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 2, 1996
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 2, 1996
Common Stock, $1 Par Value 35,342,972
Page 1 of 16
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PART I.
ITEM 1. FINANCIAL STATEMENTS
WYMAN-GORDON COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
MAR. 2, MAR. 4, MAR. 2, MAR. 4,
1996 1995 1996 1995
(000's omitted, except per share data)
Revenue $121,517 $96,238 $353,674 $286,937
Less:
Cost of goods sold 103,210 83,623 298,222 254,878
Selling, general and
administrative expenses 9,107 8,995 27,775 27,668
Other charges 110 - 1,010 -
$112,427 $92,618 $327,007 $282,546
Income from operations 9,090 3,620 26,667 4,391
Other deductions:
Interest expense 2,727 2,621 8,267 7,836
Miscellaneous, net 286 443 1,172 1,342
3,013 3,064 9,439 9,178
Net income (loss) $ 6,077 $ 556 $ 17,228 $ (4,787)
Net income (loss) per share $ .17 $ .02 $ .48 $ (.14)
Shares used to compute
earnings (loss) per share 36,269 35,051 36,061 34,770
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
MARCH 2, JUNE 3,
1996 1995
(000's omitted)
ASSETS
Cash and cash equivalents $ 13,670 $ 13,856
Accounts receivable 88,529 79,219
Inventories 85,653 78,813
Prepaid expenses 10,031 15,671
Total current assets 197,883 187,559
Property, plant and equipment, at cost 392,142 385,372
Less accumulated depreciation 255,958 243,975
Net property, plant and equipment 136,184 141,397
Intangible assets 24,767 25,295
Other assets 17,173 14,813
$376,007 $369,064
LIABILITIES
Borrowings due within one year $ 2,064 $ 3,915
Accounts payable 37,878 34,729
Accrued liabilities and other 41,938 45,634
Accrued restructuring, integration,
disposal and environmental 6,847 10,219
Total current liabilities 88,727 94,497
Restructuring, integration, disposal
and environmental 17,291 19,648
Long-term debt 90,308 90,308
Pension liability 9,560 9,589
Deferred income tax and other 18,688 21,699
Postretirement benefits 52,349 52,468
STOCKHOLDERS' EQUITY
Preferred stock - none issued - -
Common stock issued - 37,052,720 shares 37,053 37,053
Capital in excess of par value 36,302 40,118
Retained earnings 55,818 39,763
129,173 116,934
Less treasury stock at cost
March 2, 1996 - 1,709,748 shares
June 3, 1995 - 2,044,178 shares 30,089 36,079
99,084 80,855
$376,007 $369,064
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 STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
MARCH 2, MARCH 4,
1996 1995
(000's omitted)
Operating activities:
Net income (loss) $17,228 $ (4,787)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 12,785 13,872
Provision for equity investment 1,010 -
Changes in assets and liabilities:
Accounts receivable (9,310) (4,486)
Inventories (6,840) 703
Prepaid expenses and other assets 2,270 8,661
Accrued restructuring, disposal
and environmental (5,729) (8,614)
Income and other taxes 2,267 702
Accounts payable and accrued
liabilities (5,942) (7,781)
Net cash provided (used) by
operating activities 7,739 (1,730)
Investing activities:
Capital expenditures (9,742) (15,512)
Proceeds from sale of fixed assets 1,686 1,289
Other, net (191) (1,351)
Net cash provided (used) by
investing activities (8,247) (15,574)
Financing activities:
Cash paid to Cooper Industries for
factored accounts receivable - (20,561)
Net proceeds from issuance of
common stock 2,174 2,259
(Decrease) Increase in borrowings
due within one year (1,852) 3,703
Net cash provided (used) by
financing activities 322 (14,599)
Decrease in cash (186) (31,903)
Cash, beginning of year 13,856 42,179
Cash, end of period $13,670 $ 10,276
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
March 2, 1996
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 2, 1996 and its results of operations for the three months
and nine months ended March 2, 1996 and March 4, 1995 and cash
flows for the nine months ended March 2, 1996 and March 4, 1995.
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 June 3, 1995 Annual Report
on Form 10-K/A, the Company filed audited consolidated financial
statements which included all information and footnotes necessary
for a fair presentation of its financial position at June 3, 1995
and May 28, 1994 and its results of operations and cash flows for
the year ended June 3, 1995, the five months ended May 28, 1994
and the years ended December 31, 1993 and 1992 in conformity with
generally accepted accounting principles. Where appropriate,
prior period amounts have been reclassified to permit comparison.
NOTE B - INVENTORIES
Inventories consisted of:
MARCH 2, 1996 JUNE 3, 1995
(000's omitted)
Raw material $32,839 $26,440
Work-in-process 54,989 54,310
Supplies 2,306 3,228
90,134 83,978
Less progress payments 4,481 5,165
$85,653 $78,813
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 $21,584,000 higher than
reported at March 2, 1996 and June 3, 1995.
LIFO inventory credits to cost of goods sold in the three months
ended March 4, 1995 were $780,000. LIFO inventory credits to cost of
goods sold in the nine months ended March 4, 1995 were $2,793,000.
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WYMAN-GORDON COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
March 2, 1996
NOTE C - COMMITMENTS AND CONTINGENCIES
At March 2, 1996, 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.
The Company is subject to extensive, stringent and changing
federal, state and local environmental laws and regulations,
including those regulating the use, handling, storage, discharge
and disposal of hazardous substances and the remediation of
alleged environmental contamination. Accordingly, the Company is
involved from time to time in administrative and judicial
inquiries and proceedings regarding environmental matters.
Nevertheless, the Company believes that compliance with these
laws and regulations will not have a material adverse effect on
the Company's operations as a whole.
The Company had foreign exchange contracts totalling
$11,930,000 at March 2, 1996. These contracts hedge certain
normal operating purchase and sales transactions. The exchange
contracts generally mature within six months and require the
Company to exchange U.K. pounds for non-U.K. currencies or non-
U.K. currencies for U.K. pounds. Transaction gains and losses
included in the Consolidated Condensed Statements of Operations
for the three month and nine month periods ended March 2, 1996
and March 4, 1995, respectively, were not material.
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ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
"FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY"
Certain statements in Management's Discussion and Analysis
of Financial Condition and Results of Operations contain
"forward-looking" information (as defined in the Private
Securities Litigation Reform Act of 1995) that involves risk and
uncertainty, including discussions of continuing raw material
prices and availability and their impact on gross margins and
business trends as well as liquidity and sales volume. Actual
future results and trends may differ materially depending on a
variety of factors, including the Company's successful
negotiation of long-term customer pricing contracts and raw
material prices and availability. For a discussion identifing
important factors that could cause actual results to differ
materially from those anticipated in forward-looking statements,
see the Company's SEC filings, in particular see "Risk Factors"
on pages 7-10 of the Company's prospectus relating to the
registration of 15,000,000 shares of the Company's common stock,
which may be delivered by Cooper Industries, Inc. ("Cooper")
pursuant to the terms of Cooper's 6.0% Exchangeable Notes Due
January 1, 1999, dated December 14, 1995.
The principal markets served by the Company are aerospace
and power generation. Revenue by market for the respective
periods was as follows (thousands):
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 2, 1996 MARCH 4, 1995
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
Aerospace $ 87,325 72% $ 73,141 76%
Power generation 23,783 20% 14,436 15%
Other 10,409 8% 8,661 9%
$121,517 100% $ 96,238 100%
NINE MONTHS ENDED NINE MONTHS ENDED
MARCH 2, 1996 MARCH 4, 1995
% OF % OF
AMOUNT TOTAL AMOUNT TOTAL
Aerospace $258,546 73% $218,072 76%
Power generation 68,615 19% 43,041 15%
Other 26,513 8% 25,824 9%
$353,674 100% $286,937 100%
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED
MARCH 2, 1996 ("third quarter of fiscal year 1996") COMPARED TO
THREE MONTHS ENDED MARCH 4, 1995 ("third quarter of fiscal year
1995")
The Company's revenue increased 26.3% to $121.5 million in
the third quarter of fiscal year 1996 from $96.2 million in the
third quarter of fiscal year 1995 due to higher sales volume in
the Company's aerospace power generation and other markets.
These sales volume increases during the third quarter of fiscal
year 1996 as compared to the third quarter of fiscal year 1995
are reflected by market as follows: a $14.2 million (19.4%)
increase in aerospace, a $9.3 million (64.7%) increase in power
generation and a $1.7 million (20.2%) increase in other. The
cause of the strength in these markets was higher demands for
spares from aerospace engine prime contractors and higher
extruded pipe shipments to energy customers. The higher spares
demand will continue to be reflected in fourth quarter of fiscal
year 1996 revenues. Revenues in the third quarter of fiscal year
1995 were limited by raw material shortages and production delays
caused by capacity constraints of the Company's suppliers. The
revenue increases mentioned above have occurred while the
Company's backlog has grown to $500.7 million at March 2, 1996
from $457.5 million at March 4, 1995. The Company believes that
the higher order activity reflects continued higher spares demand
and new business resulting from increasing production rates on
commercial aircraft by commercial airframe primes.
The Company's gross margins were 15.1% in the third quarter
of fiscal year 1996 as compared to 13.1% in the third quarter of
fiscal year 1995. This improvement resulted from higher
production volumes and productivity gains resulting from the
Company's efforts toward focusing forging production of rotating
parts for jet engines in its Houston, Texas facility and forging
production of airframe structures and large turbine parts in its
Grafton, Massachusetts facility. Additionally, continuing
realization of cost reductions from synergies associated with the
integration of Cameron Forged Products Company ("Cameron")
contributed to this higher ratio. There were no LIFO credits
recorded during the third quarter of fiscal year 1996. Gross
margins benefitted from LIFO credits of $0.8 million during the
third quarter of fiscal year 1995.
The Company's gross margins in the third quarter of fiscal
year 1996 of 15.1% were below the 16% average gross margin during
the first two quarters of the year. The higher spares demand
referred to above required the Company to purchase certain raw
materials under terms not covered by long-term agreements "LTAs"
with its vendors. The Company simultaneously entered into supply
(customer) and purchase (vendor) LTAs and minimized its raw
material price exposure to an anticipated volume level. To the
extent that the demand is greater than anticipated by the LTAs,
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED
MARCH 2, 1996 ("third quarter of fiscal year 1996") COMPARED TO
THREE MONTHS ENDED MARCH 4, 1995 ("third quarter of fiscal year
1995")(Continued)
the Company must purchase raw materials at market prices. The
current rebound in demand for many of these raw materials,
especially nickel and titanium, have resulted in significant
price increases by the Company's vendors which have negatively
affected the Company's gross margins.
The Company is not likely to see pricing relief for its
products until early calendar 1997 when new LTAs that the Company
expects to negotiate with its customers will go into effect.
These new LTAs are anticipated to begin in January 1997. Until
the new LTAs are finalized, the Company may continue to
experience pressures on its gross margins.
Selling, general and administrative expenses were $9.1
million during the third quarter of fiscal year 1996 and $9.0
million during the third quarter of fiscal year 1995. However,
selling, general and administrative expenses as a percentage of
revenues improved to 7.5% in the third quarter of fiscal year
1996 from 9.4% in the third quarter of fiscal year 1995. The
improvement as a percent of revenues is the result of the
Company's general company-wide cost containment efforts, cost
reductions associated with the integration of Cameron Forged
Products Company ("Cameron") with the Company's forging
operations and higher revenues.
Interest expense was $2.7 million in the third quarter of
fiscal year 1996 as compared to $2.6 million in the third quarter
of fiscal year 1995. The increase in interest expense during the
third quarter of fiscal 1996 as compared to the same period of
fiscal 1995 is due to interest on borrowings on the Company's
U.K. Credit Agreement.
The Company recorded no provision for income taxes in the
third quarters of fiscal years 1996 and 1995.
Net income was $6.1 million, or $.17 per share, in the third
quarter of fiscal year 1996 and $0.6 million, or $.02 per share
in the third quarter of fiscal year 1995. The $5.5 million
improvement results from the items described above.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS AND FINANCIAL CONDITION NINE MONTHS ENDED
MARCH 2, 1996 ("first nine months of fiscal year 1996") COMPARED
TO NINE MONTHS ENDED MARCH 4, 1995 ("first nine months of fiscal
year 1995")
The Company's revenue increased 23.3% to $353.7 million in
the first nine months of fiscal year 1996 from $286.9 million in
the first nine months of fiscal year 1995 due to higher sales
volume in the Company's aerospace, power generation and other
markets. These sales volume increases during the first nine
months of fiscal year 1996 as compared to the first nine months
of fiscal year 1995 are reflected by market as follows: a $40.5
million (18.6%) increase in aerospace, a $25.6 million (59.4%)
increase in power generation and a $0.7 million (2.7%) increase
in other. The cause of the strength in these markets was higher
demands for spares from aerospace engine prime contractors and
higher extruded pipe shipments to energy customers. The higher
spares demand will continue to be reflected in fourth quarter of
fiscal year 1996 revenues. Revenues in the first nine months of
fiscal year 1995 were limited by raw material shortages and
production delays caused by capacity constraints of the Company's
suppliers. The revenue increases mentioned above have occurred
while the Company's backlog has grown to $500.7 million at March
2, 1996 from $457.5 million at March 4, 1995. The Company
believes that the higher order activity reflects continued higher
spares demand and new business resulting from increasing
production rates on commercial aircraft by commercial airframe
primes.
The Company's gross margins were 15.7% in the first nine
months of fiscal year 1996 as compared to 11.1% in the first nine
months of fiscal year 1995. This improvement resulted from
higher production volumes and productivity gains resulting from
the Company's efforts toward focusing forging production of
rotating parts for jet engines in its Houston, Texas facility and
forging production of airframe structures and large turbine parts
in its Grafton, Massachusetts facility. Additionally, continuing
realization of cost reductions from synergies associated with the
integration of Cameron contributed to this higher ratio. There
were no LIFO credits recorded during the first nine months of
fiscal year 1996. Gross margins benefitted from LIFO credits of
$2.8 million during the first nine months of fiscal year 1995.
Selling, general and administrative expenses for the first
nine months of fiscal 1996 increased slightly to $27.8 million
from $27.7 million as compared to the same period of fiscal 1995.
However, selling, general and administrative expenses as a
percentage of revenues improved to 7.9% in the first nine months
of fiscal year 1996 from 9.6% in the first nine months of fiscal
year 1995. The improvement as a percent of revenues is the
result of general company-wide cost containment efforts, cost
reductions associated with the integration of Cameron with the
Company's Forgings operations and higher revenues.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
RESULTS OF OPERATIONS AND FINANCIAL CONDITION NINE MONTHS ENDED
MARCH 2, 1996 ("first nine months of fiscal year 1996") COMPARED
TO NINE MONTHS ENDED MARCH 4, 1995 ("first nine months of fiscal
year 1995")(Continued)
During the first nine months of fiscal year 1996, the
Company provided $0.9 million in order to recognize its 25.0%
share of the net losses of its Australian Joint Venture and to
reserve for amounts loaned to the Australian Joint Venture during
the first quarter of fiscal year 1996. Additionally, the Company
provided $0.1 million relating to expenditures for an investment
in an additional joint venture.
Interest expense was $8.3 million in the first nine months
of fiscal year 1996 as compared to $7.8 million during the first
nine months of fiscal year 1995. The increase in interest
expense during the first nine months of fiscal 1996 as compared
to the first nine months of fiscal 1995 is due to interest on
borrowings on the Company's U.K. Credit Agreement.
The Company recorded no provision for income taxes in the
first nine months of fiscal years 1996 and 1995.
Net income was $17.2 million, or $.48 per share, in the
first nine months of fiscal year 1996 and net loss was $(4.8)
million, or $(.14) per share in the first nine months of fiscal
year 1995. The $22.0 million improvement results from the items
described above.
LIQUIDITY AND CAPITAL RESOURCES
The decrease in the Company's cash of $0.2 million to $13.7
million at March 2, 1996 from $13.9 million at June 3, 1995
resulted from cash provided by operating activities of $7.7
million offset by cash used by investing activities of $8.2
million and cash provided by financing activities of $0.3
million.
As of June 3, 1995, the Company estimated the remaining cash
requirements for the integration of Cameron and direct costs
associated with the acquisition of Cameron to be $8.6 million.
Of such amount, the Company expects to spend approximately $6.5
million during its fiscal year ending June 1, 1996 ("fiscal year
1996") and $2.1 million thereafter. In the first nine months of
fiscal year 1996, spending related to the integration of Cameron
and associated direct costs amounted to $4.2 million.
The 1991 restructuring plan is substantially complete. The
Company expects to expend an additional $3.8 million over the
next several years related to the 1991 restructuring plan,
approximately $1.9 million in fiscal year 1996 and $1.9 million
thereafter. In the first nine months of fiscal year 1996,
spending related to the 1991 restructure plan amounted to $1.0
million.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES, (Continued)
As of June 3, 1995, the Company expected to spend $1.8
million in fiscal year 1996 and $15.1 million thereafter on non-
capitalizable environmental activities. In the first nine months
of fiscal year 1996, $0.1 million was expended for non-
capitalizable environmental projects and the Company believes
that expenditures will not exceed $0.6 million during fiscal year
1996. However, total future expenditures are still estimated to
be $16.8 million. The Company has completed all environmental
projects within established timetables and is continuing to do so
at the present time.
The Company from time to time expends cash on capital
expenditures for more cost effective operations, environmental
projects and joint development programs with customers. Capital
expenditures amounted to $18.7 million for the year ended June 3,
1995 ("fiscal year 1995"). Although capital expenditures in the
first nine months of fiscal year 1996 amounted to $9.7 million,
capital expenditures in the foreseeable future are expected to
increase somewhat from fiscal year 1995 levels.
As of March 2, 1996, the Company had invested $4.5 million
in cash towards its share of the capital requirements of the
Australian Joint Venture for the production of nickel-based
superalloy. The book value of the Company's investment in the
Australian Joint Venture as of March 2, 1996 is approximately
$2.2 million. As of March 22, 1996, the Australian Joint Venture
has entered into a $3.0 million loan agreement with a bank. The
Company has guaranteed 50% of the Australian Joint Venture's
obligations under the loan agreement. This guarantee expires on
February 28, 1997. The Australian Joint Venture has not
generated sufficient cash flow to service its debt, and if the
operations do not become profitable in the future, the Company
may be required to write-off all or a portion of the remaining
book value of its investment and repay up to 50% of the joint
ventures debt under the loan agreement which is guaranteed by the
Company.
The Company's revolving receivables-backed credit facility
(the "Receivables Financing Program") among the Company, certain
subsidiaries and Wyman-Gordon Receivables Company ("WGRC") and a
Revolving Credit Agreement among WGRC and the financial
institutions party thereto provide the Company with an aggregate
maximum borrowing capacity under the Receivables Financing
Program of $65.0 million, with a letter of credit sub-limit of
$35.0 million. The term of the Receivables Financing Program is
five years, with an evergreen feature. As of March 2, 1996,
under the credit facility, the total availability based on
eligible receivables was $45.8 million, there were no borrowings
and letters of credit amounting to $9.4 million were outstanding.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES, (Continued)
Wyman-Gordon Limited, the Company's subsidiary located in
Livingston, Scotland, has entered into a credit agreement ("the
U.K. Credit Agreement") with a bank. The maximum borrowing
capacity under the U.K. Credit Agreement is 3.0 million pounds
sterling with a separate letter of credit or guarantee limit of
2.0 million pounds sterling. The term of the U.K. Credit
Agreement is one year with an evergreen feature. There were 1.3
million pounds sterling or $2.0 million of borrowings outstanding
at March 2, 1996 and the Company had issued .9 million pounds
sterling or $1.3 million of letters of credit or guarantees under
the U.K. Credit Agreement.
The primary sources of liquidity available to the Company in
fiscal year 1996 to fund operations, anticipated expenditures in
connection with the integration of Cameron, planned capital
expenditures and planned environmental expenditures include
available cash ($13.7 million at March 2, 1996), borrowing
availability 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, reductions of working capital
requirements and debt are expected to be the Company's primary
sources of liquidity during fiscal 1997 and beyond. The Company
believes that it has adequate resources to provide for its
operations and the funding of restructuring, integration, capital
and environmental expenditures.
The Company's current plans to improve operating results
include completing the integration of Cameron, further reductions
of personnel and various other cost reduction measures. Programs
to expand the Company's revenue base include participation in new
aerospace programs and expansion of participation in the land-
based gas turbine and extruded pipe markets and other markets in
which the Company has not traditionally participated. The
Company anticipates that, in addition to the growth in commercial
aviation, the aging current commercial airline fleet will require
future orders for its replacement.
ACCOUNTING AND TAX MATTERS
In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS
121") which must be adopted by the Company no later than fiscal
year 1997. SFAS 121 prescribes the accounting for the impairment
of long-lived assets that are to be held and used in the business
and similar assets to be disposed of. The Company has not
determined the impact of adopting SFAS 121 on its financial
position or results of operations.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (Continued)
ACCOUNTING AND TAX MATTERS, (Continued)
In December 1995, the Financial Accounting Standards Board
Issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123") which must be adopted by the Company
no later than fiscal year 1997. SFAS 123 prescribes the
accounting and disclosure of compensation of all stock-based
awards to employees. The Company has not determined the impact
of adopting SFAS 123 on its financial position or results of
operations.
As of June 3, 1995, the Company had net operating loss
carryforwards ("NOLs") of approximately $67.0 million, which
begin expiring in year 2006. The Company is seeking to utilize a
substantial portion of such NOLs to obtain a refund in excess of
$20.0 million of prior years' taxes. To the extent that the
Company is not successful in recovering a refund of prior years'
taxes, the NOLs will be available to offset future taxable
income, if any. A reasonable estimation of the potential
recovery cannot be made at this time and, accordingly, no
adjustment has been made in the financial statements with respect
to the claim for such refund.
The Company has purchased and is named as beneficiary on
approximately 1,650 life insurance policies with an aggregate
cash surrender value of approximately $11.1 million as of March
2, 1996, issued by Confederation Life Insurance Company (U.S.),
which is currently in rehabilitation. Confederation Life
Insurance Company is continuing to pay benefits under the
policies but has ceased to redeem cash surrender values. No
assurances can be given regarding to what extent the Company will
be able to realize such cash surrender values in the future.
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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
10 Employment Agreement dated January 17, 1996 by
and between Wyman-Gordon Company and Frank J.
Zugel
27 Financial Data Schedule for the Nine Months
Ended March 2, 1996
(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: 4/12/96 By: /s/ ANDREW C. GENOR
Andrew C. Genor
Vice President,
Chief Financial Officer and Treasurer
Date: 4/12/96 By: /s/ JEFFREY B. LAVIN
Jeffrey B. Lavin
Assistant Corporate Controller
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