1998 Annual Report - GenCorp Machine
Annual Report Contents| ALIGNING THE PARTS... |
GenCorp will continue to operate Aerojet's aerospace, defense and fine chemicals businesses, and the automotive Vehicle Sealing business. |
AEROJET
Major aerospace and defense contractor with growing market positions in key product segments
Space surveillance and defense electronics
Competitive and growing position in the design, development, test and manufacture of satellite sensors (infrared, microwave, millimeter-wave), data fusion/processing and ground station units for space and earth sensing systems
Strategic and Space Propulsion
World-recognized for design, development and manufacture of liquid propellant rocket engines and solid propellant rocket motors for satellite launch vehicles, strategic missiles and satellite orbital transfer and attitude control systems
Smart Munitions/Tactical Defense and Armaments
Leader in multi-sensor munitions, warheads, tactical missile motors, divert and attitude control systems, infrared sensor cooling systems and advanced smart propulsion systems
Fine Chemicals
Rapidly growing supplier to the pharmaceutical industry
Outstanding 1998 results add to impressive trend of improved performance
- Sales increase of 15% in 1998
- Operating profit improved 24% in 1998
- Margins now at 10%
New Contract Awards Drive Value-Creating Growth
- Significant new contract awards in 1998 total $505 million over life of
programs
- Substantial contract backlog at year-end of $1.7 billion
A Year Highlighted by Significant Accomplishments
In Space Surveillance...
- Continued outstanding performance on the Space-Based Infrared System (SBIRS)
High program as part of the Lockheed Martin-led contractor team
Aerojet has a key role in ground systems for satellite control, missile data processing, telemetry and tracking, and is providing the primary payload for this new space surveillance early warning system, the next generation system for the 25-year Defense Support Program
SBIRS expected to generate $780 million in sales during the initial development phase alone and will continue for decades
SBIRS ensures Aerojet's role as long-term player in U.S. space surveillance
Outstanding performance continues on SBIRS (above), the next generation space surveillance early warning system.
- Successfully completed production of sensors for the Defense Support Program
with delivery of sensor 23...$42 million in 1998
- Earned Defense Support Program post production award fee of 100%
- First Advanced Microwave Sounding Unit (AMSU) launched successfully on NOAA-K weather satellite... which is now providing temperature and water vapor profiles for worldwide weather forecasting
In Smart Munitions/Tactical Systems...
- $9.6 million contract received for second phase development of the U.S.
Army's MPIM/SRAW warhead, used to effectively defeat bunkers
- New $9 million contract win for production of the TOW 2A warhead, an anti-armor weapon
Breaking News Entering 1999...
- Lockheed names Aerojet its solid propulsion contractor for the new Atlas V
In Propulsion...
- Successful negotiations completed for $232 million on Titan II and Titan
IV contracts
Titan award fees of 100% and 97% earned in 1998
- Received contract awards in excess of $25 million for improvements and initial production of the forward boom for the U.S. Air Force's new F-22 Raptor fighter
- Over $16 million awarded for the de-orbit propulsion stage for NASA's X-38 technology demonstrator vehicle - a prototype spacecraft that could lead to development of an emergency return vehicle for the Space Station crew
- Delivered first reaction control system hardware for NASA's X-33 reusable single-stage-to-orbit launch vehicle
- Milestone delivery of first 16 thrust modules for the Air Force's Milstar satellite, a joint service satellite communications system
- Successfully test fired the first U.S.-modified NK-33 Russian engine targeted to power the Kistler Aerospace K-1 commercial launch vehicle and future launch vehicles
Major Progress on Other Fronts
- Final agreement reached with Air Force increasing environmental cost recovery for Sacramento and Azusa, California sites from 65% to 88%
- Moving forward with good speed on excess land carve-outs at Sacramento site...
Initial conservative estimates for revenue from future land sales estimated at over $100 million
Excellent momentum for continued strong sales and operating profit growth
AEROJET FINE CHEMICALS
Rapidly growing custom manufacturer of fine chemicals, intermediates, and bulk active materials primarily for the pharmaceutical industry... specializing in difficult chemistries using energetic and potentially hazardous materials
- Leveraging 30-plus years of demonstrated expertise in highly engineered chemical solutions and handling of potentially hazardous materials at highly specialized facilities in Sacramento, California
Experiencing tremendous growth
- Sales increased in excess of 100% in 1998
- Partnered with pharmaceutical companies on five major new drug applications for emerging medical breakthroughs
Anti-HIV/AIDs...Anti-Inflammatory...
Anti-Cancer...Epilepsy...Flu/Antiviral
Continuing aggressive investment program in facilities and technology
- Completed in 1998 new World Class drying facility capable of isolating
and drying bulk active pharmaceutical ingredients
Plans to further expand drying facility in 1999
- Significantly expanded reactor capacity in 1998
- New computer-controlled azide pilot plant added in 1998
- Multi-purpose pilot facility completed 1998
- New multi-purpose production facility scheduled for 1999
- Simulated Moving Bed Chromatography system planned for staged installation 1998 to early 2000
Future outlook is for exciting continued growth opportunities
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Vehicle Sealing
Leading North American producer of engineered sealing systems that prevent wind, noise, and water leaks and emission intrusion in passenger cars, sport utility vehicles and lightweight trucks
Growing international presence through European subsidiary offers additional capability in molded rubber and rubber-to-metal parts, and encapsulated glass
- Strong number two full service supplier in North America
- Industry leading design and engineering capability
- Competitive strategy based on low cost, highly engineered sealing systems
in the lightweight truck and sport utility vehicle market segments
Lightweight truck and sport utility vehicle segments represent over 80% of business base...key supplier on many of the "top ten" sellers: Ford Explorer, F-Series pickup, Ranger, Chevy C/K pickup
Fastest growing market, most popular with consumers, most profitable
Strong track record of obtaining follow-on programs - 13 new programs launched in 1998, with annualized new sales of $220 million
Several new launch programs slated for 1999
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1998 a key transition year
- Additional costs necessary to launch new vehicle platforms
- Weathered strike at General Motors
- Exited non-strategic, non-profitable Plastic Extrusions appliance gasket
business, eliminating $3 million drag on performance
- Recruited new management team
Well positioned for 1999 and beyond
- New program launch costs subside and production volumes build significantly
as new programs mature
- Sales increase significantly with higher volumes from new programs
- Profitability increasing throughout 1999
- Further improvements realized through keen focus on internal cost reductions
- Expect profit margins to approach historical levels by year-end
| "The spin-off will provide renewed vitality and opportunity by creating two strong, focused and growing companies with enhanced potential to generate even greater value in the future...It will occur at an opportune time, when businesses within each company are experiencing continued solid performance. Each has created exceptional momentum for growth going forward." |
Financial Highlights || Message
to Our Shareholders
The New Machine || The
GenCorp Machine || Financial Information
Annual Report Contents