Wyman-Gordon Announces Cost Reduction Initiatives, a $5.2 Million Restructuring Charge and a $5.8 Million One-time Charge.
Company plans layoffs and anticipates $26 million
in annual cost savings
Wyman-Gordon (NYSE:WYG) today announced major cost reduction initiatives that will result in a $5.2 million restructuring charge and a $5.8 million one-time charge. These actions are being taken to rationalize and consolidate Wyman-Gordon's business operations due to revised projections of lower near-term customer demand as well as productivity improvements from equipment upgrades, cost reduction training and six sigma programs.
"We are acting swiftly to aggressively streamline our operations in the face of a downward trend in customer demand for certain products and to take advantage of improved productivity," said David P. Gruber, chairman and chief executive officer. "These actions are being taken to increase shareholder value through improved profitability. While certain cyclical trends will affect revenue growth over the short-term, Wyman-Gordon is well positioned to grow as market conditions improve."
Annual cost savings of $26 million are anticipated due to: the elimination of approximately 350 positions, or 8 % of the combined work force; the discontinuance of certain product lines; and the consolidation of certain business units.
Costs associated with these initiatives will require a pre-tax restructuring charge of approximately $5.2 million that is expected to be recorded in the third quarter of fiscal year 1999. These costs include the discontinuation of certain product lines and related asset write-downs. Approximately $4.1 million of the total restructuring charge is expected to represent actual cash costs, principally severance; the remainder represents non-cash write-offs, primarily of equipment and inventory, related to operations affected by these cost reduction initiatives. A one-time pre-tax charge to cost of sales of $5.8 million related to sales commitments under contractual obligations with certain customers that will result in losses will also be taken in the quarter.
The company expects that the full $26 million of annual cost savings will be realized in fiscal year 2000.
Earnian the prior quarter due to unusually high prodtomer orders primarily for energy products rela associated with overtime and the outsourcing of certain work during the second quarter of 1999 to reduce ov significantly below depreciation expense due to productivity improvements that have been achieved from spending over the last few years. This will increase cash flows.
The company has repurchased 1.3 million shares under its share repurchase program and now has 700,000 shares remaining in the current authorization.
"Wyman-Gordon continues to have very strong relationships with its customers and dominant market share positions in many of its businesses. The reorganization of our company into three major strategic business units - Aerospace Structural, Aerospace turbines and Energy Products - has allowed us to be more market focused so that we can leverage our core competencies," said Mr. Gruber. "While a combination of factors are depressing the current revenue outlook, we are confident that we are taking the necessary actions to increase shareholder value."
Wyman-Gordon Company is a leading manufacturer of high quality, technologically advanced forgings, investment castings and composite structures for the commercial transportation, commercial power and defense industries. The company employs approximately 4,000 and, in its most recent fiscal year ended May 31, 1998, its revenues were $ 753 million.
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve a number of assumptions, risks and uncertainties that could cause actual results of the Company to differ materially from those matters expressed in or implied by such forward-looking statements. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond the control of the Company and may cause the actual results, performance or achievements of the Company to differ materially from anticipated future results, performance or achievements expressed or implied by such forward-looking statements. Additional information regarding this risk factor and uncertainties is detailed from time-to-time in the Company's SEC filings.
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|Date:||Feb 17, 1999|
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