GenCorp Sales and Income Up in First Quarter
17 March 1998
GenCorp Sales and Income Up in First Quarter
FAIRLAWN, Ohio, March 17 -- GenCorp today reported
significantly improved net income of $12.8 million for the first quarter of
1998 compared to $11.1 million for the first quarter of 1997. Earnings for
the first quarter of 1998 were $0.31 per share on a diluted basis, up 24% from
earnings per share of $0.25 from the first quarter of 1997, excluding a
benefit of $0.05 per share from a tax settlement.
"Our strong performance in the first quarter adds to our continuing trend
of improvement, and marks the seventh consecutive quarter of increased
earnings per share versus the prior year's quarter," said Chairman and CEO
John Yasinsky. "I am particularly pleased with our sales growth, which began
to accelerate during the last half of 1997 and now growth is 11% in the first
quarter of 1998," he said.
A strengthened balance sheet for the Company has also resulted in lower
interest expense and the financial flexibility to pursue growth, such as the
recently announced purchase of The Goodyear Tire & Rubber Company's Calhoun,
GA latex facility which occurred on March 1, 1998. "The Calhoun acquisition
by our Specialty Polymers business unit, one of our key growth platforms, is
an excellent example of the progress we are making to execute growth
strategies to create enhanced shareholder value," Yasinsky said.
The continuing success of GenCorp's growth strategy was reflected in the
11% sales increase during the first quarter of 1998 to $365.5 million as
compared to $328.0 million during the first quarter of 1997. Operating profit
for the first quarter of 1998 improved 14% to $29.6 million, versus
$26.0 million for the first quarter of 1997. Corresponding operating profit
margins improved to 8.1% in the first quarter of 1998, compared to 7.9% for
the same period of 1997.
Within the Company's polymer products segment, net sales increased 10% to
$147.5 million compared to $134.0 million in the first quarter of 1997.
Specialty Polymers and Decorative & Building Products recorded double-digit
sales increases, while Penn Racquet Sports experienced slightly lower volumes.
Specialty Polymers generated higher latex shipments in its major product
lines, while Decorative & Building Products' sales improved in paper
laminates, heat transfer printing, commercial wallcovering, building systems,
and coated fabrics.
The polymer products segment achieved a significant 43% increase in
operating profit during the first quarter of 1998 to $14.6 million, compared
to $10.2 million in the first quarter of 1997. Similarly, polymer products'
operating profit margins improved to 9.9% from 7.6%. Lower raw material
prices, reduced quality costs, and cost reduction programs led the margin
expansion. The segment also continues to invest in technology to support
value-creating growth initiatives.
The Specialty Polymers' Calhoun acquisition is expected to add over
$50 million in annualized sales and provides a strategic southeastern
geographic access to important carpet customers. Decorative & Building
Products' continuing investment in the development of new coating technologies
and equipment will greatly enhance performance characteristics on a wide range
of decorative laminates and film products.
In the first quarter of 1998, Aerojet continued its strong financial
performance with sales increasing 30% to $135.4 million as compared to
$104.4 million in the first quarter of 1997. Higher sales on the Space-Based
Infrared System (SBIRS) and growth in Custom Chemicals were major contributors
to the sales increase.
Aerojet's operating profit for the first quarter of 1998 was up 38% to
$14.2 million, compared to $10.3 million in the first quarter of 1997.
Contract mix and higher Custom Chemicals shipments contributed to the
improvement. Operating profit margins expanded to 10.5% versus 9.9% during
the same period last year.
During the quarter, new contract awards for Aerojet totaled $96 million,
including a $15 million six year Active Protection System contract from the
U.S. Army Research, Development and Engineering Center to design, develop and
deliver five warhead systems, and $9 million for warhead production on the
TOW-2A. Contract backlog totaled $1.8 billion at the end of the quarter.
Also, Aerojet's liquid propulsion systems performed successfully on four Delta
II launches carrying military and commercial communication satellite payloads.
Aerojet continues to make progress on its efforts to realize value on
surplus real estate, including its land adjacent to its propulsion
manufacturing facility near Sacramento, California. Breakthrough negotiations
with state regulators to delete an initial 1,100 acres of Sacramento real
estate from a state investigation order now allow for future development.
Aerojet is moving forward with plans for entitlement of the property, a
process estimated to take two to three years to complete. Land sales could
commence now for unentitled land, or after the completion of the entitlement
process for maximum value, and reach significant levels over a three to six
year period.
Automotive segment sales were $82.6 million in the first quarter of 1998,
versus $89.6 million in the same 1997 quarter. The anticipated sales decline
resulted from customer shutdown of several older platforms, partially offset
by accelerated launches of new replacement platforms. Operating profit
declined to $0.8 million versus $5.5 million in the first quarter of 1997.
The operating profit decline, which was largely anticipated, was due to
accelerated launch costs on several new major platforms, slower than
anticipated labor reductions in Europe, and negative exchange rate variances
from the segment's foreign operations.
At February 28, 1998, GenCorp's total debt was $137 million versus
$359 million a year ago. Interest expense decreased to $2.1 million in the
first quarter of 1998 versus $5.7 million in the comparable period a year ago,
primarily due to lower debt levels. Equity increased to $287 million, and the
debt to total capital ratio was a strong 32% at the end of the first quarter
of 1998.
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 1997 annual report and
in the annual report on Form 10K 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 market-driven, technology-based company with key positions in
numerous polymer products markets as well as the automotive and aerospace and
defense industries. Investors can obtain additional information about GenCorp
by visiting our web-site at http://www.GenCorp.com.
Business Segment Information (Unaudited)
GenCorp Inc.
Three Months Ended
(Dollars in millions, Feb. 28, Feb. 28,
except per-share data) 1998 1997
Net Sales
Aerospace and defense $135.4 $104.4
Polymer products 147.5 134.0
Automotive 82.6 89.6
Total $365.5 $328.0
Income
Aerospace and defense $ 14.2 $ 10.3
Polymer products 14.6 10.2
Automotive .8 5.5
Segment Operating Profit 29.6 26.0
Interest expense (2.1) (5.7)
Corporate other income and (expense), net (1.9) (1.1)
Corporate expenses (4.2) (4.1)
Income tax provision (8.6) (4.0)
Net Income $12.8 $11.1
Earnings per common share:
Basic $.31 $.33
Diluted $.31 $.30
Average number of shares of common stock
outstanding (in thousands):
Basic 41,349 33,509
Diluted 41,942 41,113
Capital expenditures $12.9 $ 8.2
Depreciation $15.7 $13.4
Condensed Consolidated Balance Sheet (Unaudited)
GenCorp Inc.
Feb. 28, Nov. 30,
(Dollars in millions) 1998 1997
Assets
Cash and equivalents $ 20.9 $ 18.4
Accounts receivable 244.9 252.2
Inventories 134.3 157.2
Prepaid expenses and other 59.1 56.4
Total Current Assets 459.2 484.2
Recoverable from U.S. government and third
parties for environmental remediation 166.5 167.8
Deferred income taxes 151.1 151.0
Prepaid pension 119.6 116.1
Investments and other assets 102.9 103.3
Property, plant and equipment, less
accumulated depreciation 405.0 409.7
Total $1,404.3 $1,432.1
Liabilities and Shareholders' Equity
Notes payable $ 43.5 $ 25.5
Accounts payable-trade 81.3 102.3
Income taxes 27.0 21.3
Other current liabilities 206.8 241.1
Total Current Liabilities 358.6 390.2
Long-term debt 93.2 83.6
Postretirement benefits other than pensions 330.0 335.3
Environmental reserves 270.0 274.2
Other liabilities 65.7 67.5
Shareholders' equity 286.8 281.3
Total $1,404.3 $1,432.1
SOURCE GenCorp Inc.