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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File No. 1-10348

PRECISION CASTPARTS CORP.
(Exact name of registrant as specified in its charter)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     X     No            

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.            

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes     X     No            

The aggregate market value of voting stock held by non-affiliates of the registrant as of September 28, 2003, was $1,841,991,288.

As of the close of business on June 4, 2004, Registrant had 64,753,841 shares of Common Stock, without par value, outstanding.

Portions of the Registrant's Proxy Statement to be filed in connection with the 2004 Annual Meeting of Shareholders are incorporated by reference in Part III.

Precision Castparts Corp. & Subsidiaries

PART I

ITEM 1. BUSINESS

    Precision Castparts Corp. ("PCC" or "the Company"), a worldwide manufacturer of complex metal components and products, provides high-quality investment castings, forgings, and fasteners/fastener systems for critical aerospace and industrial gas turbine applications. The Company also provides: investment castings and forgings for general industrial, automotive, armament, medical and other applications; fasteners for automotive and general industrial markets; specialty alloys, waxes and metal processing solutions for the investment casting industry; highly engineered fluid-handling industrial pumps and valves for a wide variety of markets including aftermarket services; refiner plates, screen cylinders, refiner rebuilds and other products for the pulp and paper industry; metal-injection-molded and ThixoFormed™ parts for automotive and other markets; metal-matrix-composite components for the electronics, transportation and communications industries; and metalworking tools for the fastener market and other applications.

Products and Markets

    We manufacture complex metal components and products in five principal business segments: Investment Cast Products, Forged Products, Fastener Products, Fluid Management Products and Industrial Products. Each of these five business segments is described below.

Investment Cast Products

    Our Investment Cast Products segment includes our subsidiaries PCC Structurals and PCC Airfoils. These operations manufacture investment castings for aircraft engines, industrial gas turbine ("IGT") engines, airframes, medical prostheses and other industrial applications primarily in the aerospace and power generation markets. The segment also includes the Specialty Materials and Alloys Group ("SMAG") operations, which provides alloys and waxes to PCC's investment casting operations, as well as to other companies with investment casting operations. The Investment Cast Products segment accounted for approximately 48 percent of our sales in fiscal 2004.

    We are the market leader in manufacturing large, complex structural investment castings, and we are the leading manufacturer of airfoil investment castings used in jet aircraft engines. We manufacture investment castings for every jet aircraft engine program in production or under development by our key customers. We are also one of the market leaders in manufacturing structural and airfoil investment castings for IGT and aeroderivative engines used for electric power generation, and we have expanded into the structural airframe and armament markets. In addition, we make investment castings for use in the automotive, medical prosthesis, satellite launch vehicle and general industrial markets.

    Investment casting technology involves a technical, multi-step process that uses ceramic molds in the manufacture of metal components with more complex shapes, closer tolerances and finer surface finishes than parts manufactured using other casting methods. The investment casting process begins with the creation of a wax pattern of the part to be cast, along with pathways through which molten metal flows into the ceramic mold. A ceramic shell is then formed around the wax pattern, followed by removal of the wax from the ceramic shell by melting and draining the wax. Finally, molten metal is poured into the ceramic shell, the shell is removed after the metal cools, and the part undergoes final processing and inspection.

    Because of the complexity of the manufacturing process and the application of proprietary technologies, we believe we are currently the only manufacturer that can consistently produce the largest complex structural investment castings in quantities sufficient to meet our customers' quality and delivery requirements. Our emphasis on low-cost, high-quality products and timely delivery has enabled us to become the leading supplier of structural and airfoil castings for jet aircraft and IGT engines and to expand into the structural airframe and armament markets.

    The commercial aerospace market cycle is a critical determinant of demand for our precision investment casting products. Beginning in 1995, demand for aerospace investment castings strengthened, primarily due to increased demand from the commercial aerospace industry, which had been in a cyclical downturn since 1991. However, during fiscal 1999, demand decreased in the commercial aerospace market as worldwide aircraft production reached its peak. The decrease in demand was due in part to a decline in wide-body aircraft orders for the Asian market, where depressed economic conditions curbed spending for new aircraft. This decreased demand continued through fiscal 2000, but the market rebounded in fiscal 2001 due, in part, to increased demand for wide-body aircraft from Asian airlines and growing demand in the regional jet engine market. In fiscal 2002, the major economies of the United States and Europe began to slow, and, with the terrorist attacks on September 11, 2001, air travel declined significantly, resulting in several large bankruptcies and poor financial conditions throughout the commercial airline industry. This situation has reduced demand for our commercial aerospace products, which has continued throughout fiscal 2004. Military production, however, has increased in the aftermath of September 11 and is helping to partially mitigate the weak market conditions in the commercial aerospace industry.

    Large jet aircraft engines are manufactured by a small number of suppliers, including General Electric, Pratt & Whitney, Rolls-Royce and several joint ventures. As a result, we believe a high level of customer service and strong, long-term customer relationships will continue to be important to achieving our goals. We have been supplying castings for jet engines to GE for more than 30 years, and we have been supplying Pratt & Whitney (a division of United Technologies) with castings for more than 25 years for its military jet engines and for more than 20 years for its commercial jet engines. In addition, we have supplied small structural investment castings to Rolls-Royce for more than 15 years, and we have more recently begun supplying Rolls-Royce with large, structural castings for use in its new Trent series of jet aircraft engines. As we have been able to cast larger and more complex parts, manufacturers of large jet aircraft engines have made increasing use of our structural castings.

Aerospace Structural Castings

    Our structural castings business includes the largest diameter stainless steel, nickel-based superalloy and titanium investment castings in the world, as well as a variety of smaller structural castings. These castings are stationary components that form portions of the fan, compressor, combustor and turbine sections of a jet aircraft engine, where strength and structural integrity are critical. Structural investment castings are sold primarily as original equipment to jet aircraft engine manufacturers.

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    We believe that trends in the manufacturing of aircraft jet engines will continue to increase our revenue per engine. As the design of new generation aircraft engines has emphasized increased thrust, higher fuel efficiency and reduction of noise and exhaust emissions, engine operating temperatures and pressures have increased. These conditions require the use of engine parts made of alloys that are able to withstand extreme operating conditions and provide an optimum strength-to-weight ratio. Many of these alloys are particularly suited for use in the investment castings we manufacture. In addition, titanium, a metal with a lower melting temperature than stainless steel or superalloys, is used in all but the hottest parts of the engine because of its considerable weight savings. Titanium is an exceptionally difficult metal to cast because of its reactivity to other elements. However, we have developed the necessary technology and manufacturing processes to cast large, complex investment castings in titanium alloys. Many new generation engines, which are expected to be built through the next decade and beyond, make significantly greater use of our products than did previous engine designs. We manufacture structural investment castings for all three jet aircraft engines used on the Boeing 777 aircraft. We also manufacture the intermediate case and the tail bearing housing for the Rolls-Royce Trent series of engines. These are the largest structural investment castings for jet aircraft engines in the world.

    We have also expanded into the structural airframes market through the production of airframe components manufactured primarily from titanium and aluminum alloys. Aircraft manufacturers have begun to show substantial interest in using investment castings for airframe applications such as titanium aileron and flap hinges, pylons (engine mounts), wing spars and wing ribs, as well as aluminum alloy nacelle segments (thrust reversers), cascades, aircraft access doors, electronic boxes and pump housings for hydraulic and fuel systems.

Aerospace Airfoil Castings

    We manufacture precision cast airfoils, which include the stationary vanes and rotating blades used in the turbine section of jet aircraft engines. This engine section is considered the "hot" section, where temperatures may exceed 2,400 degrees Fahrenheit. These conditions require use of special nickel based superalloys and special casting techniques to manufacture airfoil castings with internal cooling passages that provide both high performance and longer engine life.

    We use various casting technologies to produce turbine airfoils. We employ conventional casting processes to produce equiaxed airfoil castings, in which the metal grains are oriented randomly throughout the casting. A more advanced process enables us to produce directionally solidified ("DS") airfoil castings, in which the metal grains are aligned longitudinally. This alignment decreases the internal stress on the weakest portion of a metal part where the various grains adjoin, thereby providing increased strength and improved efficiencies in engine performance over equiaxed parts. An even more advanced process enables us to produce single crystal ("SX") airfoil castings, which consist of one large superalloy crystal without grain boundaries. SX castings provide greater strength and performance characteristics than either equiaxed or DS castings, as well as longer engine life.

    As engine sizes grow to generate greater thrust for larger aircraft, the turbine sections of these engines must work harder and burn hotter. As a result, the major aircraft engine manufacturers have increasingly been designing their engines with DS and SX blades. The DS and SX cast airfoils we build, with their complex cooling passages, have been instrumental in enabling these engines to operate at higher temperatures. SX cast airfoils are used in both new and redesigned engines where performance requirements are higher.

    The demand for aerospace airfoil castings is determined primarily by the number and type of engines required for new jet aircraft, the frequency of engine repairs and the inventory levels of replacement parts maintained by the principal jet aircraft engine manufacturers and repair centers. A jet engine's airfoil components have shorter useful lives than structural investment castings and are replaced periodically during engine maintenance. As a result, our sales of aerospace airfoil castings are less affected by the cyclical patterns of the aerospace industry than are our sales of structural investment castings. The timing for replacement of aerospace airfoil castings principally depends on the engine's time in service and the expected life of the airfoil casting. Based upon information from our major customers, we believe that approximately half of our sales of airfoil castings used in aircraft turbine engines are replacement parts.

IGT Castings

    In fiscal 1994, we began to focus on the manufacture of investment castings for IGT engines. We targeted this market because (1) the performance and reliability standards we have developed in the manufacture of aerospace castings were applicable to the manufacture of IGT castings, (2) the worldwide market for IGT castings was large and growing, and (3) there were a small number of suppliers in this market. Due to recent contractual gains, our market share has increased significantly, and we believe we are the leading supplier of investment castings used in IGT engines. Despite this leadership position, our sales of IGT products have declined during fiscal 2004 due to poor economic conditions and falling demand for power generation capacity. Our IGT products consist of airfoil castings and high-temperature combustion hardware used in large, land-based gas turbines designed for electrical power generation. In addition, we manufacture structural and airfoil castings for aeroderivative gas turbine engines, which are also used for power generation, as well as for other commercial and military land and marine-based applications.

    IGT manufacturers have significantly improved the efficiency and reduced the pollution profiles of industrial gas turbines, principally by incorporating advanced components in new engines as well as in refurbished and upgraded turbines in the field. We have leveraged our DS and SX airfoil casting knowledge from the aerospace market into the IGT market to produce blades and vanes that are better able to withstand the extreme heat and stresses of new higher-temperature gas turbines. IGT engines are built with investment castings that are similar, but generally larger, than blades and vanes manufactured by us for the aerospace market. Because of their size, IGT airfoils are generally more difficult to cast than smaller aerospace airfoils with the same properties.

    Since industrial gas turbines are primarily used in electrical power generation, castings sales for new IGT engines are tied to the growth of global electricity consumption, while demand for replacement parts depends on the size and usage rate of the installed base.

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Other Investment Casting Products

    Our strategy for profitable growth also includes the pursuit of other opportunities for our existing investment casting technology. We have been expanding the application of our investment casting technology in the armament, medical prosthesis, automotive, satellite and general industrial markets by manufacturing such products as gun-system components, artificial hips and knees, turbocharger wheels, parts for satellite launch vehicles and impellers for pumps and compressors.

Specialty Materials and Alloys

    With the acquisition of SPS Technologies, we were able to realize valuable vertical integration opportunities, particularly in the area of the investment casting supply chain. SMAG provides alloys and waxes to the Company's investment casting operations, as well as to other companies with investment casting or other foundry operations. SMAG is comprised of Cannon Muskegon, M. Argüeso & Company, and Greenville Metals, Inc.

    Cannon Muskegon produces several patented and trademarked alloys formulated specifically for the casting of directionally solidified and single crystal airfoils that operate in high-temperature, high-stress engine environments. Cannon Muskegon supplies alloys to us, as well as other companies with investment casting operations. The alloys produced by Cannon Muskegon also serve such diverse markets as medical, recreational and general industrial.

    M. Argüeso & Company manufactures advanced technology investment casting wax blends for us and other companies with investment casting operations. In addition, Argüeso serves the machining industry with Rigidax® tooling compound, a patented product used to prevent part vibration or movement, to stabilize a part during a machining operation

    Greenville Metals, Inc. provides metallurgical process solutions and services worldwide for us and other companies that require the melting and processing of specialty alloys. Major markets include specialty alloy producers and foundries, permanent magnet and powder metal manufacturers and other industries with special metallurgical requirements.

Forged Products

    We are among the leading manufacturers of forged products for the aerospace and power generation markets. Our Forged Products segment consists of the forging operations of Wyman-Gordon Company. Forged Products' aerospace and IGT sales are primarily derived from the same large engine customers served by the Investment Cast Products segment, with additional aerospace sales from manufacturers of landing gear and other airframe components. Similarly, the dynamics of the aerospace and power generation markets, as described in the Investment Cast Products section above, are virtually the same for Forged Products. The Forged Products segment accounted for approximately 23 percent of our sales in fiscal 2004.

    We manufacture components from sophisticated titanium and nickel-based alloys for jet engines, including fan discs, compressor discs, turbine discs, seals, spacers, shafts, hubs and cases. Our airframe structural components are used on both commercial and military aircraft and include landing gear beams, bulkheads, wingspans, engine mounts, struts, wing hinges, wing and tail flaps and housings. These parts are made of titanium, steel or other alloys. We provide forged products for use in power plants worldwide, as well as in oil and gas industry applications. These products include discs, spacers and valve components for land-based steam turbine and industrial gas turbine engines, as well as shafts, cases and compressor and turbine discs for marine gas engines. We also produce a variety of mechanical and structural tubular forged products, primarily in the form of extruded seamless pipe, for the domestic and international energy markets, which include nuclear and fossil-fueled power plants, co-generation projects and retrofit and life-extension applications. For naval defense applications, we supply forged components for propulsion systems on nuclear submarines and aircraft carriers, as well as forgings for pumps, valves and structural applications.

    Our forging business, which employs seven different manufacturing processes, involves heating titanium, steel or high-temperature nickel alloys, and then shaping them through pressing or extrusion, using hydraulic and mechanical presses with capacities ranging up to 55,000 tons. The process employed is determined based on the raw materials and the product application. The seven manufacturing processes are summarized below:

Open-Die Forging – In this process, the metal is pressed between dies that never completely surround the metal, thus allowing it to be observed during the process. This manufacturing method is used to create relatively simple, preliminary shapes to be processed further by closed-die forging.

Closed-Die Forging – Closed-die forging involves pressing heated metal into required shapes and sizes determined by machined impressions in specially prepared dies that completely surround the metal. This process allows the metal to flow more easily within the die cavity and, thus, produces forgings with superior surface finish and tighter tolerances, with enhanced repeatability of the part shape.

Hammer Forging – This form of closed-die forging uses multiple impact blows to shape a component between specially contoured dies. Forging hammers can be classified into two main types: single action and counterblow. Our counterblow hammers, which couple upper and lower ram movement to produce the impact forces required for large components, can offer improved near-net-shape capability compared to conventional press forging. Hammer forging is one of the oldest forging processes; however, computer-controlled technology has enabled the process to meet modern manufacturing requirements.

Conventional/Multi-Ram – The closed-die, multi-ram process, which is employed on our 20,000 and 30,000 ton presses, enables us to produce complex forgings with multiple cavities, such as valve bodies, in a single heating and pressing cycle. Dies may be split on either a vertical or a horizontal plane, and shaped punches may be operated by side rams, piercing rams or both. This process also optimizes grain flow and uniformity of deformation and reduces machining requirements.

Isothermal Forging – Isothermal forging is a closed-die process in which the dies are heated to the same temperature as the metal being forged, typically in excess of 1,900 degrees Fahrenheit. Because the dies may oxidize at these elevated temperatures, this process is performed in a vacuum or inert gas atmosphere. Our isothermal press produces near-net shape components, requiring less machining by our customers.

Extrusion – The extrusion process is capable of producing thick-wall, seamless pipe, with outside diameters of up to 48

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Precision Castparts Corp. & Subsidiaries

inches and a wall thickness from 0.5 inches up to 7 inches for applications in the power generation and oil and gas industry, including tension leg platforms, riser systems and production manifolds. Our 35,000-ton vertical extrusion press is one of the largest and most advanced in the world. In addition to solid metals, powdered materials can be compacted and extruded into forging billets with this press, and more recently, we are using the press to convert nickel-based alloy ingots into billets.

Ring rolling – Ring rolling begins by cutting a billet to length depending upon the volume of the finished ring, then heating the billet, typically to temperatures in excess of 3,000 degrees Fahrenheit, and using the open die forging process to produce a rough-ring shape, or preform, resembling a pancake. This "pancake" is then reheated and placed over a mandrel on the ring mill, which applies radial and axial pressure to the wall of the ring, causing it to grow in diameter. Different tooling shapes may be used at this point to create contour forged rings. At the completion of the rolling process, expanders are used to size the ring to its final dimensions.

    We believe that we are the world leader in producing forged rotating components for use in jet aircraft engines. These parts are forged from ingots, which are converted to billets in our cogging and extrusion presses and from metal powders (primarily nickel alloys) that are produced, consolidated and extruded into billets entirely in our own facilities.

The following table identifies major jet aircraft engine programs that incorporate investment castings and/or forgings produced by us.

⁽¹⁾ Represents engines of CFM International ("CFMI"), a joint venture of GE and Snecma, a major French aerospace company.

⁽²⁾ Represents engines produced by International Aero Engines ("IAE"), a joint venture of Pratt & Whitney, Rolls-Royce, Motoren-und Turbinen-Union, FiatAvio and Japanese Aero Engine Corporation.

⁽³⁾ Represents engines produced by the GE-P & W Engine Alliance, a joint venture between Pratt & Whitney and General Electric.

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The following table identifies major industrial gas turbines that incorporate investment castings and/or forgings produced by us.

Fastener Products

    With the acquisition of SPS Technologies, Inc., we have become a leading developer and manufacturer of highly engineered fasteners, fastener systems, and precision components, primarily for critical aerospace and automotive applications. More than 50 percent of Fastener Products sales come from the same aerospace customer base already served by our Investment Cast Products and Forged Products segments. In this regard, Fastener Products is subject to the same market forces as these other two segments. The balance of the segment's sales derives from automotive and general industrial markets, including farm machinery, construction equipment, machine tools, medical equipment, appliances, and recreation. The Fastener Products segment, which was only operated by us for 17 weeks during fiscal 2004, accounted for approximately 8 percent of our sales in fiscal 2004.

    Fastener manufacturing begins with wire or metal bar of various diameters, which is then cut into prescribed lengths and heat treated. The fastener blanks are then given specific head shapes and thread configurations by passing them through highly engineered tools.

    Our aerospace fasteners are manufactured from nickel and titanium alloys and are used on airframes, jet engines, aircraft wheels and brakes, and landing gear assemblies. They are found in such flight- and safety-critical areas as the wing-to-fuselage, the stabilizers-to-fuselage, and the engine-to-wing connections on an aircraft, and the airfoil-to-disc and disc-to-shaft connections on a jet engine. The product line includes a variety of bolts, nuts, plate nuts, inserts, washers, and other precision components. While the fasteners are produced to demanding customer designs, we continue to be active in developing several trademarked alloys for applications requiring high strength, elevated temperature, corrosion resistance, and/or lighter weight. These include MULTIPHASE® and AEREX® nickel-based alloys and the AERLITE™ family of titanium alloys.

    Our engineered fasteners, manufactured from a variety of steel, nickel, and titanium alloys, are used in automotive applications, including power trains; suspensions; steering, airbag, and seating systems; and chassis assemblies. These products have also penetrated other markets requiring proven strength, close dimensional tolerance, and high reliability, such as diesel, mining, construction, heavy truck and niche general industrial applications. We have developed a broad range of technically advanced proprietary products under the brand names of UNBRAKO®, FLEXLOC®, DURLOK® and DURLOK II®, TORX®, TRU-FLEX®, TAPTITE®, and MAThread™.

Fluid Management Products

    The Fluid Management Products segment includes all of the businesses within our subsidiary, PCC Flow Technologies. We entered the fluid management sector in fiscal 1997 with the acquisition of the NEWFLO Corporation. Subsequent acquisitions, which have included Crown Pumps, Baronshire Engineering, Environment/One, TBV, Sterom, Reiss Engineering, Valtaco, Technova, ConVey, Wouter Witzel, C.W. Valve Services and AOP Industries, have enabled PCC Flow Technologies to further expand its product lines and markets. The Fluid Management Products segment accounted for approximately 14 percent of our sales in fiscal 2004.

    We design, manufacture, market and service a broad range of high-quality, fluid-handling industrial valves and pumps. Our finished fluid management products are manufactured primarily from castings, forgings and fabricated steel parts. We sell these products worldwide under well-established brand names to a wide range of end-user markets.

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    The manufacturing process for fluid management products requires knowledge of multiple metal-forming and processing technologies, including casting, forging, machining, welding, heat treating, assembly and processing of metal components. Testing procedures, materials management and traceability and quality control are also important aspects of our operations.

    We use our substantial knowledge of fluid management technologies, complex metal component manufacturing techniques and our end-user markets to develop, produce and sell engineered valves and pumps that we believe provide customer benefits superior to those of other manufacturers. Many of the products we offer are customized to end-user requirements or designed for specialized applications. Our maintenance, repair and service centers, extensive distribution network and inventory of products enable us to provide responsive service and timely deliveries to customers, thereby enhancing the marketability of our products. We believe our brand names, quality products and responsive service network also lead to repeat orders, stable demand and customer loyalty.

Valves

    We manufacture and market specialty industrial and general purpose valves, fittings and flanges, principally for the chemical, refining, energy, pulp and paper and marine markets. Our valve products consist primarily of multi-turn industrial valves, check valves, quarter-turn industrial ball and plug valves, double- block-and-bleed valves, dual-expanding plug valves, four-way diverter valves and valve operators, stainless steel butterfly valves, double flanged and wafer butterfly valves, corrosion-resistant titanium ball valves and double-eccentric heavy-duty valves. Some of our valves are manufactured under contract by independent ISO 9000-qualified offshore suppliers to precise industry and end-user standards. The valve designs are developed and modified by our engineering staff for particular applications as determined by market conditions and end-user applications. We market our valve products under a number of brand names, including General Valve, PCC Ball Valves, TECHNO, TBV, Sterom, Reiss, Technova, ConVey, Wouter Witzel, AOP, Valtaco and C. W. We believe our General Valve positive shut-off, double-block-and-bleed valve and our Technocheck hinged check valves are among the most technologically advanced products of these types sold in the fluid control market.

Pumps

    We manufacture and market a complete line of general purpose and specialty pumps for power, cogeneration, geothermal, municipal, residential and industrial (including petroleum, chemical, mining, marine and pulp and paper) applications. We also supply repair parts and provide service for pumps. Our pump products consist primarily of single-suction and double-suction centrifugal pumps, submersible and non-clog pumps, booster pump systems, vertical turbine, mixed-flow and axial-flow pumps and grinder pumps. We are one of the few pump manufacturers that produce large vertical pumps greater than 36 inches in diameter. The capacities of certain of our pumps extend up to heads of 3,400 feet and flows up to 230,000 gallons per minute. We market our pump products under several brand names, including Johnston, PACO, Crown and E/One. We believe our Johnston vertical turbine pumps, our PACO booster systems and "Smart Pumps" and our E/One low-pressure sewer systems are among the leading products of these types sold in the fluid handling market.

Services

    We maintain a number of service and repair facilities as well as stocking warehouses in the U.S. and Canada, which provide aftermarket maintenance, repair, pre-sale modification services and inventory availability for our large installed base of fluid management products, as well as repair and replacement of other manufacturers' fluid management products. The market for replacement units, repair parts and repair services generally offers us higher margins and is less dependent on industry economic conditions than the market for equipment for new industrial facilities.

Industrial Products

    The Industrial Products segment includes our subsidiaries J&L Fiber Services, Advanced Forming Technology ("AFT") and the PCC Precision Tool Group ("PTG"). J&L Fiber Services produces refiner plates and screen cylinders for use in the pulp and paper industry and rebuilds refiner equipment that is used in the pulping process. AFT manufactures metal-injection- molded, metal-matrix-composite and ThixoFormed™ components for numerous industrial applications. PTG manufactures a broad range of thread rolling dies, trimming dies, punches and pins, and steel and carbide forging tools for fastener production, principally for the automotive, aerospace and general industrial and other applications.    The Industrial Products segment accounted for approximately 7 percent of our sales in fiscal 2004.

Refiner Plates and Screen Cylinders

    We are the world leader in the design, manufacture and sale of refiner plates to the pulp and paper production markets. Refiner plates, which are highly engineered metal castings, are an integral part of the wood pulping process. Refiner plates separate wood chips into component fibers as pulp is transported through the system. The design of the refiner plate affects the ultimate quality of the paper produced. In addition, we manufacture conventional and rebuildable screen cylinders. Screen cylinders are metal filtering devices that separate the usable wood fiber from undesirable elements in the pulp slurry mix. We also rebuild refiner equipment that is used in the pulping process. Approximately 95 percent of J&L Fiber Services' sales are derived from replacement parts.

Metal-Injection-Molded, Metal-Matrix-Composite and ThixoFormed™ Components

    We are the largest producer of powdered metal parts manufactured by the metal-injection-molding ("MIM") process. In addition, we manufacture advanced technology, lightweight, net-shape, metal-matrix-composite parts that are made by combining aluminum and silicon carbide ("AlSiC," a registered trademark of the Company) using a patented pressure-infiltration-casting process. We have also expanded into ThixoForming™, an advanced technology alternative to conventional die casting, in which materials such as magnesium are injected in a semi-solid (thixotropic) state into a mold under vacuum conditions. The result is a high-density, complex component with superior materials properties and precise dimensional tolerances as compared to a die-cast part. We believe these businesses have the potential for rapid growth and complement our core competencies in metals, precision metalworking and the management of complex manufacturing processes.

    The MIM process is particularly well-suited to high volume production of small, complicated metal parts for numerous

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industries, including automotive, power tools, firearms, computer peripherals, medical instruments and electronics. Metal-matrix-composite parts, which have high thermal conductivity and tightly controlled thermal expansion characteristics, are used in electronic applications that require heat dissipation and are used in automotive, telecommunication, transportation, aerospace and computer products. ThixoFormed™ components are used in automotive, electronic and other consumer products. We believe our broad range of products and high standards of craftsmanship offer growth opportunities in numerous industry applications.

Metalworking Tools

    The Precision Tool Group, which is comprised of Reed-Rico®, Hi-Life Tools, Howell Penncraft and Forming Tool Management (FTM) business units, manufactures and supplies consumable, precision tools to worldwide markets. Our products encompass the complete range of tools required by fastener and special-formed parts manufacturers in the aerospace, automotive and general industrial sectors. Major products include thread-rolling dies, trimming dies, punches and pins, and steel and carbide forging tools. Our comprehensive range of tooling is manufactured in a variety of materials, heat treatment and surface treatment combinations to optimise tool life and "tool ownership" costs for our customers. Our tooling business includes product lines manufactured under the names Reed-Rico®, Astro Punch®, Howell Penncraft, Hi-Life Tools and Titan®.

Sales and Distribution

    We sell our complex metal components and products into five major market areas: aerospace, power generation, fluid management, automotive and general industrial and other. The percentage of sales to these markets is shown below for fiscal years 2004, 2003 and 2002.

    Our sales to the aerospace market of $1,184.5 million in fiscal 2004 increased 6.3 percent from $1,114.4 million in fiscal 2003. Sales to the aerospace market as a percentage of total net sales, however, remained flat at 54 percent.

    Our sales of investment castings products and forged products are made through direct sales personnel located in each business operation and through field sales representatives located at U.S. and international locations near our major customers. Our fastener products and fluid management products and services are sold by a direct sales and marketing staff and through a worldwide network of independent sales representatives and distributors. Industrial metalworking tools and machines and other metal products are sold by both internal sales forces and sales representatives in the U.S., Europe, Asia, Australia and Latin America. Due to the sophisticated nature of our products, our sales efforts require technical personnel to work closely with customers to identify and assist in the development of new and modified products and to provide other services that are necessary to obtain new and repeat orders.

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Major Customers

    Sales to General Electric were 19.6 percent, 25.4 percent and 23.9 percent of total sales in fiscal 2004, 2003 and 2002, respectively, as follows:

    No other customer accounted for more than 10 percent of total sales, however; United Technologies and Rolls Royce are also considered our key customers and the loss of their business could have a material adverse effect on the Company's financial results.

Backlog

    The backlog of unfilled orders believed to be firm at the end of each of our last three fiscal years was $1,600.0 million as of March 28, 2004, $1,127.7 million as of March 30, 2003, and $1,548.2 million as of March 31, 2002. The majority of the backlog is for sales to aerospace customers in the Investment Cast Products and Forged Products segments. Approximately 80 percent of the Company's backlog is expected to be filled within the next fiscal year.

    The majority of sales to customers are made on individual purchase orders. Most of our orders are subject to termination by the customer upon payment of the cost of work in process plus a related profit factor. Historically, we have not experienced significant order cancellations.

Competition

    We are subject to substantial competition in all of the markets we serve. Components and products similar to those made by us can be made by competitors using either the same types of manufacturing processes or other forms of manufacturing. Although we believe our manufacturing processes, technology and experience provide advantages to our customers, such as high quality, competitive prices and physical properties that often meet more stringent demands, alternative forms of manufacturing can be used to produce many of the components and products we make. Despite intense competition, we believe we are the number one or two supplier in most of our principal markets. Several factors, including long-standing customer relationships, technical expertise, state-of-the-art facilities and dedicated employees, aid us in maintaining our competitive advantages.

    In the Investment Cast Products segment, our principal competitor is Howmet, a subsidiary of Alcoa Inc. Howmet produces stainless steel, superalloy, aluminum and titanium investment castings principally for the aerospace and IGT markets. We believe that Howmet is capable of producing investment castings comparable to all but the largest and most complex of our structural investment castings. We also believe Howmet has the financial and technical resources to produce structural castings as large and complex as those produced by us, should they decide to do so. Many other companies throughout the world also produce stainless steel, superalloy, aluminum or titanium investment castings, and some of these companies currently compete with us in the aerospace and other markets. Others are capable of competing with us if they choose to do so.

    In the Forged Products segment, our largest competitors are Ladish Co., Fortech, S.A. and Thyssen AG for aerospace turbine products, Alcoa Corporation and Schultz Steel Company for aerospace structural products, and Mannesmann A.G. and Sumitomo Corporation for energy products. In the future, we may face increased competition from international companies as customers seek lower cost sources of supply.

    International competition in the forging and casting processes may also increase in the future as a result of strategic alliances among aircraft prime contractors and foreign companies, particularly where "offset" or "local content" requirements create purchase obligations with respect to products manufactured in or directed to a particular country. Competition is often intense among the companies currently involved in the industry. We continue to strive to maintain competitive advantages with high quality products, low-cost manufacturing, excellent customer service and delivery and expertise in engineering and production.

    In the Fastener Products segment, we compete with a large number of companies based primarily on technology, price, service, product quality and performance. We believe that we maintain our strong market position through our high-quality product performance and service to our customers.

    In the Fluid Management Products and Industrial Products segments, we compete with a large number of companies in each of the markets served. The major competitive factors affecting these other business areas include product design and quality, performance characteristics, pricing and product availability.

Research and Development

    We have departments involved in research and development at PCC Structurals, PCC Airfoils, SMAG, Wyman-Gordon, Fastener Products and PCC Flow Technologies, as well as within the Industrial Products segment. The research and development effort at these locations is directed at the technical aspects of developing new and improved manufacturing processes. These research and development expenditures amounted to $5.3 million in fiscal 2004, $5.0 million in fiscal 2003 and $6.5 million in fiscal 2002. A substantial amount of our technological capability is the result of engineering work and experimentation performed on the shop floor in connection with process development and production of new parts. This engineering work and experimentation is charged to the cost of production and is not included in research and development expenditures.

Employees

    At March 28, 2004, we employed more than 15,700 people within our five segments, including 6,700 people in the Investment Cast Products segment, 1,800 people in the Forged Products segment, 3,800 people in the Fasteners segment, 2,000 people in the Fluid Management Products segment, 1,400 people in the Industrial Products segment. In addition, we employed 36 people in corporate functions and 917 in discontinued operations. Approximately 23 percent of these employees are affiliated with unions or covered by collective bargaining agreements. We expect to negotiate two union contracts or collective bargaining agreements affecting less than 3 percent of the workforce during fiscal 2005. Management believes that labor relations in the Company have generally been satisfactory.

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Patents and Trade Secrets

    From time to time, we seek U.S. and foreign patent protection on certain of our processes and products. We have also federally registered several of our trademarks in the U.S. We do not view patents or trademarks as materially important to our business as a whole. We also have rights and obligations under various license agreements. We receive no significant royalty income from patents.

Materials & Supplies

    We use a number of raw materials in our products, including certain metals such as cobalt, titanium, nickel, tantalum and molybdenum, which are found in only a few parts of the world. These metals are required for the alloys used in our investment castings and forged products. The availability and costs of these metals may be influenced by private or governmental cartels, changes in world politics, unstable governments in exporting nations and inflation. Similarly, supplies of the tool-grade steel we use may also be subject to variations in availability and cost. We have escalation clauses for nickel and other metals in certain of our long-term contracts with major customers. Shortages of and price increases for certain raw materials we use have occurred in the past and may occur in the future. Future shortages or price fluctuations in raw materials could have a material adverse effect on us.

Government Regulations

    Certain of our products are manufactured and sold under U.S. government contracts or subcontracts. Consequently, we are directly and indirectly subject to various federal rules, regulations and orders applicable to government contractors. Violation of applicable government rules and regulations could result in civil liability, in cancellation or suspension of existing contracts or in ineligibility for future contracts or subcontracts funded in whole or in part with federal funds.

International Operations

    We purchase products from and supply products to businesses located outside the U.S. We have also been expanding our international activities during the past several years, primarily through acquisitions and the development of foreign subsidiaries. This expansion is part of our strategy to acquire and develop businesses that complement our core competencies, provide low cost manufacturing, have strong growth prospects and maintain leading positions in their respective market niches. Certain risks are inherent in international operations, including the risk of government-financed competition, changes in trade policies, tariff regulations, the relative stability of certain foreign currencies and difficulties in obtaining U.S. export and import licenses. Information with respect to sales and assets by geographic location is included in "Item 8. Notes to the Consolidated Financial Statements."

Environmental Compliance

    The Company is subject to various federal and state environmental laws concerning, among other things, water discharges, air emissions, waste management, toxic use reduction and environmental cleanup. Environmental laws and regulations have changed rapidly in recent years. It is likely that we will be subject to increasingly stringent environmental standards in the future (particularly under air quality and water quality laws) and that we will be required to make additional expenditures, which could be significant, relating to environmental matters on an ongoing basis. We also own properties, or conduct or have conducted operations at properties, where hazardous materials have been used for many years, including during periods before careful management of these materials was required or generally believed to be necessary. Consequently, we are subject to environmental laws that impose liability for historical releases of hazardous substances.

    Our financial statements include reserves for future costs arising from environmental issues relating to our properties and operations. Our actual future expenditures, however, relating to compliance and cleanup of environmental conditions at our properties cannot be conclusively determined. At March 28, 2004, we had accrued aggregate environmental reserves of $41.9 million. We believe these reserves are adequate to cover the cost of remedial measures that may eventually be required by environmental authorities with respect to known environmental matters.

    The Company has been named as a potentially responsible party ("PRP") at sites identified by the Environmental Protection Agency ("EPA") and state regulatory agencies for investigation and remediation under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state statutes. Under CERCLA, and under similar state statutes, PRPs are jointly and severally liable, and therefore, the Company is potentially liable to the government or third parties for the full cost of remediating contamination at the Company's facilities or former facilities or at third-party sites where the Company has been designated a PRP. In the unlikely event that the Company is required to fully fund the remediation of a site, the statutory framework would allow the Company to pursue rights of contribution from other PRPs. The Company has been identified as a PRP at the following federally designated Superfund sites: Salco Disposal Site, Monroe, Michigan; MIG Landfill, Bevidere, Illinois; Lipari Landfill, Gloucester, New Jersey; Ogallala Site, Ogallala, Nebraska; DeRewal Chemical Company, New Jersey; Boarhead Farms, Bridgeton, Pennsylvania; Operating Industries, Monterey Park, California; Casmalia Resources Site, Casmalia, California; PSC Resources, Palmer, Massachusetts; Pasco County Landfill, Pasco, Washington; and the Gemme/Fournier site; Leicester, Massachusetts and Peterson-Puritan site, Cumberland, Rhode Island.

    The Company has notified its insurers of potential environmental cleanup liabilities at various facilities, including the Superfund Sites identified above, and has asserted that it is entitled to recover its defense and indemnity costs incurred, and to be incurred, under certain historic insurance policies. During 2002, the Company settled its defense and indemnity claims with Wyman-Gordon's primary carrier. The Company continues to pursue claims against Wyman-Gordon's excess carriers. The Company has also asserted indemnity claims against third-parties for certain sites and we expect to recover a portion of our losses with respect to these sites.

    By letter dated March 11, 2004, the California Attorney General's Office informed the Company that it was pursuing an enforcement action on behalf of the California Department of Toxic Substances Control ("DTSC") for alleged violations of the California Hazardous Waste Control Law, the California Health and Safety Code, and the rules implementing those laws. DTSC identified the alleged violations during a December 2002 inspection of the Company's facility in Santa Ana, California. For the purpose of settlement discussions, DTSC has calculated a penalty of $517,560 for the alleged violations. Following the 2002

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inspection, the Company implemented measures to achieve compliance with the matters identified by DTSC, and the Company communicated these efforts and the facility's compliance status through correspondence with the DTSC.

Forward-Looking Statements

    Information included within this Form 10K describing the projected growth and future results and events constitutes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to fluctuations in the aerospace, power generation, fluid management, automotive and other general industrial cycles; the relative success of the Company's entry into new markets; competitive pricing; the financial viability of the Company's significant customers; the availability and cost of energy, materials and supplies; insurance and pension benefits; equipment failures; relations with the Company's employees; the Company's ability to manage its operating costs and to integrate acquired businesses in an effective manner; governmental regulations and environmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; and implementation of new technologies and process improvement. Any forward-looking statements should be considered in light of these factors. The Company undertakes no obligation to publicly release any forward-looking information to reflect anticipated or unanticipated events or circumstances after the date of this document.

Available Information

    The Company's financial information (annual report, 10-K, 10-Q, proxy) filed with the Securities and Exchange Commission, as well as quarterly earnings releases, the Audit Committee Charter, the Nominating and Corporate Governance Charter, the Compensation Committee Charter, Corporate Governance Guidelines and the Code of Business Conduct and Ethics (the code of ethics that applies to the Registrants' principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions) may be received free of charge by calling Investor Relations at (503) 417-4850 or sending an email to info@precastcorp.com. This information may also be downloaded from the PCC Corporate Center at www.precast.com.

ITEM 2. PROPERTIES

    Our manufacturing plants and administrative offices, along with certain information concerning the products and facilities are as follows:

    We continue to expand our manufacturing capacity to meet anticipated market demand for our products; see "Item 7. Management's Discussion and Analysis."

ITEM 3. LEGAL PROCEEDINGS

    For a description of claims relating to environmental matters, see "Item 1. Business–Environmental Compliance."

    Various lawsuits arising during the normal course of business are pending against us. In the opinion of management, the outcome of these lawsuits will have no significant effect on our consolidated financial position, results of operations, cash flows or business.

    Like many other industrial companies in recent years, we are a defendant in lawsuits alleging personal injury as a result of exposure to chemicals and particulates, including asbestos, integrated into our premises and processes and certain historical products. The particulates at issue are no longer incorporated in any currently manufactured products and we have implemented safety protocols to reduce exposure to chemicals and remaining particulates in the workplace. To date, we have been dismissed from a number of these suits and have settled a number of others. Based on the information available to us as of the date of filing of this report, we believe, based on our review of the facts and the law, that the potential exposure from the resolution of any or all of these matters will not have a material adverse effect on the Company's results of operations, financial condition or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not applicable.

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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT^(a)

^(a)  The officers serve for a term of one year and until their successors are elected. Unless otherwise indicated, all positions have been held for the last five years.

^(b)   Elected Chairman in 2003 and Chief Executive Officer in 2002. Previously was elected Executive Vice President in 1992. Named President–Wyman-Gordon in 1999. Previously served as President–PCC Structurals.

^(c)   Elected Vice President–Finance in 1980. Named Vice President and Chief Financial Officer in 1993. Elected Senior Vice President in 2000.

^(d)  Elected Executive Vice President and President–PCC Airfoils in 1986.

^(e)   Elected Executive Vice President and President–PCC Flow Technologies in 2002. Prior to joining PCC in 2001 as Vice President of Strategic Planning and Business Development–PCC Flow Technologies, he was President of DeZURIK, a subsidiary of SPX Corporation, which manufactures industrial control valves. Prior to 2000, he held the position of Vice President of Marketing and Research and Development for the same company.

^(f)   Elected Executive Vice President and President–PCC Specialty Products in 1998. In 2002, his title was changed to Executive Vice President–Special Projects. Prior to joining PCC, he was President of Wiegand Industrial Division of Emerson Electric.

^(g)   Elected Senior Vice President and President–Fastener Products Division in 2004. Previously, he was Vice President in charge of PCC Structurals' small structural business operations.

^(h)  Named Senior Vice President–Technology and Value Creation, Wyman Gordon in 2004. Elected Senior Vice President in 2002. He has held various leadership positions since joining Wyman-Gordon.

⁽ⁱ⁾   Elected Senior Vice President and President–Industrial Products Division in 2004. He was named President of PCC's Industrial Products business in March 2003. Previously, he was President of J&L Fiber Services.

^(j)   Elected Vice President–Regulatory and Legal Affairs and Secretary in 2000. Prior to joining PCC, he was Senior Vice President, Regulatory and Legal Affairs and Secretary at Fred Meyer, Inc.

^(k)   Elected Corporate Controller and Assistant Secretary in 1997 and Vice President in 2000. Previously served as Corporate Financial Reporting Manager.

^(l)   Elected Treasurer and Assistant Secretary in 1999 and Vice President in 2000. Prior to joining PCC, he was Director of Risk Management at Electronic Data Systems Corporation.

^(m) Elected Director of Corporate Taxes and Assistant Secretary in 1999 and Vice President–Corporate Taxes in 2000. Prior to joining PCC, he was Director, International Tax at Case Corporation.

⁽ⁿ⁾  Elected Chief Information Officer and Vice President in 2000. Previously served as Director of Airframe Development and Research and Development at PCC Structurals.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

    As of March 28, 2004, there were 5,429 shareholders of record of our common stock. Our common stock is listed on the New York Stock Exchange under the symbol PCP. It is also traded on the Chicago Stock Exchange, the Pacific Stock Exchange and the Philadelphia Stock Exchange. We expect to continue to pay quarterly cash dividends, subject to our earnings, financial condition and other factors.

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ITEM 6. SELECTED FINANCIAL DATA

Five-Year Summary of Selected Financial Data

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Business overview

    Fiscal 2004 was another challenging, yet successful, year for Precision Castparts Corp. ("PCC" or "the Company"). During the past two years, the Company has faced significant challenges in its core Aerospace and Power Generation markets, where weak economic conditions have continued to reduce demand for products used in commercial aircraft and industrial gas turbines. PCC has responded to these declining market conditions by continuing to aggressively cut costs and improve operating performance. This focus on operational excellence has led to substantial share gains in PCC's core markets, and is generating strong operating margins despite declining leverage from the lower sales volume. In addition, the Company continues to consider acquisition and divestiture strategies designed to strengthen and build-upon PCC's core businesses, technologies and customer relationships. In December 2003, PCC acquired SPS Technologies, Inc. ("SPS"), a leading world-wide supplier of highly engineered fasteners and other metal products sold principally to the aerospace and automotive markets. This acquisition is an excellent fit with PCC, and it provides abundant opportunities for realization of value-added synergies and sales growth. Also in fiscal 2004, PCC continued to divest non-core businesses that did not fit the Company's strategy for long-term profitable growth, including three businesses that were part of the SPS organization. Overall, the Company is well positioned to achieve strong operating performance in fiscal 2005, and to leverage earnings as economic conditions in the Aerospace and Power Generation markets improve.

    Total sales for fiscal 2004 were $2,174.7 million, an increase of $98.1 million, or 5 percent from fiscal 2003 sales of $2,076.6 million. The addition of the SPS businesses for 17 weeks of the year contributed $231.0 million to the current year sales. Excluding SPS, the Company experienced a $132.9 million, or 6% decline in sales, principally affecting the Investment Cast Products and Forged Products segments due to weak demand from the Aerospace and Power Generation markets. Total Aerospace sales increased 6% compared to fiscal 2003 primarily due to the acquisition of SPS. As a percent of total sales, fiscal 2004 Aerospace sales remained flat at 54% compared to fiscal 2003. Power Generation sales dropped 25 percent from fiscal 2003 levels, and declined from 23 percent of total sales in fiscal 2003 to 16 percent of total sales in fiscal 2004. Sales to the Fluid Management market increased 9 percent from fiscal 2003, and increased from 12 percent of total sales in fiscal 2003 to 13 percent of total sales in fiscal 2004. Sales to the General Industrial and Other markets grew by 20 percent, and the Automotive market grew by over 300%, primarily due to the acquisition of SPS.

    Cost of goods sold was $1,679.1 million, or 77 percent of sales, in fiscal 2004 as compared to $1,586.7 million, or 76 percent of sales, in fiscal 2003. The slight increase in the percentage reflects the impact of declining leverage from lower sales volume, higher depreciation and pension expenses, increased raw material costs and higher costs associated with SPS, partially offset by strong performance improvements throughout the Company, most significantly within the Industrial Products segments.

    Selling and administrative expenses were $204.0 million, or 9 percent of sales, in fiscal 2004 compared to $180.1 million, or 9 percent of sales, in fiscal 2003. The flat year over year percentage was due to significant cost reductions throughout the Company, offset by the negative impact of the lower sales volume and the addition of SPS, which has a higher percentage of selling and administrative expenses compared to PCC's base businesses.

    Net income from continuing operations for fiscal 2004 was $135.5 million, or $2.35 per share (diluted), which included restructuring and asset impairment charges in the second and fourth quarters totaling $0.16 per share and other expense associated with financing the SPS acquisition of $0.12 per share. By comparison, net income from continuing operations for fiscal 2003 was $161.1 million, or $3.04 per share (diluted), which included restructuring charges in the second and fourth quarters totaling $0.28 per share, offset by benefits from insurance settlements in the second quarter of $0.17 per share and favorable tax settlements in the fourth quarter of $0.11 per share. Fiscal 2004 net income after discontinued operations was $117.9 million, or $2.05 per share (diluted), compared with $124.3 million, or $2.35 per share (diluted) in fiscal 2003.

Business acquisitions

    On December 9, 2003, PCC acquired 100 percent of the outstanding shares of common stock of SPS Technologies, Inc. The results of SPS' operations have been included in the consolidated financial statements since that date. The acquisition of SPS is expected to strengthen and build upon the Company's core businesses, technologies and customer relationships. In addition, SPS' complementary manufacturing processes provide the Company with opportunities to enhance efficiencies and reduce costs throughout SPS, resulting in anticipated improvements in operating margins. The aggregate purchase price was $728.8 million, which included $294.2 million of cash, PCC common stock valued at $425.1 million and $9.5 million of cash paid for transaction fees. In addition, SPS paid $39.3 million for change of control payments and transaction fees as of the close of the transaction. The value of the 9.3 million shares of PCC common stock issued in connection with the acquisition was determined based on the quoted market price of PCC's common stock on and around the date of the close of the transaction.

    SPS is a supplier of fasteners and other metal products to the aerospace, automotive, and general industrial markets. SPS' former Specialty Materials and Alloys group operates as part of the Investment Cast Products segment. A new segment, Fastener Products, comprises most of SPS' former Aerospace Fasteners and Engineered Fasteners groups. SPS' former tool group operates as part of the Industrial Products segment. In addition, three former SPS businesses–Magnetics, Mohawk, and Dacar–were classified as held for sale in the third quarter, and their results are included in discontinued operations.

Discontinued operations

    In the second quarter of fiscal 2004, the Company incurred asset impairment and disposal charges associated with its decision to sell Newmans, a valve distribution company within the Fluid Management Products segment. It was determined that Newmans' distribution business did not fit with PCC's manufacturing-focused operations and was not performing to the Company's expectations. The Newmans business was sold in the third quarter of fiscal 2004.

    In the third quarter of fiscal 2004, three businesses acquired in the SPS transaction–Magnetics, Mohawk, and Dacar–were classified as held for sale and their results were included in

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discontinued operations. They were classified as discontinued operations because they were deemed to be non-core to the Company and do not meet PCC's long-term strategy. PCC is currently marketing the operations for sale.

    In fiscal 2003, PCC incurred charges associated with the closure or sale of certain businesses within its Fluid Management Products and Industrial Products segments. The PCC Olofsson and Eldorado machine businesses were closed and the Eldorado gundrill tooling business was sold. In addition, the Company sold its controlling interest in Design Technologies International ("DTI") and certain intangible assets of Olofsson to minority shareholders of DTI. The closure or sale of these operations was in response to a steady and continual decline in the machine tool industry over the past several years. In addition, PCC closed STW Composites ("STW") as it was deemed to be a non-core business to PCC. PCC also entered into agreements to sell Barber Industries and Fastener Engineers & Lewis Machine ("FELM") and began actively marketing PCC Superior Fabrication for sale in the fourth quarter. Barber Industries and FELM were both sold during the first quarter and PCC Superior Fabrication was sold in the fourth quarter of fiscal 2004. These businesses did not fit with the Company's long-term strategy for profitable growth.

    Olofsson, Eldorado, DTI, STW, Superior Fabrication, FELM, Barber and Newmans each meet the criteria as a component of an entity under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Accordingly, any operating results of these businesses are presented in the Company's Consolidated Statements of Income as discontinued operations, net of income tax, and all prior periods have been reclassified.

    In addition, the Company recorded disposal expenses in fiscal 2004 and fiscal 2003 totaling $19.2 million and $42.4 million, respectively, related to the write-down of remaining inventory and property, plant and equipment to fair value less cost to sell, the write-down of accounts receivable and other current assets to net realizable value, and incremental costs directly related to the closure or sale of the businesses, such as pension, severance and lease termination costs.

Restructuring, asset impairment and other non-recurring charges

    The following table provides significant components of amounts recorded in the Consolidated Statements of Income related to the Company's restructuring and asset impairment charges:

    The following table provides a rollforward of amounts included in accrued liabilities for restructuring reserves:

    During fiscal 2004, PCC recorded provisions for restructuring and impairment of long-lived assets totaling $13.9 million. The tax-effected impact of these charges was $9.2 million, or $0.16 per share (diluted). These charges are summarized below:

    The Company recorded $8.5 million of restructuring charges in the second quarter of fiscal 2004 primarily for severance associated with headcount reductions at PCC's investment castings operations in the United Kingdom and the Company's forging operations in the United Kingdom and Houston, Texas. The reductions were in response to reduced demand for commercial aerospace and industrial gas turbine products. The restructuring plans provided for termination of approximately 435 employees. The tax-effected impact of these charges totaled $5.7 million, or $0.10 per share (diluted).

    The Company recorded $3.2 million of restructuring charges in the fourth quarter of fiscal 2004 to provide for severance associated with the consolidation of the Reed-Rico thread-rolling facility in Holden, Massachusetts, into the newly acquired SPS thread-rolling operations in Shannon, Ireland, further consolidation of the European valve production operations within the Fluid Management Products segment and severance associated with headcount reductions at certain domestic operations within the Fluid Management Products segment. The restructuring plans called for termination of approximately 250 employees through the second quarter of fiscal 2005. The tax-effected impact of these charges totaled $2.1 million, or $0.04 per share (diluted).

    In conjunction with the consolidation of the Reed-Rico and SPS thread-rolling operations, redundant equipment at Reed-Rico was written down to net realizable value, resulting in an impairment charge of $2.2 million. The tax-effected impact of these charges totaled $1.4 million, or $0.02 per share (diluted).

    Taking into consideration the current uncertainties in the markets served by the Company, PCC continuously assesses its cost structure to ensure that operations are properly sized for prevailing market conditions. Based on the Company's most recent assessment, there are no current plans to restructure operations in fiscal 2005.

Other expense (income)

    Other expense of $11.2 million was recorded in the third quarter of fiscal 2004 to reflect the write-off of unamortized bank fees ($2.8 million) from early termination of bank credit facilities and the termination of an interest rate swap ($8.4 million) associated with debt refinancing, both in connection with the SPS acquisition.

Outlook

    The Company expects that Aerospace sales will improve slightly in fiscal 2005 principally due to increased deliveries of commercial aircraft and higher sales of aftermarket spares. The Power

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Generation market will continue to decline in fiscal 2005 due to lower sales of industrial gas turbine components in North America, partially offset by the impact of higher demand in Asia, market share gains, requirements for IGT spares, and higher sales of seamless pipe. Other markets served by the Company are expected to be relatively flat, or slightly improved from fiscal 2004. Overall sales are expected to grow by approximately 20-25 percent from fiscal 2004, primarily due to a full year of results from the SPS acquisition. Excluding the sales contributed by SPS, sales will be up slightly year-over-year. Operating margins in the Company's base businesses are expected to have modest improvement over fiscal 2004 levels due to the benefit of restructuring activities taken during the past year, coupled with continued cost take-outs throughout the Company and the slightly higher sales levels. Operating margins at SPS are also expected to improve due to continued realization of synergies.

Financial results by segment

    PCC has organized the Company's business segments along its five major product lines and reports financial results in the following five segments: Investment Cast Products, Forged Products, Fastener Products, Fluid Management Products and Industrial Products. Operating income amounts discussed below exclude restructuring and asset impairment charges.

    To facilitate comparisons with fiscal 2003, the following segment operating income amounts reported for fiscal 2002 have been adjusted to account for the impact of SFAS No. 142 "Goodwill and Other Intangible Assets."

Investment Cast Products

    The Investment Cast Products segment includes PCC Structurals, PCC Airfoils, and the newly acquired SPS Specialty Materials and Alloys Group ("SMAG"). These businesses manufacture investment castings, or provide materials and alloys, for aircraft engines, industrial gas turbine (IGT) engines, airframes, armaments, medical prostheses and other industrial applications.

Fiscal 2004 compared with fiscal 2003

    Investment Cast Products reported fiscal 2004 sales of $1,042.8 million and operating income of $190.4 million, or 18 percent of sales. Fiscal 2004 sales decreased 3 percent from the prior year's $1,071.3 million, and operating income decreased by 10 percent over the prior year's $210.7 million, or 20 percent of sales. The addition of SPS' SMAG businesses in December 2003 contributed $40.4 million of sales and $6.4 million of operating income, or 16 percent of sales, to fiscal 2004 results. The overall sales decline compared to fiscal 2003 was due to continued weakness in both the Aerospace and Power Generation markets, combined with the impact of price reductions. Despite the sales decline and higher raw material costs compared to fiscal 2003, the Investment Cast Products segment was able to achieve solid operating margins due to continued aggressive cost takeout throughout its operations and improvements in manufacturing performance.

    The Investment Cast Products segment anticipates higher sales associated with the Aerospace market, partially offset by continued declines in the Power Generation market in fiscal 2005. Operating margins are expected to improve in fiscal 2005 as a result of leverage from the higher sales volume and continued improvements in operating efficiency.

Fiscal 2003 compared with fiscal 2002

    Investment Cast Products reported fiscal 2003 sales of $1,071.3 million and operating income of $210.7 million, or 20 percent of sales. Fiscal 2003 sales decreased 20 percent from the prior year's $1,332.0 million, and operating income decreased by 16 percent over the prior year's $251.8 million, or 19 percent of sales. The sales decline was due to weakness in both the Aerospace and Power Generation markets, combined with the impact of price reductions. Despite the significant decline, the Investment Cast Products segment was able to improve operating margins year over year due to cost takeouts throughout its operations.

Forged Products

    The Forged Products segment consists of the forging operations of Wyman-Gordon. Forged Products' sales to the Aerospace and Power Generation markets are derived primarily from the same large engine customers served by the Investment Cast Products segment, with additional aerospace sales going to manufacturers of landing gear and other airframe components. The Forged Products segment also produces seamless pipe and other products for the oil and gas industry.

Fiscal 2004 compared with fiscal 2003

    Forged Products reported sales of $502.4 million for fiscal 2004, a decrease of $64.5 million, with operating income of $64.7 million, or 13 percent of sales, a decrease of $16.8 million from the fiscal 2003 level of $81.5 million, or 14 percent of sales. The sales decline was due to reduced demand for commercial aerospace products as well as products for the Power Generation market, partially offset by increased demand for military aerospace products. Operating margins within this segment are significantly impacted by the deleveraging effect of the sales decline due to the capital-intensive nature of the forging business. Higher raw material costs, which represents a significant percentage of overall costs, as well as price concessions, also reduced operating margins. Cost reductions and benefits from settlement of a supply agreement between Wyman-Gordon and Timet helped to partially offset the impact of these items.

    Sales in fiscal 2005 within this segment are expected to benefit from the recovering Aerospace market and anticipated growth in extruded pipe sales, partially offset by continued weakness in the industrial gas turbine market. Operating income will benefit from the slightly higher sales and continued improvements in operating efficiency.

Fiscal 2003 compared with fiscal 2002

    Forged Products reported sales of $566.9 million for fiscal 2003, a decrease of $131.0 million, with operating income of $81.5 million, or 14 percent of sales, a decrease of $47.5 million from the fiscal 2002 level of $129.0 million, or 18 percent of sales. The sales decline was due to reduced demand for commercial

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aerospace products as well as products for the Power Generation market, partially offset by military aerospace sales. The operating margins were impacted by the deleveraging effect of the sales decline in this capital-intensive segment. Cost reductions, market share gains and improved value stream management have helped to mitigate the impact of the lower sales volume.

Fastener Products

    The Fastener Products segment includes most of SPS' former Aerospace Fasteners and Engineered Fasteners groups that were acquired in December 2003. The businesses that comprise this segment produce fasteners, fastener systems and components for critical applications in the aerospace, automotive and industrial machinery markets.

Fiscal 2004 compared with fiscal 2003

    The Fastener Products segment recorded sales of $181.3 million of sales and operating income of $13.5 million, or 7 percent of sales, for the year, which included approximately 17 weeks of activity since PCC acquired SPS on December 9, 2003. Since its acquisition, the Fastener Products segment has rapidly achieved cost reductions and synergies, while also increasing market share in airframe and aircraft engine sectors and opening-up share gain opportunities with major automotive customers.

    The Fastener Products segment will continue to benefit from additional opportunities for cost reductions and synergies in fiscal 2005 and beyond.

Fiscal 2003 compared with fiscal 2002

    The Fastener Products segment was not part of the Company in fiscal 2003 or 2002.

Fluid Management Products

    The Fluid Management Products segment includes all of the businesses of PCC Flow Technologies. The businesses that comprise this segment manufacture an extensive range of fluid management products under various brand names, which include PACO, Johnston and Crown pumps for water and wastewater treatment, new construction, energy, and other applications; E/One grinder pumps for low-pressure sewer systems; and General Valve, TBV, TECHNO, PCC Ball Valves, Sterom, AOP, Baronshire, Valtaco, Reiss, Technova, Wouter Witzel, CW and ConVey valves for oil and gas, fuel distribution, food processing, severe services and other applications.

Fiscal 2004 compared with fiscal 2003

    Fiscal 2004 sales for Fluid Management Products were $308.7 million, as compared to $310.9 million in fiscal 2003, a decrease of 1 percent. The segment's operating income decreased from $32.5 million, or 10 percent of sales, in fiscal 2003 to $31.0 million, or 10 percent of sales, in fiscal 2004. The slight decline in sales was due to lower sales in the Power Generation market and oil and gas sectors, partially offset by higher sales in the municipal and chemical processing sectors. Operating margins were flat despite the lower sales volume as a result of lower costs from offshore production and additional purchasing leverage, coupled with an improved cost structure resulting from restructuring efforts completed during fiscal 2003 and 2004.

    Overall, the Fluid Management Products segment is expected to benefit from an increased backlog and modest revenue growth in fiscal 2005. Operating margins are expected to improve slightly as the year progresses due to the higher volume and the impact of low cost manufacturing facilities in China and Romania. With an improved cost structure, the segment is positioned to penetrate new and existing markets.

Fiscal 2003 compared with fiscal 2002

    Fiscal 2003 sales for Fluid Management Products were $310.9 million, as compared to $298.7 million in fiscal 2002, an increase of 4 percent. The segment's operating income increased from $16.1 million, or 5 percent of sales, in fiscal 2002 to $32.5 million, or 10 percent of sales, in fiscal 2003. The sales improvement was due to higher sales in the oil and gas and municipal sectors, partially offset by lower sales in the power generation and chemical sectors. Operating margins improved due to the higher sales volume, coupled with increased offshore production, additional purchasing leverage and manufacturing efficiencies.

Industrial Products

    The Industrial Products segment includes J&L Fiber Services, Advanced Forming Technology (AFT) and the Precision Tool Group. J&L Fiber Services produces refiner plates and screen cylinders for use in the pulp and paper industry and rebuilds refiner equipment that is used in the pulping process. AFT manufactures metal-injection-molded, metal-matrix-composite, and ThixoFormed™ components for numerous industrial applications. The PCC Precision Tool Group, which consists of Reed-Rico and the SPS tool group, manufactures a broad range of cold-forming header and threader tools and dies.

Fiscal 2004 compared with fiscal 2003

    The Industrial Products segment's sales increased by 9 percent, from $127.5 million in fiscal 2003 to $139.5 million in fiscal 2004, and its operating income increased from $13.0 million, or 10 percent of sales, to $18.9 million, or 14 percent of sales. The increase in sales was due to the addition of SPS' tool group, which contributed $9.4 million of sales, as well as improved market conditions in the automotive sector and additional market penetration by the base businesses. Operating margins benefited from the higher volume, coupled with new product introductions, increased productivity and successful ramp-up of production at low-cost manufacturing facilities in Hungary and India, partially offset by the impact of adding SPS businesses, which have lower margins.

    In fiscal 2005, the Industrial Products segment should continue to benefit from the consolidation of Reed-Rico and the SPS tooling businesses, which will increase PCC's worldwide share of the fastener tooling market. Operating margins are expected to increase as a result of improved cost structures and leverage from higher volume.

Fiscal 2003 compared with fiscal 2002

    The Industrial Products segment's sales increased by 7 percent, from $119.2 million in fiscal 2002 to $127.5 million in fiscal 2003, and its operating income increased from $6.1 million, or 5 percent of sales, to $13.0 million, or 10 percent of sales. The increase in sales was due to improved market conditions in the general industrial market and increased market share in the electronics and pulp and paper sectors. Operating margins benefited from the higher volume, coupled with increased productivity and successful start-up of new low cost manufacturing facilities in Hungary and India.

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Interest and taxes

    Net interest expense in fiscal 2004 was $54.1 million, as compared with $56.4 million in fiscal 2003. The lower interest expense resulted from lower debt levels and lower effective borrowing rates during fiscal 2004.

    The effective tax rate for the year was 36 percent, compared with 34 percent in the prior year. The fiscal 2003 rate included $5.7 million of favorable tax settlements, decreasing the effective tax rate by 3 percentage points. The fiscal 2004 rate benefited from the impact of non-recurring charges related to financing the SPS acquisition, as well as the favorable resolution of certain tax contingencies.

Liquidity and capital resources

    Total assets of $3,756.2 million at March 28, 2004, represented a $1,289.0 million increase from the $2,467.2 million balance at March 30, 2003, primarily due to the acquisition of SPS, which added $1,227.4 million of assets. Total capitalization at March 28, 2004, was $2,792.4 million, consisting of $1,077.5 million of debt and $1,714.6 million of equity. The debt-to-capital ratio decreased from 39.5% at the end of fiscal 2003 to 38.6% at March 28, 2004.

    Cash requirements for the year included $280.9 million for the acquisition of SPS, $95.1 million of pension contributions ($79.0 million were voluntary), $65.5 million for capital expenditures, $25.5 million for increased working capital, $8.4 million of swap termination fees and $11.2 million of loan fees, and $6.4 million for dividends. These requirements were funded by $135.5 million of net income from continuing operations adjusted for $88.2 million of depreciation and amortization, $37.6 million of deferred income taxes and $2.2 million of asset impairment charges, $59.5 million from the sale of common stock through ESPP purchases and stock option exercises, $25.1 million of proceeds from the sale of Barber, FELM, Newmans and PCC Superior Fabrication, $9.9 million from discontinued operations and $15.7 million from other activities. The shortfall was funded by $170.9 million of net borrowings, which resulted in an ending cash balance at March 28, 2004 of $80.3 million, up $51.6 million from the fiscal 2003 ending balance.

    Capital spending of $65.5 million in fiscal 2004 principally provided for maintenance, expansion and cost reduction projects. Fiscal 2005's capital spending, which is expected to be higher than spending in fiscal 2004, principally provides for additional capital expenditures associated with SPS, coupled with projects to reduce costs, maintain production and provide for improved safety throughout the company.

    Management believes that the Company can fund requirements for working capital, capital spending, cash dividends, scheduled repayment of debt and potential acquisitions from cash generated from operations, borrowing from existing or new bank credit facilities, issuance of public or privately placed debt securities, or the issuance of equity instruments.

Contractual obligations and commercial commitments

    The Company is obligated to make future payments under various contracts such as debt agreements and lease agreements. The following table represents the significant contractual cash obligations of PCC as of March 28, 2004 (in millions):

Critical accounting policies

    The Company has identified the policies below as critical to PCC's business operations and the understanding of its results of operations. The impact and any associated risks related to these policies on PCC's business operations are discussed throughout the Management's Discussion and Analysis where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other significant accounting policies, see the Notes to the Consolidated Financial Statements of this Annual Report. Note that the preparation of this Annual Report requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates.

Revenue recognition

    The Company recognizes revenue when the earnings process is complete. This generally occurs when products are shipped to the customer in accordance with the contract or purchase order, ownership and risk of loss have passed to the customer, collectibility is reasonably assured, and pricing is fixed and determinable. In instances where title does not pass to the customer upon shipment, the Company recognizes revenue upon delivery or customer acceptance, depending on terms of the sales agreement. Service sales, representing aftermarket repair and maintenance and engineering activities, are recognized as services are performed.

Accounts receivable reserve

    The Company evaluates the collectibility of its accounts receivable based on a combination of factors. In circumstances where PCC is aware of a customer's inability to meet its financial obligations (e.g., bankruptcy filings), a specific reserve for bad debts against amounts due is recorded to reduce the receivable to the amount the Company reasonably expects will be collected. In addition, the Company records reserves for bad debts based on estimates developed by using standard quantitative measures based on historical write-offs and current economic conditions. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Although the Company considers these balances adequate and proper, changes in economic conditions in the markets in which the Company operates could have a material effect on the required reserve balances.

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Valuation of inventories

    All inventories are stated at the lower of the cost to purchase or manufacture the inventory or the current estimated market value of the inventory. Cost for work in process and metal inventories at a significant number of the Company's operations is determined on a last-in, first-out ("LIFO") basis. The average inventory cost method is utilized for most other inventories. The Company regularly reviews inventory quantities on hand and records a provision for excess or obsolete inventory equal to the difference between the cost of the inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required. Therefore, although management makes every effort to ensure the accuracy of forecast demand, any significant unanticipated changes in demand could have a significant impact on the value of PCC's inventories and reported operating results.

Goodwill and acquired intangibles

    From time to time, the Company acquires businesses in purchase transactions that typically result in the recognition of goodwill and other intangible assets, which may affect the amount of future period amortization expense and possible impairment charges. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect the consolidated financial statements.

Recently issued accounting standards

    In December 2003, the Financial Accounting Standards Board ("FASB") issued FIN No. 46R, "Consolidation of Variable Interest Entities," which clarifies the application of Accounting Research Bulletin No. 51, "Consolidated Financial Statements," relating to consolidation of certain entities. FIN No. 46R requires identification of the Company's participation in variable interest entities ("VIE"), which are defined as entities with a level of invested equity that is not sufficient to fund future activities to permit them to operate on a standalone basis, or whose equity holders lack certain characteristics of a controlling financial interest. For entities identified as VIE, FIN No. 46R sets forth a model to evaluate potential consolidation based on an assessment of which party to the VIE, if any, bears a majority of the exposure to its expected losses, or stands to gain from a majority of its expected returns. FIN No. 46R also sets forth certain disclosures regarding interests in VIE that are deemed significant, even if consolidation is not required. This interpretation applies immediately to VIE created or in which a company obtains an interest after January 31, 2003. For interests in VIE acquired before February 1, 2003, FIN No. 46R applies in the first interim period beginning after June 15, 2003. The adoption of FIN No. 46R did not have a material impact on the Company's financial position or results of operations.

    On April 30, 2003, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies the guidance on (1) derivative instruments (including derivative instruments embedded in other contracts) and (2) hedging activities that fall within the scope of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 also amends certain other existing pronouncements, which will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS No. 149 is effective (1) for contracts entered into or modified after June 30, 2003, with certain exceptions, and (2) for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on the Company's financial position or results of operations.

    On May 15, 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS No. 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity or "mezzanine" equity, by now requiring those instruments to be classified as liabilities in the statement of financial position. SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. SFAS No. 150 affects an entity's classification of the following freestanding instruments: a) mandatorily redeemable instruments, b) financial instruments to repurchase an entity's own equity instruments, c) financial instruments embodying obligations that the issuer must or could choose to settle by issuing a variable number of its shares or other equity instruments based solely on (i) a fixed monetary amount known at inception or (ii) something other than changes in its own equity instruments, d) SFAS No. 150 does not apply to features embedded in a financial instrument that is not a derivative in its entirety. The adoption of this statement did not impact the Company's results of operations or financial position.

    In December 2003, the FASB released revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." The revised standard provides required disclosures for pensions and other postretirement benefit plans and is designed to improve disclosure transparency in financial statements. The revised standard replaces existing pension disclosure requirements. The Company has adopted the disclosure requirements of SFAS No. 132 in its fiscal 2004 financial statements. See the pension and other postretirement benefit plans footnote.

    In December 2003, the staff of the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 104 ("SAB 104"), "Revenue Recognition," which rescinded accounting guidance contained in SAB 101, "Revenue Recognition in Financial Statements," and the SEC's "Revenue Recognition in Financial Statements Frequently Asked Questions and Answers." The adoption of SAB 104 did not have a material impact on the Company's revenue recognition policies.

Forward-looking statements

    Information included within this Form 10-K describing the projected growth and future results and events constitutes forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results in future periods may differ materially from the forward-looking statements because of a number of risks and uncertainties, including but not limited to fluctuations in the aerospace, power generation, fluid management, automotive and other general industrial cycles; the relative success of the Company's entry into new markets; competitive pricing; the financial viability of the Company's significant customers; the availability and cost of energy, materials, supplies, and insurance; the cost of pension benefits; equipment failures; relations with the Company's employees; the Company's ability to manage its operating costs and to integrate acquired

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businesses in an effective manner; governmental regulations and environmental matters; risks associated with international operations and world economies; the relative stability of certain foreign currencies; and implementation of new technologies and process improvements. Any forward-looking statements should be considered in light of these factors. The Company undertakes no obligation to publicly release any forward-looking information to reflect anticipated or unanticipated events or circumstances after the date of this document.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    At various times, the Company uses derivative financial instruments to limit exposure to changes in foreign currency exchange rates, interest rates and prices of strategic raw materials. Fluctuations in the market values of such derivative instruments are generally offset by reciprocal changes in the underlying economic exposures that the instruments are intended to hedge. Because derivative instruments are used solely as hedges and not for speculative trading purposes, they do not represent incremental risk to the Company. For further discussion of derivative financial instruments, refer to the "Summary of Significant Accounting Policies," "Fair Value of Financial Instruments" and "Financing Arrangements" sections in "Item 8. Notes to the Consolidated Financial Statements."

Interest Rate Risk

    The Company has variable rate debt obligations that expose the Company to interest rate risk. During the third quarter of fiscal 2004, the Company terminated an interest rate swap that fixed the interest rate on a portion of the outstanding borrowings under its terminated bank credit facility. If market rates had averaged 10 percent higher than actual levels in either fiscal 2004 or fiscal 2003, the effect on the Company's interest expense and net income, after considering the effects of the interest rate swap contracts and interest rate cap, would not have been material.

Foreign Currency Risk

    The majority of the Company's revenue, expense and capital purchasing activities are transacted in U.S. dollars; however, the Company is exposed to fluctuations in foreign currencies for transactions denominated in other currencies. As discussed in the "Summary of Significant Accounting Policies" note, the Company had foreign currency hedges in place at March 28, 2004 and March 30, 2003 to reduce such exposure. The potential loss in fair value on such financial instruments from a hypothetical 10 percent adverse change in quoted foreign currency exchange rates would not have been material to the financial position of the Company as of the end of fiscal 2004 or fiscal 2003.

Material Cost Risk

    As discussed in the "Summary of Significant Accounting Policies" note, the Company had entered into long-term supply agreements to fix the purchase price of strategic raw materials at March 28, 2004 and March 30, 2003. In addition, PCC had escalation clauses related to raw material pricing in certain of the Company's contracts at March 28, 2004 and March 30, 2003. If market rates had averaged 10 percent higher than actual levels in either fiscal 2004 or 2003, the effect on the Company's cost of sales and net earnings, after considering the effects of these agreements and contracts, would not have been material.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Statements of Income

See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets

See Notes to Consolidated Financial Statements.

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Consolidated Statements of Cash Flows