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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 29, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ________________
COMMISSION FILE NO. 1-10348
--------------------------
PRECISION CASTPARTS CORP.
(Exact name of registrant as specified in its charter)
OREGON 93-0460598
(State or other jurisdiction (I.R.S. Employer
of Identification No.)
incorporation or organization)
4650 S.W. MACADAM AVE.,
SUITE 440 PORTLAND, OR 97201 97201-4254
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (503) 417-4800
--------------------------
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
COMMON STOCK, NEW YORK STOCK EXCHANGE
WITHOUT PAR VALUE
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. / /
The aggregate market value of voting stock held by non-affiliates of the
registrant as of June 19, 1998 was $1,307,020,094.
As of the close of business on June 19, 1998, Registrant had 24,344,961
shares of Common Stock, without par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit 13, the "Financial Section of the 1998 Annual Report to Shareholders
of Precision Castparts Corp." for the year ended March 29, 1998 is incorporated
by reference in Parts II and IV and appended hereto.
Portions of the Registrant's Proxy Statement dated June 26, 1998 in
connection with the 1998 Annual Meeting of Shareholders are incorporated by
reference in Part III.
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FORM 10-K
ANNUAL REPORT
TABLE OF CONTENTS
PAGE
-----
PART I
Item 1. BUSINESS..................................................................................... 1
Products and Markets......................................................................... 1
Sales and Distribution....................................................................... 8
Backlog...................................................................................... 9
Competition.................................................................................. 9
Research and Development..................................................................... 10
Employees.................................................................................... 10
Patents and Trade Secrets.................................................................... 10
Materials and Supplies....................................................................... 10
Government Regulations....................................................................... 11
International Operations..................................................................... 11
Environmental Compliance..................................................................... 11
Forward Looking Statements................................................................... 12
Item 2. PROPERTIES................................................................................... 13
Item 3. LEGAL PROCEEDINGS............................................................................ 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................................... 13
Executive Officers of the Registrant......................................................... 14
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........................ 15
Item 6. SELECTED FINANCIAL DATA...................................................................... 15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS........ 15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................. 15
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT........................................... 16
Item 11. EXECUTIVE COMPENSATION....................................................................... 16
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................... 16
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................... 16
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.............................. 17
Signatures................................................................................... 19
Financial Statement Schedule................................................................. 20
Report of Independent Accountants............................................................ 21
PART I
ITEM 1. BUSINESS
Precision Castparts Corp. ("PCC" or the "Company") is a worldwide
manufacturer of complex metal components and products. The Company is the market
leader in manufacturing large, complex structural investment castings and is the
leading manufacturer of airfoil castings used in jet aircraft engines. In
addition, the Company has expanded into the industrial gas turbine, fluid
management, industrial metalworking tools and machines and other metal products
markets.
PRODUCTS AND MARKETS
The Company's manufacturing of complex metal components and products
includes operations in four principal business areas: precision investment
castings, fluid management products, industrial metalworking tools and machines,
and other metal products.
PRECISION INVESTMENT CASTINGS
The Company is the market leader in manufacturing large, complex structural
investment castings and is the leading manufacturer of airfoil castings used in
jet aircraft engines. The Company manufactures investment castings for every
available jet aircraft engine program in production or under development by its
key customers. The Company is leveraging its experience and expertise in large,
complex structural and airfoil investment castings to manufacture castings for
Industrial Gas Turbine ("IGT") engines used for power generation. In addition,
the Company makes investment castings for use in the automotive, medical
prostheses, satellite launch vehicle and general industrial markets and is
expanding into the airframe and rocket markets.
Because of the complexity of the manufacturing process and the application
of proprietary technologies, the Company believes it currently is the only
manufacturer that can consistently produce the largest complex structural
investment castings in quantities sufficient to meet its customers' quality and
delivery requirements. The Company's emphasis on low cost, high quality products
and timeliness of delivery has enabled it to become one of the leading suppliers
of structural and airfoil castings for jet aircraft engines and to increase its
market share of IGT castings. Investment castings accounted for approximately 62
percent of the Company's net sales in fiscal 1998, with a majority of these
products sold to the aerospace market.
The Company's 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
involves the creation of a wax pattern of the part to be cast, along with
pathways through which molten metal flows into the ceramic mold; formation of a
ceramic shell around the wax pattern followed by removal of the wax from the
ceramic shell by melting and draining the wax; pouring of molten metal into the
ceramic shell; shell removal; and final processing and inspection.
Trends in the commercial aerospace market are a critical determinant of
demand for the Company's precision investment casting products. Beginning in
1995, demand for investment castings strengthened, primarily due to increased
demand from the commercial aerospace industry, which had been in a cyclical
downturn since 1991. The Company believes the principal causes of the recent
increase in new aircraft orders include increased demand for air travel, the
recent profitability of U.S. commercial airlines, which is being driven by
increased load factors, and government Stage III noise regulations that require
airlines to modernize their fleets. Airlines are responding to these regulations
by retrofitting existing aircraft or purchasing new aircraft.
Large jet aircraft engines are manufactured by a small number of suppliers,
including General Electric ("GE"), Pratt & Whitney, Rolls-Royce ("R-R"), and
several joint ventures. As a result, the Company
1
believes a high level of customer service and strong long-term customer
relationships will continue to be important to achieving its goals. The Company
has been supplying castings for jet engines to GE for more than 25 years and has
been supplying Pratt & Whitney with castings for more than 20 years for its
military jet engines and more than 15 years for its commercial jet engines. In
addition, the Company has supplied small structural investment castings to R-R
for more than 10 years and has more recently begun supplying R-R with large,
structural castings for use in its new Trent series of aircraft jet engines. As
the Company has been able to cast larger and more complex parts, manufacturers
of large jet aircraft engines have made increasing use of the Company's
structural castings.
The following table identifies major jet aircraft engines currently in
production that incorporate investment castings produced by the Company.
PRATT &
GE WHITNEY R-R JOINT VENTURES
Boeing
717 BR715(1)
737-300/400/500 CFM56-3(2)
737-NG CFM56-7(2)
747-400 CF6-80C2 PW4000 RB211-524
757 PW2037 RB211-535
767-300/300ER CF6-80C2 PW4000 RB211-524
Trent 800,
777 GE90 PW4084, 4090, 8104
4098
C-17 F117
F-15 F100
Airbus Industrie
A300-600 CF6-80C2 PW4000
A310-300 CF6-80C2 PW4000
A319/A320/A321 CFM56-5A/B(2)
V2500(3)
A330 CF6-80E1 PW4000 Trent 700
A340-200/300 CFM56-5C(2)
A340-500/600 Trent 500
Lockheed Martin
F-16 F110 F100
F-22 F119
Northrop Grumman
F/A-18 A/B F404
F/A-18 E/F F414
- ------------------------
(1) Represents engines produced by BMW Roll-Royce AeroEngines, a joint venture
of BMW and R-R.
(2) Represents engines of CFM International ("CFMI"), a joint venture of GE and
Snecma, a major French aerospace company. CFMI has used the Company's
castings in its CFM56 jet engines for more than 20 years.
(3) Represents engines produced by International Aero Engines ("IAE"), a joint
venture of Pratt & Whitney, R-R, Motoren-und Turbinen-Union, Fiat Avio and
Japanese Aero Engine Corporation.
2
AEROSPACE STRUCTURAL CASTINGS
The Company's structural castings business includes the largest diameter
stainless steel, nickel-based superalloys 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, combustion
and turbine sections of the jet aircraft engine, where strength and structural
integrity are critical. Structural investment castings are sold primarily as
original equipment to jet aircraft engine manufacturers.
The Company believes that trends in the manufacturing of aircraft jet
engines will continue to increase PCC's revenues 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 these extreme operating
conditions and provide an optimum strength-to-weight ratio. Many of these alloys
are particularly suited to investment casting. 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 the considerable weight
savings. Titanium is an exceptionally difficult metal to cast because of its
reactivity to other elements. The Company, however, has developed the necessary
technology and manufacturing processes to cast large, complex investment
castings in titanium alloys. Many of these new generation engines, which are
expected to be built through the next decade and beyond, make significantly
greater use of the Company's products than did prior engine designs. The Company
manufactures structural investment castings for all three jet aircraft engines
used on the newer Boeing 777 aircraft, and is the sole supplier of structural
investment castings for the new GE90 jet engine. PCC also manufactures, for the
new R-R Trent series of engines, the intermediate case and the tail bearing
housing. These are the largest structural investment castings for jet aircraft
engines in the world.
AEROSPACE AIRFOIL CASTINGS
The Company manufactures precision cast airfoils, which include the
stationary vanes and rotating blades used in the turbine section of aircraft jet
engines. This engine section is considered the "hot" section, where temperatures
may exceed 2,400 degrees Fahrenheit. These conditions require use of superalloys
and special casting techniques to manufacture airfoil castings with internal
cooling passageways that provide both high performance and longer engine life.
The Company uses various casting technologies to produce its turbine
airfoils. Conventional casting processes are employed to produce equiaxed
airfoil castings, in which the metal grains are oriented randomly throughout the
casting. A more advanced process enables the Company 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 the Company 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, and the
turbine sections of these engines must work harder and burn hotter, the major
aircraft engine manufacturers have increasingly been designing their engines
with DS and SX blades. The DS and SX cast airfoils, with their complex cooling
passages, have been instrumental in enabling these engines to operate at gas
temperatures frequently in excess of 2,400 degrees Fahrenheit. SX cast airfoils
are used both in new and redesigned engines, particularly in jet engines used in
military applications where performance requirements are higher and blade life
is shorter than in commercial engines.
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
3
components have shorter useful lives than structural investment castings and are
replaced periodically during engine maintenance. As a result, the Company's
sales of aerospace airfoil castings are less affected by the cyclical patterns
of the aerospace industry than are the Company's sales of structural investment
castings. The replacement market for aerospace airfoil castings principally
depends on the engine's time in service and the expected life of the airfoil
casting. Based upon estimates provided by its major customers, the Company
believes that approximately 50 percent of its sales of cast airfoils are used as
replacement parts.
INDUSTRIAL GAS TURBINES
In fiscal 1994, the Company began to focus on the manufacture of airfoil
castings for industrial gas turbine engines. The Company targeted this market
because it believes (i) the performance and reliability standards PCC has
developed in the manufacture of aerospace airfoil castings are applicable to the
manufacture of IGT airfoils, (ii) the worldwide market is large, approximately
$500 million, and (iii) the market was principally serviced by a single
supplier. The Company's IGT products consist of airfoil castings used in large,
land-based gas turbines designed for electrical power generation. In addition,
the Company manufactures structural and airfoil castings for aircraft-derivative
gas turbine engines which are used for power generation as well as other land
and marine-based applications. Sales of aircraft-derivative gas turbine products
are reported in the general industrial and energy market area and are not
combined with IGT product sales. See Sales and Distribution section of this
report.
IGT manufacturers have significantly improved the efficiency and reduced the
pollution profiles of industrial gas turbines, principally by incorporating
component-level advances which are included not only in new engines but also in
the refurbishing and upgrading of existing turbines. PCC has leveraged its DS
and SX airfoil casting knowledge from the aerospace market into the IGT market
to produce IGT airfoil blades and vanes better able to withstand the extreme
heat and stresses of the new higher-temperature gas turbines. IGT engines are
built with investment castings that are similar, but generally larger, than
blades and vanes manufactured by the Company for the aerospace market. Because
of their size, IGT airfoils are more difficult to cast than smaller aerospace
airfoils with the same properties.
Since industrial gas turbines are primarily used in electrical power
generation, airfoil casting sales for new industrial gas turbine 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. Gas
turbine power generation has several advantages over other power-generation
methods, such as coal and nuclear-powered facilities, including lower average
capital cost, shorter installation and regulatory approval time, ease of adding
a new industrial gas turbine engine to an existing power plant to increase
output and the clean-burning characteristics of natural gas. The Company
believes these advantages have led to increased demand for gas turbine engines.
OTHER INVESTMENT CASTING PRODUCTS
The Company's strategy for profitable growth also includes the pursuit of
new opportunities for the Company's existing investment casting technology. The
Company has been expanding the application of its investment casting technology
in the automotive, medical prostheses, satellite and general industrial markets
by manufacturing such products as turbocharger wheels, artificial hips and
knees, parts for satellite launch vehicles and impellers for pumps and
compressors. The Company is also expanding into other new markets, such as
airframes and rockets. Recent engineering studies have demonstrated that, in
certain applications, airframe components manufactured from investment castings
surpass aircraft design requirements and have mechanical properties that are
equivalent to forgings. Since castings are traditionally lower cost than
forgings, aircraft manufacturers have begun to show substantial interest in
using investment castings for airframe applications such as aileron and flap
hinges, pylons and wing spurs and ribs. For the rockets market, the Company has
its unique Thermally Controlled Solidification technology. This technology
provides consistent casting capability for thin-walled and cylindrical parts.
4
FLUID MANAGEMENT PRODUCTS
The Company designs, manufactures, markets and services a broad range of
high quality, precision industrial fluid management products, including fluid
handling industrial valves, industrial pumps and fluid measuring instruments.
The Company's finished fluid management products are manufactured primarily from
castings, forging and fabricated steel parts. These products are sold worldwide
to a wide range of end-user markets under well-established brand names,
including: General Valve, NEWCO, TECHNO, Barber, Baronshire, TBV and OIC valves,
Johnston, PACO, E/ONE and Crown pumps, and Water Specialties and Penberthy
measuring instruments.
The Company entered the fluid management market in July 1996 with the
acquisition of NEWFLO, Inc. (now called PCC Flow Technologies, Inc.). Recent
acquisitions, including Crown Pumps, OIC Valves and Baronshire Engineering
Limited, have enabled PCC Flow Technologies to further expand its product lines
and markets. Subsequent to the end of fiscal 1998, the Company continued to
expand its fluid management products and markets by acquiring Environment/One
Corporation and TBV.
The manufacturing process for fluid management products requires knowledge
of multiple metalforming and processing technologies, including casting,
machining, welding, heat treating, assembly and processing of metal components.
Testing procedures, material management and traceability, and quality control
are also important aspects of the Company's operations. Fluid management
products accounted for approximately 20 percent of the Company's net sales in
fiscal 1998 and were sold primarily to the general industrial and energy
markets.
The Company uses its substantial knowledge of international fluid management
technologies, complex metal component manufacturing and its end-user markets to
develop engineered valves, pumps and instruments that the Company believes
provide customer benefits superior to those of other manufacturers. Many of the
products offered by the Company are customized to end-user requirements or
designed for specialized applications. The Company's maintenance, repair and
service centers, extensive distribution network and inventory of products enable
it to provide responsive service and timely deliveries to customers, thereby
enhancing the marketability of the Company's products. The Company believes its
brand names, quality products and responsive service network also lead to repeat
orders, stable demand and customer loyalty.
VALVES
The Company manufactures and markets specialty industrial and general
purpose valves, fittings and flanges, principally for the chemical, refining,
energy, pulp and paper and marine markets. The Company's valve products consist
primarily of multi-turn industrial valves, check valves, quarter turn industrial
ball and plug valves, double block and bleed dual expanding plug valves,
four-way diverter valves and valve operators, stainless steel butterfly valves
and corrosion-resistant titanium ball valves. Many of the Company's valves are
manufactured under contract by ISO 9001-qualified overseas suppliers to precise
industry and end-user standards and specifications. The valve designs are
developed and modified by the Company's engineering staff for particular
applications as determined by market conditions and end-user specification. The
Company markets its valve products under several brand names, including General
Valve, NEWCO, TECHNO, Barber, Baronshire, TBV and OIC. The Company believes its
General Valve positive shut-off, double block and bleed valve and its
Technocheck hinged check valves are among the most technologically advanced
products sold in the fluid control market.
PUMPS
The Company manufactures and markets 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. The Company also supplies repair parts and service for pumps. The
Company's pump products consist primarily of single and double suction
centrifugal pumps,
5
submersible and non-clog pumps, booster pump systems, vertical turbine, mixed
flow and axial flow pumps and grinder pumps. The Company is one of the few pump
manufacturers that produces large vertical pumps over 36 inches in diameter. The
capacities of certain of the Company's pumps extend up to heads of 3,400 feet
and flows up to 230,000 gallons per minute. The Company markets its pump
products under several brand names, including Johnston, PACO, Crown and E/ONE
pumps. The Company believes its Johnston vertical turbine pumps, its PACO
booster systems and "Smart Pumps" and its E/One low pressure sewer systems are
among the leading products sold in the fluid handling market.
INSTRUMENTS
The Company manufactures, markets and distributes propeller meters and fluid
measurement equipment for the municipal, irrigation and industrial markets. The
Company manufactures five types of propeller meters (main line, low pressure,
open flow, vertical flow and high pressure) and three general types of
measurement devices that are used to read, record and transmit data generated by
the meters. The Company's meters and fluid measurement devices are designed to
handle a wide range of fluids, such as fresh or salt water, treated waste water,
diesel and jet fuel, bore hole slurry, light oils, food processing fluids and
slurries, and other liquid and chemical applications. Meters are sold in 44
different models varying in size from 1.5 inches to 120 inches, in service
pressures up to 3,000 pounds per square inch, in flow rates from 4 to 300,000
gallons per minute and in operating temperature ranges from 35 to 350 degrees
Fahrenheit. The Company markets its fluid measurement products under several
brand names, including Water Specialties and Penberthy. The Company believes its
Water Specialties line of propeller meters is one of the leading lines of
propeller meters in the U.S., primarily due to its superior product design and
manufacturing.
SERVICES
The Company maintains 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 the Company's large installed base of fluid management products, as well as
repair and replacement of fluid management products of other manufacturers. The
market for replacement units, repair parts and repair services generally offers
the Company higher margins and is less dependent on industry economic conditions
than the market for equipment for new industrial facilities.
INDUSTRIAL METALWORKING TOOLS AND MACHINES
The Company maintains the number one or two position in its served markets
for industrial metalworking tools and has leading market positions in the
manufacture of metalworking machines for general industrial markets. The Company
entered these markets in March 1995 with the acquisition of Quamco, Inc. (now
called PCC Specialty Products, Inc.). The Company has since increased its
presence in the industrial metalworking tools and machines markets with three
additional acquisitions since 1995. The acquisitions of Olofsson and Astro
Punch, both acquired in fiscal 1997, and PCC Pittler, acquired in fiscal 1998,
complemented the Company's capabilities as a leading manufacturer of highly
engineered industrial metalworking tools and machines.
The Company's industrial metalworking tools and machines include machine
systems used for boring and turning processes primarily in the automotive and
general industrial markets, cold forming dies and related machines primarily
used in the fastener industry, and other metalworking tools and machines used by
industrial manufacturers. The Company believes it has been able to maintain its
leading market positions due to the quality of its products, the continued
development of new technologies to enable the high-speed manufacture of high
quality fasteners, brand name recognition and excellent customer service.
Industrial metalworking tools and machines accounted for approximately 10
percent of the Company's net sales in fiscal 1998 and were sold primarily to the
automotive and general industrial markets.
6
METALWORKING TOOLS
The Company designs, manufactures and distributes a wide variety of
precision metalworking tools to industrial companies that serve the automotive,
appliance, construction, farm equipment, medical and aerospace industries. The
Company's industrial metalworking tools consist primarily of heading, threading
and gundrilling tools. The Company markets its heading and threading tools,
which are used to form a variety of fasteners and threaded parts, under the
Reed-Rico and Astro Punch brand names. The Company's gundrilling tools, which
are distributed under the Eldorado brand name, are used to drill precision holes
to very close tolerances in such products as turbine engines, engine blocks,
cylinder heads, transmission shafts, connecting rods and medical prostheses.
METALWORKING MACHINES
The Company designs, manufactures and distributes several types of
metalworking machines primarily for the automotive industry. The Company's
industrial metalworking machines include threading machines and attachments,
gundrilling machines and computer-controlled specialized machine systems for
boring and turning applications. The Company markets its threading machines and
attachments, which are used to form a variety of threaded parts and fasteners,
under the Reed-Rico and Hartford brand names. The Company's gundrilling
machines, like its gundrilling tools, are distributed under the Eldorado brand
name. The Company's specialized machine systems for boring and turning processes
are sold under the Olofsson and Pittler brand names.
OTHER METAL PRODUCTS
The Company is the largest producer of powdered metal parts manufactured by
metal-injection-molding ("MIM"), and is a leading manufacturer of specialty
powdered metal gears and tungsten carbide cutting tools and wear parts. In
addition, the Company manufactures 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. The Company believes these businesses
have the potential for rapid growth and complement the Company's core
competencies in metals, precision metalworking and the management of complex
manufacturing processes. In fiscal 1998, the Company acquired J&L Fiber
Services, Inc., a manufacturer of metal refiner plates and screen cylinders for
the pulp and paper industry. Other metal products accounted for approximately 8
percent of the Company's net sales in fiscal 1998 and were sold primarily to the
general industrial and automotive markets.
The MIM process is particularly well-suited to high volume production of
small, complicated metal parts for numerous industries, including computer
peripherals, medical, electronics, automotive, power tools and firearms. In
addition, the Company manufactures powdered metal gears and tungsten carbide
cutting tools and wear parts for various industrial markets using a press and
sinter process. The Company also manufactures advanced technology, lightweight,
net shape metal-matrix-composite parts using a
pressure-infiltration-casting-process. Metal-matrix-composite parts, which have
high thermal conductivity and tightly controlled thermal expansion
characteristics are used in electronic applications that require heat
dissipation, such as automotive, telecommunication, aerospace and computer
products. The Company believes the broad range of products and highest standards
of craftsmanship offer growth opportunities in numerous industry applications.
The Company is also the world leader in the design, manufacture and sale of
refiner plates to the pulp and paper production markets under the J&L Fiber
Services brand name. Refiner plates, which are highly engineered metal castings,
are an integral part of the wood pulping process. Refiner plates not only
transport pulp through the system, but also perform critical work on the pulp
that affects the ultimate quality of the paper produced. In addition, the
Company manufactures conventional and rebuildable
7
screen cylinders which are metal filtering devices inside pressure vessels that
separate the usable wood fiber from undesirable elements in the pulp slurry mix.
SALES AND DISTRIBUTION
The Company sells its complex metal components and products into five major
market areas: aerospace, general industrial and energy, industrial gas turbines,
automotive, and other markets which include applications for markets such as
medical, firearms and ordnance. The relative size of sales to these markets is
shown below for fiscal years 1998, 1997 and 1996.
FISCAL 1998
Net Sales $1,316.7 million
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
53%
30%
5%
7%
5%
53% Aerospace
30% General Industrial and Energy
5% Industrial Gas Turbine
7% Automotive
5% Other
FISCAL 1997
Net Sales $972.8 million
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
53%
28%
7%
7%
5%
53% Aerospace
28% General Industrial and Energy
7% Industrial Gas Turbine
7% Automotive
5% Other
8
FISCAL 1996
Net Sales $556.8 million
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
68%
16%
4%
6%
6%
68% Aerospace
16% General Industrial and Energy
4% Industrial Gas Turbine
6% Automotive
6% Other
The Company's sales to the aerospace market of $693.8 million in fiscal 1998
increased 34 percent from $517.3 million in fiscal 1997. Sales to the aerospace
market as a percentage of total net sales remained constant at 53 percent in
fiscal 1998 and fiscal 1997, reflecting the Company's leading market position
and the overall strength of the commercial aerospace sector. The Company
believes its diversification into IGT, general industrial, energy and automotive
markets will help mitigate the adverse impact of potential downturns in the
aerospace cycle.
The Company's sales of investment castings are made through a relatively
small number of direct sales personnel located in each business operation and
through field sales representatives located at U.S. and international locations
near the Company's major customers. Industrial metalworking tools, industrial
metalworking machines and other metal products are sold by both the Company's
sales forces and sales representatives in the U.S., Europe, Asia and Latin
America. The Company's fluid management products and services are also sold by a
direct sales and marketing staff and through a worldwide network of independent
sales representatives and distributors. Due to the sophisticated nature of the
Company's products, the Company's sales efforts require technical personnel to
work closely with customers to identify and assist in the development of new
products and product modifications and to provide other services that are
necessary to obtain new and repeat orders.
BACKLOG
The backlog of unfilled orders believed to be firm at the end of each of the
Company's last three fiscal years was $795.8 million as of March 29, 1998,
$739.0 million as of March 30, 1997 and $539.7 million as of March 31, 1996. The
increase in fiscal 1998 backlog is primarily due to increased orders from
aerospace customers and the inclusion of companies acquired in fiscal 1997 and
1998.
The majority of sales to customers are made on individual purchase orders.
Most of the Company's orders are subject to termination by the customer upon
payment of the cost of work in process plus a related profit factor.
Historically, the Company has not experienced significant order cancellations.
COMPETITION
The Company is subject to substantial competition in all of the markets it
serves. Components and products similar to those made by the Company can be made
by competitors using either the same types of
9
manufacturing processes or other forms of manufacturing. Although the Company
believes its manufacturing processes, technology and experience provide
advantages to its 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 made by
the Company. Despite intense competition, the Company believes it is the number
one or two supplier in most of its principal markets. Several factors, including
long-standing customer relationships, technical expertise, state-of-the-art
facilities and dedicated employees, aid the Company in maintaining its
competitive advantages.
In its precision investment casting business, the Company's principal
competitor is the Howmet Corporation ("Howmet"). Howmet produces stainless
steel, superalloy and titanium investment castings for the aerospace and IGT
markets. Although the Company is the market leader for cast airfoils used in jet
aircraft engines, Howmet is believed to hold in excess of 50 percent of the
total market for cast airfoils, principally due to its substantial position in
the industrial gas turbine market. The Company believes that Howmet is capable
of producing structural castings comparable to all but the largest and most
complex of the Company's structural investment castings. The Company also
believes Howmet has the financial and technical resources to produce structural
castings as large and complex as those produced by the Company, should it decide
to do so. The Company's competitors for large structural castings also include
companies engaged in manufacturing parts using metal forgings, machining and
fabrication methods. Investment casting produces many types of parts at
significantly lower cost than do these alternate production methods.
In its other major business areas, which include fluid management products,
industrial metalworking tools and machines and other metal products, the Company
generally competes 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
The Company maintains separate research and development departments at PCC
Structurals, Inc., PCC Airfoils, Inc., and PCC Flow Technologies, Inc. The
research and development effort at these locations is directed at the scientific
aspects of developing new and improved manufacturing processes. These research
and development expenditures amounted to $2.9 million in 1998, $2.6 million in
1997, and $3.5 million in 1996. A substantial amount of the Company's
technological capability is the result of engineering work and experimentation
performed in connection with process development and production of new parts.
This engineering work is charged to the cost of production and is not included
in research and development expenditures.
EMPLOYEES
At March 29, 1998, the Company employed 10,367 people, including 3,067
people at PCC Structurals, 3,985 people at PCC Airfoils, 1,252 people at PCC
Flow Technologies, 1,537 people at PCC Specialty Products, 261 people at J&L
Fiber Services, 244 people at Advanced Forming Technology ("AFT"), and 21 people
in corporate functions. Approximately 24 percent of these employees have union
affiliation or are covered by collective bargaining agreements. The Company is
expected to negotiate eight union contracts or collective bargaining agreements
affecting 10% of the workforce during fiscal 1999. Management believes that
labor relations in the Company have generally been satisfactory.
PATENTS AND TRADE SECRETS
Prior to 1988, the Company had not applied for patents covering its
structural casting processes in the belief that the processes are more securely
protected by retaining the information as trade secrets and avoiding the
technical disclosures required in patent applications. For similar reasons, AFT
has not applied
10
for patents covering its MIM process. The Company's trade secrets consist
principally of technology developed over years of experience in the manufacture
of complex investment castings and MIM parts. More recently, the Company has
applied for or been issued a number of patents relating to new technology and
processes developed at PCC Structurals, PCC Airfoils and PCC Flow Technologies.
In connection with its acquisitions of PCC Airfoils, PCC Composites (now
part of AFT), PCC Specialty Products, PCC Flow Technologies and J&L Fiber
Services, the Company acquired a number of U.S. and foreign patents. The Company
also acquired certain rights and obligations under license agreements. The
Company receives no significant royalty income from patents.
MATERIALS & SUPPLIES
The Company uses a number of raw materials in its products, including
certain metals such as cobalt, titanium, nickel and molybdenum, which are found
in only a few parts of the world. These metals are required for the alloys used
in the Company's precision investment castings. 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 tool grade steel used by the Company may also be subject
to variation in availability and cost. The Company enters into option contracts
to hedge the price of nickel and has escalation clauses in certain of its
long-term contracts with major customers. Shortages of, and price increases for,
certain raw materials used by the Company 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 the Company.
GOVERNMENT REGULATIONS
Certain of the Company's products are manufactured and sold under U.S.
government contracts or subcontracts. Consequently, the Company is 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
The Company is both a purchaser of products from, and supplier to,
businesses located outside of the U.S. Certain risks are inherent in
international operations, including the risk of government financed competition,
changes in trade policies, tariff regulations and difficulties in obtaining U.S.
export and import licenses.
ENVIRONMENTAL COMPLIANCE
The Company generates certain waste materials that must be disposed of,
including certain materials for which disposal requires compliance with
environmental protection laws and regulations. The Company conducts its
operations at industrial sites where hazardous materials have been managed for
many years, including periods before careful management of these materials was
required or generally believed to be necessary. Consequently, the Company is
subject to various environmental laws that impose compliance obligations and can
create liability for historical releases of hazardous substances.
During the period 1970-1973, the Company contracted for disposal of certain
industrial waste at the Pasco Landfill located near Pasco, Washington. The
Washington State Department of Ecology ("Ecology") notified the Company that it
had determined that the Company is a Potentially Liable Party ("PLP") for the
contamination at Pasco Landfill Superfund Site. The Company joined with
approximately 40 other PLPs that sent industrial wastes to the site, as well as
with the owners, operators and other PLPs, to fund the initial Remedial
Investigation and Feasibility Study, which was completed and accepted by Ecology
in March 1994. In April, 1995, the PLPs and Ecology agreed on a Phase II
Remedial Investigation/ Feasibility
11
Study Work Plan to study potential remediation alternatives. The Company's costs
are currently being paid by its insurers although they have reserved the right
to deny coverage for the remedial action costs.
In 1989, the Oregon Health Division ("Health Division") alleged that the
Company discharged low level radioactive material to the Portland city sewer in
violation of the Company's radioactive materials license. The City of Portland
also has alleged that the discharges violated the Company's discharge permit.
Although the Company contested the alleged violations, it undertook extensive
cleaning of portions of the sewer system under a consent agreement with the City
and the Health Division. The extent to which other investigation or remedial
work may be necessary, however, is unknown.
As a result of inspections conducted in 1995, the Massachusetts Department
of Environmental Protection ("MDEP") has taken enforcement action against the
Company's Merriman operations for alleged violations of certain environmental
laws relating to waste management. Merriman has negotiated a settlement with the
MDEP for most of the alleged violations and believes the outstanding alleged
violations can be settled for an immaterial amount. PCC Specialty Products, Inc.
has entered an Administrative Consent Order with the MDEP pursuant to which it
is conducting investigations of contamination of the Merriman facility. The
extent to which these investigations will lead to requirements for remedial
action is not yet known.
PCC Specialty Products, Inc. is investigating contamination at its facility
in Holden, Massachusetts. This investigation is proceeding under requirements of
Massachusetts law, and the MDEP has not taken any enforcement action. The extent
to which these investigations will lead to requirements for remedial action is
not yet known.
12
In 1993, a lawsuit was filed in federal district court in Connecticut
against Quamco Inc., a corporation that the Company acquired in 1995 and which
is now known as PCC Specialty Products, Inc. (Marrone v. Quamco, Inc., USDC,
Conn.). The plaintiff alleged that Quamco was liable for property damages
relating to hazardous substances contamination allegedly caused by Quamco at
property it leased from the plaintiff. The court entered a default judgement in
favor of the Company in March 1997. In March 1998, the court denied the
plaintiff's motion to vacate the default judgement. All appeal periods have
expired and the court's default judgement is final.
The Connecticut Department of Environmental Protection ("CDEP") has required
PCC Specialty Products, Inc. to undertake remedial action at its former
Contromatics facility. Remedial systems are in place and were supplemented in
1997 at CDEP's request. Whether or not additional remedial action is necessary
will depend upon pending evaluations of the new remedial systems.
FORWARD LOOKING STATEMENTS
Information included within this section relating to projected growth and
future results and events constitutes forward-looking statements. Actual results
in future periods may differ materially from the forward-looking statements
because of a number of risks and uncertainties, including but not limited to
fluctuations in the aerospace and general industrial cycles; the relative
success of the Company's entry into new markets, including the rapid ramp-up for
industrial gas turbine component production; competitive pricing; the
availability and cost of materials and supplies; relations with the Company's
employees; the Company's ability to manage its operating costs and to integrate
acquired businesses in an effective manner; governmental regulations and
environmental matters; risks associated with international operations and world
economies; and implementation of new technologies. Any forward-looking
statements should be considered in light of these factors.
12
ITEM 2. PROPERTIES
The Company's manufacturing plants and administrative offices, along with
certain information concerning the products and facilities are as follows:
BUILDING SPACE (SQ. FT.)
----------------------------------
DIVISION NO. OF FACILITIES LEASED OWNED TOTAL
- ----------------------------------------------------------- ------------------- ---------- ---------- ----------
Executive & Corporate Offices
Domestic................................................. 1 7,500 -- 7,500
Foreign.................................................. -- -- -- --
PCC Structurals
Domestic................................................. 15 308,600 820,200 1,128,800
Foreign.................................................. 1 -- 77,000 77,000
PCC Airfoils
Domestic................................................. 10 44,200 907,000 951,200
Foreign.................................................. 3 153,000 249,000 402,000
PCC Flow Technologies
Domestic................................................. 36 484,200 748,400 1,232,600
Foreign.................................................. 17 110,200 126,500 236,700
PCC Specialty Products
Domestic................................................. 14 205,700 816,500 1,022,200
Foreign.................................................. 1 250,200 -- 250,200
J&L Fiber Services
Domestic................................................. 6 94,900 88,900 183,800
Foreign.................................................. 2 2,900 -- 2,900
Advanced Forming Technology
Domestic................................................. 4 68,000 18,000 86,000
Foreign.................................................. -- -- -- --
Total Company
Domestic................................................. 86 1,213,100 3,399,000 4,612,100
Foreign.................................................. 24 516,300 452,500 968,800
--- ---------- ---------- ----------
Total...................................................... 110 1,729,400 3,851,500 5,580,900
--- ---------- ---------- ----------
--- ---------- ---------- ----------
The Company continues to expand its manufacturing capacity to meet
anticipated market demand for its products. See "Management's Discussion and
Analysis," in Exhibit 13, the "Financial Section of the 1998 Annual Report to
Shareholders of Precision Castparts Corp."
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 the Company. In the opinion of management, the outcome of these lawsuits
will have no significant effect on PCC's consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
13
EXECUTIVE OFFICERS OF THE REGISTRANT (A)
OFFICER
NAME SINCE AGE POSITION HELD WITH THE REGISTRANT
- ---------------------------------------------- ---------- --- ----------------------------------------------
William C. McCormick.......................... (b) 1985 64 Chairman and Chief Executive Officer
Steven C. Riedel.............................. (c) 1997 52 Senior Vice President and President--
Industrial Products Operations
William D. Larsson............................ (d) 1980 53 Vice President and Chief Financial Officer
Mark Donegan.................................. (e) 1992 41 Executive Vice President and President-- PCC
Structurals, Inc.
Peter G. Waite................................ (f) 1980 54 Executive Vice President and President-- PCC
Airfoils, Inc.
David W. Norris............................... (g) 1996 46 Executive Vice President and President-- PCC
Flow Technologies, Inc.
Greg M. Delaney............................... (h) 1998 43 Executive Vice President and President-- PCC
Specialty Products, Inc.
Dennis L. Konkol.............................. (i) 1997 39 President--J&L Fiber Services, Inc.
Istvan F.K. Vamos............................. (j) 1997 31 President--Advanced Forming Technology, Inc.
James A. Johnson.............................. (k) 1996 57 Treasurer and Assistant Secretary
Shawn R. Hagel................................ (l) 1997 33 Corporate Controller and Assistant Secretary
- ------------------------
(a) The officers serve for a term of one year and until their successors are
elected.
(b) Elected Chairman in 1994, Chief Executive Officer in 1991 and Director in
1986.
(c) Elected Senior Vice President and President--Industrial Products Operations
in 1998.
(d) Elected Vice President and Chief Financial Officer in 1993.
(e) Elected Executive Vice President and President--PCC Structurals, Inc. in
1992.
(f) Elected Executive Vice President and President--PCC Airfoils, Inc. in 1986.
(g) Elected Executive Vice President and President--PCC Flow Technologies, Inc.
in 1996.
(h) Elected Executive Vice President and President--PCC Specialty Products, Inc.
in 1998.
(i) Elected President--J&L Fiber Services, Inc. in 1997.
(j) Elected President--Advanced Forming Technology, Inc. in 1997.
(k) Elected Treasurer in 1993 and Assistant Secretary in 1996.
(l) Elected Corporate Controller and Assistant Secretary in 1997.
14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of June 6, 1998 there were approximately 3,715 shareholders of record of
the Company's common stock. The Company's common stock is listed on the New York
Stock Exchange under the symbol PCP. It is also traded on the Midwest Stock
Exchange, the Pacific Stock Exchange and the Philadelphia Stock Exchange.
Additional information with respect to Market for the Registrant's Common Stock
and Related Stockholder Matters, including dividends, is incorporated herein by
reference to the Five-Year Summary of Selected Financial Data and the Quarterly
Financial Information in Exhibit 13, the "Financial Section of the 1998 Annual
Report to Shareholders of Precision Castparts Corp." The Company expects to
continue to pay quarterly cash dividends, subject to its earnings, financial
condition and other factors.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to Selected Financial Data is incorporated herein
by reference to the "Five-Year Summary of Selected Financial Data" in Exhibit
13, the "Financial Section of the 1998 Annual Report to Shareholders of
Precision Castparts Corp."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information with respect to Management's Discussion and Analysis of
Financial Condition and Results of Operations is incorporated herein by
reference to "Management's Discussion and Analysis" in Exhibit 13, the
"Financial Section of the 1998 Annual Report to Shareholders of Precision
Castparts Corp."
Information included in "Management's Discussion & Analysis" in Exhibit 13,
the "Financial Section of the 1998 Annual Report to Shareholders of Precision
Castparts Corp." describing the divisions relating to projected growth and
future results and events constitutes forward-looking statements. Actual results
in future periods may differ materially from the forward-looking statements
because of a number of risks and uncertainties, including but not limited to
fluctuations in the aerospace and general industrial cycles; the relative
success of the Company's entry into new markets, including the rapid ramp-up for
industrial gas turbine component production; competitive pricing; the
availability and cost of materials and supplies; relations with the Company's
employees; the Company's ability to manage its operating costs and to integrate
acquired businesses in an effective manner; governmental regulations and
environmental matters; risks associated with international operations and world
economies; and implementation of new technologies. Any forward-looking
statements should be considered in light of these factors.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to Financial Statements and Supplementary Data is
incorporated herein by reference to pages 1 through 46 of Exhibit 13, the
"Financial Section of the 1998 Annual Report to Shareholders of Precision
Castparts Corp."
15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is incorporated herein
by reference to "Proposal 1: Election of Directors" continuing through "Report
of the Compensation Committee on Executive Compensation" in the Company's Proxy
Statement dated June 26, 1998 for the 1998 Annual Meeting of Shareholders of the
Registrant. The information required by this item with respect to the Company's
executive officers follows Part I, Item 4 of this document.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation is incorporated herein by
reference to "Compensation of Executive Officers" in the Proxy Statement dated
June 26, 1998 for the 1998 Annual Meeting of Shareholders of the Registrant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to Security Ownership of Certain Beneficial Owners
and Management is incorporated herein by reference to "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Directors and Executive
Officers" in the Proxy Statement dated June 26, 1998 for the 1998 Annual Meeting
of Shareholders of the Registrant.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Certain Relationships and Related Transactions
is incorporated herein by reference to "Board Compensation, Attendance and
Committees, Certain Transactions" in the Proxy Statement dated June 26, 1998 for
the 1998 Annual Meeting of Shareholders of the Registrant.
16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) FINANCIAL STATEMENTS
The following financial statements incorporated by reference from Exhibit
13, the "Financial Section of the 1998 Annual Report to Shareholders of
Precision Castparts Corp." are filed as part of this report.
PAGE IN EXHIBIT 13,
THE "FINANCIAL SECTION
OF THE 1998 ANNUAL REPORT
TO SHAREHOLDERS
STATEMENT OF PRECISION CASTPARTS CORP."
- ------------------------------------------------------------------------------------ -----------------------------
Consolidated Statements of Income................................................... 7
Consolidated Balance Sheets......................................................... 8
Consolidated Statements of Cash Flows............................................... 10
Consolidated Statements of Shareholders' Investment................................. 13
Notes to Financial Statements....................................................... 14
Report of Independent Accountants................................................... 42
(A)(2) FINANCIAL STATEMENT SCHEDULE
The following schedule is filed as part of this report:
Schedule II--Valuation and Qualifying Accounts
Report of Independent Accountants on Financial Statement Schedule
(A)(3) EXHIBITS
(3)A -- Restated Articles of Incorporation of Precision Castparts Corp. as amended
(Incorporated herein by reference to Exhibit 3.1 to Amendment No. 3 to the
Company's Registration Statement on form 8A/A, Filed September 27, 1997.) (File
number 1-10348)
(3)B -- Bylaws of Precision Castparts Corp. (Incorporated herein by reference to
Exhibit 3.2 to Amendment No. 3 to the Company's Registration Statement on Form
8A/A, Filed September 27, 1997.) (File number 1-10348)
(4)A -- Indenture dated December 17, 1997 between the First National Bank of Chicago as
Trustee and Precision Castparts Corp.
(10)A -- Precision Castparts Corp. Revised and Restated Stock Incentive Plan as amended.
(Incorporated herein by reference to Exhibit (10)A in the Form 10-K dated April
3, 1994.) (File number 1-10348)
(10)B -- Precision Castparts Corp. Non-Employee Directors' Stock Option Plan.
(Incorporated herein by reference to Item 6(a), Exhibit (10)B in the Form 10Q
dated August 8, 1997.) (File number 1-10348)
(10)C -- Precision Castparts Corp. 1994 Stock Incentive Plan. (Incorporated herein by
reference to Appendix A in Registrant's June 20, 1994 Proxy Statement to
Shareholders.) (File number 1-10348)
(10)D -- Precision Castparts Corp. Nonemployee Directors' Deferred Compensation Plan
dated January 1, 1995. (Incorporated herein by reference to Exhibit (10)D in
the Form 10-K dated April 2, 1995.) (File number 1-10348)
17
(10)E -- Precision Castparts Corp. Executive Deferred Compensation Plan dated January 1,
1995 (Incorporated herein by reference to Exhibit (10)E in the Form 10-K dated
April 2, 1995.) (File number 1-10348)
(10)F -- Bank of America Credit Agreement Dated July 31, 1996 among Precision Castparts
Corp.; Certain of its Subsidiaries; Bank of America National Trust and Savings
Association, as Agent; Letter of Credit Issuing Bank; and The Other Financial
Institutions Party Hereto Arranged by BA Securities, Inc. (Incorporated herein
by reference to Exhibit (10)H in the Form 10Q dated October 25, 1996.) (File
number 1-10348)
(10)G -- Precision Castparts Corp. Executive Performance Compensation Plan.
(Incorporated herein by reference to Item 6(a), Exhibit (10)G in the Form 10Q
dated August 8, 1997.) (File number 1-10348)
(10)H -- Compensation Arrangement between Precision Castparts Corp. and Gregory M.
Delaney.
(10)I -- Form of Change of Control Agreement and Indemnity Agreement for Officers and
Executives of Precision Castparts Corp. (Incorporated herein by reference to
Exhibit (10)I in the Form 10K dated June 27, 1997.) (File number 1-10348)
(10)J -- Form of Employment Agreement, dated as of April 2, 1997 between Precision
Castparts Corp. and Steven C. Riedel. (Incorporated herein by reference to
Exhibit (10)J in the Form 10K dated June 27, 1997.) (File number 1-10348)
(10)K -- Precision Castparts Corp. Supplemental Executive Retirement Program 1998, Dated
January 1, 1998.
(10)L -- Precision Castparts Corp. 1998 Employee Stock Purchase Plan (Incorporated
herein by reference to Item 6(a), Exhibit (10)L in the Form 10Q dated August 8,
1997.) (File number 1-10348)
(11) -- Calculation of Earnings Per Share for the Year Ended March 29, 1998.
(12) -- Calculation of Ratio of Earnings to Fixed Charges.
(13) -- Financial Section of the 1998 Annual Report to Shareholders of Precision
Castparts Corp. for the Year Ended March 29, 1998.
(21) -- Subsidiaries of Precision Castparts Corp.
(23) -- Consent of Independent Accountants.
(27) -- Financial Data Schedule.
(B) NOT APPLICABLE.
(C) SEE (A)(3) ABOVE.
(D) SEE (A)(2) ABOVE.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PRECISION CASTPARTS CORP.
By /s/ WILLIAM C. MCCORMICK
------------------------------------------
William C. McCormick
CHAIRMAN OF THE BOARD, DIRECTOR AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE
- ------------------------------ --------------------------
As officers or directors of
PRECISION CASTPARTS CORP.
/s/ WILLIAM C. MCCORMICK Chairman of the Board,
- ------------------------------ Director and Chief
William C. McCormick Executive Officer
Vice President and Chief
/s/ WILLIAM D. LARSSON Financial Officer
- ------------------------------ (Principal Financial and
William D. Larsson Accounting Officer)
/s/ PETER R. BRIDENBAUGH
- ------------------------------ Director
Peter R. Bridenbaugh
/s/ DEAN T. DUCRAY
- ------------------------------ Director
Dean T. DuCray
/s/ DON R. GRABER
- ------------------------------ Director
Don R. Graber
/s/ ROY M. MARVIN
- ------------------------------ Director
Roy M. Marvin
/s/ VERNON E. OECHSLE
- ------------------------------ Director
Vernon E. Oechsle
/s/ STEVEN G. ROTHMEIER
- ------------------------------ Director
Steven G. Rothmeier
19
SCHEDULE II
PRECISION CASTPARTS CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED
(000'S OMITTED)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------- ----------- ------------------------ ----------- -----------
ADDITIONS
------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND BUSINESS END OF
CLASSIFICATION OF PERIOD EXPENSES ACQUISITIONS DEDUCTIONS PERIOD
- ----------------------------------- ----------- ----------- ----------- ----------- -----------
Deducted from assets to which they apply:
Reserve for doubtful accounts:
March 31, 1996................... $ 1,200 $ -- $ 100 $ 200(1) $ 1,100
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
March 30, 1997................... $ 1,100 $ 900 $ 1,400 $ 800(1) $ 2,600
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
March 29, 1998................... $ 2,600 $ 1,100 $ 700 $ 600(1) $ 3,800
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Deferred tax asset valuation
allowance:
March 31, 1996................... $ 3,800 $ 500(2) $ 200 $ 400(3) $ 4,100
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
March 30, 1997................... $ 4,100 $ 500(2) $ 1,300 $ 2,400(3) $ 3,500
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
March 29, 1998................... $ 3,500 $ -- $ -- $ 2,000(3) $ 1,500
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
- ------------------------
(1) Write off of bad debts.
(2) Establishment of valuation allowances on capital-loss carryforwards or
operating loss carryforwards.
(3) Utilization of tax benefits under capital-loss or operating loss
carryforwards.
20
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Precision Castparts Corp.
Our audits of the consolidated financial statements referred to in our
report dated April 29, 1998 appearing on page 33 of the 1998 Annual Report to
Shareholders of Precision Castparts Corp. (which report and consolidated
financial statements are included as Exhibit 13 in this Annual Report on Form
10-K) also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
/s/ PRICE WATERHOUSE LLP
--------------------------------------
PRICE WATERHOUSE LLP
Portland, Oregon
April 29, 1998
21
INDEX TO EXHIBITS
EXHIBITS
- ---------
(3)A -- Restated Articles of Incorporation of Precision Castparts Corp. as amended (Incorporated herein
by reference to Exhibit 3.1 to Amendment No. 3 to the Company's Registration Statement on
form 8A/A, Filed September 27, 1997.) (File number 1-10348)
(3)B -- Bylaws of Precision Castparts Corp. (Incorporated herein by reference to Exhibit 3.2 to
Amendment No. 3 to the Company's Registration Statement on Form 8A/A, Filed September 27,
1997.) (File number 1-10348)
(4)A -- Indenture dated December 17, 1997 between the First National Bank of Chicago as Trustee and
Precision Castparts Corp.
(10)A -- Precision Castparts Corp. Revised and Restated Stock Incentive Plan as amended. (Incorporated
herein by reference to Exhibit (10)A in the Form 10-K dated April 3, 1994.) (File number
1-10348)
(10)B -- Precision Castparts Corp. Non-Employee Directors' Stock Option Plan. (Incorporated herein by
reference to Item 6(a), Exhibit (10)B in the Form 10Q dated August 8, 1997.) (File number
1-10348)
(10)C -- Precision Castparts Corp. 1994 Stock Incentive Plan. (Incorporated herein by reference to
Appendix A in Registrant's June 20, 1994 Proxy Statement to Shareholders.) (File number
1-10348)
(10)D -- Precision Castparts Corp. Nonemployee Directors' Deferred Compensation Plan dated January 1,
1995. (Incorporated herein by reference to Exhibit (10)D in the Form 10-K dated April 2,
1995.) (File number 1-10348)
(10)E -- Precision Castparts Corp. Executive Deferred Compensation Plan dated January 1, 1995
(Incorporated herein by reference to Exhibit (10)E in the Form 10-K dated April 2, 1995.)
(File number 1-10348)
(10)F -- Bank of America Credit Agreement Dated July 31, 1996 among Precision Castparts Corp.; Certain
of its Subsidiaries; Bank of America National Trust and Savings Association, as Agent; Letter
of Credit Issuing Bank; and The Other Financial Institutions Party Hereto Arranged by BA
Securities, Inc. (Incorporated herein by reference to Exhibit (10)H in the Form 10Q dated
October 25, 1996.) (File number 1-10348)
(10)G -- Precision Castparts Corp. Executive Performance Compensation Plan. (Incorporated herein by
reference to Item 6(a), Exhibit (10)G in the Form 10Q dated August 8, 1997.) (File number
1-10348)
(10)H -- Compensation Arrangement between Precision Castparts Corp. and Gregory M. Delaney.
(10)I -- Form of Change of Control Agreement and Indemnity Agreement for Officers and Executives of
Precision Castparts Corp. (Incorporated herein by reference to Exhibit (10)I in the Form 10K
dated June 27, 1997.) (File number 1-10348)
(10)J -- Form of Employment Agreement, dated as of April 2, 1997 between Precision Castparts Corp. and
Steven C. Riedel. (Incorporated herein by reference to Exhibit (10)J in the Form 10K dated
June 27, 1997.) (File number 1-10348)
(10)K -- Precision Castparts Corp. Supplemental Executive Retirement Program 1998, Dated January 1,
1998.
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EXHIBITS
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(10)L -- Precision Castparts Corp. 1998 Employee Stock Purchase Plan (Incorporated herein by reference
to Item 6(a), Exhibit (10)L in the Form 10Q dated August 8, 1997.) (File number 1-10348)
(11) -- Calculation of Earnings Per Share for the Year Ended March 29, 1998.
(12) -- Calculation of Ratio of Earnings to Fixed Charges.
(13) -- Financial Section of the 1998 Annual Report to Shareholders of Precision Castparts Corp. for
the Year Ended March 29, 1998.
(21) -- Subsidiaries of Precision Castparts Corp.
(23) -- Consent of Independent Accountants.
(27) -- Financial Data Schedule.
23