GenCorp Reports $0.77 Fourth Quarter EPS
17 December 1998
GenCorp Reports $0.77 Fourth Quarter EPS, $0.66 From Operations
FAIRLAWN, Ohio, Dec. 17 -- GenCorp reported today
substantially improved 1998 fourth quarter earnings of $0.77 per diluted share
compared to $0.52 per diluted share during the fourth quarter of 1997.
Earnings from operations before unusual items and a tax refund totaled $0.66
per diluted share, an increase of 27% versus last year. The Company also
reported unusual income of $0.11 per diluted share in the fourth quarter of
1998 related to the valuation of idle fixed assets that were sold subsequent
to year-end and a tax refund.
For the Company's fiscal year ended November 30, 1998, earnings per
diluted share totaled $1.99 per share. Earnings from operations before
unusual items and a tax refund were $1.88, an increase of 9% compared to
$1.72 per diluted share in 1997.
"Strong results in the fourth quarter of 1998 reflect our success in
executing growth strategies and operational excellence, as we continue a solid
three-year trend of improved earnings for our shareholders. Also, our full
year earnings were impressive, especially after taking into account the strike
at General Motors, which negatively impacted our third quarter earnings by
($.10) per share," said Chairman and CEO John Yasinsky.
Total sales during the fourth quarter increased 8% to $478.7 million,
versus $443.2 million during the fourth quarter of 1997. For the full year,
sales increased 11% to $1.74 billion versus $1.57 billion in 1997.
Operating income for the current quarter, excluding unusual items,
increased 15% to $50.8 million versus $44.1 million in the 1997 fourth
quarter. Significant profit improvement in the polymer products segment and
Aerojet, the Company's aerospace and defense segment, was partially offset by
lower automotive operating income. Reported operating profit for the quarter
was $55.9 million.
Led by strong financial performance within the polymer products segment
and Aerojet, 1998 operating income improved to $159.6 million, excluding
unusual items of $5.3 million, an increase of 5% versus 1997.
"Expanding profit margins, particularly in polymer products and at
Aerojet, combined with top line sales growth and three highly synergistic
acquisitions we made in 1998 provide positive momentum as we move into 1999,"
Yasinsky said.
In a major announcement issued today, the Company says it plans to spin
off its Performance Chemicals and Decorative & Building Products businesses to
GenCorp shareholders as a separate publicly traded polymer products company,
continuing the process of aggressively evaluating and changing its business
portfolio. The Company also recently announced the divestiture of its low
margin residential wallcovering product line and its intention to sell Penn
Racquet Sports.
Outstanding financial performance was generated within the Company's
polymer products segment, as net sales increased 19% to $189.1 million
compared to $158.5 million in the fourth quarter of 1997. Performance
Chemicals, formerly the Specialty Polymers business, led the improvement with
significantly higher revenues, primarily related to recent acquisitions.
Decorative & Building Products posted strong double-digit sales gains during
the quarter on the strength of increases in European wallcovering, building
systems, decorative laminates, and coated fabrics. Penn Racquet Sports and
residential wallcovering posted lower sales than in the fourth quarter of
1997.
Operating profit for the polymer products segment during the fourth
quarter of 1998 surged 54% to $27.9 million versus $18.1 million in the fourth
quarter of 1997. Similarly, segment operating profit margins expanded to
14.8%, a record for the segment, versus 11.4% last year.
During the quarter, the Decorative & Building Products business began
integrating GenCorp U.K. Wallcoverings Inc. The August 1998 acquisition
resulted in the Company becoming the worldwide market share leader for
commercial wallcovering. In December 1998, Decorative & Building Products sold
its residential wallcovering product line, enabling it to focus on growth in
more attractive commercial markets. As a result of the sale, in the fourth
quarter of 1998 the Company reduced its estimate for the valuation reserve
that it recorded in the second quarter of 1998 for idle fixed assets by
$4.6 million. Performance Chemicals completed the acquisition of Sequa Corp's
U.S.-based specialty chemicals operations, further diversifying its product
lines and expanding its markets into the acrylic, polyvinyl-acetate and
specialty areas. Performance Chemicals also announced in December the
acquisition of the PolymerLatex acrylics plant in Fitchburg, Massachusetts,
further enhancing the business unit's technologies and capacity to serve
numerous end markets.
Results in the 1998 fourth quarter at Aerojet were also outstanding, with
operating profit improving to $19.6 million versus $17.1 million in the fourth
quarter of 1997. Operating margins grew to 11.1% in the current quarter versus
9.3% last year, as the business benefited from strong performance in its
Strategic and Space Propulsion and Fine Chemicals businesses. Sales in the
fourth quarter of 1998 declined slightly to $175.9 million, versus
$183.9 million during the fourth quarter of 1997. Higher revenues on the Titan
program and in Fine Chemicals were offset by lower volumes in smart munitions
and earth sensing systems.
Highlights during the quarter included "excellent" award fee ratings on
Titan Master, Titan Master R&D, Spaced-Based Infrared System (High), Defense
Support Program (DSP) Post Production Contract, DSP 23 Production Contract,
and Central Theater Processing Program contracts. Also during the quarter,
Aerojet booked new contract awards of $235 million, with contract backlog at
year-end totaling $1.7 billion.
Automotive segment sales were $113.7 million in the fourth quarter of
1998, versus $100.8 million in the same quarter of 1997. The 13% sales
increase came from higher volumes on the General Motors Grand AM and S-10
Blazer/Jimmy, Ford F-150 and Explorer, and Mercedes AAV programs.
Automotive operating profit rebounded to $3.3 million during the fourth
quarter of 1998, after experiencing losses in the third quarter of this year.
Operating profit during the fourth quarter was negatively affected by the
Company's September strike in Batesville, Arkansas, higher than expected
launch costs, and currency exchange rates from Canadian operations. Henniges,
the business unit's European operation, was profitable during the quarter.
Automotive continues to focus on light trucks and sport utility vehicles,
the most profitable and fastest growing segment of the market. In 1999,
volumes for new programs such as the General Motors C/K pickup and Grand AM,
and Ford F-150 should increase, and launch costs related to these vehicles
should subside. However, there will be a continuation of some new platform
costs in early 1999 as two new passenger car programs are launched. As a
result, 1999 profitability is expected to gradually increase during the year
as these programs mature, and it is expected that profit margins would
approach historical levels by year-end.
Corporate expense in the fourth quarter of 1998 was favorably impacted by
pension income and lower levels of spending. At November 30, 1998, GenCorp's
total debt increased to $371 million versus $109 million at year-end 1997 due
to three strategic acquisitions in Performance Chemicals and Decorative &
Building Products. Interest expense increased to $5.2 million in the fourth
quarter of 1998 versus $2.4 million in the same period a year ago due to the
higher debt levels. Equity increased to $344 million at year end 1998 from
$281 million a year ago.
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 technology-based manufacturer 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.
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) 1998 1997 1998 1997
Net Sales
Aerospace and defense $175.9 $183.9 $673.1 $583.7
Polymer products 189.1 158.5 689.2 615.5
Automotive 113.7 100.8 375.2 369.0
Total $478.7 $443.2 $1,737.5 $1,568.2
Income
Aerospace and defense $19.6 $17.1 $67.4 $55.1
Polymer products 27.9 18.1 89.1 68.6
Automotive 3.3 8.9 3.1 28.7
Unusual items 5.1 -- 5.3 --
Segment Operating Profit 55.9 44.1 164.9 152.4
Interest expense (5.2) (2.4) (14.1) (16.2)
Corporate other income
and (expense), net .5 (1.5) (2.1) (1.3)
Corporate expenses (.8) (4.1) (12.5) (17.0)
Income tax (provision)
benefit (18.1) (14.1) (52.4) 19.5
Net Income $32.3 $22.0 $83.8 $137.4
Earnings per common share:
Basic $.78 $.53 $2.02 $3.71
Diluted $.77 $.52 $1.99 $3.40
Average number of shares
of common stock outstanding
(in thousands):
Basic 41,530 41,245 41,468 37,023
Diluted 41,896 41,928 42,033 41,362
Capital expenditures $27.3 $22.2 $88.2 $58.3
Depreciation $14.9 $13.2 $62.4 $56.2
Divested Businesses Three Months Ended Year Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
(Dollars in millions) 1998 1997 1998 1997
Net Sales
Plastic Extrusions $-- $4.0 $9.4 $19.1
Operating Profit (Loss)
Plastic Extrusions $-- $(1.7) $(3.0) $(3.0)
Condensed Consolidated Balance Sheet (Unaudited)
GenCorp Inc.
Nov. 30, Nov. 30,
(Dollars in millions) 1998 1997
Assets
Cash and equivalents $28.6 $18.4
Accounts receivable 275.7 243.3
Inventories 165.3 157.2
Prepaid expenses and other 59.1 56.4
Total Current Assets 528.7 475.3
Recoverable from U.S. government and third
parties for environmental remediation 149.3 167.8
Deferred income taxes 136.6 151.0
Prepaid pension 129.6 116.1
Investments and other assets 314.6 112.2
Property, plant and equipment, less
accumulated depreciation 499.7 409.7
Total $1,758.5 $1,432.1
Liabilities and Shareholders' Equity
Notes payable $14.4 $25.5
Accounts payable-trade 118.7 102.3
Income taxes 34.0 21.3
Other current liabilities 263.4 241.1
Total Current Liabilities 430.5 390.2
Long-term debt 356.2 83.6
Postretirement benefits other than pensions 318.4 335.3
Environmental reserves 245.7 274.2
Other liabilities 63.7 67.5
Shareholders' equity 344.0 281.3
Total $1,758.5 $1,432.1