GenCorp Reports Favorable 1st Quarter 2001
Results
SACRAMENTO, Calif., March 28 GenCorp reported
today higher earnings for the first quarter of 2001 of $0.39 per diluted
share, compared to $0.25 per diluted share in the first quarter of 2000.
Income before the cumulative effect of an accounting change for the
first quarter of 2001 was $16.5 million, compared $10.3 million for the
first quarter of 2000. First quarter 2001 net income included an after-tax
benefit of $4.9 million related to tax refunds from the State of California
for settlement of outstanding claims.
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"While we are pleased to report that earnings for the first quarter
exceeded expectations, we are not satisfied with the performance of our
automotive unit in the quarter," said Chairman and CEO Bob Wolfe. "Aerojet
continued to perform well during the first quarter, achieving increases in
revenues and operating profit. However, GDX Automotive results during the
quarter were well below our expectations."
Wolfe added, "Although GDX Automotive revenues increased dramatically, the
increase was due to the inclusion of two months of results from the recently
completed Draftex acquisition. Excluding Draftex, GDX Automotive sales in
North America were down approximately 7% year over year. Most of this
decrease occurred at the one plant in the division whose business base
predominately consists of seals for sedans. Operating losses for the quarter
were due to losses at this plant and start up costs due to the launch of the
new Ford Explorer platform. GDX Automotive's European operations were
profitable for the quarter."
For the first quarter of 2001, revenues for the Company increased 48% to
$354 million, versus $239 million for the same period in 2000. Aerojet
revenues increased 35% while GDX Automotive, with the acquisition of Draftex,
increased over 60%. Segment operating profit before unusual items for the
first quarter of fiscal 2001 was $19.6 million compared to $23.6 million for
the same period of 2000. Aerojet was up $3.0 million from the prior year
while GDX Automotive was down $7.0 million.
Aerospace, Defense and Fine Chemicals
Sales at Aerojet were up, at $172 million in the first quarter of
2001 compared to $127 million in the same quarter of 2000. Higher revenues on
the Space Based Infrared (SBIRS) program, Search and Destroy Armor (SADARM),
and the Defense Support Program (DSP) Post Production, accounted for the
majority of the increase, partially offset by lower volume on the Titan,
Atlas V, and AMRAAM programs.
Operating profit was $22.9 million in the first quarter 2001 versus
$19.9 million in the first quarter of 2000.
Highlights at Aerojet during the quarter included:
-- A $207 million contract award, including options, from NASA to build
the Advanced Technology Microwave Sounder (ATMS), a next generation weather
instrument that will revolutionize weather forecasting and global climate
research.
-- A $30 million Space Maneuver Vehicle (SMV) contract award from the
Air Force to develop an advanced reusable peroxide rocket engine for
space-based applications. This innovative engine will maintain Aerojet's
market position for storable upper stage engines and provides a significant
competitive advantage for future SMV and military target vehicle applications.
-- A $9 million contract award from the Air Force to the joint venture
team of Aerojet and Pratt & Whitney for the Integrated High Performance Rocket
Propulsion Technology (IHPRPT) Phase II Demonstration Program.
-- Successful launch of a Titan IV rocket powered by Aerojet first and
second stage engines on 27 February 2001. The rocket deployed a Milstar
military communications satellite containing an in-flight propulsion system
also designed and built by Aerojet.
-- Successful launch of a Delta II rocket carrying a Navstar Global
Positioning System (GPS) Satellite on 30 January 2001. Aerojet manufactures
the Delta II second stage engine.
-- Successful soft landing of the NEAR Probe on the surface of the
asteroid Eros. Aerojet built the propulsion system for the NEAR Probe and the
system performed flawlessly on command 196 million miles from Earth as the
probe safely touched down.
During the quarter, Aerojet booked contract award funding of $145 million
with contract backlog at February 28, 2001 totaling $1.2 billion.
Aerojet Fine Chemicals had a loss for the quarter, but continues to make
progress towards becoming profitable. Backlog for Aerojet Fine Chemicals
totaled $80 million at quarter end.
GDX Automotive
Net sales for the GDX Automotive business segment increased 63% to
$182 million in the first quarter of 2001, versus $112 million in the first
quarter of 2000. The net sales gain was due to the acquisition of Draftex in
late December of 2000, offset somewhat by marginally lower volumes in
North America. GDX Automotive incurred an operating loss in the first quarter
of 2001 of $3.3 million, compared to $3.7 million of operating income in the
first quarter of 2000. The loss experienced in the quarter was primarily
caused by (i) a 40% decline in production at the Berger, MO. plant due to OEM
reductions in the production of sedans; (ii) launch costs relating to the new
2002 Ford Explorer and; (iii) higher utility costs. Overall, volumes for
trucks and sport utility vehicles remained strong in North America.
The Company announced that it will implement a restructuring and
consolidation of its GDX Automotive business, estimated to cost between
$18 million and $22 million. Implementation of the restructuring will begin
in the second quarter. The restructuring includes the intended closure of
GDX Automotive's Marion, Indiana and Ballina, Ireland manufacturing
facilities.
Other
During the first quarter of 2001, the Company recognized $10.9 million of
foreign currency transaction gains primarily as a result of currency hedging
transactions associated with the Draftex acquisition. During the quarter, the
Company reached a settlement with the State of California on an outstanding
tax claim. The portion of the settlement that will be repaid to the Company's
defense customers is reflected as an unusual expense item of $7.2 million in
segment income. The benefit retained by the Company, $4.9 million on an after
tax basis, is in the income tax provision for the quarter.
The Company also recognized a $1.5 million unusual gain below segment
operations as compared to a pretax unusual loss of $0.9 in the same reporting
period of fiscal year 2000.
At February 28, 2001, GenCorp's total debt increased to $446 million
versus $190 million at November 30, 2000 due to the Draftex acquisition.
Interest expense increased to $9.3 million in the first quarter of
2001 compared to $3.4 million in the first quarter of 2000 due to a higher
debt level and the increased cost of borrowing due to higher interest rates.
Outlook
For the year, the Company at its last earnings conference call gave an
estimated earnings per share range of $1.54 to $1.64 for fiscal year 2001. At
this time, given the performance of the GDX Automotive segment, the Company is
forecasting earnings at the lower end of that range. The primary risks which
could negatively impact the forecast at this time appear to be (i) a softening
European automotive market and; (ii) GDX Automotive's ability to meet higher
build rates of the seals for the new Ford Explorer, while reducing
inefficiencies experienced in the first quarter.
This earnings release contains forward-looking statements as defined by
the Private Securities Litigation Reform Act of 1995. All statements in this
release and in subsequent discussions with the Company's management, other
than historical information, are forward-looking statements. A variety of
factors, which are listed in the forward-looking statements section of
Management's Discussion and Analysis in the Company's 2000 annual report and
in the annual report on Form 10-K filed with the Securities and Exchange
Commission could cause actual results or outcomes to differ materially from
those expected by the Company and expressed in the Company's forward-looking
statements.
GenCorp is a technology-based manufacturer with leading positions in the
aerospace and defense, pharmaceutical fine chemicals and automotive
industries. Additional information about GenCorp can be obtained by visiting
the Company's web-site at http://www.GenCorp.com.
Business Segment Information (Unaudited)
GenCorp Inc.
Three Months Ended
(Dollars in millions, Feb. 28, Feb. 29,
except per-share data) 2001 2000
Net Sales
Aerospace, defense and fine chemicals $171.7 $126.8
GDX Automotive 181.8 112.0
$353.5 $238.8
Income from Operations
Aerospace, defense and fine chemicals $22.9 $19.9
GDX Automotive (3.3) 3.7
Unusual item (7.2) --
Segment Operating Profit $12.4 $23.6
Interest expense (9.3) (3.4)
Corporate other income and (expense), net (1.2) (0.5)
Corporate expenses (2.6) (1.6)
Unusual items, net 1.5 (0.9)
Foreign currency transaction gain 10.9 --
Income tax (provision) benefit 4.8 (6.9)
Income before cumulative effect
of accounting change $16.5 $10.3
Cumulative effect of accounting
change, net of tax -- 74.0
Net Income $16.5 $84.3
Basic earnings per common share:
Income before cumulative effect
of accounting change $0.39 $0.25
Effect of accounting change -- 1.76
Total $0.39 $2.01
Diluted earnings per common share:
Income before cumulative effect of
accounting change $0.39 $0.25
Effect of accounting change -- 1.76
Total $0.39 $2.01
Average number of shares of common stock
outstanding (in thousands):
Basic 42,010 41,864
Diluted 42,332 41,985
Capital expenditures $6.1 $19.0
Depreciation and amortization $18.2 $13.2
Condensed Consolidated Balance Sheet (Unaudited)
GenCorp Inc.
Feb. 28, Nov. 30,
(Dollars in millions) 2001 2000
Assets
Cash and equivalents $42.0 $17.1
Accounts receivable 238.6 134.6
Inventories 213.9 181.7
Prepaid expenses and other 15.7 12.4
Total Current Assets $510.2 $345.8
Recoverable from U.S. government and third
parties for environmental remediation 198.8 203.0
Deferred income taxes 62.2 76.5
Prepaid pension 297.6 280.8
Investments and other assets 146.9 51.9
Property, plant and equipment, less
accumulated depreciation 532.9 365.5
$1,748.6 $1,323.5
Liabilities and Shareholders' Equity
Notes payable and current portion
of long-term debt $29.8 $0.2
Accounts payable-trade 95.0 47.3
Income taxes 12.3 8.2
Other current liabilities 362.3 271.7
Total Current Liabilities $499.4 $327.4
Long-term debt 416.3 190.2
Postretirement benefits other than pensions 230.9 230.0
Environmental reserves 326.7 327.6
Other liabilities 63.8 53.8
Total shareholders' equity 211.5 194.5
$1,748.6 $1,323.5
