<PAGE> 1
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
{ } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OR
{ X } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from January 1, 1994 to May 28, 1994
COMMISSION FILE NUMBER 0-3085
WYMAN-GORDON COMPANY
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 2
MASSACHUSETTS 04-1992780
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
244 WORCESTER STREET, BOX 8001, NO. GRAFTON, MASSACHUSETTS 01536-8001
(Address of principal executive offices)
Registrant's telephone number, including area code 508-839-4441
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past
90 days.
Yes X No
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
<TABLE>
<CAPTION>
Class Outstanding at May 28, 1994
<S> <C>
Common Stock, $1 Par Value 34,548,180
</TABLE>
<PAGE>
<PAGE> 2
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION
Results of Operations
The principal markets served by the Company are commercial
aerospace and defense equipment. Revenue by market for the
respective periods were as follows (000's omitted):
<TABLE>
<CAPTION>
Two Months Ended Two Months Ended
May 28, 1994 May 29, 1993
% of % of
Amount Total Amount Total
<S> <C> <C> <C> <C>
Commercial Aerospace $18,322 53% $21,912 56%
Defense equipment 14,919 43% 16,042 41%
Other 1,467 4% 1,174 3%
$34,708 100% $39,128 100%
</TABLE>
<TABLE>
<CAPTION>
Five Months Ended Five Months Ended
May 28, 1994 May 29, 1993
% of % of
Amount Total Amount Total
<S> <C> <C> <C> <C>
Commercial Aerospace $48,942 56% $ 55,103 54%
Defense equipment 33,928 39% 42,858 42%
Other 4,106 5% 4,082 4%
$86,976 100% $102,043 100%
</TABLE>
Two Months Ended May 28, 1994 ("Two Months 1994") vs. Two Months
Ended May 29, 1993 ("Two Months 1993")
Revenues for the Two Months 1994 decreased $4.4 million or
11.3% from the comparable period of 1993. This decline in
revenues was primarily attributable to continued sluggishness in
the aerospace industry. Also, $1.4 million was attributable to
Wyman-Gordon Composites, Inc., which was sold by the Company
during November 1993, are included in Two Months 1993 revenues.
The Company's gross margins were a negative 19.4% in the Two
Months 1994 as compared to 5.8% in the Two Months 1993.
Primarily, the decline in gross margins is the result of several
significant charges totalling $8.7 million recorded in the Two
Months 1994 and are identified as: (1) a change in an accounting
estimate for workers' compensation which resulted in a charge to
cost of sales of $4.2 million or 12.1% as a percent of revenues,
(2) $.6 million charge or 2% as a percent of revenues recognized
for futures contract hedging losses and (3) $3.9 million or
-17-<PAGE>
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Two Months Ended May 28, 1994 (Second Quarter 1994) vs. Two
Months Ended May 29, 1993 (Second Quarter 1993)(Continued)
11.2% of revenues for excess inventory. Additionally, customer
invoked pricing pressures coupled with lower production volume
continued to have a negative impact on margins. Gross margins
benefitted from an inventory LIFO credit of $2.6 million in the
Two Months 1994 as compared to $1.0 million in the same period of
1993. Excluding the benefit of the LIFO credit and significant
charges, the Company's gross margins were (1.7%) and 3.3% in the
Two Months 1994 and 1993, respectively.
Selling, general and administrative expenses were $10.7
million or 30.8% as a percent of revenues in the Two Months 1994
as compared to $3.4 million or 8.6% as a percent of revenues in
the same period of 1993. The increase in selling, general and
administrative expenses is due to significant charges totalling
$7.6 million recorded in the Two Months 1994 and are identified
as follows: (1) $4.2 million of employee benefit related accruals
including $1.4 million from changes in an accounting estimate for
workers' compensation, (2) $2.9 million for resolution of
contractual matters and (3) $.5 million of other significant
charges. Excluding the effect of significant charges, the
Company's selling, general and administrative expenses in the Two
Months 1994 were $3.1 million or 8.8% as a percent of revenues as
compared to $3.4 million or 8.6% as a percent of revenues in the
same period of 1993.
The Company recorded restructuring charges of $30.6 million
during the Two Months 1994, no such charges were recognized
during the corresponding period of 1993. These charges include
$24.1 million of planned costs of integrating the Company's
forgings operations with those of Cameron Forged Products Company
("Cameron") which the Company acquired on May 26, 1994.
Restructuring charges of $5.2 million relate to the closure of a
castings facility and $1.3 million in asset write-downs.
The Company recorded a $2.0 million environmental charge
which represents anticipated future environmental expenses
related to the Company's Grafton, Massachusetts facility.
Interest expense was $2.6 million in the Two Months 1994 as
compared to $1.5 million for the same period of 1993. The
increase in interest expense is mainly due to the write-off of
$1.2 million of bank fees related to refinancing of the prior
credit facility.
Miscellaneous, net expense was $.1 million for the Two
Months 1994 as compared to $.3 million for the same period of
1993.
-18-<PAGE>
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Five Months Ended May 28, 1994 ("Five Months 1994") vs. Five
Months Ended May 29, 1993 ("Five Months 1993")
Revenues for the Five Months 1994 decreased $15.1 million
(or 14.8%) from the comparable period of 1993. This decline in
revenues was primarily attributable to continued sluggishness in
the aerospace industry. Also, $4.6 million in Five Months 1993
revenues were from Wyman-Gordon Composites, Inc. which was sold
by the Company during November 1993.
The Company's gross margins were a negative 7.8% for Five
Months 1994 as compared to 8.0% in the Five Months 1993.
Customer invoked pricing pressures coupled with lower production
volume continued to have a negative impact on margins.
Additionally, gross margin was negatively affected by several
significant charges totalling $8.7 million recorded in the Five
Months 1994 and are identified as: (1) a change in accounting
estimate for workers' compensation resulted in a charge to cost
of sales of $4.2 million or 4.8% as a percent of revenues, (2)
$.6 million charge or 1% as a percent of revenues recognized on
futures contract hedging losses and (3) $3.9 million or 4.5% of
revenues for excess inventory. Gross margins benefitted from an
inventory LIFO credit of $3.1 million in the Five Months 1994 as
compared to $2.9 million in the same period of 1993. Excluding
the benefit of the LIFO credit and significant charges, the
Company's gross margins were (1.4%) and 5.1% in the Five Months
1994 and 1993, respectively.
Selling, general and administrative expenses were $16.5
million or 19.0% as a percent of revenues for the Five Months
1994 as compared to $8.7 million or 8.5% as a percent of revenues
in the same period of 1993. The increase in selling, general and
administrative expenses is due to significant charges totalling
$7.6 million recorded in the Five Months 1994 and are identified
as follows: (1) $4.2 million of employee benefit related accruals
including $1.4 million from changes in an accounting estimate for
workers' compensation, (2) $2.9 million for resolution of
contractual matters and (3) $.5 million of other significant
charges. Excluding the effect of significant charges, the
Company's selling, general and administrative expenses for the
Five Months 1994 were $8.9 million or 10.2% as a percent of
revenues as compared to $8.7 million or 8.5% as a percent of
revenues in the same period of 1993.
The Company recorded restructuring charges of $30.6 million
during the Five Months 1994, no such charges were recognized
during the corresponding period of 1993. These charges include
$24.1 million of planned costs of integrating the Company's
forgings operations with those of Cameron Forged Products Company
which the Company acquired on May 26, 1994. Restructuring
charges of $5.2 million relate to the closure of a castings
facility and $1.3 million to asset write-downs.
-19-<PAGE>
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Five Months Ended May 28, 1994 (First Five Months of 1994) vs.
Five Months Ended May 29, 1993 (First Five Months of 1993)
(Continued)
The Company recorded a $2.0 million environmental charge
which represents anticipated future environmental expenses
related to the Company's Grafton, Massachusetts facility.
Interest expense was $5.0 million in the Five Months 1994 as
compared to $4.7 million for the same period of 1993. Interest
expense increased $0.8 million for the Five Months 1994 as
compared to the same period of 1993 due to a higher interest rate
and higher average debt during the Five Months 1994 as compared
to the same period of 1993. Additionally, the Company wrote-off
financing fees relating to credit facilities amounting to $1.2
million and $1.7 million in the Five Months 1994 and 1993,
respectively.
Miscellaneous, net expense was $.5 million for the Five
Months 1994 as compared to $0.7 million for the same period of
1993.
Liquidity and Capital Resources
Cash used by operations of $9.1 million resulted primarily
from a $22.0 million loss from operations before restructuring
and environmental charges and depreciation and amortization,
increases in non-working capital items of $1.6 million and
expenditures of $1.4 million for restructuring, disposal and
environmental offset by decreases in working capital items of
$15.9 million.
The Company from time to time expends cash on capital
expenditures for more cost effective operations and joint
development programs with the Company's customers. Capital
expenditures amounted to $13.9 million, $11.2 million and $10.2
million in the years ended December 31, 1993, 1992 and 1991,
respectively. Capital expenditures in the foreseeable future are
not expected to vary materially from historical levels. As of
May 28, 1994, the Company had contributed $4.1 million in cash
towards its share of the capital requirements of its Australian
joint venture for the production of nickel-based superalloy. The
Company is committed to contribute an additional $3.4 million to
the joint venture. However, the joint venture has entered into a
credit agreement with an Australian bank which the Company
expects will provide sufficient liquidity to meet the joint
venture's future cash requirements. The Company has guaranteed
25% of the joint ventures's obligations under the credit
agreement, this guarantee expires at such time as the joint
venture demonstrates its ability to produce commercially
acceptable products. In addition, the Company has committed to
expend $5.7 million on a waste water treatment facility to comply
with an administrative order, of which $1.8 million had been
spent as of May 28, 1994.
-20-<PAGE>
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Liquidity and Capital Resources (Continued)
On March 30, 1994, the Company received $16.1 million as a
cash payment for deferred program costs. Deferred program costs
are primarily inventory, production, tooling, and other
miscellaneous costs which are estimated to be recoverable over
future sales. At March 30, 1994, the Company had a net
investment in the related program of $13.6 million. The excess
funds received, amounting to $2.5 million, has been recorded as
$0.8 million and $1.7 million of short-term and long-term
deferred revenue, respectively, which will be recognized over
future production related to such programs. No revenue has been
recognized to date. The cash payment to the Company does not
affect the long standing status as a supplier partner under its
Agreement with the customer.
During 1994, the Company incurred significant charges
totalling $50 million of which $21.5 million will require future
cash outlays (see Note G). Additionally, the Company estimates
$12.2 million in future cash outlays from direct costs associated
with the acquisition and integration of Cameron Forged Products
Company (see Note F). A summary of these items follows:
<TABLE>
<CAPTION>
Cash Non-Cash Total
(Millions)
<S> <C> <C> <C>
Significant Charges (Note G):
Cameron Integration Costs (Note G):
Movement of the Company's
machinery and equipment
and tooling dies $ 4.8 $ - $ 4.8
Relocation, severance and
other costs related to
personnel of the Company 5.9 - 5.9
Write-down of certain assets
of the Company no longer
intended to be used:
Metal production facility - 7.6 7.6
Forging equipment - 3.2 3.2
Machining and testing equipment - 2.6 2.6
Subtotal Cameron Integration 10.7 13.4 24.1
Employee benefit-related accruals 1.1 2.3 3.4
Change in accounting estimate
estimate (Note J) 5.6 - 5.6
Castings facility closure .5 4.7 5.2
Write-down of inventories - 2.8 2.8
Write-off of bank fees .2 1.0 1.2
Environmental - 2.0 2.0
Other 3.4 2.3 5.7
Subtotal significant charges 21.5 28.5 50.0
</TABLE>
-21-<PAGE>
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Liquidity and Capital Resources (Continued)
<TABLE>
<CAPTION>
Cash Non-Cash Total
(Millions)
<S> <C> <C> <C>
Cameron Acquisition Direct Costs (Note F):
Integration costs:
Cost of relocating Cameron's
machinery and equipment
and tooling dies 4.4 - 4.4
Severance of Cameron personnel 4.9 - 4.9
Other Direct Costs:
Environmental .7 - .7
Other 2.2 - 2.2
Subtotal Cameron Acquisition
Direct Costs 12.2 - 12.2
Total significant charges and
Cameron Acquisition Direct Costs $33.7 $28.5 $62.2
</TABLE>
As of May 28, 1994, of the total cash items of $33.7 million
above, the Company expects to spend approximately $20.0 million
in fiscal 1995 and $13.7 million thereafter.
The Company projects the potential cost savings that may be
achieved by the Company and Cameron on a combined basis as a
result of such measures to be approximately $25.0 million to
$30.0 million annually following an initial period of
consolidation. These projections are based upon a variety of
estimates and assumptions which, though considered reasonable by
the Company, might not be realized, and are inherently subject to
significant business, economic and competitive uncertainties and
contingencies, many of which are beyond the Company's control.
The Company cautions that no assurances can be made as to the
accuracy of these projections or as to the Company's ability to
achieve the projected cost savings. While these projections
represent the best judgment of the Company, such estimates and
the circumstances and conditions affecting the Company and
Cameron are likely to change substantially with the passage of
time.
As of May 28, 1994, the Company expects to spend $1.2
million in fiscal 1995 and $13.4 million thereafter on
environmental activities. The Company has completed all
environmental projects within established timetables and is
continuing to do so at the present time.
-22-<PAGE>
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND CHANGES IN FINANCIAL CONDITION (Continued)
Liquidity and Capital Resources (Continued)
In connection with its 1991 restructuring, the Company
expects to expend an additional $5.1 million over the next
several years, including approximately $2.4 million in fiscal
1995 and $2.7 million thereafter. For 1994 and thereafter, these
expenditures include consolidation and reconfiguration of
existing facilities of $2.3 million in fiscal 1995 and $2.7
million thereafter, and severance costs of $0.1 million in fiscal
1995.
The primary sources of liquidity available in 1995 to fund
the Company's operations, anticipated expenditures in connection
with the acquisition and integration of Cameron, its 1991
restructuring, planned capital expenditures and planned
environmental expenditures include available cash ($42.2 million
at May 28, 1994), borrowing capacity under the Company's $65.0
million Receivables Financing Program (see Note I), cash
generated by operations and reductions in working capital
requirements through planned inventory reductions and accounts
receivable management.
Cash from operations and debt are expected to be the
Company's primary sources of liquidity beyond 1995. The Company
believes that it has adequate resources to provide for its
operations and the funding of restructuring, integration of
Cameron, capital and environmental expenditures.
Accounting and Tax Matters
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits" ("FAS 112"). This standard provides
that the Company follow an accrual method of accounting, rather
than on the as-incurred basis formerly used for benefits payable
to employees when they leave the Company for reasons other than
retirement. The adoption of FAS 112 in the first quarter of 1994
has not had a material affect on earnings or financial position
of the Company.
-23-
