1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
May 26, 1994
WYMAN-GORDON COMPANY
(Exact name of registrant as specified in its charter)
MASSACHUSETTS
(State or other jurisdiction of incorporation)
0-3085 04-1992780
Commission File Number (IRS Employer Identification No.)
244 Worcester Street, Box 8001, No. Grafton, MA 01536-8001
(Address of principal executive offices) (Zip Code)
(508) 839-4441
Registrant's Telephone Number
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Item 2. Acquisition or Disposition of Assets.
On May 26, 1994, Wyman-Gordon Company, a Massachusetts
corporation (the "Company"), completed the acquisition (the
"Acquisition") of all of the outstanding stock of Cameron Forged
Products Company ("Cameron") from Cooper Industries, Inc.
("Cooper"), pursuant to an Amended and Restated Stock Purchase
Agreement, dated as of January 10, 1994 (the "Stock Purchase
Agreement"), and an Investment Agreement, dated as of January 10,
1994 (the "Investment Agreement").
Pursuant to the Stock Purchase Agreement, the Company paid to
Cooper a purchase price, which was determined through negotiations
between the Company and Cooper, of (i) 16,500,000 shares of common
stock, par value $1.00 per share (the "Shares"), of the Company and
(ii) $5,000,000 in cash, payable as set forth below (the "Cash
Purchase Price"), subject to a cash adjustment to be paid by either
Cooper or the Company based upon changes in certain assets and
liabilities of Cameron between September 26, 1993 and the closing
of the Acquisition (the "Closing"). The Cash Purchase Price
consisted of (i) $400,000 in cash obtained by the Company from its
cash on hand and paid to Cooper at the Closing and (ii) a
promissory note of the Company in the principal amount of
$4,600,000 (the " Cameron Note"), payable in annual installments,
beginning on June 30, 1997 and on each June 30 thereafter until
paid in full, in an amount equal to the least of (A) $2,300,000,
(B) 25% of the Company's Free Cash Flow (as defined in the Cameron
Note) for the twelve-month period ending on the April 30
immediately preceding such June 30 or (C) the unpaid principal
balance of the Cameron Note. The Cameron Note does not bear
interest, except that it will bear interest from and after May 1,
1998 at a floating rate equal to the 90-day commercial paper rate
for high grade unsecured notes sold through dealers by major
corporations, as published by The Wall Street Journal, on that
portion of the principal amount of the Note equal to the sum of all
amounts of unpaid principal that would have been payable but for
mandatory debt payments by the Company. As a result of the
Acquisition, Cooper currently owns approximately 48% of the
outstanding Shares.
The Investment Agreement governs certain aspects of the
relationship between the Company and Cooper. Under the Investment
Agreement, Cooper has agreed to certain restrictions on its ability
to vote its Shares and to acquire additional Shares and other
voting securities of the Company. Cooper is entitled to two
representatives on the Company's board of directors. However,
Cooper has agreed that it will not acquire additional Company
securities for so long as it owns 5% or more the Shares. Cooper
has also agreed that, so long as it owns 5% or more of the Shares,
it will vote its Shares on all matters submitted to a shareholder
vote, at its option, either as recommended by the Company's board
of directors or proportionately with the public shareholders.
Certain other provisions will also apply. These restrictions on
Cooper will expire on May 26, 2004, or earlier in certain events,
such as if the Company's consolidated net worth declines by 35% or
more following consummation of the acquisition or if the Company
consummates a merger or similar transaction that results in a
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change of control of the Company. Pursuant to the Stock Purchase
Agreement, effective on May 26, 1994, the size of the Board of
Directors of the Company was increased by two members and Dewain K.
Cross, Vice President, Finance of Cooper, and H. John Riley, Jr.,
President and Chief Operating Officer of Cooper, were appointed to
fill the vacancies created by such expansion.
Cameron and its subsidiaries operate forging facilities in
Houston, Texas and Livingston, Scotland, as well as a powder metal
operation in Brighton, Michigan. The Company intends to integrate
Cameron's operations with the forgings business of the Company.
The foregoing descriptions of the Stock Purchase Agreement and
the Investment Agreement are incomplete and are qualified in their
entirety by reference to the full text of the Stock Purchase
Agreement and the Investment Agreement, which are attached hereto
as exhibits and are incorporated herein by reference.
Item 5. Other Events.
10 % Senior Notes due 2003: Supplemental Indenture
Effective May 20, 1994, the Company entered into a
Supplemental Indenture with the holders of its outstanding 10 %
Senior Notes due 2003 (the "Notes"). The Supplemental Indenture
amends the Indenture, dated as of March 16, 1993, by and among the
Company, the Subsidiary Guarantors and State Street Bank and Trust
Company as Trustee (the "Indenture") as follows:
* The definition which sets forth the exceptions to the
general limitation on the Company's ability to incur
additional indebtedness was amended to permit the Company
to make the deferred payments to Cooper under the Cameron
Note.
* The definition of restricted payments, which restricts
investments by the Company, was amended to permit the
Acquisition and the establishment of the Receivables
Financing Program as described below, along with other
amendments to permit the Company to manage its cash,
hedge its interest rate, currency and raw materials risks
and capitalize subsidiaries (including Wyman-Gordon
Receivables Corporation, a special purpose wholly-owned
subsidiary of the Company formed to carry out the
Receivables Financing Program ("WGRC")).
* The definition of permitted liens was expanded to permit
the pledge of collateral by Wyman-Gordon Limited
(formerly CFPD, Ltd.) (the "U.K. Subsidiary") to a new
U.K. lender.
* An exception for WGRC is made from the covenant which
would otherwise require WGRC to guarantee the Notes. As
a limited purpose financing subsidiary, WGRC would be
unable to retain the necessary degree of financial
independence from the general obligations of the Company
if it were required to guarantee the Notes.
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* Other amendments were made to various Indenture covenants
to permit the Acquisition, the Receivables Financing
Program and the U.K. Subsidiary financing.
The foregoing description of the Supplemental Indenture is
incomplete and is qualified in its entirety by reference to the
full text of the Supplemental Indenture, which is attached hereto
as an exhibit and is incorporated herein by reference.
10 % Senior Notes due 2003: Second Supplemental Indenture
The U.K. Subsidiary entered into a financing agreement with
Clydesdale Bank PLC as of May 27, 1994 under which it pledged
certain of its assets as security. Accordingly, under the terms of
the Indenture, the U.K. Subsidiary was required to execute a
guaranty of the Notes. Such guaranty was effected through a
Second Supplemental Indenture and Guarantee dated as of May 27,
1994 which is attached hereto as an exhibit and is incorporated
herein by reference.
Receivables Financing Program
On May 20, 1994, the Company terminated its existing working
capital financing arrangement with the CIT Group/Business Credit,
Inc. under a Financing Agreement dated March 8, 1993 (the "Prior
Working Capital Facility"). The Company replaced the Prior Working
Capital Facility by entering into a revolving receivables-backed
credit facility (the "Receivables Financing") effected through a
Receivables Purchase and Sale Agreement dated as of May 20, 1994
among the Company, Wyman-Gordon Investment Castings, Inc. and
Precision Founders, Inc. and WGRC (the "RPSA") and a Revolving
Credit Agreement dated as of May 20, 1999 among WGRC, the financial
institutions party thereto and Shawmut Bank N.A. as Issuing Bank,
as Facility Agent and as Collateral Agent (the "RCA"). It is
anticipated that Cameron will become a part of the Receivables
Financing Program approximately 90 days after the date of the
Acquisition. Pursuant to the RPSA, WGRC purchases the U.S. dollar-
denominated trade receivables of the Company and certain
subsidiaries on a daily basis, and WGRC pays cash for such
purchased receivables to the Company or such subsidiaries either
out of its available cash from receivables collections or from
borrowings under the RCA. Pursuant to the RCA, a syndicate of
lenders makes revolving loans to WGRC and issues letters of credit
to beneficiaries designated by WGRC, in each case secured by the
receivables purchased by WGRC. Following is a brief summary of the
terms of the Receivables Financing Program.
The aggregate maximum borrowing capacity under the Receivables
Financing Program is $65 million, with a letter of credit sub-
maximum of $35 million. Utilization of the maximum program amount
would be subject to a formula which is dependent upon a number of
reserves and adjustments relating to the accounts receivable
purchased by WGRC. The Receivables Financing Program is rated
"AAA" by Standard & Poor's Corporation. Borrowings under the
Receivables Financing Program bear interest at either the
Eurodollar Rate plus five-eighths of one percent (0.625%) or at an
Alternative Base Rate which is a fluctuating rate per annum on any
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date equal to the higher of (i) the rate of interest most recently
publicly announced by the Facility Agent as its "prime,"
"reference" or "base" rate and (ii) a rate of interest equal to the
sum of (A) the Federal Funds Rate, plus (B) 0.50%. Fees for
letters of credit are five-eighths of one percent (0.625%) per
annum. Additionally, a fee of four-tenths of percent (0.40%) per
annum is charged for unused borrowing capacity. The term of the
Receivables Financing Program is 58 months, with an evergreen
option feature.
WGRC is organized as a bankruptcy-remote, limited purpose
subsidiary of the Company. On May 20, 1994 and each day thereafter
during the term of the Receivables Financing Program, WGRC
purchases all of the U.S. dollar-denominated trade receivables of
the Company and of the two subsidiaries comprising the Company's
castings operations (collectively, the "Sellers"). It is intended
that Cameron will be added as a Seller. The purchase price for the
receivables will be paid by WGRC through collections on previously-
purchased receivables, intercompany notes issued by WGRC or
borrowings by WGRC under the revolving credit facility.
The Receivables Financing Program is secured by a first
priority security interest in all receivables purchased by WGRC
from the Sellers. The Receivables Financing Program is not
subject to financial or periodic maintenance covenants.
The foregoing summary of the terms of the Receivables
Financing Program is incomplete and is qualified in its entirety by
reference to the full text of the RCA and the RPSA, which are
attached hereto as exhibits and are incorporated herein by
reference.
Employment Arrangements
David P. Gruber became Chief Executive Officer of the Company
immediately following the Special Meeting in Lieu of Annual Meeting
of Shareholders held on May 24, 1994. In connection with Mr.
Gruber's new responsibilities, the Company has entered into a two-
year employment agreement with him providing certain termination
payments if he is terminated by the Company without cause or if he
leaves the Company for good reason. In addition, the Company
entered into a Performance Share Agreement with Mr. Gruber pursuant
to which he has been issued 150,000 shares of common stock of the
Company subject to restrictions and risk of forfeiture. The
restrictions on some or all of Mr. Gruber's shares will lapse if
(i) he is still employed by the Company as Chief Executive Officer
five years from the date of the agreement and (ii) the market value
of the Company's stock achieves certain targeted levels. In
addition, the Performance Share Agreement contains provisions
providing for partial vesting in the case of his death and
restrictions on transfer of a portion of such shares after the
restrictions lapse.
On March 4, 1994, the Company employed J. Douglas Whelan as
President, Forgings Division. In connection with the employment of
Mr. Whelan, the Company has entered into an employment agreement
with him that provides, among other things, for an annual salary of
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$204,000, a signing bonus of $50,000, participation in the
incentive compensation plan being designed for key Cameron and
Wyman-Gordon Company employees who will be responsible for
implementing the consolidation of the Company and Cameron, which
incentive compensation plan in the case of Mr. Whelan will pay out
at 2 1/2 times base salary if $30 million of annual cost savings
are achieved by the end of the second year following the Cameron
acquisition. In addition, Mr. Whelan has received an option to
purchase 75,000 shares under the Company's Long-Term Incentive Plan
and has entered into an Executive Severance Agreement in the
standard form as other executive officers.
The foregoing summary of the terms of employment arrangements
with Messrs. Gruber and Whelan is incomplete and is qualified in
its entirety by reference to the full text of the Employment
Agreement dated May 24, 1994 between Mr. Gruber and the Company,
the Performance Share Agreement dated May 24, 1994 between Mr.
Gruber and the Company, the Employment Agreement dated March 4,
1994 between Mr. Whelan and the Company and the Severance Agreement
dated as of May 1, 1994 between Mr. Whelan and the Company, which
are attached hereto as exhibits and are incorporated herein by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired.
Attached hereto as Annex I are financial statements of Cameron
for the periods specified in Rule 3-05(b) of Regulation S-X, along
with a report of Ernst & Young, independent auditors, thereon.
(b) Pro Forma Financial Statements.
Attached hereto as Annex II are the pro forma financial
statements required pursuant to Article 11 of Regulation S-X.
(c) Exhibits
The following exhibits are filed herewith:
Exhibit No. Description
1 Amended and Restated Stock Purchase Agreement,
dated as of January 10, 1994, between the Company
and Cooper.
2 Investment Agreement, dated as of January 10, 1994,
between the Company and Cooper.
3 Press release issued on by the Company on May 26,
1994.
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Exhibit No. Description
4 Amendment dated May 26, 1994 to Investment
Agreement dated as of January 10, 1994, between the
Company and Cooper.
5 10 % Senior Notes due 2003 Supplemental Indenture
dated May 19, 1994.
6 10 % Senior Notes due 2003 Second Supplemental
Indenture and Guarantee dated May 27, 1994.
7 Revolving Credit Agreement dated as of May 20, 1994
among Wyman-Gordon Receivables Corporation, the
Financial Institutions Parties Hereto and Shawmut
Bank N.A. as Issuing Bank, as Facility Agent and as
Collateral Agent.
8 Receivables Purchase and Sale Agreement dated as of
May 20, 1994 among Wyman-Gordon Company, Wyman-
Gordon Investment Castings, Inc. and Precision
Founders Inc. as the Sellers, Wyman-Gordon Company
as the Servicer and Wyman-Gordon Receivables
Corporation as the Purchaser.
9 Employment Agreement effective March 24, 1994
between Wyman-Gordon Company and David P. Gruber.
10 Employment Agreement effective March 4, 1994
between Wyman-Gordon Company and J. Douglas Whelan.
11 Performance Share Agreement under the Wyman-Gordon
Company Long-Term Incentive Plan between the
Company and David P. Gruber dated as of May 24,
1994.
12 Executive Severance Agreement between the Company
and J. Douglas Whelan dated as of May 1, 1994.
Item 8. Change in Fiscal Year
On May 24, 1994, the Company's Board of Directors voted to
change the Company's fiscal year-end from one which ended on
December 31 to one which ends on the Saturday nearest to May 31.
Accordingly, the Company plans to file a Form 10-Q for the five
month transition period ended May 28, 1994.
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SIGNATURES
Pursuant to the requirements of Section 12 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.
Wyman-Gordon Company
Date: 6/8/94 By: /s/ Luis E. Leon
Luis E. Leon
Vice President, Chief Financial
Officer and Treasurer
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ANNEX I
INDEX TO FINANCIAL STATEMENTS
PAGE
CAMERON FORGED PRODUCTS DIVISION
Combined Results of Operations for the Three
Months Ended March 31, 1993 and 1994 (unaudited) Q-1
Combined Balance Sheet as of March 31, 1994 and 1993
(unaudited) Q-2
Combined Cash Flows for the Three Months Ended
March 31, 1993 and 1994 (unaudited) Q-3
Notes to Combined Financial Statements (unaudited) Q-4
Report of Independent Auditors F-1
Combined Results of Operations for the Years
Ended December 31, 1991, 1992 and 1993 F-2
Combined Balance Sheets as of December 31, 1992
and 1993 F-3
Combined Cash Flows for the Years Ended December 31,
1991, 1992 and 1993 F- 4
Notes to Combined Financial Statements F-5
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CAMERON FORGED PRODUCTS DIVISION
COMBINED RESULTS OF OPERATIONS
Three Months Ended March 31,
1993 1994
(000's omitted)
(Unaudited)
Revenues $37,371 $38,836
Costs and expenses
Cost of goods sold 33,402 34,134
Selling, general and administrative
expenses 2,992 2,731
Depreciation and amortization 1,841 2,138
38,235 39,003
Loss before income taxes (864) (167)
Income tax benefit 82 122
Net loss $ (782) $ (45)
The accompanying Notes to Combined Financial Statements
are an integral part of these financial statements.
Q-1
11
CAMERON FORGED PRODUCTS DIVISION
COMBINED BALANCE SHEET
March 31,
1993 1994
(000's omitted)
(Unaudited)
ASSETS
Current assets:
Receivables $ 31,474 $ 33,076
Inventories 59,071 50,490
Other 353 389
Total current assets 90,898 83,955
Plant and equipment, at cost less
accumulated depreciation 62,452 60,018
Intangibles, less accumulated
amortization 2,315 2,137
Pension assets 9,060 8,546
Other assets 767 105
$165,492 $154,761
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable and accrued liabilities $ 45,827 $ 33,234
Loss on long-term contracts and
agreements - 15,200
Deferred income taxes 11,357 9,147
Total current liabilities 57,184 57,581
Postretirement benefits other than
pensions 12,141 12,159
Pension liability - 10,946
Deferred income taxes 4,227 4,293
Net assets 91,940 69,782
$165,492 $154,761
The accompanying Notes to Combined Financial Statements
are an integral part of these financial statements.
Q-2
12
CAMERON FORGED PRODUCTS DIVISION
COMBINED CASH FLOWS
Three Months Ended March 31,
1993 1994
(000's omitted)
(Unaudited)
OPERATING ACTIVITIES:
Net loss $ (782) $ (45)
Adjustments to reconcile net loss
to net cash provided by (used
for) operating activities:
Depreciation 1,647 1,953
Amortization 194 185
Deferred income taxes (82) (122)
Changes in assets and liabilities:(1)
Receivables (8,103) (7,268)
Inventories 5,288 4,112
Accounts payable and accrued
liabilities (4,178) (2,260)
Other assets and liabilities, net 519 (169)
Net cash provided by (used for)
operating activities (5,497) (3,614)
INVESTING ACTIVITIES:
Capital expenditures (2,887) (1,848)
Proceeds from sales of plant and
equipment 453 447
Net cash used for investing
activities (2,434) (1,401)
FINANCING ACTIVITIES:
Transferred (to) from Cooper 8,144 5,176
Net cash provided by (used for)
financing activities 8,144 5,176
Effect of translation on cash (213) (161)
Increase (decrease) in cash retained by
Cameron - -
Cash retained by Cameron, beginning of
period - -
Cash retained by Cameron, end of period $ - $ -
<FN>
(1) Net of the effects of translation.
The accompanying Notes to Combined Financial Statements
are an integral part of these financial statements.
Q-3
13
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STAETMENTS
(Unaudited)
A. INTERIM FINANCIAL DATA
The financial information presented as of March 31, 1993 and
1994 and for the three months ended March 31, 1993 and 1994
has been prepared from the books and records without audit.
In the opinion of management, all adjustments, consisting of
only normal recurring adjustments, necessary for a fair
statement of the financial information for the periods
indicated have been included.
B. NET ASSETS
Changes in net assets during the three months ended March 31,
1993 and 1994 were as follows:
Trans-
lation Minimum
Adjust- Pension
Total ment Liability Other
(000's omitted)
Balance at
December 31, 1992 $86,153 $(1,511) $ - $87,664
Translation adjustment (1,575) (1,575) - -
Cash flow provided by
Cooper 8,144 - - 8,144
Net (loss) (782) - - (782)
Balance at March 31, 1993 $91,940 $(3,086) $ - $95,026
Balance at
December 31, 1993 $64,449 $(2,812) $(10,946) $78,207
Translation adjustment 202 202 - -
Cash flow provided by
Cooper 5,176 - - 5,176
Net (loss) (45) - - (45)
Balance at March 31, 1994 $69,782 $(2,610) $(10,946) $83,338
Q-4
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REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cooper Industries, Inc.
We have audited the accompanying combined balance sheets of
Cameron Forged Products Division (a division of Cooper Industries,
Inc.) as of December 31, 1992 and 1993, and the related statements
of combined results of operations and combined cash flows for each
of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
Cameron Forged Products Division is a part of Cooper
Industries, Inc. and has no separate legal status or existence.
Transactions with Cooper Industries, Inc. are described in Note N.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the combined financial
position of Cameron Forged Products Division at December 31, 1992
and 1993, and the combined results of their operations and their
cash flows for the three years in the period ended December 31,
1993 in conformity with generally accepted accounting principles.
As discussed in Note C, in 1992 the Company changed its
methods of accounting for postretirement benefits other than
pensions, income taxes and postemployment benefits.
ERNST & YOUNG
Houston, Texas
February 28, 1994
F-1
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CAMERON FORGED PRODUCTS DIVISION
COMBINED RESULTS OF OPERATIONS
Year Ended December 31,
1991 1992 1993
(000's omitted)
Revenues $198,937 $174,334 $149,534
Costs and expenses
Cost of goods sold 164,134 149,222 135,686
Selling, general and administrative
expenses 13,498 12,893 11,904
Depreciation and amortization 6,247 6,982 8,902
Loss on long-term contracts and
agreements - - 15,200
Nonrecurring income - (2,300) -
183,879 166,797 171,692
Income (loss) before income taxes
and cumulative effect of changes
in accounting principles 15,058 7,537 (22,158)
Income tax (expense) benefit (6,936) (2,995) 2,104
Income (loss) before cumulative
effect of changes in accounting
principles 8,122 4,542 (20,054)
Cumulative effect on prior years
of changes in accounting
principles - (14,097) -
Net income (loss) $ 8,122 $ (9,555) $(20,054)
The accompanying Notes to Combined Financial Statements
are an integral part of these financial statements.
F-2
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CAMERON FORGED PRODUCTS DIVISION
COMBINED BALANCE SHEETS
December 31,
1992 1993
(000's omitted)
ASSETS
Current assets:
Receivables $ 23,489 $ 25,710
Inventories 64,584 54,493
Other 350 58
Total current assets 88,423 80,261
Plant and equipment, at cost less
accumulated depreciation 62,976 60,687
Intangibles, less accumulated amortization 2,330 1,998
Pension assets 9,252 8,550
Other assets 869 344
$163,850 $151,840
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable and accrued liabilities $ 50,122 $ 35,442
Loss on long-term contracts and
agreements - 15,200
Deferred income taxes 11,417 9,437
Total current liabilities 61,539 60,079
Postretirement benefits other than
pensions 11,424 12,241
Pension liability - 10,946
Deferred income taxes 4,249 4,125
Other long-term liabilities 485 -
Net assets 86,153 64,449
$163,850 $151,840
The accompanying Notes to Combined Financial Statements
are an integral part of these financial statements.
F-3
17
CAMERON FORGED PRODUCTS DIVISION
COMBINED CASH FLOWS
Year Ended December 31,
1991 1992 1993
(000's omitted)
OPERATING ACTIVITIES:
Net income (loss) $ 8,122 $ (9,555) $(20,054)
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation 5,670 6,278 7,779
Amortization 577 704 1,123
LIFO provision 1,465 1,507 1,497
Loss on long-term contracts and
agreements - - 15,200
Non-recurring income - (2,300) -
Deferred income taxes 3,022 2,995 (2,104)
Cumulative effect of changes in
accounting principles - 14,097 -
Changes in assets and liabilities:(1)
Receivables 5,226 7,938 (2,351)
Inventories 11,449 7,006 8,399
Accounts payable and accrued
liabilities (6,948) (16,080) (14,561)
Other assets and liabilities, net (73) (785) 2,645
Net cash provided by (used for)
operating activities 28,510 11,805 (2,427)
INVESTING ACTIVITIES:
Capital expenditures (20,846) (27,665) (9,201)
Proceeds from sales of plant and
equipment 554 396 1,120
Net cash used for investing
activities (20,292) (27,269) (8,081)
FINANCING ACTIVITIES:
Transferred (to) from Cooper (8,243) 14,359 10,597
Net cash provided by (used for)
financing activities (8,243) 14,359 10,597
Effect of translation on cash 25 1,105 (89)
Increase (decrease) in cash retained by
Cameron - - -
Cash retained by Cameron, beginning of
year - - -
Cash retained by Cameron, end of year $ - $ - $ -
<FN>
(1) Net of the effects of translation, non-recurring income and
the cumulative effect of changes in accounting principles.
The accompanying Notes to Combined Financial Statements
are an integral part of these financial statements.
F-4
18
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS
A. CAMERON FORGED PRODUCTS DIVISION
The accompanying combined financial statements reflect the
operations of the Cameron Forged Products Division ("Cameron") of
Cooper Industries, Inc. ("Cooper"). The combined operations include
Cameron Forged Products Company, a wholly owned U.S. subsidiary of
Cooper, which owns and operates the U.S. forging operations, the
United Kingdom forging operations, which are owned and operated by
a Cooper subsidiary, Cooper Great Britain, and Cameron Pipeline,
Inc., an inactive U.S. subsidiary. CFPD, Ltd., a wholly-owned
subsidiary of Cameron Forged Products Company purchased the United
Kingdom forging operations from Cooper Great Britain in February
1994.
The Cameron Forged Products Division was acquired by Cooper as
part of its acquisition of Cameron Iron Works, Inc. in November
1989. This acquisition was accounted for by Cooper as a purchase
business combination with resulting adjustment of historical asset
and liability amounts to estimated fair market values as of the
acquisition date. Because at the time of acquisition it was
Cooper's intention to divest the acquired forging operations, the
net assets, primarily plant and equipment, were written-down to an
anticipated sales value and none of the goodwill recorded in
connection with the overall acquisition of Cameron Iron Works, Inc.
was allocated to the Cameron Forged Products Division. The Cameron
Forged Products Division is hereinafter referred to as "Cameron."
Cameron operates in one business segment -- forged products.
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION The accompanying combined financial
statements include the accounts of Cameron as described above.
These statements are presented as if Cameron had existed as an
entity separate from its parent, Cooper, during the periods
presented and include the assets, liabilities, revenues and
expenses that are directly related to Cameron's operations. All
transactions between Cameron U.S. and U.K. operations have been
eliminated. Because Cameron's operations were included in the
consolidated financial statements of Cooper on a divisional basis,
there are no separate meaningful historical equity accounts for
Cameron. Additionally, amounts of general corporate accounting,
tax, legal and other administrative costs that are not directly
attributable to the operations of Cameron have been allocated to
Cameron based on a ratio of Cameron's revenues to the consolidated
revenues of Cooper. Management believes that this allocation method
provides Cameron with a reasonable amount of such expenses. The
difference for each of the years presented between the general and
administrative expenses calculated utilizing the allocation method
described above and the actual cost of such expenses which Cameron
anticipates it would have incurred on a stand alone basis is not
material. Cash and debt management are totally centralized
functions within Cooper's divisional management structure. As a
result, there is no practical or logical basis on which to allocate
debt and related interest expense to Cameron. The financial
information included herein may not necessarily be indicative of
F-5
19
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the financial position, results of operations or cash flows of
Cameron in the future or what statements of financial position,
results of operations or cash flows of Cameron would have been if
it was a separate, stand-alone company during the periods
presented.
REVENUE RECOGNITION Sales, including sales under long-term
contracts, are recorded when the goods are shipped to the customer.
LONG-TERM CONTRACTS AND AGREEMENTS Anticipated losses with
respect to long-term contracts, including long-term pricing
agreements, are recorded when available information indicates that
the sales price is less than a fully allocated cost projection.
RESEARCH AND DEVELOPMENT Costs for research and development
are expensed as incurred and were $1,800,000, $2,900,000 and
$1,800,000 for the years ended December 31, 1991, 1992 and 1993,
respectively.
INVENTORIES Inventories are carried at cost or, if lower, net
realizable value. On the basis of current costs, 70% of inventories
in 1992 and 72% in 1993 are carried on the last-in, first-out
(LIFO) method. The remaining inventories are carried on the
first-in, first-out (FIFO) method.
PLANT AND EQUIPMENT Depreciation is provided over the
estimated useful lives of the related assets using primarily the
straight-line method. This method is applied to group asset
accounts which in general have the following lives: buildings -- 10
to 40 years; machinery and equipment -- 8 to 12 years; and tooling,
dies, patterns, etc. -- 3 to 7 years.
INTANGIBLES Intangibles consist primarily of software which
is being amortized over its estimated useful life -- generally five
years.
INCOME TAXES Income taxes are provided as if operations in
all countries including the U.S. were stand-alone businesses filing
separate tax returns. For the years 1992 and 1993, Cameron has
determined tax expense and other deferred tax information in
compliance with Statement of Financial Accounting Standards (SFAS)
No. 109 (Accounting for Income Taxes). Prior years have not been
restated and accordingly reflect the procedures required by
Accounting Principles Board Opinion No. 11 -- Accounting for Income
Taxes, as amended.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS For the years
1992 and 1993, Cameron has determined the accounting effect of
postretirement benefits other than pensions (primarily retiree
medical costs) in accordance with the provisions of SFAS No. 106
(Employer's Accounting for Postretirement Benefits Other Than
Pensions). Such benefits in years prior to 1992 were accounted for
on a partial accrual method.
F-6
20
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
POSTEMPLOYMENT BENEFITS For the years 1992 and 1993, Cameron
has accounted for the benefits payable to employees when they leave
Cameron other than by reason of retirement in accordance with the
provisions of SFAS No. 112 (Employers' Accounting for
Postemployment Benefits). Except for an actuarial determination of
the termination benefits payable to domestic salaried employees,
Cameron's accounting in years prior to 1992 was the same as that
required by SFAS No. 112.
ENVIRONMENTAL REMEDIATION AND COMPLIANCE Environmental
remediation costs are accrued, except to the extent costs can be
capitalized, based on estimates of known environmental remediation
exposures. Environmental compliance costs include maintenance and
operating costs with respect to pollution control facilities, cost
of ongoing monitoring programs and similar costs. Such costs are
expensed as incurred. Capitalized environmental costs are
depreciated generally utilizing a 15-year life and had a net book
value of $400,000 and $300,000 at December 31, 1992 and 1993,
respectively.
EARNINGS PER SHARE Earnings per share have been omitted from
the combined statement of results of operations since Cameron was
an operating division of Cooper with no meaningful equity
securities outstanding.
FOREIGN CURRENCY TRANSLATION The local currency is the
functional currency for the foreign operation and, as such, assets
and liabilities are translated into U.S. dollars at year-end
exchange rates. Income and expense items are translated at average
exchange rates during the year. Translation adjustments resulting
from changes in exchange rates are reported as a component of net
assets.
C. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1992, Cameron adopted the following
accounting standards:
SFAS NO. 106 -- EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS This standard provides that Cameron
follow an accrual method of accounting for the benefits other than
pensions (primarily health-care costs) provided to employees after
retirement. The results of operations for the first quarter of 1992
include a charge of $9,922,000 for the immediate recognition of the
net transition obligation with respect to benefits earned by active
and retired employees prior to January 1, 1992. Additionally,
1992's ongoing postretirement costs have been recorded based on the
required actuarially determined accrual method as opposed to
Cameron's previous partial accrual method of accounting for such
costs. The effect, excluding the effect of a September 1992
curtailment gain, was to decrease 1992 full-year earnings by
$1,200,000. The remaining disclosure information required by SFAS
No. 106 is set forth in Note J of the Notes to Combined Financial
Statements.
F-7
21
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
C. CHANGES IN ACCOUNTING PRINCIPLES (CONTINUED)
SFAS NO. 109 -- ACCOUNTING FOR INCOME TAXES This standard
requires a liability as opposed to a deferred method of accounting
for income taxes. The results of operations for the first quarter
of 1992 include a net tax charge of $3,545,000 to reflect the
cumulative effect of adopting this pronouncement. This charge
primarily resulted from the establishment of a valuation allowance
for the pre-adoption deferred tax assets.
Income tax expense and certain other adjustments for 1992 and
1993 have been determined in accordance with the provisions of the
new standard. The 1992 effect was to decrease pre-tax income by
$400,000 for higher depreciation expense on fixed asset values
previously recorded net of tax and to increase tax expense by
$1,500,000 to reflect the absence of the tax benefits with respect
to fair market value depreciation reductions previously treated as
permanent differences. The remaining disclosure information
required by SFAS No. 109 is set forth in Note M of the Notes to
Combined Financial Statements.
SFAS NO. 112 -- EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT
BENEFITS This standard provides that Cameron follow an accrual
method of accounting for the benefits payable to employees when
they leave Cameron other than by reason of retirement. Since most
of these benefits were already accounted for by Cameron on an
accrual method, this new standard has a relatively small cumulative
effect -- $630,000 and a negligible effect on 1992's earnings.
In addition, in 1992, Cameron changed its accounting policy
with respect to the valuation of scrap. Certain of the forgings
which Cameron produces utilize nickel as a component material.
When, during the normal production process, Cameron produces scrap
that includes nickel, the scrap is carefully controlled so that the
nickel may be recovered. In 1992, as management became aware of the
increasing amount of nickel on hand within the business, the
accounting policy of Cameron was changed to value instead of
expense the nickel in order to provide greater financial control
over this asset. The financial statements for prior years have
been restated to reflect this change in the accounting policy.
D. NONRECURRING INCOME
Cameron's 1992 results include $2,300,000 of income resulting
from the reversal of vacation accruals due to a change in Cameron's
vacation policy which resulted in the elimination of carryover
vacation rights. The change in the vacation policy was announced in
1992. A portion of the income, $900,000, related to salaried
employees and was recorded in the second quarter of 1992. The
remainder, with respect to hourly employees, was recorded in the
third quarter of 1992 when the change was approved by the hourly
union.
F-8
22
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
E. LOSS ON LONG-TERM CONTRACTS AND AGREEMENTS
Starting in the latter part of 1992 and continuing into 1993,
Cameron has experienced extreme pricing pressure from its major
customers, who in turn have been under pressure from their major
airline customers as well as continuing cutbacks from the U.S.
military. This pressure, combined with large amounts of
industry-wide excess forging capacity have caused Cameron's margins
to decline faster than Cameron can adjust its fixed and semi-fixed
period costs. In an effort to keep its operations functioning with
the highest possible utilization and corresponding efficiency
levels, Cameron has increasingly accepted orders with lower gross
profit levels and also in the second quarter of 1993 entered into
three-year pricing agreements with two of its major customers.
Since the time when the original terms of these agreements were
negotiated, the delivery dates have been steadily pushed into the
future, exacerbating the current utilization problem.
In accordance with Cameron's policy of accruing for losses on
backlog and long-term pricing agreements, when available
information indicates that a material loss will be incurred when
the goods are delivered pursuant to the commitments, a loss accrual
of $15,200,000 was provided in connection with the preparation of
Cameron's financial statements for the third quarter ended
September 30, 1993.
Of the total accrual, approximately $10,000,000 relates to
committed backlog and $5,000,000 relates to the three-year pricing
agreements. Virtually all of the anticipated loss is with respect
to Cameron's operations in the United States as opposed to the
United Kingdom. The calculations were based on the anticipated
revenues and fully allocated operating costs for Cameron for the
year 1994. Deliveries from the backlog extend into 1995, while the
pricing agreements continue until 1996. While some portion of the
$15,200,000 may have been calculable as of an earlier date in 1993,
quantities under the long-term agreements were not sufficiently
quantifiable prior to the third quarter to permit accrual at an
earlier date. In addition, lower volume levels anticipated during
the budgeting process for 1994 have resulted in significant
increases in the anticipated losses with respect to the backlog
compared to calculations based on 1993 activity levels and costing
structures. As a result, Cameron believes that including the charge
against the third quarter of 1993 is appropriate from a timing
perspective. The $15,200,000 accrual was unchanged at December 31,
1993 since an updated calculation indicated that the amount
continued to be appropriate.
In years prior to 1993, although there were individual orders
which would have been at a loss calculated on a fully
cost-allocated basis, the aggregate amount of such backlog or
pricing agreements that would have resulted in a loss was not
material to Cameron.
F-9
23
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
F. INVENTORIES
Inventories consisted of the following:
December 31,
1992 1993
(000's omitted)
Raw Materials $19,544 $13,387
Work-in-process 20,474 21,454
Finished goods 9,722 5,250
Perishable tooling and supplies 4,341 3,751
54,081 43,842
Excess of historical LIFO costs over
current standard costs 10,516 10,038
Other (13) 613
Net inventories $64,584 $54,493
During each year, reductions in inventory quantities resulted
in liquidations of LIFO inventory layers carried at higher costs
prevailing in prior years. The effect was to decrease net income by
$1,465,000 in 1991, $1,507,000 in 1992 and $1,497,000 in 1993.
G. PLANT AND EQUIPMENT AND INTANGIBLES
Plant and equipment and intangibles consisted of the
following:
December 31,
1992 1993
(000's omitted)
Plant and equipment:
Land, buildings and land improvements $13,616 $12,807
Machinery and equipment 54,810 68,809
Under construction 11,608 3,101
80,034 84,717
Accumulated depreciation (17,058) (24,030)
$62,976 $60,687
Intangibles:
Cost $ 4,121 $ 4,199
Accumulated amortization (1,791) (2,201)
$ 2,330 $ 1,998
F-10
24
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
H. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the
following:
December 31,
1992 1993
(000's omitted)
Trade accounts and accruals $28,367 $22,702
Salaries, wages and related fringe
benefits 3,417 3,017
Pension liability 5,345 2,009
Estimated costs of plant relocations
and nonrecurring items 7,070 2,604
Payroll and other taxes 3,239 3,996
Other (individual items less than 5%
of total current liabilities) 2,684 1,114
$50,122 $35,442
I. PENSION AND SAVINGS PLANS
In accordance with the Stock Purchase Agreement between Cooper
and Wyman-Gordon Company, under which Wyman-Gordon Company will
purchase all of the outstanding shares of Cameron Forged Products
Company from Cooper, Cooper will retain all obligations and
benefits of the defined benefit pension plans discussed below.
Pension expense for defined benefit pension plans included the
following components:
Year Ended December 31,
1991 1992 1993
(000's omitted)
Service cost-benefits earned
during the year $ 2,304 $ 2,364 $ 2,532
Interest cost on projected
benefit obligation 5,930 6,559 6,420
Actual return on assets (8,490) (5,108) (9,362)
Net amortization and deferral 2,564 (1,571) 3,132
Net pension cost $ 2,308 $ 2,244 $ 2,722
F-11
25
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
I. PENSION AND SAVINGS PLANS (CONTINUED)
A summary of the funding status of the defined benefit pension
plans is as follows:
Plans With Plans With
Assets in Excess Accumulated
of Accumulated Benefits in
Benefits Excess of Assets
December 31, December 31,
1992 1993 1992 1993
(000's omitted)
Actuarial present value of:
Vested benefit obligation $(23,724) $(34,624) $(40,697) $(51,360)
Accumulated benefit
obligation $(24,572) $(35,634) $(40,720) $(51,393)
Projected benefit
obligation $(31,122) $(38,118) $(45,064) $(51,478)
Plan assets at fair value 35,425 43,350 35,349 38,337
Plan assets in excess of
(less than) projected
benefit obligation 4,303 5,232 (9,715) (13,141)
Unrecognized net loss 5,321 3,724 4,287 11,031
Unrecognized net asset from
adoption date (431) (399) - -
Unrecognized prior service
cost 142 94 - -
Adjustment required to
recognize - - - (10,946)
Pension asset (liability)
at end of year $ 9,335 $ 8,651 $ (5,428) $(13,056)
Computational Assumptions
Project
Benefit
Net Pension Cost Obligation
1991 1992 1993 1992 1993
Discount rate:
Domestic 9 % 9 % 8 1/2% 8 1/2% 7 %
International 10 9 9 9 7 3/4
Rate of increase in
compensation levels:
Domestic 6 6 5 1/2 5 1/2 5
International 7 6 6 6 5 1/2
Expected long-term rate of
return on assets:
Domestic 9 1/2 9 1/2 9 1/2 - -
International 11 10 10 - -
Benefit basis:
Salaried plans: earnings during career
Hourly plans: dollar units, multiplied by years of service
Funding policy: 5 to 30 years.
F-12
26
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
I. PENSION AND SAVINGS PLANS (CONTINUED)
As part of Cooper, the domestic salaried employees of Cameron
participate in the Salaried Employees' Retirement Plan of Cooper
Industries, Inc. while the United Kingdom (U.K.) salaried and
hourly employees participate in a combined plan along with certain
other Cooper employees in the U.K. The domestic hourly employees of
Cameron participate in the Cameron Iron Works USA, Inc. Retirement
Plan for Hourly Employees as well as the Cameron Iron Works USA,
Inc. Savings-Investment Plan for Hourly Employees (the Cameron
Hourly Savings Plan). Under the Cameron Hourly Savings Plan
employee savings deferrals are partially matched with company
contributions of cash. The amounts shown in the preceding table
reflect amounts allocated to Cameron as its proportionate share of
both the domestic and the combined U.K. plans. Aggregate pension
expense amounted to $2,680,000 in 1991, $2,612,000 in 1992 and
$3,031,000 in 1993. Cameron's expense with respect to the defined
benefit pension plans is set forth in the table above. For 1994,
primarily as a result of the reduction in the domestic discount
rate from 8.5% to 7%, Cameron's domestic defined benefit pension
plan expense is projected to increase by approximately $1,400,000.
Expense with respect to the domestic defined contribution plan for
the years ended December 31, 1991, 1992 and 1993 amounted to
$372,000, $368,000 and $309,000, respectively. Gains and losses on
curtailments and settlements were not material in any of the three
years ended December 31, 1993. The assets of the domestic and
foreign plans are maintained in various trusts and consist
primarily of equity and fixed income securities.
At December 31, 1993, the $10,946,000 "minimum liability" with
respect to the domestic hourly pension plan has been recorded in
the Combined Balance Sheet as a long-term liability with an
offsetting reduction in caption "Net Assets." The remaining
December 31, 1993 liability of $2,110,000 with respect to this plan
is included in accounts payable and accrued liabilities partially
offset by a $101,000 asset with respect to the domestic salaried
plan. The remaining pension asset of $8,550,000 relates to the
United Kingdom pension plan and is included in a long-term pension
asset caption. At December 31, 1992 there was no "minimum
liability" with respect to the domestic hourly plan and the plan's
regular liability of $5,428,000 was recorded in accounts payable
and accrued liabilities partially offset by an $83,000 asset with
respect to the domestic salaried plan. The remaining asset of
$9,252,000 which related to the United Kingdom plan was recorded in
a long-term pension asset caption.
Cameron's full-time domestic salaried employees are also
eligible to participate in the Cooper Savings and Stock Ownership
Plan. Under the Cooper Savings and Stock Ownership Plan, employee's
savings deferrals are partially matched with an allocation of
shares in Cooper's Employee Stock Ownership Plan (ESOP). No assets
or liabilities with respect to Cooper's ESOP have been included in
F-13
27
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
I. PENSION AND SAVINGS PLANS (CONTINUED)
Cameron's combined financial statements. Cameron's expense equals
the matching contribution under the Plan's formula adjusted to
reflect Cameron's proportionate participation in Cooper's ESOP.
Expense for the years ended December 31, 1991, 1992 and 1993
amounted to $367,000, $366,000 and $343,000, respectively.
J. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
As part of Cooper, Cameron's salaried employees participate in
various domestic employee welfare benefit plans including for
active employees medical, dental and prescriptions, among other
benefits. Salaried employees who retired prior to 1989, as well as
certain other employees who were near retirement and elected to
receive certain benefits, have retiree medical, prescription and
life insurance benefits while active salaried employees will not
have postretirement medical benefits.
The hourly employees have separate plans with varying benefit
formulas. In all cases, however, currently active employees,
except for certain employees who are near retirement and previously
elected to receive certain benefits, will not receive health care
benefits after retirement. Cameron entered into a union agreement
in 1992 which reduced certain postretirement health care benefits
and resulted in a curtailment gain of $1,500,000. In addition,
certain amendments were made in 1992 which resulted in an
additional $1,900,000 of accumulated postretirement benefit
obligation and additional expense of $300,000 in 1992 and 1993.
All of Cooper's plans and therefore Cameron's portion of such
plans are unfunded.
As described in Note C of the Notes to the Combined Financial
Statements, Cooper, and therefore Cameron, elected for the year
1992 and future years to follow the provisions of SFAS No. 106
(Employers' Accounting for Postretirement Benefits Other Than
Pensions). The amounts reflected in the table which follows
represent Cameron's portion of Cooper's overall salaried employee
retiree liability as well as Cameron's proportionate amounts in
various plan groupings which were actuarially evaluated in arriving
at Cooper's overall expense in accordance with SFAS No. 106.
F-14
28
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
J. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
Accumu- Items Not Yet Amounts Per
lated Recorded Financial Statements
Post- in Financial Liability
tirement Statements for Post-
Benefit Actu- retirement Net
Obliga- Prior arial Benefits Annual
tion Service Net Other Than Expense
(APBO) Cost Gain Pensions (Income)
Balance -
December 31, 1991 $ (2,178) $ - $ - $ (2,178) $ -
Adoption of SFAS
No. 106 effective
January 1, 1992 (9,922) - - (9,922) -
Plan activity:
Service cost (200) - - - 200
Interest cost (900) - - - 900
Benefit payments 576 - - 576 -
Plan amendments (1,900) 1,900 - - -
Amortization of
unrecognized
prior service
cost - (300) - - 300
Curtailment gain 1,500 - - - (1,500)
Net annual expense - - - 100 -
Balance -
December 31, 1992 (13,024) 1,600 - (11,424) $ (100)
Plan activity:
Service cost (100) - - - $ 100
Interest cost (800) - - - 800
Benefit payments 383 - - 383 -
Actuarial net gain 4,400 - (4,400) - -
Amortization of
unrecognized
prior service
cost - (300) - - 300
Net annual expense - - - (1,200) -
Balance -
December 31, 1993 $ (9,141) $1,300 $(4,400) $(12,241) $ 1,200
F-15
29
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
J. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)
December 31,
1992 1993
Amount of APBO related to:
Retired employees $(6,512) $(4,753)
Employees eligible to retire (2,214) (1,554)
Other employees (4,298) (2,834)
Actuarial assumptions:
Discount rate 7.64% 7.58%
1993 to 2002 - health-care cost
trend rate: 20% Ratable 17% Ratable
to 5.5% to 5.5%
Effect of 1% change in health-care
cost trend rate:
Increase December 31, 1992 APBO 9% 9%
Increase 1992 expense 10% 10%
K. NET ASSETS
Changes in net assets during the three years ended December
31, 1993 were as follows:
Trans-
lation Minimum
Adjust- Pension
Total ment Liability(1) Other
(000's omitted)
Balance at December 31, 1990 $ 85,781 $ 2,800 $ - $ 82,981
Translation adjustment 598 598 - -
Cash flow transferred to
Cooper (8,243) - - (8,243)
Net income 8,122 - - 8,122
Balance at December 31, 1991 86,258 3,398 - 82,860
Translation adjustment (4,909) (4,909) - -
Cash flow provided by Cooper 14,359 - - 14,359
Net (loss) (9,555) - - (9,555)
Balance at December 31, 1992 86,153 (1,511) - 87,664
Translation adjustment (1,301) (1,301) - -
Cash flow provided by Cooper 10,597 - - 10,597
Adjustment required to
recognize minimum pension
liability (10,946) - (10,946) -
Net (loss) (20,054) - - (20,054)
Balance at December 31, 1993 $ 64,449 $(2,812) $(10,946) $ 78,207
<FN>
(1) See Note I of the Notes to Combined Financial Statements.
Intercompany transactions are principally cash transfers
between Cameron and Cooper.
F-16
30
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
L. INDUSTRY SEGMENTS, DOMESTIC AND INTERNATIONAL OPERATIONS,
AND MAJOR CUSTOMERS
Cameron's operations are conducted within one business
segment -- forged products.
Translation and transaction gains and losses included in
each year's Combined Results of Operations were not significant.
Net sales to major customers as a percentage of sales were
as follows:
Year Ended December 31,
1991 1992 1993
General Electric 25.4% 27.3% 29.6%
Rolls-Royce plc 9.8 11.7 10.5
United Technologies 9.0 10.6 10.2
Domestic and International Operations -- Transfers between
domestic and international operations, principally inventory
transfers, are charged to the receiving organization at prices
sufficient to recover manufacturing costs and provide a
reasonable return. Export sales to unaffiliated customers
included in domestic sales were $13,000,000 in 1991, $15,500,000
in 1992 and $14,900,000 in 1993. Of total export sales, 25% (63%
in 1992 and 24% in 1993) were to Europe, 38% (26% in 1992 and 44%
in 1993) were to Canada, and 37% (11% in 1992 and 32% in 1993)
were to Asia.
Revenues
Year Ended December 31,
1991 1992 1993
(000's omitted)
Domestic $159,557 $132,306 $116,014
Europe 41,677 42,158 33,585
Eliminations:
Transfers to Europe (1,845) (130) (65)
Transfers to Domestic (452) - -
$198,937 $174,334 $149,534
F-17
31
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
L. INDUSTRY SEGMENTS, DOMESTIC AND INTERNATIONAL OPERATIONS,
AND MAJOR CUSTOMERS (CONTINUED)
Operating Earnings (Loss) (1)
Year Ended December 31,
1991 1992(2) 1993
(000's omitted)
Domestic $14,276 $5,738 $(19,848)
Europe 550 1,799 (2,317)
Eliminations:
Transfers to Europe 242 - 7
Transfers to Domestic (10) - -
$15,058 $7,537 $(22,158)
<FN>
(1) Combined income before income taxes and the cumulative effect
of changes in accounting principles in 1992.
(2) Domestic operating earnings include nonrecurring income as
further described in Note D of the Notes to the Combined
Financial Statements.
Identifiable Assets
December 31,
1991 1992 1993
(000's omitted)
Domestic $105,900 $114,720 $108,348
Europe 50,837 49,130 43,485
Eliminations:
Transfers to Europe (242) - 7
Transfers to Domestic 10 - -
$156,505 $163,850 $151,840
M. INCOME TAXES
Income (loss) before income taxes and cumulative effect of
changes in accounting principles is comprised of the following:
Year Ended December 31,
1991 1992 1993
(000's omitted)
Income (loss) before income taxes and
cumulative effect of changes in
accounting principles:
U.S. operations $14,518 $5,738 $(19,841)
Foreign operations 540 1,799 (2,317)
Income (loss) before income taxes
and cumulative effect of changes
in accounting principles $15,058 $7,537 $(22,158)
F-18
32
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
M. INCOME TAXES (CONTINUED)
Income tax expense (benefit) is comprised of the following:
Deferred Liability
Method Method
1991 1992 1993
(000's omitted)
Income taxes:
Currently payable:
U.S. Federal $3,357 $ - $ -
U.S. state and local - - -
Foreign 557 - -
3,914 - -
Deferred:
U.S. Federal 3,317 2,861 (1,916)
U.S. state and local - 6 (4)
Foreign (295) 128 (184)
3,022 2,995 (2,104)
Income tax expense (benefit) $6,936 $2,995 $(2,104)
Following is a summary of items giving
rise to deferred income taxes:
Excess of tax over book depreciation $1,323 $ - $ -
Capitalized for books and expensed
for tax 2,311 - -
Reserves and accruals 330 - -
LIFO inventory (829) 3,222 (1,974)
Other (113) (227) (130)
Deferred income taxes $3,022 $2,995 $(2,104)
The provision for income taxes is
at a rate other than the federal
statutory tax rate for the following
reasons:
U.S. Federal statutory rate 34.0% 34.0% (34.0)%
Nontaxable permanent difference
on book depreciation (10.1) - -
Net domestic and foreign losses
without tax benefits 22.2 5.7 24.5
Indicated effective tax rate 46.1% 39.7% (9.5)%
Following is the amount of income
taxes refunded:
Total income taxes refunded* $ (809) $ - $ -
<FN>
* Taxes are refunded by Cameron to Cooper who in turn receives
the taxes from the various taxing authorities.
F-19
33
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
M. INCOME TAXES (CONTINUED)
The components of deferred tax liabilities and assets were as
follows:
December 31,
1992 1993
(000's omitted)
Deferred tax liabilities:
LIFO inventory $(11,411) $ (9,437)
Other (4,255) (4,125)
Total deferred tax liabilities (15,666) (13,562)
Deferred tax assets:
Reserves and accruals 7,866 9,632
Plant and equipment 5,622 2,959
Postretirement benefits other
than pensions 3,889 4,168
Net operating loss carryforwards 9,689 15,139
Total deferred tax assets 27,066 31,898
Valuation allowances (27,066) (31,898)
Net deferred tax liabilities $(15,666) $(13,562)
Although Cameron's U.S. operations were included in the
consolidated U.S. Federal and certain combined and separate state
income tax returns of Cooper and its foreign operations were
included in the tax return of a Cooper subsidiary doing business in
the U.K., the above tax provisions and tax liabilities presented
have been determined as if Cameron's operations in all countries
were stand-alone businesses filing separate tax returns. Deferred
income taxes have been determined from temporary differences
between financial statement income and taxable income with
appropriate valuation allowances based on Cameron's stand-alone
ability to utilize both net operating losses and other deferred tax
assets.
The balance of accrued taxes for Cameron's U.S. and foreign
operations is included in Cameron's intercompany/equity balance
with Cooper, since Cooper pays all taxes and receives all tax
refunds on Cameron's behalf.
Income tax expense and the information shown above for 1992
and 1993 have been determined in accordance with the provisions of
SFAS No. 109 (Accounting for Income Taxes) which basically provides
for a "liability" approach to taxes. Income taxes for years prior
to 1992 have not been restated and are accordingly reflected above
based on a "deferred" approach to taxes. The major difference
between the two approaches as reflected in the information above is
that (a) acquisition date fair market value write-downs of plant
and equipment which were not tax effected and therefore treated as
permanent differences have now been tax effected and (b) items that
were previously accounted for on a "net-of-tax" basis (primarily
acquisition date reserves and accruals of acquired businesses and
F-20
34
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
M. INCOME TAXES (CONTINUED)
certain fair market value adjustments of inventories and fixed
assets) are now considered to be "temporary differences" that give
rise to larger deferred tax amounts in the provision disclosure.
See Note C of the Notes to Combined Financial Statements.
On a stand-alone basis, Cameron has pre-tax net operating loss
carryforwards of $44,526,471 ($0 net of the valuation allowance) at
December 31, 1993 with the earliest expiration date being 2000.
These net operating losses have in fact been utilized by Cooper in
its consolidated return, except for a $8,165,000 net operating loss
which existed at acquisition date and must be utilized by Cameron
on a separate return basis.
The adoption of SFAS No. 109 has not changed the actual amount
of income tax that Cameron pays nor, except for the $1,500,000
increase in income tax expense described in Note C of the Notes to
Combined Financial Statements, has it changed Cameron's income tax
expense.
The U.S. Federal portion of the above provision includes U.S.
tax expected to be payable on the foreign portion of Cameron's
income before income taxes when such earnings are remitted. Through
December 31, 1993, essentially all earnings of Cameron's foreign
operations have been remitted.
N. RELATED PARTY TRANSACTIONS
Cameron receives services provided by Cooper which include
employee benefits administration, cash management, risk management,
certain legal services, public relations, domestic tax reporting
and internal and domestic external audit. The costs associated with
these services have been allocated to Cameron. See Note B of the
Notes to Combined Financial Statements.
For purposes of Cameron's financial statements, the
intercompany account between Cameron and Cooper has been included
as an element of Cameron's net assets. All free cash flows and cash
requirements of Cameron are considered to be transferred to or
provided by Cooper and are included in this intercompany account.
Cameron sells products to Cooper on third party terms which
amounted to $10,000,000 in 1991, $6,400,000 in 1992 and $4,700,000
in 1993. In addition, Cameron incurs expense for use of Cooper's
mainframe computer and charges Cooper for shared office space and
administrative personnel in the U.K. The amounts involved in these
transactions are not material to Cameron.
F-21
35
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
O. OFF-BALANCE-SHEET ITEMS, CONCENTRATIONS OF CREDIT AND FAIR
VALUE OF FINANCIAL INSTRUMENTS
OFF-BALANCE-SHEET ITEMS Cameron enters into forward exchange
contracts to hedge certain foreign currency transactions for
periods consistent with the terms of the underlying transactions.
Cameron does not engage in speculation, nor does Cameron typically
hedge nontransaction-related balance sheet exposure. While the
forward contracts affect Cameron's results of operations, they do
so only in connection with the underlying transactions. As a
result, they do not subject Cameron to risk from exchange rate
movements, because gains and losses on these contracts offset
losses and gains on the transactions being hedged. At December 31,
1992 and 1993, Cameron had approximately $1,800,000 and $2,000,000,
respectively of foreign exchange contracts outstanding for the
exchange of British pounds for other European currencies, Canadian
dollars, U.S. dollars or Japanese yen. The forward exchange
contracts have maturities that generally do not exceed one year.
Cameron's other off-balance-sheet risks are not material.
CONCENTRATIONS OF CREDIT Concentrations of credit with
respect to trade receivables are limited due to the wide variety of
customers and markets into which Cameron's products are sold, as
well as their dispersion across many different geographic areas. As
a result, at December 31, 1993, Cameron does not consider itself to
have any significant concentrations of credit risk except for
receivables of $4,528,000, $3,701,000, and $4,903,000 from General
Electric, Rolls-Royce plc and United Technologies, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS Cameron's financial
instruments consist primarily of trade receivables, trade payables,
and foreign currency forward contracts. The book values of trade
receivables and trade payables are considered to be representative
of their respective fair values. Based on year-end exchange rates
and the various maturity dates of the foreign currency forward
contracts, Cameron estimates the aggregate contract value to exceed
the fair value by .3% at December 31, 1993.
F-22
36
CAMERON FORGED PRODUCTS DIVISION
NOTES TO COMBINED FINANCIAL STATEMENTS - (CONTINUED)
P. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter
1st 2nd 3rd 4th
(000's omitted)
1992
Revenues $ 46,903 $48,346 $ 43,821 $35,264
Gross margin(1) 6,450 8,982 5,097 4,583
Income (loss) before
cumulative effect of
changes in accounting
principles(2) 326 2,818 1,808 (410)
Cumulative effect on prior
years of changes in
accounting principles (14,097) - - -
Net income (loss)(2) (13,771) 2,818 1,808 (410)
1993
Revenues $ 37,371 $36,508 $ 39,975 $35,680
Gross margin (loss)(1) 3,969 3,140 (13,674) 5,213
Net income (loss) (782) (1,822) (17,289) (161)
<FN>
(1) Gross margin equals sales less cost of goods sold (including
loss on long-term contracts and agreements) before
depreciation and amortization.
(2) Includes nonrecurring income as further described in Note D of
the Notes to Combined Financial Statements.
F-23
37
ANNEX II
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY
The following unaudited pro forma combined financial data give
effect to the Acquisition and are based on estimates and
assumptions set forth below in the notes to such data which include
pro forma adjustments. These unaudited pro forma combined financial
data have been prepared utilizing the historical financial
statements of the Company and Cameron and should be read in
conjunction with such historical financial statements and
accompanying notes. The unaudited pro forma combined financial
data do not reflect any sales attrition which may result from the
combination or the cost savings that the Company expects to achieve
from the combination. These unaudited pro forma combined financial
data do not purport to be indicative of the results which actually
would have been obtained if the Acquisition had been effected on
the date or dates indicated or of those results which may be
obtained in the future.
The pro forma combined financial data are based on the
purchase method of accounting for the Acquisition. The pro forma
condensed combined balance sheet assumes an April 2, 1994
acquisition date. The pro forma combined statements of operations
assume that the Acquisition had occurred on January 1, 1993.
Although neither the Company nor Cooper has complete current
information as to the fair market values of Cameron's individual
assets and liabilities, a preliminary estimate of the allocation of
the purchase price was made on the basis of available information.
The actual allocation of the purchase price may be different from
that reflected in the pro forma financial data. Such differences
would result from adjustments in the purchase price and refinements
in the fair market values of the net assets acquired.
P-1
38
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
April 2, 1994
Historical Pro Forma
Wyman- Adjust- Combined
Gordon Cameron ments Companies
(000's Omitted, except per share data)
ASSETS:
Cash and cash
equivalents $ 25,255 $ - $ (400)(d) $ 49,466
24,611 (c)
Accounts receivable 49,208 33,076 - 82,284
Inventories 41,005 50,490 2,167 (d) 93,662
Prepaid expenses 11,024 389 - 11,413
Total current assets 126,492 83,955 26,378 236,825
Property, plant and
equipment, net 94,643 60,018 (15,959)(d) 122,402
(16,300)(a)
Intangible assets 20,550 2,137 (2,137)(d) 21,350
800 (d)
Pension intangible and
asset 8,368 8,546 (8,546)(b) 8,368
Deferred income taxes - - 10,002 (d) 10,002
Other assets 29,757 105 - 29,862
$279,810 $154,761 $ (5,762) $428,809
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Current maturities of
long-term debt $ 77 $ - $ - $ 77
Accounts payable and
accrued liabilities 26,307 33,234 (1,517)(b) 58,024
Note payable - - 24,862 (c) 24,862
Loss on long-term contracts
and agreements - 15,200 7,400 (d) 22,600
Deferred income taxes - 9,147 (9,147)(d) -
Accrued restructuring,
integration, disposal
and environmental 4,425 - 7,759 (d) 23,284
11,100 (a)
Total current liab. 30,809 57,581 40,457 128,847
Restructuring,
integration, disposal
and environmental 13,549 - 9,553 (d) 23,102
Long-term debt 90,461 - - 90,461
Pension liability 14,065 10,946 (10,946)(b) 18,565
4,500 (d)
Deferred income taxes
and other 9,275 4,293 (4,293)(d) 12,461
3,186 (d)
Postretirement benefits
other than pensions 41,817 12,159 - 53,976
Stockholders' equity 79,834 69,782 (27,400)(a) 101,397
(251)(c)
49,214 (d)
(69,782)(d)
$279,810 $154,761 $ (5,762) $428,809
P-2
39
UNAUDITED PRO FORMA COMBINED BALANCE SHEET (CONTINUED)
April 2, 1994
Historical Pro Forma
Wyman- Adjust- Combined
Gordon Cameron ments Companies
(000's Omitted, except per share data)
Book value per share $ 4.43 $ 2.94
Number of common shares
outstanding used to
calculate book value
per share 18,040 34,540
P-3
40
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
Historical Pro Forma
Wyman- Adjust- Combined
Gordon Cameron ments Companies
(000's Omitted, except per share data)
Revenue $239,761 $149,534 $ - $389,295
Cost and expenses:
Cost of sales 210,069 135,686 4,206 (e) 349,961
Selling, general and
administrative 20,098 11,904 175 (e) 32,177
Depreciation and
amortization 15,569 8,902 (4,590)(e) 19,881
Loss on long-term
contracts and
agreements - 15,200 - 15,200
Other 2,453 - - 2,453
248,189 171,692 (209) 419,672
Income (loss) from
operations (8,428) (22,158) 209 (30,377)
Other deductions (income):
Interest expense 9,897 - 318 (e) 10,215
Miscellaneous, net (1,321) - - (1,321)
8,576 - 318 8,894
Income (loss) before income
taxes and cumulative
effect of changes in
accounting principles (17,004) (22,158) (109) (39,271)
Income tax (expense)
benefit - 2,104 (2,104)(e) -
Income (loss) before
cumulative effect of
changes in accounting
principles $(17,004) $(20,054) $(2,213) $(39,271)
Income (loss) per share
before cumulative effect
of changes in accounting
principles $ (0.95) $ (1.14)
Average number of common
shares outstanding 17,936 34,436
P-4
41
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
ENDED APRIL 2, 1994
Historical Pro Forma
Wyman- Adjust- Combined
Gordon Cameron ments Companies
(000's Omitted, except per share data)
Revenue $ 52,268 $ 38,836 $ - $ 91,104
Cost and expenses:
Cost of sales 48,962 34,134 1,849 (f) 84,945
Selling, general and
administrative 5,352 2,731 43 (f) 8,126
Depreciation and
amortization 3,812 2,138 (1,225)(f) 4,725
58,126 39,003 667 97,796
Income (loss) from
operations (5,858) (167) (667) (6,692)
Other deductions (income):
Interest expense 2,399 - 80 (f) 2,479
Miscellaneous, net 429 - - 429
2,828 - 80 2,908
Income (loss) before income
taxes (8,686) (167) (747) (9,600)
Income tax (expense)
benefit - 122 (122)(f) -
Net income (loss) $ (8,686) $ (45) $ (869) $ (9,600)
Net income (loss) per
share $ (0.48) $ (0.28)
Average number of common
shares outstanding 18,017 34,517
P-5
42
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF
WYMAN-GORDON COMPANY WITH CAMERON FORGED PRODUCTS COMPANY
(a) The unaudited pro forma combined statements of operations
do not include non-recurring charges which result from the
transaction and the integration into the Company of Cameron, and
which are expected to be charged to operations at the consummation
of the Acquisition. Such charges, which are expected to approximate
$27.4 million, represent only those integration expenses related to
the Company's personnel, facilities, machinery and equipment and
production operations and include movement of machinery and
equipment and tooling and dies, transfer of technology between the
Company and Cameron, relocation and severance of personnel of the
Company and the write-down of certain assets of the Company to net
realizable value as a result of consolidating certain systems and
facilities, idling certain machinery and equipment, and eliminating
certain processes, departments, and operations as a result of the
acquisition. Following is a summary of such charges based on the
Company's current plans for the integration into the Company of
Cameron which have been reflected in the pro forma balance sheet
(000's omitted):
Cash Non-Cash Total
Movement of the Company's
machinery and equipment
and tooling dies $ 5,100 $ - $ 5,100
Relocation, severance and
other costs related to
personnel of the Company 6,000 - 6,000
Write-down of certain assets
of the Company to net
realizable value:
Metal production facility - 8,500 8,500
Forging equipment - 5,700 5,700
Machining and testing
equipment - 2,100 2,100
$11,100 $16,300 $27,400
Certain of these charges are preliminary estimates based on
current plans for the integration into the Company of Cameron and
may change based on additional information.
(b) To eliminate Cameron assets not acquired and liabilities
not assumed.
(c) To reflect the planned factoring of Cameron's U.S.
accounts receivable by Cooper in accordance with the Stock Purchase
Agreement and under terms and conditions that provide for a
purchase price of 99% of the total face amount of such receivables,
less a reserve of uncollectible accounts and for the repurchase by
the Company of any such receivables uncollected 90 days following
the Acquisition.
P-6
43
(d) To record the purchase price, to allocate the purchase
price to acquired assets and liabilities based on their relative
fair values, and to adjust property, plant and equipment for the
excess of the fair value of net assets acquired over the purchase
price as follows (000's omitted):
Cost of acquisition:
Issuance of 16,500 shares of common stock to
Cooper, including direct costs of $2,527 $ 49,214
Note payable to Cooper net of discount of
$1,414 3,186
Cash paid to Cooper 400
52,800
Estimated direct costs to the acquisition and
integration of Cameron into the Company 17,312
$ 70,112
Allocation of cost of acquisition:
Historical cost of net assets acquired $ 73,699
Purchase accounting adjustments:
Adjust inventories to reflect the Company's
full absorption method of valuing
inventories 2,167
Adjust intangible assets to fair value (2,137)
Record favorable lease 800
Record revaluation of Cameron's long-term
sales agreements (7,400)
Record pension transition liability (4,500)
Adjust deferred income taxes:
Long-term asset 10,002
Current liability 9,147
Long-term liability 4,293
Adjustment to property, plant and equipment (15,959)
$ 70,112
The Stock Purchase Agreement provides for adjustment of the
purchase price based on changes in certain assets and liabilities
between September 26, 1993 and the closing date. Management
presently believes these adjustments will not significantly affect
the purchase price.
Estimated direct costs related to the Acquisition and
integration of Cameron into the Company include the following
(000's omitted):
Long-
Current Term Total
Stand-alone costs for settling
assumed workers compensation
liabilities $ - $1,400 $ 1,400
Cost of relocating Cameron's
machinery and equipment and
tooling and dies 2,100 6,100 8,200
Severance of Cameron personnel 3,500 - 3,500
Other 2,159 2,053 4,212
$7,759 $9,553 $17,312
P-7
44
All such costs are incremental and directly related to the
Acquisition and reflect only those costs associated with Cameron's
facilities, organization, and personnel. Certain of these costs are
estimates based on preliminary information and may change based on
receipt of additional information.
(e) To adjust historical operating results for the year ended
December 31, 1993 to reflect the Acquisition as follows (000's
omitted):
Increase (Decrease) in Income
Selling, Deprec-
General iation Income
Cost and and Tax
of Adminis- Amorti- Interest
(Expense)
Sales trative zation Expense Benefit
Reflect the Company's
full absorption
method of valuing
inventories $(1,592)
Reflect stand-alone
fringe benefit and
insurance costs (2,214) $(175)
Reflect amortization
of favorable lease
value (400)
Reduce historical
Cameron depreciation
and amortization to
reflect the acquisi-
tion basis and useful
lives of assets
purchased $4,590(1)
Reflect amortization
of discount on note
payable to Cooper
($2,300 discounted at
10% for 38 months and
$2,300 at 10% for 50
months) $(318)
Adjust income tax
(expense) benefit to
reflect the Acquisi-
tion $(2,104)
$(4,206) $(175) $4,590 $(318) $(2,104)
P-8
45
(1) Adjustment is calculated as follows:
Acquis- Estimated
ition Useful Deprec-
Basis Life iation
Acquisition basis of property,
plant and equipment:
Land $ 3,012 N/A $ -
Buildings and land improvements 9,035 25 years 362
Machinery and equipment 32,012 8 years 3,950
$44,059 4,312
Historical 1993 Cameron
depreciation and amortization 8,902
Increase in income $4,590
P-9
46
(f) To adjust historical operating results for the thirteen
weeks ended April 2, 1994 to reflect the Acquisition as follows
(000's omitted):
Increase (Decrease) in Income
Selling, Deprec-
General iation Income
Cost and and Tax
of Adminis- Amorti- Interest
(Expense)
Sales trative zation Expense Benefit
Reflect the Company's
full absorption
method of valuing
inventories $(1,195)
Reflect stand-alone
fringe benefit and
insurance costs (554) $(43)
Reflect amortization
of favorable lease
value (100)
Reduce historical
Cameron depreciation
and amortization to
reflect the acquisi-
tion basis and useful
lives of assets
purchased $1,225(1)
Reflect amortization
of discount on note
payable to Cooper
($2,300 discounted at
10% for 38 months and
$2,300 at 10% for 50
months) $(80)
Adjust income tax
(expense) benefit to
reflect the Acquisi-
tion $(122)
$(1,849) $(43) $1,225 $(80) $(122)
P-10
47
(1) Adjustment is calculated as follows:
Acquis- Estimated
ition Useful Deprec-
Basis Life iation
Acquisition basis of property,
plant and equipment:
Land $ 3,012 N/A $ -
Buildings and land improvements 9,035 25 years 77
Machinery and equipment 32,012 8 years 836
$44,059 913
Historical Cameron depreciation
and amortization for the three
months ended March 31, 1994 2,138
Increase in income $1,225
P-11
48
INDEX TO EXHIBITS
Exhibit No. Description Page No.
99.1 Amended and Restated Stock Purchase 11
Agreement, dated as of January 10,
1994, between the Company and Cooper.
99.2 Investment Agreement, dated as of 12
January 10, 1994, between the Company
and Cooper.
99.3 Press release issued by the Company 13
on May 26, 1994.
99.4 Amendment dated May 26, 1994 to 14
Investment Agreement dated as of
January 10, 1994, between the Company
and Cooper.
99.5 10 % Senior Notes due 2003 Supple- 15
mental Indenture dated May 19, 1994.
99.6 10 % Senior Notes due 2003 Second 16
Supplemental Indenture and Guarantee
dated May 27, 1994.
99.7 Revolving Credit Agreement dated as 17
of May 20, 1994 among Wyman-Gordon
Receivables Corporation, the
Financial Institutions Parties
Hereto and Shawmut Bank N.A. as
Issuing Bank, as Facility Agent
and as Collateral Agent.
99.8 Receivables Purchase and Sale 18
Agreement dated as of May 20, 1994
among Wyman-Gordon Company, Wyman-
Gordon Investment Castings, Inc.
and Precision Founders Inc. as the
Sellers, Wyman-Gordon Company as
the Servicer and Wyman-Gordon
Receivables Corporation as the
Purchaser.
99.9 Employment Agreement effective 19
March 24, 1994 between Wyman-
Gordon Company and David P. Gruber.
99.10 Employment Agreement effective 20
March 4, 1994 between Wyman-Gordon
Company and J. Douglas Whelan.
-10-
49
Exhibit No. Description Page No.
99.11 Performance Share Agreement under 21
the Wyman-Gordon Company Long-Term
Incentive Plan between the Company
and David P. Gruber dated as of
May 24, 1994.
99.12 Executive Severance Agreement between 22
the Company and J. Douglas Whelan
dated as of May 1, 1994.
-2-