3
Precision Castparts Corp. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
6/28/98 3/29/98
____________________________
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 9,400 $ 25,000
Receivables 237,400 208,600
Inventories 245,500 240,900
Prepaid expenses 5,000 7,100
Current deferred tax asset 31,800 29,200
__________ __________
Total current assets 529,100 510,800
__________ __________
Property, Plant and Equipment, at cost 510,800 490,200
Less -- Accumulated depreciation (206,900) (197,500)
__________ __________
Net property, plant and equipment 303,900 292,700
Goodwill, net of amortization 518,400 451,600
Other Assets, net 21,200 19,500
__________ __________
$1,372,600 $1,274,600
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 19,200 $ 800
Current portion of long-term debt 24,300 24,400
Accounts payable 84,200 87,500
Accrued liabilities 117,500 123,700
Income taxes payable 43,100 28,400
__________ __________
Total current liabilities 288,300 264,800
__________ __________
Long-Term Debt, excluding
current portion 392,100 347,000
Deferred Tax Liability 23,200 23,200
Accrued Retirement Benefits Obligation 36,700 34,000
Other Long-Term Liabilities 13,100 10,300
__________ __________
Total liabilities 753,400 679,300
__________ __________
See Notes to the Interim Financial Statements on page 7.
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Page 4
Shareholders' Investment:
Common stock 24,300 24,300
Paid-in capital 174,100 172,400
Retained earnings 422,600 399,700
Cumulative translation adjustment (1,800) (1,100)
__________ __________
Total shareholders' investment 619,200 595,300
__________ __________
$1,372,600 $1,274,600
========== ==========
</TABLE>
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
___________________________
6/28/98 6/29/97
___________________________
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 24,400 $ 19,500
Non-cash items included in income:
Depreciation and amortization 13,200 10,800
Deferred taxes (100) (100)
Changes in operating working capital,
excluding effects of acquisitions:
Receivables (23,700) (24,800)
Inventories (1,500) 2,900
Prepaids 2,300 (100)
Payables, accruals & current taxes (1,900) (3,300)
Other operating activities, net 2,600 1,300
_________ _________
Net cash provided by
operating activities 15,300 6,200
_________ _________
See Notes to the Interim Financial Statements on page 7.
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Page 5
Cash Flows from Investing Activities:
Business acquisitions, net of
cash acquired (76,100) --
Acquisition of property, plant
and equipment (16,700) (15,900)
Other investing activities, net (500) 1,100
_________ _________
Net cash used by investing
activities (93,300) (14,800)
_________ _________
Cash Flows from Financing Activities:
Proceeds of long-term debt 53,000 --
Payment of long-term debt (9,400) (5,500)
Proceeds of notes payable 18,400 4,000
Proceeds from exercise of
stock options 1,700 4,200
Cash dividends (1,500) (1,400)
Other financing activities, net 200 (600)
_________ _________
Net cash provided by
financing activities 62,400 700
_________ _________
Net Decrease in Cash and
Cash Equivalents (15,600) (7,900)
Cash and Cash Equivalents at
Beginning of Period 25,000 10,100
_________ _________
Cash and Cash Equivalents at
End of Period $ 9,400 $ 2,200
========= =========
</TABLE>
See Notes to the Interim Financial Statements on page 7.
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Page 6
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
_______________________
6/28/98 6/29/97
_______________________
<S> <C> <C>
Net income $ 24,400 $ 19,500
Other comprehensive income (expense):
Foreign currency translation
adjustments (700) 300
__________ _________
Total comprehensive income $ 23,700 $ 19,800
========== =========
</TABLE>
See Notes to the Interim Financial Statements on page 7.
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Page 7
Notes to the Interim Financial Statements
(1) Basis of Presentation
The consolidated interim financial statements have been
prepared by Precision Castparts Corp. ("PCC" or the
"Company"), without audit and subject to year-end
adjustment, in accordance with generally accepted
accounting principles, except that certain information
and footnote disclosures made in the latest annual
report have been condensed or omitted for the interim
statements. Certain costs are estimated for the full
year and allocated in interim periods based on
estimates of operating time expired, benefit received,
or activity associated with the interim period. The
consolidated financial statements reflect all
adjustments which are, in the opinion of management,
necessary for fair representation.
(2) Business Acquisitions
All acquisitions have been accounted for under the
purchase method. The results of operations of the
acquired businesses are included in the consolidated
financial statements from the dates of acquisition.
During the first quarter of fiscal 1999, PCC acquired
substantially all shares of common stock of
Environment/One Corporation ("E/One"), a manufacturer
of highly engineered equipment for low-pressure sewer
systems and other applications, for $72.0 million. The
excess of the purchase price over the fair values of
the net assets acquired was $62.3 million and has been
recorded as goodwill, which is being amortized on a
straight-line basis over 40 years. E/One operates as
part of PCC Flow Technologies.
On April 17, 1998, the Company acquired the assets of
TBV, a manufacturer of ball valves and pipeline
instrumentation, for $9.8 million. The excess of the
purchase price over the fair values of the net assets
acquired was $4.4 million and has been recorded as
goodwill, which is being amortized on a straight-line
basis over 40 years. TBV operates as part of PCC Flow
Technologies.
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Page 8
(3) Earnings Per Share
PCC's authorized common stock consisted of 100,000,000
shares having a stated value of $1.00 each.
Information related to the calculation of earnings per
share follows:
<TABLE>
<CAPTION>
Three Months Ended
_________________________
6/28/98 6/29/97
______________________________________
Basic Diluted Basic Diluted
______________________________________
<S> <C> <C> <C> <C>
Net Income $ 24,400 $ 24,400 $ 19,500 $ 19,500
______________________________________
Average equivalent shares:
Average shares of
common stock
outstanding 24,300 24,300 24,000 24,000
Options and Employee
Stock Purchase Plan - 200 - 300
______________________________________
Total average
equivalent shares 24,300 24,500 24,000 24,300
______________________________________
Net income per common share $ 1.00 $ 1.00 $ 0.81 $ 0.80
======================================
</TABLE>
(4) Comprehensive Income
During the quarter ended June 28, 1998, the Company
adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income",
which requires reporting of changes in shareholders'
investment that do not result directly from
transactions with shareholders.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Sales for the first quarter were $370.0 million, up 17
percent from $317.0 million in the same quarter last year.
Net income was $24.4 million, or $1.00 per share (diluted),
for the quarter, compared with net income of $19.5 million,
or $0.80 per share (diluted) in the same quarter last year.
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Page 9
Results of Operations - Comparison Between Three Months
Ended June 28, 1998 and June 29, 1997
Sales increased $53.0 million as compared to the first
quarter a year ago, primarily due to acquisitions completed
in fiscal 1998, coupled with strong demand in the aerospace
market.
Cost of goods sold as a percent of sales for the first
quarter of fiscal 1999 was 77 percent, an improvement from
the 79 percent reported in the first quarter last year.
This improvement came from leveraging higher sales, the
addition of acquisitions yielding higher margins, and
continued development of process improvements, partially
offset by the impact of high development costs associated
with industrial gas turbine ("IGT") products.
Selling and administrative costs were $38.0 million for the
quarter, up $8.0 million from the $30.0 million a year ago.
The higher level of selling and administrative expenses
primarily reflects the acquisitions completed in fiscal 1998
and fiscal 1999.
Net interest expense in the first quarter of fiscal 1999 was
$6.9 million, as compared with $5.0 million in the first
quarter a year ago. The higher expense reflects higher debt
levels as a result of borrowings to fund the acquisitions
and debt assumed in connection with the acquisitions.
The effective tax rate in the first quarter of fiscal 1998
was 40.0 percent, approximating last year's effective tax
rate of 40.8 percent.
Changes in Financial Condition and Liquidity
Total assets of $1,372.6 million at June 28, 1998
represented a $98.0 million increase from the $1,274.6
million balance at March 29, 1998. This increase reflects
the acquisitions of E/One and TBV and higher receivables,
partially offset by a decrease in cash. Total
capitalization at June 28, 1998, was $1,054.8 million,
consisting of $435.6 million of debt and $619.2 million of
equity. The debt-to-capitalization ratio was 41 percent
compared with 38 percent at the end of the prior fiscal
year.
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Page 10
Cash from earnings for the three months ended June 28, 1998
of $37.5 million, plus $62.0 million of net borrowings and
$1.7 million from the sale of common stock through stock
option exercises was less than cash requirements which
consisted of $76.1 million for the acquisitions of E/One and
TBV, $22.2 million for increased working capital, $16.7
million for capital expenditures and $1.5 million for
dividends. The net decrease in the quarter's cash resulted
in an ending cash balance of $9.4 million, down $15.6
million from fiscal 1998 year end.
PCC believes that future capital requirements for property,
plant and equipment and cash dividends can be funded from
existing cash or additional borrowings. The Company
continues to evaluate potential acquisitions and believes
acquisition opportunities can be funded from cash,
additional borrowings and the issuance of stock.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The 1998 Annual Meeting of Shareholders of the Company
was held on August 5, 1998. At that meeting, the
shareholders elected two directors to serve terms of
three years, and ratified the appointment of Price
waterhouseCoopers LLP as auditors of the Company for
the 1999 fiscal year. The number of votes cast for,
against or withheld, as well as the number of
abstentions and broker non-votes is included in the
table below:
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Page 11
<TABLE>
<CAPTION>
Votes
_________________________________________________________________________
Against Broker
Cast or Absten- Non-
Matter Voted Upon For Withheld tions Votes Total
________________________________________________________________________________
________________
<S> <C> <C> <C> <C> <C>
1. To elect two
directors to
serve terms of
three years
Peter R. Bridenbaugh 21,360,222 198,098 -- -- 21,558,320
Steven G. Rothmeier 21,353,313 205,007 -- -- 21,558,320
2. To ratify the
appointment of
PricewaterhouseCoopers LLP
as auditors of
the Company for
the 1999 fiscal year 21,514,001 15,941 28,378 -- 21,558,320
</TABLE>
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Page 12
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 11. Computation of Per
Share Earnings*
Exhibit 27. Financial Data Schedule
* Data required by Statement of Financial
Accounting Standards No. 128, Earnings per
Share, is provided in Note 3 to the
Consolidated Financial Statements in this
Report.
b. Reports on Form 8-K
None.
Forward Looking Statements
Information included within this filing describing the
projected growth and future results and events constitutes
forward-looking statements. Actual results in future
periods may differ materially from the forward-looking
statements because of a number of risks and uncertainties,
including but not limited to fluctuations in the aerospace
and general industrial cycles; 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; risks
associated with international operations and world
economies; and implementation of new technologies. Any
forward-looking statements should be considered in light of
these factors.
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Page 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
PRECISION CASTPARTS CORP.
Registrant
DATE: August 12, 1998 /s/ W.D. Larsson
______________________________
W.D. Larsson
Vice President-Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</Page>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
June 28, 1998, 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> 3-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-START> MAR-30-1998
<PERIOD-END> JUN-28-1998
<CASH> 9400
<SECURITIES> 0
<RECEIVABLES> 241300
<ALLOWANCES> 3900
<INVENTORY> 245500
<CURRENT-ASSETS> 529100
<PP&E> 510800
<DEPRECIATION> 206900
<TOTAL-ASSETS> 1372600
<CURRENT-LIABILITIES> 288300
<BONDS> 392100
0
0
<COMMON> 24300
<OTHER-SE> 594900
<TOTAL-LIABILITY-AND-EQUITY> 1372600
<SALES> 370000
<TOTAL-REVENUES> 370000
<CGS> 284400
<TOTAL-COSTS> 284400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 40700
<INCOME-TAX> 16300
<INCOME-CONTINUING> 24400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24400
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
