-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IadGxv6qWE81gbjxMqsjweyspZGUiBNot0kgk0ZBG6wOXXOQO5aeQbpxKE15y3Ba SEaCxgJUiTrG25lKAAl1mA== 0000950152-96-001453.txt : 19960412 0000950152-96-001453.hdr.sgml : 19960412 ACCESSION NUMBER: 0000950152-96-001453 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960411 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENCORP INC CENTRAL INDEX KEY: 0000040888 STANDARD INDUSTRIAL CLASSIFICATION: GUIDED MISSILES & SPACE VEHICLES & PARTS [3760] IRS NUMBER: 340244000 STATE OF INCORPORATION: OH FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-01520 FILM NUMBER: 96546296 BUSINESS ADDRESS: STREET 1: 175 GHENT RD CITY: FAIRLAWN STATE: OH ZIP: 44333 BUSINESS PHONE: 2168694200 MAIL ADDRESS: STREET 1: 175 GHENT RD CITY: FAIRLAWN STATE: OH ZIP: 44333 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL TIRE & RUBBER CO DATE OF NAME CHANGE: 19840330 10-Q 1 GENCORP INC. 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 29, 1996 Commission File Number 1-1520 ---------------------- ------ GenCorp Inc. -------------------- (Exact name of registrant as specified in its charter) Ohio 34-0244000 - ----------------------- ----------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 175 Ghent Road Fairlawn, Ohio 44333-3300 ---------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (330) 869-4200 -------------- 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 --- --- At March 31, 1996, there were 33,412,661 outstanding shares of GenCorp Inc.'s Common Stock, par value $.10. 2 GenCorp Inc.
Table of Contents Page No. - --------------------------------------------------------------------------------------------- Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Operations - Three Months Ended February 29, 1996 and February 28, 1995 -3- Condensed Consolidated Balance Sheets - February 29, 1996 and November 30, 1995 -4- Condensed Consolidated Statements of Cash Flows - Three Months Ended February 29, 1996 and February 28, 1995 -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 -11- Part II. Other Information Item 1. Legal Proceedings -14- Item 4. Submission of Matters to a Vote of Security Holders -14- Item 5. Other Information -15- Item 6. Exhibits and Reports on Form 8-K -15- Signatures -16-
-2- 3 PART I. FINANCIAL INFORMATION ----------------------------- GenCorp Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in millions, except per share data)
Unaudited Three Months Ended -------------------------- February 29, February 28, 1996 1995 ------------ ------------ NET SALES $ 368.3 $ 428.1 ---------- ---------- COSTS AND EXPENSES Cost of products sold 312.3 366.7 Selling, general and administrative 45.1 44.2 Interest expense 8.0 8.7 Other (income) and expense, net (1.6) (3.1) Unusual items (Note C) 24.8 -- ---------- ---------- 388.6 416.5 ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES (20.3) 11.6 Income tax (benefit) provision (8.6) 4.6 ---------- ---------- NET INCOME (LOSS) $ (11.7) $ 7.0 ========== ========== EARNINGS (LOSS) PER SHARE OF COMMON STOCK (NOTE B) Primary $ (.35) $ .22 ========== ========== Fully diluted $ (.35) $ .21 ========== ========== Average number of shares of common stock outstanding (in thousands) Primary 33,670 32,259 Fully diluted 40,828 39,417 Cash dividends paid per share of common stock $ .15 $ .15
The accompanying notes to the unaudited interim condensed consolidated financial statements are an integral part of these statements. -3- 4 GenCorp Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in millions)
Unaudited Audited February 29, November 30, 1996 1995 ------------ ------------ CURRENT ASSETS: Cash and equivalents $ 15.2 $ 17.0 Accounts receivable 252.3 241.7 Inventories (Note D) 157.6 161.3 Prepaid expenses and other 49.7 45.0 -------- -------- TOTAL CURRENT ASSETS 474.8 465.0 -------- -------- Recoverable from U.S. government and third parties for environmental remediation 122.4 120.8 Deferred income taxes 144.9 147.8 Prepaid pension 96.2 109.4 Investments and other assets 86.5 71.2 Property, plant and equipment: At cost 1,095.3 1,302.2 Accumulated depreciation (670.7) (758.9) -------- -------- Net property, plant and equipment 424.6 543.3 -------- -------- TOTAL ASSETS $1,349.4 $1,457.5 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Notes payable $ 24.3 $ 20.7 Accounts payable - trade 64.8 98.6 Income taxes (2.1) 4.8 Other current liabilities 221.2 251.4 -------- -------- TOTAL CURRENT LIABILITIES 308.2 375.5 -------- -------- Long-term debt (Note E) 377.0 382.9 Postretirement benefits other than pensions 355.7 371.7 Environmental reserves 230.6 231.6 Other liabilities 60.3 60.3 Contingencies (Note F) SHAREHOLDERS' EQUITY Preference stock - (none outstanding) -- -- Common stock - $.10 par value; 33.4 million shares outstanding 3.3 3.3 Other capital 22.1 21.9 Retained earnings (deficit) (14.1) 2.5 Currency translation adjustment 6.3 7.8 -------- -------- TOTAL SHAREHOLDERS' EQUITY 17.6 35.5 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,349.4 $1,457.5 ======== ========
The accompanying notes to the unaudited interim condensed consolidated financial statements are an integral part of these statements. -4- 5 GenCorp Inc. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in millions)
Unaudited Three Months Ended -------------------------- February 29, February 28, 1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (11.7) $ 7.0 Provision for unusual items 24.8 -- Depreciation and amortization and loss on disposal of fixed assets 24.3 17.9 Increase in working capital (94.3) (89.1) Increase in deferred income taxes 2.9 -- Other - net (8.8) (4.9) ------- ------- NET CASH USED IN OPERATING ACTIVITIES (62.8) (69.1) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (10.4) (11.0) Proceeds from asset dispositions 80.3 (1.0) Investments and other - net (.4) -- ------- ------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 69.5 (12.0) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net short-term debt incurred 3.6 14.1 Long-term debt incurred 110.0 110.1 Long-term debt paid (115.9) (43.0) Dividends (5.0) (4.9) Other equity transactions (1.2) 8.4 ------- ------- NET CASH PROVIDED FROM OR (USED IN) FINANCING ACTIVITIES (8.5) 84.7 ------- ------- NET INCREASE OR (DECREASE) IN CASH AND EQUIVALENTS (1.8) 3.6 Cash and equivalents at beginning of year 17.0 22.4 ------- ------- Cash and equivalents at end of period $ 15.2 $ 26.0 ======= =======
Cash paid during the period for interest was $10.8 million and $11.4 million for the three months ended February 29, 1996 and February 28, 1995, respectively. Cash paid during the period for income taxes was $2.9 million and $8.3 million for the three months ended February 29, 1996 and February 28, 1995, respectively. The accompanying notes to the unaudited interim condensed consolidated financial statements are an integral part of these statements. -5- 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, 1995. All normal recurring accruals and adjustments considered necessary for a fair presentation of the unaudited results for the three months ended February 29, 1996 and February 28, 1995, have been reflected. The results of operations for the three months ended February 29, 1996, are not necessarily indicative, if annualized, of those to be expected for the full fiscal year. Certain reclassifications have been made to conform prior year's data to the current presentation. Note B - 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 and shares to be issued under other stock based compensation programs. 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 E for further information regarding the debentures.) Note C - Unusual Items - ---------------------- On March 1, 1996, GenCorp Inc. completed the sale of substantially all of the assets and certain liabilities of its Reinforced Plastics Division to Cambridge Industries, Inc. of Madison Heights, Michigan for an aggregate consideration of approximately $42 million, of which approximately $18 million was paid in cash at the closing, approximately $14 million of which was paid by delivery of a Subordinated Promissory Note of Cambridge Industries Holdings, Inc. and approximately $10 million of which was paid through the retention of receivables. The sale was effective as of February 29, 1996. On February 15, 1996, GenCorp Inc. completed the sale of substantially all of the assets and certain liabilities of its Vibration Control Division to BTR Antivibration Systems, Inc., a subsidiary of BTR plc. for an aggregate consideration of approximately $80 million paid in cash at the closing. The Company recognized a loss of $10 million from the sale of the two divisions and used the proceeds to reduce outstanding debt. Also during the first quarter of 1996, the Company took a pretax charge of $14.8 million for expenses related to the Voluntary Early Retirement Incentive Program for eligible employees at the Company's Fairlawn headquarters and Corporate Technology Center. -6- 7 Note D - 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:
Unaudited Audited February 29, November 30, 1996 1995 ------------ ------------ Raw materials and supplies $ 42.1 $ 46.7 Work-in-process 9.4 15.5 Finished products 63.8 64.9 ------- ------- Approximate replacement cost of LIFO inventories 115.3 127.1 Reserves, primarily LIFO (41.7) (42.8) Long-term contracts at average cost 186.5 178.5 Progress payments (102.5) (101.5) ------- ------- $ 157.6 $ 161.3 ======= =======
Note E - Long-term Debt and Credit Lines - ---------------------------------------- The Company has an unsecured revolving credit facility (Facility) which expires in April 1997. The Facility, which totaled $445 million on November 30, 1995, was reduced to $384 million as of February 29, 1996 from proceeds related to the Vibration Control divestiture. During the second quarter of 1996, the Facility was subsequently reduced to $356 million from proceeds related to the divestiture of the Reinforced Plastics Division. As of February 29, 1996, unused revolving lines of credit totaled $134 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 6.4 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 $271 million, excluding the impact of the accounting standards adopted in 1994 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 $288 million at February 29, 1996 and was in compliance with the amended agreement. 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 $118 million at February 29, 1996. At February 29, 1996, the Company had unsecured, uncommitted lines of credit with several banks for short-term borrowings aggregating $46 million, of which $19 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 $27 million at February 29, 1996. -7- 8 Note F - Contingencies - ---------------------- Environmental Matters - --------------------- Sacramento, California In June 1989, the United States District Court approved a Partial Consent Decree (Decree) requiring Aerojet to conduct a Remedial Investigation/ Feasibility Study (RI/FS) of Aerojet's Sacramento, California site and prepare an RI/FS report on specific environmental conditions present at the site and alternatives available to remedy such conditions. Aerojet also is required to pay for certain government oversight costs associated with compliance with the Decree. In September 1993, Aerojet reached a settlement with the U.S. government whereby Aerojet recovered approximately $18 million for costs incurred at the site 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. Aerojet has substantially completed its efforts under the Decree to determine the nature and extent of contamination at the facility and to identify the technologies that will likely be used to remediate the site. Based on available facts, existing technology and current environmental laws and regulations, Aerojet recorded a net $68 million charge in 1994 to remediate the site. 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 29, 1996, Aerojet had a reserve of $203 million for costs to complete the RI/FS and remediate the site and has recognized $119 million for probable future recoveries under the 1993 settlement agreement with the U.S. government. Legal proceedings to obtain reimbursements of environmental costs from insurers are continuing. Lawrence, Massachusetts The Company has studied 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 $29 million for decontamination and long-term operating and maintenance costs of this site. The reserve represents the Company's best estimate for the remaining remediation cost. Future remediation cost could range as high as $55 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 4 to 8 years. Muskegon, Michigan The United States District Court has ruled that Aerojet and its two inactive Cordova Chemical subsidiaries (Cordova) are liable with a former owner/operator of a former chemical plant at the Cordova site in Muskegon, Michigan for remediation of the site. Subsequently, the United States District Court's decision has been appealed to the United States Court of Appeals. Separately, the State of Michigan Court of Claims previously ruled that the State of Michigan is obligated to indemnify Aerojet and Cordova for all remediation and investigation costs at the site. On July 14, 1995, the Michigan Court of Appeals affirmed the decision of the Court of Claims, and on September 20, 1995, the Michigan Court of Appeals denied the State of Michigan's motion for a rehearing. The State has petitioned the Michigan State Supreme Court for review. -8- 9 Note F - Contingencies (continued) - ---------------------------------- The Company believes that most of the $50 million to $100 million in anticipated remediation costs will be paid by the State of Michigan or the former owner/operator and that its $14 million reserve will be adequate to cover the Company's costs associated with this matter. Included in investments and other assets is $9 million to be recovered from insurance companies. San Gabriel Valley Basin, California Aerojet, through its Azusa facility, is considered to be a potentially responsible party (PRP) in the portion of the San Gabriel Valley Superfund Site known as the Baldwin Park Operable Unit (BPOU). Regulatory action involves possible regional groundwater remediation, site specific investigation and cleanup. Aerojet's investigation concluded that the principal groundwater contamination is upgradient of Aerojet's property and that only 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 PRPs identified by the EPA. Aerojet contests the EPA's position regarding the source of contamination and the number of responsible PRPs. The EPA has issued a Record of Decision requiring groundwater remediation for the BPOU, estimated to cost $47 million in non-recurring costs and $4 million to $5 million in annual operating expense. Aerojet is participating in an effort to develop an alternative "consensus" plan in which certain water supply entities would integrate the 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 PRPs' costs. Aerojet's 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 following: the number of other viable PRPs; the potential for federal funding or 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 28 other Superfund and non-superfund remediation sites. In many instances, the Company's liability and proportionate share of costs have not been determined largely due to uncertainties as to the nature and extent of site conditions and the Company's involvement. While government agencies frequently claim PRPs 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. 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 $18 million as of February 29, 1996 which it believes are sufficient to cover its best estimate of its share of the environmental remediation costs at these other sites. Also, the Company is seeking recovery of its costs from its insurers. -9- 10 Note F - Contingencies (continued) - ---------------------------------- 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 liquidity, capital resources or 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 - ------------------- In August 1991, Olin Corporation (Olin) advised GenCorp that Olin believed GenCorp to be jointly and severally liable for certain Superfund remediation costs, estimated by Olin to be $70 million, associated with a former Olin manufacturing facility and waste disposal sites in Ashtabula County, Ohio. In 1993, GenCorp sought declaratory judgment in the United States District Court for the Northern District of Ohio that the Company is not responsible for environmental remediation costs associated with the former Olin facility and Superfund sites. Olin counterclaimed seeking a judgment that GenCorp is jointly and severally liable for a share of remediation costs. In late 1995, the Court hearing on the first phase of the case relative to the issue of joint and several liability was completed, but the Court has not yet rendered a decision. If the Court finds GenCorp is liable, subsequent trial phases will address allocation and damages. The Company is vigorously litigating this matter and believes that it has meritorious defenses to Olin's claims. While there can be no certainty regarding the outcome of any litigation, in the opinion of management, after reviewing the information currently available with respect to this matter and consulting with the Company's counsel, any liability which may ultimately be incurred will not materially affect the consolidated financial condition of the Company. The Company and its subsidiaries are subject to various other 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. -10- 11 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 1996 was $62.8 million as compared to $69.1 million for the first quarter of 1995. At February 29, 1996, GenCorp's total debt was $401 million, a decrease of $2 million compared to $403 million at November 30, 1995. Proceeds from the divestiture of the Vibration Control and Reinforced Plastics divisions totaled $122 million, of which $80 million was received during the first quarter of 1996 and used to reduce bank borrowings. Divestiture proceeds received during the quarter were offset by increased spending on working capital. Interest expense in the quarter decreased to $8.0 million from $8.7 million in the comparable period last year due to lower interest rates. Material Changes in Results of Operations - ----------------------------------------- Net sales in the first quarter of 1996 declined 14 percent to $368.3 million from $428.1 million in the first quarter of 1995. Sales from continuing businesses totaled $321.0 million for the first quarter of 1996, compared to $355.9 million during the first quarter of 1995. The sales decline was primarily related to lower volumes at Aerojet, the Company's aerospace and defense segment. Segment operating profit declined to $7.4 million in the first quarter of 1996, from $22.5 million in the first quarter of 1995. Improved operating profit at the polymer products segment and at Aerojet was offset by declines in automotive operating profit and the loss on the businesses sold. Operating profit from continuing businesses improved to $22.8 million for the first quarter of 1996, compared to $21.5 million for the first quarter of 1995, after adjusting for the sale of the Company's Reinforced Plastics, Vibration Control and rigid plastics businesses. Operating margins from continuing businesses increased to 7.1 percent in the first quarter of 1996, compared to 6.0 percent for the first quarter of 1995. Earnings per share from continuing operations totaled $.18 for the first quarter of 1996 compared to $.20 in the first quarter of 1995. On a consolidated basis, the Company reported a net loss of $(11.7) million for the first quarter of 1996 compared to net income of $7.0 million in the first quarter of 1995. During the first quarter of 1996, the divestitures of the two automotive divisions, Vibration Control and Reinforced Plastics, resulted in a pretax charge of $10.0 million. Also during the first quarter of 1996, the Company took a pretax charge of $14.8 million for expenses related to the Voluntary Early Retirement Incentive Program for eligible employees at the Company's Fairlawn headquarters and Corporate Technology Center. Divestitures of both the Vibration Control and Reinforced Plastics divisions represented important steps in the Company's strategy to focus resources on fewer businesses with higher potential for growth and value creation. The two highest priorities in 1996 will be to continue the Company's aggressive program for performance improvement across the Company and to move forward with strategic initiatives for those businesses that it intends to grow. Net sales for Aerojet in the first quarter of 1996 were $98.6 million, a decrease of 24 percent compared to the first quarter of 1995. The decrease reflects lower volume on the Defense Support Program (DSP) and lower sales of Titan propulsion systems. -11- 12 Material Changes in Results of Operations (continued) - ----------------------------------------------------- Aerojet's segment operating profit for the first quarter of 1996 was $7.5 million compared to $7.3 million in the first quarter of 1995. Operating margins increased to 7.6 percent during the first quarter of 1996 compared to 5.6 percent for the first quarter of 1995. Better contract performance, lower health care expenses and productivity enhancement efforts led to the improved profit and margins. Aerojet's sales volume is expected to be higher throughout the remainder of the year. In February, Aerojet received an award from the Air Force for DSP Sensor 23. Aerojet received approval to begin production on the Joint Tactical Air to Ground System (JTAGS), a tactical ballistic missile ground station system. Also during the quarter, the Near Earth Asteroid Rendezvous (NEAR) spacecraft was launched. NEAR, built around an Aerojet primary structure and propulsion system, will be the first spacecraft to orbit a small planetary body, the 433 Eros asteroid. Net sales for the automotive business segment in the first quarter of 1996 decreased 13 percent to $143.4 million, compared to $164.8 million in the first quarter of 1995, primarily due to lower volume on several key platforms and the timing of the divestitures. Automotive sales from continuing operations totaled $96.1 million in the first quarter of 1996 compared to $98.6 million in the first quarter of 1995, a 2.5 percent decline primarily due to lower sales in Europe. The automotive segment had operating losses of $(11.6) million for the first quarter of 1996, versus operating income of $6.2 million for the first quarter of 1995, due to losses of $(5.4) million related to the operations of businesses sold during the quarter and $(10.0) million related to the divestitures. The Company's continuing automotive business earned $3.8 million for the first quarter of 1996 compared to $5.5 million in the first quarter of 1995. Profit was impacted by development costs for the Automotive Occupant Sensor (AOS) business. During the quarter, the Vehicle Sealing Division received its first award from Honda for production of glassruns on the 1998 Accord. The Company is continuing to pursue new business opportunities with this important global customer. The division was also awarded new business from Volkswagen for the side window encapsulation on the EA-420 platform. The Company is also continuing to evaluate business opportunities and structures for AOS. Net sales for the polymer products business segment in the first quarter of 1996 decreased 5 percent to $126.3 million, compared to $133.1 million in the first quarter of 1995. Sales in 1996, after adjusting for last year's revenues from the divested rigid plastics business, were flat. Segment operating profit for the polymer products businesses increased to $11.5 million, compared to $8.7 million in the first quarter of 1995, after adjusting for the divestiture of the rigid plastics business. Continued productivity improvements and more stable raw material prices resulted in the improved profits for the quarter. During the 1996 first quarter, the Decorative Products group introduced several new products including Rendura ST, a new vinyl laminate for the consumer electronics market and GenFlex RM, a new PVC roofing membrane providing longer life and ease of installation to roofing customers. Essex brands also introduced Esscape, a unique breathable wallcovering designed for improved performance in high humidity/mildew prone climates. Penn Racquet Sports has signed a new contract with Pagoda International as the exclusive worldwide licensee for development, marketing and sales of Penn branded footwear. Also Penn has extended its strategic alliance with Head for an additional five years. -12- 13 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 1950s and 1960s at certain of its 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's Condensed Consolidated Balance Sheet at February 29, 1996 reflects accruals of $264 million and amounts recoverable of $127 million from third parties for remediation 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 liquidity, capital resources or 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 F - Contingencies. -13- 14 Part II. OTHER INFORMATION -------------------------- Item 1. Legal Proceedings - ------------------------- Information concerning legal proceedings, including proceedings relating to environmental matters, which appears in Note F 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 Part I 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 position 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 27, 1996, holders of GenCorp Common Stock elected Charles A. Corry, William K. Hall, Dr. Robert K. Jaedicke and Robert D. Kunisch as directors to serve a three year term expiring in 1999. Shareholders also ratified the Board of Directors' appointment of Ernst & Young LLP as the Company's independent auditors for 1996. Following is the final result of the Common votes cast: A) Election of Directors:
Broker For Withheld Nonvotes --- -------- -------- Charles A. Corry 30,012,331 548,771 -0- -------------- ----------------- ------------- William K. Hall 30,023,238 537,864 -0- -------------- ----------------- ------------- Dr. Robert K. Jaedicke 29,990,496 570,606 -0- -------------- ----------------- ------------- Robert D. Kunisch 30,016,231 544,871 -0- -------------- ----------------- -------------
B) Ratification of the Board of Directors' appointment of Ernst & Young LLP as independent auditors: Broker For: 30,194,176 Against: 204,362 Abstain: 180,378 Nonvotes: -0- ----------- -------- --------- -------
-14- 15 Item 5. Other Information - ------------------------- On April 2, 1996 the Company announced that James K. Lambert had been named Senior Vice President of Operations and Total Quality and elected an officer of the Company. On February 7, 1996 the Company announced an organizational realignment which included a Voluntary Early Retirement Incentive Program for eligible employees at its Fairlawn headquarters and its Corporate Technology Center and the elimination of the Office of the Chief Executive. Concurrently with the reorganization: (i) Roger I. Ramseier was elected Vice President; President of Aerojet-General Corporation; (ii) Samuel W. Harmon was elected Senior Vice President, Human Resources; (iii) Rosemary Younts was elected Senior Vice President, Communications; and (iv) the following GenCorp officers announced their retirement under the Voluntary Early Retirement Incentive Program: William E. Bachman, Executive Vice President; Marvin L. Isles, Executive Vice President; Charles R. Ennis, Senior Vice President, Law and Environmental Affairs; General Counsel, and Dr. Russell A. Livigni, Vice President, Corporate Technology. Item 6. Exhibits and Reports on Form 8-K - ---------------------------------------- a) Exhibits --------
Table Exhibit Item No. Exhibit Description Number ------------------------------------------------------------------------------------------------ 10 Asset Purchase Agreement dated March 1, 1996 among GenCorp Inc., Cambridge Industries Holdings, Inc. and Cambridge Industries, Inc. was filed as Exhibit A to the Company's Current Report on Form 8-K dated March 1, 1996 (File No. 1-1520) and is incorporated herein by reference. 10 Asset Purchase Agreement dated February 14, 1996 between BTR Antivibration Systems, Inc. and GenCorp Inc. was filed as Exhibit B to the Company's Current Report on Form 8-K dated March 1, 1996 (File No. 1-1520) and is incorporated herein by reference. 11 Statement re computation of per share earnings. 11 27 Financial Data Schedule. 27 (Filed for EDGAR only)
b) Reports on Form 8-K ------------------- On March 15, 1996 the Company filed a Current Report on Form 8-K, Date of Report (date of earliest event reported) March 1, 1996 reporting the sale of substantially all of the assets of its Reinforced Plastics Division to Cambridge Industries, Inc. and the previous sale of substantially all of the assets of its Vibration Control Division to BTR Antivibration Systems, Inc., a subsidiary of BTR plc. -15- 16 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 11, 1996 By /s/ D. M. Steuert --------------------------- ---------------------- D. M. Steuert, Senior Vice President and Chief Financial Officer Date April 11, 1996 By /s/ E. R. Dye --------------------------- ------------------ E. R. Dye, Secretary -16- EX-11 2 EXHIBIT 11 1 EXHIBIT 11 GenCorp Inc. COMPUTATION OF EARNINGS PER COMMON SHARE
Unaudited Three Months Ended ----------------------------- February 29, February 28, 1996 1995 ------------ ------------ Earnings (Dollars in Millions) - -------- Net Income (Loss) for Primary Earnings Per Share $ (11.7) $ 7.0 Tax Affected Interest Expense Applicable to 8% Convertible Subordinated Debentures 1.4 1.4 ---------- ---------- Net Income (Loss) for Fully Diluted Earnings Per Share $ (10.3) $ 8.4 ========== ========== Shares (In Thousands) - ------ Weighted Average Number of Common Shares Outstanding for Primary Earnings Per Share (see Note B) 33,670 32,259 Assuming Conversion of 8% Convertible Subordinated Debentures 7,158 7,158 ---------- ---------- Weighted Average Number of Common Shares Outstanding for Fully Diluted Earnings Per Share 40,828 39,417 ========== ========== Earnings Per Share - ------------------ Primary: $ (.35) $ .22 ========== ========== Fully Diluted: $ (.35) $ .21 ========== ==========
EX-27 3 EXHIBIT 27
5 1,000 3-MOS NOV-30-1995 FEB-29-1996 15,200 7,500 252,300 0 157,600 474,800 1,095,300 670,700 1,349,400 308,200 115,000 3,300 0 0 14,300 1,349,400 368,300 368,300 312,300 382,200 (1,600) 0 8,000 (20,300) (8,600) 0 0 0 0 (11,700) (.35) (.35)
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