GenCorp Earnings From Operations Improve in the Second Quarter
16 June 1998
GenCorp Earnings From Operations Improve in the Second Quarter
FAIRLAWN, Ohio, June 16 -- GenCorp reported today
improved 1998 second quarter earnings of $0.51 per diluted share compared to
$0.50 per diluted share before a tax settlement during the second quarter of
1997. Net income in the second quarter of 1998 totaled $21.4 million compared
to second quarter 1997 net income of $19.1 million before the tax settlement.
Reported net income in the second quarter of 1997 was $2.08 per diluted share,
including a tax benefit of $65 million or $1.58 per share.
"Earnings from our operations for the quarter met our expectations, with
Aerojet and Specialty Polymers leading the strong performance," said Chairman
and CEO John Yasinsky. "Strategically, our growth platform businesses made
significant progress, with the acquisition from Goodyear of the Calhoun,
Georgia latex plant by Specialty Polymers and the tentative agreement to
acquire the commercial wallcovering business of Walker Greenbank by Decorative
& Building Products," Yasinsky said.
The Calhoun facility, which was acquired during the second quarter,
strengthens GenCorp's market position and is generating results which have
exceeded the Company's initial estimates. Walker Greenbank, which the Company
expects to acquire in the third quarter, provides GenCorp with an excellent
opportunity to expand in Europe and is highly complementary with Decorative &
Building Products design and manufacturing capabilities.
Sales totaled $431.9 million for the second quarter of 1998, an increase
of 7% as compared to $403.5 million during the second quarter of 1997. All
three GenCorp segments, aerospace and defense, polymer products, and
automotive, posted revenue increases during the current quarter as compared to
the second quarter of 1997. For the six months ended May 31, 1998, sales
increased 9% to $797.4 million as compared to $731.5 million during the first
six months of 1997.
Operating profit before unusual items totaled $43.1 million for the second
quarter of 1998, versus $43.4 million for the second quarter of 1997.
Operating margins declined slightly to 10.0% compared to 10.8% in the second
quarter of 1997. Unusual items totaling $0.2 million in the current quarter
resulted from charges of $3.8 million related to exiting the plastic
extrusions appliance gasket business and an $8.8 million write-off of excess
fixed assets that will no longer be used in a number of polymer products
businesses. These were offset by a gain of $12.8 million on the sale of
surplus land in Nevada by Aerojet, the Company's aerospace and defense
segment. For the first six months of 1998, operating profit before unusual
items improved 5% to $72.7 million versus $69.4 million for the first half of
1997.
Polymer Products - Net sales for the polymer products businesses in the
second quarter of 1998 increased 9% to $174.9 million compared to $160.9
million in the second quarter of 1997. Sales increased in both Decorative &
Building Products and Specialty Polymers. Improved sales in paper laminates,
building systems, and specialty latices for paper coatings and textiles led
the increase. Penn Racquet Sports experienced a slight sales decline.
Operating profit for the polymer products businesses increased to $23.5
million for the second quarter of 1998 versus $20.9 million in the second
quarter of 1997. Operating margins increased to 13.4% in the second quarter
of 1998 compared to 13.0% in the second quarter of 1997 due to lower raw
material prices for styrene, butadiene and PVC resins, partially offset by
higher prices of other raw materials in Decorative & Building Products and
slightly lower average unit selling prices in Specialty Polymers.
During the quarter, the Specialty Polymers business unit completed the
acquisition and the successful integration of the Calhoun, Georgia latex
polymer plant. This acquisition expands GenCorp's emulsion polymer production
capacity by 30%, provides a strategic southeastern U.S. platform for new
customers, and increases the Company's market share in the styrene butadiene
latex market. Penn Racquet Sports signed two new U.S. licensing agreements
for marketing of the Penn brand name and won a new promotion for tennis balls
with a national retailer. Decorative & Building Products' tentative agreement
with U.K. based Walker Greenbank would add approximately $70 million in high
margin, value-added annualized revenues.
Automotive - Sales totaled $100.6 million in the second quarter of 1998
versus $96.7 million in the second quarter of 1997. The 4% sales increase was
led by higher volumes in North America, primarily on the Mercedes sport
utility vehicle, and on full-size pickups for Ford and General Motors.
The Company's automotive operations earned $5.9 million in the second
quarter of 1998 as compared to $8.7 million for the second quarter of 1997.
Operating profit margins dropped to 5.9% compared to 9.0% in the second
quarter of 1997. Higher than planned launch costs, operating losses of over
$1 million in plastic extrusions, and negative foreign exchange variances led
to the margin decline. Performance, however, improved significantly from the
first quarter 1998. Vehicle Sealing's German subsidiary, Henniges, was
profitable during the quarter. Also during the quarter, Vehicle Sealing
announced the decision to exit the plastic extrusions appliance gasket
business line, which should be completed in the third quarter of 1998. The
Company is closely watching how the UAW strikes at General Motors will affect
operations in the second half of the year.
Aerospace and Defense - At Aerojet, net sales increased 7% to
$156.4 million in the second quarter of 1998 as compared to $145.9 million in
the second quarter of 1997. Higher volumes on the Space Based Infrared System
(SBIRS), Special Sensor Microwave Imager/Sounder (SSMIS) and Delta liquid
rocket engines, were partially offset by lower volumes on the Defense Support
Program (DSP), Titan, Sense and Destroy Armor (SADARM), and Custom Chemicals.
Aerojet's operating profit for the second quarter of 1998 was $13.7
million, compared to $13.8 million in the second quarter of 1997. As
expected, operating margins declined during the quarter to 8.8% from 9.5% in
the second quarter of 1997. The decrease was primarily due to the delivery of
a second SSMIS satellite sensor at no profit.
During the quarter, Aerojet liquid engines performed successfully on two
Delta II launches and on two Titan launches. The launch payloads included
Iridium and Globalstar commercial communication satellites, a classified
military payload, and a NOAA/NASA weather satellite. Contract awards totaled
$160 million during the quarter, with the contract backlog totaling $1.8
billion at the end of the second quarter.
At May 31, 1998, GenCorp's total debt was $178 million, up $41 million
from the first quarter of 1998. The debt-to-total capital ratio increased
slightly to 37% from 32% for the first quarter of 1998 due to the Calhoun
acquisition. Interest expense decreased to $3.1 million from $6.2 million in
the comparable second quarter period a year ago due to lower average debt
levels.
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 leading
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 its
web-site at http://www.gencorp.com.
For previous releases, see Company News On-Call: http://www.prnewswire.com
or for a fax, call 1-800-758-5804, ext. 347350.
Business Segment Information (Unaudited)
GenCorp Inc.
Three Months Ended Six Months Ended
(Dollars in millions, May 31, May 31, May 31, May 31,
except per-share data) 1998 1997 1998 1997
Net Sales
Aerospace and defense $156.4 $145.9 $291.8 $250.3
Polymer products 174.9 160.9 322.4 295.1
Automotive 100.6 96.7 183.2 186.1
Total $431.9 $403.5 $797.4 $731.5
Income
Aerospace and defense $13.7 $13.8 $27.9 $24.1
Polymer products 23.5 20.9 38.1 31.1
Automotive 5.9 8.7 6.7 14.2
Unusual items .2 -- .2 --
Segment Operating Profit 43.3 43.4 72.9 69.4
Interest expense (3.1) (6.2) (5.2) (11.9)
Corporate other income
and (expense), net (.3) (1.6) (2.2) (2.7)
Corporate expenses (4.3) (4.0) (8.5) (8.1)
Income tax provision (14.2) 52.5 (22.8) 48.5
Net Income $21.4 $84.1 $34.2 $95.2
Earnings per common share:
Basic $.51 $2.51 $.83 $2.84
Diluted $.51 $2.08 $.81 $2.38
Average number of shares
of common stock outstanding
(in thousands):
Basic 41,482 33,554 41,416 33,529
Diluted 42,210 41,151 42,064 41,114
Capital expenditures $20.0 $10.4 $32.9 $18.6
Depreciation $16.0 $14.5 $31.7 $27.9
Condensed Consolidated Balance Sheets (Unaudited)
GenCorp Inc.
May 31, Nov. 30,
(Dollars in millions) 1998 1997
Assets
Cash and equivalents $21.2 $18.4
Accounts receivable 256.2 252.2
Inventories 133.4 157.2
Prepaid expenses and other 57.9 56.4
Total Current Assets 468.7 484.2
Recoverable from U.S. government and third
parties for environmental remediation 165.6 167.8
Deferred income taxes 151.5 151.0
Prepaid pension 122.7 116.1
Investments and other assets 158.9 103.3
Property, plant and equipment, less
accumulated depreciation 412.1 409.7
Total $1,479.5 $1,432.1
Liabilities and Shareholders' Equity
Notes payable $35.9 $25.5
Accounts payable-trade 75.0 102.3
Income taxes 35.3 21.3
Other current liabilities 228.8 241.1
Total Current Liabilities 375.0 390.2
Long-term debt 142.0 83.6
Postretirement benefits other than pensions 326.0 335.3
Environmental reserves 265.7 274.2
Other liabilities 65.8 67.5
Shareholders' equity 305.0 281.3
Total $1,479.5 $1,432.1