<PAGE>
June 24, 1998
<TABLE>
<S> <C>
RUTH A. BEYER
DIRECT DIAL
(503) 294-9332
e-mail
[email protected]
</TABLE>
VIA EDGAR
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW
Washington, DC 20549
RE: PRECISION CASTPARTS CORP.
On behalf of Precision Castparts Corp. (the "Company"), submitted herewith
for filing pursuant to Rule 14a-6(b) is the Company's definitive proxy statement
and form of proxy for use in connection with the Company's annual meeting of
shareholders to be held on August 5, 1998.
The Company anticipates that its definitive proxy material will be mailed to
the Company's shareholders on or about June 26, 1998.
If you have any questions regarding this filing, please call me at (503)
294-9332.
Very truly yours,
Ruth A. Beyer
Enclosures
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PRECISION CASTPARTS CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
PRECISION CASTPARTS CORP.
4650 SW MACADAM, SUITE 440
PORTLAND, OREGON 97201
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AUGUST 5, 1998
------------------------
You are invited to attend the Annual Meeting of Shareholders of Precision
Castparts Corp. The meeting will be held on August 5, 1998, at 9:00 a.m.,
Pacific Daylight Time, in the Intermediate Theater of the Portland Center for
the Performing Arts, 1111 SW Broadway, Portland, Oregon. The Company will
conduct the following business:
(1) electing two directors who will serve for three years;
(2) ratifying the appointment of Price Waterhouse LLP as the Company's
auditors for 1999; and
(3) conducting any other business that you or other shareholders have
properly raised before, or during an adjournment of, the meeting.
Only shareholders of record at the close of business on June 5, 1998, will
be able to vote at the meeting. Shareholders present in person or through a
proxy may periodically adjourn the meeting.
Your vote is important. Whether you plan to attend the meeting or not,
please sign, date and return your proxy card to us in the return envelope as
soon as possible. IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE APPROPRIATE
BOX ON THE PROXY CARD SO WE CAN PREPARE AN ACCURATE ADMISSION LIST. If you
attend the meeting and prefer to vote in person, you will be able to do so.
By Order of the Board of Directors,
Ruth A. Beyer
SECRETARY
Portland, Oregon
June 26, 1998
<PAGE>
PRECISION CASTPARTS CORP.
4650 SW MACADAM, SUITE 440
PORTLAND, OREGON 97201
------------------------
PROXY STATEMENT
------------------------
The Board of Directors of Precision Castparts Corp. (the "Company") solicits
your proxy in the form enclosed with this proxy statement. The proxy will be
used at the 1998 Annual Meeting of Shareholders, which will be held in the
Intermediate Theater of the Portland Center for the Performing Arts, 1111 SW
Broadway, Portland, Oregon, on Wednesday, August 5, 1998, at 9:00 a.m., Pacific
Daylight Time. The proxy may also be used at any adjournment of the meeting. We
are sending this statement and the enclosed proxy form to you on or about June
26, 1998.
If you have properly completed your proxy and have not revoked it prior to
the Annual Meeting, we will vote your shares according to your instructions on
the proxy. If you do not provide any instructions, we will vote your shares: (a)
for the nominees listed on page 2; (b) for the approval of the proposal
described on page 11; and (c) in accordance with the recommendations of the
Company's management on other business that properly comes before the meeting or
matters incident to the conduct of the meeting. If you sign and date the
enclosed proxy but attend the meeting and choose to vote personally, our ability
to exercise the proxy will be suspended. You may revoke the proxy by notifying
Ruth Beyer, the secretary of the Company, in writing prior to our exercise of
the proxy at the Annual Meeting or any adjourned meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
WE RECOMMEND A VOTE "FOR" ALL NOMINEES
The Board of Directors currently consists of eight directors. Mr. Riedel has
indicated his intent to resign on or before the date of the 1998 Annual Meeting.
As required by the Company's Bylaws, the Board of Directors is divided into
three classes. The term of office for one of the classes expires each year. This
year, the terms of Mr. Bridenbaugh and Mr. Rothmeier expire. Both are nominees
for reelection. If elected, the directors' terms will expire in 2001. If either
of them becomes unavailable for election for any reason, we will name a suitable
substitute as authorized by your proxy.
The following table provides the name, age, principal occupation and other
directorships of each nominee and continuing director, the year in which he
became a director of the Company and the year in which his term expires. Except
as otherwise noted, each has held his principal occupation for at least five
years.
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME, AGE, PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE EXPIRES
- ----------------------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
NOMINEES
Peter R. Bridenbaugh -- 57 1995 1998
Retired; Until January 1998, Executive Vice President -- Automotive, Aluminum Co. of America,
an integrated producer of aluminum and other products for the packaging, aerospace,
automotive, building and construction, and commercial and industrial markets; from 1993-1996,
Executive Vice President and Chief Technical Officer, Aluminum Co. of America.
Steven G. Rothmeier -- 51 1994 1998
Chairman and Chief Executive Officer of Great Northern Capital, a private investment and
merchant banking firm, since March 1993. Mr. Rothmeier is also a director of Honeywell, Inc.,
E.W. Blanch Holdings, Inc., Department 56, Inc., Waste Management, Inc. and Great Northern
Asset Management.
DIRECTORS WHOSE TERMS CONTINUE
Dean T. DuCray -- 57 1996 1999
Retired; Until April 1998, Vice President and Chief Financial Officer of York International
Corporation, a manufacturer of heating, air conditioning, ventilation and refrigeration
equipment.
Don R. Graber -- 54 1995 1999
Chairman, President and Chief Executive Officer of Huffy Corporation, a manufacturer of
outdoor leisure equipment and provider of retail services, since December 1997; from 1996 to
1997, President and Chief Operating Officer of Huffy Corporation; previously President of
Worldwide Household Products Group, The Black & Decker Corporation. Mr. Graber is also a
director of Huffy Corporation.
Roy M. Marvin -- 67 1967 1999
Retired; Through May 1996, Vice President -- Administration and Secretary of the Company.
William C. McCormick -- 64 1986 2000
Chairman of the Company since October 1994; Chief Executive Officer of the Company since
August 1991; from 1991-97, President of the Company. Mr. McCormick is also a director of Merix
Corporation.
Vernon E. Oechsle -- 55 1996 2000
President and Chief Executive Officer of Quanex Corporation, a manufacturer of steel bars,
aluminum shapes and steel tubes and pipes; previously Executive Vice President and Chief
Operating Officer of the automotive sector of AlliedSignal, Inc. Mr. Oechsle is also a
director of Quanex Corporation and Walbro Corp.
</TABLE>
If a quorum is present at the meeting, directors will be elected by a
plurality of the votes cast by the shareholders entitled to vote. We will treat
abstentions and broker non-votes as shares present but not voting.
2
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table, which was prepared on the basis of information
furnished by the persons described, shows ownership of the Company's Common
Stock as of May 1, 1998, by the Chief Executive Officer, by each of the other
four most highly compensated executive officers, by the directors and by the
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES
- ------------------------------------------------------------- ----------------- ---------------
<S> <C> <C>
Peter R. Bridenbaugh......................................... 2,250(1) *
Mark Donegan................................................. 9,041(2) *
Dean T. DuCray............................................... 1,650(3) *
Don R. Graber................................................ 6,250(4) *
William D. Larsson........................................... 13,926(5) *
Roy M. Marvin................................................ 5,483(6) *
William C. McCormick......................................... 75,986(7) *
Vernon E. Oechsle............................................ 1,000 *
Steven C. Riedel............................................. 11,750(8) *
Steven G. Rothmeier.......................................... 3,375(9) *
Peter G. Waite............................................... 34,803(10) *
All directors and executive officers as a group (16
persons)................................................... 178,604(11) *
</TABLE>
- ------------------------
* Less than 1 percent of the Company's outstanding shares of Common Stock.
(1) Includes 750 shares subject to options that are exercisable or become
exercisable by Mr. Bridenbaugh within 60 days after May 1, 1998.
(2) Includes 8,479 shares subject to options that are exercisable or become
exercisable by Mr. Donegan within 60 days after May 1, 1998.
(3) Includes 400 shares held in trust for children of Mr. DuCray. Includes 250
shares subject to options that are exercisable or become exercisable by Mr.
DuCray within 60 days after May 1, 1998.
(4) Includes 750 shares subject to options that are exercisable or become
exercisable by Mr. Graber within 60 days after May 1, 1998, and 500 shares
held by Mrs. Graber.
(5) Includes 11,082 shares subject to options that are exercisable or become
exercisable by Mr. Larsson within 60 days after May 1, 1998.
(6) All shares held jointly with Mrs. Marvin.
(7) Includes 24,172 shares subject to options that are exercisable or become
exercisable by Mr. McCormick within 60 days after May 1, 1998.
(8) Includes 10,000 shares subject to options that are exercisable or become
exercisable by Mr. Riedel within 60 days after May 1, 1998.
(9) Includes 1,875 shares subject to options that are exercisable or become
exercisable by Mr. Rothmeier within 60 days after May 1, 1998.
(10) Includes 4,875 shares owned by children of Mr. Waite, and 11,000 shares
owned by Mrs. Waite. Includes 17,979 shares subject to options that are
exercisable or become exercisable by Mr. Waite within 60 days after May 1,
1998.
(11) Includes 85,866 shares subject to options that are exercisable or become
exercisable within 60 days after May 1, 1998.
3
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (Committee) is composed
of three non-employee directors. Pursuant to authority delegated by the Board,
the Committee initially determines the compensation to be paid to the Chief
Executive Officer and to each of the other corporate executive officers of the
Company. The proposed compensation of the Chief Executive Officer is then
submitted to the Board of Directors for approval. Directors who are also
officers of the Company do not participate in the board action. The Committee
also is responsible for developing and making recommendations to the Board with
respect to the Company's executive compensation policies.
The Company's compensation policies for corporate executive officers
(including the named executive officers) are designed to compensate the
Company's executives fairly and to provide incentives for the executives to
manage the Company's businesses effectively for the benefit of its shareholders.
In fiscal 1998, the Company retained the services of an independent consultant
with special expertise in compensation matters to assist the Committee and the
Board of Directors in the design and monitoring of compensation arrangements
that are fair and competitive for the executives and consistent with the
objectives of the shareholders. The consultant compared the current compensation
of the Company's executive officers with compensation from a custom group of
eight companies. The comparator group of companies was selected by the
compensation consultant with recommendations of the Company and included
companies of similar size, complexity and management structure as the Company
and its significant operating subsidiaries. Industry classifications, growth
trends and other business characteristics were also considered in selecting the
comparator group of companies.
The key objectives of the Company's executive compensation policies are to
attract and retain key executives who are important to the long-term success of
the Company and to provide incentives for these executives to achieve high
levels of job performance and enhancement of shareholder value. The Company
seeks to achieve these objectives by paying its executives a competitive level
of base compensation for companies of similar size and industry and by providing
its executives an opportunity for further reward for outstanding performance in
both the short term and the long term. It is the general policy of the Committee
to set base salaries conservatively and to emphasize opportunities for
performance-based rewards through annual cash bonuses and stock option grants in
order that the total compensation (base salary, cash bonus and stock options) of
the Company's executive officers is at or progresses toward the 75th percentile
of the comparator group of companies.
EXECUTIVE OFFICER COMPENSATION PROGRAM. The Company's executive officer
compensation program is comprised of three elements: base salary, annual cash
bonus and long-term incentive compensation in the form of stock option grants.
SALARY. The Committee and the Board of Directors established base salaries
for the Company's executive officers in fiscal 1998 after taking into account
individual experience, job responsibility and individual performance during the
prior year. These factors are not assigned a specific weight in establishing
individual base salaries. The Committee also considered the Company's executive
officers' salaries relative to salary information from the comparator group of
companies described above.
After considering the information on individual performance and the
comparative information provided by the compensation consultant, the Committee
and the Board of Directors made specific adjustments to the fiscal 1998
compensation levels of the executive officers as determined to be appropriate in
the circumstances and in furtherance of the Company's compensation policies.
CASH BONUSES. The purpose of the cash bonus component of the compensation
program is to provide a direct financial incentive in the form of cash bonuses
to executives and other employees to achieve predetermined Division and Company
performance objectives. For fiscal 1998, the Company's executive incentive
bonuses were determined pursuant to the Company's Executive Performance
Compensation
4
<PAGE>
Plan, which was approved by Shareholders at the 1997 Annual Meeting. Under this
plan, the Compensation Committee annually selects a threshold parameter for the
participating officers, consisting of one or more performance criteria for the
Company. If the threshold parameter is not achieved, no performance compensation
award is paid for that year. The threshold parameter was met for fiscal 1998.
If the threshold parameter is met, the exact amount of the cash bonus
payable to the executive officer is determined at the discretion of the
Compensation Committee with reference to pre-established performance criteria.
In fiscal 1998, the Compensation Committee adopted the performance criteria set
forth in three separate cash bonus plans which are applicable to the five named
executive officers of the Company: the Corporate Bonus Program (applicable to
Messrs. McCormick, Riedel and Larsson), the PCC Structurals Executive Bonus
Program (applicable to Mr. Donegan), and the PCC Airfoils Executive Bonus
Program (applicable to Mr. Waite). In approving final bonuses for executive
officers for fiscal 1998, the Compensation Committee considered the degree to
which each executive officer had achieved the performance criteria applicable to
him and exercised its discretion in a manner that resulted in each executive
officer's bonus award equaling the amount determined under the applicable plan
that correlated to the achieved level of performance.
STOCK OPTIONS. Under the Company's compensation policy, stock options are
the primary vehicle for rewarding long-term achievement of Company goals. The
objectives of the program are to align employee and shareholder long-term
interests by creating a strong and direct link between compensation and
increases in share value. Under the Company's 1994 Stock Incentive Plan, the
Board of Directors or the Compensation Committee may grant options to purchase
Common Stock of the Company to key employees of the Company and its
subsidiaries. Approximately 260 persons, including all of the Company's
executive officers, currently participate in the 1994 Stock Incentive Plan. The
Board of Directors makes annual grants of nonstatutory options to acquire the
Company's Common Stock at an exercise price equal to the fair market value of
the shares on the date of grant (the closing sale price on the New York Stock
Exchange on the grant date). The number of shares granted to executive officers
was consistent with the Committee's general policy to consider individual
performance and the number of shares needed to reach or progress toward the 75th
percentile of total compensation. The options vest in 25 percent increments over
the four-year period following grant. All nonstatutory stock options granted to
date become fully exercisable upon a change in control of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION. The Committee determined the Chief
Executive Officer's compensation for fiscal 1998, with the final approval of the
Board of Directors. The Chief Executive Officer's base salary was determined
based upon a review of the salaries of chief executive officers for companies of
comparable size and industry identified in the consultant's fiscal 1998
comparator group of companies and upon a review of the Chief Executive Officer's
performance. In keeping with the compensation policies described above, which
emphasize both short-term and long-term performance rewards rather than base
salary only, the Chief Executive Officer's cash compensation (base salary and
annual cash bonus), was set below the 75th percentile of cash compensation paid
to the Chief Executive Officer by the comparator group of companies. The Chief
Executive Officer's bonus for fiscal 1998 was determined under the Executive
Performance Compensation Plan procedures described under Cash Bonuses, above,
based upon the level of achievement of pre-established performance objectives
for fiscal 1998 and the exercise of the Committee's discretionary powers. The
annual stock option grant to Mr. McCormick in fiscal 1998 was consistent with
the Committee's general policy, which considers individual performance and the
number of shares needed to reach or progress toward the 75th percentile of total
compensation. Additional information regarding the option grant is set forth
below under "Option Grants in Last Fiscal Year."
Steven G. Rothmeier, Chairman
Don R. Graber
Vernon E. Oechsle
5
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid to the Chief Executive
Officer and the other four most highly compensated executive officers of the
Company for services in all capacities to the Company and its subsidiaries
during each of the last three fiscal years.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION(1) AWARDS
-------------------------------------- -------------
OTHER ANNUAL NUMBER OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION(3) OPTIONS(4) COMPENSATION(5)
- ------------------------------------------ --------- ---------- ---------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William C. McCormick ..................... 1998 $ 567,500 $ 787,800 $ 19,254 29,568 3,$954 7,345
Chairman and 1997 491,265 573,306 815 30,243 6,622
Chief Executive Officer 1996 431,466 427,151 51 11,831
Peter G. Waite ........................... 1998 324,000 609,444 16,716 12,000 3,090
Executive Vice President and President 1997 308,750 563,161 6,425 10,000 3,157
-- PCC Airfoils, Inc. 1996 293,130 504,038 5,438 7,761 1,742
Steven C. Riedel(6) ...................... 1998 348,078 421,869 30,130 55,104 570
Senior Vice President and President --
Industrial Products Operations
Mark Donegan ............................. 1998 285,010 392,528 41,087 11,000 2,041
Executive Vice President and President 1997 257,509 242,143 0 12,000 848
-- PCC Structurals, Inc. 1996 226,254 200,018 0 5,887 321
William D. Larsson ....................... 1998 233,750 283,660 19,115 10,000 2,014
Vice President and Chief Financial 1997 206,256 244,569 516 7,500 1,878
Officer 1996 188,128 167,622 690 4,690 986
</TABLE>
- ------------------------
(1) Includes compensation deferred at the election of the executive officers
under the Company's 401(k) Plan and Executive Deferred Compensation Plan.
Under the Company's 401(k) Plan, officers and other employees of the Company
may elect to defer a percentage of their eligible compensation (such
percentage to be selected by the participant from a range established by the
administrator of the Plan, but subject to limitations under the Internal
Revenue Code). Beginning in calendar year 1998, the Company makes a matching
contribution under the 401(k) Plan equal to 50 percent of participants'
elective contributions, counting elective contributions up to 5 percent of
pay.
(2) These amounts are cash awards under the bonus plans described under CASH
BONUSES in the Report of the Compensation Committee on Executive
Compensation.
(3) Under the Company's Executive Deferred Compensation Plan, a participant
may elect to defer salary and/or bonus on an unsecured basis and may select
one of three performance options: S&P 500 Index, Company Common Stock or
Prime Rate Plus 2 percent. The figures shown represents earnings on amounts
deferred at the election of the named executive officer under the Prime Rate
Plus 2 percent option to the extent earnings exceeded 120 percent of the
applicable federal long-term rate and amounts reimbursed during the fiscal
year for the payment of taxes.
(4) Represents shares of Common Stock issuable upon exercise of nonstatutory
stock options granted under the Company's 1994 Stock Incentive Plan
described under STOCK OPTIONS in the Report of the Compensation Committee on
Executive Compensation.
(5) All amounts for named executive officers represent term life insurance
premiums paid by the Company.
(6) Joined the Company in May 1997.
6
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
executive officers in fiscal 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------------
NAME GRANTED(1) FISCAL YEAR SHARE DATE 5% 10%
- -------------------------------------------- ----------- ----------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
William C. McCormick........................ 29,568 7.2% $ 59.81 11/05/07 $ 1,112,215 $ 2,818,587
Peter G. Waite.............................. 12,000 2.9 59.81 11/05/07 451,386 1,143,907
Steven C. Riedel............................ 40,000 9.7 54.00 04/28/07 1,358,402 3,442,478
15,104 3.7 59.81 11/05/07 568,145 1,439,798
Mark Donegan................................ 11,000 2.7 59.81 11/05/07 413,771 1,048,582
William D. Larsson.......................... 10,000 2.4 59.81 11/05/07 376,155 953,256
</TABLE>
- ------------------------
(1) Options are granted at an exercise price equal to fair market value at the
date of grant (the closing sale price on the New York Stock Exchange on the
grant date). Options become exercisable for 25 percent of the shares one
year after the date of grant and for 25 percent of the shares each year
thereafter. Under the terms of the Company's 1994 Stock Incentive Plan, each
of the options is subject to accelerated vesting in the event of a change in
control of the Company. Each of the options is subject to early termination
in the event of termination of employment. Each option terminates 12 months
following death, disability or retirement at normal retirement age or bona
fide early retirement and six months after termination of employment for any
other reason.
(2) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or "option spreads" that would exist for
the respective options based on assumed rates of annual compound stock price
appreciation of five percent and ten percent from the date the options were
granted over the full option term and do not represent the Company's
estimate or projection of the future stock price.
7
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table indicates (i) stock options exercised by executive
officers during fiscal 1998, including the value realized on the date of
exercise, (ii) the number of shares subject to exercisable and unexercisable
stock options as of the Company's fiscal year-end, March 29, 1998, and (iii) the
value of "in-the-money" options at March 29, 1998.
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END AT FISCAL YEAR-END
ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE REALIZED(1) UNEXERCISABLE) UNEXERCISABLE)(2)
- ------------------------------------------------- ----------- ------------ --------------- ---------------------
<S> <C> <C> <C> <C>
William C. McCormick............................. 54,386 $ 2,339,511 19,172/62,319 $ 495,213/$592,793
Peter G. Waite................................... 29,670 1,286,243 17,979/26,185 531,999/265,969
Steven C. Riedel................................. -- -- --/55,104 --/140,000
Mark Donegan..................................... 8,099 268,058 8,479/25,020 214,858/236,798
William D. Larsson............................... 21,131 986,395 11,082/19,643 319,937/172,128
</TABLE>
- ------------------------
(1) Value realized equals fair market value of the stock on the date of
exercise, less the exercise price, times the number of shares acquired.
Taxes must be paid by the individual on the value realized.
(2) Value of unexercised in-the-money options equals the fair market value of
a share into which the option can be converted at March 29, 1998 (market
price $57.50), less exercise price, times the number of options outstanding.
8
<PAGE>
RETURN TO SHAREHOLDERS PERFORMANCE GRAPH
The following line graph provides a comparison of the annual percentage
change in the Company's cumulative total shareholder return on its Common Stock
to the cumulative total return of the S&P 500 Index, the S&P Aerospace Index and
the S&P Diversified Manufacturing Index. The comparison assumes that $100 was
invested on March 31, 1993, in the Company's Common Stock and in each of the
foregoing indices and, in each case, assumes the reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PRECISION CASTPARTS
FISCAL YEAR S&P 500 S&P AEROSPACE S&P DIVERSIFIED MANUFACTURING CORP.
<S> <C> <C> <C> <C>
1993 $100 $100 $100 $100
1994 $101.47 $130.44 $116.63 $147.15
1995 $117.27 $157.11 $135.91 $173.16
1996 $154.92 $243.19 $191.49 $267.01
1997 $185.63 $282.92 $241.64 $342.15
1998 $274.73 $333.48 $318.27 $398.65
</TABLE>
MEASUREMENT PERIOD
(BY FISCAL YEAR)
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
S&P 500................................................... 100 101.47 117.27 154.92 185.63 274.73
S&P Aerospace............................................. 100 130.44 157.11 243.19 282.92 333.48
S&P Diversified Manufacturing............................. 100 116.63 135.91 191.49 241.64 318.27
Precision Castparts Corp.................................. 100 147.15 173.16 267.01 342.15 398.65
</TABLE>
RETIREMENT PLANS
The Company and its subsidiaries maintain eight defined benefit pension
plans ("retirement plans") including one plan ("PCC Plan") covering the named
executive officers. All eligible domestic employees, including executive
officers and those directors who are full-time employees, receive benefits at
retirement under one of the retirement plans. The PCC Plan is based on average
monthly salary in the five consecutive years of highest compensation (exclusive
of bonuses) and length of service with the Company. Employees do not contribute
to the Plan, and the amount of the Company's annual contribution is based on an
actuarial determination. The Plan provides that a participant's accrued benefit
will become 100 percent vested upon the occurrence of a change in control of the
Company and provides for disposition to participants of any surplus assets in
the Plan upon termination of the Plan following a change in control of the
Company.
9
<PAGE>
The Company maintains a Supplemental Executive Retirement Plan (SERP) that
provides supplemental retirement benefits to the named executive officers. The
SERP provides participating employees with a supplemental retirement benefit
upon normal retirement at age 65 with 20 years of service. The supplemental
retirement benefit is designed to pay a basic monthly benefit equal to 60
percent of Final Average Pay (defined as the highest three calendar years of
compensation out of five consecutive years of covered employment, and including
all of any bonus and all of any deferred compensation) minus both the amount of
any benefit under the Retirement Plan and the Primary Social Security Benefit
(as defined in the Retirement Plan). For participants retiring with between 10
and 20 years of service at age 65, the basic benefit under the SERP formula
before offset is reduced by 1/20 for each year less than 20. There is a
provision for an actuarially reduced early retirement benefit at or after age 55
with at least 10 years of service. For participants retiring with more than 20
years of service at age 65, the benefit is (a) the basic benefit before offset,
plus (b) 0.5 percent of Final Average Pay times years of service over 20, minus
(c) both the amount of any benefit under the Retirement Plan and the Primary
Social Security Benefit. Service and pay can continue to accrue if retirement is
deferred past age 65, but there is no actuarial increase for deferred start of
benefits after age 65. The SERP provides for lump-sum payment of an accelerated
vested benefit in the event of termination of employment following a change in
control of the Company. Each of the executive officers of the Company has been
designated as a participant in the SERP.
The following table shows the estimated annual benefits payable under the
Company's Retirement Plan and SERP to named executive officers upon normal
retirement (age 65) as of March 29, 1998. The table assumes, for purposes of
calculating the SERP portion of the estimated annual benefit, that the executive
officers receive an annual bonus equal to their average targeted bonuses in each
year used in computing the three-year average salary at retirement. The target
bonuses of the named executive officers range between 90 percent and 100 percent
of base salary. Individual variations in bonus awards will result in adjustments
to the SERP component of the estimated annual benefit. The amounts listed are
net of an actuarially determined offset for estimated Social Security benefits.
<TABLE>
<CAPTION>
HIGHEST THREE-YEAR BENEFIT YEARS AT RETIREMENT
AVERAGE BASE SALARY AT ----------------------------------------------------------------------
RETIREMENT 10 15 20 25 30 35
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$225,000................................ $ 112,146 $ 176,271 $ 240,396 $ 251,084 $ 261,771 $ 272,459
300,000................................ 154,896 240,396 325,896 340,146 354,396 368,646
375,000................................ 197,646 304,521 411,396 429,209 447,021 464,834
450,000................................ 240,396 368,646 496,896 518,271 539,646 561,021
525,000................................ 283,146 432,771 582,396 607,334 632,271 657,209
600,000................................ 325,896 496,896 667,896 696,396 724,896 753,396
675,000................................ 368,646 561,021 753,396 785,459 817,521 849,584
</TABLE>
Retirement benefits are computed on an actuarial basis. The following table
shows the number of credited years of service and the calendar 1998 base
salaries, for purposes of the benefit table above, for the five officers named
in the Summary Compensation Table.
<TABLE>
<CAPTION>
CREDITED YEARS OF CALENDAR YEAR
NAME OF INDIVIDUAL SERVICE 1998 SALARY
- --------------------------------------------------------------- ------------------- -------------
<S> <C> <C>
William C. McCormick........................................... 13 $ 650,000
Peter G. Waite................................................. 17 324,000
Steven C. Riedel............................................... 1 375,000
Mark Donegan................................................... 12 300,000
William D. Larsson............................................. 18 260,000
</TABLE>
10
<PAGE>
SEVERANCE AGREEMENTS AND EMPLOYMENT AGREEMENTS
The Company's senior executives are parties to severance agreements with the
Company. The agreements generally provide for the payment upon termination of
the executive's employment by the Company without cause or by the employee for
"good reason" (as defined in the severance agreement) within two years following
a change in control of the Company of an amount equal to three times that
employee's annual salary and bonus (on an after excise-tax basis), a lump-sum
pension payment based upon three additional years of service and three years of
continued coverage under life, accident and health plans. Each executive is
obligated under the severance agreement to remain in the employ of the Company
for a period of 270 days following a "potential change in control" (as defined
in the severance agreement). Messrs. McCormick, Waite, Donegan, Riedel and
Larsson have each entered into a severance agreement.
Mr. Riedel has an employment contract with the Company. The terms of Mr.
Riedel's employment include the following, in addition to receipt of the
Company's standard employee benefits: Mr. Riedel will receive a base salary of
$375,000 per year, a signing bonus payable in the amounts of $500,000, $400,000
and $300,000 on the first, second and third anniversary of the commencement of
employment, respectively, and reimbursement for the cost of relocation to
Portland, Oregon. Upon commencement of employment he was granted an option to
purchase 40,000 shares of common stock of the Company at an exercise price equal
to the fair market value at the date of grant. Mr. Riedel is also entitled to
participate in the Company's Executive Performance Compensation Plan and
Executive Deferred Compensation Plan, will be eligible for future increases in
base compensation based on merit, and is eligible to receive additional option
grants at the discretion of the Board of Directors or the Committee. Mr.
Riedel's terms of employment provide that if he voluntarily resigns or is
terminated for cause by the Company during his first three years of employment,
any unpaid portion of the signing bonus will be forfeited. If his employment is
terminated for other reasons during the first two years, he will be entitled to
receive an amount equal to the first two years signing bonus plus six months of
base salary.
PROPOSAL 2: APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2
On May 6, 1998, Price Waterhouse LLP was appointed to act as auditors of the
Company's financial statements for the fiscal year ending March 28, 1999. The
Board of Directors is submitting this appointment for ratification by the
shareholders. Representatives of Price Waterhouse will be at the meeting, will
be able to make a statement if they wish and will be available to answer your
questions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The Company's outstanding voting securities at the close of business on June
5, 1998, consisted of 24,344,961 shares of common stock, without par value
("Common Stock"), each of which is entitled to one vote on all matters to be
presented at the meeting. Only shareholders of record at the close of business
on June 5, 1998, are entitled to notice of and to vote at the meeting or any
adjournment thereof. The Common Stock does not have cumulative voting rights.
11
<PAGE>
The following table shows information about each person known to the Company
to be the beneficial owner of more than five percent of the Company's
outstanding Common Stock on May 1, 1998, based on information contained in a
Form 13G filed by the shareholder.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OUTSTANDING SHARES
- ------------------------------------------------------------------------------ ------------- ---------------------
<S> <C> <C>
Wellington Management Company................................................. 1,904,550 7.9
75 State Street
Boston, MA 02109
INVESCO P.C. ................................................................. 1,547,900 6.4
111 Devonshire Square
London EC 2M 4YR
State Farm Mutual Automobile Insurance Company................................ 1,531,100 6.4
One State Farm Plaza
Bloomington, IL 61710
</TABLE>
BOARD COMPENSATION, ATTENDANCE AND COMMITTEES
In fiscal 1998, the Company's Board of Directors met in person four times
and via telephone conference call four times. The Company's directors, other
than full-time employees, are paid an annual retainer of $24,000, plus $1,500
for each Board meeting attended, $1,000 for each telephonic board meeting
attended and $1,000 for each committee meeting attended. Nonemployee directors
are also eligible to receive a per diem of up to $1,000 in the event the
director is requested to perform additional service beyond that normally
expected of directors. Each director attended at least 75 percent of the
aggregate number of meetings of the Board of Directors and the committees of
which he was a member.
Any director who is not an employee of the Company and has not, within two
years, been an employee of the Company ("Nonemployee Director") is eligible to
receive options under the 1987 Non-Employee Directors' Stock Option Plan
(Directors' Plan). The option price for all options granted under the Directors'
Plan will be the fair market value of the Common Stock on the date the option is
granted. On the date of each annual meeting of shareholders, each new
Nonemployee Director will automatically be granted an option to purchase 1,000
shares of Common Stock at the time of his or her initial election to the Board.
Each Nonemployee Director who is re-elected at such meeting or who continues in
office, serving a term for which such director was previously elected, will also
automatically be granted an option to purchase 1,000 shares of Common Stock. On
the date of the 1997 Annual Meeting of Shareholders, Messrs. DuCray,
Bridenbaugh, Graber, Oechsle and Rothmeier each were automatically granted an
option for 1,000 shares of Common Stock at an exercise price of $63.375 per
share under the Directors' Plan. All options have a 10-year term from the date
of grant. Each option becomes exercisable for 25 percent of the number of shares
covered by the option at the end of each of the first four years of the option
term. Options may be exercised only while the optionee is a director of the
Company, within one month after the date the optionee terminates service as a
director or within one year after the optionee's death, disability or retirement
under the Company's policy requiring retirement of directors. Options become
fully exercisable upon normal retirement or in the event a director resigns or
is removed within 12 months of a change in control of the Company.
The Board of Directors has five standing committees. The Compensation
Committee makes recommendations to the Board of Directors concerning
compensation of corporate officers and the granting of stock options. See
"Report of the Compensation Committee on Executive Compensation," above. Its
members are Messrs. Rothmeier, Graber and Oechsle. The Nominating Committee
makes recommendations to the Board of Directors concerning nominees to the Board
of Directors. Its members are Messrs. McCormick, Rothmeier and Bridenbaugh. The
Executive Committee has authority to exercise the power of the Board of
Directors, with certain exceptions, between meetings of the Board of Directors.
Its members are Messrs. Bridenbaugh, Graber, McCormick and Rothmeier. The Audit
Committee meets with
12
<PAGE>
management, internal auditors and the Company's independent public accountants,
who have access to the Audit Committee with and without the presence of
management representatives. The Audit Committee is composed of Messrs. DuCray,
Graber and Oechsle. The Environmental Committee meets with the Company's
environmental managers to monitor and advise on environmental matters concerning
the Company. The Environmental Committee is composed of Messrs. Marvin and
Riedel. The Compensation Committee met four times separate from Board meetings,
the Audit Committee met two times and the Environmental Committee met four times
in fiscal 1998. The Nominating Committee and the Executive Committee did not
hold meetings separate from Board meetings in fiscal 1998. Shareholders who wish
to submit names to the Nominating Committee for consideration should do so in
writing between May 21, 1999, and June 15, 1999, addressed to the Nominating
Committee, c/o Corporate Secretary, Precision Castparts Corp., 4650 SW Macadam,
Suite 440, Portland, Oregon 97201, setting forth (a) as to each nominee whom the
shareholder proposes to nominate for election or reelection as a director, (i)
the name, age, business address and residence address of the nominee, (ii) the
principal occupation or employment of the nominee, (iii) the class and number of
shares of capital stock of the Company beneficially owned by the nominee and
(iv) any other information concerning the nominee that would be required, under
the rules of the Securities and Exchange Commission, in a proxy statement
soliciting proxies for the election of such nominee; and (b) as to the
shareholder giving the notice, (i) the name and record address of the
shareholder and (ii) the class and number of shares of capital stock of the
Company beneficially owned by the shareholder.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, as well as persons who own more than 10
percent of the Company's Common Stock, to file initial reports of ownership and
reports of changes in ownership of Common Stock of the Company with the
Securities and Exchange Commission. To the Company's knowledge, based solely on
reports and other information submitted by executive officers and directors, the
Company believes that during the year ended March 29, 1998, each of its
executive officers, directors and persons who own more than 10 percent of the
Company's Common Stock complied with all applicable Section 16(a) filing
requirements, except that Mr. McCormick failed to make a timely filing with
respect to two charitable gifts totaling 146 shares.
ANNUAL REPORT
We have included a copy of the Company's 1998 Annual Report with this
statement.
METHOD AND COST OF SOLICITATION
The Company will pay the cost of soliciting proxies. In addition to
soliciting proxies by mail, the Company's employees may request the return of
proxies in person or by telephone. We have hired Morrow & Co., Inc. to help with
annual meeting procedures and to solicit proxies for a fee of $5,500. Brokers
and persons holding shares for the benefit of others may incur expenses in
forwarding proxies and accompanying materials and in obtaining permission from
beneficial owners of stock to execute proxies. On request, we will reimburse
those expenses.
OTHER BUSINESS/DISCRETIONARY AUTHORITY
We do not intend to present any business for action at the meeting other
than the business discussed above. We do not know of any matters that others may
present. If any other matter is properly presented at the meeting, your
submission of a valid proxy means that you intend to vote in accordance with our
recommendations.
13
<PAGE>
SHAREHOLDER PROPOSALS
If you have a proposal that you wish to be considered for inclusion in next
year's proxy material, we must receive your proposal at our principal office by
February 26, 1999. Our mailing address is 4650 SW Macadam, Suite 440, Portland,
Oregon 97201.
Whether you plan to attend the meeting or not, please sign the enclosed
proxy form and return it to us in the enclosed stamped, return envelope.
Ruth A. Beyer
SECRETARY
Portland, Oregon
June 26, 1998
14
<PAGE>
PROXY
The undersigned, revoking all prior proxies, hereby appoints W. C. McCormick
and W. D. Larsson, and each of them, as proxies, with full power of
substitution, to vote on behalf of the undersigned at the Annual Meeting of
Shareholders of Precision Castparts Corp. (the "Company") to be held on
Wednesday, August 5, 1998, or at any adjournment thereof, all shares of the
undersigned in the Company. The proxies are instructed to vote as follows:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below (except as marked to contrary below).
/ / WITHHOLD AUTHORITY
to vote for all nominees listed below.
Nominees: Peter R. Bridenbaugh, Steven G. Rothmeier (3-year terms)
(To withhold your vote for any individual nominee, strike a line through
the nominee's name in the list above.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS
FOR / / AGAINST / / ABSTAIN / /
The shares represented by this proxy will be voted in accordance with the
instructions given.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS. The
Board of Directors recommends a vote FOR each of the nominees and FOR the
Proposal.
UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE SHARES WILL BE VOTED FOR THE
NOMINEES, FOR THE PROPOSAL AND ON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT.
Please sign exactly as your name appears on this card. Persons signing as
executor, administrator, trustee, custodian or in any other official or
representative capacity should sign their full title.
Receipt is acknowledged of the notice and proxy statement relating to this
meeting.
/ / Please check here if you plan to attend the meeting in person.
<TABLE>
<S> <C>
Date , 1998 Signature(s)
</TABLE>
Please mark, date, sign and return the proxy promptly.
