<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended February 28, 1995 Commission File Number 1-1520
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GenCorp Inc.
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(Exact name of registrant as specified in its charter)
Ohio 34-0244000
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(State of Incorporation) (I.R.S. Employer Identification No.)
175 Ghent Road Fairlawn, Ohio 44333-3300
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (216) 869-4200
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
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At March 31, 1995, there were 32,517,806 outstanding shares of GenCorp Inc.'s
Common Stock, par value $.10.
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GenCorp Inc.
<TABLE>
Table of Contents
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statement of Income -
Three Months Ended February 28, 1995 and 1994 -3-
Condensed Consolidated Balance Sheet -
February 28, 1995 and November 30, 1994 -4-
Condensed Consolidated Statement of Cash Flows -
Three Months Ended February 28, 1995 and 1994 -5-
Notes to the Unaudited Interim Condensed Consolidated
Financial Statements -6-
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations -12-
Part II. Other Information
Item 1. Legal Proceedings -15-
Item 4. Submission of Matters to a Vote of Security Holders -15-
Item 5. Other Information -15-
Item 6. Exhibits and Reports on Form 8-K -16-
Signatures -17-
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
<TABLE>
GenCorp Inc.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Dollars in millions, except per-share data)
<CAPTION>
Unaudited
Three Months Ended
-------------------------------
February 28,
1995 1994
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<S> <C> <C>
NET SALES $ 428.1 $ 401.7
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COSTS AND EXPENSES
Cost of products sold 366.7 355.0
Selling, general and administrative 44.2 44.9
Interest expense 8.7 7.3
Other (income) expense, net (3.1) (.1)
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416.5 407.1
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INCOME (LOSS) BEFORE INCOME TAXES 11.6 (5.4)
Income tax (benefit) provision 4.6 (2.1)
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INCOME (LOSS) BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 7.0 (3.3)
Cumulative effect of accounting changes (Note B) - (212.7)
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NET INCOME (LOSS) $ 7.0 $(216.0)
======= =======
EARNINGS (LOSS) PER SHARE
OF COMMON STOCK (NOTE C)
Primary:
Before accounting changes $ .22 $ (.10)
Cumulative effect of accounting changes (Note B) - (6.71)
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Earnings (Loss) Per Share $ .22 $ (6.81)
======= =======
Fully Diluted:
Before accounting changes $ .21 $ (.10)
Cumulative effect of accounting changes (Note B) - (6.71)
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Earnings (Loss) Per Share $ .21 $ (6.81)
======= =======
Average number of shares of common
stock outstanding (in thousands)
Primary 32,259 31,730
Fully diluted 39,417 38,888
Cash dividends paid per share of common stock $ .15 $ .15
</TABLE>
The accompanying notes to the unaudited interim condensed consolidated
financial statements are an integral part of these statements.
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<TABLE>
GenCorp Inc.
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
<CAPTION>
Unaudited Audited
February 28, November 30,
1995 1994
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<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 26.0 $ 22.4
Marketable securities 7.2 7.3
Accounts receivable (Note D) 230.1 190.1
Inventories (Note E) 164.5 158.1
Prepaid expenses 41.3 42.9
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TOTAL CURRENT ASSETS 469.1 420.8
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Recoverable from U.S. government and third
parties for environmental remediation 124.3 125.0
Deferred income taxes 158.1 158.1
Prepaid pension 103.8 102.2
Investments and other assets 84.0 83.1
Property, plant and equipment:
At cost 1,295.6 1,294.4
Accumulated depreciation (744.3) (728.4)
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Net property, plant and equipment 551.3 566.0
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TOTAL ASSETS $1,490.6 $1,455.2
======== ========
CURRENT LIABILITIES
Notes payable $ 21.0 $ 6.9
Accounts payable - trade 96.0 103.7
Income taxes 15.9 19.0
Other current liabilities 210.9 237.7
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TOTAL CURRENT LIABILITIES 343.8 367.3
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Long-term debt (Note F) 444.7 377.6
Postretirement benefits other than pensions 373.7 373.5
Environmental reserves 253.0 255.3
Other long-term liabilities 71.8 88.4
Contingencies (Note G)
SHAREHOLDERS' EQUITY (DEFICIT)
Preference stock - (none outstanding) - -
Common stock - $.10 par value; 32.4 million
shares outstanding 3.2 3.2
Other capital 8.5 4.9
Retained earnings (deficit) (13.9) (16.0)
Currency translation adjustment 5.8 1.0
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TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 3.6 (6.9)
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT) $1,490.6 $1,455.2
======== ========
</TABLE>
The accompanying notes to the unaudited interim condensed consolidated
financial statements are an integral part of these statements.
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<TABLE>
GenCorp Inc.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in millions)
<CAPTION>
Unaudited
Three Months Ended
----------------------------
February 28,
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 7.0 $(216.0)
Cumulative effect of accounting changes - 212.7
Depreciation and amortization 17.9 19.4
Increase in working capital (89.1) (21.8)
Increase in deferred income taxes - (1.3)
Other - net (4.9) .4
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NET CASH USED IN OPERATING ACTIVITIES (69.1) (6.6)
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (11.0) (9.0)
Investments and other - net (1.0) (1.2)
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NET CASH USED IN INVESTING ACTIVITIES (12.0) (10.2)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net short-term debt incurred 14.1 8.4
Long-term debt incurred 110.1 70.0
Long-term debt paid (43.0) (52.6)
Dividends (4.9) (4.8)
Other equity transactions 8.4 (1.8)
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NET CASH PROVIDED FROM
FINANCING ACTIVITIES 84.7 19.2
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NET INCREASE IN CASH AND EQUIVALENTS 3.6 2.4
Cash and equivalents at beginning of year 22.4 15.8
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Cash and equivalents at end of period $ 26.0 $ 18.2
====== =======
</TABLE>
Cash paid during the period for interest was $11.4 million and $10.8 million
for the three months ended February 28, 1995 and 1994, respectively. Cash paid
during the period for income taxes was $5.1 million and $14.1 million for the
three months ended February 28, 1995 and 1994, respectively.
The accompanying notes to the unaudited interim condensed consolidated
financial statements are an integral part of these statements.
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<PAGE> 6
GenCorp Inc.
NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note A - Basis of Presentation
- ------------------------------
The accompanying unaudited interim condensed consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and therefore do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
These interim statements should be read in conjunction with the financial
statements and notes thereto included or incorporated by reference in the
GenCorp Inc. (Company) Annual Report on Form 10-K for the fiscal year ended
November 30, 1994.
All normal recurring accruals and adjustments considered necessary for a
fair presentation of the unaudited results for the three months ended February
28, 1995 and 1994, have been reflected. The results of operations for the
three months ended February 28, 1995, are not necessarily indicative, if
annualized, of those to be expected for the full fiscal year.
Note B - Accounting Changes
- ---------------------------
Effective December 1, 1993, the Company adopted the provisions of
Statements of Financial Accounting Standards SFAS No. 106 "Employers'
Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106), SFAS
No. 109 "Accounting for Income Taxes" (SFAS 109) and SFAS No. 112 "Employers'
Accounting for Postemployment Benefits" (SFAS 112).
SFAS 106 requires that the expected cost of providing postretirement health
care and life insurance benefits be charged to expense during the years that
the employees render service. Prior to 1994, the Company expensed the cost of
these benefits for continuing operations as they were paid. Upon
implementation of the standard, the Company elected immediate recognition of
the transition obligation by taking a one-time charge against earnings.
SFAS 109 requires the use of the liability method in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption
of SFAS 109, income tax expense was determined using the deferred tax method
required by Accounting Principles Board Opinion No. 11 - "Accounting For Income
Taxes" (APB 11).
SFAS 112 requires the use of the accrual method of accounting for benefits
payable to employees that leave the Company other than by reason of retirement.
Implementation of this standard had an immaterial impact as most of these
benefits were accounted for in accordance with SFAS 112 prior to December 1,
1993.
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Note B - Accounting Changes (continued)
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<TABLE>
The table below shows the components of the cumulative effect of accounting
changes:
<CAPTION>
(Millions, except per-share data) Amount Per Share
- --------------------------------------------------------------------
<S> <C> <C>
Other postretirement benefits,
net of $130.6 in taxes $(195.9) $(6.18)
Income taxes (16.5) (.52)
Postemployment benefits,
net of $.1 in taxes (.3) (.01)
------- ------
Total $(212.7) $(6.71)
======= ======
</TABLE>
RECLASSIFICATIONS - Certain reclassifications have been made to conform
prior year's data to the current presentation.
Note C - Net Income Per Share of Common Stock
- ---------------------------------------------
Primary earnings per share of common stock are calculated by dividing net
income by the weighted average number of common shares outstanding adjusted for
the inclusion of stock options. For fully diluted earnings per share, net
income and shares outstanding have also been adjusted as if the Company's
$115,000,000 8% Convertible Subordinated Debentures Due August 1, 2002 had been
converted. (See Note F for further information regarding the debentures.)
Note D - Accounts Receivable
- ----------------------------
In June 1994, the Company extended its receivable financing program through
December 1994. Under the agreement, new receivables were sold as collections
reduced previously sold receivables. Accounts receivable as shown in the
Company's Consolidated Balance Sheet are net of $60 million for 1994
representing the interests in receivables sold under this agreement. When this
program expired on December 31, 1994, the Company used its existing borrowing
capacity to repurchase outstanding receivables previously sold under this
agreement.
Note E - Inventories
- --------------------
Inventories are stated at the lower of cost or market value. A portion of
the inventories is priced by use of the last-in, first-out (LIFO) method using
various dollar value pools. Interim LIFO determinations may involve
management's judgments of expected year-end inventory levels. Components of
inventory are as follows:
<TABLE>
<CAPTION>
February 28, November 30,
1995 1994
---------------- -----------------
<S> <C> <C>
Raw materials and supplies $ 51.9 $ 51.4
Work-in-process 14.3 14.4
Finished products 68.4 67.0
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Approximate replacement cost of LIFO
inventories 134.6 132.8
Reserves, primarily LIFO (42.4) (42.4)
Long-term contracts at average cost 188.0 206.0
Progress payments (115.7) (138.3)
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$ 164.5 $ 158.1
======= =======
</TABLE>
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<PAGE> 8
Note F - Long-term Debt and Credit Lines
- ----------------------------------------
In April 1992, the Company converted all previously outstanding revolving
loans into a three-year $450 million unsecured revolving credit facility
(Facility). In March 1995, banks with commitments totaling $445 million
extended the maturity date of the Facility until April 1997, which is the last
extension available under the Facility. As of February 28, 1995, unused
revolving lines of credit totaled $135 million. The Company pays commitment
fees of 3/8 of one percent on the unused balance. Interest rates are variable,
primarily based on LIBOR, and are currently at an average rate of 7.2 percent.
The Facility contains various debt restrictions and provisions relating to
net worth and interest coverage ratios. The Company is required to maintain
consolidated net worth of not less than $243 million, excluding the impact of
the new accounting standards and the unusual items recorded in the fourth
quarter of 1994 pursuant to an amendment to the Facility. Excluding the impact
of these items, the Company had net worth of $273 million at February 28, 1995
and was in compliance with the amended agreement. This agreement requires the
Company to use any net proceeds from the sale of all or part of Aerojet to
reduce the outstanding debt. Further, the Facility will be reduced permanently
by the amount of the net cash proceeds.
The Company has interest rate swap agreements covering a notional amount
of $75 million, which expire in June 1995. The semi-annual settlement rates
for these agreements are calculated as a spread between a fixed annual rate of
9.54 percent and the six-month floating LIBOR rate.
The $115,000,000 8% Convertible Subordinated Debentures due August 1, 2002
(Debentures) are redeemable at the option of the Company, in whole or in part,
at any time on or after August 10, 1996. The Debentures are convertible at any
time prior to maturity, unless previously redeemed, into shares of common stock
at a conversion price of $16.065 per share (equivalent to a conversion rate of
approximately 62.247 shares of Common Stock per $1,000 principal amount of
Debentures) subject to adjustment in certain circumstances. The market value
of the Debentures was $114 million at February 28, 1995.
At February 28, 1995, the Company had unsecured, uncommitted lines of
credit with several banks for short-term borrowings aggregating $36 million, of
which $20 million was outstanding. Borrowings under such lines generally bear
interest at money market rates and are payable on demand. The Company also had
outstanding letters of credit totaling $28 million at February 28, 1995.
Note G - Contingencies and Uncertainties
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Environmental Matters
- ---------------------
Sacramento, California
In June 1989, the United States District Court for the Eastern District of
California approved entry of a Partial Consent Decree (Decree) which partially
settled environmental litigation initiated against Aerojet and its inactive
subsidiary, Cordova Chemical Company, by the State of California and the United
States Environmental Protection Agency (EPA) as a result of the release of
chemicals at Aerojet's Sacramento, California facility prior to 1980.
-8-
<PAGE> 9
Note G - Contingencies and Uncertainties (continued)
- ----------------------------------------------------
The Decree requires Aerojet to conduct a Remedial
Investigation/Feasibility Study (RI/FS) of the Sacramento site and prepare an
RI/FS report on specific environmental conditions present at the site and
alternatives available to remedy such conditions. The Decree does not require
Aerojet to perform final remedial measures at the site. Additionally, Aerojet
is required to pay for certain costs associated with ongoing government
oversight of Aerojet's compliance with the Decree.
In September 1993, Aerojet reached a settlement with the United States
government on its claim to recover a portion of environmental remediation costs
incurred after June 1989. Aerojet recovered approximately $18 million under
this settlement for costs incurred from July 1989 through November 1992. The
settlement also provides that 65 percent of covered costs incurred after
November 1992, net of insurance recoveries, will be added to the pricing of
government contracts. As a part of the settlement, Aerojet agreed to release
its claim under the "Superfund" law against the United States in federal
district court for recovery of costs covered by the settlement.
Aerojet has substantially completed its site characterization efforts
under the Decree to determine the nature and extent of contamination at the
Sacramento facility and has identified the remediation technologies that will
likely be deployed to remedy such contamination. During the fourth quarter of
1994, Aerojet completed its estimate of remediation costs at its Sacramento
facility and based on currently available facts, existing technology and
presently enacted laws and regulations, recorded a net $68 million charge.
These remediation costs are principally for design, construction and
enhancement of groundwater and soil treatment facilities, ongoing project
management and regulatory oversight, and are expected to be incurred over a
period of approximately 20 years. This estimate will be subject to changes as
work progresses and additional experience is gained.
At February 28, 1995, Aerojet had a reserve of $209 million for costs to
complete the RI/FS and remediate the site and has recognized $122 million for
probable future recoveries under existing settlement agreements with the United
States government.
Legal proceedings to obtain reimbursements of environmental costs from
insurers are continuing; however, Aerojet presently cannot estimate the
recovery that may be obtained under any policy.
Lawrence, Massachusetts
The Company has completed a study of remediation alternatives for its
closed Lawrence, Massachusetts facility, which was contaminated with PCBs, and
has begun site remediation and off-site disposal of debris. The Company has a
reserve of $32 million for the decontamination and the long-term operating and
maintenance costs of this site. The reserve represents the Company's best
estimate for the remaining remediation cost. The study indicated that the
future remediation cost could range as high as $56 million depending on the
results of future testing and the ultimate remediation alternatives undertaken
at the site. The time frame for remediation is currently estimated to range
from 5 to 9 years.
Muskegon, Michigan
Aerojet and its two inactive Cordova Chemical subsidiaries (Cordova) have
been involved in litigation regarding a former Cordova facility in Muskegon,
Michigan where the EPA has conducted an RI/FS under the Superfund law. The
United States District Court for the Western District of Michigan previously
ruled that Aerojet and Cordova were liable under the superfund law with a
former owner/operator of the facility for remediation at the site. Separately,
the State of Michigan Court of Claims previously ruled that the State of
Michigan is obligated to indemnify Cordova for remediation costs which it
incurs at the site.
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<PAGE> 10
Note G - Contingencies and Uncertainties (continued)
- ----------------------------------------------------
These rulings have been appealed to the Sixth Circuit United States Court of
Appeals and the Michigan Court of Appeals, respectively. Aerojet and Cordova
expect to prevail on these appeals. On a related matter, in May 1993 the EPA
terminated, without resolution, two orders issued in 1990 and 1991 to Cordova
and other parties to perform site and groundwater remediation.
The EPA has awarded a bid to construct and operate a groundwater treatment
system for one year. Final remediation costs for groundwater and soils cannot
presently be determined but could range from $50 million to $100 million,
depending on the remediation methods ultimately required. Furthermore, the
Company believes that most of the remediation costs will be paid by the former
owner/operator and that its $14 million reserve will be adequate to cover the
Company's costs and expenses associated with this matter. Included in
investments and other assets is $9 million to be recovered from insurance
companies.
Toledo, Ohio
In 1992, the Company signed a Consent Decree with the State of Ohio
relative to the remediation of PCBs at its formerly owned Toledo, Ohio
facility. A remediation plan for the removal of the PCBs under the Consent
Decree was approved by the State in May 1994. Remediation is expected to be
completed in 1995. The Company believes that its established reserves of $2
million will be adequate to cover all future costs and expenses associated with
this matter.
San Gabriel Valley Basin, California
Aerojet, through its Azusa facility, is one of a number of potentially
responsible parties (PRPs) in the portion of the San Gabriel Valley Superfund
Site known as the Baldwin Park Operable Unit (BPOU). Regulatory action is
proceeding on two tracks: regional groundwater remediation, under the direct
control of the EPA, and site specific investigation and cleanup supervised by
the California Regional Water Quality Control Board (Regional Board) under
delegation from the EPA.
Aerojet's investigation concluded that the principal groundwater
contamination is upgradient of Aerojet's property and that low concentrations
of contaminants are present in the soils of Aerojet's presently and
historically owned properties. The EPA contends that Aerojet is one of the
four largest sources of groundwater contamination at the BPOU of the sixteen
companies that the EPA identified as PRPs in January 1995. Aerojet contests
the EPA's position regarding the source of contamination and the number of PRPs
held responsible.
The EPA issued a Record of Decision (ROD) on March 31, 1994 for a
groundwater remediation plan for the BPOU, estimated to cost $47 million in
non-recurring costs and $4 to $5 million in annual operating expense. Aerojet
and other PRPs are participating in an effort by the San Gabriel Basin Water
Quality Authority, EPA and water supply organizations to develop an alternative
"consensus" plan in which certain water supply entities would integrate the EPA
remedial requirements into a water supply project. If implemented, the
consensus plan will provide federal funding and funding from water supply
entities receiving benefit from the project, thus reducing the portion of costs
to be borne by the PRPs. Negotiations with the EPA, water supply organizations
and other PRPs concerning the consensus plan are expected to continue through
1995 and into early 1996.
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<PAGE> 11
Note G - Contingencies and Uncertainties (continued)
- ----------------------------------------------------
Aerojet's San Gabriel Valley cost exposure cannot be estimated at this
time. However, management believes, on the basis of presently available
information, that resolution of this matter will not materially affect the
consolidated financial condition of the Company. Among the factors considered
by management are: the number of other viable PRPs in the BPOU; the potential
for cost sharing with water supply interests; Aerojet's site-specific
investigation; and the fact that, to date, Aerojet's San Gabriel Valley costs
are being recovered from the government in the pricing of Aerojet's contracts.
Additionally, Aerojet has filed suit against its insurers for recovery of such
costs.
Other Sites
The Company is also currently involved, together with other companies, in
21 other Superfund sites on the National Priority List under the federal
Comprehensive Environmental Response, Compensation, and Liability Act
(Superfund) and 15 other non-Superfund sites. In many instances, the Company's
liability and its proportionate share of costs has not been determined largely
due to uncertainties as to the nature and extent of site conditions, the
Company's involvement and potential recoveries from insurance and other
sources. While government agencies frequently claim potentially responsible
parties are jointly and severally liable at such sites, in the Company's
experience, interim and final allocations of liability costs are generally made
based on relative contributions of waste.
Such other Superfund sites include Stringfellow (California); Organic
Chemical (Michigan); Summit National (Ohio); Hardage/Criner (Oklahoma);
Industrial Excess (Ohio); and Solvent Recovery Service of New England
(Connecticut). Other non-Superfund sites include Westbury (New York); Four
County Landfill (Indiana); and Delta Chemical (Pennsylvania). The Company's
final allocated share of investigation and remediation costs at a number of
these sites has not yet been determined. Based on the Company's previous
experience, its allocated share has frequently been minimal, in many instances
less than 1 percent. The Company has reserves of approximately $20 million as
of February 28, 1995 which it believes are sufficient to cover its best
estimate of its share of the environmental remediation costs at these other
sites.
Environmental Summary
- ---------------------
In regard to the sites discussed above, management believes, on the basis
of presently available information, that resolution of these matters will not
materially affect the consolidated financial condition of the Company. The
effect of resolution of these matters on results of operations cannot be
predicted due to the uncertainty concerning both the amount and timing of
future expenditures and future results of operations.
Other Legal Matters
- -------------------
The Company and its subsidiaries are subject to various legal actions,
governmental investigations, and proceedings relating to a wide range of
matters in addition to those discussed above. In the opinion of management,
after reviewing the information which is currently available with respect to
such matters and consulting with the Company's counsel, any liability which may
ultimately be incurred with respect to these additional matters will not
materially affect the consolidated financial condition of the Company. The
effect of resolution of these matters on results of operations cannot be
predicted because any such effect depends on both future results of operations
and the amount and timing of the resolution of such matters.
-11-
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Financial Condition
- ---------------------------------------
Cash flow used in operating activities for the first quarter of fiscal
1995 was $69.1 million as compared to $6.6 million for the first quarter of
1994. The increases in cash flow used in operating activities and cash
provided from financing activities were primarily due to the required
repurchase of $60 million of receivables previously sold under the Company's
receivable-backed commercial paper program which expired on December 31, 1994
(see Note D). The Company has elected not to enter into a new receivable
financing program at this time.
GenCorp's total debt at February 28, 1995 was $466 million as compared to
$385 million at November 30, 1994. The increase reflects the repurchase of the
Company's receivables due to the expiration of the receivable-backed commercial
paper program.
Interest expense in the quarter increased to $8.7 million from $7.3
million in the comparable period last year due to higher interest rates during
the 1995 first quarter.
Material Changes in Results of Operations
- -----------------------------------------
Net sales in the first quarter of 1995 increased to $428.1 million from
$401.7 million in the first quarter of 1994. Sales growth in both the
automotive and polymer products business segments offset the decline in the
aerospace and defense business segment.
Segment operating profit increased to $22.5 million in the first quarter
of 1995 from $6.0 million in the first quarter of 1994. Each of the three
business segments contributed to the improved earnings.
Net income for the first quarter of fiscal year 1995 was $7.0 million
amounting to $0.22 per share compared to a net loss of $(3.3) million or $(.10)
per share in the first quarter of 1994 before the charge for the cumulative
effect of adopting new accounting standards. On a fully diluted basis,
earnings per share for the first quarter of 1995 were $0.21 per share.
The Company is anticipating a trend of improved performance in its
commercial businesses, despite raw material cost pressures and price reduction
demands by automotive customers. The priorities of the Company continue to be
profit margin growth, cash flow generation and debt reduction.
Net sales for the automotive business segment in the first quarter of 1995
increased to $157.9 million, 17 percent higher than the comparable quarter of
1994. The primary contributor to the sales growth was the consolidation of
HENNIGES, following the September 1994 acquisition of the remaining 51 percent
equity interest in the German original equipment automotive supplier.
Segment operating profit for the automotive businesses increased to $5.8
million in the first quarter of 1995, up 9 percent from the first quarter of
1994. Continuing manufacturing efficiency gains at both the Vibration Control
and Reinforced Plastics Divisions contributed significantly to the earnings
improvement. As anticipated, HENNIGES negatively impacted the segment's
earnings in the first quarter of 1995 as compared to the 1994 first quarter.
The operating performance of HENNIGES is expected to improve as the year
progresses as a result of significant ongoing restructuring efforts.
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<PAGE> 13
Material Changes in Results of Operations (continued)
- -----------------------------------------------------
During the 1995 first quarter, the Reinforced Plastics Division was
selected as the major supplier to the Volvo-GM Heavy Truck Corporation for
future Sheet Molded Compound applications. These applications range from large
components such as hood assemblies to smaller parts such as fender extensions,
side shields and engine covers.
Net sales for the polymer products business segment in the first quarter
of 1995 were $140.0 million, 12 percent higher than the comparable 1994
quarter. The sales improvement was led by the Specialty Polymers, Designed
Plastics and Plastic Films Divisions.
Segment operating profit for the polymer products businesses was $9.4
million, 7 percent higher than the first quarter of 1994. The Specialty
Polymers and Plastic Films Divisions were the lead contributors to the higher
quarterly earnings.
During the 1995 first quarter, GenCorp signed a letter of intent to sell
its Rigid Plastics plant in Newcomerstown, Ohio. The Newcomerstown plant is
part of the Plastic Films Division and manufactures a variety of rigid vinyl
film and plastic sheeting for fabrication into credit cards, aircraft
interiors, graphic arts, protective wall surfaces and numerous other
applications. Negotiations for a definitive agreement are currently underway
and no potential terms have been disclosed.
Continued improvement during the year for the automotive and polymer
products business segments will be influenced by an improving U. S. economy,
domestic vehicle builds and raw material costs pressures.
Net sales for Aerojet, the Company's aerospace and defense business
segment, in the first quarter of 1995 were $130.2 million, an 8 percent decline
from the 1994 first quarter. The decrease primarily reflects the 1994 second
quarter sale of the ordnance business.
Aerojet's segment operating profit for the first quarter of 1995 was $7.3
million compared to an operating loss of $(8.1) million in the first quarter of
1994. The 1994 first quarter loss was the result of a $16.6 million charge
principally related to programmatic cost growth.
Aerojet is performing well on its current contracts, its business base
appears to be stabilizing and it continues to make good progress in its efforts
to commercialize key defense technologies. Focus is on three areas which
appear to offer the greatest commercial potential -- sensors for the automotive
industry, natural gas sensors and mobile storage units, and specialty
chemicals.
Determining the future role of Aerojet remains a key part of the Company's
strategy. The Company is continuing to discuss the possibility of divestiture
of Aerojet with interested parties, while at the same time evaluating other
alternatives should efforts to divest not offer adequate shareholder value.
-13-
<PAGE> 14
Environmental Matters
- ---------------------
GenCorp's policy is to conduct its businesses with due regard for the
preservation and protection of the environment. The Company devotes a
significant amount of resources and management attention to environmental
matters and actively manages its ongoing processes to comply with extensive
environmental laws and regulations. The Company is involved in the remediation
of environmental conditions which resulted from previously accepted
manufacturing and disposal practices that date back to the 1950's and 1960's at
certain of its own plants. In addition, the Company has been designated a
potentially responsible party, with other companies, at sites undergoing
investigation and remediation.
The nature of environmental investigation and cleanup activities often
makes it difficult to determine the timing and amount of any estimated future
costs that may be required for remedial measures. However, the Company reviews
these matters and accrues for costs associated with the remediation of
environmental pollution when it becomes probable that a liability has been
incurred and its proportionate share of the amount can be reasonably estimated.
The Company recognizes amounts recoverable from third parties when the
collection of such amounts becomes probable. The Company's Consolidated
Balance Sheet at February 28, 1995 reflects accruals of $277 million for
remediation costs and amounts recoverable of $131 million from third parties
for such costs.
The effect of resolution of environmental matters on results of operations
cannot be predicted due to the uncertainty concerning both the amount and
timing of future expenditures and future results of operations. However,
management believes, on the basis of presently available information, that
resolution of these matters will not materially affect the consolidated
financial condition of the Company. The Company will continue its efforts to
mitigate past and future costs through pursuit of claims for insurance coverage
and continued investigation of new remediation alternatives and associated
technologies.
For additional discussion of environmental matters, refer to Note G -
Contingencies and Uncertainties beginning on page 8.
-14-
<PAGE> 15
Part II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
- --------------------------
Information concerning legal proceedings relating to environmental matters
at Aerojet's Sacramento, California facility and at other environmental sites
which appears in Note G beginning on page 8 of this report is incorporated
herein by reference.
The Company and its subsidiaries are subject to various legal actions,
governmental investigations, and proceedings relating to a wide range of
matters in addition to those discussed above and in Parts I and II of this
Report. In the opinion of management, after reviewing such matters and
consulting with the Company's counsel, any liability which may ultimately be
incurred with respect to these additional matters will not materially affect
the consolidated financial condition of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
At the Company's Annual Meeting of Shareholders held on March 29, 1995,
holders of GenCorp Common Stock elected Gen. Paul X. Kelley, Diane E. McGarry
and Dr. R. Byron Pipes as directors to serve three year terms expiring in 1998.
Shareholders also ratified the Board of Directors' appointment of Ernst & Young
LLP as the Company's independent auditors for 1995.
<TABLE>
Following is the final result of the Common votes cast:
A) Election of Directors:
<CAPTION>
Broker
For Withheld Nonvotes
--- -------- --------
<S> <C> <C> <C>
Gen. Paul X. Kelley 27,987,178 621,899 -0-
---------------- ------------- -----------
Diane E. McGarry 28,026,798 582,279 -0-
---------------- ------------- -----------
Dr. R. Byron Pipes 27,995,114 613,963 -0-
---------------- ------------- -----------
</TABLE>
B) Ratification of the Board of Directors' appointment of Ernst & Young LLP as
independent auditors:
Broker
For: 28,189,488 Against: 217,900 Abstain: 214,012 Nonvotes: -0-
---------- ------- ------- -----
Item 5. Other Information
- -------------------------
John B. Yasinsky, President and Chief Executive Officer of GenCorp, was
elected Chairman of the Board on March 29, 1995 at the regularly scheduled
Board of Directors meeting. Mr. Yasinsky succeeds A. William Reynolds who
stepped down from the office he has held since 1987 and is leaving the Board.
-15-
<PAGE> 16
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits
--------
<TABLE>
<CAPTION>
Table Exhibit
Item No. Exhibit Description Number
--------------------------------------------------------------------------
<S> <C> <C>
11 Statement re computation of per share earnings 11
27 Financial Data Schedule 27
(Filed for EDGAR only)
</TABLE>
b) Reports on Form 8-K
-------------------
There have been no reports on Form 8-K filed during the quarter
ended February 28, 1995.
-16-
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENCORP INC.
Date April 6, 1995 By /s/ F. J. Lucksinger
------------------------ --------------------------------------
F. J. Lucksinger, Vice President
and Controller
Date April 6, 1995 By /s/ C. R. Ennis
------------------------ --------------------------------------
C. R. Ennis, Senior Vice President,
Law & Environmental Affairs;
General Counsel
-17-
<PAGE> 1
EXHIBIT 11
GenCorp Inc.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Unaudited
Three Months Ended
-----------------------------
February 28,
1995 1994
---------- ----------
<S> <C> <C>
Earnings (Dollars in Millions)
- --------
Income (Loss) Before Accounting Changes $ 7.0 $ (3.3)
Cumulative Effect of Accounting Changes - (212.7)
------- -------
Net Income (Loss) for Primary
Earnings Per Share 7.0 (216.0)
Tax Affected Interest Expense
Applicable to 8% Convertible
Subordinated Debentures 1.4 1.4
------- -------
Net Income (Loss) for Fully Diluted
Earnings Per Share $ 8.4 $(214.6)
======= =======
Shares (In Thousands)
- ------
Weighted Average Number of
Common Shares Outstanding
for Primary Earnings Per Share 32,259 31,730
Assuming Conversion of 8%
Convertible Subordinated
Debentures 7,158 7,158
------- -------
Weighted Average Number of
Common Shares Outstanding
for Fully Diluted Earnings Per Share 39,417 38,888
======= =======
Earnings Per Share
- ------------------
Income (Loss) Before Accounting Changes $ .22 $ (.10)
Cumulative Effect of Accounting Changes - (6.71)
------- -------
Net Income (Loss) for Primary Earnings
Per Share $ .22 $ (6.81)
======= =======
Fully Diluted Earnings Per Share $ .21 $ (6.81)
======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-END> FEB-28-1995
<CASH> 26,000
<SECURITIES> 7,200
<RECEIVABLES> 230,100
<ALLOWANCES> 0
<INVENTORY> 164,500
<CURRENT-ASSETS> 469,100
<PP&E> 1,295,600
<DEPRECIATION> 744,300
<TOTAL-ASSETS> 1,490,600
<CURRENT-LIABILITIES> 343,800
<BONDS> 115,000
<COMMON> 3,200
0
0
<OTHER-SE> 400
<TOTAL-LIABILITY-AND-EQUITY> 1,490,600
<SALES> 428,100
<TOTAL-REVENUES> 428,100
<CGS> 366,700
<TOTAL-COSTS> 410,900
<OTHER-EXPENSES> (3,100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,700
<INCOME-PRETAX> 11,600
<INCOME-TAX> 4,600
<INCOME-CONTINUING> 7,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,000
<EPS-PRIMARY> .22
<EPS-DILUTED> .21
</TABLE>
