UNC to cut 300 jobs in restructuring

June 29, 1994|By Ted Shelsby | Ted Shelsby,Sun Staff Writer

UNC Inc., an Annapolis-based aviation service company, yesterday announced a restructuring program that will eliminate about 300 jobs and result in a charge against second-quarter earnings of approximately $50 million.

The news was not welcomed on Wall Street. UNC's stock fell 21 percent before trading was halted to close at $6, down $1.625.

The move is seen as a bitter dose of medicine that is expected to create annual savings of $15 million and generate another $85 million in cash through asset sales over the next 18 months.

Dan A. Colussy, chairman, president and chief executive, said the restructuring was necessary because of sluggishness in the aviation industry.

UNC makes parts used in jet engines and aircraft components for a wide variety of commercial jetliners. It also remanufactures jet engine and aircraft components, refurbishes helicopters and provides aircraft maintenance and pilot training. It earned $11.1 million last year on sales of $438.3 million.

The company has 6,200 workers at 70 locations, including about 40 at its headquarters. Mr. Colussy said a few jobs may be eliminated in Annapolis.

"It has become clear that declining aviation industry conditions, which we have been able to offset in previous periods, have not improved in 1994 as forecasted," Mr. Colussy said.

He said he anticipates the weak market conditions to continue for at least the next 18 months.

As the airlines struggle, they continue to exert extreme pricing pressures on all their suppliers as a way to meet their difficult economic circumstances, according to UNC.

The sale of assets, including land, buildings, machinery and inventories, will be used for debt reduction and provide the cash for selected acquisitions in the future.

Mr. Colussy said UNC will be closing some factories as a result of its new plan, but declined to identify them because workers have not been notified.

The company said that it could reduce its annual interest cost by approximately $6 million if all the cash generated from the sale of assets is used to reduce debt.

Given the current market conditions for real estate and other aviation related assets, the company said some assets will have to be sold below book values.

"While the restructuring charge will cause a temporary setback in our 1994 plans," Mr. Colussy said, "it ensures UNC will maintain its profitability over the long term even in a weak marketplace and that our earnings will be restored in 1995 with solid predictable growth in 1996 and beyond."

Andrew D. W. Hill, an analyst with Wellington Hill Financial Inc. in Naples, Fla., noted that UNC has made a number of acquisitions in recent years and said yesterday's action "may be a move to clean house and get costs down by consolidating operations. Maybe they will be eliminating pieces to get down to their core business."

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