GenCorp Reports Earnings of $0.41 Per Share
14 September 1998
GenCorp Reports Earnings of $0.41 Per Share in Third Quarter Automotive Unit Strike to Impact Fourth Quarter Results
FAIRLAWN, Ohio, Sept. 14 -- GenCorp reported today
1998 third quarter earnings of $0.41 per diluted share compared to $0.44 per
diluted share from operations during the third quarter of 1997. Total
reported earnings per share in the third quarter of 1997 were $0.49, which
included a benefit of $0.05 per share from a previously divested business.
Net income in the third quarter of 1998 totaled $17.3 million compared to
third quarter 1997 net income of $20.2 million.
"Our third quarter earnings were impacted by $(0.10) per share because of
the 54 day UAW strike at General Motors in our automotive segment," said
Chairman and CEO John Yasinsky. "With some continuing launch costs on our new
automotive programs, and expenses of about $(0.05) per share related to the
recently settled strike at our Batesville, Arkansas automotive plant, we
expect modest growth in operating profit and earnings per share in the fourth
quarter of 1998 as compared to last year. When the new launches are
completed, we expect automotive profits to improve significantly in 1999,
approaching historical levels," he said.
"Our polymer products segment and Aerojet, our aerospace and defense
segment, continue to generate strong operating results," Yasinsky added.
"Sales for the quarter are up 23% in these segments over last year, and
operating profit margins have expanded as we successfully execute value-
creating strategies."
Strategically, the businesses GenCorp has targeted as growth platforms
have made significant progress. The Specialty Polymers business unit has
successfully integrated the recently acquired Calhoun, Georgia specialty latex
plant, and expects to complete the acquisition of Sequa Corporation's U.S.
specialty chemicals business in the fourth quarter. Sequa will provide entry
into new but related markets such as textiles, graphic arts and construction,
and will enable the Specialty Polymers unit to further diversify its product
lines and customer base.
Decorative & Building Products completed the acquisition of Walker
Greenbank's commercial wallcovering business in August, which is a major step
towards globalization. This new U.K.-based business is expected to add
approximately $70 million in high margin annualized revenues and provide a key
platform in Europe to distribute other product lines.
Sales totaled $461.4 million for the third quarter of 1998, an increase of
17% as compared to $393.5 million during the third quarter of 1997. Aerojet
led all businesses with a 37% revenue increase while the polymer products
segment posted a revenue increase of 10% during the current quarter as
compared to the third quarter of 1997. For the nine months ended August 31,
1998, sales increased 12% to $1.26 billion as compared to $1.13 billion during
the first nine months of 1997.
Operating profit, which was negatively impacted by $(7.1) million due to
the strike at GM, totaled $36.1 million for the third quarter of 1998, versus
$38.9 million for the third quarter of 1997. Operating margins declined to
7.8% compared to 9.9% in the third quarter of 1997 due to the impact of the
strike at GM and launch costs at the automotive segment. For the first nine
months of 1998, operating profit improved to $109.0 million versus
$108.3 million for the same period in 1997.
Polymer Products - Net sales for the polymer products businesses in the
third quarter of 1998 were $177.7 million compared to $161.9 million in the
third quarter of 1997. Improved sales in specialty latices for paper coatings
and textiles, paper laminates, building systems and tennis products led the
increase.
Operating profit for the polymer products businesses increased 19% to
$23.1 million for the third quarter of 1998 versus $19.4 million in the third
quarter of 1997. Operating margins increased to 13.0% in the third quarter of
1998 compared to 12.0% in the third quarter of 1997 due to product mix, cost
reduction programs and lower raw material prices for styrene, butadiene and
PVC resins.
Automotive - Sales in the third quarter of 1998 totaled $78.3 million
versus $82.1 million in the third quarter of 1997, due to the strike at GM,
which resulted in lost revenues of $16.0 million during the quarter.
The Company's Vehicle Sealing operations had operating losses of
$(6.9) million in the third quarter of 1998 as compared to income of
$5.6 million for the third quarter of 1997. Operating income was negatively
impacted by $(7.1) million from the strike at GM, operating losses of
$(0.5) million in plastic extrusions, which was divested during the quarter,
negative foreign exchange variances of $(0.6) million, and higher than planned
launch costs.
Aerospace and Defense - At Aerojet, net sales surged 37% to $205.4 million
in the third quarter of 1998 as compared to $149.5 million in the third
quarter of 1997. Higher volumes on the Special Sensor Microwave
Imager/Sounder (SSMIS), Space Based Infrared System (SBIRS), Defense Support
Program (DSP), Sense and Destroy Armor (SADARM) and Custom Chemicals were
slightly offset by lower volumes on the Titan and Delta programs.
Aerojet's operating profit for the third quarter of 1998 was
$19.9 million, compared to $13.9 million in the third quarter of 1997, an
increase of 43%. Operating margins increased during the quarter to 9.7% from
9.3% in the third quarter of 1997. The increase was primarily due to higher
profits on the SBIRS program and the delivery of the final infrared sensor for
DSP. Aerojet will continue work on DSP, which is slated to be replaced by the
SBIRS High program, under a post-production support contract worth $265
million through 2001.
During the quarter, Aerojet contract awards totaled $121 million,
including an advanced propulsion system award from Boeing, a $16.4 million
contract from NASA to provide a deorbit propulsion stage for the X-38
demonstrator flight vehicle and a contract from Lockheed Martin for warhead
production of Phase II EMD of the U.S. Army Multi-Purpose Individual
Munition/Short Range Assault Weapon. Contract backlog totaled $1.6 billion at
the end of the third quarter.
At August 31, 1998, GenCorp's total debt was $345 million, while interest
expense increased to $3.7 million from $1.9 million in the comparable third
quarter period a year ago due to higher debt levels related to acquisitions.
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 Nine Months Ended
(Dollars in millions, Aug. 31, Aug. 31, Aug. 31, Aug. 31,
except per-share data) 1998 1997 1998 1997
Net Sales
Aerospace and defense $205.4 $149.5 $497.2 $399.8
Polymer products 177.7 161.9 500.1 457.0
Automotive 78.3 82.1 261.5 268.2
Total $461.4 $393.5 $1,258.8 $1,125.0
Income
Aerospace and defense $19.9 $13.9 $47.8 $38.0
Polymer products 23.1 19.4 61.2 50.5
Automotive (6.9) 5.6 (.2) 19.8
Unusual items -- -- .2 --
Segment Operating Profit 36.1 38.9 109.0 108.3
Interest expense (3.7) (1.9) (8.9) (13.8)
Corporate other income
and (expense), net (.4) 2.9 (2.6) .2
Corporate expenses (3.2) (4.8) (11.7) (12.9)
Income tax (provision)
benefit (11.5) (14.9) (34.3) 33.6
Net Income $17.3 $.2 $51.5 $115.4
Earnings per common share:
Basic $.42 $.52 $1.24 $3.23
Diluted $.41 $.49 $1.22 $2.87
Average number of shares
of common stock outstanding
(in thousands):
Basic 41,527 39,070 41,450 35,742
Diluted 42,103 41,582 42,077 41,219
Capital expenditures $28.0 $17.8 $60.9 $36.4
Depreciation $15.8 $15.1 $47.5 $43.0
Divested Businesses Three Months Ended Nine Months Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
(Dollars in millions) 1998 1997 1998 1997
Net Sales
Plastic Extrusions $1.4 $4.2 $9.4 $15.1
Operating Profit (Loss)
Plastic Extrusions $(.5) $(.8) $(3.0) $(1.3)
Condensed Consolidated Balance Sheets (Unaudited)
GenCorp Inc.
Aug. 31, Nov. 30,
(Dollars in millions) 1998 1997
Assets
Cash and equivalents $18.6 $18.4
Accounts receivable 296.2 252.2
Inventories 145.1 157.2
Prepaid expenses and other 55.5 56.4
Total Current Assets 515.4 484.2
Recoverable from U.S. government and third
parties for environmental remediation 159.1 167.8
Deferred income taxes 152.8 151.0
Prepaid pension 127.5 116.1
Investments and other assets 229.1 103.3
Property, plant and equipment, less
accumulated depreciation 448.4 409.7
Total $1,632.3 $1,432.1
Liabilities and Shareholders' Equity
Notes payable $43.2 $25.5
Accounts payable-trade 78.0 102.3
Income taxes 30.1 21.3
Other current liabilities 219.2 241.1
Total Current Liabilities 370.5 390.2
Long-term debt 301.6 83.6
Postretirement benefits other than pensions 322.7 335.3
Environmental reserves 255.3 274.2
Other liabilities 66.5 67.5
Shareholders' equity 315.7 281.3
Total $1,632.3 $1,432.1