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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 29, 2000
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GENCORP INC.
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(Exact Name of Registrant as Specified in Charter)
Ohio 1-01520 34-0244000
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(State or Other Jurisdiction (Commission File IRS Employer
of Incorporation) Number) Identification No.)
Highway 50 and Aerojet Road, Rancho Cordova, California 95670
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(Address of Principal Executive Offices) (Zip Code)
P.O. Box 537012, Sacramento, California 95853-7012
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(Mailing Address) (Zip Code)
Registrant's telephone number, including area code (916) 355-4000
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 12, 2001, GenCorp Inc., an Ohio corporation ("GenCorp"),
filed a Current Report on Form 8-K describing the acquisition on December 29,
2000, of all of the outstanding capital stock of various companies comprising
the Draftex International Car Body Seals Division ("Draftex") of The Laird Group
Public Limited Company, a United Kingdom company ("Laird"). Certain financial
statements of Draftex and certain pro forma financial data of GenCorp were not
then available and therefore were not included in the January 12, 2001 Form 8-K
filing. GenCorp hereby amends its Form 8-K filed on January 12, 2001 to include
the financial statements and pro forma financial information set forth below in
Item 7.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements of Businesses Acquired
Report of Ernst & Young LLP, Independent Auditors
Combined Consolidated Statement of Operations for the year
ended December 29, 2000
Combined Consolidated Balance Sheet as of December 29, 2000
Combined Consolidated Statement of Shareholder's Equity for
the year ended December 29, 2000
Combined Consolidated Statement of Cash Flows for the year
ended December 29, 2000
Notes to Combined Consolidated Financial Statements
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareholder of Draftex:
We have audited the accompanying combined consolidated balance sheet of
the various companies comprising the Draftex International Car Body Seals
Division (Draftex) of the Laird Group Public Limited Company as of December 29,
2000, and the related combined consolidated statements of operations,
shareholder's equity and cash flows for year ended December 29, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the combined consolidated financial position
of Draftex at December 29, 2000, and the combined consolidated results of its
operations and its cash flows for the year ended December 29, 2000, in
conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Sacramento, California
February 28, 2001
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DRAFTEX
COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 29, 2000
(U.S. dollars, in millions)
NET SALES $ 437.2
COSTS AND EXPENSES:
Cost of products sold 420.9
Selling, general and administrative 9.2
Depreciation and amortization 13.8
Interest expense 2.2
Other (income) expense, net 3.5
Interest and management fees paid to Laird 8.6
Unusual items 11.4
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469.6
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LOSS BEFORE INCOME TAXES (32.4)
Income tax provision 0.9
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NET LOSS $ (33.3)
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See accompanying notes to combined consolidated financial statements.
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DRAFTEX
COMBINED CONSOLIDATED BALANCE SHEET
DECEMBER 29, 2000
(U.S. dollars, in millions)
CURRENT ASSETS
Cash and cash equivalents $ 20.5
Accounts receivable (net of allowance for doubtful accounts of $1.0) 60.7
Inventories, net 33.2
Receivable from Draftex SA, a related party 1.4
Prepaid expenses and other 8.8
Deferred income tax asset 13.2
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TOTAL CURRENT ASSETS 137.8
Other assets 0.4
Property, plant and equipment, at cost
Land 3.8
Buildings and improvements 33.7
Machinery and equipment 258.4
Tooling 2.3
Construction-in-progress 7.7
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305.9
Less: accumulated depreciation (120.8)
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Net property, plant and equipment 185.1
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TOTAL ASSETS $ 323.3
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CURRENT LIABILITIES
Accounts payable $ 53.8
Accrued expenses 34.2
Payable to Draftex SA, a related party 19.3
Income taxes payable 32.0
Notes payable and current portion of long-term debt 4.7
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TOTAL CURRENT LIABILITIES 144.0
Long-term debt 5.8
Payable to Laird Group plc, a related party 35.4
Payable to GenCorp Inc. and subsidiaries 13.9
Deferred income tax liability 16.3
Other long-term liabilities 18.7
Shareholder's Equity
Share capital 195.2
Accumulated deficit (105.6)
Accumulated other comprehensive loss (0.4)
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TOTAL SHAREHOLDER'S EQUITY 89.2
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TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 323.3
========
See accompanying notes to combined consolidated financial statements.
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DRAFTEX
COMBINED CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
YEAR ENDED DECEMBER 29, 2000
(U.S. dollars, in millions)
ACCUMULATED OTHER
TOTAL
SHARE ACCUMULATED COMPREHENSIVE SHAREHOLDER'S
CAPITAL DEFICIT LOSS EQUITY
----------------- ------------------- -------------------- --------------------
BALANCES AT DECEMBER 31, 1999 $ 60.1 $ (45.9) $ - $ 14.2
Currency translation adjustment (0.4) (0.4)
Contributions from Laird 135.1 135.1
Cash dividends to Laird (26.4) (26.4)
Net loss (33.3) (33.3)
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BALANCES AT DECEMBER 29, 2000 $195.2 $(105.6) $ (0.4) $ 89.2
================= =================== ==================== ====================
See accompanying notes to combined consolidated financial statements.
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DRAFTEX
COMBINED CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 29, 2000
(U.S. dollars, in millions)
OPERATING ACTIVITIES
Net loss $ (33.3)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation, amortization and (loss)gain 14.5
on disposal of fixed assets
Change in deferred income taxes (5.9)
Net changes in operating assets and liabilities:
Accounts receivable 15.5
Inventories, net (1.7)
Other current assets 1.4
Other non-current assets (0.2)
Current liabilities 7.4
Net payable to Draftex SA (10.6)
Other long-term liabilities (1.8)
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Net Cash Used In Operating Activities (14.7)
INVESTING ACTIVITIES
Capital expenditures (31.2)
Proceeds from asset dispositions 20.2
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Net Cash Used in Investing Activities (11.0)
FINANCING ACTIVITIES
Long-term debt incurred 1.8
Long-term debt paid (0.7)
Notes payable paid, net of borrowings (7.4)
Borrowings from GenCorp Inc. 13.9
Dividends paid (26.4)
Transactions with Laird 46.5
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Net Cash Provided by Financing Activities 27.7
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Net Increase in Cash and Cash Equivalents 2.0
Cash and Cash Equivalents at Beginning of Year 18.5
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Cash and Cash Equivalents at End of Year $ 20.5
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NON-CASH INVESTING AND FINANCING ACTIVITIES
Non-cash equity contribution from Laird $135.1
==============
See accompanying notes to combined consolidated financial statements.
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DRAFTEX
NOTES TO COMBINED CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 29, 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PURPOSE - As more fully described in Note C, GenCorp Inc. (GenCorp) purchased
the stock of 15 entities in six countries on December 29, 2000 from The Laird
Group Public Limited Company (Laird). These entities have been combined and
consolidated to form Draftex International Car Body Seals Division (Draftex, or
the Company) that on December 30, 2000 became a wholly owned subsidiary of
GenCorp Inc. These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States as of and for the
year ended December 29, 2000.
ORGANIZATION - The Company is a multinational automobile parts manufacturer with
11 manufacturing plants in six countries including Spain, France, Germany, Czech
Republic, China, and the United States.
COMBINATION AND CONSOLIDATION - The combined consolidated financial statements
of the Company include the accounts of the headquarters, technical center and 11
manufacturing plants. The operating results of one manufacturing plant, Beijing
Wanyuan - Draftex Sealing Products Company Limited (Draftex-China), reflect
Beijing Wanyuan Sealing Device Factory's 40 percent minority interest. Amounts
relating to this minority interest have been included in other long-term
liabilities and other (income) expense. All significant intercompany accounts
and transactions have been eliminated in combination and consolidation.
REVENUE RECOGNITION - Generally, sales are recorded when products are shipped or
customer acceptance has occurred and all other significant customer obligations
have been met. Liabilities are established for product returns, warranty costs
and other adjustments based upon historical experience and adjusted as
necessary. Shipping and handling fees billed to customers are included in sales,
while the related costs are included in cost of sales.
USE OF ESTIMATES - The preparation of the combined consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported in
the combined consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's cash equivalents and short
and long-term bank debt bear interest at market rates. Therefore, their carrying
values approximate their fair values.
CONCENTRATIONS OF CREDIT RISK - Financial instruments which subject the Company
to potential credit risk consist of its cash equivalents and accounts
receivable. The Company believes the financial risks associated with these
financial instruments are minimal. The Company extends reasonably short
collection terms but does not require collateral. The Company has not
experienced significant losses to date.
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Receivables are due primarily from large automobile manufacturers, and
at December 29, 2000, approximately 46% of outstanding receivables were due from
two customers. During the year ended December 29, 2000, sales to two customers
accounted for 25% and 19% of total sales, respectively.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost is
generally determined using the first-in, first-out method.
LONG-LIVED ASSETS - Property, plant and equipment are recorded at cost.
Refurbishment costs are capitalized in the property accounts, whereas ordinary
maintenance and repair costs are expensed as incurred. Depreciation is computed
by the straight-line method. Depreciable lives on buildings and improvements,
and machinery and equipment, range from 30 years to 50 years, and 3 years to 13
years, respectively.
Impairment of long-lived assets is recognized when events or changes in
circumstances indicate that the carrying amount of the asset, or related groups
of assets, may not be recoverable. Measurement of the amount of impairment may
be based on appraisal, market values of similar assets or estimated future cash
flows resulting from the use and ultimate disposition of the asset.
ENVIRONMENTAL COSTS - The Company expenses, on a current basis, recurring costs
associated with managing hazardous substances and pollution in ongoing
operations, if any. The Company accrues for costs associated with the
remediation of environmental pollution when it becomes probable that a liability
has been incurred.
INCOME TAXES - Deferred income taxes are provided for temporary differences
between the carrying amount of assets and liabilities for financial reporting
and income tax purposes.
EQUITY - Equity includes share capital, which represents amounts contributed by
Laird and reduced by dividends paid to Laird, results from operations, and other
comprehensive results from operations. The amounts are presented on a combined,
consolidated basis.
STATEMENT OF CASH FLOWS - For purposes of the statement of cash flows, all
highly liquid debt instruments purchased with an original maturity of three
months or less are considered to be cash equivalents.
FOREIGN CURRENCY TRANSLATION - The financial statements of the Company have been
prepared in U.S. dollars. The functional currency of the companies located
outside of the United States is the currency of the primary economic environment
in which they operate, which generally is the local currency. When translating
the financial statements of the companies located outside the U.S. into U.S.
dollars, income and expense items are translated at average monthly rates of
exchange, and assets and liabilities are translated at the rates of exchange at
the balance sheet date. Translation adjustments resulting from translating the
functional currency into U.S. dollars are reported as a component of accumulated
other comprehensive loss in shareholder's equity. The Company periodically
enters into short-term foreign currency forward contracts to hedge the risk of
currency fluctuations on its cash flow. No significant foreign currency forward
contracts were outstanding at year end. Currency transaction gains or losses
that were recognized in current operations were not significant to the Company's
results of operations for the year ended December 29, 2000.
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RESEARCH AND DEVELOPMENT - Company-sponsored research and development expense
includes the costs of technical activities that are useful in developing new
products, services, processes or techniques, as well as those expenses for
technical activities that may significantly improve existing products or
processes and are expensed as incurred. Research and development expenses were
not material in the current year.
PREPRODUCTION COSTS RELATED TO LONG-TERM SUPPLY ARRANGEMENTS - The cost of
tooling that the Company owns is capitalized as part of plant, property and
equipment and depreciated over four years. Tooling costs are also capitalized if
the customer owns the tooling, but the Company has a noncancelable right to use
the tooling over the contract period. Costs incurred in connection with the
design and development of tooling that will be billed to customers upon
completion is carried as a component of other assets. Design and development
costs related to customer products are deferred if there is an agreement to
collect such costs from the customer. If no such agreement exists, the costs are
expensed as incurred.
NOTE B - NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities which, as
amended, is required to be adopted in years beginning after June 15, 2000.
Because of the Company's historically minimal use of derivatives, management
does not anticipate that the adoption of the new Statement will have a
significant effect on earnings or the financial position of the Company.
However, the Company is evaluating future transactions that may be subject to
the provisions of the new Statement.
NOTE C -BUSINESS COMBINATIONS
On December 29, 2000 GenCorp acquired the Company for an estimated cash
purchase price of approximately $209 million. The final purchase price will be
adjusted to reflect certain adjustments provided for in the purchase agreement
which are currently being negotiated with the seller. The acquisition has been
accounted for under the purchase method of accounting. Draftex is now part of
GenCorp's GDX Automotive business segment. Upon acquisition, the Company became
a guarantor of a new $500 million credit facility of GenCorp.
NOTE D - UNUSUAL ITEMS
For the year ended December 29, 2000, the Company incurred unusual
expenses of $11.4 million relating to its efforts to control expenses as a means
of offsetting the impact of customer pricing pressures. As a result, the cost
base of operations in Germany was reviewed and certain actions were taken,
including the transfer of capacity to other lower cost Draftex plants.
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NOTE E - INCOME TAXES
The provision for income taxes and a reconciliation of the provision
for income taxes compared with the amounts at the U.S. statutory rate are as
follows:
YEAR ENDED DECEMBER 29, 2000
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TOTAL U.S. FOREIGN
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INCOME TAX PROVISION (BENEFIT) (U.S.dollars, in millions)
Current $ 6.8 $ - $ 6.8
Deferred (5.9) 0.7 (6.6)
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Income Tax Provision (Benefit) $ 0.9 $0.7 $ 0.2
================ =============== ===============
YEAR ENDED
DECEMBER 29, 2000
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RECONCILIATION OF THE INCOME TAX PROVISION
U.S. statutory federal income tax rate 35.0%
Effect of (in points):
State taxes, net of federal income tax benefit 3.5
Change in valuation allowance (47.0)
Rate differential between U.S. statutory and rate in foreign jurisdictions 2.2
Others, net 3.5
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Effective Income Tax Rate (2.8)%
====================
Deferred income tax assets and liabilities reflect the estimated tax
effect of accumulated temporary differences between assets and liabilities for
financial reporting purposes and those amounts as measured by tax laws and
regulations. The components of deferred income tax assets and liabilities are as
follows:
DECEMBER 29, 2000
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Assets Liabilities
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DEFERRED INCOME TAXES (U.S.dollars, in millions)
Inventory valuation $ 0.2 $ -
Receivable valuation 0.1 -
Depreciation/fixed assets - (9.3)
NOLs 20.0 -
Other 8.3 (7.0)
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Total Deferred Income Taxes 28.6 $ (16.3)
Valuation allowance (15.4) =============
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Total $ 13.2
===============
The valuation allowance arose in the current year primarily as a result
of the current year net operating losses (NOLs). The majority of the NOL and tax
credit carryforwards have an indefinite carryforward period with the remaining
portion expiring in years through 2020. Cash paid for income taxes was
approximately $9 million in 2000.
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NOTE F - INVENTORIES
DECEMBER
29, 2000
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(U.S.dollars,
in millions)
Raw materials and supplies $15.2
Work-in-process 7.1
Finished products 10.9
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Inventories $33.2
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NOTE G - PENSION PLANS
The Company has two defined benefit pension plans that cover
substantially all salaried and hourly employees at its French and German
facilities - similar programs at its other facilities are not material. Normal
retirement age is generally 65 or 63, but certain plan provisions allow for
earlier retirement. The Company's funding policy is consistent with the funding
requirements of the applicable laws in France and Germany. The pension plans
provide for pension benefits, the amounts of which are calculated under formulas
principally based on average earnings and length of service for salaried
employees and under negotiated non-wage based formulas for hourly employees. The
majority of the pension plans' assets are invested in short-term investments,
listed stocks and bonds.
YEAR ENDED
DECEMBER 29, 2000
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(U.S.dollars, in
CHANGE IN BENEFIT OBLIGATION millions)
Benefit obligation at beginning of year $ 6.1
Service cost 0.3
Interest cost 0.3
Actuarial loss 0.1
Benefits paid (0.1)
Translation effect (0.3)
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Benefit Obligation at End of Year $ 6.4
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CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 0.3
Actual return on assets -
Benefits paid (0.1)
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Fair Value of Plan Assets at End of Year $ 0.2
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FUNDED STATUS $ 6.2
Unrecognized actuarial (gain)/loss (0.1)
Minimum funding liability 0.1
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Net Amount Recognized $ 6.2
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DECEMBER 29, 2000
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(U.S. dollars, in
ACCRUED EXPENSES millions)
AMOUNTS RECOGNIZED IN THE COMBINED CONSOLIDATED BALANCE SHEET
Other long-term liabilities $ (6.2)
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Net Amount Recognized at End of Year $ (6.2)
====================
NET PERIODIC PENSION COST
Service cost $ 0.3
Interest cost 0.3
Expected return on plan assets -
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Net Periodic Pension Cost $ 0.6
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WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 6%
Assumed long-term rate of return on plan assets 6%
Annual rate of salary increase 3%
NOTE H - ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES
DECEMBER 29, 2000
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(U.S.dollars, in
ACCRUED EXPENSES millions)
Payable for goods and services $ 21.4
Accrued compensation and employee benefits 5.5
Other 7.3
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Accrued Expenses $ 34.2
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DECEMBER 29, 2000
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(U.S.dollars, in
OTHER LONG-TERM LIABILITIES millions)
Minority interest in combined subsidiary $ 4.6
Pension liability 6.2
Other 7.9
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Other Long-Term Liabilities $ 18.7
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NOTE I - NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt consisted of the following:
DECEMBER 29, 2000
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(U.S.dollars, in
millions)
Capital lease agreements $ 2.3
Notes payable and other 8.2
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10.5
Less notes payable and other amounts due within one year (4.7)
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Total Long-Term Debt $ 5.8
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Maturities of notes payable and long-term debt for the five years
succeeding December 29, 2000 are $4.7 million in 2001, $0.7 million in 2002,
$2.6 million in 2003, $0.8 million in 2004, $0.8 million in 2005, and $0.9
million thereafter. Cash paid for interest during the year ended December 29,
2000 was approximately $2.6 million. Notes payable and long-term debt had an
average interest rate of 4% per annum as of December 29, 2000.
Upon acquisition, the Company became a guarantor of GenCorp's
five-year, $500 million senior credit facility partially used to finance the
acquisition of Draftex (see Note C).
NOTE J - LEASE COMMITMENTS
The Company leases certain facilities, machinery and equipment under
long-term, noncancelable operating leases. Rent expense under all operating
leases totaled $4.5 million during the year ended December 29, 2000. The Company
leases certain facilities under a capital lease arrangement through 2007.
Property, plant and equipment includes $2.5 million (net of accumulated
amortization of $0.1) of equipment acquired under this capital lease.
Future minimum lease payments under capital and operating leases as of
December 29, 2000 are as follows:
Capital Operating
Leases Leases
---------------------------------
(U.S.dollars, in millions)
2001 $ 0.4 $ 3.6
2002 0.4 2.1
2003 0.4 1.7
2004 0.4 1.6
2005 0.4 1.6
Thereafter 1.0 0.7
----------------- ---------------
Total minimum lease payments 3.0 $ 11.3
===============
Less: amounts representing interest 0.7
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Present value of net minimum lease payments, (including current portion of
$0.3 million) $ 2.3
=================
NOTE K - RELATED PARTY TRANSACTIONS
The Company was subject to allocations of interest and management fees
from Laird. The allocation was based on each subsidiary's intercompany balances
with Laird. Total charges allocated from Laird to the Company were $8.6 million
for the year ended December 29, 2000.
The Company has an agreement with Draftex SA (a wholly owned subsidiary
of Laird not purchased by GenCorp) whereby, Draftex SA, on the behalf of the
Company, collects receivables for certain Draftex companies for a commission of
approximately 0.45% of annual sales. In addition, these companies can borrow
short-term funds from Draftex SA at an interest rate of approximately 4.0% per
annum. The related amounts at December 29, 2000 are shown as a current
receivable and a current payable on the accompanying balance sheet.
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During 2000, Laird contributed $135.1 million to the Company through a
transfer from amounts payable to Laird. The Company's net payable to Laird of
$35.4 million at December 29, 2000 was settled upon the sale to GenCorp as an
increase of the purchase price paid by GenCorp.
The Company borrowed approximately $10.1 million from a subsidiary of
GenCorp and $3.8 million directly from GenCorp in December 2000 to meet certain
working capital needs prior to the GenCorp acquisition. Substantially all of
these amounts were repaid to GenCorp subsequent to December 29, 2000.
NOTE L - CONTINGENCIES
COLLECTIVE BARGAINING UNIT AGREEMENTS
As of December 29, 2000, approximately 50 percent of the Company's
employees are covered by a variety of collective bargaining unit agreements,
which are generally subject to review and renewal each year.
OTHER
The Company is subject to legal proceedings and claims that arise in
the normal course of its business. 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
combined consolidated financial position, results of operations or cash flows of
the Company.
NOTE M - GEOGRAPHIC SEGMENT INFORMATION
The Company operates in one industry segment, primarily to produce
extruded rubber profiles engineered to meet the specifications of its customers
in the passenger car market. Following is a summary of operations within
geographic areas. Sales are attributed to regions based on the location of the
sale origination.
Year Ended
December 29, 2000
--------------------
(U.S.dollars, in
SALES TO UNAFFILIATED CUSTOMERS millions)
Europe $ 330.6
United States 96.4
Other 10.2
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Total $ 437.2
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December 29, 2000
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(U.S.dollars, in
TOTAL LONG-LIVED ASSETS millions)
Europe $ 120.3
United States 53.4
Other 11.8
--------------------
Total $ 185.5
====================
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b) Pro Forma Financial Information
Introduction to Unaudited Pro Forma Combined Condensed
Financial Statements
Unaudited Pro Forma Combined Condensed Statement of Income
for the Year Ended November 30, 2000
Unaudited Pro Forma Combined Condensed Statement of Income
for the Three Months Ended February 28, 2001
Notes to Unaudited Pro Forma Combined Condensed Statements
of Income
GENCORP INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed statements of income for the
year ended November 30, 2000 and the three months ended February 28, 2001 give
effect to the business combination involving GenCorp and the Draftex
International Car Body Seals Division ("Draftex") of The Laird Group Public
Limited Company as if such business combination had occurred on December 1, 1999
and was accounted for using the purchase method of accounting. An unaudited pro
forma combined consolidated balance sheet of GenCorp and Draftex is not
presented, as a consolidated balance sheet including Draftex has been presented
in the Company's Form 10-Q for the quarter ended February 28, 2001, as filed
with the Securities and Exchange Commission. The unaudited pro forma combined
condensed statement of income for the year ended November 30, 2000 include the
historical results of GenCorp for the year ended November 30, 2000 and the
historical results of Draftex for the year ended December 29, 2000. The
unaudited pro forma combined condensed statement of income for the three months
ended February 28, 2001 include the historical results of GenCorp for the three
months ended February 28, 2001, which include Draftex from the acquisition date,
December 29, 2000, and the results of Draftex for the one month ended March 31,
2001.
GenCorp has preliminarily analyzed the savings that it expects to be
realized by consolidating certain operational and general and administrative
functions within the GDX Automotive business segment. GenCorp has not and cannot
quantify all of these savings due to the short period of time since the Draftex
acquisition occurred. It is anticipated that these savings will be partially
offset by the increased borrowing costs and increases in costs related to
GenCorp's corporate management. However, these costs, like the savings they
offset, cannot be accurately quantified. The pro forma results do not give
effect to anticipated cost savings or incremental costs that may occur as a
result of restructuring, integration, and consolidation of the acquisition.
The unaudited pro forma combined condensed financial statements include
certain adjustments to the historical financial statements, including adjusting
amortization expense to reflect purchase price allocations of the entities
acquired by GenCorp, adjusting interest expense to reflect acquisition-related
debt and the related income tax effects of these adjustments.
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The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. The unaudited pro forma combined condensed financial
statements do not purport to represent what GenCorp's results of operations
would actually have been if such transactions had in fact occurred on those
dates or to project GenCorp's results of operations for any future period.
Because GenCorp and Draftex were not under common control or management for all
periods, unaudited pro forma combined condensed results may not be comparable
to, or indicative of, future performance. The unaudited pro forma combined
condensed financial statements should be read in conjunction with the Draftex
combined consolidated financial statements and notes thereto included elsewhere
herein, and GenCorp's historical consolidated financial statements included in
its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with
the Securities and Exchange Commission.
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GENCORP INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED NOVEMBER 30, 2000
(U.S. DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
GenCorp Pro Forma
Inc. Draftex Adjustments Pro Forma
-------------- ------------- --------------------- ------------
Net Sales $ 1,047 $ 437 $ - $1,484
Costs and Expenses:
Cost of products sold 855 421 - 1,276
Selling, general and administrative 40 9 - 49
Depreciation and amortization 50 14 2 (c) 66
Interest expense 18 2 18 (a) 38
Interest and fees paid to Laird - 9 (9) (b) -
Other (income) expense, net (12) 3 - (9)
Foreign currency transaction loss 8 - (8) (d) -
Unusual items, net (4) 11 - 7
---------------------------------------------------------------
955 469 3 1,427
---------------------------------------------------------------
Income (loss) before income taxes and
cumulative effect of a change in
accounting principle 92 (32) (3) 57
Income tax (provision) benefit (37) (1) 11 (e)(f) (27)
---------------------------------------------------------------
Income (loss) before cumulative effect of a
change in accounting principle 55 (33) 8 30
Cumulative effect of a change in accounting
principle, net of taxes 74 - - 74
---------------------------------------------------------------
Net Income (Loss) $ 129 $ (33) $ 8 $ 104
============== ============= =============== ===== ============
Basic and diluted earnings per share of
common stock:
Before cumulative effect of a change in
accounting principle $ 1.31 $ 0.71
Cumulative effect of a change in accounting
principle 1.76 1.76
-------------- ------------
Total $ 3.07 $ 2.47
============== ============
See accompanying notes.
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GENCORP INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED FEBRUARY 28, 2001
(U.S. DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
GenCorp Pro Forma
Inc. Draftex Adjustments Pro Forma
-------------- ------------- --------------------- ------------
Net Sales $ 353 $ 36 $ - $ 389
Costs and Expenses:
Cost of products sold 309 34 -- 343
Selling, general and administrative 11 -- -- 11
Depreciation and amortization 18 1 -- 19
Interest expense 9 -- 2(a) 11
Other (income) expense, net (1) -- -- (1)
Foreign currency transaction gain (11) -- 11(d) --
Unusual items, net 6 -- -- 6
---------- -------- ------------ -----------
341 35 13 389
---------- -------- ------------ -----------
Income before income taxes 12 1 (13) --
Income tax (provision) benefit 5 -- 4(e)(f) 9
---------- -------- ------------ -----------
Net Income $ 17 $ 1 $ (9) $ 9
========== ======== ============ ===========
Basic and diluted earnings per share of common
stock $0.39 $0.21
=========== =========
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GENCORP INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
ASSUMPTIONS - The unaudited pro forma combined condensed statements of income
for the year ended November 30, 2000 and for the three months ended February 28,
2001 are presented as if the acquisition of Draftex had occurred on December 1,
1999.
BUSINESS COMBINATIONS - The acquisition of Draftex is being accounted for under
the purchase method of accounting for business combinations. Certain items
affecting the purchase price and its allocation are preliminary. The preliminary
purchase price consists of the following (U.S. dollars, in millions):
Cash paid to seller $ 209
Liabilities assumed 175
Acquisition related costs 7
-----------------
Total $ 391
=================
The Company has preliminarily allocated the purchase price as follows (U.S.
dollars in millions):
Tangible assets $ 302
Intangible assets 89
-----------------
Total $ 391
=================
The amount preliminarily allocated to intangible assets is expected to be
reduced as a result of certain adjustments currently under negotiation with
Laird, as provided for in the purchase agreement.
PRO FORMA ADJUSTMENTS - The following adjustments have been made to the
unaudited pro forma combined condensed statements of income:
(a) To record interest expense on the additional debt obligations incurred by
the Company in connection with the acquisition of Draftex.
(b) To reverse interest and management fees allocated to the Company by Laird.
(c) To record amortization of estimated intangible assets using the
straight-line method over a useful life of 20 years.
(d) To reverse the effect of forward contracts entered into in connection with
the Draftex acquisition. The settlement of these foreign currency contracts
resulted in GenCorp recognizing a loss of $8 million during the year ended
November 30, 2000 and a gain of $11 million during the three months ended
February 28, 2001.
(e) To record an income tax benefit for the loss of Draftex at GenCorp's
estimated effective tax rate of 40 percent.
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(f) To record the tax effect for the year ended November 30, 2000 and the three
months ended February 28, 2001 associated with the pro forma adjustments at
GenCorp's effective income tax rate of 40%.
ACQUISITION COSTS - GenCorp incurred costs of approximately $7 million related
directly to the Draftex acquisition which have been factored into the purchase
price.
OTHER - No adjustments have been made in these combined condensed pro forma
statements of income to conform the accounting policies of Draftex with those of
GenCorp. The nature and extent of such adjustments, if any, are not expected to
be significant.
----------
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SIGNATURE
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.
By: /s/ Terry L. Hall
-------------------------------------
Name: Terry L. Hall
Title: Senior Vice President and Chief
Financial Officer
Dated: May 16, 2001