1
DRAFT OF: FEBRUARY 13, 1995
(LOGO)THE INFORMATION CONTAINED
IN THIS DOCUMENT IS
------------------------------------------------------------
CONFIDENTIAL
------------------------------------------------------------
WE REALIZE THAT SERVICE TO OUR CLIENTS IS MOST IMPORTANT. IF AT ANYTIME DURING
YOUR PROJECT, YOU HAVE COMMENTS OR CONCERNS ABOUT OUR SERVICE, PLEASE CONTACT
YOUR SALESPERSON OR DAN METZ, VICE PRESIDENT OF OPERATIONS, AT (216) 621-8384
AND WE WILL DO WHAT IS NECESSARY TO ACT UPON YOUR CONCERNS TO PROVIDE THE
SERVICE YOU EXPECT.
THANK YOU.
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CLEVELAND
(216) 621-8384
Fax (216) 621-1132
PITTSBURGH
(412) 281-3838
Fax (412) 281-4546
CINCINNATI
(513) 621-8384
Fax (513) 621-2901
COLUMBUS
(614) 221-8384
Fax (614) 221-8427
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1994 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 (216) 869-4200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------------------------- ---------------------
Common Stock, par value 10 cents per share New York and Chicago
8% Convertible Subordinated Debentures New York and Chicago
due August 1, 2002
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of January 31, 1995, was $401,142,268.
As of January 31, 1995, there were 32,312,737 outstanding shares of the
Company's Common Stock, 10 cents par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1995 Proxy Statement of GenCorp Inc. are incorporated into
Part III of this Report.
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3
GENCORP INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1994
TABLE OF CONTENTS
ITEM
NUMBER PAGE
------ ----
PART I
1 Business................................................................... 1
2 Properties................................................................. 4
3 Legal Proceedings.......................................................... 6
4 Submission of Matters to a Vote of Security Holders........................ 6
Executive Officers of the Registrant....................................... 7
PART II
5 Market for Registrant's Common Equity and Related Stockholder Matters...... 8
6 Selected Financial Data.................................................... 9
7 Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 9
8 Consolidated Financial Statements and Supplementary Data................... 13
9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 13
PART III
10 Directors and Executive Officers of the Registrant......................... 38
11 Executive Compensation..................................................... 38
12 Security Ownership of Certain Beneficial Owners and Management............. 38
13 Certain Relationships and Related Transactions............................. 38
PART IV
14 Exhibits, Financial Statement Schedules and Reports on Form 8-K............ 38
Signatures................................................................. 39
Index to Financial Statements and Financial Statement Schedules............ GC-1
Exhibit Index.............................................................. i
4
PART I
ITEM 1. BUSINESS
GenCorp Inc. (hereinafter the "Company" or "GenCorp") was incorporated in
Ohio in 1915 as The General Tire & Rubber Company. The Company's operations are
grouped into three business segments: its automotive business, its polymer
products business and its aerospace and defense business, Aerojet-General
Corporation ("Aerojet"). The divisions of these segments engage in such diverse
businesses as molded reinforced plastics, extruded and molded rubber products,
vinyl-coated fabrics, vinyl woodgrain laminates, plastic films, plastic
extrusions, decorative wallcoverings, single-ply roofing systems, tennis balls
and racquetballs, styrene and butadiene based specialty latices, liquid and
solid propulsion systems, and defense electronics. The Company currently employs
approximately 12,970 persons. (Financial information relating to the Company's
business segments appears on pages 32 through 34 of this report.)
During 1994, the Company streamlined operations and removed a layer of
management by eliminating its Akron-based automotive and polymer products
segment headquarters. The operating support activities performed by the two
segments were absorbed by the Company's divisions or corporate headquarters. The
Company also eliminated levels of management and certain administrative
functions by reorganizing its research laboratories, engineering and technology
staffs and facilities.
The Company and its businesses utilize the Corporate Technology Center in
Akron, Ohio to develop new products and improve existing products and processes.
The Center has a key role in the Company's technical activity and supports
design and development efforts across the Company. The corporate technology
staff is organized into seven Centers of Excellence with focused responsibility
for analytical services, mechanical dynamic testing, advanced materials,
engineering design and analysis, adhesives and coatings, structure composites
engineering, and advanced manufacturing process engineering. A number of design
and development centers focus on specific areas of various businesses and each
plant has dedicated engineering services.
The Company licenses technology and owns patents, which expire at various
times, relating to many of its products. The loss or expiration of any one or
more of them would not materially affect the business of the Company or any of
its segments. The important trademarks of the Company are registered in its
major marketing areas.
Although GenCorp's business is not seasonal in the traditional sense, the
aerospace and defense business' revenues and earnings have tended to concentrate
to some degree in the fourth quarter of each year reflecting delivery schedules
associated with that segment's mix of contracts, while the automotive business'
revenues and earnings have tended to concentrate to some degree in the second
and fourth quarters of the Company's fiscal year, generally as a consequence of
seasonality in the automotive industry's build schedules and in response to
customers' preparation for annual model changes.
Compliance with laws and regulations relating to the discharge of materials
into the environment or the protection of the environment continues to affect
many of the Company's operating facilities. A discussion of capital and
noncapital environmental expenditures incurred in 1994 and forecasted for 1995
and 1996 for environmental compliance is included under the heading
Environmental Matters on pages 12 and 13 of this report. Environmental matters
discussed on pages 12 and 13 and in Note Q beginning on page 29 of this report
are incorporated herein by reference.
AUTOMOTIVE
Revenues of the Company's automotive business are principally derived from
the development, manufacture and sale of highly engineered polymer products
developed for the original equipment automotive market. Applications include
extruded and molded rubber products for vehicle body and window sealing, molded
reinforced plastic panels for automobile and light and heavy truck bodies and
molded rubber products for vibration control.
The Vehicle Sealing Division is a leading producer and supplier of extruded
and molded rubber products engineered to prevent air and moisture from
penetrating windows, doors and other openings. This unit supplies
5
products to all of the major domestic automotive companies for use in a wide
variety of vehicles including the General Motors full-size pickup truck, the
Suburban, Tahoe and Yukon, the small pickup truck, Blazer and Jimmy, the Ford
Ranger small pickup, the Ford Explorer and the General Motors Achieva, GrandAm
and Skylark. During 1994 GenCorp acquired the remaining 75.5% equity interest in
HENNIGES Elastomer- und Kunststofftechnik GmbH & Co. KG, and its related
companies. (The Company had acquired an initial 24.5% interest in this German
molded and extruded rubber products supplier in the third quarter of 1993.)
The Reinforced Plastics Division is one of the world's largest custom
molders of reinforced plastic components for automobile and light and heavy
truck bodies. Its state-of-the-art molding facility in Shelbyville, Indiana
incorporates innovations in automated manufacturing and is designed for
continuous flow manufacturing for the production of reinforced plastic body
panels. The plant manufactures body panels for the General Motors
Camaro/Firebird and Corvette and for the Chevrolet Lumina, Pontiac TransSport
and Oldsmobile Silhouette front wheel drive all-purpose vehicles. General Motors
has announced that production of the front wheel drive all-purpose vehicles at
its Tarrytown plant will cease in 1996. The Shelbyville facility began producing
body panels for the redesigned 1993 model General Motors Camaro/Firebird in the
fall of 1992. Additional products manufactured by the Reinforced Plastics unit
include roofs for the Chrysler Wrangler Jeep, hoods for the Lincoln Mark VIII,
flareside fenders for the Ford F-series and Ranger pickup trucks and hoods for
Volvo heavy trucks.
The Vibration Control Division produces and supplies molded rubber products
which counteract the impact and disturbance of vibrations emanating from the
power train and from road conditions. These products include bushings, engine
and transmission mounts and suspension assemblies. This unit supplies products
to all of the major domestic automotive companies as well as several foreign
vehicle manufacturers. The Company's automotive business is the sole supplier of
many products, including certain vibration control components for the General
Motors Lumina, Grand Prix, Regal and Cutlass Supreme, the Chrysler Concord,
Eagle Vision, Dodge Intrepid and Neon, the Toyota Camry, Corolla and Avalon, the
Mazda MX6 and 626 and the Ford Probe.
The automotive businesses' products are sold directly to original equipment
manufacturers or their fabricators. Automotive customers include the major
domestic automobile manufacturers, the loss of one or more of which would have a
material adverse effect on this segment. Sales to General Motors in 1994 were
approximately sixteen percent of the Company's net sales.
The emergence of foreign vehicle manufacturing facilities in North America
has significantly changed the original equipment market in recent years. While
competition based upon price, quality, service, technology and reputation is
intensifying with respect to all products marketed by this segment, a
strengthening of the automotive market, the successful launch of new product
programs and continued improvement in operating efficiencies contributed to
improvements in sales and earnings in 1994. Raw materials required by this
segment are generally in good supply.
POLYMER PRODUCTS
Revenues of the Company's polymer products business are generated through
the manufacture and sale of specialty polymers and engineered plastics and
elastomers for a variety of industrial, commercial and consumer markets. The
polymer products business has a broad base of commercial and industrial
customers, the loss of any one of which would not have a material adverse effect
on the segment's business.
The Designed Plastics Division is a diverse manufacturer and supplier in
three product areas. The division is a major producer of vinyl coated fabrics
for the home furnishings and marine industries and for a variety of other
industrial and commercial industries. The division is also a leading producer of
gaskets, seals, trim and magnetic rolls for the appliance, automotive and office
equipment industries. In addition, the division designs and sells material
systems for a wide range of commercial roofing applications.
The Plastic Films Division was formed with the acquisition of Reneer Films
Corporation in 1993. The division is a leading manufacturer of vinyl woodgrain
laminates for furniture and consumer electronics and double-polished clear vinyl
films for the office products and stationery markets. The division also produces
2
6
decorative and engineered thermoplastic films for manufacturers of furniture,
ceiling tiles, credit cards, aircraft interiors, and industrial equipment.
The Specialty Polymers Division produces and markets a comprehensive line
of specialty latices used as coatings for paper, as binding agents for carpets
and nonwoven fabrics and as tire cord adhesives. It also produces adhesives and
in-mold coatings for automotive reinforced plastic applications. During the
fourth quarter of 1994, the Company successfully completed a 50% capacity
expansion of its Green Bay, Wisconsin latex plant. This facility, originally
brought on-line in early 1993, began running near its initial maximum capacity
within a year of its opening. The expanded facility continues to augment the
division's business commitment to the coated paper and paperboard industry.
The Wallcovering Division designs, manufactures and markets a full line of
decorative products for commercial and residential wallcovering applications.
Penn Racquet Sports is one of the world's largest manufacturers of tennis
balls and racquetballs. Tennis and racquetball accessories are purchased for
resale under the "Penn" trademark. Due to soft demand for tennis products, a
second U.S. tennis ball manufacturing facility will not be reopened.
Methods of distribution utilized by the divisions of the polymer products
business segment vary widely depending on the nature of the products and the
industry or market served, with products being sold either directly or through
distributors. PENN products are marketed worldwide. The Company has an agreement
with Head Racquet Sports to distribute Penn(R) tennis balls in France, Italy,
Germany, Austria and Switzerland.
Competition based upon price, quality, service, technology and reputation
is intense with respect to virtually all products marketed by this business
segment and, to a substantial degree, upon design and style in the wallcovering
and most other coated fabrics and plastic film products. The Company believes
that it continues to be a major competitor in the markets served by this
segment, and that the raw materials required are generally available. To date,
the Company has been successful in substantially offsetting the effects of
higher raw material costs through productivity improvements, operating cost
reductions and product pricing. However, high raw material costs continue to
adversely affect each of this segment's businesses, a trend expected to continue
into 1995.
AEROSPACE AND DEFENSE
Aerojet develops, manufactures and markets solid and liquid rocket
propulsion systems, smart munitions systems, sensor surveillance systems, earth
sensing systems and related defense products and services.
Aerojet has concentrated for the past several years on obtaining contracts
that provide a balance between technology development and long-term production,
as well as between defense and space programs. More recently, efforts have been
expanded to include the pursuit of nondefense domestic and international market
opportunities that take advantage of the segment's technologies, engineering and
manufacturing expertise and capabilities. In this regard, Aerojet is involved in
a series of joint defense-conversion technology initiatives including efforts
with Pacific Gas and Electric to apply composite materials technology to liquid
natural gas storage applications and a pilot project funded under the Clinton
Administration's Technology Reinvestment Project program to assess and prototype
ultralight insulating material technologies.
The aerospace and defense business' programs have included the Titan,
Minuteman, Standard Missile, Advanced Solid Rocket Motor ("ASRM") and Delta
propulsion programs; satellite surveillance sensor systems; the Sense and
Destroy Armor (SADARM) program; earth sensing systems; TOW 2B armaments;
Combined Effects Munition systems; ground data processing systems; and medium
caliber ammunition programs. Aerojet is also active in a variety of new
development and advanced programs related to defense and space applications
including satellite, launch, and armament systems. Aerojet believes that its
experience in these areas will enable it to continue to participate in the
future funding of these or similar programs. Most of the sales of this business
are made directly or indirectly to agencies of the United States government
pursuant to contracts or subcontracts which are subject to termination for
convenience (with compensation) by the government in accordance with Federal
Acquisition Regulations.
3
7
The Small ICBM program was terminated and new production under the
Peacekeeper program was canceled during 1992. These two programs accounted for
sales of approximately $49 million in 1993. Close-out sales activity in 1994 was
$14 million.
Aerojet was a major subcontractor to Lockheed for the ASRM program. The
program was officially terminated by NASA on October 27, 1993. During November
1994 Aerojet completed negotiation of a comprehensive termination settlement
with NASA. Termination efforts accounted for $68 million in sales in 1994.
Aerojet completed negotiations with Olin Corporation with respect to the
sale of substantially all of its medium caliber ammunition and air dispensed
munition systems business in the second quarter of 1994. These ordnance products
accounted for sales of approximately $63 million in 1994.
Aerojet's direct and indirect sales to the United States Government and its
agencies (principally the Department of Defense) were approximately $578 million
in 1994, $846 million in 1993 and $982 million in 1992. Competition based upon
price, technology, quality and service is intense for all products and services
in this business segment and has increased with the decline in the national
defense budget. There are several other major companies with the technology and
capacity to produce most of the products manufactured and sold by Aerojet, and
in some areas, the government has its own manufacturing capabilities. With the
termination of the ASRM program and the sale of the ordnance business, Aerojet
announced a major streamlining and restructuring effort in the fourth quarter of
1993 that was completed in mid 1994 and has also taken additional measures to
reduce costs significantly in 1995. Aerojet believes it remains competitive in
its markets.
Backlog orders in the aerospace and defense businesses are commonplace and
significant. Aerojet's contract backlog was approximately $1.1 billion at
November 30, 1994, compared to $1.4 billion at November 30, 1993. Funded
backlog, which includes only the amount of those contracts for which money has
been authorized by Congress, totaled approximately $0.6 billion at November 30,
1994, compared with approximately $0.7 billion at November 30, 1993. Raw
materials required by this segment are generally in adequate supply.
ITEM 2. PROPERTIES
Operating, manufacturing, research, design and/or marketing facilities of
the Company and its businesses are set forth below.
Corporate Headquarters: Corporate Technology Center Westward Look Resort
GenCorp Inc. 2990 Gilchrist Road Tucson, AZ
175 Ghent Road Akron, OH 44305-4489
Fairlawn, Ohio 44333-3300 216/794-6300
216/869-4200
AEROSPACE AND DEFENSE
Aerojet Azusa, CA
P.O. Box 13222 Colorado Springs, CO
Sacramento, CA 95813-6000 Huntsville, AL
916/355-1000 Jonesboro, TN
Los Angeles, CA
Socorro, NM
Washington, DC
4
8
AUTOMOTIVE
Farmington Hills, MI (marketing and sales)
Vehicle Sealing Division Batesville, AR
7221 Engle Road, Suite 240 Berger, MO
Fort Wayne, IN 46804-2233 Marion, IN
219/434-9700 Wabash, IN
Welland, Ontario, Canada
HENNIGES, Rehburg, Germany and Ballina, Ireland
* * * * * * * * * *
Vibration Control Division Logansport, IN
6920 Pointe Inverness Way Peru, IN
Suite 140 Wabash, IN
Fort Wayne, IN 46804
219/434-9800
* * * * * * * * * *
Reinforced Plastics Division Ionia, MI
11711 North Meridian Street Rushville, IN
Suite 505 Shelbyville, IN
Carmel, IN 46032
317/580-2400
POLYMER PRODUCTS
Designed Plastics Division Columbus, MS
1722 Indian Woods Circle Evansville, IN
Suite A Fort Smith, AR
Maumee, OH 43537-4060 Hackensack, NJ
419/891-1500 Paris, France
* * * * * * * * * *
Plastic Films Division Jeannette, PA
Route 895 West, Hickory Drive Newcomerstown, OH
Auburn, PA 17922-9611
717/366-1051
* * * * * * * * * *
Specialty Polymers Division Dalton, GA
165 S. Cleveland Avenue Green Bay, WI
Mogadore, OH 44260-1593
216/628-6550
* * * * * * * * * *
Wallcovering Division Columbus, MS
Three University Plaza, Suite 200 New York, NY
Hackensack, NJ 07601-6219 Paris, France
201/489-0100 Pine Brook, NJ
Salem, NH
5
9
* * * * * * * * * *
Penn Racquet Sports Mullingar, Republic of Ireland
306 South 45th Avenue Nurnberg, Germany
Phoenix, AZ 85043
602/269-1492
In addition, the Company and its businesses own and lease properties
(primarily machinery, warehouse and office facilities) in various sections of
the country for use in the ordinary course of its business. Data appearing in
Note P on page 29 of this report with respect to leased properties is
incorporated herein by reference.
During 1994, the Company generally made effective use of its productive
capacity. As discussed under the heading Polymer Products in this report, a 50%
expansion of the new latex manufacturing facility in Green Bay, Wisconsin was
completed in 1994, while a second U.S. tennis ball manufacturing facility will
not be reopened. The Company believes that the quality and productive capacity
of its properties are sufficient to maintain the Company's competitive position.
ITEM 3. LEGAL PROCEEDINGS
Effective January 1, 1991, the Company modified its medical benefit plan
for salaried employees who had retired. The modifications included increases to
retiree-paid deductibles and co-payments, a Medicare "carve-out" provision and
an increase in the maximum lifetime benefit. In January 1992, a group of
salaried retirees filed a class action challenging the Company's right to
implement the benefit plan changes, Dague, et al. v. GenCorp Inc., No. 5:91 CV
2617 (U.S.D.C., N.D. Ohio). On August 27, 1993, the District Court granted
summary judgment for GenCorp, holding that the Company had consistently reserved
its right within relevant plan documents to modify retiree medical benefits. The
ruling rendered moot the retirees' motion for class certification. On August 24,
1993, the retirees appealed the District Court's decision to the U.S. Court of
Appeals, where the matter is currently pending (No. 93-4070, U.S.C.A., 6th
Cir.).
Information concerning legal proceedings relating to environmental matters
which appears in Note Q beginning on page 29 of this report is incorporated
herein by reference.
The U.S. Government frequently conducts investigations into allegedly
illegal or unethical activity in the performance of defense contracts.
Investigations of this nature are common to the aerospace and defense industries
in which Aerojet participates; possible consequences may include civil and
criminal fines and penalties, in some cases, double or treble damages, and
suspension or debarment from future government contracting. Aerojet currently is
subject to several U.S. Government investigations regarding business practices
and cost classification from which legal or administrative proceedings could
result. While it is not possible to predict with certainty the outcome of any
such investigation, the Company does not believe, based upon the information
available at this time, that final resolution of any such matter will have a
material adverse effect on its consolidated financial condition or result in its
suspension or termination as a government contractor.
The Company and its subsidiaries are presently engaged in other litigation,
and additional litigation has been threatened. However, based upon information
presently available, none of such other litigation is believed to constitute a
"material pending legal proceeding" within the meaning of Item 103 of Regulation
S-K (17 CFR Reg. 229.103) and the Instructions thereto.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended November 30,
1994.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is given as of February 1, 1995, and except as
otherwise indicated, each individual has held the same office during the
preceding five-year period.
A. W. Reynolds, age 61: Chairman of the Board of Directors (since January
1987); formerly Chief Executive Officer (from August 1985 to July 1, 1994) and
President and Chief Operating Officer of the Company (from September 1984 until
August 1985).
J. B. Yasinsky, age 55: President and Chief Executive Officer (since July
1, 1994); formerly President and Chief Operating Officer (since November 1993);
previously Group President of Westinghouse Electric Corporation (since February
1993), President, Westinghouse Power Systems (from 1990 to 1993), Executive Vice
President, Westinghouse, World Resources and Technology (from 1989 to 1990), and
Executive Vice President, Westinghouse International (from 1987 to 1989).
W. E. Bachman, age 55: Executive Vice President of the Company (since July
15, 1994); formerly Vice President of the Company and President of the Company's
polymer products business (since May 1993), Vice President -- Operations for the
Company's polymer products business (since April 1993), President of the
Company's Fabricated Plastics Unit (from 1988 to April 1993) and President of
the Coated Fabrics Division (from 1987 to 1988).
M. L. Isles, age 49: Executive Vice President of the Company (since July
15, 1994); formerly Vice President of the Company and President of the Company's
automotive business (since January 1988), previously President of the Company's
former Engineered Elastomers Division.
R. I. Ramseier, age 58: Executive Vice President of the Company (since July
15, 1994) and President of Aerojet (since January 1989); also Vice President of
the Company (from January 1989 to July 1994), formerly President of Aerojet
TechSystems.
T. W. Arndt, age 43: Vice President of the Company (since August 1994),
also President of the Company's Vibration Control Division (since 1990);
formerly Vice President and Controller of the Company's automotive business.
D. M. Cound, age 63: Vice President -- Quality Management (since June
1992); formerly Vice President of Quality for the Company's automotive business
(from 1988 to 1992) and Vice President of Quality for the Company's former
Diversitech General Subsidiary (from 1985 to 1987).
E. R. Dye, age 53: Secretary (since September 1988) and Assistant General
Counsel (since January 1987); formerly Assistant Secretary (from November 1986
until September 1988), Associate General Counsel (from September 1985 until
January 1987) and Counsel prior to September 1985.
C. R. Ennis, age 62: Senior Vice President, Law and Environmental Affairs;
General Counsel (since August 1994); formerly Vice President and General Counsel
(since January 1986) (also Secretary from November 1986 to September 1988);
previously Vice President and General Counsel, International Operations, for
subsidiaries of Enserch Corporation.
G. J. Goberville, age 48: Vice President -- Human Resources (since January
1993); previously Vice President -- Human Resources of the Company's automotive
business (since February 1988), Director of Compensation and Benefits of Aerojet
(from 1985 until February 1988).
M. E. Hicks, age 36: Treasurer (since September 1994); formerly Director,
Treasury for the Company (since 1989) and Manager, Cash and Banking (from 1988
to 1989).
R. A. Livigni, age 60: Vice President of Corporate Technology (since
November 1994); formerly Vice President and Director of Research (since January
1988), and Associate Director -- Research.
F. J. Lucksinger, age 49: Vice President and Controller of the Company
(since August 1993); formerly Vice President, Controller of Aerojet (Vice
President since 1989 and Controller since 1987).
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11
P. D. Mittiga, age 47: Vice President of the Company (since August 1994),
also President of the Company's Plastic Films Division (since 1993); formerly
President and Chief Executive Officer of Reneer Films Corporation (since 1989)
and Marketing Manager of the Goodyear Tire & Rubber Company's Film Division
(since 1986).
W. A. Smith, age 47: Vice President of the Company (since August 1994),
also President of the Company's Vehicle Sealing Division (since 1990); formerly
General Manager of the Company's Welland, Ontario vehicle sealing plant (since
1986 to 1990) and Vice President -- manufacturing (from 1985 to 1986).
P. A. Spanninger, age 51: Vice President, International of the Company
(since July 15, 1994); formerly Vice President, International of the Company's
automotive business (since 1988) and previously Director of Technology and
Venture Management for the Goodyear Tire & Rubber Company.
D. M. Steuert, age 46: Senior Vice President and Chief Financial Officer
(since August 1994); formerly Vice President and Chief Financial Officer (since
June 1990) and Treasurer (since May 1986), previously Vice President -- Finance
and Planning (from May 1987 to June 1990) and Treasurer.
H. B. Thompson, age 57: Vice President of the Company (since August 1994),
also President of the Company's Reinforced Plastics Division (since 1988);
formerly Executive Vice President of the Reinforced Plastics Division (from 1987
to 1988).
J. W. Ward, age 52: Vice President of the Company (since August 1994), also
President of the Company's Wallcovering Division (since 1989); formerly Vice
President of contract sales/marketing of the Wallcovering Division (from 1986 to
1989).
G. R. Weida, age 47: Vice President of the Company (since August 1994),
also President of Penn Racquet Sports (since 1991); formerly President of the
Company's Plastic Films Division (from 1987 to 1991), and General Manager of the
rigid plastics business (from 1986 to 1987).
D. I. Windham, age 49: Vice President of the Company (since August 1994),
also President of the Company's Designed Plastics Division (since 1993);
formerly Plant Manager of the Company's Columbus, Mississippi vinyl coated
fabrics plant (from 1987 to 1993) and Technical Director (from 1980 to 1987).
R. Younts, age 39: Vice President -- Communications (since January 1995);
previously Director of Communications (since July 1993) and various other
communications positions with Aerojet (from December 1984 to July 1993).
M. W. Zima, age 57: Vice President of the Company (since August 1994), also
President of the Company's Specialty Polymers Division (since 1991); formerly
President and Chief Executive Officer of Uniroyal Engineered Products in
Sarasota, Florida (from 1982 to 1991), and various management positions with
General Electric (from 1968 to 1982).
The Company's executive officers generally hold terms of office of one year
and/or until their successors are elected.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York and Chicago Stock
Exchanges. At December 31, 1994, there were approximately 15,100 holders of
record of the Company's common stock. During 1994, 1993 and 1992, the Company
paid quarterly cash dividends on common stock of $.15 per share. Information
regarding the high and low quarterly sales prices of common stock for the past
two years is contained in the Quarterly Financial Data (unaudited) which appears
on page 35 of this report and is incorporated herein by reference.
Information concerning long-term debt, including restrictions and
provisions relating to distributions and cash dividends on the Company's Common
Stock, appears in Note L on page 27 of this report and is incorporated herein by
reference.
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ITEM 6. SELECTED FINANCIAL DATA
Financial data required under this section appears on page 36 of this
report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Sales for GenCorp in 1994 totaled $1.7 billion, 9 percent below the 1993
level. Segment operating profit decreased 11 percent to $108 million, excluding
the charge of $80 million for segment unusual items, compared to $121 million
for 1993. Segment operating profit (see Note R) in 1994 including the charge for
segment unusual items was $28 million.
Net income for 1994 excluding an after tax charge of $50 million for
unusual items and $213 million for cumulative effect of accounting changes (see
Note B and Note C, respectively) was $37 million compared to $43 million in 1993
or $1.16 per share as compared to $1.35 per share for primary earnings per share
in 1993.
Including the charges for unusual items and the cumulative effect of
accounting changes, the Company reported a net loss of ($226) million for 1994
as compared to net income of $43 million in 1993. On a fully diluted basis,
earnings (loss) per share was a loss of ($7.10) per share for 1994 as compared
to earnings of $1.24 per share in 1993.
Interest expense in 1994 was $32 million compared to $26 million in 1993
and $37 million in 1992. Interest expense for 1994 increased primarily due to a
higher level of average debt outstanding and higher interest rates compared to
1993. The decrease in interest expense from 1992 to 1993 resulted from lower
interest rates and savings from the refinancing activities in 1992.
Other income and expense decreased $9 million to an expense of $4 million
in 1994 from an income of $5 million in 1993. The decrease was primarily due to
the equity loss incurred at HENNIGES Elastomer- und Kunststofftechnik GmbH & Co.
KG (HENNIGES), lower interest income and adjustments to non-operating reserves.
Other income and expense increased $9 million to an income of $5 million in 1993
from an expense of $4 million in 1992. The increase was due to the absence of
costs associated with the 1992 refinancing effort, adjustments to non-operating
reserves and other miscellaneous matters.
UNUSUAL ITEMS
As further discussed in Note B to the financial statements, in the fourth
quarter of 1994 the Company recognized net unusual charges of $83 million ($50
million or $1.56 per share after tax).
These charges included provisions for environmental remediation costs at
Aerojet's Sacramento, California facility (see Note Q), environmental costs
associated with other sites, warranty and litigation costs, asset valuation
reserves, restructuring and other costs. These provisions are net of cash
recoveries from insurers and a litigation settlement with an investment banking
firm.
The impact of these unusual charges on the operating profit of the
Company's business segments was $68 million for Aerojet, $4 million for
Automotive and $8 million for Polymer Products.
The unusual charges include a restructuring charge of $12 million. This
charge consists of $5 million for restructuring the Company's corporate and
segment headquarters and its research function and $7 million for the Reinforced
Plastics Division.
During 1994, the Company streamlined operations and removed a layer of
management by eliminating its Akron-based automotive and polymer products
segment headquarters. The operating support activities performed by the two
segments were absorbed by the Company's divisions or corporate headquarters. The
Company also eliminated levels of management and non-value added administrative
functions by reorganizing its research laboratories, engineering and technology
staffs and facilities. These actions resulted in the elimination of 65 open and
filled positions and are expected to reduce annual costs by approximately $10
million. All of the affected employees were notified of termination prior to
November 30, 1994. The Company recognized a total restructuring charge of $5
million including severance costs of $4 million and costs of
9
13
exiting facilities of $1 million. The Company paid $1 million in severance
benefits during 1994. The remaining net cash outflow from these actions is
estimated to be $3 million in 1995 and $1 million thereafter.
Also during 1994, the Reinforced Plastics Division continued its program of
aggressive pursuit of the heavy truck market to further diversify its product
base. The Ionia, Michigan plant has been identified as the plant for conversion
to a heavy truck operation. In connection with this conversion, the Company
recognized a $7 million provision for the demolition of part of this facility.
The provision included $4 million for the write-off of related fixed assets and
$3 million for the cost of demolishing parts of the facilities in 1996. After
the facilities are demolished, the Company anticipates annual savings of $1
million.
During 1992, the Company recognized a $22 million provision for a prior
restructuring program within its Reinforced Plastics Division for
rationalization of excess capacity at its plants. The reserve balance amounted
to $6 million, $10 million and $22 million at November 30, 1994, 1993 and 1992,
respectively. The remaining reserve of $6 million at November 30, 1994 includes
$4 million for the write-down of fixed assets and $2 million for the cost of
demolishing facilities in 1995.
BUSINESS ACQUISITIONS AND DIVESTITURES
During 1994, the Company enhanced its European automotive presence by
acquiring the remaining 75.5 percent equity interest in HENNIGES, a German
original equipment automotive supplier. This acquisition strengthens the
Company's ability to compete in today's global automotive markets. Also during
1994, the Company sold its Aerojet Ordnance Division's medium caliber ammunition
and air dispensed munition business to Olin Corporation in May 1994. (See Note
D.)
Determining the future role of Aerojet in the corporation is a key part of
the Company's strategy. The Company is continuing to discuss the possibility of
divestiture with interested parties while at the same time evaluating
alternatives such as joint ventures, strategic alliances or continued operation
of Aerojet should efforts to divest not offer adequate shareholder value.
The sale of all or part of Aerojet would reduce the Company's exposure to
recent wide variability in defense spending and would allow the Company to focus
on its growing commercial businesses. Any divestiture would initially reduce
sales and segment operating profit until the Company is able to redeploy assets
to businesses generating equal or better returns. The Company is required to use
the proceeds from any sale of all or part of Aerojet to reduce outstanding debt
under the Company's credit facility. Further, this credit facility would be
reduced permanently by the amount of the net cash proceeds from any sale. The
reduction in debt and interest expense would improve the Company's financial
condition.
FINANCIAL RESOURCES AND CAPITAL SPENDING
Cash flow provided from operating activities for fiscal 1994 was $133
million compared to $12 million in 1993. The improvement was primarily due to
the decrease in working capital requirements. Working capital changes in 1993
included a $63 million payment of tax liabilities related to prior years.
At November 30, 1994, the Company's total debt was $385 million compared to
$439 million at the end of 1993. Debt decreased $54 million during 1994 due to
strong cash flow from operations, reduced capital expenditures, the sale of the
ordnance business and recoveries from insurers and an investment banking firm
(see Note B).
In June 1994, the Company extended its receivable financing program through
December 1994 (see Note G). When the program expired on December 31, 1994, the
Company used its existing borrowing capacity to repurchase outstanding
receivables previously sold under this program and does not currently intend to
enter into a new receivable financing program.
Capital expenditures were made principally for capacity expansion and asset
replacement, cost reduction, safety and productivity improvements and
environmental protection. Capital expenditure outlays in 1994 totaled $63
million compared to $67 million in 1993 and $96 million in 1992.
10
14
Management believes that funds generated from operations and existing
borrowing capacity are adequate to finance planned capital expenditures,
company-sponsored research and development programs and dividend payments to
shareholders.
AUTOMOTIVE
Sales for the automotive business segment during fiscal 1994 totaled $577
million, an increase of 12 percent over 1993 sales of $514 million. Higher
volume for key vehicle platforms and new program launches of GM's Blazer/Jimmy,
Chrysler's Neon, Toyota's Avalon and Volvo's heavy truck contributed to the
improvement.
Increased sales during 1994 resulted in segment operating profit of $32
million excluding an unusual charge of $4 million, an increase of $11 million
over 1993 operating profit of $21 million. The Vibration Control and Reinforced
Plastics Divisions showed significant earnings improvement due to increased
sales volume and manufacturing efficiency gains. Operating profit for the
automotive segment was negatively impacted by HENNIGES as the German automotive
market remained weak.
During 1994, the Company acquired the remaining 75.5 percent equity
interest in HENNIGES, the Company's German automotive supplier. Due to the
increased ownership, near-term losses recognized by the Company are expected to
be larger. With 100 percent ownership, the Company initiated an aggressive
restructuring and cost reduction campaign to drive HENNIGES towards profitable
performance at the earliest possible date. Despite the near-term challenges
facing HENNIGES, the acquisition was an important part of the Company's
long-term European automotive strategy. HENNIGES strengthens and enhances the
Company's international presence, which is important to competing in today's
global automotive markets and is critical to meeting the needs and requirements
of customers in both Europe and North America.
Outlook
Sales growth in 1995 will be dependent on the level of domestic vehicle
production. Operating profit growth in 1995 will be based on sales growth and
continued cost reductions and productivity improvements.
1993 Results
Sales in 1993 increased 18 percent to $514 million from $436 million in
1992. Segment operating profit in 1993 was $21 million compared to $9 million in
1992 which excluded a $22 million unusual charge for restructuring Reinforced
Plastics in 1992.
The significant increase in sales for 1993 was due to the continued
recovery in domestic vehicle production and new program launches. The
improvement in operating profit was the result of increased sales, cost
reductions and improved productivity throughout the segment.
POLYMER PRODUCTS
Polymer Products again achieved record levels of sales and segment
operating profit in 1994. Sales for 1994 were $569 million, a 10 percent
increase over 1993 sales of $519 million. Sales growth in the Designed Plastics
and Specialty Polymers Divisions along with the full year performance of Reneer
in the Plastic Films Division contributed to the increase in segment sales.
These sales increases more than offset the decline in sales at Penn Racquet
Sports, attributable to softness in the world tennis market.
Segment operating profit in 1994 was $51 million excluding an unusual
charge of $8 million, a 9 percent increase over $47 million in 1993. The
earnings improvement was led by the Specialty Polymers and Plastic Films
Divisions. However, Penn Racquet Sports experienced lower earnings due to sales
volume decline and Designed Plastics was negatively impacted by an increase in
warranty expense and raw material prices.
Outlook
Due to improved market conditions, steady growth should continue for
Polymer Products during 1995 as it maintains strong market positions in its
businesses.
11
15
1993 Results
Sales in 1993 were $519 million, or 8 percent over 1992 sales of $482
million. The Specialty Polymers, Wallcovering, Designed Plastics and Plastic
Films Divisions experienced sales growth while sales at Penn Racquet Sports
declined. Increased sales resulted from market penetration gains and the
acquisition of Reneer Films.
Segment operating profit in 1993 was $47 million, a 4 percent increase over
$45 million in 1992. The earnings improvement was achieved by gains in Designed
Plastics, Plastic Films and Wallcovering.
AEROSPACE AND DEFENSE
Sales in 1994 for Aerojet were $594 million, down 32 percent from 1993
sales of $872 million. The decrease is due to the residual impact of the
Peacekeeper program cancellation and the Advanced Solid Rocket Motor program
termination, lower activity in the Sense and Destroy Armor and Tube-Fired
Optically Tracked Wire programs and the sale of the Ordnance medium caliber
ammunition and air dispensed munition businesses.
Aerojet's segment operating profit in 1994 was $25 million, excluding an
unusual charge of $68 million for environmental matters at its Sacramento,
California facility (see Note Q), a decline of 53 percent from $53 million in
1993. The decrease in operating profit was due primarily to lower sales revenue
and contract mix issues. During the first quarter of 1994, Aerojet took a $17
million charge for costs associated with a meteorological sensor program, a
tactical rocket propulsion program and the projected loss on disposal of a small
business. These charges were partially offset by the settlement of Aerojet's
claim for the early termination of the ASRM program which resulted in $12
million of operating profit during the fourth quarter.
Contract backlog for Aerojet was $1.1 billion at the end of 1994, compared
to $1.4 billion at the end of 1993 and $1.3 billion in 1992. Funded backlog,
which includes only the amount of those contracts for which money has been
directly authorized by Congress, totaled $0.6 billion at the end of 1994, down
from $0.7 billion at the end of 1993 and $0.9 billion in 1992.
Outlook
1995 will continue to present Aerojet with challenges due to reductions in
the defense budget, program restructuring and the effects of industry
consolidations. To address these challenges, Aerojet completed a major
streamlining and restructuring effort in 1994 that is intended to reduce future
operating costs and improve operational efficiencies to allow for more effective
competition and performance on current programs.
1993 Results
Sales in 1993 were $872 million, down 14 percent from 1992 sales of $1,019
million. Sales declines at Aerojet's propulsion and defense electronics
businesses accounted for the overall decrease.
Segment operating profit was $53 million in 1993 compared to $71 million in
1992, a decrease of 25 percent. The decline in operating profit was due
primarily to the decline in sales and contract mix issues.
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 own plants. In addition, the Company has been designated a
potentially responsible party, with other companies, at sites undergoing
investigation and remediation.
In 1994, capital expenditures for projects related to the environment were
approximately $6 million, compared to $7 million in 1993 and $10 million in
1992. The Company currently forecasts that capital
12
16
expenditures for environmental projects will range between $7 million and $12
million in each of the next two years. During 1994, noncapital expenditures for
environmental compliance and protection totaled $33 million of which $13 million
was for recurring costs associated with managing hazardous substances and
pollution abatement in ongoing operations and $20 million was for investigation
and remediation efforts at other sites. Similar noncapital expenditures were $40
million and $42 million in 1993 and 1992, respectively. It is presently expected
that noncapital environmental expenditures will increase slightly for the next
several years.
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 Consolidated Balance Sheet at November 30, 1994 reflects accruals
of $282 million and amounts recoverable of $132 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 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 Q --
Contingencies.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information called for by this item is set forth beginning on the next page
(page 14) of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in accountants or disagreements with the
Company's independent accountants on accounting and financial disclosure matters
during the Company's two most recent fiscal years or during any period
subsequent to the date of the Company's most recent financial statements.
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17
GENCORP INC.
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED NOVEMBER 30,
----------------------------
1994 1993 1992
------ ------ ------
(DOLLARS IN MILLIONS,
EXCEPT PER-SHARE DATA)
NET SALES........................................................ $1,740 $1,905 $1,937
------ ------ ------
COSTS AND EXPENSES
Cost of products sold............................................ 1,391 1,562 1,587
Selling, general and administrative.............................. 179 178 171
Depreciation..................................................... 73 74 79
Interest expense................................................. 32 26 37
Other (income) expense, net...................................... 4 (5) 4
Unusual items (Note B)........................................... 83 -- 22
------ ------ ------
1,762 1,835 1,900
------ ------ ------
INCOME (LOSS) BEFORE INCOME TAXES................................ (22) 70 37
Income tax (benefit) provision (Note F).......................... (9) 27 15
------ ------ ------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGES..... (13) 43 22
Cumulative effect of accounting changes (Note C)................. (213) -- --
------ ------ ------
Net Income (Loss).............................................. $ (226) $ 43 $ 22
====== ====== ======
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Primary:
Before cumulative effect of accounting changes................. $ (.41) $ 1.35 $ .70
Cumulative effect of accounting changes........................ (6.69) -- --
------ ------ ------
Earnings (Loss) Per Share...................................... $(7.10) $ 1.35 $ .70
====== ====== ======
Fully Diluted:
Before cumulative effect of accounting changes................. $ (.41) $ 1.24 $ .70
Cumulative effect of accounting changes........................ (6.69) -- --
------ ------ ------
Earnings (Loss) Per Share...................................... $(7.10) $ 1.24 $ .70
====== ====== ======
The accompanying notes to consolidated financial statements are an integral part
of these statements.
14
18
GENCORP INC.
CONSOLIDATED BALANCE SHEET
AT NOVEMBER 30,
-------------------
1994 1993
------ ------
(DOLLARS IN
MILLIONS)
CURRENT ASSETS
Cash and equivalents............................................. $ 22 $ 16
Marketable securities, at cost (approximates market)............. 8 7
Accounts receivable (Note G)..................................... 190 173
Inventories (Note H)............................................. 158 199
Prepaid expenses................................................. 43 42
------ ------
Total Current Assets................................... 421 437
Investments and other assets (Note J)............................ 468 233
Property, plant and equipment, at cost
Land........................................................... 40 35
Buildings and building equipment............................... 310 303
Machinery and equipment........................................ 907 925
Construction in progress....................................... 37 36
------ ------
1,294 1,299
Accumulated depreciation....................................... (728) (756)
------ ------
Net property, plant and equipment........................... 566 543
------ ------
Total Assets........................................... $1,455 $1,213
====== ======
CURRENT LIABILITIES
Notes payable.................................................... $ 7 $ 23
Accounts payable -- trade........................................ 104 102
Income taxes (Note F)............................................ 19 14
Accrued expenses (Note K)........................................ 237 209
------ ------
Total Current Liabilities.............................. 367 348
Long-term debt (Note L).......................................... 378 416
Postretirement benefits other than pensions (Note I)............. 373 70
Other long-term liabilities (Note K)............................. 344 144
Contingencies (Note Q)
SHAREHOLDERS' EQUITY (DEFICIT)
Preference stock -- $1.00 par value; 15 million shares
authorized; none outstanding................................... -- --
Common stock -- $.10 par value; 90 million shares authorized;
32.1 million shares outstanding................................ 3 3
Other capital.................................................... 5 1
Retained earnings (deficit)...................................... (16) 229
Cumulative translation adjustment................................ 1 2
------ ------
Total Shareholders' Equity (Deficit)................... (7) 235
------ ------
Total Liabilities and Shareholders' Equity (Deficit)... $1,455 $1,213
====== ======
The accompanying notes to consolidated financial statements are an integral part
of these statements.
15
19
GENCORP INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED NOVEMBER 30,
-------------------------
1994 1993 1992
----- ----- -----
(DOLLARS IN MILLIONS)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
Net Income (Loss).................................................. $(226) $ 43 $ 22
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Cumulative effect of accounting changes....................... 213 -- --
Provision for unusual items................................... 114 -- 22
Depreciation, amortization and loss on disposal of fixed
assets....................................................... 77 86 84
Changes in operating assets and liabilities
Deferred income taxes....................................... (30) (5) (22)
Accounts receivable......................................... (11) (13) 13
Inventories................................................. 35 5 (33)
Other current assets........................................ (1) 5 12
Current liabilities......................................... (12) (93) 29
Other non-current assets.................................... (31) (14) (7)
Other long-term liabilities................................. 5 (2) 1
----- ----- -----
Net Cash Provided by Operating Activities........... 133 12 121
----- ----- -----
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
Capital expenditures............................................... (63) (67) (96)
Proceeds from asset dispositions................................... 29 4 1
Acquisitions....................................................... (22) (43) --
Net (increase) decrease in marketable securities................... (1) -- 14
----- ----- -----
Net Cash Used in Investing Activities............... (57) (106) (81)
----- ----- -----
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
Long-term debt incurred............................................ 341 360 416
Long-term debt paid................................................ (379) (288) (427)
Proceeds from accounts receivable financing........................ -- 10 --
Net short-term debt incurred (paid)................................ (16) 22 --
Dividends.......................................................... (19) (19) (19)
Other equity transactions.......................................... 3 (2) (3)
----- ----- -----
Net Cash Provided by (Used in) Financing
Activities....................................... (70) 83 (33)
----- ----- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... 6 (11) 7
Cash and cash equivalents at beginning of year..................... 16 27 20
----- ----- -----
Cash and Cash Equivalents at End of Year............ $ 22 $ 16 $ 27
===== ===== =====
The accompanying notes to consolidated financial statements are an integral part
of these statements.
16
20
GENCORP INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK RETAINED CUMULATIVE
------------------- OTHER EARNINGS TRANSLATION
SHARES AMOUNT CAPITAL (DEFICIT) ADJUSTMENT
---------- ------ ------- -------- -----------
(DOLLARS IN MILLIONS)
BALANCE AT NOVEMBER 30, 1991.................... 31,729,776 $3 $1 $ 202 $ 7
Net income...................................... 22
Currency translation adjustment................. (3)
Cash dividends -- $.60 per share................ (19)
Reacquired shares for incentive programs........ (571) -- --
---------- -- -- ------ ---
BALANCE AT NOVEMBER 30, 1992.................... 31,729,205 3 1 205 4
Net income...................................... 43
Currency translation adjustment................. (2)
Cash dividends -- $.60 per share................ (19)
Shares issued under incentive programs.......... 811 -- --
Reacquired shares for incentive programs........ (158) -- --
---------- -- -- ------ ---
BALANCE AT NOVEMBER 30, 1993.................... 31,729,858 3 1 229 2
Net loss........................................ (226)
Currency translation adjustment................. (1)
Cash dividends -- $.60 per share................ (19)
Shares issued to employee saving plans.......... 336,461 -- 4
Shares issued under incentive programs.......... 8,881 -- --
Reacquired shares for incentive programs........ (18) -- --
---------- -- -- ------ ---
BALANCE AT NOVEMBER 30, 1994.................... 32,075,182 $3 $5 $ (16) $ 1
========== === === ====== ===
<FN>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
17
21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements of the Company
include the accounts of the parent company and its majority-owned subsidiaries.
REVENUE RECOGNITION -- Generally, sales are recorded when products are
shipped or services are rendered. Sales and income under most government
fixed-price and fixed-price-incentive production type contracts are recorded as
deliveries are made. For contracts where relatively few deliverable units are
produced over a period of more than two years, revenue and income are recognized
at the completion of measurable tasks rather than upon delivery of the
individual units. Sales under cost reimbursement contracts are recorded as costs
are incurred and include estimated earned fees in the proportion that costs
incurred to date bear to total estimated costs. Certain government contracts
contain cost or performance incentive provisions which provide for increased or
decreased fees or profits based upon actual performance against established
targets or other criteria. Penalties and cost incentives are considered in
estimated sales and profit rates. Performance incentives are recorded when
measurable or when awards are made and provisions for estimated losses on
contracts are recorded when such losses become evident.
ENVIRONMENTAL COSTS -- The Company expenses, on a current basis, recurring
costs associated with managing hazardous substances and pollution in ongoing
operations. The Company also 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 insurance carriers, the U.S.
government or other third parties, when the collection of such amounts becomes
probable. Pursuant to U.S. government agreements or regulations, the Company
will recover a substantial portion of its environmental costs through the
establishment of prices of the Company's products and services sold to the U.S.
government. With the exception of applicable amounts representing current assets
and liabilities, recoverable amounts and accrued costs are included in other
assets and other long term liabilities. Prior to 1994, the Company recorded
environmental liabilities net of the probable future recoveries from third
parties. Accordingly, the 1993 amounts have been reclassified on the Company's
Consolidated Balance Sheet to conform to the 1994 presentation.
INVENTORIES -- Inventories are stated at the lower of cost or market. The
automotive and polymer products business segments use the last-in, first-out
method. The aerospace and defense business segment uses the average cost method.
Foreign operations use the first-in, first-out method.
Work-in-process on fixed price contracts includes direct costs and overhead
less the estimated average cost of deliveries. Appropriate general and
administrative costs are allocated to government and certain other contracts.
PROPERTY, PLANT AND EQUIPMENT -- Refurbishment costs are capitalized in the
property accounts whereas ordinary maintenance and repair costs are expensed as
incurred. Depreciation for financial reporting is computed principally by
accelerated methods for the aerospace and defense business segment and by the
straight-line method for the remainder of the Company.
GOODWILL AND OTHER INTANGIBLE ASSETS -- The excess of purchase price over
the value of net assets acquired is included in other assets and is amortized on
a straight-line basis over a 40-year period or less.
INCOME TAXES -- Deferred income taxes are provided for temporary
differences between financial statement and taxable income.
HEDGING INSTRUMENTS -- The Company periodically enters into interest rate
swap agreements to manage interest rate exposure. The differential to be paid is
accrued as interest rates change and is recognized over the life of the
agreements. The notional amounts of swap agreements are matched with a related
underlying liability and as such are not subject to lower of cost or market
value accounting.
18
22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
STATEMENT OF CASH FLOWS -- For the purposes of the statement of cash flows,
all highly liquid debt instruments purchased with a maturity of three months or
less are considered to be cash equivalents.
EARNINGS PER SHARE -- Primary earnings per share of common stock is
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 L for further information
regarding the debentures.)
RECLASSIFICATIONS -- Certain reclassifications have been made to conform
prior year's data to the current presentation.
NOTE B -- UNUSUAL ITEMS
In the fourth quarter of 1994, the Company recognized net unusual charges
of $83 million ($50 million or $1.56 per share after tax). These charges
included provisions for environmental remediation costs at Aerojet's Sacramento,
California facility of $68 million, environmental costs associated with other
sites of $15 million, warranty costs related to discontinued products of $6
million, estimated costs for pending litigation of $5 million, write-downs of $8
million of fixed assets and investments to net realizable value and
restructuring charges of $12 million. These provisions are net of $31 million of
cash collected during the fourth quarter of 1994 from insurers for recoveries of
environmental costs incurred by the automotive and polymer products segments and
a settlement of claims against an investment banking firm arising out of such
firm's participation in a 1987 unsolicited tender offer for GenCorp's stock.
NOTE C -- 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.
19
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The table below shows the components of the cumulative effect of the above
accounting changes:
AMOUNT PER SHARE
------ ---------
(DOLLARS IN
MILLIONS,
EXCEPT PER-SHARE
DATA)
Other postretirement benefits, net of $131 in taxes........... $(196) $ (6.16)
Income taxes.................................................. (17) (.53)
------ -------
Total............................................... $(213) $ (6.69)
====== =======
The incremental impact of these changes in accounting methods decreased
earnings for the year ended November 30, 1994 by approximately $4 million.
NOTE D -- ACQUISITIONS AND DIVESTITURES
The Company purchased an initial 24.5 percent equity interest in HENNIGES
in July 1993. During 1994, the Company completed its acquisition of HENNIGES
through two additional purchases of 24.5 percent in July 1994 and 51 percent in
September 1994. The combined purchase price of the remaining 75.5 percent equity
interest was approximately $22 million. The total acquisition cost for HENNIGES
was approximately $40 million. HENNIGES' principal business is the manufacture
and distribution of engineered molded and extruded rubber products for the major
German original equipment automotive manufacturers. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16 and the investment was accounted for under the equity method
until the Company acquired a majority equity interest. The financial statements
of HENNIGES have been consolidated subsequent to such date. The acquisition
resulted in goodwill of $18 million which is being amortized over 35 years.
In May 1994, the Company sold its Aerojet Ordnance Division's medium
caliber ammunition and air dispensed munition business to Olin Corporation for
$25 million which approximated net book value.
NOTE E -- RESEARCH AND DEVELOPMENT EXPENSE
Research and Development (R&D) expense was $42 million in 1994, $45 million
in 1993 and $36 million in 1992. R&D expense includes the costs of technical
activities that are useful in developing new products, services, processes or
techniques, as well as those expenses that may significantly improve existing
products or processes.
Additional R&D expenditures which are funded under government contracts
totaled $72 million in 1994, $112 million in 1993 and $166 million in 1992.
NOTE F -- INCOME TAXES
Effective December 1, 1993, the Company adopted SFAS No. 109 "Accounting
for Income Taxes" (SFAS 109). The recognition and measurement of deferred tax
assets and liabilities differs significantly under SFAS 109 and APB 11. Under
SFAS 109, the liability method is used in accounting for income taxes, whereby
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. Under APB 11, income tax expense is determined using
the deferred method. Deferred tax expense is based on items of income and
expense that are reported in different years in the financial statements and tax
returns and are measured at the tax rate in effect in the year the difference
originated. As permitted under the new Statement, prior years' financial
statements have not been restated. The cumulative effect of adopting this
Statement as of December 1, 1993 was $17 million.
20
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The income tax (benefit) provision consists of the following:
YEARS ENDED NOVEMBER
30,
----------------------
1994 1993 1992
---- ---- ----
(DOLLARS IN MILLIONS)
CURRENT TAXES
U.S. federal.................................................. $11 $16 $15
State and local............................................... 1 6 4
Foreign....................................................... 6 8 6
---- ---- ----
18 30 25
DEFERRED TAXES
U.S. federal.................................................. (21) -- (9)
State and local............................................... (6) (3) (1)
---- ---- ----
(27) (3) (10)
---- ---- ----
Income tax (benefit) provision........................... $(9) $27 $15
==== ==== ====
The change in deferred income taxes under APB 11 reflects the tax effects
of the following items recognized as revenue or expense in different years for
tax and financial statement purposes:
YEARS ENDED
NOVEMBER 30,
-------------
1993 1992
---- ----
(DOLLARS IN
MILLIONS)
Accrued estimated costs............................................... $ 7 $ (7)
Long-term contract method............................................. (4) --
Depreciation.......................................................... -- (7)
Pension............................................................... 4 2
State NOLs and tax credit carryforwards............................... 1 3
Other................................................................. (11) (1)
---- ----
Total............................................................ $ (3) $(10)
==== ====
The difference between the statutory federal income tax rate and the
effective tax rate is attributable to the following:
YEARS ENDED NOVEMBER 30,
--------------------------
1994 1993 1992
------ ----- -----
Statutory income tax rate.................................. (35.0)% 34.9% 34.0%
State and local income taxes, net of federal income tax
benefit.................................................. (5.0) 4.2 10.7
Change in tax rate on deferred tax reversals............... -- .4 .8
Earnings of subsidiaries taxed at other than U.S. statutory
rate..................................................... (8.1) 2.0 1.7
Adjustment to estimated income tax accruals................ 14.0 -- --
Other, net................................................. (5.9) (3.0) (6.1)
------ ----- -----
Effective income tax rate............................. (40.0)% 38.5% 41.1%
====== ===== =====
21
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The table below is a summary of the significant components of the Company's
deferred tax assets and liabilities as of November 30, 1994:
ASSETS LIABILITIES
------ -----------
(DOLLARS IN MILLIONS)
Accrued estimated costs......................................... $107 $ --
Long-term contract method....................................... -- 11
Depreciation.................................................... -- 52
Pension......................................................... -- 38
State NOLs and tax credit carryforwards......................... 18 --
Other postretirement/employment benefits........................ 169 --
------ -------
Total...................................................... $294 $ 101
====== =======
The balance sheet reflects deferred income taxes of $35 million and $37
million in prepaid expenses at November 30, 1994 and 1993, respectively.
Included in other long-term assets for 1994 and 1993 are deferred income taxes
of $158 million and $13 million, respectively. The majority of state net
operating losses (NOLs) and tax credit carryforwards have an indefinite
carryforward period with the remaining portion expiring in years through 2007.
Pretax income of foreign subsidiaries was $24 million in 1994, $18 million in
1993 and $25 million in 1992. Cash paid during the year for income taxes was $23
million in 1994, $79 million in 1993 and $25 million in 1992.
NOTE G -- 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 and 1993
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. The Company does not currently intend to enter into a new receivable
financing program.
Unbilled receivables of $10 million and $9 million at November 30, 1994 and
1993, respectively, relating to long-term government contracts are included in
accounts receivable from the U.S. government. Such amounts are billed either
upon delivery of completed units or settlement of contracts. The unbilled
receivables amount at November 30, 1994 includes $4 million expected to be
collected in fiscal year 1995, and $6 million expected to be collected in
subsequent years.
At year end, the amount of commercial and U.S. government receivables was
$111 million and $79 million for 1994 and $95 million and $78 million for 1993,
respectively. Included in the 1994 and 1993 U.S. government receivable is $7
million for environmental remediation (see Note Q).
22
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE H -- INVENTORIES
Components of inventories are as follows:
AT NOVEMBER 30,
---------------
1994 1993
----- -----
(DOLLARS IN
MILLIONS)
Raw materials and supplies.......................................... $ 51 $ 44
Work-in-process..................................................... 14 15
Finished products................................................... 67 57
----- -----
Approximate replacement cost of inventories......................... 132 116
Reserves, primarily LIFO............................................ (42) (35)
Long-term contracts at average cost................................. 206 262
Progress payments................................................... (138) (144)
----- -----
Total inventories.............................................. $ 158 $ 199
===== =====
Aerojet's inventories applicable to government and other contracts include
general and administrative costs. The total of such costs incurred in 1994 and
1993 was $108 million and $127 million, respectively, and the amounts in
inventory at the end of those years are estimated at $36 million and $27
million, respectively. These estimates are based on costs being removed from
inventories on a basis proportional to the amounts of each cost element
projected through completion of the contract.
Inventories using the LIFO method represented 74 percent of consolidated
inventories at replacement cost at November 30, 1994 and 1993.
At November 30, 1994, Aerojet's contract accounting positions reflect the
expected recovery of approximately $48 million in pending claims on numerous
contracts with the U.S. government. These claims are in varying stages of
negotiation, and relate principally to contracts terminated or cancelled at the
customer's convenience, or requests for price adjustments related to customer
caused issues. Management believes that the resolution of these claims, in the
aggregate, will not have a material effect on the consolidated financial
condition of the Company.
NOTE I -- EMPLOYEE BENEFIT PLANS
Pension Plans
The Company has a number of defined benefit pension plans which cover
substantially all salaried and hourly employees. Normal retirement age generally
is 65, but certain plan provisions allow for earlier retirement. The Company's
funding policy is consistent with the funding requirements of federal law. 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.
23
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The components of net pension costs (income) are as follows:
YEARS ENDED NOVEMBER 30,
-------------------------
1994 1993 1992
----- ----- -----
(DOLLARS IN MILLIONS)
Service cost -- benefits earned during the period.......... $ 21 $ 20 $ 22
Interest cost on projected benefit obligation.............. 118 111 106
Actual return on assets.................................... 13 (231) (170)
Net amortization and deferral.............................. (161) 93 38
----- ----- -----
Net pension costs (income)....................... $ (9) $ (7) $ (4)
===== ===== =====
The assumptions used in calculating the present value of the accrued
defined benefit pension plan benefits and pension cost at November 30, 1994,
1993 and 1992 and for the years then ended were determined in consultation with
the Company's actuary. Excluding a variable annuity program with an interest
assumption of 8 percent and assets at November 30, 1994 of $682 million, the
weighted average expected rate of return on plan assets for all plans was 9
percent for all years presented. The assumed weighted average discount rate was
8 percent and the assumed weighted average rate of increase in salaried
compensation levels was 5 percent in all years presented. Benefits under the
hourly plans are not based on wages. Therefore, no benefit escalation assumption
beyond negotiated increases is provided. During 1993, the Company modified its
turnover assumption to reflect past and anticipated future experience. This
change decreased 1993 pension cost by $5 million. There was no material impact
on the projected benefit obligation. The majority of the Company's plan assets
are invested in short-term investments, listed stocks and bonds.
The following table presents the funded status of the plans:
AT NOVEMBER 30,
-----------------
1994 1993
------ ------
(DOLLARS IN
MILLIONS)
Plan assets at fair value.......................................... $1,647 $1,757
------ ------
Actuarial present value of plan benefits:
Vested........................................................... $1,405 $1,398
Non-vested....................................................... 51 73
------ ------
Accumulated benefit obligation..................................... 1,456 1,471
Effect of projected salary increases............................... 50 49
------ ------
Projected benefit obligation....................................... $1,506 $1,520
------ ------
Overfunded plans................................................... $ 141 $ 237
Unamortized balances:
Transition assets................................................ (35) (39)
Plan amendments.................................................. 31 26
Experience gains................................................. (28) (126)
Minimum funding liability........................................ (7) --
------ ------
Prepaid pension cost (included in investments and other
assets)................................................ $ 102 $ 98
====== ======
The Company also sponsors a number of defined contribution pension plans.
Participation in these plans is available to substantially all salaried
employees and to certain groups of hourly employees. Company contributions to
these plans are based on either a percentage of employee contributions or on a
specified amount per hour based on the provisions of each plan. The cost of
these plans was $12 million in 1994, $14
24
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
million in 1993 and $15 million in 1992. Beginning in August 1994, the Company
funded the contribution to the salaried plan with GenCorp common stock.
Health Care Plans
In addition to providing pension benefits, the Company currently provides
certain health care and life insurance benefits to most retired employees in the
United States with varied coverage by employee groups. The health care plans
generally provide for cost sharing in the form of employee contributions,
deductibles and coinsurance between the Company and its retirees. Retirees in
certain other countries are provided similar benefits by plans sponsored by
their governments.
Effective December 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" (SFAS 106). This Statement requires accrual of the expected
cost of providing postretirement benefits during employees' active service
lives. The Company's previous practice was to record the cost of these benefits
as claims were paid except for liabilities established for certain previously
discontinued businesses. The Company elected to recognize immediately the
transition obligation, measured as of December 1, 1993, as the cumulative effect
of an accounting change. This resulted in a one-time charge of $196 million
(after a reduction for income taxes of $131 million), which does not include
amounts accrued in prior years for previously divested businesses.
The table below sets forth the components of the net periodic
postretirement benefit cost and the accumulated postretirement benefit
obligation for postretirement benefits other than pensions:
NET PERIODIC POSTRETIREMENT BENEFIT COST
YEAR ENDED
NOVEMBER 30, 1994
--------------------
(DOLLARS IN
MILLIONS)
Service cost................................................ $ 5
Interest cost............................................... 31
------
Total cost................................................ $ 36
======
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION
AT NOVEMBER 30, 1994
--------------------
(DOLLARS IN
MILLIONS)
Retirees.................................................... $294
Fully eligible active plan participants..................... 52
Other active plan participants.............................. 60
------
Total benefit obligation.................................. $406
======
The accumulated postretirement benefit obligation includes the impact of
the cost-sharing program announced to employees and retirees on October 4, 1993.
The program established limits on the average amount the Company pays annually
to provide future retiree medical coverage. The Company believes that it has the
legal right to implement this cost-sharing program and has recently prevailed in
a lawsuit before the U.S. District Court challenging the Company's right to
modify retiree medical benefits as changed in 1991. This ruling is under appeal
to the U.S. Court of Appeals for the Sixth Circuit. While the Company expects to
prevail on appeal, an adverse ruling could affect the future cost of providing
retiree health benefits.
The accumulated postretirement benefit obligation and related benefit cost
are determined by the application of relevant actuarial assumptions. The Company
utilized an 8 percent discount rate and anticipates its health care cost trend
rate will decline from 12 percent in 1994 to 6 percent in 2003, after which the
trend
25
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
rate is expected to stabilize. The effect of a one percentage point increase in
the assumed health care cost trend rate for each future year would increase the
accumulated postretirement benefit obligation at November 30, 1994 by $10
million and increase the aggregate of the service and interest cost components
of net periodic postretirement health care benefit cost by $1 million.
The cost of retiree health care and life insurance benefits in 1993 and
1992 amounted to $30 million and $29 million, respectively.
NOTE J -- INVESTMENTS AND OTHER ASSETS
The components of investments and other assets are as follows:
AT NOVEMBER 30,
-----------------
1994 1993
---- ----
(DOLLARS IN
MILLIONS)
Recoverable from U.S. government and third parties for
environmental remediation....................................... $125 $ 42
Deferred taxes.................................................... 158 13
Prepaid pension................................................... 102 93
Other............................................................. 83 85
---- ----
Total investments and other assets.............................. $468 $233
==== ====
NOTE K -- ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES
The components of accrued expenses are as follows:
AT NOVEMBER 30,
-----------------
1994 1993
---- ----
(DOLLARS IN
MILLIONS)
Payable for goods, services and rights............................ $ 98 $ 98
Accrued compensation and employee benefits........................ 85 60
Environmental reserves............................................ 27 28
Restructuring and other reserves.................................. 10 6
Other............................................................. 17 17
---- ----
Total accrued expenses.......................................... $237 $209
==== ====
The components of other long-term liabilities are as follows:
AT NOVEMBER 30,
-----------------
1994 1993
---- ----
(DOLLARS IN
MILLIONS)
Environmental reserves............................................ $255 $ 97
Other............................................................. 89 47
---- ----
Total other long-term liabilities............................... $344 $144
==== ====
26
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE L -- LONG-TERM DEBT AND CREDIT LINES
Long-term debt and credit lines consist of the following:
AT NOVEMBER 30,
-----------------
1994 1993
---- ----
(DOLLARS IN
MILLIONS)
Revolving loans................................................... $240 $300
8% Unsecured convertible subordinated
debentures maturing 2002........................................ 115 115
Other............................................................. 25 3
---- ----
Total debt........................................................ 380 418
Less amounts due within one year.................................. (2) (2)
---- ----
Total long-term debt and credit lines........................... $378 $416
==== ====
In April 1992, the Company converted all previously outstanding revolving
loans into a three-year $450 million unsecured revolving credit facility
(Facility). In April 1994, banks with commitments totaling $440 million extended
the maturity date of the Facility for one year to April 1996. It is extendable
for up to one additional year at the option of the Company and with the approval
of the participating banks. The amount of the Facility was reduced by $5 million
as a result of the assumption of the long-term debt of HENNIGES. As of November
30, 1994, unused revolving lines of credit totaled $205 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 $243 million, excluding the impact of
the new accounting standards and the unusual items taken in the fourth quarter
pursuant to an amendment to the Facility. Excluding the impact of these items,
the Company had net worth of $257 million at November 30, 1994 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 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 million 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 $105 million at November 30, 1994.
At November 30, 1994, the Company had unsecured, uncommitted lines of
credit with several banks for short-term borrowings aggregating $36 million, of
which $9 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 $29 million at November 30, 1994.
The maturities of other debt are $5 million annually through 1999.
Cash paid during the year for interest was $31 million in 1994, $28 million
in 1993 and $33 million in 1992.
27
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NOTE M -- DISCONTINUED OPERATIONS
The balance sheet includes various current and long-term reserves relating
to operations discontinued in prior years. Those reserves include estimates for
postretirement benefits (General Tire), environmental matters (Lawrence, MA and
Muskegon, MI ) and other accrued liabilities (RKO General).
Discontinued operations reserves consist of the following:
AT NOVEMBER
30,
-------------
1994 1993
---- ----
(DOLLARS IN
MILLIONS)
Accrued expenses...................................................... $ 24 $ 30
Postretirement benefits other than pension............................ 60 62
Other long-term liabilities........................................... 50 45
---- ----
Total discontinued operations reserves........................... $134 $137
==== ====
NOTE N -- PREFERRED SHARE PURCHASE RIGHTS
In 1987, the Directors declared a dividend of one Preferred Share Purchase
Right (Right) on each outstanding share of common stock, payable to shareholders
of record on February 27, 1987. Rights outstanding at November 30, 1994 and 1993
were 32,075,182 and 31,729,858, respectively. The Shareholder Rights Plan, as
amended effective December 1987, provides that under certain circumstances each
Right will entitle shareholders to buy one one-hundredth of a share of a new
Series A Cumulative Preference Stock at an exercise price of $100. The Rights
will be exercisable only if a person or group acquires 20 percent or more of
GenCorp's common stock or announces a tender or exchange offer that will result
in such person or group acquiring 30 percent or more of the common stock.
GenCorp will be entitled to redeem the Rights at two cents per Right at any time
until ten days after a 20 percent position has been acquired (unless the Board
elects to extend such time period, which in no event may exceed thirty days). If
the Company is involved in certain transactions after the Rights become
exercisable, a holder of Rights (other than Rights beneficially owned by a
shareholder who has acquired 20 percent or more of GenCorp's common stock, which
Rights become void) is entitled to buy a number of the acquiring company's
common shares, or GenCorp's common stock, as the case may be, having a market
value of twice the exercise price of each Right. A potential dilutive effect may
exist upon the exercise of the Rights. The Rights will expire February 18, 1997.
Until a Right is exercised, the holder will have no rights as a stockholder of
the Company including, without limitation, the right to vote as a stockholder or
to receive dividends.
At November 30, 1994, 575,000 shares of $1 par value Series A Cumulative
Preference Stock were reserved for issuance upon exercise of Preferred Share
Purchase Rights.
NOTE O -- STOCK-BASED COMPENSATION PLANS
The GenCorp Inc. 1993 Stock Option Plan provides for an aggregate of
2,500,000 shares of the Company's common stock to be purchased pursuant to stock
options or to be subject to stock appreciation rights (SARs) which may be
granted to selected officers and key employees at prices equal to the market
value of a share of common stock on the date of grant. The options are
exercisable in 25 percent increments at six months, one year, two years and
three years from date of grant. No stock appreciation rights have been granted.
None of the options were exercisable prior to March 10, 1994.
28
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Information regarding this option plan is as follows:
NUMBER OF OPTION SHARES
-----------------------
1994 1993
--------- ---------
Outstanding, beginning of fiscal year......................... 496,075 --
Granted at $16.00 to $16.625 per share........................ -- 501,575
Granted at $12.625 to $13.75 per share........................ 1,169,650 --
Forfeited shares.............................................. (86,575) (5,500)
--------- ---------
Outstanding, November 30...................................... 1,579,150 496,075
--------- ---------
Exercisable, November 30...................................... 220,135 --
--------- ---------
Available for grant, November 30.............................. 920,850 2,003,925
--------- ---------
The Stock Incentive Compensation Plan (SIC Plan) adopted in 1983 is based
on a formula which values incentive awards payable in cash or stock based upon
changes in the market value of the Company's common stock. The SIC Plan is
compensatory, and compensation expense was $2 million in 1994, $5 million in
1993 and $3 million in 1992. The liability for accrued stock incentive
compensation was $15 million at both November 30, 1994 and 1993. Pursuant to the
SIC Plan, no awards may be granted after March 1, 1993 and the Company granted
no incentive unit shares during 1994 or 1993 and 443,000 incentive unit shares
during 1992.
NOTE P -- LEASE COMMITMENTS
The Company and its subsidiaries lease certain manufacturing plant
facilities, machinery and equipment and office buildings under long-term,
noncancelable leases. The leases generally provide for renewal options ranging
from five to ten years and require the Company to pay for utilities, insurance,
taxes and maintenance. Rent expense was $10 million in 1994, $14 million in 1993
and $15 million in 1992. Future minimum commitments at November 30, 1994 for
existing operating leases were $27 million with annual amounts declining from $9
million in 1995 to $3 million in 1998. The Company's current obligation for
leases after 1998 is $3 million.
NOTE Q -- CONTINGENCIES
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.
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
29
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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 November 30, 1994, Aerojet had a reserve of $210 million for costs to
complete the RI/FS and remediate the site and has recognized $123 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 $33 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. 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 hired an independent contractor to construct a groundwater
treatment facility at the site. Construction is expected to be completed in July
1995. 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 $4
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 large number of potentially responsible parties (PRPs) in
the portion of the San Gabriel Valley Superfund Site known as the
30
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Baldwin Park Operable Unit (BPOU). Regulatory action is proceeding on two
tracks: specific site investigation and cleanup supervised by the California
Regional Water Quality Control Board under delegation from the EPA, and regional
groundwater remediation, under the direct control of the EPA.
Aerojet is conducting an investigation of its current and historical
properties in Azusa pursuant to a work plan negotiated with the Regional Board
and EPA. 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 Valley Water
Quality Authority 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 could serve to reduce the
cost of the EPA remedial project to the PRPs. Negotiations concerning allocation
of potential remediation costs among PRPs and other parties are expected to
continue in 1995.
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; data indicating that the principal
groundwater contamination is upgradient of Aerojet's property; 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 16 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 $21 million as of
November 30, 1994 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
31
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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.
NOTE R -- BUSINESS SEGMENT INFORMATION
The automotive business segment designs and produces original equipment
components and systems for the domestic, transplant and foreign automotive
industries in Vehicle Sealing, Vibration Control and Reinforced Plastics.
Specifically, these products include extruded rubber for vehicle body and window
sealing, molded rubber for vibration control components and reinforced plastic
body panels for passenger cars and trucks.
The polymer products business segment manufactures specialty polymers and
engineered plastics for consumers and industry. The segment is a leading
producer of polymer-based products and operates five businesses: Designed
Plastics, Plastic Films, Wallcovering, Penn Racquet Sports and Specialty
Polymers. The principal markets include the paper industry, residential and
commercial construction and the sporting goods industry, as well as varied
consumer and industrial markets that demand a broad range of thermoplastic
products.
The aerospace and defense business segment designs, develops and
manufactures propulsion systems and electronic sensors for the Department of
Defense and National Aeronautics and Space Administration. Its businesses are
Propulsion and Electronic Systems.
GenCorp sales in 1994, 1993 and 1992 to the United States government and
its agencies (principally the Department of Defense) totaled $578 million, $847
million and $984 million, respectively, and were generated almost entirely by
the aerospace and defense business segment. Sales to General Motors, primarily
by the automotive business segment, of $281 million in 1994, $250 million in
1993 and $218 million in 1992 were at least 10 percent of the Company's net
sales. Intersegment sales were not material.
Segment operating profit represents net sales less applicable costs,
expenses and provision for restructuring and unusual items relating to
operations. Segment operating profit excludes corporate income and expenses,
provisions for unusual items, interest expense and income taxes.
In the fourth quarter of 1994, the Company recognized net unusual charges
of $83 million, of which $80 million related to the Company's three business
segments as follows:
(DOLLARS IN MILLIONS) AEROSPACE AND DEFENSE AUTOMOTIVE POLYMER PRODUCTS
----------------------------- --------------------- ---------- ----------------
Environmental................ $68 $2 $6
Warranty costs............... -- -- 5
Asset write-downs............ -- -- 3
Restructuring charges........ -- 7 --
Recoveries from insurers..... -- (5) (6)
-- -- --
Total unusual items..... $68 $4 $8
==== ==== ====
The 1992 unusual item of $22 million, approximately $14 million after tax,
or $.45 per share, related to costs associated with restructuring the Reinforced
Plastics Division within the automotive segment.
Identifiable assets are those assets that are used by the business segments
and exclude corporate assets consisting principally of cash and marketable
securities, certain investments and headquarters' fixed assets. Prior to 1993,
the Company recorded environmental liabilities net of probable future recoveries
from third parties.
32
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
GEOGRAPHIC SEGMENTS
GenCorp's operations are located primarily in Canada, Europe and the United
States. Inter-area sales are not significant to the total revenue of any
geographic area. Unusual items included in operating profit were $80 million in
1994 and $22 million in 1992 for United States operations.
YEARS ENDED NOVEMBER 30,
----------------------------
1994 1993 1992
------ ------ ------
(DOLLARS IN MILLIONS)
NET SALES
Canada................................................... $ 81 $ 72 $ 61
Europe................................................... 33 15 19
United States............................................ 1,523 1,729 1,787
United States export sales............................... 103 89 70
------ ------ ------
$1,740 $1,905 $1,937
====== ====== ======
SEGMENT OPERATING PROFIT
Canada................................................... $ 14 $ 12 $ 11
Europe................................................... 2 2 2
United States............................................ 92 107 112
Unusual items............................................ (80) -- (22)
------ ------ ------
$ 28 $ 121 $ 103
====== ====== ======
IDENTIFIABLE ASSETS
Canada................................................... $ 32 $ 32 $ 24
Europe................................................... 119 11 14
United States............................................ 1,150 1,047 935
------ ------ ------
1,301 1,090 973
------ ------ ------
Corporate assets......................................... 154 123 158
------ ------ ------
Total assets................................... $1,455 $1,213 $1,131
====== ====== ======
33
37
GENCORP INC.
BUSINESS SEGMENT INFORMATION
YEARS ENDED NOVEMBER 30,
----------------------------
1994 1993 1992
------ ------ ------
(DOLLARS IN MILLIONS)
NET SALES
Aerospace and defense............................................ $ 594 $ 872 $1,019
Automotive....................................................... 577 514 436
Polymer products................................................. 569 519 482
------ ------ ------
$1,740 $1,905 $1,937
====== ====== ======
SEGMENT OPERATING PROFIT
Aerospace and defense............................................ $ 25 $ 53 $ 71
Automotive....................................................... 32 21 9
Polymer products................................................. 51 47 45
Unusual items.................................................... (80) -- (22)
------ ------ ------
Segment Operating Profit.................................... 28 121 103
Interest expense................................................. (32) (26) (37)
Corporate other (income) expense, net............................ 4 -- (3)
Corporate expenses............................................... (19) (25) (26)
Unusual items.................................................... (3) -- --
------ ------ ------
Income (Loss) Before Income Taxes........................... $ (22) $ 70 $ 37
====== ====== ======
ASSETS
Aerospace and defense............................................ $ 605 $ 538 $ 498
Automotive....................................................... 375 270 243
Polymer products................................................. 321 282 232
------ ------ ------
Identifiable Assets......................................... 1,301 1,090 973
Marketable securities, cash and other corporate assets........... 154 123 158
------ ------ ------
Total Assets................................................ $1,455 $1,213 $1,131
====== ====== ======
CAPITAL EXPENDITURES
Aerospace and defense............................................ $ 18 $ 20 $ 29
Automotive....................................................... 23 28 27
Polymer products................................................. 21 18 39
Corporate........................................................ 1 1 1
------ ------ ------
$ 63 $ 67 $ 96
====== ====== ======
DEPRECIATION
Aerospace and defense............................................ $ 34 $ 40 $ 47
Automotive....................................................... 21 19 19
Polymer products................................................. 16 13 10
Corporate........................................................ 2 2 3
------ ------ ------
$ 73 $ 74 $ 79
====== ====== ======
EMPLOYEES
Aerospace and defense............................................ 3,390 4,670 5,980
Automotive....................................................... 6,260 5,260 4,730
Polymer products................................................. 2,850 2,930 2,680
Corporate........................................................ 470 440 460
------ ------ ------
12,970 13,300 13,850
====== ====== ======
34
38
GENCORP INC.
QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
----------------------------------------------------
FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30
----------- ------ --------- -----------
(DOLLARS IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
1994
Net sales................................................. $ 401.7 $ 467.7 $ 374.4 $ 495.7
------- ------- ------- -------
Gross profit.............................................. $ 46.6 $ 80.1 $ 64.0 $ 23.6
------- ------- ------- -------
Unusual items............................................. -- -- -- $ (82.9)
------- ------- ------- -------
Income (Loss) before income taxes......................... $ (5.3) $ 23.7 $ 10.6 $ (50.7)
------- ------- ------- -------
Income (Loss) before cumulative effect of accounting
changes................................................. $ (3.2) $ 14.2 $ 6.4 $ (30.4)
------- ------- ------- -------
Net income (loss)......................................... $(216.0) $ 14.2 $ 6.4 $ (30.4)
------- ------- ------- -------
- - ---------------------------------------------------------------------------------------------------------------
Earnings (Loss) per share of common stock
Primary:
Before cumulative effect of accounting changes........ $ (.10) $ .45 $ .20 $ (.95)
Cumulative effect of accounting changes............... (6.71) -- -- --
------- ------- ------- -------
Earnings (Loss) per share............................. $ (6.81) $ .45 $ .20 $ (.95)
------- ------- ------- -------
Fully diluted:
Before cumulative effect of accounting changes........ $ (.10) $ .40 $ .20 $ (.95)
Cumulative effect of accounting changes............... (6.71) -- -- --
------- ------- ------- -------
Earnings (Loss) per share............................. $ (6.81) $ .40 $ .20 $ (.95)
------- ------- ------- -------
The sum of the quarterly E.P.S. amounts may not equal the annual amount due to changes in the number of shares
outstanding during the year.
Common stock price range -- high.......................... 16 3/8 15 1/2 14 1/2 14 3/8
-- low.......................... 13 1/4 12 11 1/2 10
- - ---------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED
----------------------------------------------------
FEBRUARY 28 MAY 31 AUGUST 31 NOVEMBER 30
----------- ------ --------- -----------
(DOLLARS IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
1993
Net sales................................................. $ 401.5 $ 492.3 $ 482.1 $ 529.2
------- ------- ------- -------
Gross profit.............................................. $ 58.9 $ 79.0 $ 63.2 $ 73.4
------- ------- ------- -------
Income before income taxes................................ $ 10.2 $ 29.6 $ 12.9 $ 16.9
------- ------- ------- -------
Net income................................................ $ 6.1 $ 17.8 $ 7.7 $ 11.2
------- ------- ------- -------
- - ---------------------------------------------------------------------------------------------------------------
Earnings per share of common stock
Primary................................................. $ .19 $ .56 $ .25 $ .35
Fully diluted........................................... $ .19 $ .49 $ .24 $ .32
Common stock price range -- high.......................... 13 1/8 13 3/8 17 3/8 17
-- low.......................... 10 1/8 11 5/8 12 3/8 13 7/8
- - ---------------------------------------------------------------------------------------------------------------
CAPITAL STOCK
The common stock is listed on the New York and Chicago Stock Exchanges. At
November 30, 1994 and December 31, 1994, there were approximately 15,100 holders
of record of the Company's common stock. During 1994, 1993 and 1992, the Company
paid quarterly cash dividends on common stock of $.15 per share.
35
39
GENCORP INC.
SUMMARY OF SELECTED FINANCIAL DATA
YEARS ENDED NOVEMBER 30,
------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS, EXCEPT PER-SHARE AND RATIO DATA)
NET SALES
Aerospace and defense................ $ 594 $ 872 $1,019 $1,142 $ 878 $1,034 $1,056
Automotive........................... 577 514 436 368 436 433 358
Polymer products..................... 569 519 482 483 461 471 477
------ ------ ------ ------ ------ ------ ------
$1,740 $1,905 $1,937 $1,993 $1,775 $1,938 $1,891
====== ====== ====== ====== ====== ====== ======
SEGMENT OPERATING PROFIT
Aerospace and defense................ $ 25 $ 53 $ 71 $ 75 $ 65 $ 92 $ 93
Automotive........................... 32 21 9 (5) 23 10 28
Polymer products..................... 51 47 45 41 37 39 39
Unusual items........................ (80) - (22) - 29 (52) (12)
------ ------ ------ ------ ------ ------ ------
$ 28 $ 121 $ 103 $ 111 $ 154 $ 89 $ 148
====== ====== ====== ====== ====== ====== ======
OPERATIONS
Income (Loss) from continuing
operations......................... $ (13) $ 43 $ 22 $ 32 $ 51 $ 8 $ 55
Income from discontinued
operations......................... - - - - 12 202 12
Cumulative effect of accounting
changes............................ (213) - - - - - 3
------ ------ ------ ------ ------ ------ ------
Net Income (Loss)................ $ (226) $ 43 $ 22 $ 32 $ 63 $ 210 $ 70
====== ====== ====== ====== ====== ====== ======
EARNINGS (LOSS) PER SHARE OF COMMON
STOCK
Income (Loss) from continuing
operations......................... $ (.41) $ 1.35 $ .70 $ 1.00 $ 1.60 $ .25 $ 1.72
Income from discontinued
operations......................... - - - - .39 6.36 .37
Cumulative effect of accounting
changes............................ (6.69) - - - - - .10
------ ------ ------ ------ ------ ------ ------
Net income (loss) (primary).......... $(7.10) $ 1.35 $ .70 $ 1.00 $ 1.99 $ 6.61 $ 2.19
Net income (loss) (fully diluted).... $(7.10) $ 1.24 $ .70 $ 1.00 $ 1.99 $ 6.61 $ 2.19
Cash dividends paid.................. $ .60 $ .60 $ .60 $ .60 $ .60 $ .60 $ .60
OPERATING RATIOS (CONTINUING
OPERATIONS)
Return on average assets employed.... 1.2% 9.3% 7.3% 9.4% 11.6% 5.9% 12.7%
Assets employed turnover............. 2.3x 2.6x 2.7x 2.9x 2.3x 2.3x 2.7x
Income (Loss) from continuing
operations to net sales............ (.7)% 2.3% 1.1% 1.6% 2.9% .4% 2.9%
GENERAL
Capital expenditures................. $ 63 $ 67 $ 96 $ 93 $ 79 $ 111 $ 122
Depreciation......................... 73 74 79 77 74 70 63
Total assets*........................ 1,455 1,213 1,131 1,113 1,078 1,270 1,230
Long-term debt....................... 378 416 344 355 345 496 674
*Prior to 1993, the Company recorded environmental liabilities net of probable
future recoveries from third parties.
36
40
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of GenCorp Inc.:
We have audited the accompanying consolidated balance sheets of GenCorp
Inc. as of November 30, 1994 and 1993, and the related consolidated statements
of income, shareholders' equity (deficit), and cash flows for each of the three
years in the period ended November 30, 1994. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of GenCorp Inc. at
November 30, 1994 and 1993, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended November 30,
1994, in conformity with generally accepted accounting principles.
As discussed in Note C to the consolidated financial statements, in 1994
the Company changed its method of accounting for postretirement benefits other
than pensions, income taxes and postemployment benefits.
ERNST & YOUNG LLP
Akron, Ohio
January 17, 1995
37
41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to nominees who will stand for election as a
director of the Company at the March 29, 1995 Annual Meeting of Shareholders is
set forth on page 3 of the Company's 1995 Proxy Statement and is incorporated
herein by reference. Information with respect to directors of the Company whose
terms extend beyond the March 29, 1995 Annual Meeting of Shareholders is set
forth on pages 3 and 4 of the Company's 1995 Proxy Statement and is incorporated
herein by reference.
Also, see Executive Officers of the Registrant on pages 7 and 8 of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is set forth on pages 8
through 19 of the Company's 1995 Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the security ownership of certain beneficial owners
and management is set forth on pages 5 and 6 of the Company's 1995 Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain transactions and employment arrangements with
management is set forth on pages 14 through 16 of the Company's 1995 Proxy
Statement and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
A list of financial statements and financial statement schedules is set
forth in a separate section of this report beginning on page GC-1.
(a)(3) LISTING OF EXHIBITS
An index of exhibits begins on page -i- of this report.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended November 30,
1994.
(c) EXHIBITS
The response to this portion of Item 14 is set forth in a separate section
of this report immediately following the Exhibit Index.
(d) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because they are
inapplicable, not required by the instructions or the information is included in
the consolidated financial statements or notes thereto.
38
42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
February 14, 1995
By /s/ C. R. ENNIS
C. R. Ennis, Senior Vice
President, Law and
Environmental Affairs; General
Counsel
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- - ---------------------------------------- --------------------------------- -------------------
/s/ J. B. YASINSKY President and Chief Executive February 14, 1995
- - ---------------------------------------- Officer; Director
J. B. Yasinsky
/s/ D. M. STEUERT Senior Vice President and Chief February 14, 1995
- - ---------------------------------------- Financial Officer
D. M. Steuert
/s/ F. J. LUCKSINGER Vice President and Controller February 14, 1995
- - ----------------------------------------
F. J. Lucksinger
* Chairman of the Board February 14, 1995
- - ----------------------------------------
A. W. Reynolds
* Director February 14, 1995
- - ----------------------------------------
R. K. Jaedicke
* Director February 14, 1995
- - ----------------------------------------
P. X. Kelley
* Director February 14, 1995
- - ----------------------------------------
R. D. Kunisch
* Director February 14, 1995
- - ----------------------------------------
J. Lafontant-Mankarious
* Director February 14, 1995
- - ----------------------------------------
J. M. Osterhoff
* Director February 14, 1995
- - ----------------------------------------
P. J. Phoenix
* Director February 14, 1995
- - ----------------------------------------
R. B. Pipes
* Director February 14, 1995
- - ----------------------------------------
J. R. Stover
*Signed by the undersigned as
attorney-in-fact and agent for the
Directors indicated.
/s/ E. R. DYE February 14, 1995
- - ----------------------------------------
E. R. Dye
39
43
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1)(2) AND (3), (c) AND (d)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT INDEX
CERTAIN EXHIBITS
FISCAL YEAR ENDED NOVEMBER 30, 1994
GENCORP INC.
FAIRLAWN, OHIO 44333-3300
44
GENCORP INC.
ITEM 14(a)(1) AND (2)
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE
NUMBER
---
(1) FINANCIAL STATEMENTS:
The following consolidated financial statements of GenCorp Inc. are included in Item 8:
Consolidated Statement of Income for the years ended November 30, 1994, 1993 and
1992............................................................................... 14
Consolidated Balance Sheet at November 30, 1994 and 1993.............................. 15
Consolidated Statement of Cash Flows for the years ended November 30, 1994, 1993 and
1992............................................................................... 16
Consolidated Statement of Shareholders' Equity (Deficit) for the years ended November
30, 1994, 1993 and 1992............................................................ 17
Notes to Consolidated Financial Statements.............................................. 18
(2) FINANCIAL STATEMENT SCHEDULES:
All consolidated financial statement schedules are omitted because they are
inapplicable, not required by the instructions or the information is included in
the consolidated financial statements or notes thereto.
GC-1
45
CONSENT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
GenCorp Inc.
We consent to the incorporation by reference in the Prospectuses
constituting part of GenCorp Inc.'s Registration Statements No. 33-61928,
33-28056 and 2-98730 on Form S-8, Post Effective Amendment No. 1 to Registration
Statements No. 2-80440 and 2-83133 on Form S-8, and Post Effective Amendment No.
4 to Registration Statement No. 2-66840 on Form S-8 of our report dated January
17, 1995, with respect to the consolidated financial statements of GenCorp Inc.
included in this Annual Report (Form 10-K) for the year ended November 30, 1994.
ERNST & YOUNG LLP
Akron, Ohio
February 14, 1995
GC-2
46
EXHIBIT INDEX
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- - --------- ----------------------------------------------------------------------- -------
3. ARTICLES OF INCORPORATION AND BY-LAWS
The Amended Articles of Incorporation of GenCorp Inc., as amended as of
December 7, 1987, were filed as Exhibit A to the Company's Annual
Report on Form 10-K for the fiscal year ended November 30, 1988 (File
No. 1-1520), and are incorporated herein by reference. (17 pages)
The Code of Regulations of GenCorp Inc., as amended November 25, 1987,
were filed as Exhibit B to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1988 (File No. 1-1520), and are
incorporated herein by reference. (16 pages)
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
Amended and Restated Rights Agreement (with exhibits) dated as of
December 7, 1987 between GenCorp Inc. and Morgan Shareholder Services
Trust Company as Rights Agent was filed as Exhibit D to the Company's
Annual Report on Form 10-K for the fiscal year ended November 30, 1987
(File No. 1-1520), and is incorporated herein by reference. (86 pages)
Information relating to the Company's long-term debt is set forth in
Note L of this report, which information is incorporated herein by
reference. The Indenture, dated as of July 1, 1992, between GenCorp and
the Bank of New York as trustee relating to the Company's $115,000,000
8% Convertible Subordinated Debentures due August 1, 2002 and the form
of Debenture were filed as Exhibits A and B to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 31, 1992 (File No.
1-1520), and are incorporated herein by reference. (107 pages)
Instruments defining the rights of holders of other long-term debt are
not filed herewith since no such single debt item exceeds 10 percent of
consolidated assets. The Company agrees, however, to furnish a copy of
any such agreement or instrument to the Commission upon request.
10. MATERIAL CONTRACTS
10.(iii)(A) MANAGEMENT CONTRACTS, COMPENSATORY PLANS OR ARRANGEMENTS
An Employment Agreement dated August 4, 1984 between the Company and A.
W. Reynolds, Chairman and Chief Executive Officer and a Director of the
Company, was filed as Exhibit A to the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1984 (File No. 1-1520), and
is incorporated herein by reference. (3 pages)
Transition and Consulting Agreement dated June 29, 1994, as amended
October 19, 1994 between the Company and A. William Reynolds. (8 pages) A
An Employment Agreement dated October 15, 1993 between the Company and
J. B. Yasinsky, President and Chief Operating Officer of the Company,
was filed as Exhibit A to the Company's Annual Report on Form 10-K for
the fiscal year ended November 30, 1993 (File No. 1-1520), and is
incorporated herein by reference. (4 pages)
An Employment Agreement dated November 9, 1994 between Aerojet-General
Corporation and Roger I. Ramseier, Executive Vice President of the
Company and President of Aerojet-General Corporation. (23 pages) B
i
47
TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- - --------- ----------------------------------------------------------------------- -------
A Retention Agreement dated November 9, 1994 between the Company and
Roger I. Ramseier, Executive Vice President of the Company and
President of Aerojet-General Corporation. (23 pages) C
Form of Severance Agreement granted to executive officers of the
Company to provide for payment of an amount equal to 125 percent of
base salary multiplied by a factor of 3 if their employment should
terminate for any reason other than death, disability, willful
misconduct or retirement within three years after a change in control,
as such term is defined in such agreement was filed as Exhibit A to the
Company's Annual Report on Form 10-K for the fiscal year ended November
30, 1990 (File No. 1-1520), and is incorporated herein by reference.
(12 pages)
Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and
Certain Subsidiary Companies as amended and restated effective December
1, 1986, was filed as Exhibit G to the Company's Annual Report on Form
10-K for the fiscal year ended November 30, 1987 (File No. 1-1520), and
is incorporated herein by reference. (6 pages)
The Stock Incentive Compensation Plan of GenCorp Inc. (as amended
effective October 1, 1985) was filed as Exhibit B to the Company's
Annual Report on Form 10-K for the fiscal year ended November 30, 1985
(File No. 1-1520), and is incorporated herein by reference. (21 pages)
Amendment to the GenCorp Inc. and Participating Subsidiaries Stock
Incentive Compensation Plan, effective as of April 5, 1987, was filed
as Exhibit H to the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1987 (File No. 1-1520), and is incorporated
herein by reference. (6 pages)
Information relating to the Deferred Bonus Plan of GenCorp Inc. is
contained in Post-Effective Amendment No. 1 to Form S-8 Registration
Statement No. 2-83133 dated April 18, 1986 and is incorporated herein
by reference. (16 pages)
Amendment to the Deferred Bonus Plan of GenCorp Inc. effective as of
April 5, 1987, was filed as Exhibit I to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1987 (File No.
1-1520), and is incorporated herein by reference. (3 pages)
GenCorp Inc. Deferred Compensation Plan for Nonemployee Directors
effective January 1, 1992 was filed as Exhibit A to the Company's
Annual Report on Form 10-K for the fiscal year ended November 30, 1991
(File No. 1-1520) and is incorporated herein by reference. (18 pages)
GenCorp Inc. Long-Term Incentive Program effective January 27, 1993 and
as amended March 31, 1993. (20 pages) D
GenCorp Inc. 1993 Stock Option Plan effective March 31, 1993 was filed
as Exhibit 4.1 to Form S-8 Registration Statement No. 33-61928 dated
April 30, 1993 and is incorporated herein by reference. (11 pages)
Form of Restricted Stock Agreement between the Company and Nonemployee
Directors providing for payment of part of Directors' compensation for
service on the Board of Directors in Company stock. (4 pages) E
11. STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(1 page) F
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TABLE EXHIBIT EXHIBIT
ITEM NO. DESCRIPTION LETTER
- - --------- ----------------------------------------------------------------------- -------
21. SUBSIDIARIES OF THE REGISTRANT G
Listing of Subsidiaries (1 page)
23. CONSENTS OF EXPERTS
Consent of Ernst & Young LLP is contained on page GC-2 of this Form
10-K and is incorporated herein by reference.
24. POWER OF ATTORNEY H
Powers of Attorney executed by A. W. Reynolds, R. K. Jaedicke, P. X.
Kelley, R. D. Kunisch, J. Lafontant-Mankarious, J. M. Osterhoff, R. B.
Pipes, P. J. Phoenix, and J. R. Stover, Directors of the Company. (9
pages)
27. FINANCIAL DATA SCHEDULE
(Filed for EDGAR only)
The Company will supply copies of any of the foregoing exhibits to any
shareholder upon receipt of a written request addressed to GenCorp
Inc., 175 Ghent Road, Fairlawn, Ohio 44333-3300 -- Attention:
Secretary, and payment of $1 per page to help defray the costs of
handling, copying and return postage.
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