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# = pound sterling

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)

FOR THE FISCAL YEAR ENDED MAY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

244 WORCESTER STREET, BOX 8001, 01536-8001
GRAFTON, MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

508-839-4441
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------

None None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $1 PAR VALUE
(TITLE OF CLASS)

Indicate by a 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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of the voting stock held by non-affiliates of the
registrant as of July 25, 1998: $331,343,000

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

CLASS OUTSTANDING AT JULY 25, 1998
----- ----------------------------

Common Stock, $1 Par Value 36,558,983 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's "Proxy Statement for Annual Meeting of
Stockholders" on October 21, 1998 are incorporated into Part III.

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ITEM 1. BUSINESS

THE COMPANY

Wyman-Gordon Company is a leading manufacturer of high-quality,
technologically advanced forging and investment casting components for the
commercial aviation, commercial power and defense industries. The Company
produces metal components to exacting customer specifications for technically
demanding applications such as jet turbine engines, airframes and land-based and
marine gas turbine engines. The Company also produces extruded seamless thick
wall pipe, made from steel and other alloys for use primarily in the oil and gas
industry and commercial power generation plants. The Company produces components
for most of the major commercial and United States defense aerospace programs.
The Company's unique combination of manufacturing facilities and broad range of
metallurgical skills allows it to serve its customers effectively and to lead
the development of new metal technologies for its customers' applications.
Through its Scaled Composites and Scaled Technology Works subsidiaries, the
Company engages in research, development, engineering and manufacture of
composite airframe structures. In fiscal years 1998 and 1997, the Company's
total revenues were $752.9 million and $608.7 million, respectively.

The Company employs three manufacturing processes: forging, investment
casting and composite production. The Company's forging process involves heating
metal and shaping it through pressing or extrusion. Forged products represented
77% of the Company's total revenues in the year ended May 31, 1998. Castings is
a process in which molten metal is poured into molds. Cast products represented
21% of the Company's total revenues in the year ended May 31, 1998. The
Company's composite business designs, fabricates and tests composite airframe
structures for the aerospace market. The composite business represented 2% of
the Company's total revenues in fiscal year 1998.

STRATEGY

In order to better serve its customers, the Company has refocused its
organizational structure towards end-markets served (i.e., aircraft turbines,
aircraft structural components and energy products) rather than manufacturing
processes used (i.e., forging, casting or composites). As a result, the
Company's business units will be responsible for specific market sectors or
customers. The purpose of this new structure is to enhance the Company's ability
to anticipate and adapt to customer demands and market opportunities.

The Company intends to strengthen its position in the aerospace market and
diversify into new markets by leveraging its manufacturing capabilities and
expertise in high-performance materials. By diversifying its business mix, the
Company intends to lessen its reliance on the aerospace industry and mitigate
the impact of the cyclicality of that industry. The Company intends to achieve
its goals through the following initiatives:

Continue Performance Improvements and Cost Reductions. The Company has
significantly improved its performance in recent years and is committed to
continuing to streamline its operations and its cost structure. The Company has
successfully completed the consolidation of Cameron Forged Products Company
("Cameron"), which was acquired from Cooper Industries, Inc. ("Cooper") in May
1994. As a result of the elimination of duplicate facilities, improved
throughput, and increased efficiencies of scale, the Company estimates that its
total production and selling costs are more than $30 million lower on an
annualized basis than such costs would have been under the cost structures of
the Company and Cameron prior to the acquisition. Building upon the performance
improvements achieved in recent years, the Company continually strives to
increase utilization rates, reduce inventory requirements and reduce operating
expenses and other costs.

Enhance Strategic Alliances with Customers and Suppliers. The Company and
certain of its customers and raw material suppliers have undertaken various
initiatives to improve quality, shorten manufacturing cycle times and reduce
costs at each stage of production. Teams from each of the participating
companies meet regularly to share information and to develop plans to improve
the efficiency of the entire supply chain. In addition, the Company believes it
will be able to provide higher value-added, custom-tailored products to its
customers by working more closely with its customers in the early stages of
product development. In

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July 1998, in connection with the formation of the titanium castings joint
venture described below, the Company entered into a transaction with Titanium
Metals Corporation, ("TIMET") in which TIMET acquired the Company's titanium
vacuum arc remelting facility in Millbury, Massachusetts, and the Company and
TIMET entered into a long-term agreement pursuant to which the Company will
acquire a substantial portion of its titanium raw material requirements.

Develop New Applications and Enter New Markets. The Company believes that
its expertise in the manufacture of metal components with enhanced fatigue- and
temperature-resistant properties gives it the ability to design new applications
for its current markets and to enter new markets. For example, the Company has
been able to enter the power generation market by utilizing its knowledge of
nickel-based alloys and manufacturing technology for aerospace turbines to
manufacture advanced components for land-based gas turbines. The Company is also
applying its expertise in investment casting, particularly in titanium, to enter
new markets, such as oil and gas and power generation.

Pursue Acquisitions or Joint Ventures. The Company intends to pursue
selective acquisitions and joint ventures that will enable the Company to
leverage its manufacturing expertise and metallurgical skills. The Company
believes that pursuing joint ventures will be increasingly important to its
future growth. For example, foreign joint ventures to produce components for the
aerospace industry may provide the Company with the opportunity to allow its
customers to meet local content requirements as they expand into foreign
markets. In addition, joint ventures may enable the Company to secure raw
material supplies or reduce costs. In 1998, the Company acquired International
Extruded Products, LLC ("IXP") of Buffalo, New York. IXP produces extruded
seamless pipe in sizes generally smaller than those produced by the Company at
its other facilities. In addition, IXP produces certain clad pipe in which a
corosion resistant inner layer is bonded to an outer layer of a different, less
expensive alloy, and pipes made of corosion resistant alloys of titanium and
other metals. The Company believes that the IXP product line broadens its own
offerings and will allow the Company to offer more comprehensive piping packages
to meet customer needs. In July 1998, the Company formed a joint venture with
TIMET which combines the Company's titanium castings operations in Franklin, New
Hampshire with TIMET's titanium castings operations in Albany, Oregon. The
Company believes that the joint venture, which is 80.1% owned by the Company,
will allow it to expand its offering of cast titanium products.

Leverage Expertise with Larger Aerospace Components. The Company believes
that its technological expertise in manufacturing large-scale components and
experience in producing and utilizing sophisticated alloys will enable it to
capitalize on the industry trend toward widebody aircraft with larger and more
sophisticated engines. These aircraft require larger airframe structural parts
and engine components manufactured with high-purity alloys, both of which are
particular strengths of the Company.

MARKETS AND PRODUCTS

The principal markets served by the Company are aerospace and energy.
Revenue by market for the respective periods were as follows:

YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
----------------- ----------------- -----------------
% OF % OF % OF
REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL
-------- ----- -------- ----- -------- -----
(000'S OMITTED, EXCEPT PERCENTAGES)

Aerospace................... $607,844 81% $475,131 78% $362,706 73%
Energy...................... 114,186 15 97,117 16 92,991 19
Other....................... 30,883 4 36,494 6 43,927 8
-------- --- -------- --- -------- ---
Total....................... $752,913 100% $608,742 100% $499,624 100%
======== === ======== === ======== ===

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Aerospace Products

Aerospace Turbine Products. The Company manufactures components from
sophisticated titanium and nickel alloys for jet engines manufactured by General
Electric Company ("GE"), the Pratt & Whitney Division ("Pratt & Whitney") of
United Technologies Corporation ("United Technologies"), Rolls-Royce ("Rolls
Royce") and CFM International S.A. Such jet engines are used on substantially
all commercial aircraft produced by the Boeing Company ("Boeing") and Airbus
Industrie, S.A. ("Airbus"). The Company's forged engine parts include fan discs,
compressor discs, turbine discs, seals, spacers, shafts, hubs and cases. Cast
engine parts include thrust reversers, valves and fuel system parts such as
combustion chamber swirl guides. Rotating parts (which include fan, compressor
and turbine discs) must be manufactured to precise quality specifications. The
Company believes it is the leading producer of these rotating components for use
in large turbine aircraft engines. Jet engines may produce in excess of 100,000
pounds of thrust and may subject parts to temperatures reaching 1,350 degrees
Fahrenheit. Components for such extreme conditions therefore require precision
manufacturing and expertise with high-purity titanium and nickel-based alloys.

Aerospace Structural Products. The Company's airframe structural
components, such as landing gear, bulkheads and wing spars, are used on every
model of airplane manufactured by Boeing and the Airbus A321, A330 and A340. In
addition, the Company's structural components are used on a number of military
aircraft and in other defense-related applications, including the C-17 transport
and the new F-22 fighter being jointly developed by Lockheed Martin Corporation
("Lockheed") and Boeing. The Company also produces dynamic rotor forgings for
helicopters.

Aerospace structural products include wing spars, engine mounts, struts,
landing gear beams, landing gear, wing hinges, wing and tail flaps, housings,
and bulkheads. These parts may be made of titanium, steel, aluminum and other
alloys, as well as composite materials. Forging is particularly well suited for
airframe parts because of its ability to impart greater strength per unit of
weight to metal than other manufacturing processes. Investment casting can
produce complex shapes to precise, repeatable dimensions.

The Company has been a major supplier of the beams that support the main
landing gear assemblies on the Boeing 747 for many years and supplies main
landing gear beams for the Boeing 777. The Company forges landing gear and other
airframe structural components for the Boeing 737, 747, 757, 767 and 777, and
the Airbus A321, A330 and A340. The Company produces structural forgings for the
F-15, F-16 and F/A-18 fighter aircraft and the Black Hawk helicopter produced by
Sikorsky Aircraft Corporation, a subsidiary of United Technologies. The Company
also produces large, one-piece bulkheads for Lockheed and Boeing for the F-22
fighter.

Energy Products

The Company is a major supplier of extruded seamless thick wall pipe used
in critical piping systems in both fossil fuel and nuclear commercial power
plants worldwide as well as in oil and gas industry applications. The Company
produces rotating components, such as discs and spacers, and valve components
for land-based steam turbine and gas turbine generators, and in addition, also
manufactures shafts, cases, and compressor and turbine discs for marine gas
engines. The Company believes the energy sector provides it with an opportunity
to build on its manufacturing capabilities and metallurgical know-how gained
from manufacturing products for the aerospace industry. The April 1998
acquisition of IXP enhances this opportunity.

The Company produces a variety of mechanical and structural tubular forged
products, primarily in the form of extruded seamless pipe, for the domestic and
international energy markets, which include nuclear and fossil-fueled power
plants, cogeneration projects and retrofit and life extension applications.
These tubular forged products also have ordnance and other military
applications. Aluminum, steel, and titanium products are manufactured at the
Company's Houston, Texas forging facility where one of the world's largest
vertical extrusion presses extrudes pipe up to 48 inches in diameter and seven
inches in wall thickness and bar stock from six to 32 inches in diameter.
Lengths of pipe and bar stock vary from ten to 45 feet, with a maximum forged
weight of 20 tons. Similar equipment and capabilities are in operation at the
Company's Livingston,

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Scotland, and Buffalo, New York, forging facilities. Additionally, the Houston
press extrudes powder billets for use in aircraft turbine engine forgings.

Other Products

The Company supplies products to builders of military ordnance. Examples of
forged products include steel casings for bombs and rockets. For naval defense
applications, the Company supplies components for propulsion systems for nuclear
submarines and aircraft carriers as well as pump, valve, structural and non-
nuclear propulsion forgings. The Company also manufactures extruded missile,
rocket and bomb casings and supplies extruded products for nuclear submarines
and aircraft carriers, including thick wall piping for nuclear propulsion
systems, torpedo tubes and catapult launch tubes. The Company also extrudes
powders for other alloy powder manufacturers.

Through its investment casting operations, which utilize a process of
pouring molten metal into a mold, the Company manufactures products for
commercial applications such as food processing, semiconductor manufacturing,
diesel turbochargers and sporting equipment. The Company is actively seeking to
identify alternative applications for its capabilities, such as in the
automotive and other commercial markets.

CUSTOMERS

The Company has approximately 275 active customers that purchase forgings,
approximately 800 active customers that purchase investment castings and
approximately 20 active customers that purchase composite structures. The
Company's principal customers are similar across all of these production
processes. Five customers accounted for 51%, 48% and 47% of the Company's
revenues for the years ended May 31, 1998, 1997 and 1996, respectively. GE and
United Technologies (primarily Pratt & Whitney division and Sikorsky) each
accounted for 10% or more of revenues for the years ended May 31, 1998, 1997 and
1996.

GE.................................. $169,894 23% $156,764 26% $134,830 27%
United Technologies................. 76,786 10 60,921 10 53,116 11

Boeing and Rolls-Royce are also significant customers of the Company.
Because of the relatively small number of customers for some of the Company's
principal products, those customers exercise significant influence over the
Company's prices and other terms of trade.

The Company has become actively involved with its aerospace customers
through supply chain management initiatives, joint development relationships and
cooperative research and development, engineering, quality control, just-in-time
inventory control and computerized design programs. The Company believes that
greater involvement in the design and development of components for its
customers' products will result in significant efficiencies and will allow the
Company to better serve its customers.

MARKETING AND SALES

The Company markets its products principally through its own sales
engineers and makes only limited use of independent manufacturers'
representatives. Substantially all sales are made directly to original equipment
manufacturers.

The Company's sales are not subject to significant seasonal fluctuations.

A substantial portion of the Company's revenues are derived from long-term,
fixed-price agreements ("LTAs") with major engine and aircraft manufacturers.
These contracts are typically "requirements" contracts under which the purchaser
commits to purchase a given portion of its requirements of a particular
component from the Company. Actual purchase quantities are typically not
determined until shortly before the year in which products are to be delivered.
The Company has increased its efforts to obtain LTAs with

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customers which contain price adjustments which would compensate the Company for
increased raw material costs. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- General."

BACKLOG

The Company's firm backlog includes the sales prices of all undelivered
units covered by customers' orders for which the Company has production
authorization. The Company's firm backlog in the various markets served by the
Company has been as follows:

MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
------------------- ----------------- -----------------
% OF % OF % OF
BACKLOG TOTAL BACKLOG TOTAL BACKLOG TOTAL
---------- ----- -------- ----- -------- -----
(000'S OMITTED, EXCEPT PERCENTAGES)

Aerospace.......................... $ 908,633 88% $767,989 86% $499,103 83%
Energy............................. 94,314 9 99,172 11 66,341 11
Other.............................. 27,145 3 28,664 3 32,994 6
---------- --- -------- --- -------- ---
Total.............................. $1,030,092 100% $895,825 100% $598,438 100%
========== === ======== === ======== ===

At May 31, 1998, approximately $716.8 million of total firm backlog was
scheduled to be shipped within one year (compared to $671.6 million at May 31,
1997 and $437.0 million at May 31, 1996) and the remainder in subsequent years.
Sales during any period include sales which were not part of backlog at the end
of the prior period. Customer orders in firm backlog are subject to rescheduling
or termination for customer convenience and as a result of market fluctuations
in the commercial aerospace industry. However, in certain cases, the Company is
entitled to an adjustment in contract amounts. Because of the cyclical nature of
order entry experienced by the Company and its dependence on the aerospace
industry, there can be no assurance that order entry will continue at current
levels or that current firm purchase orders will not be canceled or delayed.
Accordingly, the Company's backlog is not necessarily indicative of the
Company's revenues for any future period or periods.

MANUFACTURING PROCESSES

The Company employs three manufacturing processes: forging, investment
casting and composites production.

Forging

The Company's forging process involves heating metal and shaping it through
pressing or extrusion. The Company forges titanium and steel alloys, as well as
high temperature nickel alloys. Forging is conducted on hydraulic presses with
capacities ranging up to 55,000 tons. The Company believes that it is the
leading producer of rotating components for use in turbine aircraft engines.
These parts are forged from purchased ingots which are converted to billet in
the Company's cogging presses and from alloy metal powders (primarily nickel
alloys) which are produced, consolidated and extruded into billet entirely at
the Company's facilities.

The Company manufactures its forgings at its facilities in Grafton and
Worcester, Massachusetts; Houston, Texas; Buffalo, New York; and Livingston,
Scotland. The Company also operates an alloy powder metal facility in Brighton,
Michigan; vacuum remelting facilities in Houston, Texas which produce steel and
nickel alloy ingots; and a plasma arc melting facility for the production of
titanium electrodes and ingots in Millbury, Massachusetts. The Company has eight
large closed die hydraulic forging presses rated as follows: 18,000 tons, 35,000
tons and 50,000 tons in Grafton Massachusetts; 20,000 tons, 29,000 tons and
35,000 tons in Houston, Texas; 12,000 tons in Buffalo, New York and 30,000 tons
in Livingston, Scotland. The Company reinstalled the 20,000 ton multi-ram press
in Houston at a cost of approximately $6 million and began operating it at the
end of fiscal year 1997. The addition of this press substantially increased the
Company's forging capacity. The 35,000 ton vertical extrusion press in Houston
can also be operated as a 55,000 ton hydraulic forging press. The Company also
operates two open die cogging presses used to convert ingot into

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billet rated at 2,000 tons and 1,375 tons at its Grafton, Massachusetts
location. The Company produces isothermal forgings on its forging press rated at
8,000 tons at its Worcester, Massachusetts location.

The Company employs the following five forging processes:

- Open-Die Forging. In this process, the metal is pressed between dies
that never completely surround the metal, thus allowing the metal to be
observed during the process. Typically, open-die forging is used to
create relatively simple, preliminary shapes to be further processed by
closed die forging.

- Closed-Die Forging. Closed-die forging involves pressing heated metal
into the required shapes and size determined by machined impressions in
specially prepared dies which completely surround the metal. In hot-die
forging, both titanium and nickel alloys can be forged using this
process, in which the dies are heated to a temperature of approximately
1300 degreesF. This process allows metal to flow more easily within the
die cavity which produces forgings with superior surface finish,
metallurgical structures with tighter tolerances and enhanced
repeatability of the part shape.

- Conventional/Multi-Ram. The closed-die, multi-ram process utilized on
the Company's 30,000 and 20,000 ton presses enables the Company to
produce extremely complex forgings such as valve bodies with multiple
cavities in a single heating and pressing cycle. Dies may be split either
on a vertical or a horizontal plane and shaped punches may be operated by
side rams, piercing rams, or both. Multi-ram forging enables the Company
to produce a wide variety of shapes, sizes and configurations. The
process also optimizes grain flow and uniformity of deformation and
reduces machining requirements.

- Isothermal Forging. Isothermal forging is a closed-die process in which
the dies are heated to the same temperature as the metal being forged,
typically in excess of 1,900 degrees Fahrenheit. The forged material
typically consists of nickel alloy powders. Because of the high die
temperatures necessary for forming these alloys, the dies are made of
refractory metals, typically molybdenum, so that the die retains its
strength and shape during the forging process. Because the dies may
oxidize at these elevated temperatures, the forging process is carried on
in a vacuum or inert gas atmosphere. The Company's isothermal press also
allows it to produce near-net shape components (requiring less machining
by the customer) made from titanium alloys, which can be an important
competitive advantage in times of high titanium prices. The Company
carries on this process in its 8,000-ton isothermal press.

- Extrusion. The Company's 35,000 ton vertical extrusion press is one of
the largest and most advanced extrusion presses in the world. Extrusions
are produced for applications in the oil and gas industry, including
tension leg platforms, riser systems and production manifolds. The
extrusion process is facilitated by manipulators capable of handling work
pieces weighing up to 20 tons, rotary hearth furnaces and a 14,000 ton
blocking press. The Company's extrusion press is capable of producing
thick wall seamless pipe with outside diameters up to 48 inches and wall
thicknesses from 1/2 inch up to seven inches. Solid extrusions can be
manufactured from six to 32 inches in diameter. Typical lengths vary from
ten to 45 feet. Powder materials can also be compacted and extruded into
forging billets utilizing this press. The 30,000 ton press in Scotland
has similar extrusion capabilities in addition to its multi-ram forging
capabilities. The 12,000 ton press in Buffalo, New York is capable of
producing seamless pipe with outside diameters up to 20 inches and wall
thicknesses from 3/8 inches up to three inches.

Metal Production. The Company's Brighton, Michigan powder metal facility
has the capability to atomize, process, and consolidate (by hot isostatic
pressing) alloy metal powders for use in aerospace, medical implant,
petrochemical, hostile environment oil and gas drilling and production, and
other applications. This facility has an annual production capacity of up to
500,000 pounds of alloy powder. After production of the powder, the Company
consolidates the metal by extrusion using its 35,000 ton press in Houston, and
the extruded billets are then forged into critical jet engine components on the
Company's 8,000 ton isothermal press in Worcester, Massachusetts.

The Company's vacuum arc remelting ("VAR") shop in Houston, Texas has five
computer-controlled VAR furnaces which process electrodes up to 42 inches in
diameter that weigh up to 40,000 pounds. The Houston VAR furnaces are used to
remelt purchased electrodes into high purity alloys for internal use. In
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addition, the VAR furnaces are used for toll melting. These vacuum metallurgy
techniques provide consistently high levels of purity, low gas content, and
precise control over the solidification process. This minimizes segregation in
complex alloys and results in improved mechanical properties, as well as hot and
cold workability.

The Company's plasma arc melting ("PAM") facility in Millbury is capable of
producing high quality titanium ingot and nickel alloy powder. The Company has
entered into a joint venture with Pratt & Whitney and certain Australian
investors to produce nickel alloy ingots in Perth, Australia, some of which the
Company utilizes as raw materials for its forging and casting products.

Support Operations. The Company manufactures some of its own forging dies
out of high-strength steel and molybdenum. These dies can weigh in excess of 100
tons and can be up to 25 feet in length. In manufacturing its dies, the Company
utilizes its customers' drawings and engineers the dies using CAD/CAM equipment
and sophisticated computer models that simulate metal flow during the forging
process. This activity improves die design and process control and permits the
Company to enhance the metallurgical characteristics of the forging.

The Company also has at its three major forging locations machine shops
with computer aided profiling equipment, vertical turret lathes and other
equipment that it employs to shape rough machine products. The Company also
operates rotary and car-bottom furnaces for heat treatment to enhance the
performance characteristics of the forgings.

Testing. Because the Company's products are for high performance end uses,
rigorous testing is necessary and is performed internally by Company engineers.
Throughout the manufacturing process, numerous tests and inspections are
performed to insure the final quality of each product; statistical process
control techniques are also applied throughout the entire manufacturing process.
The Company subjects its products to extensive quality inspection and contract
qualification procedures involving zyglo, chemical etching, ultrasonic, red dye,
hardness, and electrical conductivity testing facilities.

Investment Castings

The Company's investment castings operations use high-volume production
equipment and both air-melt and vacuum-melt furnaces to produce a wide variety
of complex investment castings. Castings are made of a range of metal alloys
including steel, aluminum, nickel, titanium and magnesium. The Company's
castings operations are conducted in facilities located in Groton, Connecticut;
Franklin and Tilton, New Hampshire; Carson City, Nevada; San Leandro, California
and Albany, Oregon.

In July 1998, the Company and TIMET combined their respective titanium
casting operations in Tilton, New Hampshire and Albany, Oregon into Wyman Gordon
Titanium Castings, LLC, a Delaware limited liability company, (the "Joint
Venture"), 80.1% owned by the Company and 19.9% by TIMET. The parties have
agreed, in general, that the TIMET Venture will be the exclusive means by which
they conduct their titanium castings operations.

The Company produces its investment castings by the "lost wax" process, a
method developed in China over 5,000 years ago. The initial step in producing
investing castings is to create a wax form of the ultimate metal part by
injecting molten wax into an aluminum mold, known as a "tool." These tools are
produced to the specifications of the customer and are primarily purchased from
outside die makers, although the Company maintains internal tool-making
capabilities. The wax patterns are then mechanically coated with a ceramic
slurry in a process known as investment. This forms a ceramic shell which is
subsequently air-dried and hardened under controlled environmental conditions.
Next, the wax inside this shell is melted and removed in a high temperature
steam autoclave and the molten wax is recycled. In the next, or "foundry" stage,
metal is melted in an electric furnace in either an air or vacuum environment
and poured into the ceramic shell. After cooling, the ceramic shells are removed
by vibration, chipping or various types of water or air blasting. The metal
parts are then cleaned in a high temperature caustic bath, followed by water
rinsing. In the finishing stage, the castings are finished by grinding and
polishing to remove excess metal. The final product then

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undergoes a lengthy series of testing (radiography, fluorescent penetrant,
magnetic particle and dimensional) to ensure quality and consistency.

Composites

The Company's composites subsidiary, Scaled Composites, located in Mojave,
California, designs, fabricates and tests composite airframe structures made by
layering carbon graphite and other fibers with epoxy resins for the aerospace
market. During fiscal year 1998, the Company completed the construction of a
120,000-square-foot facility in Montrose, Colorado, where the Company's
subsidiary, Scaled Technology Works, manufactures airplane components,
principally those designed by Scaled Composites.

OPERATING FACILITIES

The following table sets forth certain information with respect to the
Company's operating facilities at May 31, 1998, all of which are owned. The
Company believes that its operating facilities are well maintained, are suitable
to support the Company's business and are adequate for the Company's present and
anticipated needs. On average, during the Company's fiscal year 1998, the
Company's forging, investment castings and composites facilities were operating
at approximately 78%, 76% and 77% of their total productive capacity,
respectively.

APPROXIMATE
SQUARE
LOCATION FOOTAGE PRIMARY FUNCTION
- -------- ----------- --------------------------

Brighton, Michigan................................... 34,500 Alloy Powder Production
Grafton, Massachusetts............................... 85,420 Administrative Offices
Grafton, Massachusetts............................... 843,200 Forging
Houston, Texas....................................... 1,283,800 Forging
Livingston, Scotland................................. 405,200 Forging
Millbury, Massachusetts.............................. 104,125 Research and Development,
Metals Production
Worcester, Massachusetts............................. 22,300 Forging
Buffalo, New York (2 plants)......................... 235,000 Forging
Carson City, Nevada.................................. 55,000 Casting
Franklin, New Hampshire.............................. 43,200 Casting
Groton, Connecticut (2 plants)....................... 162,550 Casting
San Leandro, California.............................. 60,000 Casting
Tilton, New Hampshire................................ 94,000 Casting
Mojave, California................................... 67,000 Composites
Montrose, Colorado................................... 120,000 Composites

RAW MATERIALS

Raw materials used by the Company in its forgings and castings include
titanium, nickel, steel, aluminum, magnesium and other metallic alloys. The
composites operation uses high strength fibers such as fiberglass or graphite,
as well as materials such as foam and epoxy, to fabricate composite structures.
The major portion of metal requirements for forged and cast products are
purchased from major metal suppliers producing forging and casting quality
material as needed to fill customer orders. The Company has two or more sources
of supply for all significant raw materials. Its principal suppliers of nickel
alloys include Special Metals Corporation, Allegheny Teledyne, Inc., and
Carpenter Technologies Corporation. Its principal suppliers of titanium alloys
are TIMET, Oregon Metallurgical Corp. and RMI Titanium Company. In July 1998,
the Company exchanged certain assets of its Millbury, Massachusetts titanium
vacuum arc remelting facility for certain assets of TIMET's Albany, Oregon
titanium castings business. In connection with such exchange the Company and
TIMET entered into a long term supply agreement pursuant to which the Company
will acquire a substantial portion of its titanium raw material requirements
from TIMET. The

8
10

Company's powder metal facility in Brighton, Michigan produces nickel alloy
powder and high quality titanium ingots. In addition the Company is a
participant in the joint venture to produce nickel alloy ingots, and the Company
utilizes a portion of the output of its Australian joint venture for its own
use.

The titanium and nickel alloys utilized by the Company have a relatively
high dollar value. Accordingly, the Company attempts to recover and recycle
scrap materials such as machine turnings, forging flash, scrapped forgings, test
pieces and casting sprues, risers and gates.

In the event a customer cancels an order for which material has been
purchased, the Company may, under certain circumstances, obtain reimbursement
from the customer if the material cannot be diverted to other uses. Costs of
material already on hand, along with any conversion costs incurred, are
generally billed to the customer unless transferable to another order. As demand
for the Company's products grew during recent fiscal years, and prices of raw
materials have risen, the Company experienced raw material shortages and
production delays. During fiscal year 1997 and the first six months of fiscal
year 1998, the Company's suppliers of nickel and titanium alloys experienced
increases in the market prices of the elements (e.g., nickel, titanium, cobalt),
that they use in fabricating their products. Because the Company's suppliers
generally have alternative markets for their products where they may have
greater ability to increase their prices, production in some cases was diverted
to alternative markets. As a result, during fiscal year 1997 and the first six
months of 1998, the Company's lead time for deliveries from its suppliers
expanded from 20 weeks to 50 weeks or more. In the last six months this trend
has started to change. New capacities at these suppliers combined with a
flatening in overall demand is causing some softening in price and reductions in
lead times back toward 20 weeks. In response to these supply problems, the
Company has sought price increases and other financial considerations from its
customers which would permit it to increase the price it pays to suppliers. In
addition, the Company and certain of its customers and suppliers have undertaken
active programs for supply chain management which have helped to reduce the
overall lead times for deliveries of raw materials.

Many of the Company's customer contracts have fixed prices for extended
time periods and do not provide complete price adjustments for changes in the
prices of raw materials such as metals. The Company attempts to reduce its risk
with respect to its customer contracts by procuring long-term contracts with
suppliers of metal alloys, but the Company's supply contracts typically do not
completely insulate the Company from fluctuations in the prices of raw
materials.

ENERGY USAGE

The Company is a large consumer of energy. Energy is required primarily for
heating metals to be forged and melting metals to be cast, melting of ingots,
heat-treating products after forging and casting, operating forging presses,
melting furnaces, die-sinking, mechanical manipulation and pollution control
equipment and space heating. Supplies of natural gas, oil and electricity used
by the Company have been sufficient and there is no anticipated shortage for the
future. However, significant increases in the price of or shortages in these
energy supplies may have an adverse impact on the Company's results of
operations.

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11

EMPLOYEES

As of May 31, 1998, the Company had approximately 4,285 employees, of whom
1,145 were executive, administrative, engineering, research, sales and clerical
and 3,140 were production and craft. Approximately 49% of the production and
craft employees, consisting of employees in the forging business, are
represented by unions. The Company has entered into collective bargaining
agreements with these union employees as follows:

NUMBER OF
EMPLOYEES COVERED
BY BARGAINING
LOCATION AGREEMENTS INITIATION DATE EXPIRATION DATE
- -------- ----------------- ---------------- ------------------

Grafton, Millbury and
Worcester,
Massachusetts............. 582 April 6, 1997 March 24, 2002
Houston, Texas.............. 616 August 10, 1998 August 12, 2001
45 August 7, 1995 September 27, 1998
Livingston, Scotland........ 203 December 1, 1995 November 30, 1998
35 February 1, 1996 January 31, 1999
Buffalo, New York........... 52 October 21, 1996 June 6, 1999
-----
Total............. 1,533
=====

The Company believes it has good relations with its employees, but there
can be no assurances that the Company will not experience a strike or other work
stoppage or that acceptable collective bargaining agreements can be negotiated
when the existing collective bargaining agreements expire.

RESEARCH AND PATENTS

The Company maintains research and development departments at both
Millbury, Massachusetts, and Houston, Texas, which are engaged in applied
research and development work primarily relating to the Company's forging
operations. The Company works closely with customers, universities and
government technical agencies in developing advanced forging and casting
materials and processes. The Company's Castings Operations conduct research and
development related to advanced casting materials and processes at its Groton,
Connecticut, and Tilton, New Hampshire, facilities. The Company's composites
operation conducts research and development related to aerospace composite
structures at the Mojave, California, facility. The Company spent approximately
$3.3 million, $2.9 million and $1.6 million on applied research and development
work during the years ended May 31, 1998, 1997 and 1996, respectively. Although
the Company owns patents covering certain of its processes, the Company does not
consider that these patents are of material importance to the Company's business
as a whole. Most of the Company's products are manufactured to customer
specifications and, consequently, the Company has few proprietary products.

COMPETITION

Most of the Company's production capabilities are possessed in varying
degrees by other companies in the industry, including both domestic and foreign
manufacturers. Competition in each of the Company's current product markets is
cyclical, intensifying during upturns and lessening during downturns, but such
cyclicality of competition is especially present in aerospace structural
products markets because of the cyclical nature of the commercial and defense
aerospace industries. In the aerospace turbine products market, the Company's
largest competitors are Ladish Co., Inc., Fortech, S.A. and Thyssen AG. In the
aerospace structural products market, Alcoa Corporation and Schultz Steel
Company are the Company's largest competitors. In the energy products market,
the Company faces mostly international competition from Mannesmann A.G. and
Sumitomo Corporation, among others. In the aerospace castings products market,
Howmet Corporation and Precision Cast Parts Corp. are the Company's largest
competitors.

In the future, the Company may face increased competition from
international companies which currently have the required manufacturing
equipment, but may lack sufficient technological or financial

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12

resources, and may be hampered by lower productivity. International competition
in the forging and casting processes may also increase in the future as a result
of strategic alliances among aircraft prime contractors and foreign companies,
particularly where "offset" or "local content" requirements create purchase
obligations with respect to products manufactured in or directed to a particular
country. Competition is often intense among the companies currently involved in
the industry. Competitive advantages are afforded to those with high quality
products, low cost manufacturing, excellent customer service and delivery and
engineering and production expertise. The Company believes that it has strength
in these areas, but there can be no assurance that the Company can maintain its
share of the market for any of its products.

ENVIRONMENTAL REGULATIONS

The Company's operations are 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. However, it is not possible to predict accurately the amount or
timing of costs of any future environmental remediation requirements. The
Company continues to design and implement a system of programs and facilities
for the management of its raw materials, production processes and industrial
waste to promote compliance with environmental requirements. As of May 31, 1998,
aggregate environmental reserves amounted to $16.5 million, which includes
expected cleanup expenses estimated between $4.4 million and $5.4 million upon
the eventual sale of the Worcester facility, certain environmental issues,
including the remediation of on-site landfills, at Cameron amounting to
approximately $3.5 million, $5.6 million in remediation projects at the Grafton
facility, $0.9 million for remediation at the Buffalo facility and $1.1 million
for various Superfund sites. There can be no assurance that the actual costs of
remediation will not eventually materially exceed the amount presently accrued.

Pursuant to an agreement entered into with the U.S. Air Force upon the
acquisition of the Grafton facility from the federal government in 1982, the
Company agreed to make expenditures totaling $20.8 million for environmental
management and remediation at that site during the period 1982 through 1999, of
which $4.0 million remained as of May 31, 1998. These expenditures will not
resolve the Company's obligations to federal and state regulatory authorities,
who are not parties to the agreement, however, and the Company expects to incur
an additional amount, currently estimated at approximately $3.5 million, to
comply with current federal and state environmental requirements governing the
investigation and remediation of contamination at the site.

The Company's Grafton facility was formerly included in the U.S. Nuclear
Regulatory Commission's ("NRC") May 1992 Site Decommissioning Management Plan
("SDMP") for low-level radioactive waste as the result of the disposal of
magnesium thorium alloys at the facility in the 1960s and early 1970s under
license from the Atomic Energy Commission. On March 31, 1997, the NRC informed
the Company that jurisdiction for the Grafton site had been transferred to the
Commonwealth of Massachusetts Department of Public Health (the "DPH") and that
the Grafton facility had been removed from the SDMP. Although it is unknown what
specific remediation and disposal requirements may be imposed on the Company by
the DPH, the Company believes that a reserve of $1.5 million recorded on its
books is sufficient to cover all costs. There can be no assurance, however, that
such reserve will be adequate to cover any obligations that the DPH may
ultimately impose on the Company.

The Company, together with numerous other parties, has been named a PRP
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") for the cleanup of the following Superfund sites: Operating
Industries, Monterey Park, California; Cedartown Municipal Landfill, Cedartown,
Georgia; PSC Resources, Palmer, Massachusetts; the Harvey GRQ site, Harvey,
Illinois; the Berlin & Farrow site, Swartz Creek, Michigan; the Gemme/Fournier
site, Leicester, Massachusetts; and the Salco, Inc. site, Monroe, Michigan. The
Company believes that a reserve of $1.1 million recorded on its books is
sufficient to cover all costs.
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13

At the Gemme/Fournier site, a proposed agreement would allocate 33% of the
cleanup costs to the Company. In September 1995, a consulting firm retained by
the PRP group made a preliminary remediation cost estimate of $1.4 million to
$2.8 million. The Company's insurance company is defending the Company's
interests, and the Company believes that any recovery against the Company would
be offset by recovery of insurance proceeds.

The Company expects to incur between $4.4 and $5.4 million in cleanup
expenses upon the planned sale of its Worcester, Massachusetts facility to
remedy certain contamination discovered on site. The Massachusetts Department of
Environmental Protection has classified the site as a Tier II site under the
Massachusetts Contingency Plan.

PRODUCT LIABILITY EXPOSURE

The Company produces many critical engine and structural parts for
commercial and military aircraft. As a result, the Company faces an inherent
business risk of exposure to product liability claims. The Company maintains
insurance against product liability claims, but there can be no assurance that
such coverage will continue to be available on terms acceptable to the Company
or that such coverage will be adequate for liabilities actually incurred. The
Company has not experienced any material loss from product liability claims and
believes that its insurance coverage is adequate to protect it against any
claims to which it may be subject.

LEGAL PROCEEDINGS

In addition to the matters disclosed below, at May 31, 1998, the Company
was involved in certain legal proceedings arising in the normal course of its
business. The Company believes the outcome of these matters will not have a
material adverse effect on the Company.

On December 22, 1996, a serious industrial accident occurred at the
Houston, Texas, facility of Wyman-Gordon Forgings, Inc. ("WGFI"), a wholly-owned
subsidiary of the Company, in which eight employees were killed and two others
injured.

OSHA conducted an investigation of the accident. On June 18, 1997, WGFI
reached an agreement with OSHA, settling citations resulting from the accident.

The injured workers and the decedents' families have asserted claims
against the Company and WGFI. WGFI has also received claims from several
employees of a subcontractor claiming to have been injured at the time of the
accident as well as from one current employee.

To date, the Company has settled all claims that could be brought by three
of the decedents' families on terms acceptable to the Company and its insurance
carriers and in addition has reached agreement for the settlement of the claims
of the family of a fourth decedent. The Company has also settled most of the
claims of the subcontractor employees. The Company thus far has been unable to
achieve settlements with the other claimants, and, on October 24, 1997, a
lawsuit was filed in the District Court of Harris County, Texas, on behalf of
three of the decedents' families against the Company, WGFI and Cooper-Cameron
Corporation. One of the injured employees has subsequently filed a motion to be
included in the lawsuit. Trial of the lawsuit is currently set for January,
1999.

In general, under Texas statutory law, an employee's exclusive remedy
against an employer for an on-the-job injury is the benefits of the Texas
Workers' Compensation Act. WGFI, the employer of the deceased employees, has
workers' compensation insurance coverage and the injured employees and
beneficiaries of the deceased employees are receiving workers' compensation
payments. Under applicable law, however, statutory beneficiaries of employees
killed in the course and scope of their employment may recover punitive (but not
compensatory) damages in excess of workers compensation benefits. However, to do
so, they must prove that the employer was grossly negligent. The protection of
the workers compensation exclusive remedy provision may not extend to the
Company as parent corporation of WGFI. Therefore, with regard to the October 24,
1997 lawsuit and any future lawsuits brought on behalf of those killed or
injured in the Houston accident or their families against the Company, if (i)
the court finds that the Company had a legal duty to WGFI and its employees,
(ii) the evidence supports a finding that the Company acted negligently in its
duty to WGFI and
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14

its employees and (iii) such negligence had a causal connection with the
accident, the plaintiffs might be able to recover compensatory damages against
the Company. If it is shown that the Company's conduct amounted to gross
neglect, and that conduct is found to be a cause of the accident, the plaintiffs
may be able to recover punitive damages against the Company.

It is not possible at this time to determine the extent, if any, to which
WGFI or the Company could be held liable in connection with the accident. The
Company maintains general liability and employer's liability insurance for
itself and its subsidiaries under various policies with aggregate coverage
limits of approximately $29 million, a portion of which has been expended in the
settlements to date. While WGFI has tendered the defense of the various claims
to the Company's insurance carriers, there can be no assurance that the full
insurance coverage will be available. Based on the Company's experience in the
settlement negotiations to date, the Company believes that there is a
substantial risk that the pending and threatened claims will not be settled for
an aggregate amount within its insurance coverage limits. The Company
anticipates that, as with the currently pending lawsuit, any additional lawsuits
will include claims for alleged compensatory as well as punitive damages that in
the aggregate could substantially exceed the Company's available insurance
coverage. The Company intends to vigorously defend all lawsuits that have been
or may be filed relating to the accident. However, if one or more such lawsuits
were to be prosecuted successfully by the plaintiffs and a judgment were to be
obtained by one or more plaintiffs in such lawsuits and sustained on appeal,
litigation costs, including the cost of pursuing any appeals, and the cost of
paying such a judgment, to the extent not covered by insurance, could have a
material adverse effect on the Company's financial condition and the results of
operations, particularly if any such judgment includes awards for punitive
damages.

On September 25, 1997, the Company received a subpoena from the United
States Department of Justice informing it that the United States Department of
Defense and other federal agencies had commenced an investigation with respect
to the manufacture and sale of investment castings at the Company's Tilton, New
Hampshire, facility. The focus of the investigation is whether the Company
failed to comply with required quality control procedures for cast aerospace
parts and whether the Company shipped cast components that did not meet
applicable specifications, which could be a violation of federal requirements.
The investigating agencies have directed the Company to furnish various
documents and information relating to the subject of the investigation. The
Company is cooperating fully with the investigation, and in addition, has
substantially completed its own investigation, which was supervised by the
Company's outside attorneys and conducted by quality and process auditors from
another casting facility of the Company and by the Company's internal attorneys.
Such investigation has identified certain departures from Company policies and
procedures which have been addressed. The federal investigation may result in
criminal or civil charges being brought against the Company which could result
in civil damages and penalties and criminal liability if the Company were found
to have violated federal laws. Based on the Company's own investigation to date,
the Company does not believe that the federal investigation is likely to result
in a material adverse impact on the Company's financial condition or results of
operations, although no assurance as to the outcome or impact of that
investigation can be given.

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MANAGEMENT

The executive officers and directors of the Company are as follows:

NAME AGE POSITION
- ---- --- --------

David P. Gruber........................... 56 Chairman and Chief Executive Officer
J. Douglas Whelan......................... 59 President, Chief Operating Officer and
Director
Edward J. Davis........................... 51 Vice President, Chief Financial Officer and
Treasurer
Sanjay N. Shah............................ 47 Vice President, Corporate Strategy Planning
and Business Development
J. Stewart Smith.......................... 56 President, Manufacturing
Colin Stead............................... 59 Senior Vice President, Quality and
Technology
Wallace F. Whitney, Jr.................... 55 Vice President, General Counsel and Clerk
Frank J. Zugel............................ 53 President, Marketing
E. Paul Casey............................. 68 Director
Warner S. Fletcher........................ 53 Director
Robert G. Foster.......................... 60 Director
Russell E. Fuller......................... 72 Director
Charles W. Grigg.......................... 59 Director
M Howard Jacobson......................... 65 Director
Judith S. King............................ 63 Director
Robert L. Leibensperger................... 59 Director
Andrew E. Lietz........................... 59 Director
H. John Riley, Jr. ....................... 57 Director
David A. White, Jr. ...................... 56 Director

DAVID P. GRUBER was elected Chairman and Chief Executive Officer of the
Company on October 15, 1997, having previously served as President and Chief
Executive Officer since May 1994 and as President and Chief Operating Officer
since he joined the Company in October 1991. Prior to joining the Company, Mr.
Gruber served as Vice President, Advanced Ceramics, of Compagnie de Saint Gobain
(which acquired Norton Company in 1990), a position he held with Norton Company
since 1987. Mr. Gruber previously held various executive and technical positions
with Norton Company since 1978. He is a Director of State Street Corporation, a
Trustee of the Manufacturers' Alliance for Productivity and Innovation, and a
member of the Mechanical Engineering Advisory Committee of Worcester Polytechnic
Institute.

J. DOUGLAS WHELAN was elected President and Chief Operating Officer of the
Company on October 15, 1997, having previously served as President, Forgings
since he joined the Company in March 1994. He joined the Company's Board of
Directors in 1998. Prior to joining the Company, he had served for a short time
as the President of Ladish Co., Inc., a forging company in Cudahy, Wisconsin,
and prior thereto, had been Vice President, Operations of Cameron, with which
company and its predecessors he had been employed since 1965 in various
executive capacities. Mr. Whelan is a Director of Sifco Industries, Inc. and a
member of the President's Council of Manufacturers Alliance.

EDWARD J. DAVIS was elected Vice President, Chief Financial Officer and
Treasurer in February 1998. Prior to joining the Company, Mr. Davis had served
as Executive Vice President and Chief Financial Officer of General Ship
Acquisition Corporation, Boston, Massachusetts since 1992, and as Senior Manager
of Price Waterhouse & Company from 1989 to 1992.

SANJAY N. SHAH was elected Vice President, Corporate Strategy Planning and
Business Development in May 1994, having previously served as Vice President and
Assistant General Manager of the Company's Aerospace Forgings Division. He has
held a number of executive, research, engineering and manufacturing positions at
the Company since joining the Company in 1975.

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16

J. STEWART SMITH was elected President, Manufacturing of the Company on
October 15, 1997, having previously served as Vice President, Manufacturing and
Engineering of the Forgings Division since 1994. Prior to that time, Mr. Smith
had held various technical and manufacturing positions with Cameron and its
predecessors since joining that company in 1978.

COLIN STEAD was elected Senior Vice President, Quality and Technology of
the Company on October 15, 1997, having previously served as Vice President,
Quality and Metallurgy of the Forgings Division since 1994. Prior thereto, he
had served in various technical and quality positions with Cameron and its
predecessors since joining that company in 1984.

WALLACE F. WHITNEY, JR. joined the Company in 1991. Prior to that time, he
had been Vice President, General Counsel and Secretary of Norton Company since
1988, where he had been employed in various legal capacities since 1973.

FRANK J. ZUGEL was elected President, Marketing of the Company on October
15, 1997, having previously served as President, Investment Castings, since he
joined the Company in 1993. Prior to that time, he had served as President of
Stainless Steel Products, Inc., a metal fabricator for aerospace applications,
since 1992.

E. PAUL CASEY, Chairman and General Partner, Metapoint Partners, Peabody,
Massachusetts (an investment partnership which he established in 1988), has been
a Director of the Company since 1993. He served as Vice Chairman of Textron,
Inc. from 1986 to 1987 and as Chief Executive Officer and President of Ex-Cell-O
Corporation during 1978 to 1986. Mr. Casey is a Director of Comerica, Inc. and
Hood Enterprises, Inc., a Trustee of Henry Ford Health Care System and President
of the Hobe Sound, Florida Community Chest.

WARNER S. FLETCHER, Attorney and Director of the law firm of Fletcher,
Tilton & Whipple, P.C., Worcester, Massachusetts, has been a Director of the
Company since 1987. Mr. Fletcher is an Advisory Director of Bank of Boston,
Worcester. He is also Chairman of The Stoddard Charitable Trust, a Trustee of
The Fletcher Foundation, the George I. Alden Trust, Worcester Polytechnic
Institute, Worcester Foundation for Experimental Biology, Bancroft School and
the Worcester Art Museum.

ROBERT G. FOSTER, President, Chief Executive Officer and Chairman of the
Board of Commonwealth BioVentures, Inc., Portland, Maine (a venture capital
company engaged in biotechnology) since 1987. Director of the Company since
1989. Term expires in 2000. He is also a Director of United Timber Corp.,
Meridian Medical Technologies, Phytera, the Small Enterprise Growth Fund for the
State of Maine, Intellicare American and Epic Pharmaceuticals.

RUSSELL E. FULLER, Chairman of REFCO, Inc., (a supplier of specialty
industrial products), has been a Director of the Company since 1988. Mr. Fuller
is Chairman and Treasurer of The George F. and Sybil H. Fuller Foundation and a
Trustee of The Medical Center of Central Massachusetts. He is also Trustee of
the Massachusetts Biotechnology Research Institute and the Worcester County
Horticultural Society.

CHARLES W. GRIGG, Chairman and Chief Executive Officer of SPS Technologies,
Inc. (a manufacturer of high technology products in the field of fastening,
precision components and materials handling), was elected a Director in 1996.
Prior to joining SPS Technologies in 1993, Mr. Grigg spent ten years at Watts
Industries, Inc. (a Massachusetts manufacturer of valves for industrial
applications), the last nine of which as President and Chief Operating Officer.

M HOWARD JACOBSON, Senior Advisor, Bankers Trust, New York, has been a
Director of the Company since 1993. Term expires in 1999. Mr. Jacobson was for
many years President and Treasurer and a Director of Idle Wild Foods, Inc. until
that company was sold in 1986. Mr. Jacobson is a Director of Allmerica Financial
Corporation, Stonyfield Farm, Inc. and Boston Chicken, Inc. He is Chairman of
the Overseers of WGBH Public Broadcasting, the Massachusetts Biotechnology
Research Institute, a Trustee of the Worcester Foundation for Biomedical
Research, a Trustee of the Worcester Polytechnic Institute, Umass Memorial
Healthcare and a member of the Harvard University Overseers' Committee on
University Resources. He is also a member of the Commonwealth of Massachusetts
Board of Higher Education.

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17

JUDITH S. KING, Trustee and Treasurer of The Stoddard Charitable Trust, has
been a Director of the Company since 1990.

ROBERT L. LEIBENSPERGER, Executive Vice President, Chief Operating Officer
and President -- Bearings of The Timken Company, Canton, Ohio (a manufacturer of
precision bearings.) Mr. Leibensperger joined the Company's Board of Directors
in January 1998. Mr. Leibensperger has been employed by The Timken Company since
1960, where he held various research, engineering, sales and marketing, and
executive positions. Mr. Leibensperger is a member of the American Bearing
Manufacturers Association Executive Committee, the Council on Competitiveness
Global R&D Committee, the Stark County (Ohio) Capital Campaigns Committee, the
Cultural Center for the Arts (Canton, Ohio) House & Grounds Committee and the
Goodwill Industries (Canton, Ohio) Transportation Services Committee.

ANDREW E. LIETZ, President and Chief Executive Officer and Director of
HADCO Corporation, Salem, New Hampshire. (Manufacturer of electronic
interconnect products.) Mr. Lietz joined the Company's Board of Directors in
January 1998. Mr. Lietz has held various executive positions with HADCO
Corporation since 1984. He is director of EnergyNorth, Inc., Business and
Industry Association and National Electronics Manufacturing Initiative, as well
as a member of the advisory Board of New Hampshire Whittemore School of Business
and the Executive Committee of New Hampshire Industrial Research Center.

H. JOHN RILEY, JR., Chairman and Chief Executive Officer of Cooper, has
been a Director of the Company since 1994. Mr. Riley has served in a series of
executive positions at Cooper since 1982. He was named President and Chief
Operating Officer of Cooper in 1992, Chief Executive Officer in 1995 and
Chairman in 1996. He is a Director and Chairman of Central Houston, Inc., a
Director of Junior Achievement, Inc. and Junior Achievement of Southeast Texas,
The Houston Symphony, The Houston Forum, The Greater Houston Partnership, and
the Business Committee for the Arts. He also is a member of the Business Round
Table and a Trustee of the Museum of Fine Arts in Houston, and the
Manufacturers' Alliance for Productivity and Innovation.

DAVID A. WHITE, JR., Senior Vice President of Strategic Planning for
Cooper, was elected a Director in 1996. Since joining Cooper as a Planning
Analyst in 1971, Mr. White has served in various planning and finance
capacities. In 1980, he was named Vice President and General Manager of the
Cooper Power Tools Division and in 1988 he became Vice President, Corporate
Planning and Development. He assumed his present position in 1996. Mr. White
serves as Vice Chairman of the Strategic Planning and Development Council of the
Manufacturers' Alliance for Productivity and Innovation.

ITEM 2. PROPERTIES

The response to ITEM 2. PROPERTIES incorporates by reference the paragraphs
captioned "Facilities" included in ITEM 1. BUSINESS.

ITEM 3. LEGAL PROCEEDINGS

The response to ITEM 3. LEGAL PROCEEDINGS incorporates by reference the
paragraphs captioned "Environmental Regulations" and "Legal Proceedings"
included in ITEM 1. BUSINESS.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended May 31, 1998.

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18

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

Wyman-Gordon Company's common stock, par value $1.00 per share, is traded
in the over-the-counter market and prices of its common stock appear daily in
the NASDAQ National Market Quotation System. The table below lists the quarterly
price range per share for the years ended May 31, 1998 and 1997. The quarterly
price range per share is based on the high and low sales prices. At May 31,
1998, there were approximately 1,741 holders of record of the Company's common
stock.

YEAR ENDED YEAR ENDED
MAY 31, 1998 MAY 31, 1997
------------- ----------------
HIGH LOW HIGH LOW
----- ---- ----- ----

First quarter............................................... $28 1/4 $23 3/8 $21 1/4 $15 3/8
Second quarter.............................................. 30 20 3/8 24 3/8 19 5/8
Third quarter............................................... 22 1/8 16 1/2 23 3/8 17 7/8
Fourth quarter.............................................. 23 1/8 19 3/4 23 11/16 18 1/8

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected financial data and other operating
information of Wyman-Gordon Company. The selected financial data in the table
are derived from the consolidated financial statements of Wyman-Gordon Company.
The data should be read in conjunction with the consolidated financial
statements, related notes, other financial information and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included herein.

YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1998 1997 1996 1995 1994(1) 1993(2)
---------- -------- -------- -------- -------- --------
(UNAUDITED)
(000'S OMITTED, EXCEPT PER-SHARE AMOUNTS)

STATEMENT OF OPERATIONS DATA(3):
Revenues......................... $ 752,913 $608,742 $499,624 $396,639 $224,694 $239,761
Gross profit..................... 115,646 97,634 78,132 49,388 6,878 20,673
Other charges (credits)(4)....... (4,900) 23,083 2,717 (710) 35,003 2,453
Income (loss) from operations.... 68,892 30,322 37,699 13,718 (63,657) (8,428)
Net income (loss)(5)............. 33,890 50,023 25,234 1,039 (72,403) (60,004)
BASIC PER SHARE DATA:
Income (loss) per share before
extraordinary item and
cumulative effect changes in
accounting principles.......... $ 1.07 $ 1.40 $ 0.72 $ 0.03 $ (4.09) $ (0.95)
Net income (loss) per share(5)... .93 1.40 0.72 0.03 (4.09) (3.35)
Dividends paid per share......... -- -- -- -- -- --
DILUTED PER SHARE DATA:
Income (loss) per share before
extraordinary item and
cumulative effect changes in
accounting principles.......... $ 1.05 $ 1.35 $ 0.70 $ 0.03 $ (4.02) $ (0.95)
Net income (loss) per share(5)... .91 1.35 0.70 0.03 (4.02) (3.34)
Dividends paid per share......... -- -- -- -- -- --
Shares used to compute income
(loss) per share:
Basic.......................... 36,331 35,825 35,243 34,813 17,700 17,936
Diluted........................ 37,357 37,027 36,241 35,148 17,992 17,965

17
19

BALANCE SHEET DATA (AT END OF
PERIOD)(3):
Working capital.................. $ 223,764 $166,205 $116,534 $ 93,062 $ 91,688 $ 90,685
Total assets..................... 551,610 454,371 375,890 369,064 394,747 286,634
Long-term debt................... 162,573 96,154 90,231 90,308 90,385 90,461
Stockholders' equity............. 204,820 164,398 109,943 80,855 72,483 88,349
OTHER DATA:
Order backlog (at end of
period)........................ $1,030,092 $895,825 $598,438 $468,721 $389,407 $256,259

- ---------------
(1) 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 the
Saturday nearest to May 31. For financial reporting purposes, the year end
is stated as May 31. The Statement of Operations Data for the year ended May
31, 1994 is unaudited.

The following table sets forth Summary Consolidated Statement of Operations
Data, which has been derived from the Company's audited financial
statements, for the five months ended May 31, 1994 (000's omitted, except
per-share amounts):

Revenue................................................... $ 86,976
Gross profit.............................................. (4,931)
Other charges (credits) and environmental charges......... 32,550
Income (loss) from operations............................. (55,805)
Net income (loss)......................................... (61,370)
Per share data:
Net income (loss) per share............................. $ (3.32)
Dividends paid per share................................ --

(2) Including Cameron's financial results for the year ended December 31, 1993,
the Company's pro forma unaudited revenues, loss before the cumulative
effect of changes in accounting principles and net loss would have been
$389,300,000, $(39,300,000) and $(82,300,000), respectively.

(3) On May 26, 1994, the Company acquired Cameron Forged Products Company
("Cameron") from Cooper Industries, Inc. The Selected Consolidated Financial
Data include the accounts of Cameron from the date of the acquisition.
Cameron's operating results from May 26, 1994 to May 31, 1994 are not
material to the consolidated statement of operations for the year ended May
31, 1994.

On April 9, 1998, the Company acquired International Extruded Products, LLC
("IXP"). The Selected Consolidated Financial Data include the accounts of
IXP from the date of acquisition. IXP's operating results from April 9, 1998
to May 31, 1998 are not material to the consolidated statement of operations
for the year ended May 31, 1998.

(4) In November 1993, the Company sold substantially all of the net assets and
business operations of Wyman-Gordon Composites, Inc. and recorded a non-cash
charge on the sale of $2,500,000.

In May 1994, the Company recorded charges of $6,500,000 related to the
closing of a castings facility, $24,100,000 related to restructuring and
integration of Cameron and $2,000,000 for environmental investigation and
remediation costs.

During the year ended May 31, 1996, the Company provided $1,900,000 in order
to recognize its 25.0% share of the net losses of its Australian joint
venture and to reduce the carrying value of such joint venture.
Additionally, the Company provided $800,000 to reduce the carrying value of
the cash surrender value of certain company-owned life insurance policies.

18
20

During the year ended May 31, 1997, the Company recorded other charges of
$23,100,000, which included $4,600,000 to provide for the costs of workforce
reductions at the Company's Grafton, Massachusetts, Forging facility,
$3,400,000 to the write-off and disposal of certain forging equipment,
$2,300,000 to reduce the carrying value and dispose of certain assets of the
Company's titanium castings operations, $1,200,000 to consolidate the
titanium castings operations, $2,500,000 to reduce the carrying value of the
Australian joint venture, $5,700,000 to reduce the carrying value of the
cash surrender value of certain Company-owned life insurance policies,
$1,900,000 to reduce the carrying value of a building held for sale and
$250,000 to reduce the carrying value of other assets. Other charges
(credits) in the year ended May 31, 1997 also included a charge of
$1,200,000, net of insurance recovery of $6,900,000, related to the accident
at the Houston, Texas, facility of Wyman-Gordon Forgings, Inc. in December
1996.

Other charges (credits) in the year ended May 31, 1998 includes a credit of
$4,000,000 for the recovery of cash surrender value of certain company-owned
life insurance policies, a credit of $1,900,000 resulting from the disposal
of a building held for sale and a charge of $1,000,000 to provide for costs
as a result of the six-month shutdown of the 29,000-ton press at the
Company's Houston, Texas, forging facility.

(5) Includes a charge of $43,000,000, or $2.39 per share, in fiscal year 1993
relating to the Company's adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" ("SFAS 106") and SFAS 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 106 requires postretirement
benefit obligations to be accounted for on an accrual basis rather than the
"expense as incurred" basis formerly used. The Company elected to recognize
the cumulative effect of these accounting changes in the year ended December
31, 1993.

In the year ended May 31, 1997, net tax benefits of $25,680,000 were
recognized, including a refund of prior years' income taxes amounting to
$19,680,000, plus interest of $3,484,000, and $6,500,000 related to the
expected realization of NOLs in future years and $10,250,000 related to
current NOLs benefit offsetting $10,750,000 of current income tax expense.
The refund relates to the carryback of tax net operating losses to tax years
1981, 1984 and 1986 under the applicable provisions of Internal Revenue Code
Section 172(f).

In the year ended May 31, 1998, the Company provided $16,355,000 for income
taxes, net of a tax benefit of approximately $1,800,000 relating to the
utilization of NOL carryforwards. In addition, the Company has recorded a
$2,920,000 tax benefit against the extraordinary loss of $8,112,000
associated with the early extinguishment of the Company's 10 3/4% Senior
Notes.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

YEAR ENDED MAY 31, 1998 ("FISCAL YEAR 1998") COMPARED TO YEAR ENDED MAY 31,
1997
("FISCAL YEAR 1997")

The Company's revenue increased 23.7% to $752.9 million in fiscal year 1998
from $608.7 million in fiscal year 1997 as a result of higher sales volume and
higher sales prices at the Company's Forgings and Castings Divisions. These
revenue increases during fiscal year 1998 as compared to fiscal year 1997 are
reflected by market as follows: a $132.7 million (27.9%) increase in aerospace,
a $17.1 million (17.6%) increase in energy and a $5.6 million (15.4%) decrease
in other. The reasons for the strength in the aerospace market were higher
airplane and engine build rates and higher demands for spares by aerospace
engine prime contractors. Although there were higher shipments to aerospace
customers during fiscal year 1998, the shipments to aerospace customers were
impacted by the Company's 29,000 ton press being out of service for repairs for
six months. The increase in energy revenue was a result of higher shipments of
land-based gas turbine products in fiscal year 1998 compared to fiscal year
1997. The cause of the decrease in other markets is primarily due to the decline
in the titanium golf club head business as the Company exited this business.
Revenues in fiscal year 1997 were limited by raw material shortages and
production delays caused by capacity constraints of the Company's suppliers.
Revenues in fiscal year 1998 were limited due to lower than anticipated
productivity of recent equipment and personnel additions, unanticipated repairs
of equipment and inconsistencies in raw material deliveries corresponding to
customer requirements, as noted above.

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21

The Company's backlog increased to $1,030.1 million at May 31, 1998 from
$895.8 million at May 31, 1997. This increase resulted from the following
factors:

1. Higher build rates of the Company's engine and airframe customers,

2. Higher prices for the Company's aerospace products, and

3. An increase in overdue orders to customer delivery dates as a
result of shipping delays at the Company due to equipment repairs and raw
material unavailability.

The Company does not expect that this rate of increase in backlog will
continue since it expects that customer orders will not increase at the same
rates as in the recent past, and that capacity enhancements, refurbishments and
additions installed by the Company will enable the Company to meet its customer
demands in a more timely fashion. Of the Company's total current backlog, $716.8
million is shippable in the next twelve months. Because of the additional
production capacity, generated from equipment enhancements, refurbishments and
additions, the Company believes that it will be able to fulfill those
twelve-month requirements.

The Company's gross margins were 15.4% in fiscal year 1998 as compared to
16.0% in fiscal year 1997. Gross margin in fiscal year 1998 was negatively
affected by the impact of the Company's 29,000 ton press being taken out of
service for repairs for six months. During the six month period the press was
out of service, the work scheduled on the 29,000 ton press was performed on
alternative presses at a significant cost. The Company has estimated that gross
margin in fiscal year 1998 was negatively impacted by approximately 2.3% as a
result of underabsorption, inefficiencies and other items, all of which include
extra labor, higher overtime, tooling modifications and higher scrap and rework
costs. In addition, gross margin in fiscal year 1998 was negatively affected by
other production inefficiency costs related to equipment downtime in the
Company's Forgings operations, personnel additions and the reinstallation and
start-up of two major forge presses. The Company expects that the addition of
these presses and recent repair and enhancement of the Company's 29,000 ton
press in Houston will improve the Company's ability to meet its customer
requirements. Gross margin in fiscal year 1997 was negatively affected by higher
raw material costs which could not be passed on to customers as a result of the
then-existing long-term agreements with customers and by price and demand
declines within the titanium golf club head business.

There was no LIFO charge (credit) impacting gross margins in fiscal year
1998. In fiscal year 1997, gross margin was negatively impacted by a LIFO charge
of $1.6 million.

Selling, general and administrative expenses increased 16.8% to $51.7
million during fiscal year 1998 from $44.2 million during fiscal year 1997.
Selling, general and administrative expenses as a percentage of revenues
improved to 6.9% in fiscal year 1998 from 7.3% in fiscal year 1997. The
improvement as a percent of revenues was primarily the result of higher
revenues. Although selling, general and administrative expense in fiscal year
1998 improved, it includes higher costs associated with relocating employees,
development costs associated with the Company's composite operations and $2.0
million higher compensation expense, as compared to fiscal year 1997, associated
with the Company's performance share program.

During fiscal year 1998, the Company recorded net other credits of $4.9 million.
Such other credits include $1.9 million resulting from the disposal of a
building held for sale and $4.0 million for the recovery of cash surrender value
of certain Company-owned life insurance policies offset by other charges of $1.0
million to provide for costs as a result of the shutdown of the 29,000 ton press
at the Company's Houston, Texas, forging facility.

During fiscal year 1997, the Company recorded other charges of $23.1
million. Such other charges included $4.6 million to provide for the costs of
workforce reductions at the Company's Grafton, Massachusetts, facility, $3.4
million to write off and disposal of certain forging equipment, $2.3 million to
reduce the carrying value and dispose of certain assets of the Company's
titanium castings operations, $1.2 million to consolidate the titanium castings
operations, $2.5 million to recognize the Company's 25.0% share of the net
losses of its Australian joint venture and to reduce the carrying value of such
joint venture, $0.3 million relating to expenditures for an investment in
another joint venture, $5.7 million to reduce the carrying value of

20
22

the cash surrender value of certain Company-owned life insurance policies and
$1.2 million of costs, net of insurance recovery of $6.9 million, related to the
Houston accident and $1.9 million to reduce the carrying value of the Jackson,
Michigan, facility being held for sale.

As of May 31, 1997, the Company had fully written off its investment in the
Australian joint venture. However, in the future, the Company may make
additional capital contributions to the Australian joint venture to satisfy its
cash or other requirements and may be required to recognize its share of any
additional losses or may write off such additional capital contributions. There
were no contributions made to the joint venture in fiscal year 1998.

Interest expense increased $1.7 million to $12.5 million in fiscal year
1998 compared to $10.8 million in fiscal year 1997. The increase results
primarily from an issuance of $150.0 million of 8% Senior Notes offset by
repayment of $84.7 million of 10 3/4% Senior Notes.

Miscellaneous, net was an expense of $0.9 million in fiscal year 1998 as
compared to income of $4.8 million in fiscal year 1997. Miscellaneous, net in
fiscal year 1998, included a $0.7 million loss on the sale of fixed assets.
Miscellaneous, net in fiscal year 1997 included interest income on a refund of
prior years' income taxes amounting to $3.5 million and a $2.0 million gain on
the sale of fixed assets.

The Company provided $16.4 million for income taxes, net of a tax benefit
of approximately $1.8 million relating to the utilization of NOL carryforwards.
In addition, the Company has recorded a $2.9 million tax benefit against the
extraordinary loss of $8.1 million associated with the early extinguishment of
the Company's 10 3/4% Senior Notes.

Net tax benefits of $25.7 million were recognized in fiscal year 1997,
including a refund of prior years' income taxes amounting to $19.7 million and
$6.5 million related to the expected realization of NOLs in the future years and
$10.3 million related to current NOLs benefit offsetting $10.8 million of
current income tax expense. The refund related to the carryback of tax net
operating losses to tax years 1981, 1984 and 1986 under applicable provisions of
Internal Revenue Code Section 172(f).

In fiscal year 1998, net income before extraordinary item was $39.1
million, or $1.05 per share (diluted), and net income, including extraordinary
item, was $33.9 million, or $.93 per share (diluted). In fiscal year 1998, the
Company recorded an extraordinary charge of $5.2 million, or $.14 per share
(diluted), net of tax, in connection with the extinguishment of $84.7 million of
its 10 3/4% Senior Notes. In fiscal year 1997, the Company reported net income
of $50.0 million, or $1.40 per share (diluted). The decrease resulted from the
items described above.

YEAR ENDED MAY 31, 1997 ("FISCAL YEAR 1997") COMPARED TO YEAR ENDED MAY 31,
1996 ("FISCAL YEAR 1996")

The Company's revenue increased 21.8% to $608.7 million in fiscal year 1997
from $499.6 million in fiscal year 1996 as a result of higher sales volume at
the Company's Forgings and Castings Divisions. These sales volume increases
during fiscal year 1997 as compared to fiscal year 1996 are reflected by market
as follows: a $112.4 million (31.0%) increase in aerospace, a $4.1 million
(4.4%) increase in energy and a $7.4 million (16.9%) decrease in other. The
reasons for the strength in the aerospace market were higher airplane and engine
build rates and higher demands for spares by aerospace engine prime contractors.
Although there were higher extruded pipe shipments to energy customers for
fiscal 1997, the shipments to energy customers were impacted by the 10 week
shutdown of the 35,000 ton vertical extrusion press in Houston due to the
industrial accident at the Houston, Texas, facility of Wyman-Gordon Forgings,
Inc. The cause of the decrease in other markets is primarily due to the decline
in the titanium head golf club business because of oversupply, cost
disadvantages and decreased demand. Revenues in fiscal year 1996 and, to a
lesser extent, in fiscal year 1997 were limited by raw material shortages and
production delays caused by capacity constraints of the Company's suppliers. The
Company believes that the increase in order activity reflects a continued
increase in spares demand and new business resulting from increasing production
rates on commercial aircraft by commercial airframe primes.

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23

The Company's backlog increased to $895.8 million at May 31, 1997 from
$598.4 million at May 31, 1996. This increase resulted from the following
factors:

1. Higher build rates of the Company's engine and airframe customers,

2. Higher prices for the Company's aerospace products, particularly
as reflected in the new long-term agreements ("LTAs") which went into
effect on January 1, 1997, and

3. An increase in overdue orders to customer delivery dates as a
result of shipping delays at the Company due to capacity constraints and
raw material unavailability.

The Company does not expect that this rate of increase in backlog will
continue since it expects that customer orders will not increase at the same
rates as in the recent past, that prices will moderate and that capacity
additions installed by the Company and its suppliers will enable the Company to
meet its customer demands in a more timely fashion. Of the Company's total
current backlog, $671.6 million is shippable in the next twelve months. Because
of the additional production capacity that the Company and its suppliers are
installing, the Company believes that it will be able to fulfill those
twelve-month requirements.

The Company's gross margins were 16.0% in fiscal year 1997 as compared to
15.6% in fiscal year 1996. The improvement in gross margins resulted from higher
production volumes, continued emphasis on cost reductions, productivity gains
resulting from the Company's continuing 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 and continuing realization of cost reductions
from synergies associated with the integration of Cameron in fiscal year 1996
and fiscal year 1997. The Company believes that the improvements in gross margin
would have been greater except that the Company incurred higher raw material
costs which could not be passed on to customers as a result of the then-existing
LTAs with its customers. Beginning in the second half of fiscal year 1996,
higher demand required the Company to purchase certain raw materials under terms
not covered by LTAs with its vendors. The current rebound in demand for many of
these raw materials, especially nickel and titanium, resulted in significant
market price increases which negatively affected the Company's gross margins.
The Company began to see pricing relief for its products in early calendar 1997,
when certain LTAs that the Company negotiated with its customers went into
effect, allowing the Company to pass some raw material price increases on to its
customers.

Gross margins in fiscal year 1997 were also negatively impacted by price
and demand declines within the titanium golf club head business because of
oversupply, cost disadvantages and decreased demand.

Gross margin was negatively impacted by a LIFO charge of $1.6 million in
fiscal year 1997 as compared to a favorable impact by a LIFO credit of $4.9
million in fiscal year 1996.

Selling, general and administrative expenses increased 17.3% to $44.2
million during fiscal year 1997 from $37.7 million during fiscal year 1996.
Selling, general and administrative expenses as a percentage of revenues
improved to 7.3% in fiscal year 1997 from 7.6% in fiscal year 1996. The
improvement as a percent of revenues is the result of higher revenues.

During fiscal year 1997, the Company recorded other charges of $23.1
million. Such other charges include $4.6 million to provide for the costs of
workforce reductions at the Company's Grafton, Massachusetts, Forging facility,
$3.4 million to write off and dispose of certain Forging equipment, $2.3 million
to reduce the carrying value and dispose of certain assets of the Company's
titanium castings operations, $1.2 million to consolidate the titanium castings
operations, $2.5 million to recognize the Company's 25.0% share of the net
losses of its Australian joint venture and to reduce the carrying value of such
joint venture, $0.3 million relating to expenditures for an investment in
another joint venture, $5.7 million to reduce the carrying value of the cash
surrender value of certain Company-owned life insurance policies, $1.2 million
of costs, net of insurance recovery of $6.9 million, related to the Houston
accident and $1.9 million to reduce the carrying value of the Jackson, Michigan,
facility being held for sale.

venture to satisfy its cash or other requirements and may be required to
recognize its share of any additional losses or may write off such additional
capital contributions.

During fiscal year 1996, the Company provided $1.9 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 fiscal year
1996 and to provide for expenditures for an investment in an additional joint
venture. Additionally, other charges (credits) includes a charge of $0.8 million
in fiscal year 1996 to reduce the carrying value of the cash surrender value of
certain Company-owned life insurance policies.

Interest expense was $10.8 million in fiscal year 1997 and $11.3 million in
fiscal year 1996. The decrease results from lower borrowings outstanding under
the Company's U.K. Credit Agreement.

Miscellaneous, net was income of $4.8 million in fiscal year 1997 as
compared to an expense of $1.2 million in fiscal year 1996. Miscellaneous, net
in fiscal year 1997 includes interest income on the refund of prior years'
income taxes amounting to $3.5 million and a $2.0 million gain on the sale of
fixed assets. Miscellaneous, net in fiscal year 1996 includes a $0.3 million
gain on the sale of marketable securities.

Net tax benefits of $25.7 million were recognized in fiscal year 1997
including a refund of prior years' income taxes amounting to $19.7 million and
$6.5 million related to the expected realization of NOLs in the future years and
$10.3 million related to current NOLs benefit offsetting $10.8 million of
current income tax expense. The refund relates to the carryback of tax net
operating losses to tax years 1981, 1984 and 1986 under applicable provisions of
Internal Revenue Code Section 172(f). There was no provision or benefit recorded
for income taxes in fiscal year 1996.

The Company expects that in the year ended May 31, 1998, income tax
provisions will approximate statutory rates subject to utilization of state
NOLs.

Net income was $50.0 million, or $1.36 per share, in fiscal year 1997 and
$25.2 million, or $.70 per share in fiscal year 1996. The $24.8 million
improvement results from the items described above.

LIQUIDITY AND CAPITAL RESOURCES

The increase in the Company's cash of $12.6 million to $64.6 million at May
31, 1998 from $52.0 million at May 31, 1997 resulted primarily from net
borrowings from debt of $55.5 million, cash provided by operating activities of
$14.4 million, issuance of common stock of $12.4 million in connection with
employee compensation and benefit plans and $0.7 million of proceeds from the
sale of fixed assets, offset by capital expenditures of $48.0 million,
acquisition of IXP of $15.5 million, $4.6 million repurchase of common stock and
$2.3 million payment to Cooper Industries, Inc. ("Cooper"). The $2.3 million
payment to Cooper was made in accordance with the Company's $4.6 million
promissory note payable to Cooper under the terms of the Stock Purchase
Agreement with Cooper related to the acquisition of Cameron Forged Products
Company in May 1994. The remaining $2.3 million was paid on June 30, 1998.

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25

The increase in the Company's working capital of $57.6 million to $223.8
million at May 31, 1998 from $166.2 million at May 31, 1997 resulted primarily
from (in millions):

Net income.................................................. $ 33.9
Decrease in:
Long-term restructuring, integration disposal and
environmental.......................................... (0.8)
Long-term benefit liabilities............................. (2.5)
Deferred taxes and other.................................. (1.8)
Other changes in stockholders' equity..................... (1.3)
Increase in:
Intangible and other assets............................... (2.3)
Long-term debt............................................ 66.4
Property, plant and equipment, net........................ (43.6)
Pension liability......................................... 1.8
Issuance of common stock.................................. 7.8
------
Increase in working capital.......................... $ 57.6
======

Earnings before interest, taxes, depreciation, amortization, other charges
(credits) and extraordinary item ("EBITDA") increased $7.5 million to $86.6
million in fiscal year 1998 from $79.1 million in fiscal year 1997. The EBITDA
increases reflect higher profitability.

EBITDA should not be considered a substitute for net income as an indicator
of operating performance or as an alternative to cash flow as a measure of
liquidity, in each case determined in accordance with generally accepted
accounting principles. Investors should be aware that EBITDA as shown above may
not be comparable to similarly titled measures presented by other companies, and
comparisons could be misleading unless all companies and analysts calculate this
measure in the same fashion.

As of May 31, 1998, the Company estimated the remaining cash requirements
for the 1997 restructuring to be $3.7 million. Of such amount, the Company
expects to spend approximately $2.5 million during fiscal year 1999 and $1.2
million thereafter.

As of May 31, 1998, the Company estimated the remaining cash requirements
for the integration of Cameron and direct costs associated with the acquisition
of Cameron to be $1.5 million, of which the Company expects to spend
approximately $0.6 million during fiscal year 1999 and $0.9 million thereafter.

The Company spent $0.6 million in fiscal year 1998 for non-capitalizable
environmental projects and has a reserve with respect to environmental matters,
the balance of which is $16.5 million, of which it expects to spend $2.0 million
in fiscal year 1999 and the remainder in future periods on non-capitalizable
environmental activities.

The Company from time to time expends cash on capital expenditures for more
cost-effective operations, environmental projects and joint development programs
with customers. In fiscal year 1998, capital expenditures amounted to $48.0
million and are expected to be approximately $40.0 to $45.0 million in fiscal
year 1999.

On December 15, 1997, the Company issued $150.0 million of 8% Senior Notes
due 2007 under an indenture between the Company and a bank as trustee. The 8%
Senior Notes were issued at a price of 99.323% of face value and pay interest
semi-annually in arrears on June 15 and December 15 of each year, commencing
June 15, 1998. The 8% Senior Notes are general unsecured obligations of the
Company, are non-callable for a five-year period and are senior to any future
subordinated indebtedness of the Company. The Company used approximately $90.7
million of the net proceeds from the sale of the 8% Senior Notes to repurchase
$84.7 million (94%) of its outstanding 10 3/4% Senior Notes due 2003.

The Company's revolving receivables-backed credit facility (the
"Receivables Financing Program") provides the Company with an aggregate maximum
borrowing capacity of $65.0 million (subject to a

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26

borrowing base), with a letter of credit sub-limit of $35.0 million. The term of
the Receivables Financing Program is five years with a renewal option. As of May
31, 1998, the total availability under the Receivables Financing Program was
$65.0 million, there were no borrowings and letters of credit amounting to $8.4
million were outstanding.

Wyman-Gordon Limited, the Company's subsidiary located in Livingston,
Scotland, entered into a credit agreement ("the U.K. Credit Agreement") with
Clydesdale Bank PLC ("Clydesdale") effective June 27, 1997. The maximum
borrowing capacity under the U.K. Credit Agreement is #2,000,000 (approximately
$3,200,000) with separate letter of credit and guarantee limits of #1,000,000
(approximately $1,600,000) each. Borrowings bear interest at 1% over
Clydesdale's base rate. In the event that borrowings by way of overdraft are
allowed to exceed the agreed limit, interest on the excess borrowings will be
charged at the rate of 1.5% per annum over Clydesdale's base rate. The U.K.
Credit Agreement is secured by all present and future assets of Wyman-Gordon
Limited (including without limitation, accounts receivable, inventory, property,
plant and equipment, intellectual property, intercompany loans, and other real
and personal property). The U.K. Credit Agreement contains covenants
representations and warranties customary for such facilities. There were no
borrowings outstanding at May 31, 1998 or May 31, 1997. At May 31, 1998, and May
31, 1997, Wyman-Gordon Limited had outstanding #975,000 (approximately
$1,590,000), and #935,000 (approximately $1,534,000) respectively, of letters of
credit or guarantees under the U.K. Credit Agreement.

The primary sources of liquidity available to the Company to fund
operations and other future expenditures include available cash ($64.6 million
at May 31, 1998), 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. The Company believes that it has adequate resources to
provide for its operations and the funding of restructuring, integration,
capital and environmental expenditures.

IMPACT OF INFLATION

The Company's earnings may be affected by changes in price levels and in
particular, changes in the price of basic metals. The Company's contracts
generally provide for fixed prices for finished products with limited protection
against cost increases. The Company would therefore be affected by changes in
prices of the raw materials during the term of any such contract. The Company
attempts to minimize this risk by entering into fixed price arrangements with
raw material suppliers and, where possible, negotiating price escalators into
its customer contracts to offset a portion of raw material cost increases.

ACCOUNTING AND TAX MATTERS

Effective February 28, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128
replaces the previously reported primary and fully diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented and, where necessary, restated to
conform to the SFAS 128 requirements.

In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS 130"). The implementation of SFAS
130 will require that the components of comprehensive income be reported in the
financial statements. Implementation of this new Standard is required for the
year ending May 31, 1999 ("Fiscal Year 1999").

In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). The implementation of SFAS 131 will require the disclosure of
segment information utilizing the approach that the Company uses to manage its
internal organization. Implementation of this Standard is required for the year
ending May 31, 1999.

25
27

In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers' Disclosures about Pensions and Other Post Retirement
Benefits" ("SFAS 132"). SFAS 132 standardizes disclosure requirements of
Statement Nos. 87, "Employers' Accounting for Pensions", and 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". Implementation of
this Standard is required for the year ending May 31, 1999.

YEAR 2000

The Year 2000 computer issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the computer programs in the Company's computer systems and plant equipment
systems that have time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculation causing disruptions of operations, including, among other things,
a temporary inability to process transactions, send invoices or engage in
similar normal business activities.

The Company's overall Year 2000 project approach and status is as follows:

STAGE OF ESTIMATED TIMETABLE
DESCRIPTION OF APPROACH: COMPLETION: FOR COMPLETION:
- ------------------------ ----------- -------------------

Computer Systems:
Assess systems for possible Year 2000 impact.............. 100% Completed
Modify or replace non-compliant systems................... 40% May 31,1999
Test systems with system clocks set at current date....... 40% May 31,1999
Test systems off-line with system clocks set at various
Year 2000 related critical dates....................... 10% May 31,1999
Plant Equipment:
Computer-dependent plant equipment assessment and
compliance procedures performed........................ 10% May 31,1999

The Company has completed a comprehensive inventory of substantially all
computer systems and programs. All hardware required for stand alone testing of
systems has been installed in order to perform off-line testing for Year 2000
program compliance. The Company has identified all software supplied by outside
vendors that are not Year 2000 compliant. With respect to approximately 90% such
non-compliant software the Company has acquired the most recent release and is
currently testing such versions for Year 2000 compliance. All software developed
in-house has been reviewed and necessary modifications have been completed and
are in the final stages of testing.

In addition to assessing the Company's Year 2000 readiness, the Company has
contacted and sent questionnaires regarding Year 2000 readiness to most of its
suppliers. Over 70% have responded thus far. Of this amount, the majority of the
Company's top suppliers have responded and believe they will be Year 2000
compliant prior to December 31, 1999. On-site audits of our key suppliers are
currently being coordinated in order to assess their Year 2000 system readiness.

The Company is using both internal and external resources to reprogram, or
replace, and test software for Year 2000 modifications. The Year 2000 project is
40% complete and the Company anticipates completing the project by mid-1999.
Maintenance or modification costs will be expensed as incurred, while the costs
of new information technology will be capitalized and amortized in accordance
with Company policy. The Company is uncertain of the cost of making its
computer-dependent plant-equipment Year 2000 compliant due to the early stages
of this part of the Year 2000 computer project. The estimated cost of the Year
2000 computer project, including software modifications, consultants,
replacement costs for non-compliant systems and internal personnel costs, based
on presently available information, is not material to the financial operations
of the Company and is estimated at approximately $0.8 million. However, if such
modifications and conversions are not made, or are not completed in time, the
Year 2000 computer issue could have a material impact on the operations of the
Company.

26
28

The Company is currently making Year 2000 contingency plans. The Company
has multiple business systems at different locations. In case of the failure of
a system at one location, the Company's contingency plan is to evaluate the use
of an alternate compliant business system at another location. The Company will
continue to assess possible contingency plan solutions.

The forecast costs and the date on which the Company believes it will
complete its Year 2000 computer modifications are based on its best estimates,
which, in turn, were based on numerous assumptions of future events, including
third-party modification plans, continued availability of resources and other
factors. The Company cannot be sure that these estimates will be achieved and
actual results could differ materially from those anticipated.

OTHER MATTERS

On December 22, 1996, a serious industrial accident occurred at the
Houston, Texas, facility of WGFI. For details of the accident, refer to "Legal
Proceedings" within this Form 10-K.

"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). The words
"believe," "expect," "anticipate," "intend," "estimate," "assume" and other
similar expressions which are predictions of or indicate future events and
trends and which do not relate to historical matters identify forward-looking
statements. In addition, information concerning raw material prices and
availability, customer orders and pricing, and industry cyclicality and their
impact on gross margins and business trends, as well as liquidity and sales
volume are forward-looking statements. Reliance should not be placed on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which are in some cases beyond the control of
the Company and may cause the actual results, performance or achievements of the
Company to differ materially from anticipated future results, performance or
achievements expressed or implied by such forward-looking statements.

Certain factors that might cause such differences include, but are not
limited to, the following: The Company's ability to successfully negotiate
long-term contracts with customers and raw materials suppliers at favorable
prices and other terms acceptable to the Company, the Company's ability to
obtain required raw materials and to supply its customers on a timely basis and
the cyclicality of the aerospace industry.

For further discussion identifying important factors that could cause
actual results to differ materially from those anticipated in forward-looking
statements, see "Business -- The Company," "Customers," "Marketing and Sales,"
"Backlog," "Raw Materials," "Energy Usage," "Employees," "Competition,"
"Environmental Regulations," "Product Liability Exposure" and "Legal
Proceedings".

27
29

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

To the Stockholders of Wyman-Gordon Company:

We have prepared the financial statements included herein and are
responsible for all information and representations contained therein. Such
financial information was prepared in accordance with generally accepted
accounting principles appropriate in the circumstances, based on our best
estimates and judgements.

Wyman-Gordon maintains accounting and internal control systems which are
designed to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and to produce records adequate for preparation of financial
information. These systems are established and monitored in accordance with
written policies which set forth management's responsibility for proper internal
accounting controls and the adequacy of these controls subject to continuing
independent review by our external auditors, Ernst & Young LLP.

To assure the effective administration of internal control, we carefully
select and train our employees, develop and disseminate written policies and
procedures and provide appropriate communication channels. We believe that it is
essential for the Company to conduct its business affairs in accordance with the
highest ethical standards.

The financial statements have been audited by Ernst & Young LLP,
Independent Auditors, in accordance with generally accepted auditing standards.
In connection with their audit, Ernst & Young LLP has developed an understanding
of our accounting and financial controls, and conducted such tests and related
procedures as it considers necessary to render their opinion on the financial
statements.

The financial data contained in these financial statements were subject to
review by the Audit Committee of the Board of Directors. The Audit Committee
meets periodically during the year with Ernst & Young LLP and with management to
review accounting, auditing, internal control and financial reporting matters.

We believe that our policies and procedures provide reasonable assurance
that operations are conducted in conformity with applicable laws and with our
commitment to a high standard of business conduct.

David P. Gruber Signature
David P. Gruber
Chairman and Chief Executive Officer

Edward J. Davis Signature
Edward J. Davis
Vice President, Chief Financial
Officer and
Treasurer

28
30

WYMAN-GORDON COMPANY

REPORT OF INDEPENDENT AUDITORS

To the Stockholders of Wyman-Gordon Company:

We have audited the accompanying consolidated balance sheets of
Wyman-Gordon Company and subsidiaries as of May 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended May 31, 1998. Our audits also
included the financial statement schedule of Wyman-Gordon Company listed in Item
14(a). These consolidated financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule 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.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Wyman-Gordon Company and subsidiaries at May 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

'Ernst & Young Signature

Boston, Massachusetts
June 25, 1998

29
31

WYMAN-GORDON COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
---------- ---------- ----------
(000'S OMITTED, EXCEPT PER-SHARE DATA)

Revenue.................................................... $752,913 $608,742 $499,624
-------- -------- --------
Cost of goods sold......................................... 637,267 511,108 421,492
Selling, general and administrative expenses............... 51,654 44,229 37,716
Other charges (credits).................................... (4,900) 23,083 2,717
-------- -------- --------
684,021 578,420 461,925
-------- -------- --------
Income from operations..................................... 68,892 30,322 37,699
-------- -------- --------
Other deductions (income):
Interest expense......................................... 12,548 10,822 11,272
Miscellaneous, net....................................... 907 (4,843) 1,193
-------- -------- --------
13,455 5,979 12,465
-------- -------- --------
Income before income taxes................................. 55,437 24,343 25,234
Provision (benefit) for income taxes....................... 16,355 (25,680) --
-------- -------- --------
Income before extraordinary item........................... 39,082 50,023 25,234
Extraordinary item net of income tax benefit (Note D)...... 5,192 -- --
-------- -------- --------
Net income................................................. $ 33,890 $ 50,023 $ 25,234
======== ======== ========
Basic net income per share:
Income before extraordinary item......................... $ 1.07 $ 1.40 $ .72
Extraordinary item, net of tax........................... (.14) -- --
-------- -------- --------
Net income............................................... $ .93 $ 1.40 $ .72
======== ======== ========
Diluted net income per share:
Income before extraordinary item......................... $ 1.05 $ 1.35 $ .70
Extraordinary item, net of tax........................... (.14) -- --
-------- -------- --------
Net income............................................... $ .91 $ 1.35 $ .70
======== ======== ========
Shares used to compute net income per share:
Basic.................................................... 36,331 35,825 35,243
Diluted.................................................. 37,357 37,027 36,241

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
30
32

WYMAN-GORDON COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED)

ASSETS
Cash and cash equivalents................................... $ 64,561 $ 51,971
Accounts receivable......................................... 124,658 119,159
Inventories................................................. 133,134 92,332
Prepaid expenses............................................ 6,710 7,789
Deferred income taxes....................................... -- 6,500
-------- --------
Total current assets.............................. 329,063 277,751
-------- --------
Property, plant and equipment, net.......................... 197,363 153,737
Intangible assets........................................... 19,461 19,255
Other assets................................................ 5,723 3,628
-------- --------
Total assets...................................... $551,610 $454,371
======== ========
LIABILITIES
Borrowings due within one year.............................. $ 3,017 $ 77
Accounts payable............................................ 51,590 62,092
Accrued liabilities and other............................... 50,692 49,377
-------- --------
Total current liabilities......................... 105,299 111,546
-------- --------
Restructuring, integration, disposal and environmental...... 17,314 18,172
Long-term debt.............................................. 162,573 96,154
Pension liability........................................... 2,908 1,102
Deferred income taxes and other............................. 14,066 15,861
Postretirement benefits..................................... 44,630 47,138
STOCKHOLDERS' EQUITY
Preferred stock, no par value: Authorized 5,000,000 shares;
none issued............................................... -- --
Common stock, par value $1.00 per share:
Authorized 70,000,000 shares; issued 37,052,720........... 37,053 37,053
Capital in excess of par value.............................. 28,037 27,608
Retained earnings........................................... 148,847 114,957
Equity adjustments.......................................... 1,465 2,763
Treasury stock, 543,077 and 1,001,199 shares at May 31, 1998
and 1997.................................................. (10,582) (17,983)
-------- --------
Total stockholders' equity........................ 204,820 164,398
-------- --------
Total liabilities and stockholders' equity........ $551,610 $454,371
======== ========

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
31
33

WYMAN-GORDON COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- -------- --------
(000'S OMITTED)

OPERATING ACTIVITIES:
Net income................................................. $ 33,890 $ 50,023 $ 25,234
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary loss on debt retirement.................... 5,192 -- --
Depreciation and amortization............................ 23,473 20,872 17,428
Deferred income taxes.................................... 6,500 (6,500) --
Other charges (credits).................................. -- 19,145 846
Losses on equity investment.............................. -- 2,734 1,871
Changes in assets and liabilities:
Accounts receivable...................................... (1,547) (24,430) (15,709)
Inventories.............................................. (38,219) (27,235) 12,940
Prepaid expenses and other assets........................ 727 4,754 3,118
Accrued restructuring, integration, disposal and
environmental......................................... (3,536) (3,950) (6,837)
Income and other taxes payable........................... (123) (5,241) 3,631
Accounts payable and accrued and other liabilities....... (11,931) 17,839 (7,250)
-------- -------- --------
Net cash provided by operating activities............. 14,426 48,011 35,272
-------- -------- --------
INVESTING ACTIVITIES:
Investment in acquired subsidiaries...................... (15,460) -- --
Capital expenditures..................................... (48,017) (34,123) (18,331)
Proceeds from sale of fixed assets....................... 869 559 1,718
Other, net............................................... (221) (921) (1,664)
-------- -------- --------
Net cash (used) by investing activities............... (62,829) (34,485) (18,277)
-------- -------- --------
FINANCING ACTIVITIES:
Payment to Cooper Industries, Inc........................ (2,300) -- --
Net borrowings (repayments) of debt...................... 55,463 5,923 (3,915)
Net proceeds from issuance of common stock............... 12,433 7,325 3,198
Repurchase of common stock............................... (4,603) (4,937) --
-------- -------- --------
Net cash provided (used) by financing activities...... 60,993 8,311 (717)
-------- -------- --------
Increase in cash........................................... 12,590 21,837 16,278
Cash, beginning of period.................................. 51,971 30,134 13,856
-------- -------- --------
Cash, end of period........................................ $ 64,561 $ 51,971 $ 30,134
======== ======== ========

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
32
34

WYMAN-GORDON COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

COMMON STOCK
---------------- CAPITAL IN
SHARES PAR EXCESS OF RETAINED EQUITY TREASURY
ISSUED VALUE PAR VALUE EARNINGS ADJUSTMENTS STOCK TOTALS
------ ------- ---------- -------- ----------- -------- --------
(000'S OMITTED)

Balance, May 31, 1995....... 37,053 $37,053 $40,118 $ 39,700 $ 63 $(36,079) $ 80,855
Net income................ 25,234 25,234
Stock plans............... (6,486) 8,626 2,140
Savings/Investment Plan
match.................. (341) 1,399 1,058
Pension equity
adjustment............. 1,403 1,403
Currency translation...... (747) (747)
------ ------- ------- -------- ------ -------- --------
Balance, May 31, 1996....... 37,053 37,053 33,291 64,934 719 (26,054) 109,943
Net income................ 50,023 50,023
Stock plans............... (5,838) 11,106 5,268
Stock repurchase.......... (4,937) (4,937)
Savings/Investment Plan
match.................. 155 1,902 2,057
Pension equity
adjustment............. (23) (23)
Currency translation...... 2,067 2,067
------ ------- ------- -------- ------ -------- --------
Balance, May 31, 1997....... 37,053 37,053 27,608 114,957 2,763 (17,983) 164,398
Net income................ 33,890 33,890
Stock plans............... 12 9,982 9,994
Stock repurchase.......... (4,603) (4,603)
Savings/Investment Plan
match.................. 417 2,022 2,439
Pension equity
adjustment............. (901) (901)
Currency translation...... (397) (397)
------ ------- ------- -------- ------ -------- --------
Balance, May 31, 1998....... 37,053 $37,053 $28,037 $148,847 $1,465 $(10,582) $204,820
====== ======= ======= ======== ====== ======== ========

The accompanying Notes to the Consolidated Financial Statements
are an integral part of these financial statements.
33
35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company is engaged principally in the design, engineering, production
and marketing of high-technology forged and investment cast metal and composite
components used for a wide variety of aerospace and power generation
applications.

The Company maintains its books using a 52/53 week year ending on the
Saturday nearest to May 31. For purposes of the consolidated financial
statements, the year-end is stated at May 31. The years ended May 31, 1998, 1997
and 1996 consisted of 52 weeks.

Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

Revenue Recognition: Sales and income are recognized at the time products
are shipped.

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Reclassifications: Where appropriate, prior year amounts have been
reclassified to permit comparison.

Cash and Cash Equivalents: Cash equivalents include short-term investments
with maturities of less than three months at the time of investment.

Inventories: Inventories are valued at both the lower of first-in,
first-out (FIFO) cost or market, or for certain forgings raw material and
work-in-process inventories, the last-in, first-out (LIFO) method. On certain
orders, usually involving lengthy raw material procurement and production
cycles, progress payments received from customers are reflected as a reduction
of inventories. Product repair costs are expensed as incurred.

Long-Term, Fixed Price Contracts: A substantial portion of the Company's
revenues is derived from long-term, fixed price contracts with major engine and
aircraft manufacturers. These contracts are typically "requirements" contracts
under which the purchaser commits to purchase a given portion of its
requirements of a particular component from the Company. Actual purchase
quantities are typically not determined until shortly before the year in which
products are to be delivered. Losses on such contracts are provided when
available information indicates that the sales price is less than a fully
allocated cost projection.

Depreciable Assets: Property, plant and equipment, including significant
renewals and betterments, are capitalized at cost and are depreciated on the
straight-line method. Generally, depreciable lives range from 10 to 20 years for
land improvements, 10 to 40 years for buildings and 5 to 15 years for machinery
and equipment. Tooling production costs are primarily classified as machinery
and equipment and are capitalized at cost less associated reimbursement from
customers and depreciated over 5 years. Depreciation expense amounted to
$22,835,000, $20,168,000 and $16,723,000 in the years ended May 31, 1998, 1997
and 1996, respectively.

Bank Fees: Bank fees and related costs of obtaining credit facilities are
recorded as other assets and amortized over the term of the facilities.

Net Income per Share: In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS 128"). SFAS 128 replaces the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share. Basic
per-share data are computed based on the weighted average number of common
shares outstanding during each year. Common stock equivalents related to
outstanding stock options are included in diluted per-share computations unless
their inclusion would be antidilutive. All earnings per share amounts for all
periods have been presented, and where necessary, restated to conform to the
SFAS 128 requirements.

34
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Concentration of Credit Risk: Financial instruments that potentially
subject the Company to concentration of credit risk consist primarily of
temporary cash investments and trade receivables. The Company restricts
investment of temporary cash investments to financial institutions with high
credit standing. The Company has approximately 1,100 active customers. However,
the Company's accounts receivable are concentrated with a small number of
Fortune 500 companies with whom the Company has long-standing relationships.
Accordingly, management considers credit risk to be low. Five customers
accounted for 50.5%, 47.7% and 47.3% of the Company's revenues during the years
ended May 31, 1998, 1997 and 1996, respectively. General Electric Company
("GE")and United Technologies Corporation ("UT") each accounted for 10%, or
more, of the Company's revenues as follows:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 % 1997 % 1996 %
-------- --- -------- --- -------- ---
($000'S OMITTED, EXCEPT PERCENTAGES)

GE............................... $169,894 23 $156,764 26 $134,830 27
UT............................... 76,786 10 60,921 10 53,116 11

Currency Translation: For foreign operations, the local currency is the
functional currency. Assets and liabilities are translated at year-end exchange
rates, and statement of income items are translated at the average exchange
rates for the year. Translation adjustments are reported in equity, adjustments
as a separate component of stockholders' equity, which also includes exchange
gains and losses on certain intercompany balances of a long-term investment
nature.

Research and Development: Research and development expenses, including
related depreciation, amounted to $3,290,000, $2,895,000 and $1,630,000 for the
years ended May 31, 1998, 1997 and 1996, respectively.

Intangible Assets: Intangible assets consist primarily of costs of
acquired businesses in excess of net assets acquired and are amortized on a
straight line basis over periods up to 35 years. On a periodic basis, the
Company estimates the future undiscounted cash flows of the businesses to which
the costs of acquired businesses in excess of net assets acquired relate in
order to ensure that the carrying value of such intangible asset has not been
impaired.

Accounting for Stock-Based Compensation: The Company has elected to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), in accounting for its employee stock option plans because
the alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" ("FAS 123"), requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, when the exercise price of the Company's employee stock
options equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.

Impairment of Long-Lived Assets: Effective June 1, 1996, the Company
adopted Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121"). 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 adoption has not had a material effect on earnings
or the financial position of the Company.

Reporting Comprehensive Income: In June 1997, the Financial Accounting
Standards Board issued Statement No. 130 "Reporting Comprehensive Income" ("SFAS
130"). The implementation of SFAS 130 will require that the components of
comprehensive income be reported in the financial statements. Implementation of
this new Standard is required for the year ending May 31, 1999.

Segment Reporting: In June 1997, the Financial Accounting Standards Board
issued Statement No. 131 "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). The implementation of SFAS 131 will require
the disclosure of segment information utilizing the approach that
35
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Company uses to manage its internal organization. Implementation of this
Standard is required for the year ending May 31, 1999.

Pensions and Other Post Retirement Benefits: In February 1998, the
Financial Accounting Standards Board issued Statement No. 132, "Employers'
Disclosures about Pensions and Other Post Retirement Benefits" ("SFAS 132").
SFAS 132 standardizes disclosure requirements of Statement No's. 87, "Employers'
Accounting for Pensions," and 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions." Implementation of this Standard is required for
the year ending May 31, 1999.

B. ACQUISITION

The Company acquired International Extruded Products, LLC ("IXP"), a
specialty manufacturer of extruded seamless wall pipe, on April 9, 1998 for
approximately $15,460,000. The acquisition was financed through operating cash.
The acquisition was accounted for as a purchase and the net assets and results
of operations have been included in the consolidated financial statements since
the date of acquisition. The purchase price was allocated on the basis of the
estimated fair market value of the assets acquired and the liabilities assumed.
This acquisition did not materially impact consolidated results, therefore no
pro forma information is provided.

C. BALANCE SHEET INFORMATION

Components of selected captions in the consolidated balance sheets follow:

MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED)

PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and improvements............................ $133,401 $108,496
Machinery and equipment..................................... 330,337 292,103
Under construction.......................................... 27,065 21,789
-------- --------
490,803 422,388
Less: accumulated depreciation.............................. 293,440 268,651
-------- --------
$197,363 $153,737
======== ========
INTANGIBLE ASSETS:
Pension intangible.......................................... $ 1,847 $ 937
Costs in excess of net assets acquired...................... 28,786 28,786
Less: accumulated amortization.............................. (11,172) (10,468)
-------- --------
$ 19,461 $ 19,255
======== ========
OTHER ASSETS:
Cash surrender value of Company-owned life insurance
policies.................................................. $ 1,105 $ 1,041
Other....................................................... 4,618 2,587
-------- --------
$ 5,723 $ 3,628
======== ========
ACCRUED LIABILITIES AND OTHER:
Accrued payroll and benefits................................ $ 12,520 $ 12,602
Restructuring, integration, disposal and environmental
reserves.................................................. 5,330 7,108
Other....................................................... 32,842 29,667
-------- --------
$ 50,692 $ 49,377
======== ========

36
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

D. INVENTORIES

Inventories consisted of the following:

MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED)

Raw material................................................ $ 50,050 $ 36,990
Work-in-process............................................. 92,136 65,742
Other....................................................... 4,221 2,905
-------- --------
146,407 105,637
Less progress payments...................................... 13,273 13,305
-------- --------
$133,134 $ 92,332
======== ========

At May 31, 1998 and 1997 approximately 38% and 37%, respectively, of
inventories are valued at LIFO cost. If all inventories valued at LIFO cost had
been valued at FIFO cost or market which approximates current replacement cost,
inventories would have been $18,262,000 higher than reported at May 31, 1998 and
1997.

LIFO inventory quantities increased in the year ended May 31, 1998 and
1997. LIFO inventory quantities were reduced in the year ended May 31, 1996,
resulting in the liquidation of LIFO inventories carried at the lower costs
prevailing in prior years compared with the cost of current purchases which has
a favorable effect on income from operations. Inflation and deflation have
negative and positive effects on income from operations, respectively. The
effects of lower quantities and inflation were as follows:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)

Lower quantities........................................ $-- $ -- $5,448
Inflation............................................... -- (1,600) (526)
-- ------- ------
Net increase (decrease) to income from operations....... $-- $(1,600) $4,922
== ======= ======

E. SHORT-TERM AND LONG-TERM DEBT

Short-term and long-term debt consisted of the following:

MAY 31, MAY 31,
1998 1997
-------- -------
(000'S OMITTED)

Borrowings due within one year:
Current portion of long-term debt......................... $ 3,017 $ 77
-------- -------
Total borrowings due within one year.............. $ 3,017 $ 77
======== =======
Long-term debt:
10 3/4% Senior Notes...................................... $ 5,275 $90,000
8% Senior Notes........................................... 150,000 --
Industrial Revenue Bond................................... 5,600 6,000
Other..................................................... 1,698 154
-------- -------
Total long-term debt.............................. $162,573 $96,154
======== =======

37
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On December 15, 1997, the Company issued $150,000,000 of 8% Senior Notes
due 2007 ("8% Senior Notes") under an indenture between the Company and a bank
as trustee. The 8% Senior Notes were issued at a price of 99.323% of face value
and pay interest semi-annually in arrears on June 15 and December 15 of each
year, commencing June 15, 1998. The 8% Senior Notes are general unsecured
obligations of the Company, are non-callable for a five year period, and are
senior to any future subordinated indebtedness of the Company. The Company used
approximately $90,750,000 of the net proceeds from the sale of the 8% Senior
Notes to repurchase $84,725,000 (94%) of its outstanding 10 3/4% Senior Notes
due 2003 ("10 3/4% Senior Notes").

In conjunction with the extinguishment of the 10 3/4% Senior Notes, the
Company recorded an extraordinary loss, net of income tax benefit of $2,920,000,
amounting to $5,192,000. The extraordinary after-tax loss relates to (i) the
premium related to the retirement of the 10 3/4% Senior Notes, (ii) the
write-off of certain deferred debt issue expenses and (iii) fees and expenses
payable by the Company with respect to the tender offer for the 10 3/4% Senior
Notes.

The estimated fair value of the combined 8% and 10 3/4% Senior Notes was
$157,067,000 and $96,300,000 at May 31, 1998 and 1997, respectively, based on
third party valuations.

In December 1996, the Company issued an Industrial Revenue Bond (the "IRB")
for the construction of a facility in Montrose, Colorado amounting to
$6,000,000. The IRB bears an interest rate approximating 3.9%, fluctuating
weekly. The fair value approximates market value. The Company maintains a letter
of credit to collateralize the IRB.

On May 20, 1994, the Company initiated, through a subsidiary, Wyman-Gordon
Receivables Corporation ("WGRC"), a revolving credit agreement with a group of
five banks ("Receivables Financing Program"). WGRC is a separate corporate
entity from Wyman-Gordon Company and its other subsidiaries, with its own
separate creditors. WGRC's business is the purchase of accounts receivable from
Wyman-Gordon Company and certain of its subsidiaries ("Sellers"), and neither
WGRC on the one hand nor the Sellers (or subsidiaries or affiliates of the
Sellers) on the other have agreed to pay or make their assets available to pay
creditors of others. WGRC's creditors have a claim on its assets prior to those
assets becoming available to any creditors of any of the Sellers. The facility
provides for a total commitment by the banks of up to $65,000,000, including a
letter of credit subfacility of up to $35,000,000. Interest on borrowings is
charged at LIBOR plus 0.625% or based on the bank's base rate.

There were no borrowings outstanding under the Receivables Financing
Program at May 31, 1998 and 1997. At May 31, 1998 and 1997, the total
availability under the Receivables Financing Program was $65,000,000 and
$45,310,000, respectively, there were no borrowings against the available
amounts in either year and letters of credit amounting to $8,373,000 and
$7,007,000 were outstanding, respectively.

38
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

For the years ended May 31, 1998 and 1997, the weighted average interest
rate on short-term borrowings was 6.5% and 6.8%, respectively.

Annual maturities of long-term debt in the next five years amount to
$3,017,000 for 1999, $1,241,000 for 2000, $1,198,000 for 2001, $1,234,000 for
2002, $6,500,000 for 2003 and $152,400,000 thereafter. On June 30, 1998, the
Company made a final principal payment of $2,300,000 under the Company's
promissory note to Cooper Industries, Inc. provided under the terms of the
"Stock Purchase Agreement" with Cooper Industries, Inc.

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)

Interest on debt.............................. $11,319 $ 9,795 $10,003
Capitalized interest........................ -- (528) (262)
Amortization of financing fees and other.... 1,229 1,555 1,531
------- ------- -------
Interest expense............................ $12,548 $10,822 $11,272
======= ======= =======

Total interest paid approximates "Interest on debt" stated in the table
above.

F. RESTRUCTURING OF OPERATIONS AND OTHER CHARGES (CREDITS)

Cameron Purchase Cash Costs:

On May 26, 1994, the Company acquired Cameron Forged Products Company
("Cameron") from Cooper Industries, Inc. Included as part of the Cameron
purchase price allocation, the Company recorded $12,200,000 for direct cash
costs related to the acquisition and integration of Cameron, for relocation of
Cameron machinery and dies, severance of Cameron personnel and other costs.
During the year ended May 31, 1995, the Company made $4,100,000 of cash charges
against the reserves and it was determined that the cash costs of the
acquisition were $5,200,000 lower than originally estimated. There have been no
significant changes to the Company's May 31, 1995 estimates of the remaining
integration activities. The Company made $2,400,000 of cash charges against
these reserves in the years ended May 31, 1998, 1997 and 1996. The remaining
activities will require estimated cash outlays of $100,000 in the year ended May
31, 1999 and $400,000 thereafter.

1994 Cameron Integration Costs:

Based on the Company's plans for the integration of Cameron, in May 1994,
the Company recorded an integration restructuring charge totalling $24,100,000
to provide for relocating machinery, equipment, tooling and dies of the Company
as well as relocation and severance costs related to personnel of the Company
and the write-down of certain assets of the Company, including portions of metal
production facilities and certain forging, machining and testing equipment 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.

During the year ended May 31, 1995, after a year of evaluating the combined
forgings operations and concluding that most of its integration activities had
been completed or were adequately provided for within the remaining integration
restructuring reserves, the Company determined that severance and other
personnel costs were $1,900,000 lower and movement of machinery, equipment and
tooling and dies costs were $2,500,000 lower than originally estimated.
Additionally, certain machinery and equipment redundancies as a result of the
integration of Cameron's operations with those of the Company's were $2,300,000
higher than original estimates. As a result, the Company took into income from
operations in 1995, an integration restructuring credit in the amount of
$2,100,000. There have been no significant changes to the Company's May 31, 1995
estimates of the remaining integration activities. The Company made a total of
$4,700,000 of

39
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

cash charges against these reserves during the years ended May 31, 1998, 1997
and 1996. At May 31, 1998, the Company estimates these remaining integration
activities will require cash outlays of approximately $500,000 in the year ended
May 31, 1999 and $500,000 thereafter. Most of these future expenditures
represent costs associated with consolidation and reconfiguration of production
facilities and relocation or severance costs.

1997 Restructuring:

The Company recorded a charge totalling $11,500,000 which included
$4,600,000 to provide for the costs of workforce reductions at the Company's
Grafton, Massachusetts Forging facility, $3,400,000 to write-off and dispose of
certain Forging equipment, $2,300,000 to reduce the carrying value and dispose
of certain assets of the Company's titanium castings operations and $1,200,000
to consolidate the titanium castings operations. The Company made a total of
$2,700,000 of cash charges against these reserves during the years ended May 31,
1998 and 1997 and estimates that the remaining severance and other personnel
costs, disposal of Forging equipment and consolidation of the titanium castings
operations will require cash outlays of $2,500,000 in the year ended May 31,
1999 and $1,200,000 thereafter.

40
42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of charges made or estimated to be made against restructuring,
integration and disposal reserves is as follows:

FIVE MONTHS
ENDED YEAR
MAY 31, 1994 YEAR YEAR YEAR ENDED
AND FOR THE ENDED ENDED ENDED MAY 31,
YEAR ENDED MAY 31, MAY 31, MAY 31, 1999 AND
TOTAL MAY 31, 1995 1996 1997 1998 THEREAFTER
------- ------------ ------- ------- ------- ----------
(000'S OMITTED)

CAMERON PURCHASE CASH COSTS:
Cost of relocating Cameron's
machinery and equipment and
tooling and dies.............. $ 3,200 $ 1,700 $ 300 $ 800 $ 100 $ 300
Severance of Cameron personnel... 3,800 2,400 1,200 -- -- 200
------- ------- ------ ------ ------ ------
Total Cameron purchase
cash costs............. $ 7,000 $ 4,100 $1,500 $ 800 $ 100 $ 500
======= ======= ====== ====== ====== ======
1994 CAMERON INTEGRATION COSTS:
Cash:
Movement of machinery, equipment
and tooling and dies.......... $ 4,300 $ 800 $1,500 $ 900 $ 400 $ 700
Severance and other personnel
costs......................... 4,000 1,800 1,600 200 100 300
------- ------- ------ ------ ------ ------
Total cash charges....... 8,300 2,600 3,100 1,100 500 1,000
------- ------- ------ ------ ------ ------
Non-Cash:
Asset revaluation................ 13,700 13,700 -- -- -- --
Credits to reserves.............. 2,100 2,100 -- -- -- --
------- ------- ------ ------ ------ ------
Total non-cash charges... 15,800 15,800 -- -- -- --
------- ------- ------ ------ ------ ------
Total 1994 Cameron
integration costs...... $24,100 $18,400 $3,100 $1,100 $ 500 $1,000
======= ======= ====== ====== ====== ======
1995 OTHER CHARGES:
Non-Cash:
Credits to 1994 Cameron
integration costs............. $(2,100) $(2,100) $ -- $ -- $ -- $ --
------- ------- ------ ------ ------ ------
Total 1995 other
charges................ $(2,100) $(2,100) $ -- $ -- $ -- $ --
======= ======= ====== ====== ====== ======
1997 RESTRUCTURING:
Cash:
Severance and other personnel
costs......................... $ 2,200 $ -- $ -- $ 200 $1,400 $ 600
Disposal of Forging equipment.... 2,300 -- -- -- 400 1,900
Castings titanium operations..... 1,900 -- -- 700 -- 1,200
------- ------- ------ ------ ------ ------
Total cash charges....... 6,400 -- -- 900 1,800 3,700
------- ------- ------ ------ ------ ------
NON-CASH:
Severance and other personnel
costs......................... 2,400 -- -- 2,400 -- --
Asset write-off and
revaluation................... 2,700 -- -- 2,700 -- --
------- ------- ------ ------ ------ ------
Total non-cash charges... 5,100 -- -- 5,100 -- --
------- ------- ------ ------ ------ ------
Total 1997
Restructuring.......... $11,500 $ -- $ -- $6,000 $1,800 $3,700
======= ======= ====== ====== ====== ======

41
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other Charges (Credits):

Other charges (credits) also include non-cash charges to reduce the
carrying value of certain non-operating other assets as follows:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)

Australian Joint Venture.................................... $ -- $ 2,484 $1,871
Cash surrender value of Company-owned life insurance
policies.................................................. -- 5,745 846
Building held for sale...................................... -- 1,900 --
Other....................................................... (1,000) 250 --
------- ------- ------
$(1,000) $10,379 $2,717
======= ======= ======

Other charges (credits) in the year ended May 31, 1998 include a credit of
$4,000,000 for the recovery of cash surrender value of certain Company-owned
life insurance policies and a credit of $1,900,000 resulting from the disposal
of a building held for sale.

G. ENVIRONMENTAL MATTERS

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. However, it is not possible to
predict accurately the amount or timing of costs of any future environmental
remediation requirements. The Company continues to design and implement a system
of programs and facilities for the management of its raw materials, production
processes and industrial waste to promote compliance with environmental
requirements. As of May 31, 1998, aggregate environmental reserves amounted to
$16,509,000 and have been provided for expected cleanup expenses estimated
between $4,400,000 and $5,400,000 upon the eventual sale of the Worcester
facility, certain environmental issues at Cameron amounting to approximately
$3,500,000 and the exposures noted in the following paragraphs, which include
certain capitalizable amounts for environmental management and remediation
projects.

Pursuant to an agreement entered into with the U.S. Air Force upon the
acquisition of the Grafton facility from the federal government in 1982, the
Company agreed to make expenditures totalling $20,800,000 for environmental
management and remediation at the site during the period 1982 through 1999, of
which $4,000,000 remained as of May 31, 1998. These expenditures will not
resolve the Company's obligations to federal and state regulatory authorities,
who are not parties to the agreement, however, the Company expects to incur an
additional amount, currently estimated at $ 3,500,000, to comply with current
federal and state environmental requirements governing the investigation and
remediation of contamination at the site.

The Company's Grafton facility was formerly included in the U.S. Nuclear
Regulatory Commission's ("NRC") May 1992 Site Decommissioning Management Plan
("SDMP") for low-level radioactive waste as the result of the disposal of
magnesium thorium alloys at the facility in the 1960s and early 1970s under
license from the Atomic Energy Commission. On March 31, 1997, the NRC informed
the Company that jurisdiction for the Grafton site had been transferred to the
Commonwealth of Massachusetts Department of Public Health and that the Grafton
facility had been removed from the SDMP. Although it is unknown what specific
disposal requirements may be placed on the Company by the Massachusetts
Department of Public Health, the Company believes that a reserve of $1,500,000
recorded on its books is sufficient to cover all costs.

42
44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company, together with numerous other parties, has been named a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA") for the cleanup of the
following Superfund sites: Operating Industries, Monterey Park, California;
Cedartown Municipal Landfill, Cedartown, Georgia; PSC Resources, Palmer,
Massachusetts; the Harvey GRQ site, Harvey, Illinois; the Berlin & Farrow site,
Swartz Creek, Michigan; the Gemme/Fournier site, Leicester, Massachusetts; and
the Salco, Inc. site, Monroe, Michigan. The Company believes that a reserve of
$1,150,000 recorded on its books is sufficient to cover all costs.

At the Gemme/Fournier site, a proposed agreement would allocate 33% of the
cleanup costs to the Company. In September 1995, a consulting firm retained by
the PRP group made a preliminary remediation cost estimate of $1,400,000 to
$2,800,000. The Company's insurer is defending the Company's interests, and the
Company believes that any recovery against the Company would be offset by
recovery of insurance proceeds.

H. BENEFIT PLANS

The Company and its subsidiaries have pension plans covering substantially
all employees. Benefits are generally based on years of service and a fixed
monthly rate or average earnings during the last years of employment. Pension
plan assets are invested in equity and fixed income securities, pooled funds
including real estate funds and annuities. Company contributions are determined
based upon the funding requirements of U.S. and other governmental laws and
regulations.

A reconciliation between the amounts recorded on the consolidated balance
sheets and the summary tables of the funding status of the pension plans are as
follows:

MAY 31, MAY 31,
1998 1997
------- -------
(000'S OMITTED)

Pension liability per balance sheet......................... $(2,908) $(1,102)
Prepaid (accrued) pension expense included in prepaid
expenses in the balance sheet............................. (3,417) 95
U.K. prepaid pension expense (pension liability)............ 84 89
------- -------
Net U.S. prepaid pension expense (pension liability)........ $(6,241) $ (918)
======= =======

U.S. Pension Plans

Effective April 30, 1996, two of the Company's U.S. pension plans which had
accumulated benefits exceeding assets were merged into the plan which had assets
exceeding the accumulated benefits.

Pension expense for the U.S. pension plans included the following
components:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- -------- --------
(000'S OMITTED)

Service cost....................................... $ 4,961 $ 4,298 $ 3,042
Enhanced benefit package for early retirement...... -- 3,775 --
Interest cost on projected benefit obligation...... 12,179 11,302 11,662
Actual return on assets............................ (45,296) (17,804) (36,188)
Net amortization and deferral of actuarial gains
(losses)......................................... 32,573 4,722 23,412
-------- -------- --------
Net pension expense................................ $ 4,417 $ 6,293 $ 1,928
======== ======== ========
Assumed long-term rate of return on plan assets.... 10.0% 10.0% 10.0%
======== ======== ========

43
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the funding status of the U.S. pension plans and a
reconciliation to the amounts recorded in the consolidated balance sheets are as
follows:

MAY 31, 1998
------------------------------------
ASSETS ACCUMULATED
EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS TOTAL
----------- ----------- --------
(000'S OMITTED, EXCEPT PERCENTAGES)

Actuarial present value of benefit obligations:
Vested.................................................... $151,934 $ 9,376 $161,310
Nonvested................................................. 3,934 615 4,549
-------- -------- --------
Accumulated benefit obligation............................ 155,868 9,991 165,859
Impact of forecasted salary increases during future
periods................................................ 13,638 1,211 14,849
-------- -------- --------
Projected benefit obligation for employee service to
date................................................... 169,506 11,202 180,708
Current fair market value of plan assets.................... 195,987 -- 195,987
-------- -------- --------
Excess (shortfall) of plan assets over (under) projected
benefit obligation........................................ 26,481 (11,202) 15,279
Unrecognized net (gain) loss................................ (29,950) 2,315 (27,635)
Unrecognized net (asset) obligation at transition........... 1,140 881 2,021
Unrecognized prior service cost............................. 6,537 966 7,503
Adjustment required to recognize minimum liability.......... -- (2,824) (2,824)
Net periodic pension cost March 30, 1998 to May 31, 1998.... (458) (278) (736)
Contributions March 30, 1998 to May 31, 1998................ -- 151 151
-------- -------- --------
Net prepaid pension expense (pension liability)............. $ 3,750 $ (9,991) $ (6,241)
======== ======== ========
Estimated annual increase in future salaries................ 4-5%
Weighted average discount rate.............................. 7.0%
---
---

44
46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the funding status of the U.S. pension plans and a
reconciliation to the amounts recorded in the consolidated balance sheets are as
follows:

MAY 31, 1997
------------------------------------
ASSETS ACCUMULATED
EXCEEDING BENEFITS
ACCUMULATED EXCEEDING
BENEFITS ASSETS TOTAL
----------- ----------- --------
(000'S OMITTED, EXCEPT PERCENTAGES)

Actuarial present value of benefit obligations:
Vested.................................................... $146,771 $ 6,965 $153,736
Nonvested................................................. 935 392 1,327
-------- ------- --------
Accumulated benefit obligation............................ 147,706 7,357 155,063
Impact of forecasted salary increases during future
periods................................................ 12,878 2,024 14,902
-------- ------- --------
Projected benefit obligation for employee service to
date................................................... 160,584 9,381 169,965
Current fair market value of plan assets.................... 164,977 -- 164,977
-------- ------- --------
Excess (shortfall) of plan assets over (under) projected
benefit obligation........................................ 4,393 (9,381) (4,988)
Unrecognized net (gain) loss................................ (8,190) 728 (7,462)
Unrecognized net (asset) obligation at transition........... 1,655 1,116 2,771
Unrecognized prior service cost............................. 8,842 1,192 10,034
Adjustment required to recognize minimum liability.......... -- (1,013) (1,013)
Net periodic pension cost March 30, 1997 to May 31, 1997.... (202) (218) (420)
Contributions March 30, 1997 to May 31, 1997................ -- 160 160
-------- ------- --------
Net prepaid pension expense (pension liability)............. $ 6,498 $(7,416) $ (918)
======== ======= ========
Estimated annual increase in future salaries................ 3-5%
Weighted average discount rate.............................. 7.50%
----
----

U.K. Pension Plan

Pension expense for the U.K. pension plan included the following:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
(000'S OMITTED)

Service cost.......................................... $ 746 $ 629 $ 579
Interest cost......................................... 1,695 1,507 1,300
Expected return on assets............................. (1,800) (1,640) (1,283)
------- ------- -------
Net pension expense......................... $ 641 $ 496 $ 596
======= ======= =======

45
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The U.K. pension plan's assets and liabilities were rolled over from the
former Cameron plan during fiscal 1996. The funded status of the U.K. pension
plan is as follows:

MAY 31, MAY 31,
1998 1997
-------- --------
(000'S OMITTED,
EXCEPT PERCENTAGES)

Fair value of plan assets................................... $27,187 $22,007
Projected benefit obligation................................ 25,780 21,164
------- -------
Plan assets greater than projected benefit obligation....... 1,407 843
Unrecognized net gain....................................... (1,323) (754)
------- -------
Prepaid pension cost........................................ $ 84 $ 89
======= =======
Accumulated benefits........................................ $25,554 $19,436
======= =======
Vested benefits............................................. $24,365 $19,436
======= =======
Assumed long-term rate of return on plan assets............. 6.25% 8.0%
Weighted average discount rate.............................. 6.25% 8.0%
Rate of salary increase..................................... 3.25% 5.0%

Defined Contribution Plan

The Company also makes a 401(k) plan available to most full-time employees.
Employer contributions to the defined contribution plan are made at the
Company's discretion and are reviewed periodically. There were no cash
contributions in the years ended May 31, 1998 and 1997. Cash contributions
amounted to $26,000 for the year ended May 31, 1996. Additionally, for the years
ended May 31, 1998, 1997 and 1996, the Company contributed 100,409, 97,696 and
79,426 shares of common stock from Treasury to its defined contribution plan,
respectively, and recorded expense relating thereto of $2,439,000, $2,057,000
and $1,058,000, respectively.

I. OTHER POSTRETIREMENT BENEFITS

In addition to providing pension benefits, the Company and its subsidiaries
provide most retired employees with health care and life insurance benefits. The
majority of these health care and life insurance benefits are provided through
insurance companies, some of whose premiums are computed on a cost plus basis.

Most of the Forgings Division and Corporate retirees and full-time
employees are or become eligible for these postretirement health care and life
insurance benefits if they meet minimum age and service requirements. There are
certain retirees for which Company cost and liability are affected by future
increases in health care cost. The liabilities have been developed assuming a
medical trend rate for growth in future health care claim levels from the
assumed 1994 level. For the year ended May 31, 1998, the medical trend rate for
indemnity and Health Maintenance Organization ("HMO") inflationary costs was
6.5% and 4.5%, respectively. The rate for indemnity and HMO for the year ended
May 31, 1999 is 6.0% and 4.0% and are ultimately estimated at 5.0% and 4.0%,
respectively, for the year ended May 31, 2001. The change to the accumulated
postretirement benefit obligation for each 1.0% change in these assumptions is
$3,133,000. The change in the annual SFAS 106 expense for each 1.0% change in
these assumptions is $248,000. The weighted average discount rate used in
determining the amortization of the accumulated postretirement benefit
obligation was 7.0% and 7.5% at May 31, 1998 and May 31, 1997, respectively, and
the average remaining service life was 20 years.

46
48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net periodic benefit expense consists of the following components:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
------- ------- -------
($000'S OMITTED)

Service cost............................................ $ 160 $ 380 $ 234
Benefit from early retirement package................... -- (1,375) --
Interest on the accumulated benefit obligation.......... 3,372 3,550 4,021
Net amortization and deferral........................... 61 409 (53)
------ ------- ------
Total postretirement benefit expense.......... $3,593 $ 2,964 $4,202
====== ======= ======

The Company has no plans for funding the liability and will continue to pay
for retiree medical costs as they occur. The components of the accumulated
postretirement benefit obligation are as follows:

MAY 31, MAY 31,
1998 1997
------- -------
(000'S OMITTED)

Accumulated postretirement benefit obligation:
Retirees.................................................. $40,397 $40,516
Fully eligible active plan participants................... 1,745 3,082
Other active plan participants............................ 4,497 2,845
------- -------
Accumulated postretirement benefit obligation in excess of
plan assets............................................... 46,639 46,443
Unrecognized net gain (loss) from past experience different
from that assumed and from changes in assumptions......... (1,421) 1,055
Prior service cost not yet recognized in net periodic
postretirement benefit cost............................... (673) (733)
Other....................................................... 85 373
------- -------
Accrued postretirement benefit cost......................... $44,630 $47,138
======= =======

J. FEDERAL, FOREIGN AND STATE INCOME TAXES

The components of the net expense for income taxes for the year ended May
31, 1998 are as follows:

U.S. U.S.
FEDERAL STATE U.K. TOTAL
------- ------ ------ -------
(000'S OMITTED)

Current tax expense........................... $ 5,778 $1,250 $2,827 $ 9,855
Deferred tax expense.......................... 6,500 -- -- 6,500
------- ------ ------ -------
Net provision for income taxes before
extraordinary loss tax benefit.............. $12,278 $1,250 $2,827 $16,355
======= ====== ====== =======

In the year ended May 31, 1998, the Company provided $16,355,000 for income
taxes, net of a tax benefit of approximately $1,800,000 relating to the
utilization of NOL carryforwards. In addition, the Company has recorded a
$2,920,000 tax benefit against the extraordinary loss of $8,112,000 associated
with the early extinguishment of the Company's 10 3/4% Senior Notes.

In the year ended May 31, 1997, net tax benefits of $25,680,000 were
recognized including a refund of prior years' income taxes amounting to
$19,680,000 and $6,500,000 related to the expected realization of NOLs in future
years and $10,250,000 related to current NOLs benefit offsetting $10,750,000 of
current income tax expense. The refund relates to the carryback of tax net
operating losses to tax years 1981, 1984 and

47
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

1986 under applicable provisions of Internal Revenue Code Section 172(f). The
amount of net operating losses carried back to such years was approximately
$48,500,000.

The benefit (provision) for income taxes before extraordinary item is at a
rate other than the federal statutory tax rate for the following reasons:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- ------- -------
(000'S OMITTED)

Benefit (provision) at the applicable U.S federal
statutory tax rate................................. $(19,403) $(8,442) $(8,832)
Benefit from net permanent tax differences........... 4,059 -- --
Benefit of higher statutory tax rates in applicable
prior years realized in Section 172(f) carryback
claims............................................. -- 2,700 --
State income taxes................................... (1,640) (200) --
(Increase)decrease of deferred tax asset valuation
allowance.......................................... (1,168) 30,626 8,832
Other................................................ 1,797 996 --
-------- ------- -------
Income tax benefit (provision) before extraordinary
loss tax benefit................................... $(16,355) $25,680 $ --
======== ======= =======

The principal components of deferred tax assets and liabilities were as
follows:

MAY 31, 1998 MAY 31, 1997
------------ ------------
(000'S OMITTED)

DEFERRED TAX ASSETS
Provision for postretirement benefits.................. $ 18,298 $ 19,232
Net operating loss carryforwards....................... 4,667 17,117
Restructuring provisions............................... 8,406 9,856
Alternative minimum tax carryforward credit............ 5,964 --
Other.................................................. 8,205 10,315
-------- --------
45,540 56,520
Valuation allowance.................................... (32,269) (35,934)
-------- --------
13,271 20,586
-------- --------
DEFERRED TAX LIABILITIES
Accelerated depreciation............................... 12,409 11,256
Other.................................................. 862 2,830
-------- --------
13,271 14,086
-------- --------
Net deferred tax asset (liability)....................... $ -- $ 6,500
======== ========

The change in the valuation allowance primarily reflects the expiration of
state NOL carryforwards and other adjustments such as alternative minimum tax
credit and utilization of federal NOL carryforwards.

48
50
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

K. NET INCOME PER SHARE

There were no adjustments required to be made to income before
extraordinary item for purposes of computing basic and diluted net income per
share. A reconciliation of the average number of common shares outstanding used
in the calculation of basic and diluted net income per share is as follows:

MAY 31, 1998 MAY 31, 1997 MAY 31, 1996
------------ ------------ ------------
(000'S OMITTED)

Shares used to compute basic net income per
share...................................... 36,331,305 35,824,576 35,242,630
Dilutive effect of stock options............. 1,025,553 1,202,247 998,782
---------- ---------- ----------
Shares used to compute diluted net income per
share...................................... 37,356,858 37,026,823 36,241,412

L. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS

The Company, through administration by the Compensation Committee of the
Company's Board of Directors (the "Committee"), may grant awards under the
Company's Long-Term Incentive Plans in the form of non-qualified stock options
or incentive stock options to those key employees it selects to purchase in the
aggregate up to 3,400,000 shares of newly issued or treasury common stock.
Options expire after 10 years from the date of grant and generally become
exercisable ratably over a three to seven year period commencing from the date
of grant. The exercise price of non-qualified stock options may not be less than
50% of the fair market value of such shares on the date of grant or, in the case
of incentive stock options, 100% of the fair market value on the date of grant.
Awards of stock appreciation rights ("SAR's") may also be granted, either in
tandem with grants of stock options (and exercisable as an alternative to the
exercise of stock options) or separately.

In addition, the Committee may grant other awards that consist of, are
denominated in or are payable in shares or that are valued by reference to
shares, including, for example, restricted shares, phantom shares, performance
units, performance bonus awards or other awards payable in cash, shares or a
combination thereof at the Committee's discretion.

Information concerning stock options issued to officers and other employees
is presented in the following table.

YEAR WEIGHTED YEAR WEIGHTED YEAR WEIGHTED
ENDED AVERAGE ENDED AVERAGE ENDED AVERAGE
MAY 31, EXERCISE MAY 31, EXERCISE MAY 31, EXERCISE
1998 PRICE 1997 PRICE 1996 PRICE
------- -------- ------- -------- ------- --------
(SHARES IN THOUSANDS)

Number of shares under option:
Outstanding at beginning of
year.......................... 2,648 $12.56 2,295 $ 9.46 1,858 $ 5.90
Granted.......................... 356 24.11 817 18.34 861 15.14
Exercised........................ (500) 10.74 (415) 6.60 (390) 4.81
Canceled or expired.............. (42) 18.95 (49) 14.18 (34) 11.90
----- ------ ----- ------ ----- ------
Outstanding at end of year....... 2,462 $14.46 2,648 $12.56 2,295 $ 9.46
===== ====== ===== ====== ===== ======
Exercisable at end of year....... 1,598 1,189 1,104
===== ===== =====

At May 31, 1998 and 1997, 1,304,207 and 1,616,845 shares were available for
future grants, respectively.

49
51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following tables summarize information about stock options outstanding
at May 31, 1998:

OPTIONS OUTSTANDING
----------------------------------
WTD. AVG. OPTIONS EXERCISABLE
REMAINING --------------------
RANGE OF CONTRACTUAL WTD. AVG. WTD. AVG.
EXERCISE PRICES SHARES LIFE (YRS.) EXER. PRICE SHARES EXER. PRICE
- --------------- ------ ----------- ----------- ------ -----------
(SHARES IN THOUSANDS)

$ 3.00 - $ 7.99 743 4.0 $ 5.73 743 $ 5.73
$ 8.00 - $12.99 252 7.2 $12.52 152 $12.56
$13.00 - $17.99 901 7.7 $16.68 600 $16.67
$18.00 - $22.99 154 8.6 $20.10 44 $20.07
$23.00 - $27.99 412 8.9 $24.46 59 $23.00
----- -----
2,462 1,598
===== =====

In addition to stock options, the Company grants performance shares to key
executive employees. There were no performance shares granted during the year
ended May 31, 1998. During the years ended May 31, 1997 and 1996, awards of
118,000 and 551,000 shares of the Company's common stock were made,
respectively, subject to restrictions based upon continued employment and the
performance of the Company. Compensation expense totalling $3,412,000,
$1,403,000 and $413,000 relating to the awards were recorded during the years
ended May 31, 1998, 1997 and 1996, respectively.

EMPLOYEE STOCK PURCHASE PLAN

Effective January 1, 1996, the Company adopted a qualified, noncompensatory
Employee Stock Purchase Plan. This plan enables substantially all employees to
subscribe to purchase shares of the Company's common stock on an annual basis.
Such shares are subscribed at the lower of 85% of their fair market value on the
first day of the plan year, January 1, or 85% of their fair market value on the
last business day of the plan year, usually December 31. Each eligible
employee's participation is limited to 10% of base wages and a maximum of
450,000 shares are authorized for subscription. Employee subscriptions for the
twelve months ended December 31, 1997 were 83,580 shares at $16.68 per share
based on 85% of the fair market value on January 1, 1997 ($19.63).

Accounting for stock-based plans is in accordance with Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense has been recognized for fixed stock option
plans or Employee Stock Purchase Plan.

As required by SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company has determined the weighted average fair values of stock-based
arrangements granted during the years ended May 31, 1998, 1997 and 1996 to be
$14.94, $11.28 and $9.34, respectively. The fair values of stock-based
compensation awards granted were estimated using the Black-Scholes model with
the following assumptions.

EXPECTED
RISK-FREE ----------------------------------
GRANT OPTION DIVIDEND INTEREST
YEAR ENDED MAY 31, DATE TERM VOLATILITY YIELD RATE
- ------------------ --------- -------- ---------- -------- --------

1998................... 10/15/97 10 years 41% -- 5.57%
1/14/98 9 years 41% -- 5.57%
2/17/98 10 years 41% -- 5.57%
1997................... 7/16/96 9 years 38% -- 6.67%
10/16/96 10 years 38% -- 6.67%
1/15/97 10 years 38% -- 6.67%
3/17/97 9 years 38% -- 6.67%
1996................... 10/18/95 9 years 38% -- 6.67%
4/17/96 10 years 38% -- 6.67%

50
52
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Had compensation expense for the Company's stock-based plans and Employee
Stock Purchase Plan been accounted for using the fair value method prescribed by
SFAS No. 123, net income and earnings per share would have been as follows:

1998 1997 1996
---------- ---------- ----------
(000'S OMITTED, EXCEPT PER-SHARE DATA)

Net income as reported................................ $33,890 $50,023 $25,234
Pro forma net income under SFAS No. 123............... 32,062 47,399 24,957
Net income per share as reported:
Basic............................................... $ .93 $ 1.40 $ .72
Diluted............................................. .91 1.35 .70
Proforma net income per share under SFAS No. 123:
Basic............................................... $ .88 $ 1.32 $ .71
Diluted............................................. .86 1.28 .69

The effects of applying SFAS No. 123 in the above pro forma disclosure are
not indicative of future amounts. SFAS No. 123 does not apply to awards granted
prior to the year ended May 31, 1996.

M. STOCK PURCHASE RIGHTS

On October 19, 1988, the Board of Directors of the Company declared a
dividend distribution of one right (a "Right") for each outstanding Share to
shareholders of record at the close of business on November 30, 1988 pursuant to
a Rights Agreement dated as of October 19, 1988 (the "Original Rights
Agreement"). On January 10, 1994, in connection with the acquisition of Cameron,
the Original Rights Agreement was amended and restated. The description and
terms of the Rights are set forth in an Amended and Restated Rights Agreement
(the "Rights Agreement"), between the Company and State Street Bank & Trust
Company, as Rights Agent. Each Right entitles the registered holder to purchase
from the Company one one-hundredth of a share of Series A Junior Participating
Preferred Stock, no par value (the "Series A Shares"), of the Company at a price
of $50 per one one-hundredth of a Series A Share (the "Exercise Price"), subject
to adjustment.

In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power is sold after a person or group has become an Acquiring Person (as defined
below), proper provision will be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring Company which at the time of such transaction will have a market
value of two times the exercise price of the Right. In the event that any person
or group of affiliated or associated persons becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter be void), will
thereafter have the right to receive upon exercise that number of Shares having
a market value of two times the exercise price of the Right. For purposes of the
Rights Agreement, an "Acquiring Person" generally means a person or group of
affiliated or associated persons who have acquired beneficial ownership of 20%
or more of the outstanding Shares. However, Cooper Industries, Inc. and its
affiliates and associates (together, the "Cooper Group") will not be deemed to
be an Acquiring Person for so long as (A) the Cooper Group beneficially owns at
least 10% or more of the outstanding Shares continuously from and after May 26,
1994 and (B) the Cooper Group does not acquire beneficial ownership of any
Shares in breach of the Investment Agreement dated as of January 10, 1994
between Cooper Industries, Inc. and the Company (other than an inadvertent
breach which is remedied as promptly as practicable by a transfer of the Shares
so acquired to a person which is not a member of the Cooper Group).

The Rights will expire on November 30, 1998 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed or exchanged by the Company.

51
53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

N. COMMITMENTS AND CONTINGENCIES

At May 31, 1998, certain lawsuits arising in the normal course of business
were pending. In the opinion of management, the outcome of these legal matters
will not have a material adverse effect on the Company's financial position and
results of operations.

The Company has entered into various foreign exchange contracts to manage
its foreign exchange risks. Through its foreign currency hedging activities, the
Company seeks to minimize the risk that the eventual cash flows resulting from
purchase and sale transactions denominated in other than the functional currency
of the operating unit will be affected by changes in exchange rates. Foreign
currency transaction exposures generally are the responsibility of the Company's
individual operating units to manage as an integral part of their business. The
Company hedges its foreign currency transaction exposures based on judgment,
generally through the use of forward exchange contracts. Gains and losses on the
Company's foreign currency transaction hedges are recognized as an adjustment to
the underlying hedged transactions. Deferred gains and losses on foreign
exchange contracts were not significant at May 31, 1998 and 1997. The Company
had foreign exchange contracts totaling $44,550,000 at May 31, 1998. Such
contracts include forward contracts of $21,482,000 for the purchase of U.K.
pounds and $23,068,000 for the sale of U.K. pounds. These contracts hedge
certain normal operating purchase and sales transactions. The exchange contracts
have no material fair market value, 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. Translation and transaction gains and losses
included in the Consolidated Statements of Net Income for the years ended May
31, 1998, 1997 and 1996 were not significant.

OSHA conducted an investigation of the accident. On June 18, 1997, WGFI
reached an agreement with OSHA, settling citations resulting from the accident.

In general, under Texas statutory law, an employee's exclusive remedy
against an employer for an on-the-job injury is the benefits of the Texas
Workers' Compensation Act. WGFI, the employer of the deceased employees, has
workers' compensation insurance coverage and the injured employees and
beneficiaries of the deceased employees are receiving workers compensation
payments. Under applicable law, however, statutory beneficiaries of employees
killed in the course and scope of their employment may recover punitive (but not
compensatory) damages in excess of workers compensation benefits. However, to do
so, they must prove that the employer was grossly negligent. The protection of
the workers compensation exclusive remedy provision may not extend to the
Company as parent corporation of WGFI. Therefore, with regard to the October 24,
1997 lawsuit and any future lawsuits brought on behalf of those killed or
injured in the Houston accident or their families against the Company, if (i)
the court finds that the Company had a legal duty to WGFI and its employees,
(ii) the evidence supports a finding that the Company acted negligently in its
duty to WGFI and

52
54
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

O. SUBSEQUENT EVENTS

On July 31, 1998, the Company completed a transaction with Titanium Metals
Corporation ("TIMET") in which the parties have combined their respective
titanium castings businesses into a jointly-owned venture. The joint venture,
80.1% owned by Wyman-Gordon and 19.9% by TIMET, consists primarily of Wyman-
Gordon's titanium casting business located in Franklin, New Hampshire, and
TIMET's titanium casting business located in Albany, Oregon. The joint venture
will produce investment castings primarily for the aerospace market and will
seek to develop new applications for titanium castings.

In connection with the formation of the joint venture, TIMET has acquired
the operating assets of Wyman-Gordon's Millbury, Massachusetts, vacuum arc
remelting facility which produces titanium ingots for further processing into
finished forgings. In addition, Wyman-Gordon and TIMET have entered into a ten-

53
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

year supply agreement pursuant to which TIMET will supply a portion of
Wyman-Gordon's requirements for titanium raw materials for its forging and
casting operations.

P. GEOGRAPHIC AND OTHER INFORMATION

Transfers between U.S. and international operations, principally inventory
transfers, are charged to the receiving organization at prices sufficient to
recover manufacturing costs and provide a reasonable return.

Certain information on a geographic basis follows:

YEAR YEAR YEAR
ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31,
1998 1997 1996
-------- -------- --------
(000'S OMITTED)

REVENUES FROM UNAFFILIATED CUSTOMERS:
United States (including direct export sales)...... $676,342 $541,456 $447,515
United Kingdom..................................... 76,571 67,286 52,109
-------- -------- --------
$752,913 $608,742 $499,624
======== ======== ========
INTER AREA TRANSFERS:
United States...................................... $ 1,127 $ 378 $ 14
United Kingdom..................................... 7,062 6,244 4,666
-------- -------- --------
$ 8,189 $ 6,622 $ 4,680
======== ======== ========
EXPORT SALES:
United States direct export sales.................. $118,407 $ 88,888 $ 71,792
======== ======== ========
INCOME (LOSS) FROM OPERATIONS:
United States...................................... $ 58,126 $ 20,578 $ 32,042
United Kingdom..................................... 10,766 9,744 5,657
-------- -------- --------
$ 68,892 $ 30,322 $ 37,699
======== ======== ========
IDENTIFIABLE ASSETS (EXCLUDING INTERCOMPANY):
United States...................................... $479,181 $390,540 $309,868
United Kingdom..................................... 63,759 54,777 44,287
General corporate.................................. 8,670 9,054 21,735
-------- -------- --------
$551,610 $454,371 $375,890
======== ======== ========

54
56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Q. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for the years ended May 31, 1998 and 1997
were as follows:

QUARTER
--------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
(000'S OMITTED, EXCEPT PER-SHARE DATA)

YEAR ENDED MAY 31, 1998
Revenue................................. $180,009 $189,370 $181,764 $201,771
Cost of goods sold...................... 146,764 157,422 159,229 173,852
Other charges (credits)................. (1,900) (3,000) -- --
Income from operations.................. 21,750 21,771 9,577 15,794
Income before extraordinary item........ 11,859 13,336 3,963 9,924
Extraordinary item, net of tax.......... -- -- (5,192) --
Net income (loss)....................... 11,859 13,336 (1,229) 9,924
Basic net income per share:
Income before extraordinary item...... .33 .37 .11 .27
Net income (loss)..................... .33 .37 (.03) .27
Diluted net income per share:
Income before extraordinary item...... .32 .36 .11 .27
Net income (loss)....................... .32 .36 (.03) .27
YEAR ENDED MAY 31, 1997
Revenue................................. $134,235 $138,655 $153,331 $182,521
Cost of goods sold...................... 122,744 115,079 124,716 148,569
Other charges........................... 15,779 -- 2,434 4,870
Income (loss) from operations........... (14,340) 12,527 15,839 16,296
Income before extraordinary item........ 7,815 9,133 13,009 20,066
Extraordinary item, net of tax.......... -- -- -- --
Net income (loss)....................... 7,815 9,133 13,009 20,066
Basic net income per share:
Income before extraordinary item...... .22 .26 .36 .56
Net income............................ .22 .26 .36 .56
Diluted net income per share:
Income before extraordinary item...... .21 .25 .35 .54
Net income............................ .21 .25 .35 .54

The 1997 and first two quarters of 1998 earnings per share amounts have
been restated to comply with Statement of Financial Accounting Standards No.
128, Earnings Per Share.

55
57

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

The information called for by Item 10 (Directors and Executive Officers of
the Registrant), Item 11 (Executive Compensation), Item 12 (Security Ownership
of Certain Beneficial Owners and Management) and Item 13 (Certain Relationships
and Related Transactions) is incorporated herein by reference to the
registrant's definitive proxy statement to be filed in connection with its 1998
Annual Meeting of Stockholders to be held on October 21, 1998.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents Filed as a Part of this Report

PAGES
-----

1. Financial Statements:
Report of Management........................................ 28
Report of Independent Auditors.............................. 29
Consolidated Statements of Income........................... 30
Consolidated Balance Sheets................................. 31
Consolidated Statements of Cash Flows....................... 32
Consolidated Statements of Stockholders' Equity............. 33
Notes to Consolidated Financial Statements.................. 34

56
58

2. Exhibits:

Exhibits to the Form 10-K have been included only with the copies of the
Form 10-K filed with the Commission. Upon request to the Company and payment of
a reasonable fee, copies of the individual exhibits will be furnished.

EXHIBIT INDEX

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----

3.A Restated Articles of Organization of Wyman-Gordon
Company -- incorporated by reference to Exhibit 3A to the
Company's Form 10-K for the year ended June 3, 1995. --
3.B Bylaws of Wyman-Gordon Company, as amended through May 24,
1994 -- incorporated by reference to Exhibit 3B to the
Company's Form 10-K for the year ended June 3, 1995. --
4.A Amended and Restated Rights Agreement, dated as of January
10, 1994 between the Company and State Street Bank & Trust
Company, as Rights Agent -- incorporated by reference to
Exhibit 1 to the Company's Report on Form 8-A/A dated
January 21, 1994. --
4.B Indenture dated as of March 16, 1993 among Wyman-Gordon
Company, its Subsidiaries and State Street Bank and Trust
Company as Trustee with respect to Wyman-Gordon Company's
10 3/4% Senior Notes due 2003 -- incorporated by reference
to Exhibit 4C to the Company's Report on Form 10-K for the
year ended December 31, 1992. --
4.C 10 3/4% Senior Notes due 2003. Supplemental Indenture dated
May 19, 1994 -- incorporated by reference to Exhibit 5 to
the Company's Report on Form 8-K dated May 26, 1994. --
4.D 10 3/4% Senior Notes due 2003. Second Supplemental Indenture
and Guarantee dated May 27, 1994 -- incorporated by
reference to the Company's Report on Form 8-K dated May 26,
1994. --
4.E Instruments defining the rights of holders of long-term debt
are omitted pursuant to paragraph (b)(4)(iii) of Regulation
S-K Item 601. The Company agrees to furnish such instruments
to the Commission upon request. --
4.F 10 3/4% Senior Notes due 2003. Third Supplemental Indenture
dated December 9, 1997. E-1
4.G Indenture dated as of December 15, 1997 among Wyman-Gordon
Company, its Subsidiaries and State Street Bank and Trust
Company as Trustee with respect to Wyman-Gordon Company's 8%
Senior Notes due 2007. E-2
4.H 8% Senior Notes due 2007. Supplemental Indenture dated
December 15, 1997. E-3
10.A J. Stewart Smith, Executive Severance Agreement dated
October 15, 1997. E-4
10.B David P. Gruber, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.B of the
Company's Report on Form 10-K dated May 31, 1996. --
10.C Sanjay N. Shah, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.C of the
Company's Report on Form 10-K dated May 31, 1996. --
10.D J. Douglas Whelan, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.D of the
Company's Report on Form 10-K dated May 31, 1996. --

57
59

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----

10.E Wallace F. Whitney, Jr., Executive Severance Agreement dated
April 17, 1996 -- incorporated by reference to Exhibit 10.E
to the Company's Report on Form 10-K dated May 31, 1996. --
10.F Frank J. Zugel, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.F of the
Company's Report on Form 10-K dated May 31, 1996. --
10.G J. Stewart Smith, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated July
16, 1996. E-5
10.H David P. Gruber, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.H
of the Company's Report on Form 10-K dated May 31, 1996. --
10.I Sanjay N. Shah, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.I of the
Company's Report on Form 10-K dated May 31, 1996. --
10.J J. Douglas Whelan, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.J
of the Company's Report on Form 10-K dated May 31, 1996. --
10.K Wallace F. Whitney, Jr., Performance Stock Option Agreement
under the Wyman-Gordon Company Long-term Incentive Plan
dated April 17, 1996 -- incorporated by reference to Exhibit
10.K of the Company's Report on Form 10-K dated May 31,
1996. --
10.L Frank J. Zugel, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.L of the
Company's Report on Form 10-K dated May 31, 1996. --
10.M J. Stewart Smith, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-6
10.N David P. Gruber, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.N of the
Company's Report on Form 10-K dated May 31, 1996. --
10.O Sanjay N. Shah, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.O of the
Company's Report on Form 10-K dated May 31, 1996. --
10.P J. Douglas Whelan, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.P of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Q Wallace F. Whitney, Jr., Performance Share Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.Q
of the Company's Report on Form 10-K dated May 31, 1996. --
10.R Frank J. Zugel, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.R of the
Company's Report on Form 10-K dated May 31, 1996. --
10.S Colin Stead, Executive Severance Agreement dated October 15,
1997. E-7
10.T David P. Gruber, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.T of the
Company's Report on Form 10-K dated May 31, 1996. --
10.U Sanjay N. Shah, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.U of the
Company's Report on Form 10-K dated May 31, 1996. --

58
60

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----

10.V J. Douglas Whelan, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.V of the
Company's Report on Form 10-K dated May 31, 1996. --
10.W Wallace F. Whitney, Jr., Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.W of the
Company's Report on Form 10-K dated May 31, 1996. --
10.X Frank J. Zugel, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.X of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Y Amendment to Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated May 24,
1994 between Wyman-Gordon Company and David P.
Gruber -- incorporated by reference to Exhibit 10.Y of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Z Stock Purchase Agreement dated as of January 10, 1994
between Cooper Industries, Inc. and the
Company -- incorporated by reference to Annex A to the
Company's preliminary Proxy Statement filed with the
Securities and Exchange Commission on March 8, 1994. --
10.AA Investment Agreement dated as of January 10, 1994 between
Cooper Industries, Inc. and the Company -- incorporated by
reference to Annex B to the Company's preliminary Proxy
Statement filed with the Securities and Exchange Commission
on March 8, 1994. --
10.AB Amendment dated May 26, 1994 to Investment Agreement dated
as of January 10, 1994, between the Company and
Cooper -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AC 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 -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AD 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 -- incorporated by
reference to the Company's Report on Form 8-K dated May 26,
1994. --
10.AE 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 -- incorporated by reference
to the Company's Report on Form 8-K dated May 26, 1994. --
10.AF Long-term Incentive Plan dated July 19, 1995 incorporated by
reference to Appendix A of the Company's "Proxy Statement
for Annual Meeting of Stockholders" on October 18, 1995. --
10.AG Wyman-Gordon Company Non-Employee Director Stock Option Plan
dated January 18, 1995 -- incorporated by reference to
Appendix C of the Company's "Proxy Statement for Annual
Meeting of Stockholders" on October 18, 1995. --
10.AH Wyman-Gordon Company Long-Term Incentive Plan dated January
15, 1997 -- incorporated by reference to Appendix A of the
Company's "Proxy Statement for Annual Meeting of
Stockholders" to be held on October 15, 1997 --
10.AI Colin Stead, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-8

59
61

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----

10.AJ Colin Stead, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-9
10.AK Edward J. Davis, Executive Severence Agreement dated
February 17, 1998. E-10
21 List of Subsidiaries E-11
23 Consent of Ernst & Young LLP 61
27 Financial Data Schedule E-12

(b) Reports on Form 8-K

On November 19, 1997, the Company filed a Form 8-K dated November 14, 1997
with the Commission for the following purposes: (1) to report that the Company
has commenced a cash tender offer for certain of its debt securities and is
soliciting to amend the related indenture; (2) to report developments relating
to the previously reported industrial accident at the facility of Wyman-Gordon
Forgings, Inc. in Houston, Texas; and (3) to report the commencement of an
investigation by certain federal agencies involving alleged irregularities at
the Company's Tilton, New Hampshire facility.

On December 9, 1997, the Company filed a Form 8-K with the Commission to
report that the Company had taken the 29,000 ton press at its Houston, Texas
facility out of service for repairs.

On February 9, 1998, the Company filed a Form 8-K with the Commission to
update the statue of the 29,000 ton press and to announce an extraordinary one
time charge relating to the refinancing of its 10 3/4% Senior Notes due 2003.

On August 11, 1998, the Company filed a Form 8-K with the Commission to
report that it and Titanium Metals Corporation completed a transaction in which
the parties have combined their respective titanium castings businesses into a
jointly-owned venture.

60
62

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Form S-8, File Numbers 2-56547, 2-75980, 33-26980, 33-48068 and 33-64503)
pertaining to the Wyman-Gordon Company Executive Long-Term Incentive Program
(1975) -- Amendment No. 6, the Wyman-Gordon Company Stock Purchase Plan, the
Wyman-Gordon Company Savings/Investment Plan, the Wyman-Gordon Company Long-Term
Incentive Plan and the Wyman-Gordon Company Employee Stock Purchase Plan; and
the Registration Statements (Form S-3, File Numbers 33-63459 and 333-32149) of
Wyman-Gordon Company and in the related Prospectuses of our report dated June
25, 1998, with respect to the consolidated financial statements of Wyman-Gordon
Company and subsidiaries included in this Annual Report (Form 10-K) for the year
ended May 31, 1998.

[Ernst & Young Signature]

Boston, Massachusetts
August 27, 1998

61
63

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Wyman-Gordon Company
(REGISTRANT)

By /s/ EDWARD J. DAVIS

------------------------------------
Edward J. Davis
Vice President, Chief Financial
Officer
and Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

/s/ DAVID P. GRUBER Chairman of the Board of August 27, 1998
- --------------------------------------------------- Directors and Chief Executive
David P. Gruber Officer

/s/ J. DOUGLAS WHELAN President and Chief Operating August 27, 1998
- --------------------------------------------------- Officer
J. Douglas Whelan

/s/ EDWARD J. DAVIS Vice President, Chief Financial August 27, 1998
- --------------------------------------------------- Officer and Treasurer and
Edward J. Davis Principal Financial Officer

/s/ JEFFREY B. LAVIN Corporate Controller and August 27, 1998
- --------------------------------------------------- Principal Accounting Officer
Jeffrey B. Lavin

/s/ E. PAUL CASEY Director August 27, 1998
- ---------------------------------------------------
E. Paul Casey

/s/ WARNER S. FLETCHER Director August 27, 1998
- ---------------------------------------------------
Warner S. Fletcher

/s/ ROBERT G. FOSTER Director August 27, 1998
- ---------------------------------------------------
Robert G. Foster

/s/ RUSSELL E. FULLER Director August 27, 1998
- ---------------------------------------------------
Russell E. Fuller

/s/ CHARLES W. GRIGG Director August 27, 1998
- ---------------------------------------------------
Charles W. Grigg

/s/ M HOWARD JACOBSON Director August 27, 1998
- ---------------------------------------------------
M Howard Jacobson

/s/ JUDITH S. KING Director August 27, 1998
- ---------------------------------------------------
Judith S. King

62
64

/s/ ROBERT L. LEIBENSPERGER Director August 27, 1998
- ---------------------------------------------------
Robert L. Leibensperger

/s/ ANDREW E. LIETZ Director August 27, 1998
- ---------------------------------------------------
Andrew E. Lietz

/s/ H. JOHN RILEY, JR. Director August 27, 1998
- ---------------------------------------------------
H. John Riley, Jr.

/s/ DAVID A. WHITE, JR. Director August 27, 1998
- ---------------------------------------------------
David A. White, Jr.

63
65

EXHIBIT INDEX

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----

10.F Frank J. Zugel, Executive Severance Agreement dated April
17, 1996 -- incorporated by reference to Exhibit 10.F of the
Company's Report on Form 10-K dated May 31, 1996. --
10.G J. Stewart Smith, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated July
16, 1996. E-5
10.H David P. Gruber, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.H
of the Company's Report on Form 10-K dated May 31, 1996. --
10.I Sanjay N. Shah, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.I of the
Company's Report on Form 10-K dated May 31, 1996. --
10.J J. Douglas Whelan, Performance Stock Option Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.J
of the Company's Report on Form 10-K dated May 31, 1996. --
10.K Wallace F. Whitney, Jr., Performance Stock Option Agreement
under the Wyman-Gordon Company Long-term Incentive Plan
dated April 17, 1996 -- incorporated by reference to Exhibit
10.K of the Company's Report on Form 10-K dated May 31,
1996. --
10.L Frank J. Zugel, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.L of the
Company's Report on Form 10-K dated May 31, 1996. --
10.M J. Stewart Smith, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-6
10.N David P. Gruber, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.N of the
Company's Report on Form 10-K dated May 31, 1996. --
10.O Sanjay N. Shah, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.O of the
Company's Report on Form 10-K dated May 31, 1996. --
10.P J. Douglas Whelan, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.P of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Q Wallace F. Whitney, Jr., Performance Share Agreement under
the Wyman-Gordon Company Long-term Incentive Plan dated
April 17, 1996 -- incorporated by reference to Exhibit 10.Q
of the Company's Report on Form 10-K dated May 31, 1996. --
10.R Frank J. Zugel, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.R of the
Company's Report on Form 10-K dated May 31, 1996. --
10.S Colin Stead, Executive Severance Agreement dated October 15,
1997. E-7
10.T David P. Gruber, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.T of the
Company's Report on Form 10-K dated May 31, 1996. --
10.U Sanjay N. Shah, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.U of the
Company's Report on Form 10-K dated May 31, 1996. --
10.V J. Douglas Whelan, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.V of the
Company's Report on Form 10-K dated May 31, 1996. --

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----

10.W Wallace F. Whitney, Jr., Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.W of the
Company's Report on Form 10-K dated May 31, 1996. --
10.X Frank J. Zugel, Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated April
17, 1996 -- incorporated by reference to Exhibit 10.X of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Y Amendment to Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated May 24,
1994 between Wyman-Gordon Company and David P.
Gruber -- incorporated by reference to Exhibit 10.Y of the
Company's Report on Form 10-K dated May 31, 1996. --
10.Z Stock Purchase Agreement dated as of January 10, 1994
between Cooper Industries, Inc. and the
Company -- incorporated by reference to Annex A to the
Company's preliminary Proxy Statement filed with the
Securities and Exchange Commission on March 8, 1994. --
10.AA Investment Agreement dated as of January 10, 1994 between
Cooper Industries, Inc. and the Company -- incorporated by
reference to Annex B to the Company's preliminary Proxy
Statement filed with the Securities and Exchange Commission
on March 8, 1994. --
10.AB Amendment dated May 26, 1994 to Investment Agreement dated
as of January 10, 1994, between the Company and
Cooper -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AC 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 -- incorporated by reference to the Company's Report
on Form 8-K dated May 26, 1994. --
10.AD 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 -- incorporated by
reference to the Company's Report on Form 8-K dated May 26,
1994. --
10.AE 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 -- incorporated by reference
to the Company's Report on Form 8-K dated May 26, 1994. --
10.AF Long-term Incentive Plan dated July 19, 1995 incorporated by
reference to Appendix A of the Company's "Proxy Statement
for Annual Meeting of Stockholders" on October 18, 1995. --
10.AG Wyman-Gordon Company Non-Employee Director Stock Option Plan
dated January 18, 1995 -- incorporated by reference to
Appendix C of the Company's "Proxy Statement for Annual
Meeting of Stockholders" on October 18, 1995. --
10.AH Wyman-Gordon Company Long-Term Incentive Plan dated January
15, 1997 -- incorporated by reference to Appendix A of the
Company's "Proxy Statement for Annual Meeting of
Stockholders" to be held on October 15, 1997 --
10.AI Colin Stead, Performance Stock Option Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-8
10.AJ Colin Stead, Performance Share Agreement under the
Wyman-Gordon Company Long-term Incentive Plan dated July 16,
1996. E-9

EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----

10.AK Edward J. Davis, Executive Severence Agreement dated
February 17, 1998. E-10
21 List of Subsidiaries E-11
23 Consent of Ernst & Young LLP 61
27 Financial Data Schedule E-12