Exhibit 99.1
GenCorp Announces 3rd Quarter 2003 Results
SACRAMENTO, Calif., Oct. 6 /PRNewswire-FirstCall/ -- GenCorp Inc.
(NYSE: GY) today reported a third quarter 2003 loss of $2 million, or ($0.05)
per share, compared to earnings of $8 million, or $0.19 per share, for the
third quarter 2002. Earnings for the first nine months of 2003 were
$11 million, or $0.24 per share compared with $17 million, or $0.40 per share
last year. Compared with the prior year, pre-tax income from employee
retirement benefit plans was $9 million lower for the third quarter and
$28 million lower for the first nine months.
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Sales for the third quarter 2003 were $283 million, a 6% improvement over
the third quarter 2002. Sales for the first nine months of 2003 were
$869 million, a 6% improvement over last year. Sales increases for both
periods include the effect of Aerojet's acquisition in October 2002 of the
Redmond, Washington operations (the former General Dynamics Space Propulsion and
Fire Suppression business) as well as a $15 million real estate sale in the
third quarter.
"The third quarter was a difficult quarter for our GDX Automotive
business. GDX experienced greater than anticipated declines in volume and
also incurred higher than expected launch costs on new platforms. We are
disappointed in the performance of GDX and are taking immediate steps to
improve its results going forward. We anticipate that GDX will return to
profitability in the fourth quarter," said Terry Hall, president and chief
executive officer.
"Our other segments, Aerospace and Defense and Fine Chemicals, are
continuing their strong performance. Both segments are experiencing growing
demand for their products. We expect to close the acquisition of the
propulsion business of Atlantic Research Corporation within a few weeks. With
this acquisition, our Aerospace and Defense segment will strengthen its
position in the solid propulsion market."
Operations Review
GDX Automotive
GDX Automotive sales for the third quarter 2003 were $174 million, down 8%
from a year ago. Sales for the first nine months were $579 million, down 2%
from last year. Sales decreases reflect lower volumes and increased price
allowances to major customers, offset in part by favorable currency exchange
rates.
GDX Automotive reported an operating loss of $14 million for the third
quarter compared to operating income of $5 million in the third quarter 2002.
The unfavorable third quarter operating results reflect lower sales volumes,
increased price allowances, increased costs associated with the launch of new
vehicle platforms, unscheduled shutdowns due to OEM labor issues in Europe,
costs incurred with respect to personnel actions taken at GDX headquarters and
lower income from employee retirement benefit plans of $2 million for the
third quarter. In addition, during the third quarter GDX recorded a
$3 million charge related to the correction of accounting for certain customer
pricing allowances and vendor rebates. The transactions were not material to
the periods in which they were initially recorded.
Operating profit for the first nine months of 2003 was $7 million compared
to $25 million in the first nine months of 2002. Lower sales volumes,
increased price allowances and the effect of other impacts discussed above
contributed to the decline in operating income, as did lower income from
employee retirement benefit plans of $6 million. Operating profit for the
first nine months of 2003 included $2 million from favorable foreign currency
exchange rates.
Aerospace and Defense
Aerospace and Defense sales for the third quarter 2003 were $99 million,
up 57% from the third quarter 2002. Sales for the first nine months of 2003
were $246 million, up 22% over last year. Sales from the Redmond, Washington
operations contributed $16 million in the third quarter and $42 million in the
first nine months. Programs contributing to sales gains included liquid and
solid systems for Missile Defense applications, Boeing HyFly and Atlas V,
while lower volumes were experienced on various other programs, including NASA
programs. In addition, the sale of an existing office complex in the third
quarter contributed $15 million.
Operating profit for the third quarter 2003 was $21 million compared to
$14 million in the third quarter 2002. Operating profit for the first nine
months of 2003 was $41 million compared to $44 million last year. Operating
profit for the quarter and year to date reflect a $10 million gain on the sale
of real estate in the third quarter. Operating profit also reflects the
impact of contributions from the Redmond, Washington operations and increased
volumes on programs for liquid and solid systems for Missile Defense
applications, offset in part by decreased profit contributions from other
programs and lower income from employee retirement plans of $5 million for the
third quarter and $15 million for the first nine months of the year.
Contract backlog was $696 million at the end of the third quarter 2003
compared to $773 million as of November 30, 2002. Funded backlog, which
includes only those contracts for which money has been directly authorized by
the U.S. Congress, or for which a firm purchase order has been received from a
commercial customer, was $343 million at the end of the third quarter 2003
compared to $416 million as of November 30, 2002. The decrease in backlog is
primarily attributed to the Titan program which was restructured in the first
quarter 2003, reducing funded backlog by $58 million. Aerojet expects this
funding to be incrementally restored in future years.
Aerojet is awaiting regulatory approval of its proposed acquisition of the
propulsion business of Atlantic Research Corporation (ARC Propulsion), a
subsidiary of Sequa Corporation, and expects to complete the $133 million
acquisition in October 2003.
Fine Chemicals
Fine Chemicals sales in the third quarter totaled $12 million compared
to $13 million in the prior year. For the first nine months, sales were
$46 million compared to $28 million a year ago. As a contract manufacturer and
ingredient supplier to pharmaceutical and biotechnology companies, Fine
Chemicals' sales trends reflect, to a large extent, demand for its customers'
end products.
Operating profit for the third quarter was $2 million, compared to
$3 million in the prior year. The decline in operating profit reflects
slightly lower volumes and changes in product mix. For the first nine months
of 2003, operating profit was $8 million, compared to a loss of $1 million a
year ago. The operating profit improvements reflect higher sales volumes and
operating improvements.
Corporate and Other Expenses
Interest expense increased to $6 million in the third quarter 2003 from
$4 million in the prior year. For the first nine months, interest expense
increased to $17 million from $11 million last year. The increase is due
primarily to additional debt incurred for the acquisition of the Redmond,
Washington operations in October 2002.
Corporate and other expenses increased to $9 million in the third quarter
2003 from $6 million in the prior year. Corporate and other expenses
increased to $25 million in the first nine months of 2003, up $4 million from
a year ago. Increases are due primarily to lower income from employee
retirement benefit plans and increases in professional service fees and
compensation costs. Costs last year included $6 million in costs for the
accounting review of prior periods' results.
The third quarter income tax benefit includes $1 million in settlements
and reductions of prior estimates based on final tax filings in the quarter.
Other
During the third quarter, the Company issued $150 million in senior
subordinated notes to fund the pending acquisition of ARC Propulsion, of which
$50 million was used to repay amounts outstanding under the Company's
revolving credit facility, and $95 million is restricted to the acquisition of
ARC Propulsion or the repayment of term loans in the event the acquisition of
ARC does not close by December 31, 2003. The ARC Propulsion acquisition for
$133 million will be funded with the restricted cash balance of $95 million
and borrowings under the Company's revolving credit facility.
As of August 31, 2003, the Company had cash of $61 million, restricted
cash of $95 million and $97 million in availability under its credit
facilities.
Forward-Looking Statements
This earnings release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. All
statements in this release and in subsequent discussions with the Company's
management, other than historical information, may be deemed to be
forward-looking statements. These statements present (without limitation)
management's expectations, beliefs, plans and objectives, future financial
performance and assumptions underlying, or judgments concerning, the matters
discussed in such statements. A variety of factors could cause actual results
or outcomes to differ materially from those expected by the Company and
expressed in the Company's forward-looking statements. Some important risk
factors that could cause actual results or outcomes to differ from those
expressed in the forward-looking statements include, but are not limited to,
the following:
-- Legal and regulatory developments that may have an adverse impact on
the Company or its segments. For example: 1) the judgment order in the
amount of approximately $29 million entered November 21, 2002 against
GenCorp in GenCorp Inc. v Olin Corporation (U.S. District Court for
the Northern District of Ohio, Eastern Division), if it is upheld on
appeal and the reductions to which the Company believes it is entitled
are not realized; 2) restrictions on real estate development that
could delay the Company's proposed real estate development activities;
3) a change in toxic tort or asbestos litigation trends that is
adverse to the Company; and 4) changes in international tax laws or
currency controls.
-- Changes in Company-wide or business segment strategies, which may
result in changes in the types or mix of business in which the Company
is involved or chooses to invest.
-- Changes in U.S., global or regional economic conditions, which may
affect, among other things, 1) consumer spending on new vehicles which
could reduce demand for products from the GDX Automotive segment; 2)
customer funding for the purchase of Aerospace and Defense products
which may impact the segment's business base and, as a result, impact
its ability to recover environmental costs; 3) health care spending
and demand for the pharmaceutical ingredients produced by Fine
Chemicals; 4) the Company's ability to successfully complete its real
estate activities; and 5) the funded status and costs related to
employee retirement benefit plans.
-- Changes in U.S. and global financial markets, including market
disruptions, and significant currency or interest rate fluctuations,
which may impede the Company's access to, or increase the cost of,
external financing for its operations and investments and/or
materially affect results of operations and cash flows.
-- Risks associated with the Company's Aerospace and Defense segment's
being a defense contractor including: 1) the right of the U.S.
government to terminate any contract for convenience; 2) modification
or termination of U.S. government contracts due to lack of
congressional funding; and 3) the lack of assurance that bids for new
programs will be successful, contract options will be exercised or
follow-on contracts will be awarded in light of the competitive
bidding atmosphere under which most contracts are awarded.
-- Increased competitive pressures both domestically and internationally
which may, among other things, affect the performance of the Company's
businesses. For example, the automotive industry is increasingly
outsourcing the production of key vehicle sub-assemblies. Accordingly,
industry suppliers, such as the Company's GDX Automotive segment, will
need to demonstrate the ability to be a reliable supplier of
integrated components to maintain and expand their market share.
-- Labor disputes, which may lead to increased costs or disruption of
operations in the Company's GDX Automotive, Aerospace and Defense and
Fine Chemicals segments.
-- Changes in product mix, which may affect automotive vehicle
preferences and demand for the Company's GDX Automotive segment's
products.
-- Technological developments or patent infringement claims which may
impact the use of critical technologies in the Company's GDX
Automotive, Aerospace and Defense and Fine Chemicals segments leading
to reduced sales and/or increased costs.
-- An unexpected adverse result or required cash outlay in the toxic tort
cases, environmental proceedings or other litigation, or change in
proceedings or investigations pending against the Company.
These and other factors are described in more detail in the Company's
Annual Report on Form 10-K for the year ended November 30, 2002 and its
subsequent filings with the Securities and Exchange Commission. Additional
risks may be described from time-to-time in future filings with the U.S.
Securities and Exchange Commission. All such risk factors are difficult to
predict, contain material uncertainties that may affect actual results, and
may be beyond the Company's control.
GenCorp is a multi-national, technology-based manufacturer with operations
in the automotive, aerospace, defense and pharmaceutical fine chemicals
industries. Additional information about GenCorp can be obtained by visiting
the Company's web site at http://www.GenCorp.com.
Business Segment Information
GenCorp Inc.
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
2003 2002 2003 2002
(Dollars in millions, (Unaudited) (Unaudited)
except per share data)
Net Sales
GDX Automotive $174 $190 $579 $589
Aerospace and Defense 99 63 246 201
Fine Chemicals 12 13 46 28
Intersegment sales
elimination (2) -- (2) --
$283 $266 $869 $818
Income (Loss) from
Operations
GDX Automotive $(14) $5 $7 $25
Aerospace and Defense 21 14 41 44
Fine Chemicals 2 3 8 (1)
Unusual items -- -- -- (6)
Segment Operating Profit 9 22 56 62
Interest expense (6) (4) (17) (11)
Corporate and other
expenses (9) (6) (25) (21)
Unusual items -- -- -- (3)
Income (Loss) Before
Income Taxes (6) 12 14 27
Income tax (provision)
benefit 4 (4) (3) (10)
Net Income (Loss) $(2) $8 $11 $17
Basic and diluted
earnings (loss)
per common share: $(0.05) $0.19 $0.24 $0.40
Shares used for
calculation of earnings
per common share (in thousands):
Basic 43,478 42,919 43,234 42,788
Diluted 43,478 51,382 43,277 43,198
Capital expenditures $15 $17 $36 $31
Depreciation and
amortization $21 $18 $58 $48
Condensed Consolidated Balance Sheet
GenCorp Inc.
August 31, November 30,
(Dollars in millions) 2003 2002
(Unaudited)
Assets
Cash and equivalents $61 $48
Accounts receivable 113 139
Inventories, net 183 167
Recoverable from the U.S.
government and other third
parties environmental
remediation costs 24 24
Prepaid expenses and other 10 5
Total Current Assets 391 383
Restricted cash 95 --
Recoverable from U.S.
government and other third
parties for environmental remediation 192 208
Deferred income taxes -- 9
Prepaid pension asset 349 337
Goodwill, net 132 126
Property, plant and equipment, net 473 481
Other noncurrent assets, net 98 92
$1,730 $1,636
Liabilities and Shareholders' Equity
Short-term borrowings and current
portion of long-term debt $44 $22
Accounts payable 77 89
Reserves for
environmental remediation 39 39
Income taxes payable 15 22
Current deferred income taxes -- 1
Other current liabilities 194 200
Total Current Liabilities 369 373
Long-term debt, net of current portion 161 215
Subordinated notes 300 150
Reserves for environmental remediation 278 301
Postretirement benefits other than pensions 165 176
Other noncurrent liabilities 63 61
Total shareholders' equity 394 360
$1,730 $1,636
SOURCE GenCorp, Inc.
-0- 10/06/2003
/CONTACT: Yasmin Seyal, Senior Vice president & Chief Financial Officer,
+1-916-351-8585, or Linda Beech Cutler, Vice President, Corporate
Communications, +1-916-351-8650, both of GenCorp Inc./
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(GY)
CO: GenCorp, Inc.; Aerojet; GDX Automotive
ST: California
IN: CPR CHM ARO
SU: ERN