GenCorp Reports Q1 EPS
16 March 1999
GenCorp Reports $0.41 First Quarter EPS, a 32% Improvement Versus 1998
FAIRLAWN, Ohio, March 16 -- GenCorp reported today
significantly improved 1999 first quarter earnings of $0.41 per diluted share
compared to $0.31 per diluted share during the first quarter of 1998.
Both higher sales and operating profit in the first quarter of 1999
reflect GenCorp's continuing success in executing strategies based on its
priorities of operational excellence and value-creating growth. Sales of
$439.6 million were up 20%, compared to $365.5 million in the first quarter of
1998. Operating profit of $38.0 million increased 28% versus $29.6 million
for the first quarter of 1998, and was up in all three GenCorp reporting
segments, aerospace and defense, polymer products and automotive.
Consolidated operating profit margins rose to 8.6% in the first quarter of
1999 versus 8.1% for the same period of 1998.
"Excellent financial performance in the first quarter continues GenCorp's
multi-year trend of improved earnings, and further supports our rationale and
timing to spin off Performance Chemicals and Decorative & Building Products as
a separately traded public company," said Chairman and CEO John Yasinsky.
The Company announced a plan to spin off these two businesses on
December 17, 1998. Under the plan, GenCorp would continue to operate
Aerojet's aerospace, defense and fine chemicals businesses, and the Vehicle
Sealing automotive unit. "The spin-off plan is an important strategic step
that will enhance the ability of management for both GenCorp and the new
company to focus more effectively on fewer core businesses in order to
accelerate shareholder value beyond that achievable as a complex diversified
corporation," Yasinsky said.
"Our current diverse structure makes it difficult to effectively focus
strategies and fund growth in all of our segments. The spin-off plan creates
two less complex, better-aligned and more efficient companies, where capital
investments and human resources can be more easily focused on enhanced
earnings and sales growth strategies. The plan for a spin-off also comes at
an opportune time when all businesses are experiencing good performance and
are well-positioned for growth in the future," he added.
The Company is on target to complete the spin-off plan in the second half
of 1999, a plan that is contingent upon a tax-free ruling from the IRS,
shareholder approval and market conditions at the time of completion. During
the quarter, the Company expensed $500,000 of spin-related activities.
Within the Company's polymer products segment, net sales increased for the
first quarter of 1999 by 26% to $185.5 million compared to $147.5 million in
the first quarter of 1998. Performance Chemicals and Decorative & Building
Products both posted strong double-digit sales gains during the quarter.
Increases were especially strong for Decorative & Building Products' European
wallcovering, building systems and decorative laminates units. Higher sales
and improved operating performance were also posted by Penn Racquet Sports,
which the Company is in the process of divesting.
Operating profit for the polymer products segment during the first quarter
of 1999 improved 15% to $16.8 million versus $14.6 million in the first
quarter of 1998. Segment operating profit margins declined to 9.1% versus
9.9% last year, primarily due to lower pricing in several markets and
integration costs related to acquisition activity in the latter half of 1998.
During the quarter, Decorative & Building Products continued its
successful integration of GenCorp U.K. Wallcoverings Inc. This August 1998
acquisition elevated the Company to the worldwide market share leader in
commercial wallcovering. In the North American market, introduction of new
wallcovering designs in late 1998 has resulted in encouraging growth of new
orders in the past several months.
Synergies realized from the 1997 Printworld acquisition have led to
double-digit sales growth in the decorative laminates business from new
coordinated paper and vinyl product lines.
During the quarter, Decorative & Building Products also increased market
share across all of its Building Systems product lines.
Performance Chemicals completed the acquisition of PolymerLatex's U.S.
acrylics business located in Fitchburg, Massachusetts in the first quarter,
further diversifying its product lines and technology and expanding geographic
reach into the Northeast United States.
Outstanding results at Aerojet continued into the 1999 first quarter, with
operating profit improving to $18.4 million versus $14.2 million in the first
quarter of 1998. Operating margins grew to 12.2% in the current quarter
versus 10.5% last year, primarily as a result of strong performance in the
Strategic and Space Propulsion and Space Surveillance businesses. Sales in
the first quarter of 1999 increased 11% to $150.3 million, versus $135.4
million during the first quarter of 1998. Higher revenues were achieved from
the Titan, Spaced-Based Infrared System (SBIRS High), and tactical programs.
Highlights during the quarter included three Delta II launches, one of
which marked the 200th consecutive successful launch of Aerojet's second-stage
engine. Also during the quarter, Aerojet booked new contract awards of
$223 million, increasing contract backlog to $1.8 billion.
One major award from Lockheed Martin calls for Aerojet to build a new
generation solid rocket motor for the Atlas V medium-to-heavy lift launch
vehicle for the commercial satellite market and government missions. This new
contract, with potential to exceed half a billion dollars over the next
decade, fits with Aerojet's continuing strategy of aggressively pursuing work
in the commercial space arena.
Aerojet also won an $8.5 million contract from the Boeing Company to
provide attitude control systems for the National Missile Defense (NMD) first
stage booster rocket. Aerojet will deliver a flight-qualified system in less
than six months, with additional units to be supplied over the next year to
support the flight test program.
Also during the quarter, Aerojet finalized an important agreement with the
U.S. Air Force which significantly enhances environmental cost recovery from
65% to 88%.
Automotive segment sales were $103.8 million in the first quarter of 1999,
versus $82.6 million in the same quarter of 1998. The 26% sales increase came
from higher volumes on the Ford F-150 and Explorer, Mercedes AAV, and General
Motors C/K pickup programs.
Automotive operating profit improved to $2.8 million during the first
quarter of 1999, compared to operating profit of $0.8 million during the first
quarter of 1998, as expected due to the completion of launch activities for
several new programs in 1998. Improvements were offset slightly by some
launch costs on several new 1999 passenger car programs, and currency exchange
rates from Canadian operations. Henniges, the business unit's European
operation, had positive operating profit during the quarter.
Automotive continues to focus on light trucks and sport utility vehicles,
the most profitable and fastest growing segment of the market. Profitability
is expected to gradually increase during the year as programs launched in 1998
and early 1999 mature.
At February 28, 1999, GenCorp's total debt increased to $409 million
versus $371 million at year-end 1998 due to capital expenditures and the
acquisition of the Fitchburg facility. Interest expense increased to
$5.4 million in the first quarter of 1999 versus $2.1 million in the same
period a year ago due to the higher debt levels primarily from 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 1998 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 manufacturer with leading
positions in numerous polymer products markets as well as the automotive and
aerospace and defense industries.
Business Segment Information (Unaudited)
GenCorp Inc.
Three Months Ended
(Dollars in millions, Feb. 28, Feb. 28,
except per-share data) 1999 1998
Net Sales
Aerospace and defense $150.3 $135.4
Polymer products 185.5 147.5
Automotive 103.8 82.6
Total $439.6 $365.5
Income
Aerospace and defense $18.4 $14.2
Polymer products 16.8 14.6
Automotive 2.8 .8
Segment Operating Profit 38.0 29.6
Interest expense (5.4) (2.1)
Corporate other income
and (expense), net .5 (1.9)
Corporate expenses (3.6) (4.2)
Unusual items (.5) --
Income tax provision (11.8) (8.6)
Net Income $17.2 $12.8
Earnings per common share:
Basic $.41 $.31
Diluted $.41 $.31
Average number of shares of
common stock outstanding
(in thousands):
Basic 41,582 41,349
Diluted 42,036 41,942
Capital expenditures $19.0 $12.9
Depreciation $17.7 $15.7
Condensed Consolidated Balance Sheet (Unaudited)
GenCorp Inc.
Feb. 28, Nov. 30,
(Dollars in millions) 1999 1998
Assets
Cash and equivalents $21.5 $28.6
Accounts receivable 272.2 275.7
Inventories 160.0 165.3
Prepaid expenses and other 56.3 59.1
Total Current Assets 510.0 528.7
Recoverable from U.S. government
and third parties for environmental
remediation 148.0 149.3
Deferred income taxes 137.1 136.9
Prepaid pension 136.5 127.4
Investments and other assets 299.4 301.4
Property, plant and equipment, less
accumulated depreciation 497.5 499.7
Total $1,728.5 $1,743.4
Liabilities and Shareholders' Equity
Notes payable $53.2 $14.4
Accounts payable-trade 88.0 118.7
Income taxes 34.3 34.0
Other current liabilities 226.9 263.2
Total Current Liabilities 402.4 430.3
Long-term debt 356.1 356.2
Postretirement benefits other
than pensions 315.6 318.4
Environmental reserves 248.5 245.7
Other liabilities 51.7 49.3
Shareholders' equity 354.2 343.5
Total $1,728.5 $1,743.4