GenCorp's net debt grows while cash shrinks in second quarter; board looking to grow shareholder value

By Jennifer Lanning Drey

Portland, Ore., June 30 - GenCorp Inc.'s net debt increased to $382 million during the second quarter, up from $354 million at Nov. 30, 2007, due in part to the company's required funding of a $35 million grantor trust established under the shareholder agreement the company entered into with Steel Partners II in March, Yasmin Seyal, GenCorp's chief financial officer, said Monday during the company's second-quarter earnings conference call.

The increase in net debt also reflects increased cash usage during the first half of the year, which was offset by proceeds from the sale of the company's Rio Del Oro property for $10 million in cash, as well as cash generation contributed by its Aerojet segment, she said.

GenCorp's cash balance was $58.8 million at the May 31 second-quarter end, down from $92.3 million at Nov. 30, 2007. The company had a zero balance on its $80 million revolving credit facility at quarter end.

During the second quarter, GenCorp inadvertently failed to register shares in its 401(k) employee benefit plan with the Securities and Exchange Commission. As a result, the company is preparing to make a registered rescission offer to eligible plan participants, Seyal said. GenCorp estimates it will spend between $6 million and $12 million of cash for the repurchase of the shares upon completion of the rescission offer.

GenCorp incurred a $900,000 charge in the second quarter related to the matter.

During the second quarter, GenCorp also incurred a $12.7 million charge resulting from the Steel Partners II shareholder agreement.

Evaluating options to increase value

As previously reported, GenCorp named three of Steel Partner II's nominees to its board under the shareholder agreement. The new members joined the board in March.

"The new board and management are working closely together to evaluate how to best enhance shareholder value and have begun the process of looking at various options and scenarios," J. Scott Neish, interim chief executive officer of GenCorp, said during Monday's call.

The company expects to be in a position to comment on its progress in late summer, he said.

GenCorp reported second-quarter net income of $6.9 million, compared to $12.5 million in the same period of 2007.

GenCorp is a Rancho Cordova, Calif., defense products manufacturer.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.