<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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 4, 1999
------------------------
You are invited to attend the Annual Meeting of Shareholders of Precision
Castparts Corp. The meeting will be held on Wednesday, August 4, 1999, at 9:00
a.m. Pacific Time, in the Fifth Avenue Suites Hotel, 506 SW Washington Street,
Portland, Oregon. The Company will conduct the following business:
1. Electing three directors to serve for three year terms and one director
to serve a two year term;
2. Amending the 1994 Stock Incentive Plan to increase the number of shares
reserved for issuance under the plan by 1,000,000 shares;
3. Ratifying the appointment of PricewaterhouseCoopers LLP as the Company's
auditors for fiscal year 2000; and
4. Conducting any other business that is properly raised before the
meeting.
Only shareholders of record at the close of business on June 4, 1999, will
be able to vote at the meeting.
Your vote is important. 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 28, 1999
<PAGE>
PRECISION CASTPARTS CORP.
4650 SW MACADAM, SUITE 440
PORTLAND, OREGON 97201
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
------------------------
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 1999 Annual Meeting of Shareholders, which will be held on
Wednesday, August 4, 1999, at 9:00 a.m. Pacific Time, in the Fifth Avenue Suites
Hotel, 506 SW Washington Street, Portland, Oregon. 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 28, 1999.
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; (c) for the approval of the proposal described on page 16;
and (d) 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, date and return 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 at the address listed above 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 seven directors. The Board of
Directors will increase in size to eight directors this year. 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.
DuCray, Mr. Graber and Mr. Marvin expire. Mr. Marvin has decided not to stand
for reelection. Mr. DuCray and Mr. Graber are both nominees for reelection. In
addition, Mr. Pond and Mr. Travis are nominated to serve on the Board of
Directors as new members. If elected, the terms of Mr. DuCray, Mr. Graber and
Mr. Pond will expire in 2002. Pursuant to the requirement in the Company's
Bylaws that the directors be apportioned among the three classes as nearly
equally as possible, Mr. Travis's term will expire after two years in 2001. If
any 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
Dean T. DuCray -- 58 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. Mr. DuCray is also a director of Airxcel, Inc.
Don R. Graber -- 55 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.
Byron O. Pond, Jr. -- 62 -- --
Retired; until May 1998, Chief Executive Officer of Arvin Industries, Inc., a manufacturer
and supplier of automotive parts. Mr. Pond also serves as the Chairman Emeritus of Arvin
Industries, Inc. and as a director of Cooper Tire and Rubber Company and Intermet
Corporation.
J. Frank Travis -- 63 -- --
Managing General Partner of Sivart Holdings, a limited partnership engaged in investment and
investment management; from 1996-1999, Chief Operating Officer of Ingersoll-Rand, a
diversified manufacturing company; from December 1993-1996, Executive Vice-President of
Ingersoll-Rand; previously Vice-President of Ingersoll Rand and President and Chief Executive
Officer of the Torrington Company, an Ingersoll-Rand subsidiary.
DIRECTORS WHOSE TERMS CONTINUE
William C. McCormick -- 65 1986 2000
Chairman and Chief Executive Officer of the Company. Mr. McCormick is also a director of
Merix Corporation.
Vernon E. Oechsle -- 56 1996 2000
Chairman 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.
Peter R. Bridenbaugh -- 58 1995 2001
Sole proprietor of P. Bridenbaugh, Inc., a provider of consulting services; until retiring in
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 to 1996, Executive Vice
President and Chief Technical Officer, Aluminum Co. of America.
Steven G. Rothmeier -- 52 1994 2001
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.
</TABLE>
VOTE REQUIRED
If a quorum of shareholders is present at the meeting, the four nominees for
director who receive the greatest number of votes cast at the meeting will be
elected directors. We will treat abstentions and broker nonvotes as 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, 1999, by the Chief Executive Officer, by each of the other
four most highly compensated executive officers, by the directors and nominees,
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......................................... 3,000(1) *
Gregory M. Delaney........................................... 2,500(2) *
Mark Donegan................................................. 52,948(3) *
Dean T. DuCray............................................... 2,650(4) *
Don R. Graber................................................ 9,000(5) *
William D. Larsson........................................... 21,561(6) *
Roy M. Marvin................................................ 5,445(7) *
William C. McCormick......................................... 97,916(8) *
Vernon E. Oechsle............................................ 1,250(9) *
Byron O. Pond, Jr............................................ 0 *
Steven G. Rothmeier.......................................... 5,500(10) *
J. Frank Travis.............................................. 0 *
Peter G. Waite............................................... 44,187(11) *
All directors and executive officers as a group (11
persons)................................................... 223,253(12) *
</TABLE>
- ------------------------
* Less than 1 percent of the Company's outstanding shares of Common Stock.
( 1) Includes 1,500 shares subject to options that are exercisable or become
exercisable by Mr. Bridenbaugh within 60 days after May 1, 1999.
( 2) Includes 2,500 shares subject to options that are exercisable or become
exercisable by Mr. Delaney within 60 days after May 1, 1999.
( 3) Includes 9,298 shares subject to options that are exercisable or become
exercisable by Mr. Donegan within 60 days after May 1, 1999.
( 4) Includes 400 shares held in trust for children of Mr. DuCray. Includes 750
shares subject to options that are exercisable or become exercisable by Mr.
DuCray within 60 days after May 1, 1999.
( 5) Includes 1,500 shares subject to options that are exercisable or become
exercisable by Mr. Graber within 60 days after May 1, 1999, and 500 shares
held by Mrs. Graber.
( 6) Includes 18,302 shares subject to options that are exercisable or become
exercisable by Mr. Larsson within 60 days after May 1, 1999.
( 7) All shares held jointly with Mrs. Marvin.
( 8) Includes 46,236 shares subject to options that are exercisable or become
exercisable by Mr. McCormick within 60 days after May 1, 1999.
( 9) Includes 250 shares subject to options that are exercisable or become
exercisable by Mr. Oechsle within 60 days after May 1, 1999.
(10) Includes 3,000 shares subject to options that are exercisable or become
exercisable by Mr. Rothmeier within 60 days after May 1, 1999.
(11) Includes 3,750 shares owned by children of Mr. Waite, and 11,000 shares
owned by Mrs. Waite. Includes 28,223 shares subject to options that are
exercisable or become exercisable by Mr. Waite within 60 days after May 1,
1999.
(12) Includes 126,575 shares subject to options that are exercisable or become
exercisable within 60 days after May 1, 1999.
3
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "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 1999, the Company did not engage the services of an independent
compensation consultant as it had done in fiscal 1998. Because the Company's
relative size, complexity, organizational structure and other business
characteristics are consistent with its status in fiscal 1998, the Committee
reviewed the report and recommendations of the independent consultant retained
in fiscal 1998 and adjusted for cost of living changes in the intervening year
and other objective data gathered by the Company.
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 1999 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 identified in the consultant's report 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 1999
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 1999, the Company's executive incentive
bonuses were determined pursuant to the Company's Executive Performance
Compensation 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
4
<PAGE>
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 1999.
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 1999, the Compensation Committee adopted the performance criteria set
forth in four separate cash bonus plans which are applicable to the 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), the PCC Airfoils Executive Bonus Program
(applicable to Mr. Waite) and the PCC Specialty Products Executive Bonus Program
(applicable to Mr. Delaney). In approving final bonuses for executive officers
for fiscal 1999, the Compensation Committee considered the degree to which each
executive officer, except for Mr. Delaney, 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. Mr.
Delaney was guaranteed his target bonus under the terms of his employment
agreement.
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 stock incentive plans, 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. 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 1999, 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, adjusted as described above, 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
1999 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 1999 and the exercise of the
Committee's discretionary powers. The annual stock option grant to Mr. McCormick
in fiscal 1999 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, the other four most highly compensated executive officers and a
departed executive officer 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 ..................... 1999 $ 668,750 $ 580,000 $ 152,740 117,359 $ 3,240
Chairman and Chief Executive Officer 1998 567,500 787,800 19,254 29,568 3,954
1997 491,265 573,306 815 30,243 7,345
Peter G. Waite ........................... 1999 340,750 589,158 26,786 7,969 3,513
Executive Vice President and 1998 324,000 609,444 16,716 12,000 3,090
President -- PCC Airfoils, Inc. 1997 308,750 563,161 6,425 10,000 3,157
Mark Donegan ............................. 1999 307,500 442,759 0 26,458 1,270
Executive Vice President and 1998 285,010 392,528 41,087 11,000 2,041
President -- PCC Structurals, Inc. 1997 257,509 242,143 0 12,000 848
William D. Larsson ....................... 1999 266,250 205,200 7,104 23,389 2,010
Vice President and Chief Financial 1998 233,750 283,660 19,115 10,000 2,014
Officer 1997 206,256 244,569 516 7,500 1,878
Gregory M. Delaney(6) .................... 1999 202,500 172,125 100,000 13,120 4,612
Executive Vice President and 1998 41,026 34,872 0 10,000 0
President -- PCC Specialty Products,
Inc.
Steven C. Riedel(7) ...................... 1999 281,250 0 500,000 0 594,902
Senior Vice President and 1998 348,078 421,869 30,130 55,104 570
President -- Industrial Products
Operations
</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 as described under STOCK OPTIONS in the Report of the
Compensation Committee on Executive Compensation.
6
<PAGE>
(5) Amounts for named executive officers represent term life insurance
premiums paid by the Company, and with respect to Mr. Riedel, includes
amounts paid pursuant to a severance arrangement.
(6) Joined the Company in January 1998. The amount included under Other Annual
Compensation represents a payment required under the compensation
arrangement with Mr. Delaney in connection with his joining the Company.
(7) Left the Company in December 1998. Joined the Company in May 1997. Other
Annual Compensation includes $500,000 payable under the terms of Mr.
Riedel's employment agreement.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options granted to
the named executive officers in fiscal 1999.
<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........................ 117,359 21.9 $ 46.25 11/04/08 $ 3,413,973 $ 8,650,532
Peter G. Waite.............................. 7,969 1.5 46.25 11/04/08 231,818 587,395
Mark Donegan................................ 26,458 4.9 46.25 11/04/08 769,663 1,950,219
William D. Larsson.......................... 23,389 4.4 46.25 11/04/08 680,386 1,724,003
Gregory M. Delaney.......................... 13,120 2.4 46.25 11/04/08 381,661 967,075
Steven C. Riedel(3)......................... 0 0 N/A N/A N/A N/A
</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. 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.
(3) Left the Company in December 1998. All of Mr. Riedel's options will
terminate on June 30, 1999.
7
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table indicates (i) stock options exercised by named executive
officers during fiscal 1999, 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 28, 1999, and (iii) the
value of "in-the-money" options at March 28, 1999.
<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.............................. 0 $ 0 41,236/157,614 $238,518/$8,319
Peter G. Waite.................................... 0 0 28,223/23,910 255,861/5,459
Mark Donegan...................................... 8,479 245,778 9,298/42,180 36,188/4,140
William D. Larsson................................ 0 0 18,302/35,812 151,573/3,299
Gregory M. Delaney................................ 0 0 2,500/20,620 0/0
Steven C. Riedel.................................. 0 0 13,776/0(3) 0/0
</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 28, 1999 (market
price $38.3125), less exercise price, times the number of options
outstanding.
(3) Left the Company in December 1998. All unexercisable options were
terminated when Mr. Riedel left the Company.
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 April 3, 1994, 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>
1994 $100 $100 $100 $100
1995 $115.57 $124.62 $116.63 $117.68
1996 $152.67 $192.19 $135.91 $181.45
1997 $182.92 $219.74 $191.49 $232.52
1998 $270.74 $263.80 $241.64 $270.91
1999 $320.72 $188.09 $318.27 $185.23
</TABLE>
MEASUREMENT PERIOD
(BY FISCAL YEAR)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
----- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
S&P 500................................................... 100 115.57 152.67 182.92 270.74 320.72
S&P Aerospace............................................. 100 124.62 192.19 219.74 263.80 188.09
S&P Diversified Manufacturing............................. 100 116.63 135.91 191.49 241.64 318.27
Precision Castparts Corp.................................. 100 117.68 181.45 232.52 270.91 185.23
</TABLE>
RETIREMENT PLANS
The Company and its subsidiaries maintain eight defined benefit pension
plans (the "retirement plans") including two plans 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 retirement plan that covers named
officers other than Mr. Delaney (the "Plan") and the retirement plan that covers
Mr. Delaney (the "SPD Plan") are 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
9
<PAGE>
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.
The Company maintains a Supplemental Executive Retirement Plan (the "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 Plan and the Primary Social Security Benefit (as defined
in the 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 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 named 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 28, 1999. 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 85 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 EARNING FOR ----------------------------------------------------------------------
RETIREMENT BENEFITS 10 15 20 25 30 35
- ---------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 250,000............................... $ 59,000 $ 96,000 $ 134,000 $ 140,000 $ 146,000 $ 152,000
400,000............................... 104,000 164,000 224,000 234,000 244,000 254,000
550,000............................... 149,000 231,000 314,000 327,000 341,000 355,000
700,000............................... 194,000 299,000 404,000 421,000 439,000 456,000
850,000............................... 239,000 366,000 494,000 515,000 536,000 557,000
1,000,000.............................. 284,000 434,000 584,000 609,000 634,000 659,000
1,150,000.............................. 329,000 501,000 674,000 702,000 731,000 760,000
1,300,000.............................. 374,000 569,000 764,000 796,000 829,000 861,000
1,450,000.............................. 419,000 636,000 854,000 890,000 926,000 962,000
</TABLE>
10
<PAGE>
Retirement benefits are computed on an actuarial basis. The following table
shows the number of credited years of service, for purposes of the benefit table
above, for the officers named in the Summary Compensation Table. The
compensation covered by the retirement plans is substantially equivalent to the
sum of the salary and bonus amounts contained in the Summary Compensation Table.
<TABLE>
<CAPTION>
CREDITED YEARS OF
NAME OF INDIVIDUAL SERVICE
- ------------------------------------------------------------------------------- -----------------
<S> <C>
William C. McCormick........................................................... 14
Peter G. Waite................................................................. 18
Mark Donegan................................................................... 13
William D. Larsson............................................................. 19
Gregory M. Delaney............................................................. 1
Steven C. Riedel(1)............................................................ N/A
</TABLE>
- ------------------------
(1) Left the Company in December 1998. Mr. Riedel did not have a sufficient
number of years of service with the Company to qualify for retirement
benefits.
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, Larsson and
Delaney have each entered into a severance agreement.
Mr. Delaney entered into a compensation agreement with the Company in
connection with his joining the Company in January 1998. The agreement provides
for lump sum cash payments of $100,000 on each of the first three anniversary
dates of Mr. Delaney's employment. In the event of Mr. Delaney's voluntary
resignation or termination for "cause" (as defined in the compensation
agreement) during his first three years of employment, the remaining payments
will be cancelled.
PROPOSAL 2: AMENDMENT TO THE 1994 STOCK INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2
The Board of Directors of the Company believes that the availability of
stock options and other stock incentives is an important factor in the Company's
ability to attract and retain qualified employees and to provide an incentive
for them to exert their best efforts on behalf of the Company. In 1994, the
Company adopted the 1994 Stock Incentive Plan (the "Plan"), reserving 1,032,078
shares of Common Stock for issuance, plus any shares that were subject to
options granted under the Company's 1984 Stock Incentive Plan (the "1984 Plan")
which were outstanding on May 16, 1994 and which options expired, terminated, or
were cancelled under such plan after May 16, 1994. 516,039 shares were added to
the shares available for grant as a result of the 3-for-2 stock split effective
August 1994. As of May 1, 1999, 116,212 shares of stock had been issued under
the Plan pursuant to the exercise of options, 1,263,785 shares were subject to
outstanding options and 168,120 shares were available for future grants. In
order to continue to attract and retain key employees, in May 1999 the Board of
Directors approved an amendment to the Plan, subject to shareholder approval, to
reserve an additional 1,000,000 shares for issuance under the Plan. In February
1999, the Board of Directors adopted a stock option plan under which it can
grant non-statutory stock options to employees who are not officers or directors
of the Company that it believes have made or will make an important contribution
to the Company or one of its subsidiaries. The additional shares approved
11
<PAGE>
in May 1999 will be available for grant to all qualified employees, including
persons who are officers or directors of the Company.
Approval of the foregoing amendment will also constitute reapproval of
per-employee limits on the grant of stock and dollar awards under Section 162(m)
of the Internal Revenue Code of 1986 (the "Code"). Shareholder approval of
per-employee limits is required every five years for continued compliance with
regulations under Section 162(m) in order to permit the grant of stock and
dollar awards that will qualify as "performance-based compensation." See TAX
CONSEQUENCES.
Certain provisions of the Plan are summarized below. The complete text of
the Plan, as proposed to be amended, is attached to this proxy statement as
Appendix A.
DESCRIPTION OF THE 1994 STOCK INCENTIVE PLAN
ELIGIBILITY. Salaried key employees of the Company or any subsidiary of the
Company, including employees who are officers or directors, who have substantial
responsibility in the direction and management of the Company or any of its
subsidiaries or divisions are eligible to participate in the Plan.
ADMINISTRATION. The Plan is administered by the Board of Directors which
determines and designates from time to time the individuals to whom awards are
made under the Plan, the amount of any such award and the price and other terms
and conditions of any such award. The Board of Directors may delegate to a
committee of the Board of Directors or specified officers of the Company, or
both (the "Committee") any or all authority for administration of the Plan. If
authority is delegated to a Committee, all references to the Board of Directors
shall mean and relate to the Committee except (i) as otherwise provided by the
Board of Directors, (ii) that only the Board of Directors may amend or terminate
the Plan and (iii) that a Committee including officers of the Company shall not
be permitted to grant options to persons who are officers of the Company.
Subject to the provisions of the Plan, the Board of Directors may adopt and
amend rules and regulations relating to the administration of the Plan, advance
the lapse of any waiting period, accelerate any exercise date, waive or modify
any restriction applicable to shares (except those restrictions imposed by law)
and make all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan.
SHARES AVAILABLE. The Plan permits the grants of incentive stock options,
non-statutory stock options, stock appreciation rights, cash bonus rights,
foreign qualified awards, restricted stock and stock bonus awards. If an option
or stock appreciation right granted under the Plan expires, terminates or is
canceled, or if shares sold or awarded as a bonus are forfeited to the Company
or repurchased by the Company, the shares shall again become available for
issuance under the Plan.
TERM OF PLAN. The Plan will continue until all shares available for
issuance under the plan have been issued and all restrictions on such shares
have lapsed. The Board of Directors may suspend or terminate the Plan at any
time except with respect to options and shares subject to restrictions then
outstanding under the Plan. Termination shall not affect any outstanding
options, any right of the Company to repurchase shares or the forfeitability of
shares issued under the Plan.
STOCK OPTIONS. The Board of Directors determines the persons to whom
options are granted, the option price, the number of shares subject to each
option, the period of each option and the time or times at which the options may
be exercised and whether the option is an Incentive Stock Option ("ISO"), as
defined in Section 422 of the Code, or an option other than an ISO (a
"Non-Statutory Stock Option" or "NSO"). If the option is an NSO, the option
price may be any price determined by the Board of Directors. If the option is an
ISO, the option price cannot be less than the fair market value of the Common
Stock on the date of grant. If an optionee of an ISO at the time of grant owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Company, the option price may not be less than 110% of the fair
market value of the Common Stock on the date of grant. The fair market value of
such shares shall be deemed to be the closing price of the Common Stock as
reported in THE WALL STREET JOURNAL on the day preceding the date the option is
granted, or if there has been no sale on that date, on the last preceding date
on which a sale occurred, or such other value of the Common Stock as shall be
12
<PAGE>
specified by the Board of Directors. No ISO may be granted on or after the tenth
anniversary of the date that the Plan was adopted by the Board of Directors. No
individual may be granted options or stock appreciation rights under the 1994
Stock Incentive Plan for more than an aggregate of 100,000 shares of Common
Stock in any calendar year. The aggregate fair market value, on the date of the
grant, of the stock for which ISOs are exercisable for the first time by an
employee during any calendar year may not exceed $100,000. No monetary
consideration is paid to the Company upon the granting of options.
Options granted under the Plan generally continue in effect for the period
fixed by the Board of Directors, except that ISOs are not exercisable after the
expiration of 10 years from the date of grant or five years in the case of 10%
shareholders. Options are exercisable in accordance with the terms of an option
agreement entered into at the time of grant and, except as otherwise determined
by the Board of Directors with respect to an NSO granted to a person who is
neither an officer or a director of the Company, are nontransferable except on
death of a holder or pursuant to a qualified domestic relations order. Options
may be exercised only while an optionee is employed by or in the service of the
Company or a subsidiary or within 12 months following termination of employment
by reason of death or disability or 90 days following termination for any other
reason. The Plan provides that the Board of Directors may extend the exercise
period for any period up to the expiration date of the option and may increase
the number of shares for which the option may be exercised up to the total
number underlying the option. The purchase price for each share purchased
pursuant to exercise of options must be paid in cash, including cash which may
be the proceeds of a loan from the Company, or, with the consent of the Board of
Directors, in whole or in part, in shares of Common Stock valued at fair market
value, in restricted stock, in performance units or other contingent awards
denominated in either stock or cash, in deferred compensation credits, in
promissory notes, or in other forms of consideration. Upon the exercise of an
option, the number of shares subject to the option and the number of shares
available under the Plan for future option grants are reduced by the number of
shares with respect to which the option is exercised, less any shares
surrendered in payment or withheld to satisfy withholding obligations.
STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SARs") may be
granted under the Plan. SARs may, but need not, be granted in connection with an
option grant or an outstanding option previously granted under the Plan. A SAR
gives the holder the right to payment from the Company of an amount equal in
value to the excess of fair market value on the date of exercise of a share of
Common Stock of the Company over its fair market value on the trading day
preceding the date of grant, or if granted in connection with an option, the
option price per share under the option to which the SAR relates.
A SAR is exercisable only at the time or times established by the Board of
Directors. If a SAR is granted in connection with an option it is exercisable
only to the extent and on the same conditions that the related option is
exercisable. Payment by the Company upon exercise of a SAR may be made in Common
Stock of the Company valued at its fair market value, in cash, or partly in
stock and partly in cash, as determined by the Board of Directors. The Board of
Directors may withdraw any SAR granted under the Plan at any time and may impose
any condition upon the exercise of a SAR or adopt rules and regulations from
time to time affecting the rights of holders of SARs.
The existence of SARs, as well as certain bonus rights described below,
would require charges to income over the life of the right based upon the amount
of appreciation, if any, in the market value of the Common Stock of the Company
over the exercise price of shares subject to exercisable SARs or bonus rights.
No SARs have been granted under the Plan.
STOCK BONUS AWARDS. The Board of Directors may award Common Stock of the
Company as a stock bonus under the Plan. The Board of Directors may determine
the recipients of the awards, the number of shares to be awarded and the time of
the award. Stock received as a stock bonus is subject to the terms, conditions
and restrictions determined by the Board of Directors at the time the stock is
awarded.
RESTRICTED STOCK. The Plan provides that the Company may issue restricted
stock in such amounts, for such consideration, subject to such restrictions and
on such terms as the Board of Directors may determine.
13
<PAGE>
CASH BONUS RIGHTS. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii) SARs
granted or previously granted, (iii) stock bonuses awarded or previously awarded
and (iv) shares sold or previously sold under the Plan. Bonus rights granted in
connection with options entitle the optionee to a cash bonus if and when the
related option is exercised or terminates in connection with the exercise of a
SAR related to the option. If the shares are purchased on the exercise of an
option and the optionee does not exercise a related SAR, the amount of the bonus
shall be determined by multiplying the excess of the total fair market value for
the shares to be acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. If an optionee exercises a related
SAR in connection with the termination of an option, the amount of the bonus
shall be determined by multiplying the total fair market value of the shares and
cash received pursuant to the exercise of the SAR by the applicable bonus
percentage. The bonus percentage applicable to any bonus right is determined by
the Board of Directors. Bonus rights granted in connection with stock bonuses
entitle the recipient to a cash bonus, in an amount determined by the Board of
Directors, at the time the stock is awarded or at such time as any restrictions
to which the stock is subject lapse. Bonus rights granted in connection with
restricted stock purchases entitle the recipient to a cash bonus in an amount
determined by the Board of Directors, payable when the shares are purchased or
restrictions, if any, to which the stock is subject lapse. Bonus rights granted
in connection with restricted stock purchased or stock bonuses terminate in the
event that restricted stock is repurchased by the Company or forfeited by the
holder pursuant to the restrictions. No bonus rights have been granted under the
Plan.
FOREIGN QUALIFIED GRANTS. Awards under the Plan may be granted to eligible
persons residing in foreign jurisdictions. The Board of Directors may adopt such
supplements to the Plan as may be necessary to comply with the applicable laws
of such foreign jurisdictions and to afford participants favorable treatment
under such laws except that no award shall be granted under any such supplement
with terms which are more beneficial to the participants than the terms
permitted by the Plan.
CHANGES IN CAPITAL STRUCTURE. The Plan provides that if the outstanding
Common Stock of the Company is increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any recapitalization, stock split
or certain other transactions, appropriate adjustment will be made by the Board
of Directors in the number and kind of shares available for awards under the
Plan. In addition, the Board of Directors will make appropriate adjustments in
outstanding options and SARs. In the event of dissolution of the Company or a
merger, consolidation or plan of exchange affecting the Company, in lieu of the
foregoing treatment for options and SARs, the Board of Directors may, in its
sole discretion, provide a 30-day period prior to such event during which
optionees shall have the right to exercise options and SARs in whole or in part
without any limitation on exercisability and upon the expiration of which 30-day
period all unexercised options and SARs shall immediately terminate.
AMENDMENTS. The Board of Directors may at any time amend the Plan in such
respects as it shall deem advisable because of changes in the law while the Plan
is in effect or for any other reason.
TAX CONSEQUENCES. Certain options authorized to be granted under the Plan
are intended to qualify as ISOs for federal income tax purposes. Under federal
income tax law currently in effect, the optionee will recognize no income upon
grant or upon a proper exercise of the ISO. If an employee exercises an ISO and
does not dispose of any of the option shares within two years following the date
of grant and within one year following the date of exercise, then any gain
realized upon subsequent disposition of the shares will be treated as income
from the sale or exchange of a capital asset. If an employee disposes of shares
acquired upon exercise of an ISO before the expiration of either the one-year
holding period or the two-year waiting period, any amount realized will be
taxable as ordinary compensation income in the year of such disqualifying
disposition to the extent that the lesser of the fair market value of the shares
on the exercise date or the fair market value of the shares on the date of
disposition exceeds the exercise price. The Company will not be allowed any
deduction for federal income tax purposes at either the time of the
14
<PAGE>
grant or exercise of an ISO. Upon any disqualifying disposition by an employee,
the Company will generally be entitled to a deduction to the extent the employee
realized ordinary income.
Certain options authorized to be granted under the Plan will be treated as
NSOs for federal income tax purposes. Under federal income tax law presently in
effect, no income is realized by the grantee of an NSO pursuant to the Plan
until the option is exercised. At the time of exercise of an NSO, the optionee
will realize ordinary compensation income, and the Company will generally be
entitled to a deduction, in the amount by which the market value of the shares
subject to the option at the time of exercise exceeds the exercise price. The
Company is required to withhold on the income amount. Upon the sale of shares
acquired upon exercise of an NSO, the excess of the amount realized from the
sale over the market value of the shares on the date of exercise will also be
taxable.
An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless the
shares are not substantially vested for purposes of Section 83 of the Code and
no Section 83(b) election is made. If the shares are not vested at the time of
receipt, the employee will realize taxable income in each year in which a
portion of the shares substantially vest, unless the employee elects under
Section 83(b) of the Code within 30 days after the original transfer. The
Company will generally be entitled to a tax deduction in the amount includable
as income by the employee at the same time or times as the employee recognizes
income with respect to the shares, provided the Company withholds on the income
amount. On exercise of a SAR, the amount realized by the holder will, for
federal tax purposes, be taxed as ordinary income, and the Company will be
allowed to take a deduction for such amount. The SAR holder is subject to
withholding on such income. Under current accounting principles, the Company
will be required to account for the increase in value of an outstanding SAR as
compensation expense (and may take a credit to compensation expense for a
decrease in such value to the extent a prior expense has been recorded) over the
period the SAR holder provides services to the Company. Current financial
accounting principles do not require similar ongoing charges to earnings in
connection with options. A participant who receives a cash bonus right under the
plan will generally recognize income equal to the amount of any cash bonus paid
at the time of receipt of that bonus, and the Company will generally be entitled
to a deduction equal to the income recognized by the participant.
Section 162(m) of the Code limits to $1,000,000 per person the amount that
the Company may deduct for compensation paid to any of its most highly
compensated officers in any year. Under applicable regulations, compensation
received through the exercise of an option will not be subject to the $1,000,000
limit if the option and the plan pursuant to which it is granted meet certain
requirements of the exception for performance-based compensation. One such
requirement is shareholder approval at least once every five years of the
per-employee limits on the number of shares as to which options may be granted
each year. As discussed above under STOCK OPTIONS, the Plan limits the options
or stock appreciation rights that an employee may be granted to no more than an
aggregate of 100,000 shares of Common Stock in any calendar year. Other
requirements of the exception for performance-based compensation are that the
option or stock appreciation right be granted by a committee of at least two
outside directors and that the exercise price of the option or the stock
appreciation right be not less than fair market value of the Common Stock on the
date of grant. The Compensation Committee is composed of three outside directors
and, thus, meets the requirements of the regulations. Assuming that future
option grants are made in compliance with the above requirements, the Company
believes that the options will be exempt from the $1,000,000 deduction limit.
VOTE REQUIRED FOR APPROVAL
The proposal to approve the amendment to the Plan must be approved by the
holders of at least a majority of the votes cast, provided that the total vote
cast on this proposal represents a majority of the outstanding shares of Common
Stock entitled to vote on the matter at the annual meeting. Broker nonvotes are
counted for purposes of determining whether a quorum exists at the annual
meeting but are not counted and have no effect on the results of the vote.
15
<PAGE>
PROPOSAL 3: APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3
PricewaterhouseCoopers LLP audited the Company's financial statements for
the year ended March 28, 1999 and has been appointed to act as auditors of the
Company's financial statements for the fiscal year ending April 2, 2000. The
Board of Directors is submitting this selection for ratification by the
shareholders. Representatives of PricewaterhouseCoopers 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
4, 1999, consisted of 24,480,540 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 4, 1999, are entitled to notice of and to vote at the meeting or any
adjournment thereof. The Common Stock does not have cumulative voting rights.
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 in April 1999.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OWNED OUTSTANDING SHARES
- ------------------------------------------------------------------------------ ------------- ---------------------
<S> <C> <C>
INVESCO P.C. ................................................................. 3,088,682 12.6
111 Devonshire Square
London EC 2M 4YR
Wellington Management Company................................................. 1,960,000 8.0
75 State Street
Boston, MA 02109
State Farm Mutual Automobile Insurance Company................................ 1,531,000 6.3
One State Farm Plaza
Bloomington, IL 61710
</TABLE>
BOARD COMPENSATION, ATTENDANCE AND COMMITTEES
In fiscal 1999, the Company's Board of Directors met in person four times
and via telephone conference call one time. 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 $1,500 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 1998 Annual Meeting of Shareholders, Messrs.
DuCray, Bridenbaugh, Graber, Marvin, Oechsle and Rothmeier each were
automatically granted
16
<PAGE>
an option for 1,000 shares of Common Stock at an exercise price of $44.50 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. Bridenbaugh, Rothmeier and McCormick. 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. McCormick, Rothmeier, Graber and Bridenbaugh. The Audit
Committee meets with 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 Mr. Marvin
and Bridenbaugh. The Compensation Committee met three times separate from Board
meetings, the Audit Committee met two times and the Environmental Committee met
four times in fiscal 1999. The Nominating Committee and the Executive Committee
did not hold meetings separate from Board meetings in fiscal 1999. Shareholders
who wish to submit names to the Nominating Committee for consideration should do
so in writing between May 19, 2000, and June 13, 2000, 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 28, 1999, 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.
ANNUAL REPORT
We have included a copy of the Company's 1999 Annual Report with this
statement.
17
<PAGE>
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 $7,500. 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.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders provides for transaction
of such other business as may properly come before the meeting, the Board of
Directors has no knowledge of any matters to be presented at the meeting other
than those referred to in this Proxy Statement. However, the enclosed proxy
gives discretionary authority in the event any other matters should be
presented.
SHAREHOLDER PROPOSALS
Shareholders wishing to present proposals for action at an annual meeting
must do so in accordance with the Company's Bylaws. To be timely, a
shareholder's notice must be in writing, delivered to or mailed and received at
the principal executive office of the Company, not less than 50 days nor more
than 75 days prior to that year's annual meeting; provided, however, that in the
event less than 65 days' notice or prior public disclosure of the meeting is
given or made to shareholders, notice by the shareholder, to be timely, must be
received not later than the close of business on the 15th day following the date
on which such notice of the annual meeting was mailed or such public disclosure
was made, whichever first occurs. For purposes of the Company's 2000 Annual
Meeting, such notice, to be timely, must be received by the Company between May
19, 2000 and June 13, 2000. In addition, SEC rules require that any shareholder
proposal that you wish to be considered for inclusion in next year's annual
meeting proxy material, be received at our principal office by February 29,
2000. 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 28, 1999
18
<PAGE>
PRECISION CASTPARTS CORP.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, AUGUST 4, 1999
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoints William
C. McCormick and William 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 4, 1999, or at any adjournment thereof, all shares
of the undersigned in the Company. The proxies are instructed to vote as
follows:
(Continued, and to be signed and dated on the reverse side.)
<PAGE>
1. Election of Directors
Nominees: Dean T. DuCray (3-year term), Don R. Graber (3-year term),
Byron O. Pond, Jr. (3-year term), J. Frank Travis (2-year term).
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list above.
2. AMENDMENT OF THE COMPANY'S 1994 STOCK INCENTIVE PLAN TO INCREASE THE TOTAL
NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN.
For Against Abstain
/ / / / / /
3. PROPOSAL TO RATIFY THE APPOINTMENT OF INDEPENDENT AUDITORS.
For Against Abstain
/ / / / / /
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
Proposals.
The shares represented by this proxy will be voted in accordance with the
instructions given.
UNLESS CONTRARY INSTRUCTIONS ARE GIVEN, THE SHARES WILL BE VOTED FOR THE
NOMINEES, FOR THE PROPOSALS AND ON ANY OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING IN ACCORDANCE WITH THE RECOMMENDATIONS OF MANAGEMENT.
PLEASE CHECK HERE IF YOU PLAN / /
TO ATTEND THE MEETING IN PERSON
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.
Date , 1999
--------------------------------------
Signature(s)
-------------------------------------
VOTES MUST BE INDICATED
(X) IN BLACK OR BLUE INK. / /
PLEASE MARK, DATE, SIGN AND RETURN THE PROXY PROMPTLY.
