Exhibit 99.1
GenCorp Reports 2003 4th Quarter and Annual Results
SACRAMENTO, Calif., Jan. 28 /PRNewswire-FirstCall/ --
GenCorp Inc. (NYSE: GY) today reported net income for 2003 of $23 million
($0.53 per share) compared to net income of $30 million ($0.69 per share) for
2002. The decrease in earnings from 2002 was primarily driven by nominal,
non-cash pretax expense from employee retirement benefit plans in 2003
compared to income from employee retirement benefit plans in 2002, as well as
weak performance at GDX Automotive in 2003. In its other segments, the Company
had increased sales and improvements in operating performance, excluding
income (expense) from employee retirement benefit plans. Sales for 2003
totaled $1.2 billion compared to $1.1 billion in 2002.
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Net income for the fourth quarter totaled $13 million ($0.28 per share)
for 2003, the same as in 2002. Sales for the fourth quarter in 2003 were $323
million, compared to $317 million in 2002.
"With the exception of GDX Automotive, we are pleased with the 2003
operating performance of our businesses," said Terry L. Hall, chairman,
president and CEO.
"We continue to experience improved operating performance in our Aerospace
and Defense segment, driven by increased government spending on national
missile defense, tactical missiles and space exploration. Aerojet provided
propulsion systems for NASA's recent Mars exploration probe, and in December
2003 was awarded, as part of the Northrop Grumman and Raytheon team, a
significant role on the U.S. Missile Defense Agency's Kinetic Energy
Interceptors (KEI) program. In 2004, we expect continued growth in this
segment driven by strong government spending."
"Our GDX Automotive segment performance was disappointing. The $14 million
third quarter operating loss at GDX hurt the Company's performance in 2003.
GDX returned to profitability in the fourth quarter. Further actions are
required, however, to offset industry pricing pressures and bring operating
margins to acceptable levels. Our customer base has been broadened with new
awards from Chrysler, Toyota, Peugeot, Renault and Fiat. Also, a new joint
venture has been formed between GDX and Fuyao Glass Industry Group Co., Ltd.,
the largest automotive glass manufacturer in China. This new entity, along
with our existing business in China, will allow us to participate in the
anticipated growth of the Chinese automotive market. As we work on expanding
the business base, we have also started to consolidate GDX's manufacturing
capacity."
"Aerojet Fine Chemicals (AFC) experienced double-digit sales growth for
its third consecutive year as demand for its expertise in high containment and
chiral separation chemistry continues to grow. Sales volume has continued to
increase, and segment performance more than doubled in 2003 compared to 2002.
Expanding the pipeline of potential products has positioned AFC for continued
future growth. We expect revenues to continue to grow by 10% or more in 2004."
"At the same time, we are making progress in our goal to monetize the
Company's real estate holdings in California. We have filed applications for
zoning on a 1,400 acre mixed use project called "Easton." This project is
located on a portion of our property adjacent to Highway 50, east of the city
of Sacramento. In addition, we have also filed an application for zoning for a
2,700 acre project called Rio Del Oro. This project is on a portion of our
property located in the recently incorporated city of Rancho Cordova,
California. Although it will be several years before these large projects are
completed, given their scale, we believe this is an appropriate time to begin
presenting Real Estate as a separate business segment in our financial
reporting," concluded Mr. Hall.
Operations Review
Aerospace and Defense
Total Year
In October 2003, Aerojet completed the previously announced acquisition of
the propulsion business of Atlantic Research Corporation (ARC) for cash of
$144 million, including transaction costs. In October 2002, Aerojet completed
the acquisition of the assets of General Dynamics Ordnance and Tactical
Systems Space Propulsion and Fire Suppression business (referred to as the
Redmond, Washington operations).
Sales were $321 million for 2003, up 18% from 2002. The acquisitions
mentioned above contributed $68 million in increased sales as compared to the
prior year. Other programs that contributed to the increase in sales included
liquid and solid systems for missile defense applications, Boeing HyFly and
Atlas V; however, these increases were more than offset by declines in other
programs, including NASA programs substantially completed in 2002.
Segment performance was $43 million for 2003, compared to $44 million in
2002. Excluding the decrease in income from employee retirement benefit plans
and unusual items (described below), segment performance increased by
$13 million in 2003 compared to the prior year. The increase reflects the
impact of higher sales, improved margins on the Delta program and other
operating performance improvements.
In 2003, Aerojet recorded unusual charges of $5 million for costs
associated with ongoing efforts to settle a legal action with a water company
involving contaminated wells. In 2002, Aerojet recorded unusual charges of
$6 million for the final purchase price adjustment on the 2001 sale of its EIS
business and $6 million for the write-off of in-process R&D purchased as part
of the acquisition of the Redmond, Washington operations.
Fourth Quarter
Fourth quarter sales were $95 million, up 28% from 2002. The increase is
due largely to contributions to sales from the recent acquisitions discussed
above, partially offset by net lower sales volumes on other programs.
Fourth quarter segment performance in 2003 was $17 million compared to
$8 million in 2002. Excluding the decrease in income from employee retirement
benefit plans and unusual items, segment performance increased by $12 million
over the fourth quarter of 2002. The increase reflects the impact of higher
sales, improved margins on the Delta program, and other operating performance
improvements.
As of November 30, 2003, Aerojet's contract backlog was $831 million,
compared to $773 million as of November 30, 2002. Funded backlog, which
includes only the amount of those contracts for which money has been directly
authorized by the U.S. Congress, or for which a firm purchase order has been
received by a commercial customer, was approximately $425 million as of
November 30, 2003, compared to $416 million as of November 30, 2002.
Real Estate
The Real Estate segment manages activities related to the development,
sale and leasing of the Company's real estate assets. Real Estate sales and
segment performance for 2003 were $32 million and $23 million, respectively,
compared to $6 million and $3 million, respectively, for 2002. The 2003
results included sales of a 96,000 square foot office complex on 11 acres in
Sacramento County for $15 million, 20 acres of land sold to local automobile
dealers for $6 million, and other smaller asset sales. Results in 2002
reflected only leasing activity.
Fine Chemicals
Total Year
Sales for 2003 were $58 million, up 12% from 2002. As a contract
manufacturer and ingredient supplier to pharmaceutical and biotechnology
companies, AFC's sales trends reflect, to a large extent, demand for its
customers' end products.
Segment performance for 2003 was $8 million compared to $3 million for
2002. The increase reflects higher sales volumes, operational improvements and
higher capacity utilization. Segment performance for 2003 also includes fees
of $2 million paid by a customer to settle a matter involving minimum purchase
requirements.
Fourth Quarter
Fourth quarter sales were $12 million, down 50% from 2002. The decrease
reflects the timing of production activities and when sales from those
activities are recognized.
Fourth quarter segment performance for 2003 was break-even compared to
$4 million in the prior year. The decrease reflects lower sales volumes and
changes in product mix.
As of November 30, 2003, AFC's backlog was $57 million. This amount
represents the unfilled sales value of firm customer purchase orders.
GDX Automotive
Total Year
Sales were $786 million in 2003, down 3% from 2002. The decrease reflects
lower production volumes and increased pricing concessions to major customers
in North America, partially offset by the effect of favorable currency
exchange rates.
Segment performance for 2003 was $8 million compared to $36 million in
2002. Excluding the expense from employee retirement benefit plans and asset
impairments in 2003, and income from employee retirement benefit plans and
restructuring charges in 2002, segment performance decreased by $15 million in
2003 compared to the prior year. Segment performance was negatively impacted
by volume decreases, pricing concessions, and higher material and labor costs.
Favorable exchange rates contributed $4 million to segment performance.
During 2003, GDX recorded an asset impairment charge of $6 million related
to the closure of one of its manufacturing facilities in France. During 2002,
GDX recorded a restructuring charge of $2 million.
Fourth Quarter
Fourth quarter sales were $207 million, down 5% from 2002. The decrease in
sales reflects lower volumes and increased pricing concessions to major
customers, offset in part by favorable currency exchange rates.
Fourth quarter segment performance for 2003 was $1 million compared to
$11 million in the prior year. Excluding the expense from employee retirement
benefit plans and asset impairments in 2003, and the income from employee
retirement benefit plans and restructuring charges in 2002, segment
performance decreased by $4 million compared to the fourth quarter of 2002.
The decline in segment performance reflects lower volumes due to major vehicle
platform transitions, new production start-up costs, and the impact of pricing
concessions, partially offset by lower production costs and favorable foreign
exchange rates.
Other Information
Interest expense increased to $28 million in 2003 from $16 million in 2002
due to higher debt levels and higher interest rates. Average debt balances
during 2003 were approximately $436 million compared to $285 million during
2002. The Company's average interest rates increased to 6.3 percent in 2003
from 5.2 percent in 2002. Long-term debt increased from $387 million as of
November 30, 2002 to $538 million as of November 30, 2003, due largely to debt
incurred to finance the acquisition of ARC.
As of November 30, 2003, the Company had cash of $64 million and
availability under its credit facilities of $62 million.
Corporate and other expenses increased in 2003 to $33 million from
$31 million in 2002. The increase is primarily due to increases in
professional service fees and compensation costs. Costs last year included
$6 million for the accounting review of prior periods' results. Corporate and
other expenses included amortization of debt financing costs of $5 million in
2003 and $4 million in 2002.
In 2002, the Company recorded unusual charges of $1 million related to the
write-off of bank fees associated with the termination of a term loan and
$2 million related to certain agreements that were part of the transaction to
reacquire a 40 percent minority interest in Aerojet Fine Chemicals from
NextPharma Technologies USA.
The Company had a net income tax benefit in 2003 resulting from foreign
and domestic federal, state and provincial tax settlements, and the plant
shutdown in France. The Company's tax provision in 2002 was favorably impacted
by income tax settlements and a charitable gift of real property.
Business Outlook
The following forward-looking statements are based on current expectations
and assumptions. Actual results may differ materially. These statements do not
include the potential impact of any mergers, acquisitions, asset sales or
other strategic transactions that may be completed during 2004.
The Company expects sales to increase in 2004, driven primarily by the
inclusion of the operations of ARC for a full year.
The Company also expects to incur a net loss in 2004 as a result of
non-cash, pre-tax expense from employee retirement benefit plans of
approximately $55 million, compared to nominal non-cash, pre-tax expense in
2003. The expected change in pre-tax employee retirement benefit expense in
2004 is primarily due to the recognition of the under performance of our U.S.
pension plan assets resulting from lower market investment returns in 2001 and
2002, and a decrease in the discount rate due to lower interest rates.
The Company uses a five-year period to recognize gains and losses on
pension plan assets. The Company's U.S. pension plans remain over funded and
the Company does not expect to have to make any net cash contributions in
2004.
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. The words "believe," "estimate," "anticipate,"
"project" and "expect," and similar expressions, are intended to identify
forward-looking statements. Forward-looking statements involve certain risks,
estimates, assumptions and uncertainties, including with respect to future
sales and activity levels, cash flows, contract performance, the outcome of
litigation and contingencies, environmental remediation and anticipated costs
of capital. 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 a 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 U.S. 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 technology-based manufacturer with positions in the aerospace
and defense, pharmaceutical fine chemicals, real estate and automotive
industries. Additional information about GenCorp can be obtained by visiting
the Company's web site at www.GenCorp.com.
Consolidated Statement of Income
GenCorp Inc.
Three Months Ended Year Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
(Dollars in millions, 2003 2002 2003 2002
except per-share data)
(Unaudited) (Unaudited)
Net Sales $323 $317 $1,192 $1,135
Costs and Expenses:
Cost of products sold 260 265 979 935
Selling, general and administrative 25 10 86 55
Depreciation and amortization 23 16 81 66
Interest expense 11 5 28 16
Other (income) expense, net (4) (2) (5) 4
Restructuring charges -- 2 -- 2
Unusual items, net 3 6 5 15
Income Before Income Taxes 5 15 18 42
Income tax benefit (provision) 8 (2) 5 (12)
Net Income $13 $13 $23 $30
Basic earnings per common share: $0.30 $0.30 $0.53 $0.71
Diluted earnings per common share: $0.28 $0.28 $0.53 $0.69
Shares used for calculation of earnings
per common share (in thousands):
Basic 43,685 42,971 43,347 42,830
Diluted 51,966 51,174 43,409 48,562
Capital expenditures $13 $14 $49 $45
Business Segment Information
GenCorp Inc.
Three Months Ended Year Ended
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
(Dollars in millions, 2003 2002 2003 2002
except per-share data)
(Unaudited) (Unaudited)
Net Sales:
Aerospace and Defense $95 $74 $321 $271
Real Estate 12 2 32 6
Fine Chemicals 12 24 58 52
GDX Automotive 207 217 786 806
Intersegment sales elimination (3) -- (5) --
Total $323 $317 $1,192 $1,135
Segment Performance:
Aerospace and Defense $20 $8 $45 $32
Retirement benefit plan income -- 6 3 24
Unusual items (3) (6) (5) (12)
Aerospace and Defense Segment
Performance 17 8 43 44
Real Estate Segment Performance 10 1 23 3
Fine Chemicals Segment Performance -- 4 8 3
GDX Automotive 8 12 18 33
Retirement benefit plan
income (expense) (1) 1 (4) 5
Asset impairment charge (6) -- (6) --
Restructuring -- (2) -- (2)
GDX Automotive Segment Performance 1 11 8 36
Total Segment Performance 28 24 82 86
Interest expense (11) (5) (28) (16)
Corporate retirement benefit plan
income (expense) (1) 1 (3) 6
Corporate and other expenses (11) (5) (33) (31)
Unusual items -- -- -- (3)
Income Before Income Taxes 5 15 18 42
Income tax benefit (provision) 8 (2) 5 (12)
Net Income $13 $13 $23 $30
Segment performance represents net sales from continuing operations less
applicable costs, expenses, retirement benefit plan income (expense), and
provisions for restructuring and unusual items relating to operations. Segment
performance excludes corporate retirement benefit plan income (expense),
corporate income and expenses, provisions for unusual items not related to the
operations, interest expense, income taxes and minority interest.
Condensed Consolidated Balance Sheet
GenCorp Inc.
Nov. 30, Nov. 30,
(Dollars in millions) 2003 2002
(Unaudited)
Assets
Cash and equivalents $64 $48
Accounts receivable 176 139
Inventories, net 211 167
Recoverable form U.S. government and other
third parties for environmental remediation 37 24
Current deferred income tax 7 --
Prepaid expenses and other 21 5
Total Current Assets 516 383
Property, plant and equipment, net 530 481
Recoverable from U.S. government and other
third parties for environmental remediation 183 208
Deferred income taxes 10 9
Prepaid pension asset 345 337
Goodwill, net 197 126
Other noncurrent assets, net 126 92
$1,907 $1,636
Liabilities and Shareholders' Equity
Short-term borrowings and current portion
of long-term debt $52 $22
Accounts payable 114 89
Reserves for environmental remediation 53 39
Income taxes payable 24 22
Current deferred income taxes -- 1
Other current liabilities 243 200
Total Current Liabilities 486 373
Long-term debt, net of current portion 486 365
Postretirement benefits other than pensions 162 176
Reserves for environmental remediation 262 301
Other noncurrent liabilities 82 61
Total shareholders' equity 429 360
$1,907 $1,636
SOURCE GenCorp Inc.
-0- 01/28/2004
/CONTACT: investors, Yasmin Seyal, senior vice president & chief
financial officer, +1-916-351-8585, or media, Linda Beech Cutler, vice
president, Corporate Communications, +1-916-351-8650, both of GenCorp Inc./
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/Web site: http://www.gencorp.com/
(GY)
CO: GenCorp Inc.
ST: California
IN: ARO HEA MTC CHM RLT AUT
SU: ERN