1
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 March 4, 1995
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 March 4, 1995
Common Stock, $1 Par Value 34,875,157
Page 1 of 14
2
Part I.
Item 1. FINANCIAL STATEMENTS
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
Mar. 4, Feb. 26, Mar. 4, Feb. 26,
1995 1994 1995 1994
(000's omitted, except per share data)
Revenue $96,238 $ 50,896 $286,937 $165,581
Less:
Cost of goods sold 83,623 50,375 254,878 154,992
Selling, general and
administrative expenses 8,994 8,881 27,668 20,995
Disposition of production
facilities - 87 - 2,453
$92,617 $ 59,343 $282,546 $178,440
Income (loss) from
operations 3,620 (8,447) 4,391 (12,859)
Other deductions:
Interest on debt 2,342 2,356 7,038 6,768
Amortization of financing
fees and other costs 356 203 1,143 662
Miscellaneous, net 366 276 997 (2,549)
3,064 2,835 9,178 4,881
Net income (loss) $ 556 $(11,282) $ (4,787) $(17,740)
Net income (loss) per share $ .02 $ (.63) $ (.14) $ (.99)
Average shares outstanding 34,832 17,998 34,770 17,962
The accompanying notes to the consolidated condensed financial
statements are an integral part of these financial statements.
-2-
3
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 4, May 28,
1995 1994
(000's omitted)
ASSETS
Cash and cash equivalents $ 10,276 $ 42,179
Accounts receivable 81,505 77,019
Inventories 65,034 65,737
Prepaid expenses 9,125 15,191
Total current assets 165,941 200,126
Property, plant and equipment, at cost 386,599 375,386
Less accumulated depreciation 237,713 229,612
Net property, plant and equipment 148,886 145,774
Intangible assets 19,904 21,232
Pension intangible 6,527 6,527
Other assets 24,578 27,172
$365,835 $400,831
LIABILITIES
Short-term borrowings $ 3,703 $ -
Current maturities of long-term debt 77 77
Obligation to Cooper Industries - 20,561
Accounts payable 46,035 45,134
Other accrued liabilities 12,400 22,252
Accrued restructuring, integration,
disposal and environmental 14,249 20,415
Total current liabilities 76,464 108,439
Restructuring, integration, disposal
and environmental 27,496 29,945
Long-term debt 90,385 90,385
Pension liability 17,966 17,912
Deferred income tax and other 29,732 29,819
Postretirement benefits 53,007 51,848
STOCKHOLDERS' EQUITY
Preferred stock - none issued - -
Common stock issued
March 4, 1995 - 37,052,720 shares
May 28, 1994 - 36,902,720 shares 37,053 36,903
Capital in excess of par value 41,644 43,884
Retained earnings 30,521 33,253
109,218 114,040
Less treasury stock at cost
March 4, 1995 - 2,177,563 shares
May 28, 1994 - 2,354,540 shares 38,433 41,557
70,785 72,483
$365,835 $400,831
The accompanying notes to the consolidated condensed financial
statements are an integral part of these financial statements.
-3-
4
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
March 4, February 26,
1995 1994
(000's omitted)
Operating activities:
Net loss $ (4,787) $(17,740)
Adjustments to reconcile net loss to net
cash provided By operating activities:
Depreciation and amortization 13,872 11,649
Loss on sale of production facility - 2,453
Changes in assets and liabilities net
of purchase price activity:
Accounts receivable (4,486) 11,621
Inventories 703 10,496
Prepaid expenses and other assets 8,661 3,212
Accrued restructuring, disposal
and environmental (3,996) (7,762)
Income and other taxes 702 (385)
Accounts payable and accrued
liabilities (7,781) 162
Net cash provided by operating
activities 2,888 13,706
Investing activities:
Capital expenditures (15,512) (10,176)
Payment of amounts provided in connection
with the integration of Cameron (4,618) -
Proceeds from disposals 1,289 4,345
Deferred program costs - 344
Other, net 909 3,562
Net cash used by investing
activities (17,932) (1,925)
Financing activities:
Net cash paid for Cameron accounts
receivable factored at acquisition (21,807) -
Net cash received from Cameron accounts
receivable factored at acquisition 1,246 -
Increase in short-term borrowings 3,703 -
Net cash used by financing
activities (16,858) -
Increase (Decrease) in cash (31,903) 11,781
Cash, beginning of year 42,179 4,568
Cash, end of period $ 10,276 $ 16,349
The accompanying notes to the consolidated condensed financial
statements are an integral part of these financial statements.
-4-
5
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 4, 1995
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
March 4, 1995 and its results of operations for the three months
and nine months ended March 4, 1995 and February 26, 1994 and
cash flows for the nine months ended March 4, 1995 and February
26, 1994. 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 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"). The accompanying
consolidated condensed statements of operations for the three
months and nine months ended March 4, 1995, balance sheets as of
March 4, 1995 and May 28, 1994 and statement of cash flows for
the nine months ended March 4, 1995 include the accounts of
Cameron.
-5-
6
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
March 4, 1995
Note B - Inventories
Inventories consisted of:
March 4, 1995 May 28, 1994
(000's omitted)
Raw material $24,735 $13,706
Work-in-process 43,142 54,570
Supplies 2,632 2,286
70,509 70,562
Less progress payments 5,475 4,825
$65,034 $65,737
</TABLE
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 $24,965,000
and $27,758,000 higher than reported at March 4, 1995 and May 28,
1994, respectively.
LIFO inventory credits to cost of goods sold in the three
months ended March 4, 1995 and February 26, 1994 were $780,000
and $1,556,000, respectively.
LIFO inventory credits to cost of goods sold in the nine
months ended March 4, 1995 and February 26, 1994 were $2,793,000
and $5,500,000, respectively.
Note C - Cameron Integration Costs
During the five month transition period ended May 28, 1994,
the Company recorded charges of $24,100,000 for the integration
of Cameron of which $10,700,000 was estimated to require cash
outlays. Additionally, the Company estimated $12,200,000 in cash
outlays from direct costs associated with the acquisition and
integration of Cameron. As of March 4, 1995, the activity
charged against the reserves has been as anticipated and there
have been no significant changes to the original estimates.
-6-
7
WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
March 4, 1995
Note D - 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 $11,467,000 and $19,000,000 are included in the accompanying
balance sheets at March 4, 1995 and May 28, 1994. These loss
reserves were assumed as part of the acquisition of Cameron on
May 26, 1994
Note E - Commitments and contingencies
At March 4, 1995, 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.
-7-
8
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
transportation, defense equipment and power generation. Revenue by
market for the respective periods were as follows (000's omitted):
Three Months Ended Three Months Ended
March 4, 1995 February 26, 1994
% of % of
Amount Total Amount Total
Commercial transportation $56,042 58% $29,011 57%
Defense equipment 26,152 28% 17,305 34%
Power generation 9,780 10% 3,054 6%
Other 4,264 4% 1,526 3%
$96,238 100% $50,896 100%
Nine Months Ended Nine Months Ended
March 4, 1995 February 26, 1994
% of % of
Amount Total Amount Total
Commercial transportation $162,119 56% $ 91,070 55%
Defense equipment 81,559 28% 57,953 35%
Power generation 32,159 11% 13,247 8%
Other 11,100 5% 3,311 2%
$286,937 100% $165,581 100%
Three Months Ended March 4, 1995 vs. Three Months Ended
February 26, 1994
Revenues for the three months ended March 4, 1995 increased
$45.3 million or 89.1% 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 which have resulted in raw material
shortages throughout fiscal 1995, improved during the third
quarter of fiscal 1995 but still continue to have a negative
impact on revenues.
The Company's gross margins were 13.1% of sales for the
third quarter of fiscal 1995 as compared to 1.0% for the same
period of the prior year. Also, customer invoked pricing
pressures had a negative impact on margins in both fiscal 1995
and fiscal 1994. However, margins improved in the third quarter
of fiscal 1995 as compared to the same period of the prior year
resulting from improvements to operations and realization of
-8-
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Three Months Ended March 4, 1995 vs. Three Months Ended
February 26, 1994 (Continued)
synergy benefits associated with the integration of Cameron with
Wyman-Gordon's forging operations. Additionally, gross margins
at the Company's castings and composites operations continued to
show improvement during fiscal 1995 as compared to the prior
year. Gross margins benefitted from an inventory LIFO credit of
$0.8 million or 0.8% of revenues for the third quarter of fiscal
1995 as compared to $1.6 million or 3.0% of revenues for the same
period of the prior year. Excluding the benefit of the LIFO
credit, the Company's gross margins were 12.3% for the third
quarter of fiscal 1995 as compared to a negative margin of 2.0%
for the same period of the prior year.
Selling, general and administrative expenses were $9.0
million or 9.3% of revenues in the third quarter of fiscal 1995
as compared to $8.9 million or 17.5% of revenues for the same
period of the prior year. The increase in selling, general and
administrative expense is attributable to the Company's
acquisition of Cameron in May 1994. Also, the third quarter of
fiscal 1994 includes a $2.4 million charge or 4.7% of revenues
resulting from a change in estimated cash surrender values
provided by the Company's insurance actuaries of Company-owned
life insurance policies. Selling, general and administrative
expense as a percent of sales declined reflecting the realization
of certain synergy savings associated with the integration of
Cameron with Wyman-Gordon's forging operations.
Amortization of financing fees and other costs increased to
$0.4 million during the third quarter of fiscal 1995 from $0.2
million during the same period of the prior fiscal year. Fiscal
1995 includes fees from the newly created receivables backed
credit facility and bond fees.
Nine Months Ended March 4, 1995 vs. Nine Months Ended
February 26, 1994
Revenues for the nine months ended March 4, 1995 increased
$121.4 million or 73.2% 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. Although capacity limitations on the
part of the Company's suppliers resulting in raw material
shortages have improved recently, they had a negative impact on
revenues throughout the first nine months of fiscal 1995.
Additionally, $4.7 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 1993.
-9-
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Nine Months Ended March 4, 1995 vs. Nine Months Ended
February 26, 1994 (Continued)
The Company's gross margins were 11.2% of sales for the
first nine months of fiscal 1995 as compared to 6.4% for the same
period of the prior year. Lower production volumes resulting
from raw material shortages had a negative impact on margins
during fiscal 1995. Also, customer invoked pricing pressures had
a negative impact on margins during both fiscal 1995 and fiscal
1994. However, margins improved during the first nine months of
fiscal 1995 as compared to the same period of the prior year due
to improvements to operations and realization of certain synergy
benefits associated with the integration of Cameron with Wyman-
Gordon's forging operations. Additionally, gross margins at the
Company's castings and composites operations continued to show
improvement during fiscal 1995 as compared to the prior year.
Gross margins benefitted from an inventory LIFO credit of $2.8
million or 1.0% of revenues for the first nine months of fiscal
1995 as compared to $5.5 million or 3.3% of revenues for the same
period of the prior year. Excluding the benefit of the LIFO
credit, the Company's gross margins were 10.2% for the first nine
months of fiscal 1995 as compared to 3.1% for the same period of
the prior year.
Selling, general and administrative expenses were $27.7
million or 9.6% of revenues in the first nine months of fiscal
1995 as compared to $20.1 million or 12.7% of revenues for the
same period of the prior year. The increase in selling, general
and administrative expense is attributable to the Company's
acquisition of Cameron in May 1994. However, selling, general
and administrative expense as a percent of sales declined
reflecting certain savings associated with the integration of
Cameron with Wyman-Gordon's forging operations. Also, the nine
months ended February 26, 1994 include a $2.4 million charge or
1.5% of revenues resulting from a change in estimated cash
surrender values provided by the Company's insurance actuaries on
Company-owned life insurance policies.
In fiscal 1994, the Company recognized a $2.5 million loss
on the sale of substantially all of the net assets and business
operations of its Wyman-Gordon Composites, Inc. operations.
Interest expense was $7.0 million for the first nine months
of fiscal 1995 as compared to $6.8 million for the same period of
the prior year. Fiscal 1995 includes $0.1 million of interest on
borrowings against the Company's credit agreement in the United
Kingdom (UK). The Company entered into this credit agreement to
provide financing for its new UK subsidiary acquired as part of
the Cameron acquisition.
-10-
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Nine Months Ended March 4, 1995 vs. Nine Months Ended
February 26, 1994 (Continued)
Amortization of financing fees and other costs increased to
$1.1 million during the first nine months of fiscal 1995 from
$0.7 million during the same period of the prior fiscal year.
Fiscal 1995 includes fees from the newly created receivables
backed credit facility and bond fees.
Miscellaneous, net expense was $1.0 million in the first
nine months of fiscal 1995 as compared to miscellaneous, net
income of $2.5 million during the same period of the prior year.
The income recognized in the first nine months of fiscal 1994
reflects from a $3.3 million gain on the sale of marketable
securities.
Liquidity and Capital Resources
The decrease in the Company's cash from $42.1 million to
$10.3 million was largely the result of $20.6 million paid to
Cooper Industries for Cameron accounts receivable factored at
acquisition. Cash provided by operations of $2.9 million
resulted from increases in working capital items of $6.2 million
offset by depreciation and amortization of $13.9 million, and the
$4.8 million net loss.
The Company from time to time expends cash on capital
expenditures for environmental compliance, 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. Due to the acquisition of Cameron,
capital expenditures will be somewhat higher during fiscal 1995.
During the five month transition period ended May 28, 1994,
the Company recognized costs to be incurred for the integration
of Cameron totalling $24.1 million of which, $10.7 million will
require cash outlays. Additionally, the Company estimates $12.7
million in cash outlays from direct costs associated with the
acquisition and integration of Cameron Forged Products Company.
As of March 4, 1995, 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 $0.1 million in the remainder
of fiscal 1995 and $13.8 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.
-11-
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Liquidity and Capital Resources (Continued)
In connection with its 1991 restructuring, the Company
expects to spend approximately $0.6 million in the remainder of
fiscal 1995 and $5.0 million thereafter. As of March 4, 1995,
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 integration of Cameron, its 1991
restructuring, planned capital expenditures and planned
environmental expenditures include available cash ($10.3 million
at March 4, 1995), borrowing capacities under the Company's
receivables financing program and its credit agreement in the UK,
cash generated by operations and management of working capital
requirements.
Cash from operations and borrowing capacity under the
Company's receivables financing program 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, restructuring, integration of Cameron and capital
and environmental expenditures.
-12-
13
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
27 Financial Data Schedule for the Nine Months
Ended March 4, 1995
(b) No reports on Form 8-K have been filed with the Commission
during the period covered by this report.
-13-
14
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: 4/12/95 By: /s/ ANDREW C. GENOR
Andrew C. Genor
Vice President,
Chief Financial Officer and
Treasurer
Date: 4/12/95 By: /s/ JEFFREY B. LAVIN
Jeffrey B. Lavin
Assistant Corporate Controller
-14-