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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 3, 1994
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 NUMBER 0-3085
WYMAN-GORDON COMPANY
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1992780
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
244 WORCESTER STREET, BOX 8001, NO. GRAFTON, MASSACHUSETTS 01536-8001
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 508-839-4441
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 the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
Outstanding at
Class September 3, 1994
Common Stock, $1 Par Value 34,719,136
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Part I.
Item 1. FINANCIAL STATEMENTS
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended
September 3, August 28,
1994 1993
(000's omitted, except per share data)
Revenue $95,725 $58,452
Less:
Cost of goods sold 86,150 50,433
Selling, general and
administrative expenses 9,572 6,133
$95,722 $56,566
Income from operations 3 1,886
Other deductions:
Interest on debt 2,388 2,316
Amortization of financing fees
and other costs 512 225
Miscellaneous, net 424 161
3,324 2,702
Net loss $(3,321) $ (816)
Net loss per share $ (.10) $ (.05)
Average shares outstanding 34,715 17,932
The accompanying notes to the consolidated condensed financial
statements are an integral part of these financial statements.
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WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
September 3, May 28,
1994 1994
(000's omitted)
ASSETS
Cash and cash equivalents $ 22,145 $ 42,179
Accounts receivable 74,271 56,458
Inventories 74,531 81,939
Prepaid expenses 12,488 11,275
Total current assets 183,435 191,851
Property, plant and equipment, at cost 363,688 363,100
Less accumulated depreciation 231,506 229,612
Net property, plant and equipment 132,182 133,488
Intangible assets 20,256 21,232
Pension intangible 6,527 6,527
Other assets 26,468 27,172
$368,868 $380,270
LIABILITIES
Current maturities of long-term debt $ 77 $ 77
Accounts payable 40,802 45,134
Other accrued liabilities 17,007 16,252
Accrued restructuring, integration,
disposal and environmental 21,638 23,875
Total current liabilities 79,524 85,338
Restructuring, integration, disposal
and environmental 25,309 25,735
Long-term debt 90,385 90,385
Pension liability 17,922 17,912
Deferred income tax and other 33,311 36,569
Postretirement benefits 52,497 51,848
STOCKHOLDERS' EQUITY
Preferred stock - none issued - -
Common stock issued
September 3, 1994 - 37,052,720 shares
May 28, 1994 - 36,902,720 shares 37,053 36,903
Capital in excess of par value 44,070 43,884
Retained earnings 29,918 33,253
111,041 114,040
Less treasury stock at cost
September 3, 1994 - 2,329,834 shares
May 28, 1994 - 2,354,540 shares 41,121 41,557
69,920 72,483
$368,868 $380,270
The accompanying notes to the consolidated condensed financial
statements are an integral part of these financial statements.
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WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
September 3, August 28,
1994 1993
(000's omitted)
Operating activities:
Net loss $ (3,321) $ (816)
Adjustments to reconcile net loss
to net cash provided (used) by
operating activities:
Depreciation and amortization 4,582 4,100
Changes in assets and liabilities net
of purchase price activity:
Accounts receivable 786 11,138
Inventories 7,408 79
Prepaid expenses and other assets 790 (1,038)
Accrued restructuring, disposal
and environmental (2,662) (3,584)
Income and other taxes 721 (321)
Accounts payable and accrued
liabilities (6,108) 1,187
Net cash provided by operating
activities 2,196 10,745
Investing activities:
Net cash paid to Cooper Industries for
Cameron accounts receivable factoring
at acquisition (18,599) -
Capital expenditures (4,503) (3,624)
Deferred program costs - 1,489
Other, net 872 30
Net cash used by investing
activities (22,230) (2,105)
Financing activities:
Net cash provided (used) by financing
activities - -
Increase (Decrease) in cash (20,034) 8,640
Cash, beginning of year 42,179 4,568
Cash, end of period $ 22,145 $ 13,208
The accompanying notes to the consolidated condensed financial
statements are an integral part of these financial statements.
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WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 3, 1994
Note A - Basis of Presentation
In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments necessary to present fairly its financial position at
September 3, 1994 and its results of operations and cash flows
for the three months ended September 3, 1994 and August 28, 1993.
All such adjustments are of a normal recurring nature.
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with Article 10 of
Securities and Exchange Commission Regulation S-X and, therefore,
do not include all information and footnotes necessary for a fair
presentation of the financial position, results of operations and
cash flows in conformity with generally accepted accounting
principles. In conjunction with its December 31, 1993 Annual
Report on Form 10-K, the Company filed audited consolidated
financial statements which included all information and footnotes
necessary for a fair presentation of its financial position at
December 31, 1993 and December 31, 1992 and its results of
operations and cash flows for the years ended December 31, 1993,
1992 and 1991 in conformity with generally accepted accounting
principles. Where appropriate, prior period amounts have been
reclassified to permit comparison.
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 filed a transition report on Form 10-Q
for the five month transition period ended May 28, 1994.
On May 26, 1994, the Company completed the acquisition of
Cameron Forged Products Company ("Cameron") (see Note E ). The
accompanying consolidated condensed income statement for the
three months ended September 3, 1994, balance sheets as of
September 3, 1994 and May 28, 1994 and statement of cash flows
for the three months ended September 3, 1994 include the accounts
of Cameron.
Note B - Inventories
Inventories consisted of:
September 3, 1994 May 28, 1994
(000's omitted)
Raw material $19,236 $15,548
Work-in-process 54,592 65,014
Supplies 5,272 6,202
79,100 86,764
Less progress payments 4,569 4,825
$74,531 $81,939
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WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
September 3, 1994
Note B - Inventories (Continued)
If all inventories valued at LIFO cost had been valued at
first-in, first-out (FIFO) cost or market which approximates
current replacement cost, inventories would have been $28,737,000
and $29,799,000 higher than reported at September 3, 1994 and May
28, 1994, respectively.
LIFO inventory credits to cost of goods sold in the three
months ended September 3, 1994 and August 28, 1993 were
$1,122,000 and $1,972,000, respectively.
Note C - Cameron Integration Costs
During 1994, the Company incurred charges of $24.1 million
for the integration of Cameron of which $10.7 million was
estimated to require cash outlays. Additionally, the Company
estimated $12.2 million in cash outlays from direct costs
associated with the acquisition and integration of Cameron. As
of September 3, 1994, the activity charged against the reserves
has been as anticipated and there have been no significant
changes to the original estimates.
Note D - 10 3/4% Senior Notes due 2003: Supplemental Indentures
The 10 3/4% Senior Notes are guaranteed on a joint and
several basis by certain of the Company's subsidiaries. As a
result, the Company has included the following summarized
financial information for the subsidiary guarantors as a group as
of September 3, 1994 and May 28, 1994.
September 3, 1994 May 28, 1994
(000's omitted)
Current assets $48,765 $45,650
Non-current assets $60,276 $56,713
Note E - Loss on long-term contracts and agreements
In accordance with the Company's policy of recognizing
losses on backlog and long-term pricing agreements, loss reserves
of $16,316,000 and $19,000,000 are included in the accompanying
September 3, 1994 and May 28, 1994 balance sheet as follows:
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WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
September 3, 1994
Note E - Loss on long-term contracts and agreements (Continued)
September 3, May 28,
1994 1994
(000's omitted)
Other short-term liabilities $ 6,916 $ 7,000
Other long-term liabilities 9,400 12,000
Total $16,316 $19,000
These loss reserves were assumed as part of the acquisition
of Cameron on May 26, 1994.
Note F - Commitments and contingencies
At September 3, 1994, certain lawsuits arising in the normal
course of business were pending. The Company denies all material
allegations of these complaints. In the opinion of management,
the outcome of legal matters will not have a material adverse
effect on the Company's financial position, results of operations
or liquidity.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION
Results of Operations
The principal markets served by the Company are commercial
aerospace and defense equipment. Revenue by market for the
respective periods were as follows (000's omitted):
Three Months Ended Three Months Ended
September 3, 1994 August 28, 1993
% of % of
Amount Total Amount Total
Commercial Aerospace $63,380 66% $32,510 56%
Defense equipment 29,031 30% 24,256 41%
Other 3,314 4% 1,686 3%
$95,725 100% $58,452 100%
Three Months Ended September 3, 1994 vs. Three Months Ended
August 28, 1993
Revenues for the three months ended September 3, 1994
increased $37.3 million or 63.8% from the comparable period of
the prior year. This increase in revenues is attributable to the
Company's acquisition of Cameron Forged Products Company from
Cooper Industries during May 1994. Capacity limitations on the
part of the Company's suppliers resulted in raw material
shortages which had a negative impact on revenues during the
first three months of fiscal 1995. Additionally, $2.4 million of
revenues for the same period of the prior year were from Wyman-
Gordon Composites, Inc. which was sold by the Company during
November 1994.
The Company's gross margins were 10.0% of sales for the
first three months of fiscal 1995 as compared to 13.7% for the
same period of the prior year. Customer invoked pricing
pressures and lower production volumes resulting from raw
material shortages had a negative impact on margins. Gross
margins benefitted from an inventory LIFO credit of $1.1 million
or 1.1% of revenues for the first three months of fiscal 1995 as
compared to $2.0 million or 3.4% of revenues for the same period
of the prior year. Excluding the benefit of the LIFO credit, the
Company's gross margins were 8.8% for the first three months of
fiscal 1995 as compared to 10.4% for the same period of the prior
year.
Selling, general and administrative expenses were $9.6
million or 10.0% of revenues in the first three months of fiscal
1995 as compared to $6.1 million or 10.5% of revenues for the
same period of the prior year. The increase in selling, general
and administrative expense is attributable to the Company's newly
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Three Months Ended September 3, 1994 vs. Three Months Ended
August 28, 1993 (Continued)
acquired operations in May 1994. However, selling, general and
administrative expense as a percent of sales declined reflecting
the integration of Cameron with Wyman-Gordon's Forging
operations.
Interest expense was $2.4 million for the first three months
of fiscal 1995 as compared to $2.3 million for the same period of
the prior year.
Amortization of financing fees and other costs increased
from $0.2 million during the first three months of the prior year
to $0.5 million during the same period of fiscal 1995. Fiscal
1995 includes fees from the newly created receivables backed
credit facility and bond fees.
Miscellaneous, net expense was $0.4 million in the first
three months of fiscal 1995 as compared to $0.2 million during
the same period of the prior year.
Liquidity and Capital Resources
The decrease in the Company's cash from $42.2 million to
$22.1 million was namely the result of $18.6 million paid to
Cooper Industries for Cameron accounts receivable factoring at
acquisition. Cash provided by operations of $2.2 million
resulted primarily from $1.3 million in income before
depreciation and amortization.
The Company from time to time expends cash on capital
expenditures for more cost effective operations and joint
development programs with the Company's customers. Capital
expenditures amounted to $13.9 million, $11.2 million and $10.2
million in the years ended December 31, 1993, 1992 and 1991,
respectively. Capital expenditures in the foreseeable future are
not expected to vary materially from historical levels.
During 1994, the Company incurred for Cameron integration
costs, charges of $24.1 million of which $10.7 million will
require cash outlays. Additionally, the Company estimated $12.2
million in cash outlays from direct costs associated with the
acquisition and integration of Cameron Forged Products Company.
As of September 3, 1994, the activity against the reserves has
been as anticipated and there have been no significant changes to
the original estimates.
The Company expects to spend $1.2 million in fiscal 1995 and
$13.4 million thereafter on environmental activities. The
Company has completed all environmental projects within
established timetables and is continuing to do so at the present
time.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
In connection with its 1991 restructuring, the Company
expects to expend an additional $5.1 million over the next
several years, including approximately $2.4 million in fiscal
1995 and $2.7 million thereafter. As of September 3, 1994, the
activity against the reserves has been as anticipated and there
have been no significant changes to the original estimates.
The primary sources of liquidity available in Fiscal 1995 to
fund the Company's operations, anticipated expenditures in
connection with the acquisition and integration of Cameron, its
1991 restructuring, planned capital expenditures and planned
environmental expenditures include available cash ($22.1 million
at September 3, 1994), borrowing capacity under the Company's
Receivables Financing Program, cash generated by operations and
reductions in working capital requirements through planned
inventory reductions and accounts receivable management.
Cash from operations and debt are expected to be the
Company's primary sources of liquidity beyond Fiscal 1995. The
Company believes that it has adequate resources to provide for
its operations and the funding of restructuring, integration of
Cameron, capital and environmental expenditures.
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Part II.
Item 6. EXHIBITS AND REPORTS FILED ON FORM 8-K
(a) Exhibits
The following exhibits are being filed as part of this Form
10-Q:
Exhibit No. Description
3 Articles of Organization as Amended May 24, 1994
27 Financial Data Schedule for the Three Months
Ended September 3, 1994
(b) No reports on Form 8-K have been filed with the Commission
during the period covered by this report.
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SIGNATURES
Pursuant to the requirements 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: 10/17/94 By: /s/ LUIS E. LEON
Luis E. Leon
Vice President,
Chief Financial Officer and Treasurer
Date: 10/17/94 By: /s/ JEFFREY B. LAVIN
Jeffrey B. Lavin
Assistant Corporate Controller
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