<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended December 28, 1997
Commission File No. 1-10348
_______________________________________
Precision Castparts Corp.
An Oregon Corporation
IRS Employer Identification No. 93-0460598
4650 S.W. Macadam Avenue
Suite 440
Portland, Oregon 97201-4254
Telephone: (503) 417-4800
_______________________________________
Indicate by checkmark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of Common Stock, no par value, outstanding
as of February 9, 1998: 24,199,939
Page 1 of 14 Pages
Note: This 10-Q was filed electronically via EDGAR with the
Securities and Exchange Commission.
</Page>
<PAGE>
PART 1: FINANCIAL INFORMATION
Item 1. Financial Statements
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Income
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
_____________________________________
December 28, 1997 December 29,
1996
_____________________________________
<S> <C> <C>
Net Sales $ 326,400 $274,600
Cost of Goods Sold 255,000 215,300
Selling and Administrative Expenses 30,400 26,800
Interest Expense, Net 5,100 6,400
_______ ________
Income Before Provision for
Income Taxes 35,900 26,100
Provision for Income Taxes 14,300 10,800
_______ ________
Net Income $ 21,600 $ 15,300
======= ========
Net Income Per Common Share (2):
Basic $ 0.89 $ 0.70
========
========
Diluted $ 0.88 $ 0.69
========
========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
_____________________________________
December 28, 1997 December 29,
1996
_____________________________________
<S> <C> <C>
Net Sales $ 961,500 $685,500
Cost of Goods Sold 752,300 542,600
Selling and Administrative Expenses 91,300 62,800
Interest Expense, Net 14,600 12,200
________ ________
Income Before Provision for
Income Taxes 103,300 67,900
Provision for Income Taxes 41,500 28,000
________ ________
Net Income $ 61,800 $ 39,900
======== ========
Net Income Per Common Share (2):
Basic $ 2.56 $ 1.89
======== =========
Diluted $ 2.54 $ 1.87
======== =========
</TABLE>
See Notes to the Interim Financial Statements on page 6.
Page 2
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<PAGE>
Precision Castparts Corp. and Subsidiaries
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 28,1997 March 30, 1997
_________________________________
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 13,600 $ 10,100
Receivables 218,600 178,200
Inventories 243,300 235,800
Prepaid expenses 7,500 6,200
Current deferred tax asset 28,500 23,800
__________ __________
Total current assets 511,500 454,100
__________ __________
Property, Plant and Equipment, at cost 459,900 398,800
Less -- Accumulated depreciation (192,700) (169,700)
__________ __________
Net property, plant and equipment 267,200 229,100
Goodwill, net of amortization 441,900 379,500
Other Assets, net 13,100 7,400
__________ __________
$1,233,700 $1,070,100
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Notes payable $ 4,100 $ 17,000
Current portion of long-term debt 24,500 22,500
Accounts payable 71,900 84,400
Accrued liabilities 114,000 101,900
Income taxes payable 30,900 23,100
__________ __________
Total current liabilities 245,400 248,900
__________ __________
Long-Term Debt, excluding
current portion 359,700 261,000
Deferred Tax Liability 16,500 12,200
Accrued Retirement Benefits Obligation 33,300 26,000
Other Long-Term Liabilities 10,000 17,600
__________ __________
Total liabilities 664,900 565,700
__________ __________
</TABLE>
See Notes to the Interim Financial Statements on page 6.
Page 3
</Page>
<PAGE>
<TABLE>
<S> <C> <C>
Shareholders' Investment:
Common stock 24,200 24,000
Paid-in capital 168,000 160,800
Retained earnings 376,800 319,400
Cumulative translation adjustment (200) 200
__________ __________
Total shareholders' investment 568,800 504,400
__________ __________
$1,233,700 $1,070,100
========== ==========
</TABLE>
Precision Castparts Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
_____________________________________
December 28, 1997 December 29,
1996
_____________________________________
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 61,800 $ 39,900
Non-cash items included in income:
Depreciation and amortization 32,400 25,200
Deferred taxes 1,800 (5,300)
Changes in operating working capital,
excluding effects of acquisitions:
Receivables (27,500) (36,200)
Inventories 10,800 (17,700)
Prepaids (800) (2,300)
Other assets (5,600) (2,900)
Payables, accruals & current taxes (8,500) 14,100
Other liabilities 6,100 3,400
_________ ________
Net cash provided by
operating activities 70,500 18,200
_________ ________
Cash Flows from Investing Activities:
Business acquisitions, net of
cash acquired (113,300) (322,700
)
Acquisition of property, plant
and equipment (51,100) (35,000)
Other investing activities, net 8,500 (500)
_________ ________
Net cash used by investing
activities (155,900) (358,200
)
</TABLE>
Page 4
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<PAGE>
<TABLE>
<S> <C> <C>
Cash Flows from Financing Activities:
Proceeds of long-term debt 245,000 308,300
Payment of long-term debt (144,300) (138,100)
Proceeds of notes payable 13,000 10,200
Payment of notes payable (25,900) --
Sale of common stock 7,400 148,800
Cash dividends (4,400) (2,500)
Other financing activities, net (1,900) (100)
_________ ________
Net cash provided
by financing activities 88,900 326,600
_________ ________
Net Increase (Decrease) in Cash and
Cash Equivalents 3,500 (13,400)
Cash and Cash Equivalents at
Beginning of Period 10,100 26,200
_________ ________
Cash and Cash Equivalents at
End of Period $ 13,600 $ 12,800
========= ========
</TABLE>
See Notes to the Interim Financial Statements on page 6.
Page 5
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<PAGE>
Notes to the Interim Financial Statements
(1) Basis of Presentation
The consolidated interim financial statements have been
prepared by Precision Castparts Corp. ("PCC" or the
"Company"), without audit and subject to year-end
adjustment, in accordance with generally accepted
accounting principles, except that certain information
and footnote disclosures made in the latest annual
report have been condensed or omitted for the interim
statements. Certain costs are estimated for the full
year and allocated in interim periods based on
estimates of operating time expired, benefit received,
or activity associated with the interim period. The
consolidated financial statements reflect all
adjustments which are, in the opinion of management,
necessary for fair representation.
(2) Earnings per Share
During the quarter ended December 28, 1997, the Company
adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share", which specifies
the computation, presentation, and disclosure
requirements for earnings per share ("EPS"). SFAS 128
replaces the presentation of primary and fully diluted
EPS with basic and diluted EPS. Basic EPS excludes
dilution [such as the effect of the Company's
outstanding stock options ("options") and the Company's
Employee Stock Purchase Plan ("ESPP")] and is computed
based upon the weighted average number of common shares
outstanding during the period. Basic EPS under SFAS
128 does not differ from the Company's previously
reported primary EPS. Diluted EPS reflects the
potential dilution that would occur if securities or
other contracts to issue common stock were exercised or
converted into common stock. The following represents
a reconciliation from basic EPS to diluted EPS (income
and shares in thousands):
<TABLE>
<CAPTION>
Three Months Ended December 28, 1997
____________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
______________________________________
<S> <C> <C> <C>
Basic EPS $21,600 24,200 $ .89
======
Options & ESPP - 200
--------- ---------
Diluted EPS $21,600 24,400 $ .88
========= ========= ======
</TABLE>
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Page 6
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<TABLE>
<CAPTION>
Three Months Ended December 29, 1996
______________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
_____________________________________
<S> <C> <C> <C>
Basic EPS $15,300 22,000 $ .70
======
Options - 200
--------- ---------
Diluted EPS $15,300 22,200 $ .69
========= ========= ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 28, 1997
_____________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
_____________________________________
<S> <C> <C> <C>
Basic EPS $61,800 24,100 $ 2.56
======
Options & ESPP - 200
--------- ---------
Diluted EPS $61,800 24,300 $ 2.54
========= ========= ======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended December 29, 1996
_____________________________________
Income Shares Per-Share
(Numerator) (Denominator) Amount
_____________________________________
<S> <C> <C> <C>
Basic EPS $39,900 21,100 $ 1.89
======
Options - 200
--------- ---------
Diluted EPS $39,900 21,300 $ 1.87
========= ========= ======
</TABLE>
Page 7
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<PAGE>
Options to purchase twenty four thousand shares of
common stock at prices ranging from $62.00-$64.63 per
share were outstanding during the current fiscal year
but were not included in the computation of diluted EPS
because the options' exercise prices were greater than
the average market price of the common shares. The
options, which expire at dates ranging from July 2007
to October 2007, were still outstanding as of December
28, 1997.
(3) Fiscal 1998 Business Acquisitions
On July 7, 1997, the Company acquired certain of the
assets of Pittler GmbH of Langen, Germany, a
manufacturer of computer-controlled metalworking
machine systems. The business will operate as part of
PCC Specialty Products, Inc. This acquisition was
completed in a cash transaction for approximately $5.3
million. Purchase accounting yielded negative goodwill
of approximately $3.3 million.
On October 31, 1997, the Company purchased 100 percent
of the stock of J&L Fiber Services, Inc. of Waukesha,
Wisconsin, a manufacturer of refiner plates for the
pulp and paper industry. The purchase price of $108.0
million, subject to adjustment, was funded through an
existing credit line. Purchase accounting yielded
goodwill of approximately $79.2 million.
(4) Fiscal 1997 Business Acquisitions
In the first quarter of last year, PCC acquired The
Olofsson Corporation ("Olofsson"). In the second
quarter of last year, the Company acquired Balo
Precision Parts, Inc. ("Balo"), AE Turbine Components,
Limited ("AETC"), NEWFLO Corporation (now operating as
"PCC Flow Technologies") and Astro Punch Corporation
("Astro Punch"). In the third and fourth quarters of
last year, the Company acquired Crown Pump Corp.
("Crown Pump")and OIC Valve ("OIC"), respectively.
The following represents the pro forma results of
operations for the Company and its material fiscal 1997
business acquisitions as though the acquisitions had
occurred at the beginning of the fiscal year. Results
for the three months ended December 29, 1996 include
the full quarter's actual results from the acquisitions
and therefore are not presented separately. The pro
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forma information is not necessarily indicative of the
results which would have resulted had the acquisitions
occurred at the beginning of the fiscal year, nor is it
necessarily indicative of future results.
<TABLE>
<CAPTION>
Nine
Months Ended
_________________
December 29, 1996
_________________
<S> <C>
Net Sales $ 798,500
=========
Net Income $ 41,100
=========
Net Income Per Common share:
Basic $ 1.95
=========
Diluted $ 1.93
=========
</TABLE>
(5) Long Term Debt
In December 1997, the Company completed a public
offering of $150.0 million of 6.75% notes due December
15, 2007, with interest to be paid semi-annually. The
Company used $105.3 million of the proceeds to repay
bank indebtedness originally incurred in connection
with redemption of the Company's $100.0 million
principal amount of 13.25% subordinated notes due 2002
issued by NEWFLO Corporation (the "NEWFLO Notes"). The
NEWFLO Notes were redeemed as of November 15, 1997.
The remainder of the proceeds were used to pay down
short-term debt.
Page 9
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<PAGE>
(6) Subsequent Events
On December 31, 1997, the Company acquired the assets
of Schlosser Casting Company ("PCC Schlosser"), of
Redmond, Oregon, a titanium investment casting foundry.
The business will operate as part of PCC Structurals,
Inc. The purchase price of $20.2 million, subject to
adjustment, was funded through an existing credit line.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Sales for the third quarter of fiscal 1998 reached a record
$326.4 million, an increase of 19 percent over the $274.6
million in the same quarter last year. Net income was $21.6
million, or $0.88 per share (diluted), for the quarter,
compared with net income of $15.3 million, or $0.69 per
share (diluted) in the same quarter last year.
Results of Operations - Comparison Between Three Months
Ended December 28, 1997 and December 29, 1996
Sales increased $51.8 million compared to the third quarter
a year ago, primarily due to continued strong sales
performance in the aerospace market, and to a lesser extent,
to business acquisitions completed in fiscal 1997 and 1998.
Cost of goods sold as a percentage of sales for the third
quarter of fiscal 1998 was 78 percent, equal to the amount
reported in the third quarter last year. Reflected in the
fiscal 1998 results are higher margins contributed primarily
from leveraging the higher sales volume and improved
operating performance related to aerospace products, offset
by higher costs related to development of industrial gas
turbine ("IGT") products and lower performance at the
Specialty Products Division.
Selling and administrative costs were $30.4 million for the
quarter, up $3.6 million from the $26.8 million a year ago.
The higher level of selling and administrative expenses is
primarily due to the fiscal 1997 and 1998 business
acquisitions.
Page 10
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<PAGE>
Net interest expense in the third quarter of fiscal 1998 was
$5.1 million, as compared with $6.4 million in the third
quarter a year ago. The lower expense reflects lower
average borrowings as well as lower average borrowing rates
during the current fiscal quarter.
The effective tax rate in the third quarter of fiscal 1998
was 39.8 percent, compared to last year's effective tax rate
of 41.4 percent. The current fiscal year rate reflects
utilization of tax benefits related to prior period
operating losses of a foreign subsidiary and a state tax
refund, partially offset by higher amounts of non-deductible
goodwill amortization.
Results of Operations - Comparison Between Nine Months Ended
December 28, 1997 and December 29, 1996.
Sales of $961.5 million for the first nine months of fiscal
1998 increased $276.0 million, or 40 percent, compared to
the first nine months a year ago. The increase was due to
improved sales to the aerospace industry, as well as the
impact from acquisitions made in both fiscal 1997 and 1998.
Excluding the effects of the acquisitions, sales increased
25 percent.
Cost of goods sold as a percent of sales for the first nine
months of fiscal 1998 was 78 percent, representing an
improvement from the 79 percent achieved during the first
nine months of last year. Reflected in the fiscal 1998
results are higher margins contributed by leveraging the
higher sales volume and improved operating performance on
sales to the aerospace market and higher than average
margins from certain acquisitions, partially offset by
higher costs related to the development of IGT products and
lower performance at the Specialty Products Division.
Selling and administrative costs were $91.3 million for the
first nine months, or 9.5 percent of sales, compared to
$62.8 million, or 9.2 percent of sales, a year ago. This
increase is due to acquisitions which operate with higher
selling costs due to their related advertising, trade show
and sales commission costs.
Net interest expense in the first nine months of fiscal 1998
was $14.6 million, as compared with $12.2 million in the
first nine months a year ago. The increase reflects the
Page 11
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<PAGE>
higher debt this year compared with a year ago as a result
of borrowing to fund the fiscal 1997 and 1998 business
acquisitions, as well as debt assumed in connection with
these acquisitions.
The effective tax rate for the first nine months of fiscal
1998 was 40.2 percent, compared to last year's effective tax
rate of 41.2 percent. The decrease reflects the utilization
of tax benefits related to prior period operating losses of
a foreign subsidiary and a state tax refund, partially
offset by higher amounts of non-deductible goodwill
amortization.
Changes in Financial Condition and Liquidity
Total assets of $1,233.7 million at December 28, 1997
represented a $163.6 million increase from the $1,070.1
million balance at March 30, 1997. The majority of this
increase was due to fiscal 1998 business acquisitions.
Total capitalization at December 28, 1997, was $957.1
million, consisting of $388.3 million of debt and $568.8
million of equity. The debt-to-capitalization ratio was
40.6 percent compared with 37.3 percent at the end of the
prior fiscal year.
Cash from earnings for the nine months ended December 28,
1997 of $96.0 million, plus cash of $7.4 million from the
sale of common stock through stock option exercises, was
less than cash requirements which consisted of $113.3
million for business acquisitions, $51.1 million of capital
expenditures, $25.5 million of increased working capital and
$4.4 million of cash dividends. The cash shortfall was
funded from $87.8 million of net borrowings, resulting in a
net increase to cash of $3.5 million. As of December 28,
1997, cash and cash equivalents were $13.6 million.
PCC believes that future capital requirements for property,
plant and equipment and cash dividends can be funded from
existing cash or additional borrowings. The Company
continues to evaluate potential acquisitions and believes
acquisition opportunities can be funded from cash,
additional borrowings and the issuance of stock.
Page 12
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<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The matter entitled "Marrello Valve Ltd. v. General
Valve, Brian Warren, NEWFLO Corporation, et. al."
was settled during December 1997. The amounts paid
in settlement are not material to the Company's
results of operations.
Item 6. Exhibits and Reports on Form 8-K
Item 6.(a) Exhibits
(27) Financial Data Schedule
Item 6.(b) Reports on Form 8-K
None.
Forward Looking Statements
Information included within this filing describing the
projected growth and future results and events constitutes
forward-looking statements. Actual results in future
periods may differ materially from the forward-looking
statements because of a number of risks and uncertainties,
including but not limited to fluctuations in the aerospace
cycle; the relative success of the Company's entry into new
markets, including the rapid ramp-up for industrial gas
turbine component production; competitive pricing; the
availability and cost of materials and supplies; relations
with the Company's employees; the Company's ability to
manage its operating costs and to integrate acquired
businesses in an effective manner; governmental regulations
and environmental matters; and risks associated with
international operations. Any forward-looking statements
should be considered in light of these factors.
Page 13
</Page>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
PRECISION CASTPARTS CORP.
Registrant
DATE: February 11, 1998 /s/ W.D. LARSSON
______________________________
W.D. Larsson
Vice President-Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 14
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
December 28, 1997, financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000079958
<NAME> PRECISION CASTPARTS CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-29-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> DEC-28-1997
<CASH> 13600
<SECURITIES> 0
<RECEIVABLES> 221900
<ALLOWANCES> 3300
<INVENTORY> 243300
<CURRENT-ASSETS> 511500
<PP&E> 459900
<DEPRECIATION> 192700
<TOTAL-ASSETS> 1233700
<CURRENT-LIABILITIES> 245400
<BONDS> 0
0
0
<COMMON> 24200
<OTHER-SE> 544600
<TOTAL-LIABILITY-AND-EQUITY> 1233700
<SALES> 961500
<TOTAL-REVENUES> 961500
<CGS> 752300
<TOTAL-COSTS> 752300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14600
<INCOME-PRETAX> 103300
<INCOME-TAX> 41500
<INCOME-CONTINUING> 61800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61800
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.54
</TABLE>
