GenCorp Trend of Improved Performance Continues in 1997 4th Quarter, Full Year
15 January 1998
GenCorp Trend of Improved Performance Continues in 1997 4th Quarter, Full Year
FAIRLAWN, Ohio, Jan. 15 _ GenCorp announced today
that 1997 full year and fourth quarter results for continuing businesses were
substantially improved over 1996.
For the Company's fiscal year ending November 30, 1997, fully diluted
earnings per share (EPS) totaled $3.36, versus fully diluted EPS of $1.15 in
1996. For continuing businesses before unusual items and tax settlements,
fully diluted EPS improved to $1.70 in 1997 compared to $1.44 in 1996 for the
full year, and were $0.52 in 1997 compared to $0.46 in 1996 for the fourth
quarter.
For continuing businesses, sales for 1997 increased 7% to $1.57 billion,
while operating profit increased 10% to $152 million. Net income before tax
settlements and unusual items for continuing businesses increased 26% to
$68 million in 1997, compared to $54 million in 1996.
"Excellent performance in 1997 reflects our commitment to generate
increased value for our shareholders and adds another year to the steady trend
of continuous improvement we've achieved over the past three years," said John
Yasinsky, Chairman and CEO. "I am especially pleased that our 1997
performance led to a significant return to shareholders," he said. EPS for
continuing businesses grew 18% in fiscal 1997. For the 12 months ended
December 31, 1997, GenCorp shareholders earned total returns of 41%.
In addition to the Company's improved operating results, Yasinsky cited
numerous key accomplishments that highlighted 1997, including a tax settlement
resulting in a $67 million benefit, the conversion of the Company's
convertible debentures and the acquisition of Printworld by the Decorative &
Building Products business unit.
GenCorp also made outstanding progress in strengthening its financial
position. Debt was reduced nearly $200 million while equity increased by
$225 million, resulting in the Company's first investment grade debt rating in
ten years. "This solid record of performance improvement, combined with our
substantially enhanced financial position and the current strategic
initiatives and actions underway, reinforce our commitment for value-creating
growth and enhanced profitability," Yasinsky said.
The Company's strategies continue to be focused on growth in targeted
business areas. Its Specialty Polymers and Decorative & Building Products
business units, as well as the Space Surveillance and Smart Munitions sectors
of its aerospace and defense unit, Aerojet, serve as key growth platforms.
The Company is aggressively pursuing growth opportunities in these business
areas through internal expansion, new technology and product development,
acquisitions, joint ventures and strategic alliances.
The success of GenCorp's growth strategy was reflected in GenCorp's fourth
quarter 1997 results, where total sales for continuing businesses increased 9%
to $443.2 million from $407.4 million in the 1996 fourth quarter. Operating
profit for continuing businesses in the fourth quarter of 1997 declined
modestly to $44.1 million versus $44.6 million in the 1996 fourth quarter, in
part due to aggressive efforts to grow sales, including restructuring actions
and significant internal investments in staffing and process improvements.
Within the Company's polymer products segment, net sales increased 9% to
$158.5 million compared to $145.3 million in the fourth quarter of 1996. The
Specialty Polymers business unit led this improvement through significantly
higher latex shipments to new customers. During the quarter, Specialty
Polymers set records for product volume and brought on line a new high-speed
advanced pilot coater, which greatly enhances GenCorp's ability to develop new
products and supports coated paper and paperboard customers in developing new
polymer coating formulations.
Sales increases were achieved within the Decorative & Building Products
business unit, with volume increases specifically in commercial wallcovering
and building systems. Decorative & Building Products also successfully
completed the integration of Printworld into its operations in 1997. Acquired
in May, Printworld was accretive to earnings during its first six months.
Operating profit for the polymer products segment during the fourth
quarter of 1997 declined to $18.1 million versus $21.2 million in the fourth
quarter of 1996. Similarly, polymer products' segment operating profit
margins declined to 11.4% from 14.6%. Lower unit pricing in Specialty
Polymers, modestly higher raw material prices and investments to support
growth initiatives contributed to the margin decrease.
Results in the 1997 fourth quarter at Aerojet were outstanding with net
sales increasing 19% to $183.9 million as compared to $154.1 million in the
1996 fourth quarter. Higher volumes on the Special Sensor Microwave
Imager/Sounder (SSMIS) and the Space-Based Infrared System (SBIRS) contributed
to the sales increase.
Aerojet's operating profit for the 1997 fourth quarter was up 11% to
$17.1 million, compared to $15.4 million in the fourth quarter of 1996. The
increased operating profit was driven by higher incentive award fees and
improved performance in the Custom Chemicals business. Operating profit
margins declined modestly to 9.3% from 10% quarter over quarter, mainly
reflecting the first SSMIS delivery to the Air Force.
New contract awards for Aerojet during the quarter totaled $269 million.
Contract backlog at quarter end was nearly $1.9 billion. During the quarter,
1,100 acres for GenCorp of land at Aerojet's Sacramento, California, facility
were delisted from the Sacramento Superfund site, which will enable the
Company to move forward on zoning and development plans for future use of this
asset.
Aerojet also exceeded U.S. Army requirements during initial production
tests on the Search and Destroy Armor (SADARM) program. Aerojet is the Army's
prime contractor for this important smart munitions system.
Automotive segment sales were $100.8 million in the 1997 fourth quarter,
versus $108.0 million in the same 1996 quarter. Vehicle Sealing sales
increased in North America but declined in Europe. Earnings for automotive
operations, however, were $8.9 million versus $8.0 million in the 1996 fourth
quarter, an 11% increase. Operating profit margins also improved to 8.8%
versus 7.4% during the same period in 1996. Operational excellence
initiatives, including Six Sigma, and aggressive actions to reduce costs and
boost productivity contributed to the improvements. The Vehicle Sealing
business enters 1998 with 13 new launches in its North American and European
operations, which strongly positions the business for growth into the next
century.
At November 30, 1997, GenCorp's total debt was $109 million versus
$306 million at year end 1996. Interest expense decreased to $2.4 million
from $6.1 million in the comparable fourth quarter period due to lower
interest rates and lower average debt. Equity increased to $281 million at
year end 1997 from $56 million at year end 1996. As a result, the debt to
total capital ratio for GenCorp, which began the year at 85%, dramatically
improved to 28% at year end 1997.
The Company announced yesterday that an agreement in principle had been
reached with The Goodyear Tire and Rubber Company to acquire Goodyear's
Chemical Products Calhoun, Georgia, latex manufacturing facility. Calhoun
would be part of GenCorp's growing Specialty Polymers business. The
transaction is expected to be completed quickly.
Separately, the Company announced on January 8, 1998, that it has made a
proposal to acquire Sybron Chemicals Inc. in a merger in which Sybron
shareholders would receive $38.00 per share in cash. Sybron's board rejected
the proposal in favor of a previously approved buy-out offer of $34.50.
Although GenCorp's proposal terminates on January 21, 1998, the Company
remains interested at the proposed price because Sybron would serve as a
growth vehicle for its Specialty Polymers unit into new but closely related
textile and acrylic polymer markets.
1998 Outlook
In 1998, the Company expects sales and operating profit to increase in all
three operating segments.
At Aerojet, significant long-term contract awards received in 1996 and
1997 should favorably affect all major product areas in 1998. Within the
automotive segment, 13 program launches are expected in 1998, which should
increase sales volumes, while segment operating profit should be favorably
affected by higher volume and cost reduction initiatives. The polymer
products segment should benefit from the full year results of operations from
Printworld and investments made in 1997 for future growth.
The Company currently expects operations to show improvement during each
quarter of 1998. However, based on forecasts of automotive vehicle builds and
aerospace and defense deliveries, the Company anticipates that those
improvements will be modest during the first six months of 1998, before
accelerating significantly in the second half.
Safe Harbor For Forward-Looking Statements
Note: 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.
These statements represent management's current judgment on expectations for
future operations. A variety of factors could cause business conditions and
the Company's actual results to differ materially from those expected by the
Company or expressed in the Company's forward-looking statements. These
factors include, without limitation, changes in governmental and regulatory
policies including environmental regulations, the Company's ability to
successfully integrate acquisitions or to restructure current operations,
vehicle build rates for the North American automotive producers, delivery to
and acceptance by the federal government of aerospace/defense related
products, Defense Department or NASA budget reductions, raw material prices
for chemical feed stocks and natural/synthetic rubber supplies, the activity
level of commercial and residential construction/renovation markets, and
fluctuations in exchange rates of foreign currencies and other risks
associated with foreign operations. Additional risk factors may be described
from time to time in the Company's filings with the Securities and Exchange
Commission. All such risk factors are difficult to predict, and contain
material uncertainties that may affect actual results and may be beyond the
Company's control.
GenCorp is a market-driven, technology-based company with key positions in
numerous polymer product markets as well as the automotive, aerospace and
defense industries.
Business Segment Information (Unaudited)
GenCorp Inc.
Three Months Ended Year Ended
(Dollars in millions, Nov. 30, Nov. 30, Nov. 30, Nov. 30,
except per-share data) 1997 1996 1997 1996
Net Sales
Aerospace and defense $183.9 $154.1 $ 583.7 $ 494.0
Polymer products 158.5 145.3 615.5 573.3
Automotive 100.8 108.0 369.0 447.3
Total $443.2 $407.4 $1,568.2 $1,514.6
Income (Loss)
Aerospace and defense $ 17.1 $ 15.4 $ 55.1 $ 42.2
Polymer products 18.1 21.2 68.6 72.2
Automotive 8.9 8.0 28.7 19.1
Unusual items - (3.4) - (13.4)
Segment Operating Profit 44.1 41.2 152.4 120.1
Interest expense (2.4) (6.1) (16.2) (26.7)
Corporate other income
and (expense), net (1.5) (4.1) (1.3) (7.4)
Corporate expenses (4.1) (4.9) (17.0) (15.4)
Unusual items - (14.2) - (29.1)
Income tax (provision)
benefit (14.1) 11.5 19.5 .2
Net Income $ 22.0 $ 23.4 $ 137.4 $ 41.7
Earnings per common share:
Primary $ .52 $ .69 $ 3.63 $ 1.24
Fully diluted $ .52 $ .60 $ 3.36 $ 1.15
Average number of shares
of common stock outstanding
(in thousands):
Primary 42,373 33,896 37,807 33,672
Fully diluted 42,373 41,334 41,819 41,258
Capital expenditures $ 22.2 $ 15.6 $ 58.3 $ 47.0
Depreciation $ 13.2 $ 12.5 $ 56.2 $ 58.1
Continuing Businesses Three Months Ended Year Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
(Dollars in millions) 1997 1996 1997 1996
Net Sales
Aerospace and defense $183.9 $154.1 $ 583.7 $ 494.0
Polymer products 158.5 145.3 615.5 573.3
Automotive 100.8 108.0 369.0 400.0
Total $443.2 $407.4 $1,568.2 $1,467.3
Operating Profit
Aerospace and defense $ 17.1 $ 15.4 $ 55.1 $ 42.2
Polymer products 18.1 21.2 68.6 72.2
Automotive 8.9 8.0 28.7 24.5
Total $ 44.1 $ 44.6 $ 152.4 $ 138.9
Divested Businesses Three Months Ended Year Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
(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.
Nov. 30, Nov. 30,
(Dollars in millions) 1997 1996
Assets
Cash and equivalents $ 18.4 $ 22.6
Accounts receivable 252.2 206.7
Inventories 157.2 158.4
Prepaid expenses and other 56.4 64.7
Total Current Assets 484.2 452.4
Recoverable from U.S. government
and third parties for
environmental remediation 167.8 118.1
Deferred income taxes 151.0 156.3
Prepaid pension 116.1 103.5
Investments and other assets 103.3 86.8
Property, plant and equipment,
less accumulated depreciation 409.7 412.8
Total $1,432.1 $1,329.9
Liabilities and Shareholders' Equity
Notes payable $ 25.5 $ 42.9
Accounts payable-trade 102.3 80.6
Income taxes 21.3 26.6
Other current liabilities 241.1 219.6
Total Current Liabilities 390.2 369.7
Long-term debt 83.6 263.2
Postretirement benefits other
than pensions 335.3 346.1
Environmental reserves 274.2 230.3
Other liabilities 67.5 64.9
Shareholders' equity 281.3 55.7
Total $1,432.1 $1,329.9
SOURCE GenCorp