-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AS28o0FQ4VFMNVLWjy7m32qSPvos6gb6YHBHfSO88wGwMiTpSW+YHhX4Peb0AqDA HBaFWZ0kJFhTaFG6IP7fSg== 0000950129-95-001539.txt : 19951202 0000950129-95-001539.hdr.sgml : 19951202 ACCESSION NUMBER: 0000950129-95-001539 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19951130 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYMAN GORDON CO CENTRAL INDEX KEY: 0000108703 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 041992780 STATE OF INCORPORATION: MA FISCAL YEAR END: 0528 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-63459 FILM NUMBER: 95598176 BUSINESS ADDRESS: STREET 1: 244 WORCHESTER ST STREET 2: BOX 8001 CITY: NORTH GRAFTON STATE: MA ZIP: 01536 BUSINESS PHONE: 5088394441 S-3/A 1 WYMAN-GORDAN COMPANY AMEND. #2 TO S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 30, 1995 REGISTRATION NO. 33-63459 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------------------ Amendment No. 2 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------------ WYMAN-GORDON COMPANY (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-1992780 (State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number) organization)
244 WORCESTER STREET, BOX 8001, GRAFTON, MASSACHUSETTS 01536-8001. (508) 839-4441 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) WALLACE F. WHITNEY, JR. Vice President, General Counsel and Clerk Wyman-Gordon Company 244 Worcester Street, Box 8001 Grafton, Massachusetts 01536-8001 (508) 839-8110 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: MARGARET L. WOLFF DIANE K. SCHUMACHER GREGORY M. SHAW GREGORY A. FERNICOLA Senior Vice President, Cravath, Swaine & Moore Skadden, Arps, Slate, General Counsel and Secretary Worldwide Plaza Meagher & Flom Cooper Industries, Inc. 825 Eighth Avenue 919 Third Avenue 1001 Fannin, Houston, TX 77002 New York, NY 10019 New York, NY 10022 (713) 739-5400 (212) 474-1000 (212) 735-3000
------------------------------------ Approximate date of commencement of proposed sale to the public: As soon as possible after this Registration Statement becomes effective. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box / / ------------------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. APPENDIX A Subject to Completion, Dated November 30, 1995 PROSPECTUS 15,000,000 SHARES [LOGO] WYMAN-GORDON COMPANY COMMON STOCK (PAR VALUE $1.00 PER SHARE) This Prospectus relates to 15,000,000 shares of Common Stock, par value $1.00 per share (the "Common Stock"), of Wyman-Gordon Company (the "Company"), which may be delivered by Cooper Industries, Inc. ("Cooper"), at its option, pursuant to the terms of the % Exchangeable Notes Due , 1998 (the "Debt Exchangeable for Common StockSM" or "DECSSM" ). This Prospectus is Appendix A to a prospectus of Cooper (the "DECS Prospectus") covering the sale of 15,000,000 DECS (the "DECS Offering"). The Company will not receive any of the proceeds from the offering contemplated hereby. Cooper has granted the Underwriters of the DECS a 30-day option to purchase up to an additional 1,500,000 DECS, which may be exchangeable at their maturity for additional shares of Common Stock. Such option has been granted solely to cover over-allotments, if any. To the extent that the over-allotment option is not exercised by the Underwriters in full, Cooper may, subject to certain limitations, sell up to 1,500,000 shares of Common Stock pursuant to this Prospectus. See "Plan of Distribution." PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION CONTAINED UNDER "RISK FACTORS" ON PAGE 7. In connection with market-making activities in the DECS, Salomon Brothers Inc. ("Salomon") may, subject to certain limitations, from time to time borrow, return and reborrow up to 1,250,000 shares of Common Stock from Cooper. Salomon is not under any obligation to engage in any market-making transactions with respect to the DECS, and any market-making in the DECS actually engaged in by Salomon may cease at any time. In addition, the Common Stock is traded on The Nasdaq Stock Market's National Market ("Nasdaq") under the symbol WYMN. On , 1995, the last reported sale price of Common Stock was $ per share. See "Price Range of Common Stock and Dividend Policy." The Company and Cooper have agreed not to sell, without the prior written consent of the Underwriters, any shares of Common Stock or any securities convertible into or exchangeable for Common Stock for a period of 90 days after the date of this Prospectus. See "Plan of Distribution." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1995. 3 THE COMPANY HAS BEEN ADVISED THAT IN CONNECTION WITH THE OFFERING BY COOPER OF THE DECS, THE UNDERWRITERS OF THE DECS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE DECS OR THE COMMON STOCK OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON NASDAQ OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP MEMBERS) AND THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SEE "PLAN OF DISTRIBUTION." AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance with the Exchange Act files reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC"). The Company has filed a registration statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with the SEC with respect to the Common Stock offered hereby. This Prospectus, which constitutes part of the Registration Statement, does not contain all the information set forth in the Registration Statement and reference is made to the Registration Statement and the exhibits thereto for further information with respect to the Company and the Common Stock. Such reports, proxy statements, Registration Statement and exhibits and other information omitted from this Prospectus can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the SEC's Regional Offices located at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Such reports, proxy statements and other information concerning the Company can also be inspected at The Nasdaq Stock Market at 1735 K Street, N.W., Washington, D.C. 20006. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's Annual Report on Form 10-K for the fiscal year ended June 3, 1995, the Quarterly Report on Form 10-Q for the fiscal quarter ended September 2, 1995, the proxy statement dated August 30, 1995, and the Company's Current Report on Form 8-K filed on June 9, 1994, including the financial statements of Cameron (as defined herein) contained therein, are incorporated by reference in this Prospectus. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering made hereby shall be deemed to be incorporated by reference into this Prospectus and to be made a part hereof from the respective dates of filing of such documents. Any statement in any document incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement or this Prospectus. Copies of the above documents (other than exhibits to such documents unless such exhibits are specifically incorporated by reference in such documents) may be obtained upon written or oral request without charge from the Company, 244 Worcester Street, Grafton, Massachusetts 01536, Attention: Clerk, telephone (508) 839-4441. 2 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information and the consolidated financial statements appearing elsewhere in this Prospectus as well as the information incorporated herein by reference. THE COMPANY Wyman-Gordon Company (the "Company"), founded in 1883, is a leading producer of highly engineered, technically advanced components, primarily for the aerospace industry as well as for other markets including power generation. The Company uses forging, casting and composites technologies to produce components to exacting customer specifications for technically demanding applications such as jet turbine engines, airframe structures, land-based gas turbines, and extruded seamless pipe. Components manufactured by the Company are utilized in most of the major commercial and United States defense aerospace programs. The Company believes that it is the only firm to provide the aerospace industry with a combination of forging, casting and composites capabilities for the production of high quality components and that it produces the broadest offering of aerospace forgings available on the market. The Company manufactures components from sophisticated titanium and nickel-based superalloys for jet engines manufactured by General Electric Company ("GE"), the Pratt & Whitney Division ("Pratt & Whitney") of United Technologies Corporation ("United Technologies"), Rolls-Royce plc ("Rolls- Royce") and CFM International S.A. The Company's airframe structural components, such as landing gear, bulkheads and wing spars, are used on the entire fleet of airplanes manufactured by The Boeing Company ("Boeing"), including the new 777, as well as the McDonnell Douglas Corporation ("McDonnell Douglas") MD-11 and the Airbus Industrie S.A. ("Airbus") A330 and A340, and on a number of military aircraft and other defense-related applications including the McDonnell Douglas C-17 transport and the new F-22 air superiority fighter being jointly developed by Lockheed Martin Corporation ("Lockheed") and Boeing. Recently the Company has expanded its product offerings by focusing on the land-based gas turbine market through products sold primarily to GE and on the power generation markets through pipe and valve bodies sold to a variety of customers. In recent years the Company has experienced losses as a result of declines in customer demand caused by a combination of defense spending cutbacks, reduced orders for new commercial aircraft and reductions in customer inventory levels. In response, the Company's senior management implemented a series of strategic initiatives designed to (i) lower the Company's cost structure, (ii) consolidate its forgings operations, (iii) lower inventory requirements, and (iv) solidify customer relations. In further response to the continuing overcapacity in the industry, the Company acquired all of the stock of Cameron Forged Products Company ("Cameron") from Cooper in May 1994 (the "Acquisition"). Prior to the Acquisition, Cameron was the Company's principal competitor in the production of forgings for use in critical aerospace applications. For the year ended December 31, 1993, Cameron had revenues of $149.5 million, an operating loss of ($22.2) million and total assets of $151.8 million. As part of the consideration for the Acquisition, the Company issued 16.5 million shares of Common Stock to Cooper, which shares are being registered in connection with the DECS Offering. Currently, these shares represent approximately 47% of the outstanding Common Stock of the Company. As a result of the Acquisition, the Company has achieved cost savings, which total more than $26.0 million on an annualized basis to date. In addition, the Company has achieved the following production efficiencies. Focused Factories. The Company has substantially completed the consolidation of the manufacture of rotating parts for jet engines from Grafton, Massachusetts into Cameron's Houston, Texas facility. At the same time, the Grafton facility has been focused on the production of large airframe structures and large turbine parts such as components for the GE90 engine and land-based gas turbines. The result has been the elimination of duplicative facilities, improved throughput, and efficiencies of scale. 3 5 Rationalization of Forging Operations. Subsequent to the Acquisition the Company closed one of the two Cameron forging plants in Houston, Texas. In addition, the Company has closed its ring-roll operations and is in the process of closing its hammer forging operations at its Worcester, Massachusetts facility. The result has been improved manufacturing efficiencies, higher utilizations and better inventory management. Best Practices. The Company is in the process of adopting the best manufacturing practices of the Company and Cameron. The improved manufacturing practices have resulted in cost reductions from lower material input weights on certain forgings, improved machining practices and more efficient testing procedures. Substantial raw material cost savings in certain of the Company's forging processes have resulted from utilization of material produced in Cameron's Brighton, Michigan powder metal facility and Cameron's Houston, Texas vacuum arc remelting facility. From 1991 through 1995 average production cycle times at Cameron's Houston facility were reduced from approximately 22 weeks to seven weeks and the Company is seeking to achieve similar reductions at its Grafton, Massachusetts facility. As a result of these realized production efficiencies and cost savings the Company's operating results improved in each quarter of fiscal year 1995 and continued at improved levels in the first quarter of fiscal year 1996 as shown by the following table.
THREE MONTHS ENDED --------------------------------------------------------------------------- SEPTEMBER 3, DECEMBER 3, MARCH 4, JUNE 3, SEPTEMBER 2, 1994 1994 1995 1995 1995 ------------ ----------- -------- -------- ------------ (000'S, EXCEPT PERCENTAGE DATA) Revenues................ $95,725 $94,974 $96,238 $109,702 $114,077 Gross profit............ 9,575 9,869 12,615 17,329 18,180 Gross margin............ 10.0% 10.4% 13.1% 15.8% 15.9% Operating income........ $ 3 $ 768 $ 3,620 $ 9,327 8,083 Operating margin........ 0.0% 0.8% 3.8% 8.5% 7.1% Annualized revenues per employee.............. $ 129 $ 129 $ 130 $ 146 $ 151
In addition to the benefits the Company has realized from the Acquisition and expects to realize in the future, the Company has in place several programs designed to strengthen its position in the aerospace market and to enter new markets through its expertise in high performance materials. Focus on Large Aerospace Components. The Company believes that its extensive installed asset base, technological leadership in manufacturing large-scale components and experience in producing and utilizing sophisticated alloys will enable the Company to capitalize on the industry trend toward widebody aircraft with larger and more sophisticated engines. These aircraft, which include the new Boeing 777, require larger airframe structural parts and their engines require high-purity alloys, both of which are particular strengths of the Company. Strategic Alliances with Key Customers. The Company has entered into joint development programs with its two largest customers, GE and Pratt & Whitney, for the production of (i) forged rotating parts for the new GE90 jet engine and (ii) nickel-based superalloy ingots in Perth, Australia for use in forging and casting applications (the "Australian Joint Venture"), respectively. Management believes that alliances such as these strengthen existing relationships, and in some cases allow the Company to become involved in the design phases for new components and applications, thereby enhancing the Company's chances of obtaining future orders. New Applications and Markets. The Company believes that its expertise in the manufacture of highly specialized metal components with enhanced fatigue and temperature resistant properties gives it the ability to design new applications for existing technologies in its current markets and to utilize existing technologies in new markets. For example, the Company has been able to enter the power generation market where the Company's knowledge of nickel-based superalloys and manufacturing technology 4 6 utilized for aircraft engines can be applied to manufacture energy efficient, high strength, temperature resistant gas turbines. Management believes that the combination of the Company's technological capabilities, installed asset base and close customer relationships, together with its improved cost structure, will allow the Company to operate profitably in an environment of relatively low commercial aircraft deliveries and to benefit from increases in delivery rates. At the same time the Company seeks to expand into new product and geographic markets. No assurances can be given that such strategic initiatives will be successful in producing long-term profitability. See "Risk Factors -- History of Recent Losses." THE OFFERING OF THE DECS This Prospectus relates to 15.0 million shares of Common Stock, and up to 1.5 million additional shares of Common Stock to cover over-allotments, which may be delivered by Cooper, at its option, pursuant to the terms of the DECS, which are being offered by Cooper pursuant to the Cooper Prospectus. To the extent that the over-allotment option is not exercised by the Underwriters, Cooper may, subject to certain limitations, sell up to 1.5 million shares of Common Stock pursuant to this Prospectus. The Company is registering the shares of Common Stock pursuant to the Investment Agreement, dated January 10, 1994 (the "Investment Agreement"), between the Company and Cooper, which Investment Agreement provides Cooper with certain rights to have the shares of Common Stock held by Cooper registered by the Company under the Securities Act. The Company has also agreed to indemnify Cooper and the Underwriters of the DECS against certain liabilities, including civil liabilities under the Securities Act. The Company and Cooper have agreed not to sell, without the prior written consent of the Underwriters, any shares of Common Stock or any securities convertible into or exchangeable for Common Stock for a period of 90 days after the date of this Prospectus. See "Plan of Distribution." 5 7 SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA The following tables set forth summary consolidated financial and other data for the Company for the respective periods indicated based on the Company's audited and unaudited financial statements. The following tables should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information included elsewhere in this Prospectus.
THREE MONTHS ENDED YEAR ENDED ---------------------------- ------------------------------------------ SEPTEMBER 2, SEPTEMBER 3, JUNE 3, MAY 28, DECEMBER 31, 1995 1994 1995 1994 (1) 1993 (2) ------------- ------------ ------------ ------------ ------------ (000'S OMITTED, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA (3): Revenues............................... $114,077 $ 95,725 $396,639 $224,694 $239,761 Gross profit........................... 18,180 9,575 49,388 6,878 20,673 Other charges (credits) and environmental charges (4)............ 900 -- (710) 35,003 2,453 Income (loss) from operations.......... 8,083 3 13,718 (63,657) (8,428) Net income (loss) (5).................. 5,101 (3,321) 1,039 (72,403) (60,004) PER SHARE DATA: Income (loss) per share before taxes and cumulative effect of changes in accounting principles................ $ 0.14 $ (0.10) $ 0.03 $ (4.02) $ (0.95) Net income (loss) per share (5)........ 0.14 (0.10) 0.03 (4.02) (3.34) Dividends paid per share............... -- -- -- -- -- Shares used to compute income (loss) per share............................ 35,889 34,715 35,148 17,992 17,965 BALANCE SHEET DATA: (at end of period)(3): Working capital........................ $103,943 $ 91,109 $ 93,062 $ 91,688 $ 90,685 Total assets........................... 370,619 368,868 369,064 394,747 286,634 Long-term debt......................... 90,308 90,385 90,308 90,385 90,461 Stockholders' equity................... 85,768 69,920 80,855 72,483 88,349 OTHER DATA: Order backlog (at end of period)....... $476,944 $400,110 $468,761 $389,407 $256,259 EBITDA (6)............................. 11,816 3,649 30,188 (45,380) 9,388 - --------------- (1) On May 24, 1994, the Company's Board of Directors voted to change the Company's fiscal year end from December 31 to the Saturday nearest to May 31. The Statement of Operations Data for the year ended May 28, 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 28, 1994 (000's omitted, except per share amounts): Revenues....................................................................... $ 86,976 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 fiscal year 1993, the Company's pro forma unaudited revenues, loss before the cumulative effect of changes in accounting principles and net loss would have been $389.3 million, ($39.3) million and ($82.3) million, respectively. (3) On May 26, 1994, the Company acquired Cameron from Cooper. The Summary Consolidated Financial and Other Data include the accounts of Cameron from the date of the Acquisition. Cameron's operating results from May 26, 1994 to May 28, 1994 are not material to the consolidated statement of operations for the year and five months ended May 28, 1994. (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 $2.5 million. In May 1994, the Company recorded charges of $6.5 million related to the closing of a castings facility, $24.1 million related to restructuring and integration of Cameron and $2.0 million for environmental investigation and remediation costs. During the first quarter of fiscal year 1996, the Company provided $0.8 million in order to recognize its 25.0% share of the net losses of the Australian Joint Venture and to reserve for amounts loaned to the Australian Joint Venture during the first quarter of fiscal year 1996. Additionally, the Company provided $0.1 million relating to expenditures for an investment in an additional joint venture. (5) Includes a charge of $43.0 million or $2.39 per share in fiscal year 1993 related 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 benefits 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 fiscal year 1993. (6) EBITDA is defined as earnings before interest, taxes, depreciation, amortization and changes in accounting principles. EBITDA is presented because it may be used as one indicator of a company's ability to service debt. The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as 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.
6 8 RISK FACTORS Prospective investors should carefully consider the specific risk factors set forth below as well as the other information contained in this Prospectus and the information incorporated herein by reference. HISTORY OF RECENT LOSSES Although the Company reported net income of $1.0 million for fiscal year 1995, the Company reported a net loss for the five months ended May 28, 1994, and for two of the three previous fiscal years. For the year ended December 31, 1993, the Company reported a net loss (before the cumulative effect of changes in accounting principles) of ($17.0) million. Cameron reported a net loss of ($20.1) million for the same period, its last fiscal year prior to the Acquisition. The Company has implemented structural changes designed to improve its cost structure and increase efficiency and productivity at its Houston facilities. The Company is now implementing similar changes at its Grafton facility, which has been operating at a loss in recent years. If these objectives cannot be successfully achieved, the Company may implement further restructuring measures which could result in write-offs and reduced earnings or losses. There can be no assurance that the Company's operations will be profitable in the future. See the Consolidated Financial Statements. VOLATILITY IN THE COMMERCIAL AEROSPACE INDUSTRY Approximately 52% of the Company's revenues during fiscal year 1995 was derived from the commercial aerospace industry, an industry that is cyclical in nature and subject to changes based on general economic conditions and airline profitability. Although the United States economy entered a period of slow growth in 1989 and 1990, the aerospace industry made record deliveries of commercial aircraft, based on revenue, during those years, and aircraft deliveries continued to grow through 1991 and decreased only slightly in 1992. In 1990 through 1992, domestic airlines suffered significant operating losses. As a result of these losses, the high levels of debt incurred to purchase new aircraft and the excess capacity within the commercial airline sector, the commercial aerospace industry has since experienced reduced new orders for commercial aircraft and related spare parts as well as deferrals, and in some cases cancellations, of deliveries of previously ordered aircraft. While the Company's customers are now reporting increased orders for spare parts, aircraft deliveries continue at historically low rates. Although it appears that the health of the airline industry is improving, based on profitability, there can be no assurance that any improvement in the commercial aerospace market will be substantial or that improved conditions would be sustained. See "Business -- Markets" and "Business -- Customers." REDUCTIONS IN DEFENSE SPENDING Approximately 24% of the Company's revenues during fiscal year 1995 was derived from the defense aerospace industry, an industry that is dependent upon government defense budgets and, in particular, the United States' defense budget. In general, defense budgets in the United States have been declining in recent years, resulting in reduced demand for new aircraft and spare parts. While the effect of United States defense budget reductions may be offset in part by foreign military sales, such sales are affected by United States governmental regulation, regulation by the purchasing government and political uncertainties in the United States and abroad. There can be no assurance that United States defense budgets and the related demand for defense equipment will not continue to decline or that sales of defense equipment to foreign governments will continue at present levels. DEPENDENCE ON MAJOR CUSTOMERS The Company is dependent upon a few large aerospace contractors for a significant percentage of its revenue. Five customers accounted for approximately 50% of the Company's revenues during the Company's fiscal year 1995, and two of the five, GE and United Technologies, accounted for 26% and 15% of total revenues, respectively. In addition, many of the Company's sales to its smaller customers are eventually incorporated into components sold to its major customers. The loss of, or significant reduction 7 9 in, purchases by any of the Company's major customers would adversely affect the Company. In addition, 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. See "Business -- Customers." COMPETITION The Company is subject to intense competition for supplying its customers with products. Many of the Company's products are sold under long-term contracts which are bid upon by several suppliers. Because of reductions in demand for aerospace products in recent years, there exists excess productive capacity in the market for a number of the Company's principal products which results in intense price competition for orders. There can be no assurance that the Company can maintain its share of the market for any of its products. See "Business -- Competition." RISK OF FLUCTUATIONS IN PRICE AND AVAILABILITY OF RAW MATERIALS The Company's results of operations are affected by significant fluctuations in the prices of raw materials used by the Company. 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. In addition, during periods of increasing raw materials prices, metals suppliers, who are subject to increased raw materials costs, may be unable to make timely deliveries or may experience quality problems. During the past year the Company has experienced a doubling of the delivery times for its principal raw materials, nickel-based alloys and titanium alloys. Due to these and other factors, significant increases in the prices or scarcity of supply of raw materials used by the Company may well have an adverse impact on the Company's results of operations. See "Business -- Raw Materials." LIQUIDITY The Company anticipates making cash expenditures during fiscal year 1996 of approximately $35 to $38 million of which approximately $25 million will be for ongoing capital expenditures, and the balance will be for expenditures relating to the consolidation of the Company's forging operations with Cameron, for costs associated with prior restructuring activities, and for environmental management and remediation projects. The Company expects that its cash expenditures will continue at close to the same level for fiscal years 1997 and 1998. There can be no assurances that the Company will be able to generate the cash flow from its operations and from improved inventory management necessary to meet its anticipated cash requirements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." COMPLIANCE WITH ENVIRONMENTAL AND OTHER GOVERNMENT REGULATIONS The Company's operations are subject to extensive environmental, health and safety laws and regulations promulgated by federal, state and local governments. Many of these laws and regulations provide for substantial fines and criminal sanctions for violations. The nature of the Company's business exposes the Company to risks of liability due to the use and storage of materials that can cause contamination or personal injury if released into the environment. In addition, environmental laws may have a significant effect on the nature, scope and cost of cleanup of contamination at operating facilities. It is difficult to predict the future development of such laws and regulations or their impact on future earnings and operations, but the Company anticipates that these standards will continue to require increased capital expenditures. There can be no assurance that material costs or liabilities will not be incurred. 8 10 Based upon information presently available, the Company does not expect that costs for future environmental compliance and remediation will have a material adverse effect on its competitive or financial position or its ongoing results of operations. However, it is not possible to predict accurately the amount or timing of costs of any future environmental remediation requirements. Such costs could be material to future quarterly or annual results of operations. In addition, the "Superfund" statutes may impose joint and several liability for the costs of remedial investigations and actions on the entities that arranged for disposal of the wastes, the waste transporters that delivered materials to the disposal sites and the past and present owners and operators of such sites; responsible parties (or any one of them, including the Company) may be required to bear all of such costs regardless of fault, legality of the original disposal or ownership of the disposal site. In such event, the amount owed by the Company for liabilities at Superfund sites could be significantly greater. See "Business -- Environmental Regulations" and Footnote G to the Consolidated Financial Statements. PRODUCT LIABILITY EXPOSURE The Company produces many critical engine and structural parts for commercial and military aircraft. As a result, the Company has an inherent risk of exposure to product liability claims. The Company maintains product liability insurance, 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 incurred. See "Business -- Product Liability Exposure." ANTI-TAKEOVER PROVISIONS; POSSIBLE ADVERSE EFFECTS OF ISSUANCE OF PREFERRED STOCK The Company's Restated Articles of Organization (the "Articles"), By-Laws and Rights Agreement (as defined herein), as well as Massachusetts law, contain provisions that could discourage a proxy contest, make more difficult the acquisition of a substantial block of the Common Stock, which could make the payment of a premium to shareholders in connection with a change in control less likely, and increase the difficulty of removing incumbent management and board members. In addition, such provisions could limit the price that investors might be willing to pay in the future for shares of the Common Stock. The Board of Directors of the Company is authorized to issue, without stockholder approval, Preferred Stock with voting, conversion and other rights and preferences that could adversely affect the voting power or other rights of the holders of Common Stock. The issuance of Preferred Stock or rights to purchase Preferred Stock could be used to discourage an unsolicited acquisition proposal. Pursuant to the Rights Agreement the Company has issued Rights (as defined herein) which provide that under certain circumstances each holder of a Right will have the right to receive a number of shares of common stock of an Acquiring Person (as defined herein) having a market value of two times the Exercise Price (as defined herein) of the Right. The Rights will cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Company's Board of Directors. See "Description of the Company's Capital Stock -- Rights Agreement." The Board of Directors is divided into three "staggered" classes, with each class serving for a term of three years. Dividing the Board of Directors in this manner could increase the difficulty of removing incumbent members and could discourage a proxy contest or the acquisition of a substantial block of the Common Stock. The Articles also contain a "fair price provision" that could impede certain business combinations involving the Company. Massachusetts law contains certain anti-takeover provisions, including Chapter 110F of the Massachusetts General Laws (the "MGL"), a so-called "Business Combination Statute" that restricts certain stockholders that own (together with their affiliates) 5% or more of the outstanding voting stock of a Massachusetts corporation from engaging in certain business combinations with such corporation ("Chapter 110F"), and Chapter 110D of the MGL, a so-called "Control Share Statute" that limits any person or entity that has acquired 20% or more of a corporation's stock from voting such shares unless the corporation's stockholders, other than such acquiring person or entity, authorize such voting rights by a vote of the holders of the majority of stock of the corporation entitled to vote on such matters ("Chapter 110D"). Although the Company has presently selected to "opt-out" of Chapter 110D, the Company remains subject to Chapter 110F. Such provisions of Massachusetts law could have the effect of discouraging a potential acquiror from making an offer for the Common Stock, which would make the payment of a premium to stockholders in connection with a change in control less likely, and could 9 11 increase the difficulty of removing incumbent management and board members. See "Description of the Company's Capital Stock." In addition, the Investment Agreement with Cooper creates certain obstacles to a takeover of the Company. See "Restrictions on Voting Control" below. RESTRICTIONS ON VOTING CONTROL The Investment Agreement with Cooper, which relates to Cooper's ownership of 16.5 million shares of Common Stock or 47% of the Common Stock outstanding, includes provisions (i) requiring Cooper to vote its shares of Common Stock as recommended by the Company's Board of Directors or at Cooper's option in the same proportion to votes of the other shareholders, (ii) restricting Cooper's ability to sell or encumber its shares of Common Stock, and (iii) preventing Cooper from joining in any proxy contest, making any proposal with respect to the acquisition of any securities or assets of the Company, initiating or soliciting proxies for the approval of any shareholder proposals, and tendering shares of Common Stock that Cooper owns in a tender offer unless the Company's Board of Directors approves such tender or takes a neutral position on the offer. See "Relationship Between the Company and Cooper -- Investment Agreement." Such "standstill" agreements give the Company's Board of Directors effective voting control over 47% of the Company's outstanding shares of Common Stock which could make it substantially more difficult for owners of shares of Common Stock to affect the outcome of shareholder votes. IMPACT OF THE DECS ON THE MARKET FOR THE COMPANY'S COMMON STOCK It is not possible to predict accurately how or whether the DECS will trade in the secondary market or whether such market will be liquid. Any market that develops for the DECS is likely to influence and be influenced by, the market for the Common Stock. For example, the price of the Common Stock could become more volatile and could be depressed by investors' anticipation of the potential distribution into the market of substantial additional amounts of Common Stock at the maturity of the DECS, by possible sales of Common Stock by investors who view the DECS as a more attractive means of equity participation in the Company and by hedging or arbitrage trading activity that may develop involving the DECS and the Common Stock. PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY The Common Stock of the Company is listed on Nasdaq under the symbol WYMN. The following table sets forth the high and low sales price of the Common Stock for the calendar periods listed below as reported on Nasdaq.
HIGH LOW ------ ------ 1994 First Quarter.......................................................... $7 1/8 $4 5/8 Second Quarter......................................................... 6 7/8 4 1/2 Third Quarter.......................................................... 7 5 3/4 Fourth Quarter......................................................... 6 1/2 4 3/4 1995 First Quarter.......................................................... 8 5 1/4 Second Quarter......................................................... 12 3/8 7 5/8 Third Quarter.......................................................... 14 1/8 10 5/8 Fourth Quarter (through November 28, 1995)............................. 15 1/8 12 1/4
On November , 1995, the last reported sale price of the Common Stock was per share. The Company discontinued dividends on the Common Stock beginning in the fourth quarter of 1991. While it is the intention of the Board of Directors to consider the resumption of dividends on the Common Stock from time to time, the declaration of future dividends will be dependent upon the Company's earnings, financial condition, and other relevant factors. 10 12 The Company is limited in the amount of dividends it may pay under the terms of the indenture dated March 16, 1993, pursuant to which it issued $90.0 million principal amount of 10 3/4% Senior Notes due 2003 (the "Senior Note Indenture"). Such limitation is provided by the Senior Note Indenture's limitation on restricted payments, including dividends. The Senior Note Indenture provides that the Company will not, and will not permit any of its subsidiaries to, pay dividends or make any other restricted payment if, after giving effect thereto, the aggregate amount of all restricted payments made from and after the date of the Senior Note Indenture would exceed the sum of (a) 50% of consolidated net income of the Company accrued for the period (taken as one accounting period) commencing with March 29, 1993, to and including the date of such calculation (or, in the event consolidated net income is a deficit, then minus 100% of such deficit); (b) the aggregate net proceeds, including the fair market value of property other than cash, received by the Company from the issuance or sale of its capital stock, including the issuance of its capital stock upon conversion of securities other than its capital stock, and options, warrants and rights to purchase its capital stock (other than redeemable stock) from and after the date of the Senior Note Indenture; and (c) $5.0 million. As of June 3, 1995, the Company was not eligible to pay dividends under the terms of the Senior Note Indenture. The Senior Note Indenture also contains certain other covenants including limitations on indebtedness, liens, and disposition of assets. As of , 1995, the Common Stock was held by holders of record. The number of record holders may not be representative of the number of beneficial holders because many shares are held by depositories, brokers, or other nominees. 11 13 CAPITALIZATION The following table sets forth as of September 2, 1995 and June 3, 1995, the capitalization of the Company. The Company will receive no proceeds from the sale of the DECS or from sales of Common Stock by Cooper pursuant to this Prospectus, if any. This table should be read in conjunction with the Consolidated Financial Statements of the Company and the related notes thereto appearing elsewhere in this Prospectus. See "Selected Consolidated Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SEPTEMBER 2, JUNE 3, 1995 1995 ------------ -------- (000'S OMITTED) Borrowings Due Within One Year.................................... $ 4,812 $ 3,915 ======== ======== Long-Term Debt: 10 3/4% Senior Notes Due 2003................................... $ 90,000 $ 90,000 Other........................................................... 308 308 -------- -------- Total Long-Term Debt............................................ 90,308 90,308 -------- -------- Stockholders' Equity: Preferred Stock, No Par Value: Authorized 5,000,000 Shares; None Issued..................... -- -- Common Stock, Par Value $1.00 Authorized 70,000,000 Shares; Issued 37,052,720.............. 37,053 37,053 Capital in Excess of Par Value.................................. 38,699 40,118 Retained Earnings............................................... 44,801 39,700 Equity Adjustments.............................................. (714) 63 -------- -------- 119,839 116,934 Less Treasury Stock at Cost..................................... (34,071) (36,079) -------- -------- Total Stockholders' Equity................................... 85,768 80,855 -------- -------- Total Capitalization.............................................. $176,076 $171,163 ======== ========
12 14 SELECTED CONSOLIDATED FINANCIAL DATA The consolidated balance sheet data as of June 3, 1995, May 28, 1994 and December 31, 1993, 1992, 1991 and 1990 and consolidated statement of operations data for the year ended June 3, 1995, five months ended May 28, 1994 and years ended December 31, 1993, 1992, 1991 and 1990 have been derived from the Company's audited consolidated financial statements. The consolidated balance sheet data as of September 2, 1995 and September 3, 1994 and the consolidated statement of operations data for the three months ended September 2, 1995 and September 3, 1994 and for the year ended May 28, 1994, have been derived from the Company's unaudited consolidated financial statements. The financial data set forth below should be read in conjunction with the Consolidated Financial Statements of the Company and related notes thereto, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other financial information included elsewhere in this Prospectus.
THREE MONTHS ENDED YEAR ENDED ------------------------- ------------------------------------------------------------------------------ SEPTEMBER 2, SEPTEMBER 3, JUNE 3, MAY 28, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 1995 1994 1995 1994(1) 1993(2) 1992 1991(3) 1990(3) ------------ ------------ -------- -------- ------------ ------------ ------------ ------------- (000'S OMITTED, EXCEPT PER SHARE AMOUNTS) STATEMENT OF OPERATIONS DATA(4): Revenues............... $114,077 $ 95,725 $396,639 $224,694 $239,761 $298,881 $ 355,390 $405,381 Gross profit........... 18,180 9,575 49,388 6,878 20,673 55,590 28,362 56,295 Other charges (credits) and environmental charges(5)............ 900 -- (710) 35,003 2,453 -- 106,464 -- Income (loss) from operations....... 8,083 3 13,718 (63,657) (8,428) 27,275 (115,160) 21,319 Net income (loss)(6)... 5,101 (3,321) 1,039 (72,403) (60,004) 21,795 (99,681) 8,696 PER SHARE DATA: Income (loss) per share before cumulative effect of changes in accounting principles............ $ 0.14 $ (0.10) $ 0.03 $ (4.02) $ (0.95) $ 1.21 $ (5.59) $ 0.49 Net income (loss) per share (6)............. 0.14 (0.10) 0.03 (4.02) (3.34) 1.21 (5.59) 0.49 Dividends paid per share -- -- -- -- -- -- 0.30 0.80 Shares used to compute income (loss) per share............. 35,889 34,715 35,148 17,992 17,965 18,078 17,831 17,831 BALANCE SHEET DATA (at end of period)(4): Working capital........ $103,943 $ 91,109 $ 93,062 $ 91,688 $ 90,685 $ 96,057 $ 110,859 $124,030 Total assets........... 370,619 368,868 369,064 394,747 286,634 295,156 339,154 421,886 Long-term debt......... 90,308 90,385 90,308 90,385 90,461 70,538 90,615 73,892 Stockholders' equity... 85,768 69,920 80,855 72,483 88,349 149,516 128,088 232,157 OTHER DATA: Order backlog (at end of period)............... $476,944 $400,110 $468,761 $389,407 $256,259 $309,679 $ 386,905 $392,857 EBITDA (7)............. 11,816 3,649 30,188 (45,380) 9,388 45,191 (89,960) 50,599
13 15 [FN] - --------------- (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. The Statement of Operations Data for the year ended May 28, 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 28, 1994 (000's omitted, except per share amounts): Revenues..................................................... $ 86,976 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 fiscal year 1993, the Company's pro forma unaudited revenues, loss before the cumulative effect of changes in accounting principles and net loss would have been $389.3 million, ($39.3) million and ($82.3) million, respectively. (3) In fiscal year 1991, the Company divested its automotive crankshaft operations. Revenues pro forma for the exclusion of such operations are $306.6 million and $344.0 million for fiscal years 1991 and 1990, respectively, assuming the divestiture of the automotive crankshaft operations had taken place as of the beginning of each of the periods. (4) On May 26, 1994, the Company acquired Cameron from Cooper. 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 28, 1994 are not material to the consolidated statement of operations for the year and five months ended May 28, 1994. (5) During fiscal year 1991 the Company incurred charges of approximately $88.0 million and $11.5 million in connection with a restructuring program primarily at its forging operations and disposition of its automotive crankshaft forging division, respectively. Additionally, $7.0 million was provided with respect to environmental investigation and remediation costs at one of the Company's facilities. 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 $2.5 million. In May 1994, the Company recorded charges of $6.5 million related to the closing of a castings facility, $24.1 million related to restructuring and integration of Cameron and $2.0 million for environmental investigation and remediation costs. During the first quarter of fiscal year 1996, the Company provided $0.8 million in order to recognize its 25.0% share of the net losses of the Australian Joint Venture and to reserve for amounts loaned to the Australian Joint Venture during the first quarter of fiscal year 1996. Additionally, the Company provided $0.1 million relating to expenditures for an investment in an additional joint venture. (6) Includes a charge of $43.0 million 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 benefits 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 charges in fiscal year 1993. (7) EBITDA is defined as earnings before interest, taxes, depreciation, amortization and changes in accounting principles. The presentation of EBITDA is presented because it may be used as one indicator of a company's ability to service debt. The Company believes that EBITDA, while providing useful information, should not be considered in isolation or as 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. 14 16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following discussion and analysis presents management's assessment of material developments affecting the Company's results of operations, liquidity and capital resources during the first quarter of fiscal year 1996 and the first quarter of fiscal year 1995, and during fiscal years 1995, 1994 and 1993. These discussions should be read in conjunction with the Company's Consolidated Financial Statements and the Notes thereto. Comparisons of fiscal 1995 results with results prior to the Acquisition of Cameron may not be meaningful. RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED SEPTEMBER 2, 1995 ("FIRST QUARTER OF FISCAL YEAR 1996") COMPARED TO THREE MONTHS ENDED SEPTEMBER 3, 1994 ("FIRST QUARTER OF FISCAL YEAR 1995") The Company's revenues increased 19.2% to $114.1 million in the first quarter fiscal year 1996 from $95.7 million in the first quarter fiscal year 1995 due to higher sales volume at the Company's Forgings and Castings Divisions. These sales volume increases during the first quarter of fiscal year 1996 as compared to the first quarter of fiscal year 1995 are reflected by market as follows: a $9.3 million (12.8%) increase in aerospace, a $8.3 million (57.2%) increase in power generation and a $0.8 million (9.1%) increase in other. Revenues in the first quarters of fiscal years 1996 and 1995 were limited by raw material shortages and production delays caused by capacity constraints of the Company's suppliers. While the severity of the raw material shortages was not as extensive in the first quarter of fiscal year 1996 as compared to the first quarter of fiscal year 1995, the Company is seeking to improve upon its ability to receive raw material such that there is no disruption to its production schedule. The revenue increases mentioned above have occurred while the Company's backlog has grown steadily to $477.0 million at September 2, 1995 from $400.1 million at September 3, 1994. The Company's gross margins were 15.9% in the first quarter of fiscal year 1996 as compared to 10.0% in the first quarter of fiscal year 1995. This improvement resulted from higher production volumes and productivity gains resulting from the Company's efforts toward focusing forging production of rotating parts for jet engines in its Houston, Texas facility and forging production of airframe structures and large turbine parts in its Grafton, Massachusetts facility. Additionally, continuing realization of cost reductions from synergies associated with the integration of Cameron contributed to this higher ratio. Gross margins benefitted from LIFO credits of $1.1 million during the first quarter of fiscal year 1995. There were no LIFO credits recorded during the first quarter of fiscal year 1996. Selling, general and administrative expenses decreased 3.9% to $9.2 million during the first quarter of fiscal year 1996 from $9.6 million during the first quarter of fiscal year 1995. Selling, general and administrative expenses as percentage of revenues improved to 8.1% in the first quarter of fiscal year 1996 from 10.0% in the first quarter of fiscal year 1995. The improvement as a percent of revenues is the result of cost reductions associated with the integration of Cameron with the Company's Forgings operations and higher revenues. During the first quarter of fiscal year 1996, the Company provided $0.8 million in order to recognize its 25.0% share of the net losses of the Australian Joint Venture and to reserve for amounts loaned to the Australian Joint Venture during the first quarter of fiscal year 1996. Additionally, the Company provided $0.1 million relating to expenditures for an investment in an additional joint venture. Interest expense was $2.9 million in both the first quarter of fiscal year 1996 and the first quarter of fiscal year 1995. Miscellaneous, net was an expense of $0.1 million in the first quarter of fiscal year 1996 as compared to an expense of $0.4 million in the first quarter of fiscal year 1995. Miscellaneous, net in the first quarter of fiscal year 1996 includes a $0.2 million gain on the sale of marketable securities. 15 17 The Company recorded no provision for income taxes in the first quarter of fiscal years 1996 and 1995. Net income was $5.1 million, or $.14 per share, in the first quarter of fiscal year 1996 and net loss was $(3.3) million, or $(.10) per share in the first quarter of fiscal year 1995. The $8.4 million improvement results from the items described above. YEAR ENDED JUNE 3, 1995 ("FISCAL YEAR 1995") COMPARED TO YEAR ENDED MAY 28, 1994 ("FISCAL YEAR 1994") The Company's results of operations for fiscal year 1995 include the results of Cameron which the Company acquired from Cooper in May 1994. As a result of the Acquisition, the Company has broadened its revenue base and expanded into new markets. The Company is also realizing substantial operating and processing efficiencies through the consolidation of systems and facilities and the reduction of personnel performing duplicate functions. The Company's revenues increased 76.5% to $396.6 million in fiscal year 1995 from $224.7 million in fiscal year 1994. Approximately $151.0 million of this increase was due to the Acquisition of Cameron, which provides a broader revenue base in the Company's traditional markets of commercial and defense aerospace and provides diversification into the power generation market. The remainder of the revenue increase was due to higher sales volume at the Company's forgings and castings divisions. The increase in revenues was limited by raw material shortages and production delays caused by capacity constraints of the Company's suppliers. Although this situation improved during the second half of fiscal year 1995, it had a negative impact on overall revenues. Additionally, fiscal year 1994 contained $4.7 million of revenues from Wyman-Gordon Composites, Inc. which was sold by the Company during November 1993. The Company's gross margins were 12.5% in fiscal year 1995, as compared to 3.1% in fiscal year 1994. Higher production volumes, particularly in the Company's castings division, productivity gains in factory operations and realization of certain synergies associated with the integration of Cameron with the Company's forgings operations contributed to this higher ratio. In addition, the gross margins at the Company's composites divisions for fiscal year 1995 were well above fiscal year 1994 levels. These favorable trends were offset somewhat by production delays resulting from raw material shortages experienced most significantly in the first half of fiscal year 1995. Gross margins benefited from LIFO credits of $6.2 million in fiscal 1995 as compared to $8.1 million in fiscal year 1994. Gross margin in fiscal year 1994 was negatively impacted by significant charges totaling $8.7 million related mainly to a change in accounting estimate for workers' compensation of $4.2 million and excess inventories of $2.8 million. Selling, general and administrative expenses increased 2.4% to $36.4 million in fiscal year 1995 from $35.5 million in fiscal year 1994. Selling, general and administrative expenses improved as a percentage of revenues to 9.2% in fiscal year 1995 from 15.8% in fiscal year 1994. Fiscal year 1994 selling, general and administrative expenses include $7.6 million of significant charges. Absent the significant charges, fiscal year 1994 selling, general and administrative expenses were 12.4% of revenues. The improvement as a percent of revenues is the result of certain savings associated with the integration of Cameron with the Company's forgings operations, and higher revenues. During fiscal year 1995, the Company recognized $1.4 million of other charges for its 25.0% equity share of the losses of its Australian Joint Venture for the production of nickel-based superalloy. In fiscal year 1994, the Company recognized other charges of $35.0 million, which included $24.1 million for Cameron integration costs, $6.5 million for castings division restructuring costs, $2.0 million for anticipated environmental charges, and $2.4 million related to the disposition of production facilities. The Company recognized a $2.1 million credit in fiscal year 1995 after determining that Cameron integration costs, including severance and other personnel costs, were lower than originally estimated. The Company believes that most of the integration activities have been completed or adequate reserves have been provided. As of June 3, 1995, unused reserves for Cameron integration costs amount to $8.6 million. Interest expense decreased 1.0% to $11.0 million in fiscal year 1995 from $11.1 million in fiscal year 1994. Fiscal year 1995 interest expense includes higher financing fees associated with the establishment 16 18 in May 1994 of a receivables backed credit facility. Fiscal year 1994 interest expense includes the write-off of financing fees relating to the Company's prior credit facility amounting to $1.2 million. Miscellaneous, net was an expense of $1.7 million in fiscal year 1995 and income of $2.4 million in fiscal year 1994. Miscellaneous, net in fiscal year 1994 includes a $3.3 million gain on the sale of marketable securities. The Company recorded no provision for income taxes in fiscal years 1995 and 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources." Net income was $1.0 million, or $.03 per share, in fiscal year 1995 compared to a net loss of ($72.4) million, or ($4.02) per share, in fiscal year 1994. The $73.4 million improvement results from the items described above. YEAR ENDED DECEMBER 31, 1993 ("FISCAL YEAR 1993") COMPARED TO YEAR ENDED DECEMBER 31, 1992 ("FISCAL YEAR 1992") The Company's revenues decreased 19.8% to $239.8 million in fiscal year 1993 from $298.9 million in fiscal year 1992. This decline in revenues was primarily attributable to continued sluggishness in the commercial aerospace industry during fiscal year 1993. The Company's gross margins were 8.6% in fiscal year 1993 as compared to 18.6% in fiscal year 1992. The decline in gross margins was a result of (1) lower production volume, (2) lower LIFO credits recorded in fiscal year 1993 as compared to fiscal year 1992 and (3) competitive pricing which continued to place pressure on the Company's gross margins. LIFO credits, which include both LIFO liquidation and deflation effects, of $7.9 million and $22.8 million were recognized in fiscal year 1993 and fiscal year 1992, respectively. Selling, general and administrative expenses decreased 5.9% to $26.6 million in fiscal year 1993 from $28.3 million in fiscal year 1992. The decrease in selling, general and administrative expenses is mainly due to lower payroll costs from reductions in personnel. Selling, general and administrative expenses increased as a percent of revenues to 11.1% in fiscal year 1993 from 9.4% in fiscal year 1992 as a result of the revenue decline. In November 1993, the Company sold substantially all of the net assets and business operations of its Wyman-Gordon Composites, Inc. operations. The Company recorded a non-cash charge on the sale in fiscal year 1993 of $2.5 million. Interest expense increased 43.9% to $10.8 million in fiscal year 1993 from $7.5 million in fiscal year 1992 primarily as a result of higher interest rates on the 10 3/4% Senior Notes due 2003 as compared to that on the debt retired with the proceeds of the 10 3/4% Senior Notes. The average debt balance was $87.7 million and $84.8 million in fiscal year 1993 and fiscal year 1992, respectively. Additionally, the Company wrote off financing fees relating to a prior credit facility amounting to $1.7 million in fiscal year 1993. Miscellaneous income was $2.2 million in fiscal year 1993 as compared to $2.0 million in fiscal year 1992. Miscellaneous income in fiscal year 1993 reflects primarily the gain of $3.3 million on the sale of marketable securities. Miscellaneous income in fiscal year 1992 reflects primarily the gain of $0.9 million on the sale of marketable securities and a gain of $0.6 million from a settlement of an overfunded pension plan terminated in a prior year. Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106"), and No. 109, "Accounting for Income Taxes" ("SFAS 109"). The Company elected to recognize the cumulative effect of these accounting changes, resulting in a noncash reduction in earnings in 1993 of $43.0 million or $2.39 per share. 17 19 Net loss was ($60.0) million, or ($3.34) per share, in fiscal year 1993 and net income was $21.8 million, or $1.21 per share, in fiscal year 1992. The change results from the items described above. LIQUIDITY AND CAPITAL RESOURCES The increase in the Company's cash of $7.5 million to $21.4 million as of September 2, 1995 from $13.9 million as of June 3, 1995 resulted primarily from cash provided by operating activities of $6.6 million. The increase in the Company's working capital of $10.9 million to $103.9 million as of September 2, 1995 from $93.1 million as of June 3, 1995 resulted primarily from net income of $5.1 million, an increase in income taxes and other of $2.8 million, net reductions of fixed assets of $4.3 million and net proceeds from the issuance of Common Stock of $0.6 million, offset by a net increase in other assets of $0.6 million and a decrease in long-term restructuring, integration, disposal and environmental of $0.8 million. Earnings before interest, taxes, depreciation, amortization and changes in accounting principles ("EBITDA") was $30.2 million in fiscal year 1995. EBITDA increased $8.2 million to $11.8 million in the first quarter of fiscal year 1996 from $3.6 million in the first quarter of fiscal year 1995. This improvement reflects primarily the $8.4 million improvement in the Company's net income in the first quarter of fiscal year 1996 as compared to the first quarter of fiscal year 1995. During fiscal year 1994, the Company recognized costs to be incurred for the integration of Cameron totalling $24.1 million of which $12.7 million were estimated to require cash outlays. Additionally, the Company estimated $12.2 million in cash outlays from direct costs associated with the Acquisition and integration. Therefore, combined reserves for Cameron integration costs totalled $36.3 million of which $24.9 million were estimated to require cash. The projects undertaken for the integration of Cameron into the Company include (i) consolidating the manufacture of rotating parts for jet engines from the Company's Grafton, Massachusetts facility into Cameron's Houston facility, while the Grafton facility has been focused on the production of large airframe structures and large turbine parts, (ii) closing of one of the two Cameron forging plants in Houston, (iii) closing the Company's ring-roll and hammer forging operations at its Worcester, Massachusetts facility and (iv) adopting the best manufacturing practices of the Company and Cameron. As a result of such projects, the Company has eliminated duplicative facilities, improved manufacturing efficiencies, improved inventory management and realized cost reductions. During May 1994, $11.4 million of non-cash asset write-offs were charged to these reserves. During fiscal year 1995, the Company incurred $11.1 million in charges on the integration of Cameron which were charged to these reserves, $6.7 million of which required the use of cash. Additionally, the Company reduced its estimates of costs to be incurred for the integration of Cameron and direct costs associated with the acquisition by a total of $7.3 million. Such reduction is reflected by an adjustment in the purchase price of $5.2 million and a credit to income of $2.1 million on the fiscal year 1995 Statement of Operations. See Footnote F to the Consolidated Financial Statements for a summary of cash outlays relating to restructuring charges. As of June 3, 1995, the Company estimates the remaining cash requirements for the integration of Cameron and direct costs associated with the Acquisition to be $8.6 million, and expects to spend approximately $6.5 million during its fiscal year ending June 1, 1996 ("fiscal year 1996") and $2.1 million thereafter. In the first quarter of fiscal year 1996, spending related to the integration of Cameron and associated direct costs amounted to $1.5 million. The 1991 restructuring plan is substantially complete. See Footnote F to the Consolidated Financial Statements. The Company incurred cash charges of $2.7 million related to the 1991 restructuring plan during fiscal year 1995 and expects to expend an additional $3.8 million over the next several years, approximately $1.9 million in fiscal year 1996 and $1.9 million thereafter. For fiscal year 1996 and thereafter, these expenditures are anticipated to include payments for consolidation and reconfiguration of existing facilities of $1.7 million in fiscal year 1996 and $0.6 million thereafter, and payments under a deferred compensation agreement of approximately $1.5 million. In the first quarter of fiscal year 1996, spending related to the 1991 restructure plan amounted to $0.4 million. 18 20 As of June 3, 1995, the Company expects to spend $1.8 million in fiscal year 1996 and $15.1 million thereafter on non-capitalizable environmental activities. In the first quarter of fiscal year 1996, no amounts were expended for non-capitalizable environmental projects. The Company has completed all environmental projects within established timetables and is continuing to do so at the present time. The Company from time to time expends cash on capital expenditures for more cost effective operations, environmental projects and joint development programs with customers. Capital expenditures amounted to $18.7 million, $2.4 million, $13.9 million and $11.2 million in fiscal year 1995 the five months ended May 28, 1994 and fiscal years 1993 and 1992, respectively. Capital expenditures in the foreseeable future are expected to increase from fiscal year 1995 levels. In the first quarter of fiscal year 1996, capital expenditures amounted to $1.8 million. As of June 3, 1995, the Company had invested $4.1 million in cash towards its share of the capital requirements of the Australian Joint Venture for the production of nickel-based superalloy. The Company is committed to invest an additional $3.4 million in the Joint Venture. The Australian Joint Venture has entered into a credit agreement with an Australian bank under which it has $17.3 million in borrowings outstanding. The Company has guaranteed 25.0% of the Australian Joint Venture's obligations under the credit agreement. This guarantee expires at such time as the Australian Joint Venture demonstrates its ability to produce commercially acceptable products. The Australian Joint Venture has not generated sufficient cash flow to service its debt, and if the operations do not become profitable in the future, the Company may be required to write off all or a portion of the remaining book value of its investment and repay up to 25.0% of the Joint Venture's $17.3 million debt, which is guaranteed by the Company. The book value of the Company's investment in the Australian Joint Venture as of September 2, 1995 is approximately $2.3 million. On May 20, 1994, the Company entered into a revolving receivables-backed credit facility (the "Receivables Financing Program") among the Company, certain subsidiaries and Wyman-Gordon Receivables Company ("WGRC") and a Revolving Credit Agreement dated as of May 20, 1994 among WGRC and the financial institutions party thereto. WGRC is a separate corporate entity from the Company and its other subsidiaries with its own separate creditors. WGRC purchases accounts receivable from the Company and certain other selling subsidiaries ("Sellers") and using those receivables as collateral borrows from the lending banks. WGRC's creditors have a claim on its assets prior to those assets becoming available to any creditors of any of the Sellers. Borrowings are subject to a formula which is dependent upon certain reserves relating to the accounts receivable purchased by WGRC and bear interest at fluctuating rates tied to Eurodollar rates or the lending banks' prime rates. The aggregate maximum borrowing capacity under the Receivables Financing Program is $65.0 million, with a letter of credit sub-limit of $35.0 million. The term of the Receivables Financing Program is five years, with an evergreen feature. As of June 3, 1995, under this credit facility, the total availability based on eligible receivables was $44.8 million, there were no borrowings and letters of credit amounting to $10.0 million were outstanding. As of September 2, 1995, under the credit facility, the total availability based on eligible receivables was $42.0 million, there were no borrowings and letters of credit amounting to $9.7 million were outstanding. Wyman-Gordon Limited, the Company's subsidiary located in Livingston, Scotland, entered into a credit agreement effective November 28, 1994 (the "U.K. Credit Agreement"). The maximum borrowing capacity under the U.K. Credit Agreement is L3.0 million with a separate letter of credit or guarantee limit of L1.0 million. The term of the U.K. Credit Agreement is one year with an evergreen feature. There were L2.4 million or $3.8 million of borrowings outstanding at June 3, 1995 and the Company had issued L0.4 million or $0.6 million of letters of credit or guarantees under the U.K. Credit Agreement. There were L3.0 million or $4.7 million of borrowings outstanding as of September 2, 1995 and the Company had issued L0.9 million or $1.5 million of letters of credit or guarantees under the U.K. Credit Agreement. The primary sources of liquidity available to the Company in fiscal year 1996 to fund operations, anticipated expenditures in connection with the integration of Cameron, planned capital expenditures and planned environmental expenditures include available cash ($21.4 million as of September 2, 1995 and 19 21 $13.9 million as of June 3, 1995), borrowing availability under the Company's Receivables Financing Program, cash generated by operations and reductions in working capital requirements through planned inventory reductions and accounts receivable management. Cash from operations and debt are expected to be the Company's primary sources of liquidity beyond fiscal year 1996. The Company believes that it has adequate resources to provide for its operations and the funding of restructuring, integration, capital and environmental expenditures. The Company's current plans to improve operating results include completing the integration of Cameron, further reductions of personnel and various other cost reduction measures. Programs to expand the Company's revenue base include participation in new aerospace programs and expansion of participation in the land-based gas turbine and extruded pipe markets and other markets in which the Company has not traditionally participated. The Company anticipates that, in addition to the growth in commercial aviation, the aging current commercial airline fleet will require future orders for its replacement. 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. ACCOUNTING, TAX AND OTHER MATTERS In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121") which must be adopted by the Company no later than fiscal year 1997. SFAS 121 prescribes the accounting for the impairment of long-lived assets that are to be held and used in the business and similar assets to be disposed of. The Company has not determined the impact of adopting SFAS 121 on its financial position or results of operations. Effective January 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("SFAS 112"). This standard provides that the Company follow an accrual method of accounting, rather than the as-incurred basis formerly used for benefits payable to employees when they leave the Company for reasons other than retirement. The adoption, including the cumulative effect, has not had a material affect on earnings or the financial position of the Company. As of June 3, 1995, the Company had net operating loss carryforwards ("NOLs") of approximately $67.0 million, which begin expiring in year 2006. The Company is seeking to utilize a substantial portion of such NOLs to obtain a refund in excess of $20.0 million of prior years' taxes. To the extent that the Company is not successful in recovering a refund of prior years' taxes, the NOLs will be available to offset future taxable income, if any. A reasonable estimation of the potential recovery cannot be made at this time and, accordingly, no adjustment has been made in the financial statements with respect to the claim for such refund. The Company's ability to utilize its NOLs in the future may be affected by Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"), which generally limits the use of a corporation's NOLs following a more than 50 percentage point change in the ownership of the corporation's equity within any three-year period (an "ownership change"). An ownership change could result in the imposition of limitations on the Company's ability to offset future taxable income with the Company's NOL's. The Australian Joint Venture has reported continued operating losses and has not generated sufficient cash flow to service its debt. In fiscal year 1995, the Company provided $1.4 million to 20 22 recognize the Company's 25.0% share of the net losses of this Joint Venture. The Company provided an additional $0.8 million in the first quarter of fiscal year 1996. The book value of the Company's investment in the Australian Joint Venture as of September 2, 1995 is approximately $2.3 million. If the Joint Venture's operations do not become profitable in the future, the Company may be required to make further provisions or to write off all or a portion of the remaining book value of its investment and repay up to 25.0% of the Joint Venture's $17.3 million debt, which is guaranteed by the Company. The Company for several years maintained a program of company-owned life insurance ("COLI") for certain of its employees. As of September 2, 1995 the Company is named as beneficiary on approximately 1,650 COLI policies with an aggregate cash surrender value of approximately $9.0 million, issued by Confederation Life Insurance Company (U.S.), which is currently in rehabilitation. Confederation Life Insurance Company is continuing to pay benefits under the policies but has ceased to redeem cash surrender values. No assurances can be given regarding to what extent the Company will be able to realize such cash surrender values in the future. 21 23 BUSINESS GENERAL Wyman-Gordon Company is a leading producer of highly engineered, technically advanced components for both the commercial and defense aerospace market and the commercial power generation market. The Company uses die forging, extrusion and investment casting processes to produce metal components to exacting customer specifications for technically demanding applications such as jet turbine engines, airframes and land-based gas turbine engines. The Company also extrudes seamless heavy-wall steel pipe for use primarily in commercial power generation plants, and designs and produces prototype aircraft using composite technologies. The Company produces components for most of the major commercial and U.S. defense aerospace programs. Metallurgical skills, an unique asset base and a broad offering of capabilities allow the Company to serve competing customers effectively and to lead the development and use of new metal technologies for its customers' uses. The Company is the leading producer of rotating components for use in turbine aircraft engines. These parts are forged from purchased ingots converted to billet in the Company's cogging presses and from superalloy metal powders which are produced, consolidated and extruded into billet entirely at the Company's facilities. Forging is conducted in Massachusetts, Texas and Scotland on a number of hydraulic presses with capacities ranging from 8,000 to 55,000 tons. The Company forges these engine components primarily from alloys of high-temperature nickel. Additionally, the Company uses modern, automated, high-volume production equipment and both air-melt and vacuum-melt furnaces in its investment casting operations to produce complex non-rotating jet engine parts from high-temperature nickel-based alloys. Structural airframe components are produced from alloys of steel, aluminum and titanium on the Company's forging presses and by its investment casting process. The Company uses its metallurgical and manufacturing capabilities to design new products to accommodate its customers' needs for larger, stronger structural parts forged from new superalloy metals. The Company produces smaller, near net-shape structural parts for aircraft through its investment castings business. 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 power generation 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, titanium and superalloy 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 7 inches in wall thickness and bar stock from 6 to 32 inches in diameter. Lengths of pipe and bar stock vary from 10 to 45 feet with a maximum forged weight of 20 tons. Similar equipment and capabilities are in operation at the Company's Livingston, Scotland forging facility. Additionally, the Houston press extrudes powder billets for use in aircraft turbine engine forgings. The Company's composite operation, Scaled Composites, Inc., plans, designs, fabricates and tests composite airframe structures for the aerospace market. The Company's acquisition of Cameron from Cooper in May 1994 united two of the country's largest and most technically advanced forging companies and had a pervasive impact on the Company. As a result of the Acquisition, the Company has broadened its revenue base and expanded into new markets. The Company is also realizing substantial operating and processing efficiencies through the consolidation of systems and facilities and the reduction of personnel performing duplicate functions. At the time of the Acquisition in May 1994 Cameron and the Company's Forgings operations employed a combined total of 2,030 people. As of October 31, 1995 this number had been reduced by 9.4% to 1,840. The Company estimates that this reduction in personnel and the Company's ability to increase production with fewer employees as evidenced by the increase in revenues per employee has resulted in improved operating results. See "Prospectus Summary" on page 4. Areas where the Company has combined 22 24 operations include sales and marketing, testing, research and development and management information systems. BUSINESS STRATEGY In recent years the Company experienced losses as a result of declines in customer demand caused by a combination of defense spending cutbacks, reduced orders for new commercial aircraft and reductions in customer inventory levels. In response the Company's senior management implemented a series of strategic initiatives designed to (i) lower the Company's cost structure, (ii) consolidate its forging operations, (iii) lower inventory requirements, and (iv) solidify customer relations. In further response to the continuing overcapacity in the industry, the Company acquired all of the stock of Cameron from Cooper in May 1994. Prior to the Acquisition, Cameron was the Company's principal competitor in the production of forgings for use in critical aerospace applications. For the year ended December 31, 1993, Cameron had revenues of $149.5 million, an operating loss of ($22.2) million and total assets of $151.8 million. As part of the consideration for the Acquisition, the Company issued 16.5 million shares of Common Stock to Cooper, which shares are being registered in connection with the DECS Offering. Currently, these shares represent approximately 47% of the outstanding Common Stock of the Company. As a result of the Acquisition, the Company has achieved cost savings, which total more than $26.0 million on an annualized basis to date. In addition, the Company has achieved the following production efficiencies. Focused Factories. The Company has substantially completed the consolidation of the manufacture of rotating parts for jet engines from Grafton, Massachusetts into Cameron's Houston, Texas facility. At the same time, the Grafton facility has been focused on the production of large airframe structures and large turbine parts such as components for the GE90 engine and land-based gas turbines. The results have been the elimination of duplicative facilities, improved throughput, and efficiencies of scale. Rationalization of Forging Operations. Subsequent to the Acquisition the Company closed one of the two Cameron forging plants in Houston, Texas. In addition, the Company has closed its hammer forging operations and is in the process of closing its ring-roll operations at its Worcester, Massachusetts facility. The result has been improved manufacturing efficiencies, higher utilizations and better inventory management. Best Practices. The Company is in the process of adopting the best manufacturing practices of the Company and Cameron. The improved manufacturing practices have resulted in cost reductions from lower material input weights on certain forgings, improved machining practices and more efficient testing procedures. Substantial raw material cost savings in certain of the Company's forgings processes have resulted from utilization of material produced in Cameron's Brighton, Michigan powder metal facility and Cameron's Houston, Texas vacuum arc remelting facility. From 1991 through 1995 average production cycle times at Cameron's Houston facility were reduced from approximately 22 weeks to seven weeks and the Company is seeking to achieve similar reductions at its Grafton, Massachusetts facility. In addition to the benefits the Company has realized from the Acquisition and expects to realize in the future, the Company has in place several programs to strengthen its position in the aerospace market and to enter new markets utilizing its expertise in high performance materials. Focus on Large Aerospace Components. The Company believes that its extensive installed asset base, technological leadership in manufacturing large-scale components and experience in producing and utilizing sophisticated alloys will enable the Company to capitalize on the industry trend toward widebody aircraft with larger and more sophisticated engines. These aircraft, which include the new Boeing 777, require larger airframe structural parts and their engines require high-purity alloys, both of which are particular strengths of the Company. 23 25 Strategic Alliances with Key Customers. The Company has entered into joint development programs with its two largest customers, GE and Pratt & Whitney, for the production of (i) forged rotating parts for the new GE90 jet engine and (ii) nickel-based superalloy ingots through the Australian Joint Venture, respectively. Management believes that alliances such as these strengthen existing relationships, and in some cases allow the Company to become involved in the design phases for new components and applications, thereby enhancing the Company's chances of obtaining future orders. New Applications and Markets. The Company believes that its expertise in the manufacture of highly specialized metal components with enhanced fatigue and temperature resistant properties gives it the ability to design new applications for existing technologies in its current markets and to utilize existing technologies in new markets. For example, the Company has been able to enter the power generation market where the Company's knowledge of nickel-based superalloys and manufacturing technology utilized for aircraft engines can be applied to manufacture energy efficient, high strength, temperature resistant gas turbines. Management believes that the combination of the Company's technological capabilities, installed asset base and close customer relationships, together with its improved cost structure, will allow the Company to operate profitably in an environment of relatively low commercial aircraft deliveries and to benefit from increases in delivery rates. However, the Company's results of operations could be adversely affected by a variety of factors. See "Risk Factors". At the same time the Company seeks to expand into new product and geographic markets. MARKETS AND PRODUCTS The principal markets served by the Company are aerospace and power generation. Revenue by market for the respective periods were as follows:
THREE MONTHS ENDED YEAR ENDED ------------------- ---------------------------------------------------------------------------------- SEPTEMBER 2, 1995 DECEMBER 31, DECEMBER 31, ------------------- JUNE 3, 1995 MAY 28, 1994 1993 1992 ---------------- ---------------- ---------------- ---------------- % OF % OF % OF % OF % OF REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL REVENUE TOTAL --------- ------- -------- ----- -------- ----- -------- ----- -------- ----- (000'S OMITTED, EXCEPT PERCENTAGES) Aerospace........... $ 82,211 72% $300,143 76% $188,518 84% $205,077 85% $263,961 88% Power generation.... 22,823 20 66,892 17 15,616 7 14,719 6 17,401 6 Other............... 9,043 8 29,604 7 20,560 9 19,965 9 17,519 6 -------- -- -------- --- -------- --- -------- --- -------- --- Total.............. $114,077 100% $396,639 100% $224,694 100% $239,761 100% $298,881 100% ======== === ======== ==== ======== === ======== === ======== ===
AEROSPACE The Company manufactures products utilized in general aviation, defense and business jet aircraft. The Company manufactures numerous forged and cast components for jet engines produced by all of the major manufacturers, including GE, Pratt & Whitney and Rolls-Royce. 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. Jet engines may produce in excess of 100,000 pounds of thrust and may subject parts produced by the Company to temperatures reaching 1,350 degrees Fahrenheit. Components for such extreme conditions require precision manufacturing and expertise with high-purity titanium and nickel-based superalloys. Rotating parts such as fan, compressor and turbine discs must be manufactured to precise quality specifications. The Company manufactures forged and cast structural parts for fixed-wing aircraft and helicopters. These 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. The Company also produces dynamic rotor forgings for helicopters. Forging is particularly well-suited for airframe parts because of its ability to impart 24 26 greater proportional strength 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 has recently begun shipping main landing gear beams for the new Boeing 777 widebody. The Company forges landing gear and other airframe structural components for the Boeing 737, 747, 757, 767 and 777, the McDonnell Douglas MD-11 and the Airbus A330 and A340. The Company produces structural forgings for the F-15, F-16 and F-18 fighter aircraft and the Black Hawk helicopter produced by the Sikorsky Division of United Technologies ("Sikorsky"). The Company also produces large, one-piece bulkheads for Lockheed/Boeing for the F-22 next generation air superiority fighter aircraft. POWER GENERATION The Company is a major supplier of extruded seamless heavy wall pipe for the critical piping systems in both fossil fuel and nuclear commercial power plants worldwide, as well as offshore petroleum exploration applications. The Company believes it is a leading supplier in the U.S. and the U.K. of large diameter, seamless heavy wall pipe. The Company produces components for steam turbine and gas turbine generators and forged valves for land-based power generation applications. The Company also manufactures shafts, cases, and compressor and turbine discs for marine gas turbines. OTHER PRODUCTS The Company supplies products to builders of military missiles. Examples of these products include breech block and breech rings for large cannon and forged steel casings for bombs, rockets and expendable launch vehicles. The Company participates in a variety of U.S. Government programs including the Standard, Harm, Patriot and Aegis programs. For naval defense applications, the Company supplies components for propulsion systems for nuclear submarine and aircraft carriers as well as pump, valve, structural and non nuclear propulsion forgings. The Company also manufactures extruded missile, rocket and bomb cases and supplies extruded products for nuclear submarines and aircraft carriers including heavy wall piping for nuclear propulsion systems, torpedo tubes and catapult launch tubes. The Company's investment castings operations produce products for commercial applications such as: components for golf clubs, pistol frames, bicycles, food processing equipment, diesel turbo-chargers, land-based military equipment such as tanks, and various other applications. The Company also supplies extruded powders for other superalloy powder manufacturers. The Company is actively seeking to identify alternative applications for its capabilities, such as in the automotive and other commercial markets. 25 27 CUSTOMERS The Company has approximately 150 active customers that purchase forgings, approximately 550 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 52% of the Company's revenues for the three months ended September 2, 1995, 50% of the Company's revenues for the year ended June 3, 1995, 51% for the year ended May 28, 1994, and 56% and 53% for the years ended December 31, 1993 and 1992, respectively. GE and United Technologies (primarily Pratt & Whitney and Sikorsky) each accounted for more than 10% of revenues for the year ended June 3, 1995, the year ended May 28, 1994, and the years ended December 31, 1993 and 1992, respectively, as follows:
THREE MONTHS ENDED YEAR ENDED ------------------ ------------------------------------------------------------------------------------- SEPTEMBER 2, 1995 JUNE 3, 1995 MAY 28, 1994 DECEMBER 31, 1993 DECEMBER 31, 1992 ------------------ ------------------- ------------------ ------------------ ------------------ % OF % OF % OF % OF % OF TOTAL TOTAL TOTAL TOTAL TOTAL REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE REVENUE ------- ------- -------- ------- ------- ------- ------- ------- ------- ------- (000'S OMITTED, EXCEPT PERCENTAGES) GE.............. $32,106 28% $101,261 26% $48,286 22% $55,585 23% $62,740 21% United Technologies... 12,953 11 58,873 15 39,100 17 37,060 16 48,920 17
Boeing, McDonnell Douglas 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 organized its operations into product groups which focus on specific customers or groups of customers with similar needs. The Company has become actively involved with its aerospace customers through joint development relationships and cooperative research and development, engineering, quality control, just-in-time inventory control and computerized design programs. This involvement begins with the design of the tooling and processes to manufacture the customer's components to its precise specifications. MARKETING AND SALES The Company markets its products principally through its own sales engineers and makes only limited use of 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 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. BACKLOG The Company's firm backlog includes the sales price of all undelivered units covered by customers' orders for which the Company has production authorization. 26 28 The Company's firm backlog in the various markets served by the Company has been as follows:
SEPTEMBER 2, 1995 JUNE 3, 1995 MAY 28, 1994 ------------------- ------------------- ------------------- % OF % OF % OF BACKLOG TOTAL BACKLOG TOTAL BACKLOG TOTAL --------- ----- --------- ----- --------- ----- (000'S OMITTED, EXCEPT PERCENTAGES) Aerospace....................... $385,625 81% $382,982 82% $342,007 88% Power generation................ 59,234 13 57,248 12 33,700 9 Other........................... 28,549 6 28,531 6 13,700 3 -------- --- -------- --- -------- --- Total......................... $476,950 100% $468,761 100% $389,407 100% ======== === ======== === ======== ===
At June 3, 1995 approximately $365.0 million of total firm backlog was scheduled to be shipped within one year 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 due to market fluctuations in the commercial aerospace industry. However, in certain cases the Company is entitled to an adjustment in contract amounts. MANUFACTURING PROCESSES The Company employs three manufacturing processes: forging, investment casting and composites production. Forging Forging is the process by which desired shapes, metallurgical characteristics, and mechanical properties are imparted to metal by heating and shaping it through pressing or extrusion. The Company forges alloys of titanium, aluminum and steel as well as high temperature nickel-based superalloys. The Company manufactures most of its forgings at its facilities in Grafton and Worcester, Massachusetts; Houston, Texas and Livingston, Scotland. The Company also operates a superalloy powder metal facility in Brighton, Michigan and vacuum arc remelting facilities in Houston, Texas and Millbury, Massachusetts which produce steel, nickel and titanium ingots, and a plasma arc melting facility for the production of high quality titanium ingots and nickel powder in Millbury, Massachusetts. The Company has six large closed die hydraulic forging presses rated as follows: 18,000 tons, 35,000 tons and 50,000 tons in Grafton Massachusetts; 29,000 tons and 35,000 tons in Houston, Texas and 30,000 tons in Livingston, Scotland. The 35,000 ton vertical extrusion press in Houston can be modified to a 55,000 ton hydraulic forging press. The Company also operates an open die cogging press rated at 2,000 tons at its Grafton, Massachusetts location and a hydraulic isothermal forging press rated at 8,000 tons at its Worcester, Massachusetts location. The Company employs all major forging processes, including the following: Open-Die Forging. In this process, the metal is forged 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 exert three dimensional control on the metal. In hot-die forging, a type of closed-die process, the dies are heated to a temperature approaching the transformation temperature of the materials being forged so as to allow the metal to flow more easily within the die cavity which produces forgings with superior surface conditions, metallurgical structures, tighter tolerances, enhanced repeatability of the part shapes and greater metallurgical control. Both titanium and nickel-based superalloys are forged using this process, in which the dies are heated to a temperature of approximately 1,300 degrees Fahrenheit. 27 29 Conventional/Multi-Ram. The closed-die, multiple-ram process featured on the Company's 30,000 ton press enables the Company to produce extremely complex forgings 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 utilizing less input weight. The process also optimizes grain flow and uniformity of deformation, reduces machining requirements, and minimizes overall costs. 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-based superalloy powders. Because of the extreme temperatures necessary for forming these alloys, the dies must be made of refractory metal (such as 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 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. It is capable of producing heavy wall seamless pipe with outside diameters up to 48 inches and wall thicknesses from 1/2 inch up to 7 inches or more. Solid extrusions can be manufactured from 6 to 32 inches in diameter. Typical lengths vary from 10 to 45 feet. Powder materials can also be compacted and extruded into forging billets utilizing this press. The 30,000 ton press has similar extrusion capabilities in addition to its multi-ram forging capabilities. Titanium and Superalloy Production. The Company utilizes vacuum arc remelting technology to produce titanium alloy suitable for structural and turbine aerospace applications. Titanium produced in this manner is utilized in both the Company's forging and castings operations. The Company's Brighton, Michigan powder metal facility has the capability to atomize, process, and consolidate (by hot isostatic pressing) superalloy metal powders for use in aerospace, medical implant, petrochemical, hostile environment oil and gas drilling and production, and other high technology applications. This facility has an annual production capacity of up to 500,000 pounds of superalloy powder. In addition, the Company has the capacity to consolidate powdered metals by extrusion using its 30,000 ton and 35,000 ton presses. Extruded billets are further processed and either sold to other forge shops or forged into critical jet engine components on the Company's 8,000 ton isothermal press. The Company's Plasma Arc Melting "PAM" facility in Millbury, Massachusetts is capable of producing high quality titanium ingot and nickel-based superalloy powder. The Company is currently pursuing certifications by certain customers for use of this technology in high performance jet engines. The Company's vacuum arc remelt ("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 severe applications. In 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 has entered into the Australian Joint Venture with Pratt & Whitney and certain Australian investors to produce nickel-based superalloy ingots in Perth, Australia. These ingots will be utilized as raw materials for the Company's forging and casting products. 28 30 Support Operations. The Company manufactures 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 metal flow 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 rough machine products to a shape allowing inspection of the products. The Company also operates rotary and car-bottom heat treating furnaces that enhance the performance characteristics of the forgings. These furnaces have sufficient capacity to handle all the Company's forged products. The Company subjects its products to extensive quality inspection and contract qualification procedures involving zyglo, chemical etching, ultrasonic, red dye, and electrical conductivity testing facilities. 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 ("SPC") techniques are also applied throughout the entire manufacturing process. Investment Casting The Company's investment castings operations use modern, automated, 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 aluminum, magnesium, steel, titanium and nickel-based superalloys. The Company's castings operations are conducted in facilities located in Connecticut, New Hampshire, Nevada and California. These plants house air and vacuum-melt furnaces, wax injection machines and investment dipping tanks. Because of the growth in demand for the Company's high quality titanium castings, the Company is in the process of restarting its Franklin, New Hampshire facility which it closed in 1993. The Company has ordered a new state-of-the-art titanium melting furnace for installation in the Franklin plant. Additionally, the Company has expanded its Groton, Connecticut facility for the production of high quality titanium castings. Investment castings are produced in four major stages. First, molten wax is injected into an aluminum mold, known as a "tool," in the shape of the ultimate component to be produced. 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. In the second stage, the wax patterns are mechanically coated with a sand and silicate-bonded slurry in a process known as investment. This forms a ceramic shell which is subsequently air-dried under controlled environmental conditions. The wax inside this shell is then melted and removed in a high temperature steam autoclave and the molten wax is recycled. In the third, 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. The metal parts are then cleaned in a high temperature caustic bath, followed by water rinsing. In the fourth, or finishing stage, the castings are finished to remove excess metal. The final product then undergoes a lengthy series of testing (radiography, fluorescent penetrant, magnetic particle and dimensional) to ensure quality and consistency. Composites The Company's composites operation, Scaled Composites, Inc., plans, designs, fabricates and tests composite airframe structures for the aerospace market. Customers include Lawrence Livermore Laboratories and Orbital Sciences Corp. 29 31 FACILITIES The following table sets forth certain information with respect to the Company's major facilities at June 3, 1995, all of which are owned. The Company believes that its 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 1995, the Company's forging, investment castings and composites facilities were operating at approximately 60%, 70% and 90% of their total productive capacity, respectively.
APPROX. SQUARE LOCATION FOOTAGE PRIMARY FUNCTION -------- ------- ---------------- FORGINGS: Brighton, Michigan................................. 34,500 Superalloy Powder Production Grafton, Massachusetts............................. 85,420 Administrative Offices Grafton, Massachusetts............................. 843,200 Forging Houston, Texas..................................... 1,283,800 Forging Livingston, Scotland............................... 405,200 Forging Livingston, Scotland............................... 112,000 Currently idle Millbury, Massachusetts............................ 104,125 Research and Development, Metals Production Worcester, Massachusetts........................... 43,200 Currently idle Worcester, Massachusetts........................... 22,300 Forging Worcester, Massachusetts........................... 301,400 Closing 1995 CASTINGS: Carson City, Nevada................................ 46,000 Casting Franklin, New Hampshire............................ 43,200 Casting Groton, Connecticut (2 plants)..................... 162,550 Casting San Leandro, California............................ 45,000 Casting Tilton, New Hampshire.............................. 94,000 Casting COMPOSITES: Mojave, California................................. 67,000 Composites
RAW MATERIALS Raw materials used by the Company in its forgings and castings include alloys of titanium, nickel, steel, aluminum, magnesium and other high-temperature 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. The Company satisfies some of its nickel and titanium requirements internally by producing titanium alloy from titanium scrap and "sponge." The Company's powder metal facility and PAM units produce nickel-based superalloy powder and high quality titanium ingot. The Company has experienced delays in the delivery of its raw materials. The titanium and nickel-based superalloys 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. 30 32 In the event of customer cancellation, 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 fiscal year 1995, and prices of raw materials rose, the Company experienced certain raw material shortages and production delays. Although this situation improved during the second half of fiscal year 1995, it had a negative impact on overall revenues. The Company's most significant raw materials consist of nickel and titanium alloys. Its principal suppliers of nickel alloys include Special Metals Corporation, Teledyne Allvac Corporation, and Carpenter Technologies Corporation. Its principal suppliers of titanium alloys are Titanium Metals Corporation of America, Oregon Metallurgical Corp., and Refractory Metals, Inc. Each of these suppliers has experienced increases in the market prices of the elements (e.g. nickel, titanium, cobalt), that they use in fabricating their products. The Company often has fixed-price contracts with its suppliers. Because the Company's suppliers generally have alternative markets for their products where they may have greater ability to increase their prices, production has in some cases been diverted to alternative markets. As a result the Company's lead time for deliveries from its suppliers has expanded from 20 weeks to 40 weeks in the case of titanium alloys and from 22 weeks to 44 weeks in the case of nickel-based alloys. 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; and is considering producing a greater amount of its requirements in its own facilities, including the Australian Joint Venture; and has sought alternative sources of supply such as from the Republics formerly comprising the Soviet Union. In addition, the Company, its customers and suppliers have undertaken active programs for supply chain management which should reduce the overall lead times. 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 materials after forging and casting, operating forging presses, melting furnaces, die-sinking, mechanical manipulation and pollution control equipment and space heating. The Company uses natural gas, oil and electricity in varying amounts at its manufacturing facilities. Supplies of natural gas, oil and electricity have been sufficient and there is no anticipated shortage for the future. EMPLOYEES As of June 3, 1995, the Company had approximately 3,100 employees of whom 850 were executive, administrative, engineering, research, sales and clerical and 2,250 were production and craft. Approximately 61% 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 INITIATION EXPIRATION LOCATION AGREEMENTS DATE DATE -------- ---------- ---------------- ----------------- Grafton and Worcester, Massachusetts... 562 March 27, 1995 March 30, 1997 Houston, Texas......................... 505 August 7, 1995 August 9, 1998 32 August 7, 1995 Sept. 27, 1998 Livingston, Scotland................... 200 December 1, 1993 November 30, 1995 55 February 1, 1994 January 31, 1996 ----- Total.................................. 1,354 =====
The Company believes it has good relations with its employees although it experienced a one week strike in August 1995 in connection with the negotiation of its current collective bargaining agreement 31 33 with the union representing most of its factory workforce in Houston, Texas. The strike involved approximately 505 union personnel. Because of the short nature of the strike and the fact that the Company was able to continue to operate the plant with non-union personnel, the strike did not have a significant impact on the Company's operations. 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 composites operation conducts research and development related to aerospace composite structures at the Mojave, California facility. The Company spent approximately $2.2 million, $0.7 million, $2.8 million, and $3.0 million on applied research and development work during fiscal year 1995, the five months ended May 28, 1994, and fiscal years 1993 and 1992, 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 is 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 considers that it is in a leading position in these areas. ENVIRONMENTAL REGULATIONS The Company is subject to extensive, stringent and changing federal, state and local environmental laws and regulations, including those regulating the use, handling, storage, discharge and disposal of hazardous substances and the remediation of alleged environmental contamination. Accordingly, the Company is involved from time to time in administrative and judicial inquiries and proceedings regarding environmental matters. Nevertheless, the Company believes that compliance with these laws and regulations will not have a material adverse effect on the Company's operations as a whole. The Company 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. In the fourth quarter of 1991, the Company recorded a pre-tax charge of $7.0 million with respect to environmental investigation and remediation costs at the Grafton facility and a pre-tax charge of $5.0 million against potential environmental remediation costs upon the eventual sale of the Worcester facility. During the five-month fiscal period ended May 28, 1994 the Company provided an additional $2.0 million for potential environmental investigation and remediation costs and established a $3.5 million purchase accounting reserve related to environmental issues at Cameron. 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 the site during the period 1982 through 1999, of which $6.1 million remained as of June 3, 1995. 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 $3.5 million, to comply with current federal and state environmental requirements governing the investigation and remediation of contamination at the site. In connection with these requirements, the Company is 32 34 evaluating and planning for closure of 46 solid waste management units on the site. In addition, the Company is subject to an administrative consent order issued by the Environmental Protection Agency in 1991 that requires the Company to close several wastewater and water treatment facilities and construct a Runoff Management Facility to treat process water and stormwater, which was completed in January 1995 at a cost of $5.5 million. The Company's Grafton facility is included in the U.S. Nuclear Regulatory Commission's ("NRC") May 1992 Site Decommissioning Management Plan for low-level radioactive waste. In a draft 1992 long-range dose assessment the NRC determined that the site should be remediated. As a result the Company has challenged the draft assessment, believing it to be flawed. The Company has provided $1.5 million for the estimated cost of remediation and disposal if the NRC requires it to take these actions. However, the Company may be required to dispose of the wastes at a more expensive disposal facility, which could increase the remediation and disposal costs beyond the provision that the Company has established. The Company believes that it may have meritorious claims for contribution from the U.S. Air Force in respect of any liabilities it may have for such remediation. 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 four Superfund sites: Operating Industries, Monterey Park, California; Cedartown Municipal Landfill, Cedartown, Georgia; PSC Resources, Palmer, Massachusetts; and the Gemme site, Leicester, Massachusetts. The Company believes that any liability it may incur with respect to these sites will not be material. At the Gemme 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 $6.0 and $7.0 million in cleanup expenses upon the planned sale of its Worcester, Massachusetts facility to remedy certain contamination discovered on-site. 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 At June 3, 1995, 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. 33 35 MANAGEMENT The executive officers and directors of the Company are as follows:
NAME AGE POSITION ---- --- -------- John M. Nelson....................... 64 Chairman of the Board David P. Gruber...................... 53 President, Chief Executive Officer and Director Andrew C. Genor...................... 53 Vice President, Chief Financial Officer and Treasurer Sanjay N. Shah....................... 45 Vice President, Corporate Strategy Planning and Business Development J. Douglas Whelan.................... 56 President, Forging Division Wallace F. Whitney, Jr. ............. 52 Vice President, General Counsel and Clerk Frank J. Zugel....................... 50 President, Investment Castings Division E. Paul Casey........................ 65 Director Dewain K. Cross...................... 58 Director Warner S. Fletcher................... 50 Director Robert G. Foster..................... 57 Director Russell E. Fuller.................... 69 Director M Howard Jacobson.................... 62 Director Judith S. King....................... 61 Director George S. Mumford, Jr. .............. 67 Director H. John Riley, Jr. .................. 55 Director Jon C. Strauss....................... 55 Director Charles A. Zraket.................... 71 Director
JOHN M. NELSON was elected Chairman of the Company in May 1994 having previously served as the Company's Chairman of the Board and Chief Executive Officer since May 1991. Prior to that time he served for many years in a series of executive positions with Norton Company, a manufacturer of abrasives and ceramics based in Worcester, Massachusetts, and was Norton's Chairman and Chief Executive Officer from 1988 to 1990 and its President and Chief Operating Officer from 1986 to 1988. Mr. Nelson is also Chairman of the Board of Directors of the TJX Companies, Inc., a Director of Brown & Sharpe Manufacturing Company, Cambridge Biotechnology, Inc., Commerce Holdings, Inc. and Stocker & Yale, Inc. He is also Chairman of the Board of Trustees of Worcester Polytechnic Institute and Vice President of the Worcester Art Museum. DAVID P. GRUBER was elected President and Chief Executive Officer of the Company in May 1994 having previously served 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 Trustee of the Manufacturers' Alliance for Productivity and Innovation, and is a member of the Mechanical Engineering Advisory Committee of Worcester Polytechnic Institute. ANDREW C. GENOR joined the Company as Vice President, Chief Financial Officer and Treasurer in January 1995. Prior to joining the Company, Mr. Genor was Chief Financial and Operating Officer of HNSX Supercomputers, Inc., a company he co-founded in 1987 to provide support to supercomputer users and vendors. Prior to that time, he spent 20 years at Honeywell, Inc., including service as Vice President and Corporate Treasurer and Vice President, Finance, Administration and Business Development for Honeywell Europe. 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. 34 36 J. DOUGLAS WHELAN joined the Company in March 1994 and was elected President, Forgings in May 1994. 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. 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 joined the Company in June 1993 when he was elected Vice President -- General Manager, Investment Castings. Prior to that time he had served as President of Stainless Steel Products, Inc., a metal fabricator for aerospace applications, since 1992 and before then as Vice President of Pacific Scientific Company, a supplier of components to the aerospace industry, since 1988. 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. DEWAIN K. CROSS, Retired Senior Vice President, Finance of Cooper, has been a Director of the Company since 1994. He is a former member of the Financial Council II of the Manufacturers' Alliance for Productivity and Innovation and is a member of the American Institute of Certified Public Accountants. 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., (a venture capital company engaged in biotechnology) has been a Director of the Company since 1989. Mr. Foster was President and Chairman of Ventrex Laboratories, Inc. from 1976 to 1987 when he assumed his present position. He is also a Director of United Timber Corp., Carr Separations, Phytera, Neptune Pharmaceuticals, ActiMed Laboratories, Inc., Brunswick Biomedical Corp. and Watson Technologies. He is also a member of the Science & Technology Board for the State of Maine. 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. M HOWARD JACOBSON, Senior Advisor, Bankers Trust, New York, has been a Director of the Company since 1993. Mr. Jacobson was for many years Chief Executive Officer, President and Treasurer and a Director of Idle Wild Foods, Inc. until that company was sold in 1986. From 1989 to 1991 he was a Senior Advisor to Prudential Bache Capital Funding. Mr. Jacobson is a Director of Allmerica Property & Casualty Cos., Inc., ImmuLogic Pharmaceutical Corporation, Stoneyfield Farm, Inc. and Boston Chicken, Inc. He is Vice Chairman of the Board of Trustees of the Medical Center of Central Massachusetts, Chairman of the Overseers of WGBH/National Public Broadcasting, a Trustee of the Worcester Foundation for Experimental Biology, a Trustee of the Worcester Polytechnic Institute, and a member of the Harvard University Overseers' Committee on University Resources. JUDITH S. KING, Trustee and Treasurer of The Stoddard Charitable Trust, has been a Director of the Company since 1990. 35 37 GEORGE S. MUMFORD, JR., Professor, Department of Physics and Astronomy, Tufts University, has been a Director of the Company since 1968. Mr. Mumford formerly served as Dean of the Graduate School of Arts and Sciences at Tufts University. He is a former member of the Board of Directors of the Council of Graduate Schools in the United States and Past President of the Northeast Association of Graduate Schools. He is a Director of the Charles River Watershed Association. H. JOHN RILEY, JR., President and Chief Executive Officer of Cooper, has been a Director of the Company since 1994. Mr. Riley was elected Chief Executive Officer of Cooper effective September 1, 1995, having previously served as President and Chief Operating Officer since 1992 and as Executive Vice President, Operations of Cooper since 1982. Prior to that time he held various executive positions at Crouse-Hinds Company, which was acquired by Cooper in 1982. He is also Director and Chairman of Junior Achievement of Southeast Texas, a Director of Central Houston, Inc., a Director of Houston Symphony, a member of the Corporate Advisory Council of Syracuse University School of Management, and a Trustee of the Manufacturers' Alliance for Productivity and Innovation. JON C. STRAUSS, Vice President and Chief Financial Officer of Howard Hughes Medical Institute, Chevy Chase, Maryland (a medical research institute and the largest private philanthropic organization in the United States) has been a Director of the Company since 1989. Prior to assuming his current position in 1994, Dr. Strauss served as President of Worcester Polytechnic Institute, Worcester, Massachusetts since 1985 and, before then, as Chief Administrative Officer at the University of Southern California. He is a Director of Computervision Corporation. CHARLES A. ZRAKET, Trustee and Former President and Chief Executive Officer of MITRE Corporation, (a not-for-profit corporation engaged in systems engineering and research primarily for the United States government), has been a Director of the Company since 1990. Mr. Zraket is a Trustee of Northeastern University, Beth Israel Hospital and the Hudson Institute. RELATIONSHIP BETWEEN THE COMPANY AND COOPER STOCK PURCHASE AGREEMENT Pursuant to a Stock Purchase Agreement dated as of January 10, 1994 (the "Stock Purchase Agreement"), between the Company and Cooper, the Company acquired from Cooper on May 26, 1994 (the "Closing Date"), all of the outstanding shares of common stock of Cameron Forged Products Company ("Cameron") in consideration for 16.5 million shares of the Company's Common Stock and $5.0 million (the "Cash Purchase Price"). The market price of the Common Stock on the Closing Date was $6.25 per share. The Cash Purchase Price consisted of (1) $400,000 in cash paid by the Company to Cooper on the Closing Date and (2) a promissory note in the principal amount of $4.6 million (the "Note") executed and delivered to Cooper by the Company on the Closing Date. The principal amount of the Note is payable in annual installments, beginning on June 30, 1997 and on each June 30 thereafter until paid in full, in an amount equal to the lesser of (a) $2.3 million, (b) 25 percent of the Company's Free Cash Flow (as defined in the Note) for the 12-month period ending on the April 30 immediately preceding such June 30 and (c) the unpaid principal balance of the Note. The Note will not bear interest until May 1, 1998, from which date it will bear interest at a floating rate equal to the 90-day commercial paper rate for high grade unsecured notes sold through dealers by major corporations, as published by The Wall Street Journal on that portion of the principal amount of the Note equal to the sum of all amounts of unpaid principal that would have been payable but for mandatory debt payments by the Company. The Company may from time to time prepay all or any portion of the outstanding balance of the Note without penalty or premium. Cooper may declare the Note to be immediately due and payable in the event that (i) the Company does not pay any portion of the principal or interest on the Note within 10 days after such payment becomes due or (ii) a Trigger Event (as defined below in the discussion of the Investment Agreement) occurs. In the Stock Purchase Agreement the parties agreed to a cash adjustment in the Cash Purchase Price based on certain changes in the balance sheet of Cameron between September 26, 1993, and the 36 38 Closing Date. Since there was an increase in the Net Asset Value of Cameron (as defined in the Stock Purchase Agreement) during that period, the Company paid Cooper $3.6 million in full satisfaction of this adjustment on September 19, 1994. Pursuant to the Stock Purchase Agreement, (i) Cooper agreed to indemnify the Company and its subsidiaries against all taxes of Cameron and its subsidiaries for any taxable year or taxable period ending on or before the Closing Date. The Stock Purchase Agreement further provides that any taxes for a taxable period beginning before the Closing Date and ending after the Closing Date with respect to Cameron or any of its subsidiaries will be apportioned between the Company and Cooper based on the actual operations of Cameron or the subsidiary, as the case may be, during the portion of such period ending on the Closing Date and the portion of such period following the Closing Date. Pursuant to the Stock Purchase Agreement, Cooper agreed to retain and indemnify the Company and its affiliates against (i) certain liabilities under ERISA with respect to employee benefit plans or arrangements, other than employee benefit plans or arrangements maintained for the benefit of employees and former employees of the Business (as defined below), and (ii) pension benefits under designated plans for periods prior to the Closing Date. Pursuant to the Stock Purchase Agreement, Cameron assumed Cooper's Cameron Obligations (as defined below), effective on the Closing Date. For purposes of the Stock Purchase Agreement, "Cooper's Cameron Obligations" means any obligation, commitment, liability or responsibility of Cooper, its affiliates or their predecessors (whether or not also an obligation, commitment, liability, or responsibility of or claim against, in whole or in part, Cameron or its subsidiaries C.F.P., Ltd. (the "U.K. Sub") or Cameron Pipeline Inc. (the "Pipeline Sub")), arising, undertaken or created before the Closing Date in connection with, on behalf of or for the benefit of any of certain entities, to the extent that such entities conducted all or part of the Business (as defined below) (the "Cameron Entities"), or arising from the conduct of the Business, including without limitation (i) any consulting, employment or severance agreements, guarantees, letters of credit, performance bonds, or indemnities, or obligations or indemnities to officers or directors of any Cameron Entity, (ii) any agreements with any transferors to Cooper, its affiliates, or their predecessors, of any assets of any Cameron Entity or of the Business, (iii) any labor or collective bargaining agreements relating to any Cameron Entity, (iv) any governmental contracts relating to any Cameron Entity, (v) any sales or purchase agreements relating to any Cameron Entity, (vi) any leases of real or personal property relating to any Cameron Entity, and (vii) any other agreements or commitments relating to any Cameron Entity under which Cooper, its affiliates or predecessors will have any liability after the Closing Date, except that Cooper's Cameron Obligations exclude the matters that Cooper is required to indemnify as described herein. "Business" means research, development, engineering, melting, refining, remelting, forging, extrusion, machining, manufacturing, distribution, sales, marketing, service or repair operations associated with the Products. "Products" means closed die forgings (including rotating parts for aircraft engines or industrial turbines, aircraft landing gear, structural airframe parts, ordnance and related parts, military and power plant nuclear forgings, valves, heavy wall pipe and fittings, power generation forgings and oil field equipment forgings), extrusions (including for aircraft engines, pipe, oil field equipment, bar stock and ordnance), super alloy powder products, thermal rail products for steel support member in push slab furnaces and custom-shaped insulators, other forged products, skid rail reheat systems, and high velocity burners. In the Stock Purchase Agreement, the Company and Cooper made customary representations and warranties to each other. Each of the Company and Cooper represented to the other that to its knowledge, its representations and warranties were, subject in certain cases to materiality and supplemental disclosure schedules, true and correct as of the Closing Date (except for those representations and warranties that expressly relate only to some other time) (the "Accuracy Representations"). The parties' representations and warranties expired at the Closing except that the Accuracy Representations remain in full force and effect until November 28, 1995. Any claim for indemnification with respect to the Accuracy Representations not asserted by notice by that date may not be pursued and will be irrevocably waived and released. 37 39 Subject to certain terms and conditions set forth in the Stock Purchase Agreement, (i) Cooper agreed to indemnify the Company, its affiliates, and their directors, officers or employees (collectively, the "Company's Group") against all Losses (as defined in the Stock Purchase Agreement) resulting from (a) any inaccuracy in the Accuracy Representations given by Cooper or (b) any breach of Cooper's covenants in the Stock Purchase Agreement and (ii) the Company agreed to indemnify Cooper, its affiliates, and their directors, officers or employees (collectively, the "Cooper Group") against all Losses resulting from (a) any inaccuracy in the Accuracy Representations given by the Company, (b) any breach of the Company's covenants in the Stock Purchase Agreement and (c) Cooper's Cameron Obligations. In addition, the Company agreed in the Stock Purchase Agreement to indemnify the Cooper Group against all Losses resulting from any liabilities or obligations of or relating to, or claims against, any Cameron Entity or the Business (other than the Losses that Cooper is required to indemnify) on, before or after the Closing Date, including without limitation (i) all Losses resulting from any Product Liability Claims (as defined in the Stock Purchase Agreement) arising out of or resulting from Products sold or furnished by Cooper, any of its affiliates or any Cameron Entity (including without limitation any product liability assumed in connection with the acquisition of any business or product line) on, before or after the Closing Date; (ii) all Losses resulting from (A) any noncompliance of the operations, properties or business activities of any Cameron Entity or the Business with any environmental law on, before or after the Closing Date or (B) any liabilities or obligations of or relating to, or claims against, any Cameron Entity or the Business based upon any environmental law, or arising from the disposal of any regulated materials, on, before, or after the Closing Date; and (iii) all Losses resulting from (A)any workers' compensation claim filed against any Cameron Entity on, before or after the Closing Date, and (B) any employment or severance agreements entered into by Cooper or Cameron relating to employees of Cameron on, before or after the Closing Date, other than severance payments under a specified employment agreement. Cooper agreed in the Stock Purchase Agreement, other than losses that the Company is required to indemnify, (i) to indemnify the Company's Group against all Losses resulting from any liabilities or obligations of or relating to, or claims against, Cooper or Cooper's subsidiaries to the extent that such liabilities, obligations or claims (x) do not relate to the Business and (y) arise from the activity of (a) any Cameron Entity (other than the Company or the Pipeline Sub) before the Closing Date, or (b) Cooper or any of Cooper's subsidiaries other than the Cameron Entities, (ii) except to the extent the actions of the Company, Cameron or their affiliates may cause or increase any such Losses after the Closing Date, to indemnify the Company's Group against all Losses resulting from any regulated materials disposed of on, or discharged into the environment at, a specified manufacturing facility of Cooper or at a specified Superfund location on or before the Closing Date; and (iii) to indemnify the Company's Group against all Losses resulting from severance payments under a specified employment agreement. Notwithstanding any contrary provision of the Stock Purchase Agreement, no claim by either party against the other for indemnification will be valid unless the aggregate amount of Losses associated with such claim exceeds $100,000. Further, any claims by the indemnified party will be determined net of any tax benefit actually recognized and utilized to offset or reduce the tax liability of the indemnified party or the other members of its group. Cooper agreed in the Stock Purchase Agreement that, until the later to occur of (i) Cooper's ceasing to own at least 10 percent of the outstanding shares of the Company's Common Stock and (ii) May 26, 1997, Cooper will not, and Cooper will not permit any of its subsidiaries (regardless of whether such person is a subsidiary of Cooper on the date hereof) to, engage in the manufacturing or marketing of the Products currently manufactured or marketed by Cameron or the U.K. Sub in competition with the Company or any subsidiary of the Company (a "Competing Business"), except that (i) Cooper or any affiliate of Cooper (other than Cameron and the Cameron Subsidiaries) may continue any existing nonaerospace forging operations and may make any reasonable maintenance, improvements and refinements thereto and (ii) Cooper or any affiliate of Cooper may acquire any business that includes ancillary forging operations in support of its main business. In addition, this 38 40 noncompetition provision will not prevent Cooper or its affiliates from acquiring shares in or the business or assets of any company, business or entity (the "Target") having a Competing Business (i) if no more than $10.0 million of the Target's sales revenue (as recorded in the then-latest available audited accounts) arises from the Competing Business or (ii) if the sales revenue of the Competing Business is greater than $10.0 million of the Target's sales revenue, if Cooper uses its reasonable commercial efforts to dispose of the Competing Business within a two-year period from the date of acquisition of the Target. If Cooper cannot dispose of the Competing Business on terms reasonably acceptable to it during such two-year period, Cooper will be free to retain and operate the Competing Business without any restriction of the Stock Purchase Agreement. INVESTMENT AGREEMENT In connection with the Stock Purchase Agreement the Company and Cooper entered into an Investment Agreement dated as of January 10, 1994, which governs Cooper's ownership of the 16.5 million shares of Common Stock that were issued to Cooper under the Stock Purchase Agreement. The Investment Agreement is unaffected by the DECS offering. In the Investment Agreement, Cooper agreed that, so long as the Investment Agreement remains in effect, Cooper will not sell or otherwise dispose of or encumber any Company Voting Securities (as hereinafter defined), except: (a) to any wholly-owned subsidiary of Cooper which agrees to be bound by the Investment Agreement; (b) pursuant to a bona fide underwritten offering or other distribution of such Company Voting Securities registered under the Securities Act; (c) pursuant to a bona fide underwritten offering or other distribution of securities of Cooper convertible into or exercisable or exchangeable for Company Voting Securities registered under the Securities Act; (d) pursuant to Rule 144 of the General Rules and Regulations under the Securities Act, or any successor rule of similar effect ("Rule 144"); or (e) pursuant to a tender offer or exchange offer if the board of directors of the Company has (i) recommended that the shareholders of the Company accept such offer and such recommendation has not been withdrawn or (ii) expressed no opinion and remains neutral toward such offer; (f) pursuant to a merger or consolidation in which the Company is acquired, or a sale of all or substantially all of the Company's assets to another corporation or any other transaction approved by the board of directors of the Company. For purposes of the Investment Agreement "Company Voting Securities" means (i) shares of Common Stock, (ii) any other Company securities entitled to vote generally for the election of directors of the Company, or (iii) any securities of the Company convertible into or exchangeable for or exercisable for Common Stock or any Company securities entitled to vote generally for the election of directors of the Company. In any registered offering or Rule 144 transaction, the seller of Company Voting Securities or securities of Cooper convertible into or exercisable or exchangeable for Company Voting Securities will be required under the Investment Agreement to use its reasonable best efforts to effect the sale or transfer of such securities in a manner which will effect the broadest possible distribution. Such seller of Company Voting Securities will also be required to use its reasonable best efforts to avoid making any sales or transfers of such Company Voting Securities to any one person or group within the meaning of the Exchange Act who or which after such transfer will own Company Voting Securities representing more than 4 percent of the voting power for the election of directors represented by all of the then-outstanding Company Voting Securities (whether directly or indirectly). In the Investment Agreement, Cooper agreed to cause all Company Voting Securities beneficially owned by it or any wholly-owned subsidiary to which it has transferred any Company Voting Securities, and agrees to use reasonable efforts to cause all Company Voting Securities known by the Cooper to be beneficially owned by "affiliates" (as defined in Rule 12b-2 promulgated under the Exchange Act) of Cooper over which Cooper has control, to be present at all shareholder meetings of the Company at which the vote of common shareholders is sought so that they may be counted for the purpose of determining the presence of a quorum at such meetings. 39 41 Cooper also agreed in the Investment Agreement to vote or cause to be voted all Company Voting Securities beneficially owned by it or any wholly-owned subsidiary to which it has transferred any Company Voting Securities, and agrees to use reasonable efforts to cause to be voted all Company Voting Securities known by Cooper to be beneficially owned by its affiliates over which it has control, on all matters (including the election of directors) either in the manner recommended to shareholders by the board of directors of the Company, or, at Cooper's election, in the same proportion as the vote of the other shareholders of the Company. Notwithstanding the foregoing, Cooper, such wholly-owned subsidiaries of Cooper and such affiliates of Cooper over which it has control will not be obligated so to vote if the matter being voted on by the shareholders of the Company would, if approved, result in a breach of the Investment Agreement. Pursuant to the Investment Agreement, so long as the Investment Agreement remains in effect, Cooper and its controlled affiliates will not, directly or indirectly, acting alone or in concert with others, unless specifically requested or approved in advance by the board of directors of the Company: (1) in any manner acquire or agree, attempt, seek or propose to acquire (or make any request for permission with respect thereto), by purchase, merger, through the acquisition of control of another person, by joining a partnership, limited partnership, syndicate or other "group" (within the meaning of Section 13(d)(3) of the Exchange Act), or otherwise, ownership (including, but not limited to, beneficial ownership as defined in Rule 13d-3 under the Exchange Act) of any of the assets or businesses of the Company or any securities issued by the Company (the "Company Securities"), or any rights or options to acquire such ownership (including from a third party), except (i) as expressly permitted by the Investment Agreement or the Stock Purchase Agreement, or (ii) pursuant to customary business transactions in the ordinary course of the Company's and Cooper's business or (iii) in the case of Company Securities, in connection with (A) a stock split or reverse stock split or other reclassification affecting outstanding Company Securities, or (B) a stock dividend or other pro rata distribution by the Company to holders of outstanding Company Securities; (2) make, or cause to be made any proposal for the acquisition of the Company or any assets or business of the Company or Company Securities or for any other extraordinary transaction involving the Company, including, without limitation, any merger, or other business combination, restructuring, recapitalization, liquidation or similar transaction, except (i) as expressly permitted by the Investment Agreement or the Stock Purchase Agreement or (ii) proposals pursuant to customary business transactions in the ordinary course of the Company's and Cooper's business; (3) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any Company Securities; (4) make, or in any way cause or participate in, any "solicitation" of "proxies" to vote (as such terms are defined in Regulation 14A under the Exchange Act) with respect to the Company, or communicate with, seek to advise, encourage or influence any person or entity, in any manner, with respect to the voting of, any Company Securities, or become a "participant" in any "election contest" (as such terms are defined or used in Rule 14a-11 under the Exchange Act) with respect to the Company, or execute any written consent with respect to the Company; (5) initiate, propose or otherwise solicit shareholders for the approval of one or more shareholder proposals with respect to the Company or induce or attempt to induce any other person to initiate any shareholder proposal, or (except as expressly permitted by the Investment Agreement) seek election to or seek to place a representative on the board of directors of the Company or seek the removal of any member of the board of directors of the Company; (6) in any manner, agree, attempt, seek or propose (or make any request for permission with respect thereto) to deposit any Company Securities, directly or indirectly, in any voting trust or similar arrangement or to subject any Company Voting Securities to any other voting or proxy agreement, arrangement or understanding; 40 42 (7) disclose any intention, plan or arrangement, or make any public announcement (or request permission to make any such announcement), or induce any third party to take any action, inconsistent with the foregoing; (8) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing; or (9) advise, assist or encourage or finance (or assist or arrange financing to or for) any other person in connection with any of the foregoing. Pursuant to the Investment Agreement, the Company agreed that it will use its best efforts to cause two persons designated by Cooper and reasonably acceptable to the Company to be elected to the board of directors of the Company and to serve as directors of the Company until their successors are duly elected and qualified. Cooper has designated H. John Riley, Jr., its President and Chief Executive Officer, and Dewain K. Cross, its retired Senior Vice President, Finance, as its current representatives on the Company's board. In the event that any such designee will cease to serve as a director for any reason, the Company agreed in the Investment Agreement that it will use its best efforts to cause such vacancy resulting thereby to be filled by a designee of Cooper reasonably acceptable to the Company. The Investment Agreement provides that the Company will vote all shares for which the Company's management or board of directors holds proxies or is otherwise entitled to vote in favor of the election of the designees of Cooper except as may otherwise be provided by shareholders submitting such proxies. The Investment Agreement provides that the Company will not amend (i) Article 6(e)(2) (the "Fair Price Provision") of its Articles (except pursuant to the Fair Price Amendment as defined below) in any manner that adversely affects Cooper or any other person to whom any of the Common Stock acquired by Cooper under the Stock Purchase Agreement has been transferred in accordance with the terms of the Investment Agreement or (ii) the provision of its By-Laws pursuant to which it has opted out of Chapter 110D of the MGL. Under the Fair Price Provision, a Business Combination (as defined in the Company's Articles) between the Company or a subsidiary of the Company and an Interested Stockholder (as defined in the Company's Articles) requires the approval of at least 85 percent of the outstanding voting stock of the Company, unless either (i) the Business Combination has been approved by at least two-thirds of the Company's Continuing Directors (as defined in the Company's Articles) or (ii) certain minimum price requirements are satisfied. The Fair Price Amendment exempts Cooper and its affiliates and associates for so long as such group beneficially owns at least 10 percent or more of the outstanding shares of Common Stock continuously from and after May 26, 1995, unless such group acquires beneficial ownership of additional shares of Common Stock in breach of the Investment Agreement. The Investment Agreement also provides that the Company will not amend its Rights Agreement (described below under "Description of the Company's Capital Stock") or adopt any other rights or similar agreement, except that following prior consultation with Cooper, the Company may amend the Rights Agreement in accordance with the terms thereof if such amendment does not adversely affect Cooper or any other person to whom any of the Common Stock acquired by Cooper under the Stock Purchase Agreement has been transferred in accordance with the terms of the Investment Agreement. The Investment Agreement provides that, among others, the limitations on Cooper and its affiliates described above with respect to restrictions on sales of shares by Cooper, voting, ownership and certain other matters and the limitations on the Company described above with respect to amendments to the Company's Articles and By-Laws will terminate immediately and be of no further force and effect on the date that a Trigger Event (as defined below) occurs. For these purposes, "Trigger Event" means the occurrence of one or more of the following events, without Cooper's prior written consent: (1) in connection with the issuance of Company Voting Securities (other than (x) issuances pursuant to the Company's current employee benefit plans or other customary employee benefit plans of the Company or (y) issuances in connection with bona fide capital raising programs pursuant to which the securities are sold for fair value, as approved by the board of directors of the Company, and the proceeds of which are invested in the businesses in which the Company or one or more of its subsidiaries are then engaged or (z) issuances for fair value, as determined by the board of directors of the 41 43 Company, in connection with acquisitions by the Company or one of its wholly-owned subsidiaries primarily involving one or more Similar Businesses (as defined below)), the failure to provide Cooper with the right to purchase, at the same price as Company Voting Securities are being issued, that number or amount of Company Voting Securities which would enable Cooper to maintain its proportionate interest in the Company following such issuance; (2) a Change in Control of the Company (as defined below); (3) a material acquisition or investment by the Company or one of its subsidiaries, other than an acquisition or investment by the Company or one of its wholly-owned subsidiaries primarily involving one or more Similar Businesses; (4) a decline of at least 35% in the Consolidated Net Worth of the Company (as defined in the Investment Agreement) from the Consolidated Net Worth of the Company immediately following the consummation of the Acquisition after giving effect to the Acquisition (including the issuance of 16.5 million shares of Common Stock to Cooper), but not taking into account (A) any reduction in the Company's Consolidated Net Worth attributable to or taken in connection with or as a result of the Acquisition or the combination of the business acquired from Cooper with the Company's business and recorded in the Company's financial statements for any period ending on (and including) the end of the first full fiscal year of the Company after the consummation of the Acquisition or (B) any adjustments following the date of consummation of the Acquisition as a result of any changes in generally accepted accounting principles (including the implementation of SFAS 106) or any other regulatory changes or requirements applicable to the Company or its financial statements or (C) any adjustment resulting from any liability arising from or growing out of any matter or circumstance existing as of the time of the consummation of the Acquisition and relating to the business or assets acquired by the Company from Cooper but not reflected on the balance sheet of such business and assets or (D) any change in the translation component of shareholders' equity or (E) adjustments as a result of sales of the Company's accounts receivables pursuant to a bona fide receivables securitization program pursuant to which fair value is received for receivables so sold (as determined by the Company's board of directors, taking into account, among other things, any discount or credit enhancement features required by any securities rating agency) or (F) any adjustment resulting from a SFAS 109 valuation allowance recorded or reserved by the Company with respect to deferred tax assets that were included in or excluded from the Company's final Accounting Principles Bulletin No. 16, "Business Combinations," acquisition date balance sheet; (5) any default or defaults by the Company or one of its subsidiaries under any indebtedness of the Company or its subsidiaries for money borrowed with a principal amount then outstanding, individually or in the aggregate, in excess of $5.0 million, which default will constitute a failure to pay any portion of the principal of each indebtedness at final maturity or will have resulted in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable without such indebtedness having been discharged, or such acceleration having been rescinded or annulled within a period of 30 days after maturity or acceleration; (6) an Event of Bankruptcy (as defined in the Investment Agreement); or (7) the failure of the board of directors of the Company to nominate at least two of Cooper's representatives for election to the Company's board of directors. The Investment Agreement further provides that the Company may not issue any securities having more than one vote per share (other than pursuant to the Company's Rights Agreement) without the prior written consent of Cooper. For purposes of the Investment Agreement, (1) a "Change in Control of the Company means (A) a merger or consolidation involving the Company or a sale of all or substantially all of the assets of the Company, in each case except for a transaction in which the Company's shareholders receive at least 50 percent of the stock of the surviving, resulting or acquiring corporation, (B) the acquisition by an individual, entity or group (excluding the Company or an employee benefit plan of the Company or a corporation controlled by the Company's shareholders) of shares of capital stock of the Company entitled to cast a majority of the votes entitled to be cast on matters submitted to the shareholders of the 42 44 Company, or (C) a change in a majority of the members of any class of the Company's board of directors in connection with an "election contest" (as used in Rule 14a-11 under the Exchange Act); and (2) "Similar Businesses" means (A) businesses in which the Company or one or more of its subsidiaries are engaged, (B) any businesses involving products related to or complementary to the products of the Company or one or more of its subsidiaries or (C) any similar businesses providing customers of the Company or one or more of its subsidiaries with products or services similar to those provided by the Company or one or more of its subsidiaries. Pursuant to the Investment Agreement, Cooper and certain of its transferees have the right to require the Company to file under the Securities Act up to three demand registrations of the shares of Common Stock acquired by Cooper under the Stock Purchase Agreement (and any other of the Company's securities issued in respect thereof) at the Company's expense (except that the Company will not be responsible for underwriting discounts and commissions or transfer taxes). Cooper also has the right to an unlimited number of additional demand registrations under the Securities Act at Cooper's expense. Cooper also has the right, under certain circumstances, to "piggyback" registrations in the event that the Company registers securities for its own account or for the account of third parties. Cooper's demand and piggyback registration rights are subject to customary restrictions and limitations. In connection with any registration statement filed pursuant to these registration rights, Cooper and the Company will indemnify each other against certain liabilities, including certain liabilities under the Securities Act. The description of the Stock Purchase Agreement and the Investment Agreement is a summary of the material terms thereof. Copies of the Stock Purchase Agreement and the Investment Agreement have been filed as exhibits to the Registration Statement of which this Prospectus is a part. DESCRIPTION OF THE COMPANY'S CAPITAL STOCK GENERAL The Company has the authority to issue 70,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, no par value (the "Preferred Stock"). The Company's Board of Directors has authority (without action by shareholders) to issue the authorized and unissued shares of Preferred Stock in one or more series and, within certain limitations, to determine the voting rights (including the right to vote as a series on particular matters), preference as to dividends and in liquidation, conversion, redemption and other rights of each such series. The ability of the Board of Directors to issue Preferred Stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from acquiring, a majority of the outstanding voting stock of the Company. There are no shares of Preferred Stock issued or outstanding and the Company has no present plans to issue any of the Preferred Stock. COMMON STOCK Holders of Common Stock are entitled to one vote per share on all matters to be voted on by shareholders, including the election of directors. Shareholders are not entitled to cumulative voting rights, and, accordingly, the holders of a majority of the shares voting for the election of directors can elect the entire Board if they choose to do so and, in that event, the holders of the remaining shares of Common Stock will not be able to elect any person to the Board of Directors. Pursuant to the Company's By-Laws, the number of directors of the Company may be not less than seven nor more than 13, as determined from time to time by the directors. The number of directors is currently 13. The By-Laws provide that the Board of Directors is divided into three classes in respect of term of office, each class to contain as near as may be one-third of the whole number of the Board. At each annual meeting of shareholders, one class of directors is elected to serve until the annual meeting of shareholders held three years next following and until their successors are elected and qualify. In the event any vacancy occurs on the Board of 43 45 Directors, the bylaws give the remaining directors the power to fill the vacancy for the balance of the term of office, except that any vacancy occurring because of an increase in the number of directors may be filled only until the next annual meeting of shareholders, at which time the vacancy shall be filled by vote of the shareholders. The holders of shares of Common Stock are entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors, in its discretion, from funds legally available therefor and subject to the prior dividend rights of holders of any shares of Preferred Stock which may be outstanding. Upon liquidation or dissolution of the Company, subject to prior liquidation rights of the holders of Preferred Stock, the holders of shares of Common Stock are entitled to receive on a pro rata basis the remaining assets of the Company available for distribution. Holders of shares of Common Stock have no preemptive or other subscription rights, and there are no conversion rights or redemption or sinking fund provisions with respect to such shares. RIGHTS AGREEMENT On October 19, 1988, the Board of Directors of the Company declared a dividend distribution of one right (a "Right") for each outstanding share of Common Stock to shareholders of record at the close of business on November 30, 1988 (the "Rights Record Date") pursuant to a Rights Agreement dated as of October 19, 1988 between the Company and The First National Bank of Boston (the "Original Rights Agreement"). On January 10, 1994, in connection with the Stock Purchase Agreement, 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, dated as of January 10, 1994 (the "Rights Agreement"), between the Company and State Street Bank & Trust Company, as Rights Agent ("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. Until the earlier to occur of (i) ten days following a public announcement that a person or group of affiliated or associated persons has become an Acquiring Person (as defined below) or (ii) ten business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in a person or group becoming an Acquiring Person (the earlier of such dates being called the "Distribution Date"), the Rights will be evidenced by the certificates representing the shares of Common Stock, with either a copy of the Summary of Rights that was sent to shareholders in connection with the original issuance of the Rights (the "Summary of Rights") attached thereto or a notation incorporating the Rights Agreement by reference. 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 of Common Stock. For purposes of the Rights Agreement, a person shall generally (subject to certain exceptions) be deemed the "beneficial owner" of, and shall be deemed to "beneficially own," any Common Stock which such person or any of such person's affiliates or associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options or otherwise. However, Cooper 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 of Common Stock continuously from and after the Closing Date and (B) the Cooper Group does not acquire beneficial ownership of any shares in breach of the Investment Agreement (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). In addition, for purposes of applying certain provisions of the Rights Agreement, no person or entity owning more than 5% of the shares of Common Stock as of October 19, 1988 will be deemed to be 44 46 the beneficial owner of, or to beneficially own, any shares of Common Stock in excess of 5% of the shares of Common Stock owned by such person or entity as of October 19, 1988. The Rights Agreement provides that, until the Distribution Date (or earlier redemption or expiration of the Rights), the Rights will be transferred with and only with the shares of Common Stock. Until the Distribution Date (or earlier redemption or expiration of the Rights), share certificates issued after the Rights Record Date upon transfer or new issuance of shares of Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption or expiration of the Rights), the surrender for transfer of any certificates for shares of Common Stock outstanding as of the Rights Record Date, even without such notation or a copy of the Summary of Rights being attached thereto, will also constitute the transfer of the Rights associated with the shares of Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Right Certificates") will be mailed to holders of record of the shares of Common Stock as of the close of business on the Distribution Date and such separate Right Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. 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, in each case, as described below. The Exercise Price payable, and the number of Series A Shares or other securities or property issuable, upon the exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series A Shares, (ii) upon the grant to holders of the Series A Shares of certain rights or warrants to subscribe for or purchase Series A Shares at a price, or securities convertible into Series A Shares with a conversion price, less than the then-current market price of the Series A Shares or (iii) upon the distribution to holders of the Series A Shares of evidences of indebtedness or assets (excluding regular periodic cash dividends paid out of earnings or retained earnings or dividends payable in Series A Shares) or subscription rights or warrants (other than those referred to above). The number of outstanding Rights and the number of one one-hundredths of a Series A Shares issuable upon exercise of each Right are also subject to adjustment in the event of a stock split of the shares of Common Stock or a stock dividend on the shares of Common Stock payable in shares or subdivisions, consolidations or combinations of the shares of Common Stock occurring, in any case, prior to the Distribution Date. Series A Shares purchasable upon exercise of the Rights will not be redeemable. Each Series A Share will be entitled to a minimum preferential quarterly dividend payment of $1 per share but will be entitled to an aggregate dividend of 100 times the dividend declared per share of Common Stock. In the event of liquidation, the holders of the Series A Shares will be entitled to a minimum preferential liquidation payment of $100 per share but will be entitled to an aggregate payment of 100 times the payment made per share of Common Stock. Each Series A Share will have 100 votes, voting together with the shares of Common Stock. Finally, in the event of any merger, consolidation or other transaction in which Shares are exchanged, each Series A Share will be entitled to receive 100 times the amount received per share of Common Stock. These rights are protected by customary antidilution provisions. Because of the nature of the Series A Shares' dividend, liquidation and voting rights, the value of the one one-hundredth interest in a Series A Share purchasable upon exercise of each Right should approximate the value of one share of Common Stock. 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 are sold after a person or group has become an Acquiring Person, 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. 45 47 At any time after any person or group becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding shares of Common Stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such person or group which will have become void), in whole or in part, at an exchange ratio of one share of Common Stock, or one one-hundredth of a Series A Share (or of a share of a class or series of the Company's preferred stock having equivalent rights, preferences and privileges), per Right (subject to adjustment). With certain exceptions, no adjustment in the Exercise Price will be required until cumulative adjustments require an adjustment of at least 1% in such Exercise Price. No fractional Series A Shares will be issued (other than fractions which are integral multiples of one one-hundredth of a Series A Share, which may, at the election of the Company, be evidenced by depository receipts) and in lieu thereof, an adjustment in cash will be made based on the market price of the Series A Shares on the last trading day prior to the date of exercise. At any time prior to the acquisition by a person or group of affiliated or associated persons of beneficial ownership of 20% or more of the outstanding Shares, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.02 per Right (the "Redemption Price"). The redemption of the Rights may be made effective at such time on such basis with such conditions as the Board of Directors in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price. The terms of the Rights may be amended by the Board of Directors of the Company without the consent of the holders of the Rights, including an amendment to lower certain thresholds described above to not less than the greater of (i) the sum of .001% and the largest percentage of the outstanding Shares then known to the Company to be beneficially owned by any person or group of affiliated or associated persons (other than the Cooper Group for so long as the Cooper Group is deemed not to be an Acquiring Person) and (ii) 10% except that from and after such time as any person or group of affiliated or associated persons becomes an Acquiring Person no such amendment may adversely affect the interests of the holders of the Rights. Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including without limitation, the right to vote or to receive dividends. The Rights have certain anti-takeover effects. The Rights will cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Company's Board of Directors, except pursuant to an offer conditioned on a substantial number of Rights being acquired. The Rights should not interfere with any merger or other business combination approved by the Board of Directors since the Rights may be redeemed by the Company at the Redemption Price prior to the time that a person or group has become an Acquiring Person. A copy of the Rights Agreement has been filed with the SEC as an exhibit to a Registration Statement on Form 8-A/A dated January 21, 1994. A copy of the Rights Agreement is available to any holder of Common Stock free of charge from the Company. This summary description of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, which is hereby incorporated herein by reference. MASSACHUSETTS LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS; ANTI-TAKEOVER EFFECTS The Company is subject to Chapter 110F of the MGL, an anti-takeover law. Under Chapter 110F, a Massachusetts corporation with more than 200 stockholders may not engage in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person becomes an interested stockholder, unless (i) the interested stockholder obtains the approval of the Board of Directors prior to becoming an interested stockholder, (ii) the interested stockholder acquires 90% of the outstanding voting stock of the corporation (excluding shares held by certain affiliates of the corporation) at the time it becomes an interested stockholder or (iii) the business 46 48 combination is approved by both the Board of Directors and the holders of two-thirds of the outstanding voting stock of the corporation (excluding shares held by the interested stockholder). An "interested stockholder" is a person who, together with affiliates and associates, owns (or, in certain cases, at any time within the prior three years did own) 5% or more of the outstanding voting stock of the corporation. A "business combination" includes a merger, certain stock or asset sales, and certain other specified transactions resulting in a financial benefit to the interested stockholder. The By-Laws of the Company include a provision excluding the Company from the applicability of Chapter 110D of the MGL, which regulates the acquisition of so-called "control shares." A control share acquisition is the acquisition of shares which, when added to shares already owned, would (but for the statute) entitle the acquiring person to vote at least 20% of a corporation's stock. Shares acquired in such a transaction would, under the statute, have no voting rights unless a majority of noninterested stockholders voted to grant such voting rights. In general, the person acquiring such shares, officers of the Company and those directors of the Company who are also employees, are not permitted to vote on whether such voting rights shall be granted. The Board of Directors may amend the By-Laws at any time to subject the Company to this statute prospectively. MGL Chapter 156B, Section 50A requires that a publicly held Massachusetts corporation have a classified board of directors consisting of three classes as nearly equal in size as possible, unless the corporation elects not to be covered by Section 50A. The Company's By-Laws contain provisions which give effect to Section 50A. The By-Laws also provide that the directors and officers of the Company generally shall be indemnified by the Company to the fullest extent authorized by Massachusetts law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred in connection with service for or on behalf of the Company. In addition, the Articles provide that the directors of the Company will not be personally liable to the Company or its stockholders for monetary damages for certain breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to the Company or its stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions, approved certain loans to insiders or derived an improper benefit from their action as directors. The Company's By-Laws further provide that special meetings of stockholders may be called only by the Chief Executive Officer, by the Board of Directors or by the Clerk upon the written request of the holders of at least 10% of the Company's outstanding Common Stock. In addition, under the fair price provision of the Articles, a Business Combination (as defined in the Articles) between the Company or a subsidiary of the Company and an Interested Stockholder (as defined in the Articles) requires the approval of at least 85% of the outstanding voting stock of the Company, unless either (i) the Business Combination has been approved by at least two-thirds of the Company's Continuing Directors (as defined in the Articles) or (ii) certain minimum price requirements are satisfied. See "Relationship Between the Company and Cooper -- Investment Agreement." REGISTRAR AND TRANSFER AGENT The registrar and transfer agent for the Common Stock is State Street Bank & Trust Company, 2 Heritage Drive, North Quincy, Massachusetts, telephone number (617) 985-3024. 47 49 COMMON STOCK OWNERSHIP OF COOPER Cooper beneficially owns 16.5 million shares of Common Stock, representing approximately 47% of the outstanding shares of Common Stock. Immediately following the sale of the DECS pursuant to the DECS Prospectus, the ownership interest of Cooper will remain at approximately 47% of the outstanding shares of Common Stock. Pursuant to the terms of the DECS, Cooper may, at its option, consummate the mandatory exchange at maturity thereof by delivering to holders thereof shares of Common Stock. Cooper's ownership interest after maturity of the DECS could remain at 47% of the presently outstanding number of shares of Common Stock if it elects to deliver cash or could be reduced to less than one percent of the presently outstanding shares of Common Stock if (a) at maturity of the DECS the Maturity Price is less than or equal to the Initial Price (each as defined in the DECS Prospectus), (b) the Underwriters elect to exercise their over-allotment option in full and (c) Cooper elects to deliver its shares of Common Stock instead of cash and does not acquire any additional shares of Common Stock. However, Cooper is under no obligation to, and there can be no assurance that Cooper will, elect to exercise its option to deliver Common Stock pursuant to the terms of the DECS or, if it so elects, that it will use all or any portion of its current holdings of Common Stock to make such delivery. PLAN OF DISTRIBUTION The Underwriters have severally agreed, subject to the terms and conditions set forth in the Underwriting Agreement, to purchase from Cooper the aggregate number of DECS set forth opposite their names below:
NUMBER OF UNDERWRITERS DECS ------------ --------- Salomon Brothers Inc ....................................... Merrill Lynch, Pierce, Fenner & Smith Incorporated.................................... Schroder Wertheim & Co. Incorporated........................ ---------- Total.................................................. 15,000,000 ==========
In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all of the DECS if any are purchased. The Company has been advised that the Underwriters propose to offer the DECS to the public initially at the offering price set forth on the cover of the Cooper Prospectus and to certain dealers at such price less a selling concession of $ per DECS; that the Underwriters may allow, and each such dealer may reallow, to other dealers a concession not exceeding $ per DECS; and that, after the initial public offering, such public offering price and such concession and reallowance may be changed. The Company and Cooper have agreed not to offer for sale, sell or otherwise dispose of, without the prior written consent of the Underwriters, any shares of Common Stock or any securities convertible into or exchangeable for, or warrants to acquire Common Stock for a period of 90 days after the date of this Prospectus; provided, however, that such restriction shall not affect the ability of the Company or Cooper or their respective subsidiaries to take any such actions in connection with the offering of the DECS made hereby or any exchange at Maturity pursuant to the terms of the DECS. In connection with the DECS Offering, Cooper or an affiliate thereof, referred to herein as the "Lender", and Salomon Brothers Inc ("Salomon") intend to enter into a Securities Loan Agreement (the "Securities Loan Agreement") which provides that, subject to certain restrictions and with the agreement of the Lender, Salomon may from time to time borrow, return and reborrow shares of Common Stock from the Lender (the "Borrowed Securities"); provided, however, that the number of Borrowed Securities at any time may not exceed 750,000 shares in the twelve-month period beginning December , 1995; 1,000,000 shares in the twelve-month period beginning December , 1996; and 48 50 1,250,000 in the twelve-month period beginning December , 1997, subject to adjustment to provide antidilution protection. The Securities Loan Agreement contains limitations on the amount of Borrowed Securities that Salomon can borrow on any day and from time to time and requires Salomon to return Borrowed Securities within a specified period of time from the date of borrowing and prior to any record date. The Securities Loan Agreement is intended to facilitate market-making activity in the DECs by Salomon. Salomon may from time to time offer shares of Common Stock borrowed from the Lender under the Securities Loan Agreement directly to one or more purchasers at negotiated prices, at market prices prevailing at the time of sale or at prices related to such market prices, in connection with such market making activities. The availability of shares of Common Stock under the Securities Loan Agreement, if any, at any time is not assured and any such availability does not assure market-making activity with respect to the DECs and any market-making actually engaged in by Salomon may cease at any time. The foregoing description of the Securities Loan Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which is filed as an exhibit to the Registration Statement of which the Prospectus is a part. Cooper has granted to the Underwriters an option, exercisable for 30 days from the date of this Prospectus (or, if such 30th day shall not be a Business Day, on the next Business Day thereafter), to purchase up to an additional 1,500,000 DECS, at the per DECS price to the public less the aggregate underwriting discount set forth on the cover of the Cooper Prospectus. The Underwriters may exercise such right of purchase only for the purpose of covering overallotments, if any, incurred in connection with the sale of DECS being offered. To the extent that the Underwriters exercise such option, each of the Underwriters will become obligated, subject to certain conditions, to purchase a number of such additional DECS proportionate to such Underwriter's initial commitment. The Company and Cooper have agreed in the Underwriting Agreement to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or contribute to payments the Underwriters may be required to make in respect thereof. In connection with the offering of the DECS, the Underwriters and selling group members (if any) and their respective affiliates may engage in passive market making transactions in the Common Stock on Nasdaq in accordance with Rule 10b-6A under the Exchange Act. The passive market making transactions will comply with applicable volume and price limits and will be identified as such. As of September 30, 1995, 1,027,600 shares of Common Stock (representing 2.9% of the issued and outstanding shares of Common Stock) were owned by accounts over which an affiliate of Schroder Wertheim & Co. Incorporated exercises discretionary authority. Salomon has provided financial advisory services to the Company in the past, for which it has received customary fees. Merrill Lynch & Co. has provided financial advisory services to Cooper in the past, for which it has received customary fees. To the extent that the over-allotment option is not exercised by the Underwriters, Cooper may, subject to the Investment Agreement and Underwriting Agreement, sell up to 1.5 million shares of Common Stock pursuant to this Prospectus. Any such distribution hereunder of the Common Stock by Cooper may be effected from time to time in one or more of the following transactions: (a) through brokers, acting as agent in transactions (which may involve block transactions), in special offerings, in the over-the-counter market, or otherwise, at market prices obtainable at the time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, (b) to underwriters who will acquire the shares of Common Stock for their own account and resell them in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale (any public offering price and any discount or concessions allowed or reallowed or paid to dealers may be changed from time to time), (c) directly or through brokers or agents in private sales at negotiated prices, (d) to lenders pledged as collateral to secure loans, credit or other financing arrangements and any subsequent foreclosure, if any, thereunder, or, (e) by any other legally available means. Also, offers to purchase Common Stock may be solicited by agents designated by Cooper from time to time. Underwriters or other agents participating in an offering made pursuant to 49 51 this Prospectus (as amended or supplemented from time to time) may receive underwriting discounts or commissions under the Securities Act and discounts or concessions may be allowed or reallowed or paid to dealers, and brokers or agents participating in such transactions may receive brokerage or agent's commissions or fees. At the time a particular offering of any share of Common Stock is made by Cooper hereunder, to the extent required by law, a Prospectus Supplement will be distributed which will set forth the amount of Common Stock being offered and the terms of the offering, including the purchase price or public offering price, the name or names of any underwriters, dealers or agents, the purchase price paid by any underwriter for any Common Stock purchased from Cooper, any discounts, commissions and other items constituting compensation from Cooper and any discounts, commission or concessions allowed or filed or paid to dealers. LEGAL MATTERS Certain legal matters have been passed upon for the Company by Wallace F. Whitney, Jr., Vice President, General Counsel and Clerk of the Company. As of November 22, 1995, Mr. Whitney was the beneficial owner of 3,145 shares of Common Stock of the Company and held options to purchase 103,000 shares of Common Stock. The Underwriters have been represented by Cravath, Swaine & Moore. EXPERTS The consolidated financial statements of the Company incorporated by reference in its Annual Report (Form 10-K) for the year ended June 3, 1995 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. The combined financial statements of Cameron Forged Products Division (a division of Cooper Industries, Inc.) included in the Company's Current Report (Form 8-K) dated May 26, 1994 have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such combined financial statements are incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 50 52 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Report of Independent Auditors.......................................................... F-1 Consolidated Statements of Operations for the years ended June 3, 1995, May 28, 1994 (unaudited), December 31, 1993 and December 31, 1992 and the five months ended May 28, 1994.................................................................................. F-2 Consolidated Balance Sheets at June 3, 1995 and May 28, 1994............................ F-3 Consolidated Statement of Cash Flows for the Years ended June 3, 1995, May 28, 1994 (unaudited), December 31, 1993 and December 31, 1992 and the five months ended May 28, 1994.................................................................................. F-4 Consolidated Statement of Stockholders' Equity for the year ended June 3, 1995, the five months ended May 28, 1994 and the two years ended December 31, 1993 and 1992.......... F-5 Notes to Consolidated Financial Statements.............................................. F-6
51 53 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 June 3, 1995 and May 28, 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for the year ended June 3, 1995, for the five months ended May 28, 1994, and for each of the two years in the period ended December 31, 1993. These consolidated financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Wyman-Gordon Company and Subsidiaries at June 3, 1995 and May 28, 1994, and the consolidated results of their operations and their cash flows for the year ended June 3, 1995, for the five months ended May 28, 1994, and for each of the two years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Notes I and J to the consolidated financial statements, in 1993 the company changed its method of accounting for postretirement benefits other than pensions and income taxes. Ernst & Young LLP Boston, Massachusetts June 26, 1995 F-1 54 WYMAN-GORDON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED FIVE MONTHS YEAR ENDED ---------------------- ENDED DECEMBER 31, JUNE 3, MAY 28, MAY 28, ------------------- 1995 1994 1994 1993 1992 ------- -------- ----------- -------- -------- (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE DATA) Revenue............................. $396,639 $224,694 $ 86,976 $239,761 $298,881 -------- -------- -------- -------- -------- Cost of goods sold.................. 347,251 217,816 91,907 219,088 243,291 Selling, general and administrative expenses.......................... 36,380 35,532 18,324 26,648 28,315 Other charges (credits)............. (710) 33,003 30,550 2,453 -- Environmental charge................ -- 2,000 2,000 -- -- -------- -------- -------- -------- -------- 382,921 288,351 142,781 248,189 271,606 -------- -------- -------- -------- -------- Income (loss) from operations....... 13,718 (63,657) (55,805) (8,428) 27,275 -------- -------- -------- -------- -------- Other deductions (income): Interest expense.................. 11,027 11,135 5,383 10,823 7,521 Miscellaneous, net................ 1,652 (2,389) 182 (2,247) (2,041) -------- -------- -------- -------- -------- 12,679 8,746 5,565 8,576 5,480 -------- -------- -------- -------- -------- Income (loss) before cumulative effect of changes in accounting principles........................ 1,039 (72,403) (61,370) (17,004) 21,795 Cumulative effect of changes in accounting principles............. -- -- -- (43,000) -- -------- -------- -------- -------- -------- Net income (loss)................... $ 1,039 $(72,403) $(61,370) $(60,004) $ 21,795 ======== ======== ======== ======== ======== INFORMATION PER SHARE Income (loss) before cumulative effect of changes in accounting principles........................ $ .03 $ (4.02) $ (3.32) $ (.95) $ 1.21 Cumulative effect of changes in accounting principles............. -- -- -- (2.39) -- -------- -------- -------- -------- -------- Net income (loss)................... $ .03 $ (4.02) $ (3.32) $ (3.34) $ 1.21 ======== ======== ======== ======== ======== Shares used to compute earnings per share............................. 35,148 17,992 18,490 17,965 18,078 ======== ======== ======== ======== ========
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements. F-2 55 WYMAN-GORDON COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE 3, MAY 28, 1995 1994 --------- --------- (000'S OMITTED) ASSETS Cash and cash equivalents......................................... $ 13,856 $ 42,179 Accounts receivable............................................... 79,219 77,019 Inventories....................................................... 78,813 65,737 Prepaid expenses.................................................. 15,671 15,192 -------- -------- Total current assets........................................... 187,559 200,127 -------- -------- Property, plant and equipment, net................................ 141,397 139,689 Intangible assets................................................. 25,295 27,759 Other assets...................................................... 14,813 27,172 -------- -------- Total assets................................................... $369,064 $394,747 ======== ======== LIABILITIES Borrowings due within one year.................................... $ 3,915 $ 77 Obligation to Cooper Industries................................... -- 20,561 Accounts payable.................................................. 34,729 27,650 Accrued liabilities and other..................................... 55,853 60,151 -------- -------- Total current liabilities...................................... 94,497 108,439 -------- -------- Restructuring, integration, disposal and environmental............ 19,648 26,201 Long-term debt.................................................... 90,308 90,385 Pension liability................................................. 9,589 14,462 Deferred income taxes and other................................... 21,699 30,929 Postretirement benefits........................................... 52,468 51,848 -------- -------- 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 and 36,902,720 shares at June 3, 1995 and May 28, 1994....................... 37,053 36,903 Capital in excess of par value.................................... 40,118 43,884 Retained earnings................................................. 39,700 38,661 Equity adjustments................................................ 63 (5,408) Treasury stock, 2,044,178 shares at June 3, 1995 and 2,354,540 shares at May 28, 1994......................................... (36,079) (41,557) -------- -------- Total stockholders' equity..................................... 80,855 72,483 -------- -------- Total liabilities and stockholders' equity..................... $369,064 $394,747 ======== ========
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements. F-3 56 WYMAN-GORDON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED FIVE MONTHS YEAR ENDED ---------------------- ENDED DECEMBER 31, JUNE 3, MAY 28, MAY 28, ------------------- 1995 1994 1994 1993 1992 -------- ----------- ----------- -------- -------- (UNAUDITED) (000'S OMITTED) OPERATING ACTIVITIES: Net income (loss)..................................... $ 1,039 $(72,403) $(61,370) $(60,004) $ 21,795 Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation and amortization....................... 18,122 15,888 6,782 15,569 15,875 Loss from disposal of production facilities......... -- 2,453 -- 2,453 -- Environmental and other charges (credits)........... (2,100) 32,550 32,550 -- -- Losses of equity investment......................... 1,390 -- -- -- -- Cumulative effect of changes in accounting principles........................................ -- -- -- 43,000 -- Changes in assets and liabilities net of purchase price activity: Accounts receivable................................. (2,200) 9,545 3,228 15,139 14,699 Inventories......................................... (13,076) 16,219 4,215 8,474 16,345 Prepaid expenses and other assets................... 11,542 5,078 2,255 (7,114) 986 Accrued restructuring, integration, disposal and environmental..................................... (14,646) (8,224) (1,352) (9,653) (25,735) Income and other taxes.............................. 628 (623) 585 (940) 2,789 Accounts payable and accrued liabilities............ 7,073 5,515 6,429 311 (15,951) Deferred income taxes............................... -- 1,009 1,009 (58) -- -------- -------- -------- -------- -------- Net cash provided (used) by operating activities...................................... 7,772 7,007 (5,669) 7,177 30,803 -------- -------- -------- -------- -------- INVESTING ACTIVITIES: Investment in acquired subsidiaries................. (3,591) (3,450) (3,450) -- (3,700) Capital expenditures................................ (18,714) (11,888) (2,404) (13,866) (11,156) Deferred program costs.............................. -- 16,408 16,063 (22) (2,086) Proceeds from disposal of production facilities........................................ -- 4,345 -- 4,345 451 Proceeds from sale of fixed assets.................. 1,563 62 -- 393 2,282 Other, net.......................................... (415) 4,071 2,137 1,650 742 -------- -------- -------- -------- -------- Net cash provided (used) by investing activities...................................... (21,157) 9,548 12,346 (7,500) (13,467) -------- -------- -------- -------- -------- FINANCING ACTIVITIES: Cash received from Cooper Industries for factored accounts receivable............................... -- 20,561 20,561 -- -- Cash paid to Cooper Industries for factored accounts receivable........................................ (20,561) -- -- -- -- Payment of debt..................................... (77) (77) (77) (70,077) (22,077) Issuance of debt.................................... 3,838 -- -- 84,680 -- Net proceeds from issuance of common stock.......... 1,862 572 201 537 220 -------- -------- -------- -------- -------- Net cash provided (used) by financing activities...................................... (14,938) 21,056 20,685 15,140 (21,857) -------- -------- -------- -------- -------- Increase (decrease) in cash........................... (28,323) 37,611 27,362 14,817 (4,521) Cash, beginning of period............................. 42,179 4,568 14,817 -- 4,521 -------- -------- -------- -------- -------- Cash, end of period................................... $ 13,856 $ 42,179 $ 42,179 $ 14,817 $ -- ======== ======== ======== ======== ========
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements. F-4 57 WYMAN-GORDON COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
COMMON STOCK CAPITAL ---------------- IN EXCESS SHARES PAR OF PAR RETAINED EQUITY TREASURY ISSUED VALUE VALUE EARNINGS ADJUSTMENTS STOCK ------ ------- --------- -------- ----------- -------- (000'S OMITTED) Balance, December 31, 1991....... 20,403 $20,403 $16,616 $138,240 $(1,788) $(45,383) Net income..................... 21,795 Stock plans.................... (567) 735 Pension equity adjustment...... (535) ------ ------- ------- -------- ------- -------- Balance, December 31, 1992....... 20,403 20,403 16,049 160,035 (2,323) (44,648) Net loss....................... (60,004) Stock plans.................... (984) 1,250 Savings/Investment Plan match....................... (769) 1,040 Pension equity adjustment...... (1,700) ------ ------- ------- -------- ------- -------- Balance, December 31, 1993....... 20,403 20,403 14,296 100,031 (4,023) (42,358) Net loss....................... (61,370) Stock plans.................... (429) 546 Savings/Investment Plan match....................... (171) 255 Pension equity adjustment...... (1,385) Issuance of common stock....... 16,500 16,500 30,188 ------ ------- ------- -------- ------- -------- Balance, May 28, 1994............ 36,903 36,903 43,884 38,661 (5,408) (41,557) Net income..................... 1,039 Stock plans.................... 150 150 (2,354) 3,355 Savings/Investment Plan match....................... (1,412) 2,123 Pension equity adjustment...... 3,952 Currency translation........... 1,519 ------ ------- ------- -------- ------- -------- Balance, June 3, 1995............ 37,053 $37,053 $40,118 $ 39,700 $ 63 $(36,079) ====== ======= ======= ======== ======= ========
The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements. F-5 58 WYMAN-GORDON COMPANY AND SUBSIDIARIES 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. On May 24, 1994, the company's Board of Directors voted to change the company's fiscal year end from one which ended on December 31 to one which ends on the Saturday nearest to May 31. On May 26, 1994, the Company acquired Cameron Forged Products Company ("Cameron") from Cooper Industries. The accompanying consolidated financial statements include the accounts of Cameron from the date of the acquisition. Cameron's operating results from May 26, 1994 to May 28, 1994 are not material to the consolidated statement of operations for the five month period ended May 28, 1994. The unaudited statement of operations and cash flows for the year ended May 28, 1994 are presented for comparative purposes only. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the company and all subsidiaries. All intercompany accounts and transactions have been eliminated. REVENUE RECOGNITION: Sales and income are recognized at the time products are shipped. 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 and castings 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 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. As part of the company's acquisition of Cameron on May 26, 1994, loss reserves on backlog and long-term pricing agreements are included on the balance sheet (see Footnote C). 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 revenue and depreciated over 5 years. BANK FEES: Bank fees and related costs of obtaining credit facilities are recorded as other assets and amortized over the term of the facilities. EARNINGS (LOSS) PER SHARE: 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 per-share computations unless their inclusion would be antidilutive. F-6 59 WYMAN-GORDON COMPANY AND SUBSIDIARIES 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 550 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 50.0% of the company's revenues during the year ended June 3, 1995, 50.6% for the five months ended May 28, 1994, 55.6% for the year ended December 31, 1993 and 52.7% for the year ended December 31, 1992. General Electric Company ("GE") and United Technologies Corporation ("UT") each accounted for more than 10% of the company's revenues as follows:
FIVE MONTHS YEAR ENDED ENDED MAY YEAR ENDED DECEMBER 31, JUNE 3, 28, ---------------------------------- 1995 % 1994 % 1993 % 1992 % ---------- --- ----------- --- -------- --- -------- --- ($000'S OMITTED) GE........................... $ 101,261 26 $ 17,226 20 $ 55,585 23 $ 62,740 21 UT........................... 58,873 15 13,930 16 37,060 16 48,920 17
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 operations 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 $2,213,000, $733,000, $2,778,000 and $3,013,000 for the year ended June 3, 1995, five months ended May 28, 1994 and for the years ended December 31, 1993 and 1992, respectively. INTANGIBLE ASSETS: Intangible assets consists primarily of costs of acquired businesses in excess of net assets acquired and are amortized on a straightline 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. F-7 60 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) B. ACQUISITION On May 26, 1994, the company acquired all of the outstanding stock of Cameron from Cooper Industries Inc. for 16,500,000 shares of the company's common stock valued at $46,687,000, direct costs of $3,050,000, a note payable to Cooper Industries, Inc. of $3,186,000 net of discount of $1,414,000, $400,000 in cash at closing and a final cash settlement of $3,591,000. Cameron and its subsidiaries operate forging facilities in Houston, Texas and Livingston, Scotland, as well as a powder metal operation in Brighton, Michigan. The integration of Cameron's operations with the company's is progressing substantially as planned. The acquisition was accounted for as a purchase transaction. The company's results of operations for fiscal 1995 include the accounts of Cameron. The final allocation of the purchase price of this transaction is reflected in the May 28, 1994 balance sheet as follows:
(000'S OMITTED) Cost of acquisition: Issuance of 16,500 shares of common stock to Cooper, direct expenses of $3,050 and $3,591 final price adjustment................................ $53,328 Note payable to Cooper net of discount of $1,414 (included in other long-term liabilities on the balance sheet)............................. 3,186 Cash paid to Cooper at closing............................................. 400 ------- 56,914 Estimated costs to integrate Cameron into the company........................ 6,993 ------- $63,907 ======= Allocation of cost of acquisition: Fair value of property, plant and equipment................................ $81,183 Less excess of fair value of net assets acquired over purchase price....... (30,712) ------- 50,471 Other assets acquired and liabilities assumed.............................. 13,436 ------- $63,907 =======
The allocation of the cost of the acquisition has been made on the basis of the fair market value of the individual assets and liabilities acquired. Direct costs of the acquisition of Cameron and liabilities assumed are $5,200,000 and $900,000, respectively, lower than originally estimated at May 28, 1994. The Unaudited Pro Forma Combined financial data of the company with Cameron as though Cameron had been acquired as of the beginning of each period presented are as follows:
FIVE MONTHS ENDED YEAR ENDED MAY 28, DECEMBER 31, 1994 1993 ----------- ------------ (000'S OMITTED, EXCEPT PER-SHARE DATA) Revenue....................................................... $151,834 $389,295 ======== ======== Income (loss) before cumulative effect of changes in accounting principles....................................... $(71,525) $(39,271) ======== ======== Net income (loss)............................................. $(71,525) $(82,271) ======== ======== Income (loss) per share before cumulative effect of changes in accounting principles....................................... $ (2.07) $ (1.14) ======== ======== Net income (loss) per share................................... $ (2.07) $ (2.38) ======== ========
F-8 61 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) C. BALANCE SHEET INFORMATION Components of selected captions in the consolidated balance sheets follow:
JUNE 3, MAY 28, 1995 1994 --------- --------- (000'S OMITTED) PROPERTY, PLANT AND EQUIPMENT: Land, buildings and improvements.................................... $100,399 $ 92,150 Machinery and equipment............................................. 278,691 272,429 Under construction.................................................. 6,282 4,722 -------- -------- 385,372 369,301 Less accumulated depreciation....................................... 243,975 229,612 -------- -------- $141,397 $139,689 ======== ======== INTANGIBLE ASSETS: Pension intangible.................................................. $ 5,568 $ 6,527 Costs in excess of net assets acquired.............................. 28,786 29,586 Less: Accumulated amortization...................................... (9,059) (8,354) -------- -------- $ 25,295 $ 27,759 ======== ======== OTHER ASSETS: Cash surrender value of company-owned life insurance policies....... $ 7,974 $ 12,341 Other............................................................... 6,839 14,831 -------- -------- $ 14,813 $ 27,172 ======== ======== ACCRUED LIABILITIES AND OTHER: Accrued payroll and benefits........................................ $ 11,511 $ 9,900 Restructuring, integration, disposal and environmental reserves..... 10,219 19,082 Payroll and other taxes............................................. 3,139 2,511 Loss on long-term contracts......................................... 7,407 8,334 Other............................................................... 23,577 20,324 -------- -------- $ 55,853 $ 60,151 ======== ======== DEFERRED INCOME TAXES AND OTHER: Deferred income taxes............................................... $ 2,623 $ 2,623 Loss on long-term contracts......................................... 3,413 12,000 Other long-term liabilities......................................... 15,663 16,306 -------- -------- $ 21,699 $ 30,929 ======== ========
F-9 62 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) D. INVENTORIES Inventories consisted of the following:
JUNE 3, MAY 28, 1995 1994 -------- -------- (000'S OMITTED) Raw material........................................................ $ 26,440 $ 13,706 Work-in-process..................................................... 54,310 54,570 Other............................................................... 3,228 2,286 83,978 70,562 Less progress payments.............................................. 5,165 4,825 $ 78,813 $ 65,737
If all inventories valued at LIFO cost had been valued at FIFO cost or market which approximates current replacement cost, inventories would have been $21,584,000 and $27,758,000 higher than reported at June 3, 1995 and May 28, 1994, respectively. LIFO inventory quantities were reduced in each of the periods presented below, 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, inflation or deflation were as follows:
YEAR ENDED DECEMBER YEAR ENDED FIVE MONTHS 31, JUNE 3, ENDED MAY --------------------- 1995 28, 1994 1993 1992 ---------- ----------- -------- -------- (000'S OMITTED) Lower quantities.......................... $ 7,567 $2,050 $5,469 $18,388 (Inflation) deflation..................... (1,393) 1,085 4,450 2,448 ------- ------ ------ ------- Net increase to income from operations.... $ 6,174 $3,135 $9,919 $20,836 ======= ====== ====== =======
E. SHORT-TERM AND LONG-TERM DEBT Short-term and long-term debt consisted of the following:
JUNE 3, MAY 28, 1995 1994 -------- -------- (000'S OMITTED) Borrowings due within one year: Current portion of long-term debt................................. $ 77 $ 77 Borrowings under U.K. Credit Agreement............................ 3,838 -- ------- ------- Total borrowings due within one year........................... $ 3,915 $ 77 ======= ======= Long-term debt: Senior Notes...................................................... $90,000 $90,000 Other............................................................. 308 385 ------- ------- Total long-term debt........................................... $90,308 $90,385 ======= =======
F-10 63 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) During 1993, the company issued $90,000,000 of 10 3/4% Senior Notes due March 2003 (the "Senior Notes") under an indenture between the company and a bank as trustee. The Senior Notes pay interest semi-annually. The 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 indenture contains certain covenants including limitations on indebtedness, restrictive payments including dividends, liens, and disposition of assets. The estimated fair value of the Senior Notes was $86,400,000 and $88,200,000 at June 3, 1995 and May 28, 1994 based on third party valuations. On May 20, 1994, the company initiated, through a new 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. There were no borrowings outstanding at June 3, 1995 and May 28, 1994, but the company had issued $10,009,000 and $5,139,000 of letters of credit under the Receivables Financing Program, respectively. As of June 3, 1995 and May 28, 1994, total availability based on eligible receivables was $44,816,000 and $15,418,000, respectively. Cameron's accounts receivable became eligible on October 21, 1994. Wyman-Gordon Limited, the company's subsidiary located in Livingston, Scotland, entered into a credit agreement ("U.K. Credit Agreement") with a bank ("the Bank") effective November 28, 1994. The maximum borrowing capacity under the U.K. Credit Agreement is 3,000,000 pound sterling with a separate letter of credit or guarantee limit of 1,000,000 pound sterling. Borrowings bear interest at 1% over the Bank'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 2% over the Bank's base rate. The company is obligated to pay a commitment fee of .75% on letters of credit issued under the U.K. Credit Agreement. The U.K. Credit Agreement is secured by a debenture from Wyman-Gordon Limited and is senior to any intercompany loans. The term of the U.K. Credit Agreement is one year with an evergreen feature. There were 2,415,000 pound sterling or $3,838,000 borrowings outstanding at June 3, 1995 and the company had issued pound sterling 380,000 or $604,000 of letters of credit or guarantees under the U.K. Credit Agreement. For the year ended June 3, 1995, the weighted average interest rate on short-term borrowings was 7.3%. F-11 64 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Annual maturities of long-term debt in the next five years amount to $77,000 per year and $90,000,000 thereafter. The company's promissory note to Cooper Industries, Inc. in the principal amount of $4,600,000, will be payable in annual installments beginning on June 30, 1997 and each June 30 thereafter until paid in full in amounts provided under the terms of the "Stock Purchase Agreement" with Cooper Industries, Inc.
FIVE MONTHS YEAR ENDED YEAR ENDED ENDED DECEMBER 31, JUNE 3, MAY 28, --------------------- 1995 1994 1993 1992 ---------- ----------- -------- -------- (000'S OMITTED) Interest on debt.......................... $ 9,929 $3,973 $ 8,741 $5,171 Capitalized interest...................... (397) (152) (544) (218) Amortization of financing fees and other................................... 1,495 1,562 2,626 2,568 ------- ------ ------- ------ Interest expense.......................... $11,027 $5,383 $10,823 $7,521 ======= ====== ======= ======
Total interest paid approximates "Interest on debt" stated in the table above. F. RESTRUCTURING OF OPERATIONS 1991 RESTRUCTURING: During 1991, the company incurred charges of $87,966,000 and $11,498,000 in connection with a restructuring program primarily at its forging operations and disposition of its automotive crankshaft forging division, respectively. A significant portion of this charge related to the consolidation of forging operations, including severance and other personnel costs. The company has nearly completed its 1991 restructuring plan. Some consolidation activities still remain to be completed requiring cash outlays of approximately $1,700,000 and $600,000 in fiscal 1996 and 1997, respectively. Deferred compensation of approximately $1,500,000 will be payable over the next several years under the terms of a severance agreement. The divestiture of the company's automotive crankshaft forging division is virtually complete with minor costs remaining. 1993 DISPOSITION: In 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 in the fourth quarter of 1993 of $2,453,000. 1994 RESTRUCTURING: The company recorded a charge of $6,450,000 in May 1994, $5,200,000 for closing a castings facility, of which $1,100,000 required cash, and $1,250,000 to write-down castings fixed assets to their net realizable value. The non-cash items amounting to $5,350,000 were charged against the reserve in May 1994. A $600,000 cash charge was made against the reserve in fiscal 1995 and cash charges of $500,000 are expected to be incurred in fiscal 1996. 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 which consisted of estimated cash costs of F-12 65 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) $12,700,000 and estimated non-cash charges of $11,400,000 for asset revaluations. Cash costs include relocating machinery, equipment, tooling and dies of the company as well as relocation and severance costs related to personnel of the company. Non-cash charges included 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. In the fourth quarter of fiscal 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, the company had originally identified certain machinery and equipment expected to become redundant as a result of the integration of Cameron's operations with those of the company's. These redundancies were $2,300,000 higher than the company's original estimates. As a result, the company took into income from operations, an integration restructuring credit in the amount of $2,100,000. At June 3, 1995, the company estimates the remaining integration activities will require cash outlays of approximately $4,100,000 in fiscal 1996 and $1,600,000 thereafter. Most of these future expenditures represent costs associated with consolidation and reconfiguration of production facilities and relocation or severance costs. CAMERON PURCHASE CASH COSTS: 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. At June 3, 1995, it was determined that the cash costs of the acquisition were $5,200,000 lower than originally estimated. The company made $4,100,000 of cash charges against these reserves in fiscal 1995, and the remaining activities will require estimated cash outlays of $2,900,000. F-13 66 WYMAN-GORDON COMPANY AND SUBSIDIARIES 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 YEAR ENDED MONTHS YEAR ENDED DECEMBER 31, ENDED ----------------- ------------------------------ MAY 28, JUNE 3, JUNE 1, THERE- TOTAL 1991 1992 1993 1994 1995 1996 AFTER ------- -------- -------- -------- ------- ------- ------- ------ (000'S OMITTED) 1991 RESTRUCTURING: CASH: Consolidation and reconfiguration of facilities................................... $32,600 $ 700 $21,100 $4,800 $ 1,400 $ 2,300 $1,700 $ 600 Severance and deferred compensation............ 6,400 -- 2,200 2,000 300 400 200 1,300 ------- ------- ------- ------ ------- ------- ------ ------ Total cash charges........................... 39,000 700 23,300 6,800 1,700 2,700 1,900 1,900 ------- ------- ------- ------ ------ ------- ------ ------ NON-CASH: Asset revaluation.............................. 56,000 51,900 2,400 $1,700 $ -- $ -- $ -- $ -- ------- ------- ------- ------ ------- ------- ------ ------ Total 1991 Other Charges..................... $95,000 $52,600 $25,700 $8,500 $ 1,700 $ -- $1,900 $1,900 ======= ======= ======= ====== ======= ======= ====== ====== 1993 DISPOSITION: NON-CASH: Disposition of production facilities........... $ 2,453 $ -- $ -- $2,453 $ -- $ -- $ -- $ -- ------- ------- ------- ------ ------- ------- ------ ------ Total 1993 Other Charges..................... $ 2,453 $ -- $ -- $2,453 $ -- $ -- $ -- $ -- ======= ======= ======= ====== ======= ======= ====== ======= 1994 RESTRUCTURING: CASH: Casting facility closure....................... $ 1,100 $ -- -- $ -- $ -- $ 600 $ 500 $ -- ------- ------- ------- ------ ------- ------- ------ ------ NON-CASH: Casting facility closure....................... 4,100 -- -- -- 4,100 -- -- -- Other.......................................... 1,250 -- -- -- 1,250 -- -- -- ------- ------- ------- ------ ------- ------- ------ ------ Total non-cash charges....................... 5,350 -- -- -- 5,350 -- -- -- ------- ------- ------- ------ ------- ------- ------ ------ Total 1994 Restructuring..................... 6,450 -- -- -- 5,350 600 500 -- 1994 CAMERON INTEGRATION COSTS: CASH: Movement of machinery, equipment and tooling and dies..................................... 4,300 -- -- -- -- 800 2,100 1,400 Severance and other personnel costs............ 4,000 -- -- -- -- 1,800 2,000 200 ------- ------- ------- ------ ------- ------- ------ ------ Total cash charges........................... 8,300 -- -- -- -- 2,600 4,100 1,600 ------- ------- ------- ------ ------- ------- ------ ------ NON-CASH: Asset revaluation.............................. 13,700 -- -- -- 11,400 2,300 -- -- Credits to reserves............................ 2,100 -- -- -- -- 2,100 -- -- ------- ------- ------- ------ ------- ------- ------ ------ Total non-cash charges....................... 15,800 -- -- -- 11,400 4,400 -- -- ------- ------- ------- ------ ------- ------- ------ ------ Total 1994 Cameron integration costs......... 24,100 -- -- -- 11,400 7,000 4,100 1,600 ------- ------- ------- ------ ------- ------- ------ ------ Total 1994 Other Charges..................... $30,550 $ -- $ -- $ -- $16,750 $ 7,600 $4,600 $1,600 ======= ======= ======= ====== ======= ======= ====== ====== CAMERON PURCHASE CASH COSTS: Cost of relocating Cameron's machinery and equipment and tooling and dies............... $ 3,200 $ -- $ -- $ -- $ -- $ 1,700 $1,100 $ 400 Severance of Cameron personnel................. 3,800 -- -- -- -- 2,400 1,300 100 ------- ------- ------- ------ ------- ------- ------ ------ Total Cameron Purchase Cash Costs............ $ 7,000 $ -- $ -- $ -- $ -- $ 4,100 $2,400 $ 500 ======= ======= ======= ====== ======= ======= ====== ====== 1995 OTHER CHARGES: NON-CASH: Credits to 1994 Cameron integration costs...... $(2,100) $ -- $ -- $ -- $ -- $(2,100) $ -- $ -- ------- ------- ------- ------ ------- ------- ------ ------ Total 1995 Other Charges..................... $(2,100) $ -- $ -- $ -- $ -- $(2,100) $ -- $ -- ------- ------- ------- ------ ------- ------- ------ ------ Total Cash..................................... $55,400 $ 700 $23,300 $6,800 $ 1,700 $10,000 $8,900 $4,000 ------- ------- ------- ------ ------- ------- ------ ------ Total Non-cash................................. $77,503 $51,900 $ 2,400 $4,153 $16,750 $ 2,300 $ -- $ -- ======= ======= ======= ====== ======= ======= ====== ======
F-14 67 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 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. In 1991, the company recorded a charge of $7,000,000 with respect to environmental investigation and remediation costs at one of the company's facilities. During the five months ended May 28, 1994, the company provided an additional $2,000,000 to the current estimated cost of remediation and established a $3,500,000 purchase accounting reserve related to environmental issues at Cameron. Additionally, a charge of $5,000,000 against potential environmental remediation costs upon the eventual sale of another facility was included in the 1991 restructuring charge. As of June 3, 1995, aggregate environmental reserves amounted to $16,967,000 and have been provided for expected cleanup expenses estimated between $6,000,000 and $7,000,000 upon the planned sale of a 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 a facility from the federal government in 1982, the company agreed to make additional expenditures for environmental management and remediation projects at that site during the period 1982 through 1999. Approximately $6,100,000 of future expenditures remain as of June 3, 1995. The company, together with numerous other parties, has also been alleged to be a potentially responsible party at four federal or state Superfund sites. The company does not believe that liabilities related to such sites will be material in the aggregate. The company's Grafton, Massachusetts plant location is included in the U.S. Nuclear Regulatory Commission's ("NRC") May 1992 Site Decommissioning Management Plan for low-level radioactive waste as a "Priority C" (lowest priority) site. The NRC conducted a long range dose assessment in 1992, and concluded that the site should be remediated. However, the company believes the NRC's draft assessment was flawed and has challenged that draft assessment. The company has provided $1,500,000 for the estimated cost of the remediation. The company believes that it may have meritorious claims for reimbursement from the U.S. Air Force in respect of any liabilities it may have for such remediation. The company has been named in a suit which relates to the clean-up of a privately owned site in Massachusetts formerly used as an impoundment lagoon from which hazardous material is alleged to have spilled. A proposed agreement would allocate 33% of the clean-up costs to the company. An insurance company is defending the company's interests, and the company believes that any recovery against the company would be covered by insurance. A consulting firm retained by the PRP group has recently made a preliminary remediation cost estimate of $300,000 to $9,900,000, depending on the level of toxicity found and the method of remediation ultimately used. 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. F-15 68 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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:
JUNE 3, MAY 28, 1995 1994 --------- --------- (000'S OMITTED) Pension liability per balance sheet................................. $(9,589) $(14,462) Prepaid pension expense included in prepaid expenses in the balance sheet............................................................. 1,639 2,769 UK pension liability................................................ 789 750 ------- -------- Net pension liability............................................... $(7,161) $(10,943) ======= ========
U.S. PENSION PLANS Pension expense for the U.S. pension plans included the following components:
YEAR ENDED FIVE MONTHS DECEMBER 31, YEAR ENDED ENDED --------------------- JUNE 3, 1995 MAY 28, 1994 1993 1992 ---------- ------------ -------- -------- (000'S OMITTED) Service cost.............................. $ 2,938 $ 917 $ 1,720 $ 1,937 Interest cost on projected benefit obligation.............................. 10,842 4,373 10,955 11,083 Actual return on assets................... (8,205) (2,248) (18,107) (6,849) Net amortization and deferral of actuarial gains (losses).......................... (1,385) (1,798) 8,208 (3,403) -------- ------- -------- ------- Net pension expense....................... $ 4,190 $ 1,244 $ 2,776 $ 2,768 ======== ======= ======== ======= Assumed long-term rate of return on plan assets.................................. 9.0% 9.0% 9.0% 9.0% ======== ======= ======== =======
F-16 69 WYMAN-GORDON COMPANY AND SUBSIDIARIES 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:
JUNE 3, 1995 ----------------------------------------- ASSETS ACCUMULATED EXCEEDING BENEFITS ACCUMULATED EXCEEDING BENEFITS ASSETS TOTAL ----------- ----------- --------- (000'S OMITTED) Actuarial present value of benefit obligations: Vested......................................... $ 82,042 $ 46,202 $128,244 Nonvested...................................... 349 324 673 ------- ------- -------- Accumulated benefit obligation................. 82,391 46,526 128,917 Impact of forecasted salary increases during future periods.............................. 5,737 339 6,076 ------- ------- -------- Projected benefit obligation for employee service to date............................. 88,128 46,865 134,993 Current fair market value of plan assets......... 101,933 30,967 132,900 ------- ------- -------- Excess (shortfall) of plan assets over (under) projected benefit obligation................... 13,805 (15,898) (2,093) Unrecognized net (gain) loss..................... (10,261) 1,771 (8,490) Unrecognized net (asset) obligation at transition..................................... (455) 4,912 4,457 Unrecognized prior service cost.................. 5,290 2,456 7,746 Adjustment required to recognize minimum liability...................................... -- (8,800) (8,800) Net periodic pension cost April 1, 1995 to June 3, 1995........................................ (48) (650) (698) Contributions April 1, 1995 to June 3, 1995...... -- 717 717 -------- -------- -------- Net prepaid pension expense (pension liability)..................................... $ 8,331 $(15,492) $ (7,161) ======== ======== ======== Estimated annual increase in future salaries..... 3-5% Weighted average discount rate................... 9.0% --------
F-17 70 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MAY 28, 1994 ----------------------------------------- ASSETS ACCUMULATED EXCEEDING BENEFITS ACCUMULATED EXCEEDING BENEFITS ASSETS TOTAL ----------- ----------- --------- (000'S OMITTED) Actuarial present value of benefit obligations: Vested......................................... $ 91,533 $ 50,639 $142,172 Nonvested...................................... 341 398 739 -------- -------- -------- Accumulated benefit obligation................. 91,874 51,037 142,911 Impact of forecasted salary increases during future periods.............................. 6,798 235 7,033 -------- -------- -------- Projected benefit obligation for employee service to date............................. 98,672 51,272 149,944 Current fair market value of plan assets......... 103,349 31,390 134,739 -------- -------- -------- Excess (shortfall) of plan assets over (under) projected benefit obligation................... 4,677 (19,882) (15,205) Unrecognized net (gain) loss..................... (1,274) 5,121 3,847 Unrecognized net (asset) obligation at transition..................................... (522) 5,965 5,443 Unrecognized prior service cost.................. 5,706 2,860 8,566 Adjustment required to recognize minimum liability...................................... -- (13,712) (13,712) Net periodic pension cost April 1, 1994 to May 28, 1994....................................... 34 (507) (473) Contributions April 1, 1994 to May 28, 1994...... -- 591 591 -------- -------- -------- Net prepaid pension expense (pension liability)..................................... $ 8,621 $(19,564) $(10,943) ======== ======== ======== Estimated annual increase in future salaries..... 3-5% Weighted average discount rate................... 7.5% --------
A measurement date of March 31 has been used for determining the disclosure information. Expense recognition and contributions received during the period April 1 through fiscal year-end are then recognized to bring the accrued or prepaid expense to June 3, 1995 and May 28, 1994 balances. U.K. PENSION PLAN Pension expense for the U.K. pension plan included the following:
YEAR ENDED JUNE 3, 1995 --------------- (000'S OMITTED) Service cost.............................................. $ 692 Interest cost............................................. 1,189 Expected return on assets................................. (1,084) ------- Net pension expense..................................... $ 797 =======
F-18 71 WYMAN-GORDON COMPANY AND SUBSIDIARIES 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 1995. The funded status of the U.K. pension plan is as follows:
JUNE 3, 1995 --------------- (000'S OMITTED) Fair value of plan assets................................. $14,682 Projected benefit obligation.............................. 15,247 ------- Plan assets less than projected benefit obligation........ (565) Unrecognized net gain loss................................ 498 ------- Accrued pension cost...................................... $ (67) ======= Accumulated benefits...................................... $13,472 ======= Vested benefits........................................... $13,472 ======= Assumed long-term rate of return on plan assets........... 9.0% Weighted average discount rate............................ 9.0% Rate of salary increase................................... 6.0%
The company also maintains a 401K plan for most full-time salaried employees. Employer contributions to the defined contribution plan are made at the company's discretion and are reviewed periodically. Such contributions amounted to $136,000 for the year ended June 3, 1995, $591,000 for the five months ended May 28, 1994, and $134,000 and $375,000 for the years ended December 31, 1993 and 1992, respectively. Additionally, for the year ended June 3, 1995, the five months ended May 28, 1994 and the years ended December 31, 1993 and 1992, the company contributed 120,261; 14,432; 58,927 and 0 shares of common stock from Treasury to its defined contribution plan, respectively, and recorded expense relating thereto of $711,000, $84,000, $271,000 and $0, 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. The annual cost of these benefits on the expense-as-incurred basis amounted to $4,849,000 in 1992. Effective January 1, 1993, the company adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This standard requires companies to accrue postretirement benefits during the years the employees are working and earning benefits for retirement, as contrasted to the expense-as-incurred basis that the company followed in 1992 and prior years. The company elected to recognize the cumulative effect of the accounting change, resulting in a non-cash reduction in earnings in 1993 of $43,000,000 or $2.39 per share. 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. The change to the accumulated postretirement benefit obligation for each 1.0% change in these assumptions is $850,000. The change in the annual SFAS 106 expense for each 1.0% change in these assumptions is $78,000. The weighted average discount rate used in determining the amortization of the accumulated postretirement benefit F-19 72 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) obligation was 9.0% and 7.5% at June 3, 1995 and May 28, 1994, respectively, and the average remaining service life was 20 years. Net periodic benefit expense consists of the following components:
FIVE MONTHS YEAR ENDED ENDED YEAR ENDED JUNE 3, MAY 28, DECEMBER 31, 1995 1994 1993 ---------- ----------- ------------ (000'S OMITTED) Service cost.................................... $ 350 $ 85 $ 170 Interest on the accumulated benefit obligation.................................... 3,990 1,540 3,660 ------ ------- ------ Total postretirement benefit expense.......... $4,340 $1,625 $3,830 ====== ====== ======
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:
JUNE 3, MAY 28, 1995 1994 -------- -------- (000'S OMITTED) Accumulated postretirement benefit obligation: Retirees............................................................ $41,323 $43,285 Fully eligible active plan participants............................. 5,180 5,239 Other active plan participants...................................... 7,023 6,778 ------- ------- 53,526 55,302 Plan assets at fair value............................................. -- -- ------- ------- Accumulated postretirement benefit obligation in excess of plan assets.............................................................. 53,526 55,302 Unrecognized net gain (loss) from past experience different from that assumed and from changes in assumptions............................. 901 (3,454) Prior service cost not yet recognized in net periodic postretirement benefit cost........................................................ (2,000) -- ------- ------- Accrued postretirement benefit cost................................... $52,427 $51,848 ======= =======
J. FEDERAL, FOREIGN AND STATE INCOME TAXES As of January 1, 1993, the company adopted financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes" ("SFAS 109"). As permitted under SFAS 109, the company has elected not to restate the financial statements of prior years. The impact of this change on the results of operations for the year ended December 31, 1993 was immaterial. The company has not recognized an income tax benefit (provision) during the year ended June 3, 1995, the five months ended May 28, 1994, or the years ended December 31, 1993 and 1992, respectively. The company received income tax refunds of $0, $138,000, $282,000 and $3,725,000 during the years ended June 3, 1995, the five months ended May 28, 1994, and the years ended December 31, 1993 and 1992, respectively. F-20 73 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The benefit (provision) for income taxes is at a rate other than the federal statutory tax rate for the following reasons:
YEAR ENDED DECEMBER YEAR ENDED FIVE MONTHS 31, JUNE 3, ENDED MAY --------------------- 1995 28, 1994 1993 1992 ---------- ----------- -------- -------- (000'S OMITTED) U.S. federal statutory tax rate........... $ (363) $ 21,480 $ 5,781 $(7,410) Recognition of previously unrecognized deferred tax assets..................... 1,749 -- -- 7,410 Tax carryforwards without current tax benefits (foreign in 1995 and U.S. federal in 1994 and 1993)............... (1,386) (21,480) (5,781) -- -------- -------- ------- ------- Income tax benefit (provision)............ $ -- $ -- $ -- $ -- ======== ======== ======= =======
Tax net operating loss carryforwards of $67,000,000 begin expiring in the year 2006. The company has experienced significant operating losses and there is no assurance that the net operating loss carryforwards will be utilized, therefore, a valuation allowance of $67,731,000 and $69,716,000 at June 3, 1995 and May 28, 1994 has been recognized, respectively. The principal components of deferred tax assets and liabilities were as follows:
JUNE 3, 1995 MAY 28, 1994 ------------ ------------ (000'S OMITTED) DEFERRED TAX ASSETS Provision for postretirement benefits......................... $ 21,512 $ 21,228 Net operating loss carryforwards.............................. 23,585 19,230 Restructuring provisions...................................... 26,602 35,804 Other......................................................... 6,496 5,768 -------- -------- 78,195 82,030 Valuation allowance........................................... (67,731) (69,716) -------- -------- 10,464 12,314 -------- -------- DEFERRED TAX LIABILITIES Accelerated depreciation...................................... 9,393 10,069 Other......................................................... 3,694 4,868 -------- -------- 13,087 14,937 -------- -------- Net deferred tax liability...................................... $ 2,623 $ 2,623 ======== ========
The net deferred tax liability is included in "Deferred income taxes and other" on the accompanying consolidated balance sheets. The company is seeking refunds of prior year's federal taxes paid, which, if fully realized, could have a material favorable impact on the company's financial position. A reasonable estimation of the potential recovery cannot be made at this time and, accordingly, no adjustment has been made in the financial statements with respect to the claim. F-21 74 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) K. STOCK OPTION PLANS The company's Long-Term Incentive Plan (the "Plan") is administered by the Management Resources and Compensation Committee of the Board (the "Committee"), which has plenary authority to interpret the Plan and to adopt rules relating thereto. The Committee may also determine the number, frequency and timing of awards, as well as the type of award and its exercise price, if any, prescribe any performance criteria to be met and any restrictions on exercise and determine any other terms or conditions, including schedules for vesting and exercisability and the conditions under which vesting and exercisability may be accelerated, such as in the event of a change in control of the company. The Committee may grant awards in the form of non-qualified stock options or incentive stock options to those key employees of the company and its subsidiaries, including executive officers, it selects to purchase in the aggregate up to 1,750,000 shares of newly issued or treasury common stock. 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 or are denominated in or 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. During fiscal 1995, awards of 150,000 shares of the company's common stock were made subject to restrictions based upon continued employment for a period of five years and the performance of the company. Compensation expense totalling $330,000 relating to the awards was recorded during the year ended June 3, 1995. The 1975 Executive Long-Term Incentive Program (the "Program"), as amended, provided for the granting of stock options, alternative common stock appreciation rights and performance bonus award units to key employees of the company and its subsidiaries. The 1975 program expired on December 31, 1992, except as to outstanding grants. F-22 75 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Option activity under the 1975 Program and the 1991 Plan in the year ended June 3, 1995, the five months ended May 28, 1994 and the years ended December 31, 1993 and 1992 was as follows:
OPTION PRICE RANGE SHARES ----------- --------- Outstanding at December 31, 1991................................. 3.75-29.00 1,839,246 Granted........................................................ 5.00 321,502 Terminated..................................................... 3.75 (185,001) Exercised...................................................... 3.75 (16,666) Cancelled...................................................... 3.75-29.00 (65,895) --------- Outstanding at December 31, 1992................................. 3.75-29.00 1,893,186 Granted........................................................ 5.00- 6.00 285,500 Terminated..................................................... 3.75-29.00 (372,480) Exercised...................................................... 3.75 (70,831) --------- Outstanding at December 31, 1993................................. 1,735,375 Granted........................................................ 5.13- 5.63 88,008 Terminated..................................................... 3.75-19.00 (28,185) Exercised...................................................... 3.75- 5.00 (30,943) --------- Outstanding at May 28, 1994...................................... 1,764,255 Granted........................................................ 5.63-10.63 365,000 Terminated..................................................... 3.75-21.50 (103,922) Exercised...................................................... 3.75- 6.25 (190,098) --------- Outstanding at June 3, 1995...................................... 1,835,235 =========
Options for 1,203,000; 930,000; 867,000 and 677,000 shares, were exercisable at June 3, 1995, May 28, 1994 and December 31, 1993 and 1992, respectively. At June 3, 1995, 105,000 shares were available for future grants. L. STOCK PURCHASE RIGHTS In August 1988, the company adopted a Rights Agreement (the "Rights Agreement"), and in October 1988, the company declared a dividend distribution of one common stock purchase Right on each outstanding share of common stock. The Rights will become exercisable at a purchase price of $50 each on the distribution date which occurs if a person or group acquires or makes an offer to acquire 20% or more of the company's common stock. In the event that at any time following the distribution date, (i) a person or group becomes the beneficial owner of 20% or more of the then outstanding shares of common stock (except pursuant to an offer for all outstanding shares of common stock which the continuing Directors determine to be fair to and otherwise in the best interests of the company and its stockholders), (ii) the company is not the surviving corporation in a merger and its common stock is not changed or exchanged, (iii) an acquiring person engages in one or more self-dealing transactions as set forth in the Rights Agreement, or (iv) during such time as there is an acquiring person, an event occurs which results in such person's ownership interest being increased by more than 1%, each holder of a Right will thereafter have the right to receive, upon exercise of the Right and payment of the purchase price, common stock or a F-23 76 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) combination of common stock, cash, preferred stock or debt having a value equal to two times the purchase price of the Right. Alternatively, in such event and with the approval of the continuing Directors, each holder of a Right will have the right, or may be permitted only, to receive shares of common stock having a value equal to the purchase price upon surrender of the Right to the company and without payment of the purchase price. Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph, all Rights that are beneficially owned by the acquiring person will be null and void. However, Rights are not exercisable following the occurrence of any of the events set forth above until such time as the Rights are no longer redeemable by the company. In the event that, at any time following the date on which a person or group acquires 20% or more of the company's outstanding shares (i) the company is acquired in a merger or other business combination transaction in which the company is not the surviving corporation (other than certain exceptions mentioned in the Rights agreement) or (ii) 50% or more of the company's assets or earning power is sold or transferred, each holder of a Right which has not been previously voided shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the purchase price of the Right. The Rights may generally be redeemed by the company at a price of $.02 per Right and they expire in November 1998. M. COMMITMENTS AND CONTINGENCIES At June 3, 1995, certain lawsuits arising in the normal course of business were pending. The company denies all material allegations of these complaints. In the opinion of management, the outcome of legal matters will not have a material adverse effect on the company's financial position, results of operations or liquidity. As of June 3, 1995, the company had invested $4,100,000 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 an additional investment of $3,400,000 to the joint venture. The joint venture has entered into a credit agreement with an Australian bank. The company has guaranteed 25% of the joint venture's obligations under the credit agreement totalling $17,300,000. This guarantee expires at such time as the joint venture demonstrates its ability to produce commercially acceptable products. The company enters 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 June 3, 1995. The company had foreign exchange contracts totalling $11,600,000 at June 3, 1995. Such contracts include forward contracts of $9,100,000 for the sale of U.K. pounds and $2,500,000 for the purchase of U.K. pounds. These contracts hedge certain normal operating purchase and sales transactions. The exchange contracts generally mature within six months and require the company to exchange U.K. pounds for non-U.K. currencies or non-U.K. currencies for U.K. pounds. Translation and transaction gains and losses included in fiscal 1995's Consolidated Statements of Operations were not significant. F-24 77 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) N. GEOGRAPHIC AND OTHER INFORMATION Prior to May 28, 1994 the company operated solely in the United States. 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 ENDED FIVE MONTHS JUNE 3, ENDED MAY 1995 28, 1994 ---------- ----------- (000'S OMITTED) REVENUES FROM UNAFFILIATED CUSTOMERS: United States (including direct export sales)................... $365,666 $ 86,976 United Kingdom.................................................. 30,973 -- -------- -------- $396,639 $ 86,976 ======== ======== INTER AREA TRANSFERS: United States................................................... $ 373 $ -- United Kingdom.................................................. 2,528 -- -------- -------- $ 2,901 $ -- ======== ======== EXPORT SALES: United States direct export sales............................... $ 81,208 $ 13,254 ======== ======== INCOME (LOSS) FROM OPERATIONS: United States................................................... $ 14,931 $(55,805) United Kingdom.................................................. (1,213) -- -------- -------- $ 13,718 $(55,805) ======== ======== IDENTIFIABLE ASSETS (EXCLUDING INTERCOMPANY): United States................................................... $289,649 $312,462 United Kingdom.................................................. 47,547 39,457 General corporate............................................... 31,868 42,828 -------- -------- $369,064 $394,747 ======== ========
F-25 78 WYMAN-GORDON COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) O. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected quarterly financial data for fiscal 1995 and fiscal 1994 were as follows:
QUARTER FIRST SECOND THIRD FOURTH - ------- --------- --------- --------- --------- (000'S OMITTED, EXCEPT PER-SHARE DATA) YEAR ENDED JUNE 3, 1995 Revenue...................................... $95,725 $94,974 $96,238 $109,702 Cost of goods sold........................... 86,150 85,105 83,623 92,373 Other charges (credits) and environmental charges.................................... -- -- -- (710) Income (loss) from operations................ 3 768 3,620 9,327 Net income (loss)............................ (3,321) (2,021) 556 5,825 Net income (loss) per share.................. (.10) (.06) .02 .17 YEAR ENDED MAY 28, 1994 Revenue...................................... $58,452 $56,233 $50,896 $59,113 Cost of goods sold........................... 50,433 53,014 50,375 63,994 Other charges (credits) and environmental charges.................................... -- 2,366 87 32,550 Income (loss) from operations................ 1,886 (6,298) (8,447) (50,798) Net income (loss)............................ (816) (5,642) (11,282) (54,663) Net income (loss) per share.................. (.05) (.31) (.63) (3.02) - --------------- (a) Income (loss) from operations during the third quarter of the year ended May 28, 1994 reflects charges of $2,400 resulting from a change in estimated cash surrender values provided by the company's insurance actuaries on company-owned life insurance policies. (b) Income (loss) from operations during the fourth quarter of the year ended May 28, 1994 reflects significant charges amounting to $17,450,000.
F-26 79 NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ------------------------ TABLE OF CONTENTS
PAGE ------ Available Information................ 2 Incorporation of Certain Documents by Reference.......................... 2 Prospectus Summary................... 3 Risk Factors......................... 7 Price Range of Common Stock and Dividend Policy.................... 10 Capitalization....................... 12 Selected Consolidated Financial Data............................... 13 Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 15 Business............................. 22 Management........................... 34 Relationship between the Company and Cooper............................. 36 Description of the Company's Capital Stock.............................. 43 Common Stock Ownership of Cooper..... 48 Plan of Distribution................. 48 Legal Matters........................ 50 Experts.............................. 50 Index to Consolidated Financial Statements......................... 51
15,000,000 SHARES WYMAN-GORDON COMPANY COMMON STOCK (PAR VALUE $1.00 PER SHARE) [LOGO] PROSPECTUS DATED , 1995 80 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. [ALTERNATE PAGE FOR SHELF PROSPECTUS] Subject to Completion, Dated November 30, 1995 PROSPECTUS 15,000,000 SHARES [LOGO] WYMAN-GORDON COMPANY COMMON STOCK (PAR VALUE $1.00 PER SHARE) This Prospectus relates to 15,000,000 shares of Common Stock, par value $1.00 per share (the "Common Stock"), of Wyman-Gordon Company (the "Company"), which may be delivered by Cooper Industries, Inc. ("Cooper"), at its option, pursuant to the terms of the % Exchangeable Notes Due , 1998 (the "Debt Exchangeable for Common StockSM" or "DECSSM" ). The DECS are offered (the "DECS Offerings") pursuant to a prospectus of Cooper (the "DECS Prospectus") covering the sale of 15,000,000 DECS (the "DECS Offering"). The Company will not receive any of the proceeds from the offering contemplated hereby. Cooper has granted the Underwriters of the DECS a 30-day option to purchase up to an additional 1,500,000 DECS, which may be exchangeable at their maturity for additional shares of Common Stock. Such option has been granted solely to cover over-allotments, if any. To the extent that the over-allotment option is not exercised by the Underwriters in full, Cooper may, subject to certain limitations, sell up to 1,500,000 shares of Common Stock pursuant to this Prospectus. See "Plan of Distribution." PROSPECTIVE INVESTORS ARE ADVISED TO CONSIDER CAREFULLY THE INFORMATION CONTAINED UNDER "RISK FACTORS" ON PAGE 7. In connection with market-making activities in the DECS, Salomon Brothers Inc. ("Salomon") may, subject to certain limitations, from time to time borrow, return and reborrow up to 1,250,000 shares of Common Stock from Cooper. Salomon is not under any obligation to engage in any market-making transactions with respect to the DECS, and any market-making in the DECS actually engaged in by Salomon may cease at any time. In addition, the Common Stock is traded on The Nasdaq Stock Market's National Market ("Nasdaq") under the symbol WYMN. On , 1995, the last reported sale price of Common Stock was $ per share. See "Price Range of Common Stock and Dividend Policy." The Company and Cooper have agreed not to sell, without the prior written consent of the Underwriters, any shares of Common Stock or any securities convertible into or exchangeable for Common Stock for a period of 90 days after the date of this Prospectus. See "Plan of Distribution." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1995. 81 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth various expenses in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except the Securities and Exchange Commission registration fee. SEC Registration Fee........................................... $71,121 National Association of Securities Dealers, Inc. Fee........... $ 9,375 Blue Sky Fees and expenses..................................... * Accounting Fees and Expenses................................... * Legal Fees and Expenses........................................ * Printing....................................................... * Miscellaneous.................................................. * -------- Total........................................................ ======== - --------------- *To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS (a) Section 67 of the Business Corporation Law of the Commonwealth of Massachusetts provides that indemnification of directors, officers, employees or other agents may be provided by the corporation. Section 13(b)(1-1/2) of the Business Corporation Law of the Commonwealth of Massachusetts provides that the Articles of Organization may contain a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Sections 61 or 62 of the Massachusetts Business Corporation Law, or (iv) for any transaction form which the director derived an improper personal benefit. Article 6(b) of the Company's Restated Articles of Organization states that: No director of the Company shall have any personal liability to the Company or its Stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability; provided, however, that this Article 6(b) shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Company or its Stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 61 or 62 of Chapter 156B of the Massachusetts General Laws, or (iv) for any transaction from which the director derived an improper personal benefit. The preceding sentence shall not eliminate or limit the liability of a director for any act or omission occurring prior to the date upon which this Article 6(b) becomes effective. No amendment to or repeal of this Article 6(b) shall apply to or have any effect on the elimination pursuant hereto of liability or alleged liability of any director of the Company for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. Nothing in this Article 6(b) shall limit any lawful right to indemnification existing independently of this Article. II-1 82 Article V of the Company's By-laws further states that: 1. RIGHT OF INDEMNIFICATION Every person who is or was a Director, officer or employee of this Corporation or of any other corporation which he served at the request of the Corporation and in which the Corporation owns or owned shares of capital stock or of which it is a creditor shall have a right to be indemnified by this Corporation against all reasonable expenses incurred by him in connection with or resulting from any action, suit or proceeding in which he may become involved as a party or otherwise by reason of his being or having been a Director, officer or employee of the Corporation or such other corporation, provided (a) said action, suit or proceeding shall be prosecuted to a final determination and he shall be vindicated on the merits, or (b) in the absence of such final determination vindicating him on the merits, the Board of Directors shall determine that he acted in good faith in the reasonable belief that his action was in the best interests of the Corporation or such other corporation and that he cooperated effectively with the Corporation in the defense and disposition of any said action, suit or proceeding, said determinations to be made by the Board of Directors acting through a quorum of disinterested directors, or in its absence on the opinion of counsel. 2. DEFINITIONS For purposes of Section 1 of this Article V: (a) "reasonable expenses" shall include but not be limited to reasonable counsel fees and disbursements, amounts of any judgment, fine or penalty, and reasonable amounts paid in settlement, but in not event shall "reasonable expenses" include any item for which indemnification would be contrary to law; (b) "action, suit or proceeding" shall include every claim, action, suit or proceeding, whether civil or criminal, derivative or otherwise, administrative, judicial or legislative, any appeal relating thereto, and shall include any reasonable apprehension or threat of such a claim, action, suit or proceeding; and (c) a settlement, plea of nolo contendere, consent judgment, adverse civil judgment, or conviction shall not of itself create a presumption that the person seeking indemnification did not act in good faith in the reasonable belief that his action was in the best interests of this Corporation or such other corporation, but the Board of Directors shall be bound by a civil judgment or conviction which adjudges that the person did not act in good faith in the reasonable belief that his action was in the best interests of this Corporation or such other corporation. 3. PERSONS ENTITLED TO INDEMNIFICATION The right of indemnification shall extend to any person otherwise entitled to it under this Article V whether or not that person continues to be a director or officer of this Corporation at the time such liability or expense shall be incurred. The right of indemnification shall extend to the legal representatives and heirs of any person otherwise entitled to indemnification. If a person meets the requirements of this Article V with respect to some matters in an action, suit or proceeding, but not with respect to others, he shall be entitled to indemnification as to the former. Advances against liability and expenses may be made by the Corporation on terms fixed by the Board of Directors subject to an obligation to repay if indemnification proves unwarranted. 4. BYLAW NOT EXCLUSIVE This Article V shall not exclude any other rights of indemnification or other rights to which any Director, officer or employee may be entitled by contract, by vote of the Board of Directors, or as a matter of law. If any clause, provision or application of this Article V shall be determined to be invalid, the other clauses, provisions or applications of these Bylaws shall not be affected but shall remain in full force and effect. The provisions of this Article V shall be applicable to actions, suits or proceedings commenced after the adoption hereof, whether arising from acts or omissions occurring before or after the adoption hereof. II-2 83 (b) In addition to the indemnification provided under the Company's By-laws, the Company has entered into agreements with its directors and certain of its executive officers which, subject to certain limitations, provide for indemnification of such directors and executive officers to the full extent authorized by Section 67 of the Massachusetts Business Corporation Law or Article V of the By-Laws, whichever is more favorable to the director or executive officer. In addition, the agreements provide that if the Company elects not to maintain director and officer liability insurance policies, the Company will indemnify the officer or director to the full extent of the coverage which would otherwise have been provided pursuant to the insurance policy as it was last in effect between the insurer and the Company. (c) Section 10 of the Underwriting Agreement provides for indemnification by the Underwriters of directors, officers and controlling persons of the Registrant against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"), under certain circumstances. (d) The Company maintains insurance covering the directors and executive officers of the Company and its subsidiaries against certain liabilities. ITEM 16. EXHIBITS
EXHIBIT NO. TITLE - -------- ----- **1.1 Form of Underwriting Agreement 2.1 Stock Purchase Agreement dated as of January 10, 1994 between Cooper 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. 2.2 Investment Agreement dated as of January 10, 1994 between Cooper 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. 2.3 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. 4.1 Restated Articles of Organization of the Company, incorporated by reference to Exhibit to the Company's Report on Form 10-K dated August , 1995. 4.2 By-laws of the Company, as amended, incorporated by reference to Exhibit 3B to the Company's Report on Form 10-K dated March 26, 1993. 4.3 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. 4.4 Indenture dated as of March 16, 1993 among the Company, its subsidiaries and State Street Bank and Trust Company, as Trustee, with respect to the 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. 4.5 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. 4.6 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. **5.1 Opinion of Wallace F. Whitney, Jr., Vice President, General Counsel and Clerk of the Company, with respect to the legality of the securities being offered. **23.1 Consent of Wallace F. Whitney, Jr. (included in Exhibit 5.1 hereto) *23.2 Consent of Ernst & Young LLP ***24.1 Powers of Attorney (included on page II-6) - --------------- * Filed herewith ** To be filed by amendment *** Previously filed
II-3 84 ITEM 17. UNDERTAKINGS (a) Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "Act"), may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein and the offering of such securities as that time shall be deemed to be the initial bona fide offering thereof. (d) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-4 85 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Town of Grafton, Commonwealth of Massachusetts, on this 30th day of November, 1995. WYMAN-GORDON COMPANY By: S/ DAVID P. GRUBER -------------------------- David P. Gruber, President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman of the Board November 30, 1995 - ------------------------------------- John M. Nelson * President and November 30, 1995 - ------------------------------------- Chief Executive Officer David P. Gruber * Vice President, November 30, 1995 - ------------------------------------- Chief Financial Officer Andrew C. Genor and Treasurer (Principal Financial Officer) * Assistant Corporate Controller November 30, 1995 - ------------------------------------- (Principal Accounting Officer) Jeffrey B. Lavin * Director November 30, 1995 - ------------------------------------- E. Paul Casey Director - ------------------------------------- Dewain K. Cross * Director November 30, 1995 - ------------------------------------- Warner S. Fletcher * Director November 30, 1995 - ------------------------------------- Robert G. Foster * Director November 30, 1995 - ------------------------------------- Russell E. Fuller
II-5 86
SIGNATURE TITLE DATE --------- ----- ---- * Director November 30, 1995 - ------------------------------------- M Howard Jacobson * Director November 30, 1995 - ------------------------------------- Judith S. King * Director November 30, 1995 - ------------------------------------- George S. Mumford, Jr. * Director November 30, 1995 - ------------------------------------- H. John Riley, Jr. * Director November 30, 1995 - ------------------------------------- Jon C. Strauss * Director November 30, 1995 - ------------------------------------- Charles A. Zraket - --------------- * Wallace F. Whitney, Jr., by signing his name hereto, does hereby execute this Registration Statement on behalf of the directors and officers of the Registrant indicated above by asterisks, pursuant to powers of attorney duly executed by such directors and officers filed with the Registration Statement.
By: S/ WALLACE F. WHITNEY, JR. -------------------------- Wallace F. Whitney, Jr. Attorney-in-Fact II-6 87 INDEX TO EXHIBIT
EXHIBIT NO. TITLE - -------- ----- **1.1 Form of Underwriting Agreement 2.1 Stock Purchase Agreement dated as of January 10, 1994 between Cooper 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. 2.2 Investment Agreement dated as of January 10, 1994 between Cooper 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. 2.3 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. 4.1 Restated Articles of Organization of the Company, incorporated by reference to Exhibit to the Company's Report on Form 10-K dated August , 1995. 4.2 By-laws of the Company, as amended, incorporated by reference to Exhibit 3B to the Company's Report on Form 10-K dated March 26, 1993. 4.3 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. 4.4 Indenture dated as of March 16, 1993 among the Company, its subsidiaries and State Street Bank and Trust Company, as Trustee, with respect to the 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. 4.5 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. 4.6 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. **5.1 Opinion of Wallace F. Whitney, Jr., Vice President, General Counsel and Clerk of the Company, with respect to the legality of the securities being offered. **23.1 Consent of Wallace F. Whitney, Jr. (included in Exhibit 5.1 hereto) *23.2 Consent of Ernst & Young LLP ***24.1 Powers of Attorney (included on page II-6) - --------------- * Filed herewith ** To be filed by amendment *** Previously filed
EX-23.2 2 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in Amendment 2 to the Registration Statement (Form S-3; No. 33-63459) and related Prospectus of Wyman-Gordon Company for the registration of 16,500,000 shares of its common stock and to the use and the incorporation by reference therein of our report dated June 26, 1995 with respect to the consolidated financial statements and schedule of Wyman-Gordon Company incorporated by reference in its Annual Report (Form 10-K) for the year ended June 3, 1995, filed with the Securities and Exchange Commission. We also consent to the incorporation by reference in the Registration Statement (Form S-3; No. 33-63459) and related Prospectus of Wyman-Gordon Company for the registration of 16,500,000 shares of its common stock and to the incorporation by reference therein of our report dated February 28, 1994, with respect to the combined balance sheets of Cameron Forged Products Division (a division of Cooper Industries, Inc.) as of December 31, 1992 and 1993, and the related statements of combined results of operations and combined cash flows for each of the three years in the period ended December 31, 1993, included in Wyman-Gordon Company's Form 8-K dated May 26, 1994, filed with the Securities and Exchange Commission. Ernst & Young LLP Boston, Massachusetts November 30, 1995 -----END PRIVACY-ENHANCED MESSAGE-----