GenCorp Reports 17 Percent Earnings Per Share Improvement in Third Quarter
16 September 1997
GenCorp Reports 17 Percent Earnings Per Share Improvement in Third Quarter
Third Quarter Highlights
* EPS, including $0.05 from non-recurring items, improves to $0.49
* 9% increase in sales
* Successful conversion of $115 Million Convertible Subordinated
Debentures
* Significant balance sheet improvement
FAIRLAWN, Ohio, Sept. 16 -- GenCorp reported
improved net income of $20.2 million, or $0.49 per fully diluted share, for
the third quarter of 1997 compared to net income of $15.9 million, or
$0.42 per share for the third quarter of 1996. Earnings from continuing
operations for the third quarter of 1997 totaled $0.44 per share excluding a
benefit of $2.3 million, or $0.05 per share from previously discontinued
operations.
"I am pleased with our sales growth, operating performance and especially
the improvements to our balance sheet," said Chairman and CEO John Yasinsky.
"We started the quarter highly leveraged with a debt to total capital ratio of
68%, but with the conversion of the $115 million debentures and profitable
operations, the Company's financial position improved dramatically with a debt
to total capital ratio of only 39%. This creates much greater financial
flexibility to pursue our growth strategies."
Operating profit improved to $38.9 million for the third quarter of 1997,
versus $37.2 million for the third quarter of 1996. Operating margins were
9.9% in the third quarter of 1997, compared to 10.3% for the third quarter of
1996. For the first nine months of 1997, operating profit from continuing
operations has improved 15% to $108.3 million versus $94.3 million for the
same period of 1996.
Sales totaled $393.5 million for the third quarter of 1997, an increase of
9% over $360.9 million during the third quarter of 1996. Sales increases were
achieved at the Company's aerospace and defense and polymer products segments,
while the automotive segment experienced an expected decline in revenues. For
the nine months ended August 31, 1997, sales from continuing operations
increased 6% to $1.12 billion as compared to $1.06 billion during the first
nine months of 1996.
Polymer Products - Net sales for the polymer products businesses in the
third quarter of 1997 increased 10% to $161.9 million compared to
$147.0 million in the third quarter of 1996. Sales increases in the segment's
Decorative & Building Products and Specialty Polymers business units were
partially offset by a decline at Penn Racquet Sports. Sales improvements were
realized in commercial wallcovering, building systems, specialty latices for
paper coatings and textiles, as well as in transfer printing and paper
laminates at Printworld, which was acquired in the second quarter of 1997.
Operating profit for the polymer products businesses increased to
$19.4 million for the third quarter of 1997 versus $18.8 million in the third
quarter of 1996. Operating profit for the third quarter of 1997 included
reimbursement of expenses related to an environmental settlement, and expenses
related to business realignment in Specialty Polymers and Decorative &
Building Products. Operating margins declined slightly to 12.0% in the third
quarter of 1997 compared to 12.8% in the third quarter of 1996 due to higher
raw material costs in Decorative & Building Products, and slightly lower
average selling prices in Specialty Polymers.
During the quarter, Specialty Polymers' volumes increased at a double-
digit rate versus last year and the business unit continued to gain new
customers for its paper, nonwoven and specialty latex applications.
Decorative & Building Products won initial orders from important customers
through coordination of existing vinyl woodgrain laminates with newly acquired
Printworld paper laminates. The ability to offer superior color and pattern
matches for the Company's customers in these product lines represents a
significant market opportunity.
Automotive - Sales totaled $82.1 million in the third quarter of 1997
versus $93.7 million in the third quarter of 1996 due to timing related to
GenCorp launches of new customer programs, customer related strikes and
production problems, and lower appliance gasket orders.
The Company's automotive operations earned $5.6 million for the third
quarter of 1997, versus $7.5 million in the third quarter of 1996. Operating
profit for the third quarter of 1997 included expenses related to plant
consolidation and manpower reductions, and recoveries of environmental
expenses. Operating profit for the third quarter of 1996 included
$2.6 million from the sale of the segments' Automotive Occupant Sensor
business. Operating profit margins were 6.8% in the third quarter of 1997,
versus 8.0% during the same period a year ago.
Vehicle Sealing was awarded new contracts from Saturn with production
slated to begin in late 1997, and achieved QS9000 quality certification at
three additional manufacturing facilities.
Aerospace and Defense - At Aerojet, net sales increased 24% to
$149.5 million in the third quarter of 1997 versus $120.2 million in the third
quarter of 1996. Higher volumes on the Space Based Infrared System (SBIRS),
Defense Support Program (DSP), and Special Sensor Microwave
Imager/Sounder(SSMIS) were partially offset by lower volumes on Titan and
Joint Tactical Ground Station (JTAGS).
Aerojet's operating profit for the third quarter of 1997 was
$13.9 million, up 28% compared to $10.9 million in the third quarter of 1996.
Operating margins during the quarter were 9.3%, up slightly from last year's
9.1% third quarter margins.
During the quarter, Aerojet's Sense and Destroy Armor (SADARM), the Army's
first artillery fire and forget weapon available for use in precision strikes
against artillery and other armored targets, successfully performed against
offensive and defensive countermeasures during Initial Production Test firing
at Fort Greely, Alaska. Aerojet's liquid engines performed in four successful
Delta II launches, including missions which placed into orbit Iridium and Air
Force GPS satellites. Contract awards totaled $114 million during the
quarter. At August 31, 1997, Aerojet's contract backlog was $1.9 billion, up
$900 million from the third quarter of 1996.
On June 23, 1997, the Company completed the redemption of its $115 Million
Convertible Subordinated Debentures due 2002. Nearly 100% of the debentures
were tendered for conversion into GenCorp common stock.
At August 31, 1997, GenCorp's total debt was $172 million, down
$117 million from the second quarter of 1997 and the lowest level in over ten
years. Interest expense decreased to $1.9 million from $6.0 million in the
comparable third quarter in 1996 due to lower average debt levels, and the
redemption of the convertible debentures for common stock. The redemption of
the convertible debentures was also primarily responsible for the $131 million
increase in shareholders' equity to $264 million.
Corporate other income and expense was favorably impacted by the
collection of a note receivable and interest from a 1996 divestiture.
GenCorp is a technology-driven manufacturing company with strong positions
in numerous polymer markets, as well as the automotive and aerospace and
defense industries.
Business Segment Information (Unaudited)
GenCorp Inc.
Three Months Ended Nine Months Ended
(Dollars in millions, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
except per-share data) 1997 1996 1997 1996
Net Sales
Aerospace and defense $149.5 $120.2 $ 399.8 $ 339.9
Polymer products 161.9 147.0 457.0 428.0
Automotive 82.1 93.7 268.2 339.3
Total $393.5 $360.9 $1,125.0 $1,107.2
Income (Loss)
Aerospace and defense $ 13.9 $ 10.9 $ 38.0 $ 26.8
Polymer products 19.4 18.8 50.5 51.0
Automotive 5.6 7.5 19.8 11.1
Unusual items -- -- -- (10.0)
Segment Operating Profit 38.9 37.2 108.3 78.9
Interest expense (1.9) (6.0) (13.8) (20.6)
Corporate other income
and (expense), net 2.9 (1.5) .2 (3.3)
Corporate expenses (4.8) (3.3) (12.9) (10.5)
Unusual items - - - (14.9)
Income tax (provision)
benefit (14.9) (10.5) 33.6 (11.3)
Net Income $ 20.2 $ 15.9 $ 115.4 $ 18.3
Earnings per common share:
Primary $ .50 $ .47 $ 3.16 $ .55
Fully diluted $ .49 $ .42 $ 2.83 $ .55
Average number of shares
of common stock outstanding
(in thousands):
Primary 40,263 33,734 36,501 33,622
Fully diluted 42,111 40,893 41,825 40,852
Capital expenditures $ 17.8 $ 10.2 $ 36.4 $ 30.3
Depreciation $ 15.1 $ 14.1 $ 43.0 $ 45.6
Continuing Businesses Three Months Ended Nine Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
(Dollars in millions) 1997 1996 1997 1996
Net Sales
Aerospace and defense $149.5 $120.2 $ 399.8 $ 339.9
Polymer products 161.9 147.0 457.0 428.0
Automotive 82.1 93.7 268.2 292.0
Total $393.5 $360.9 $1,125.0 $1,059.9
Operating Profit
Aerospace and defense $ 13.9 $ 10.9 $ 38.0 $ 26.8
Polymer products 19.4 18.8 50.5 51.0
Automotive 5.6 7.5 19.8 16.5
Total $ 38.9 $ 37.2 $ 108.3 $ 94.3
Divested Businesses Three Months Ended Nine Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
(Dollars in millions) 1997 1996 1997 1996
Net Sales
Reinforced Plastics $ -- $ -- $ -- $ 23.6
Vibration Control -- -- -- 23.7
Total $ -- $ -- $ -- $ 47.3
Operating Profit (Loss)
Reinforced Plastics $ -- $ -- $ -- $ (4.3)
Vibration Control -- -- -- (1.1)
Total $ -- $ -- $ -- $ (5.4)
Condensed Consolidated Balance Sheet (Unaudited)
GenCorp Inc.
Aug. 31, Nov. 30,
(Dollars in millions) 1997 1996
Assets
Cash and equivalents $ 21.7 $ 22.6
Accounts receivable 257.8 206.7
Inventories 167.0 158.4
Prepaid expenses and other 61.6 64.7
Total Current Assets 508.1 452.4
Recoverable from U.S. government
and third parties for
environmental remediation 112.9 118.1
Deferred income taxes 156.5 156.3
Prepaid pension 112.8 103.5
Investments and other assets 102.6 86.8
Property, plant and equipment,
less accumulated depreciation 406.7 412.8
Total $1,399.6 $1,329.9
Liabilities and Shareholders' Equity
Notes payable $ 47.7 $ 42.9
Accounts payable-trade 77.5 80.6
Income taxes 27.1 26.6
Other current liabilities 226.1 219.6
Total Current Liabilities 378.4 369.7
Long-term debt 124.6 263.2
Postretirement benefits other
than pensions 339.8 346.1
Environmental reserves 227.3 230.3
Other liabilities 65.5 64.9
Shareholders' equity 264.0 55.7
Total $1,399.6 $1,329.9
SOURCE GenCorp