Exhibit 99.1
GenCorp Reports 2004 2nd Quarter Results
2nd Quarter Highlights
- 35% increase in sales from continuing operations this quarter compared
with last year's second quarter. Aerospace & Defense sales rise 52%
with the contribution of the October 2003 ARC acquisition.
- GDX Automotive becomes discontinued operation in anticipation of sale,
and a one-time charge of $261 million recorded. $6.25 loss per diluted
share from discontinued operations.
SACRAMENTO, Calif., July 15 /PRNewswire-FirstCall/ -- GenCorp Inc.
(NYSE: GY) today reported sales from continuing operations for the second
quarter 2004 of $136 million, compared to $101 million for the second quarter
2003, an increase of 35%. Sales for the first six months of 2004 were
$260 million compared to $181 million for the first six months of 2003, an
increase of 44%. Sales increases in both periods primarily reflect
contributions by the propulsion business of Atlantic Research Corporation
(ARC) acquired in October 2003. Both periods reflect the GDX Automotive
segment classified as a discontinued operation as a result of the Company's
announced plans to sell the business. In connection with these plans, the
Company recorded a one-time charge of $261 million at the end of the second
quarter 2004.
Including the charge, the Company reported a net loss of $312 million
($7.06 per share) for the second quarter 2004 compared to net income of
$10 million ($0.22 per share) for the second quarter 2003. The loss from
continuing operations for the second quarter 2004 was $36 million ($0.81 per
share), compared to income of $1 million ($0.02 per share) for the second
quarter 2003. The decrease in earnings from the 2003 period is the result
primarily of a $13 million increase in non-cash pretax expense from employee
retirement benefit plans, as well as higher interest expense associated with
higher debt levels, including amounts incurred to finance the ARC acquisition,
and a tax provision to reflect the uncertainty of realizing deferred tax
benefits, given historical losses. The net loss for the first six months of
2004 was $331 million ($7.51 per share), including the loss from discontinued
operations, compared to net income of $13 million ($0.30 per share) for the
first six months of 2003. The loss in the first half of 2004 from continuing
operations was $45 million ($1.03 per share) compared to income of $2 million
($0.06 per share) in 2003. The decrease in earnings for the first half of
2004 includes a $26 million increase in non-cash pretax expense from employee
retirement benefit plans, higher interest expense, and the tax provision
impact as described above.
"We are beginning an important new phase in GenCorp's history, with our
plans to sell our GDX Automotive business. We are transforming ourselves into
a strategically focused corporation that aims to deliver better returns on our
capital than we have been able to do in the recent past," said Terry L. Hall,
chairman of the Board, president and chief executive officer.
"Our Aerospace & Defense business continues to experience steady
performance improvement and increasing business opportunities. To date, we
have successfully integrated the ARC business. In addition, we were able to
further strengthen our capabilities and market position with the acquisition
last month of the THAAD and MK-72 programs and related assets from Pratt &
Whitney Space Propulsion."
Hall continued, "Taken together, these acquisitions expand our
participation in bedrock aerospace and defense programs that are expected to
be in production for many years to come. At the same time, we continue our
efforts to unlock the value of our considerable real estate holdings in the
suburban Sacramento community."
Operations Review
Aerospace and Defense Segment
Second quarter 2004 sales increased to $125 million compared to
$82 million in the second quarter 2003. Sales for the first six months of
2004 were $238 million compared to $144 million last year. The increases
include sales generated by the acquired ARC business of $42 million in the
second quarter and $81 million for the first six months.
Second quarter segment performance in 2004 was $8 million compared to
$10 million in 2003. Excluding the effect of employee retirement benefit plan
income or expense, second quarter segment performance was $15 million in 2004
compared to $9 million in 2003. For the first six months of 2004, segment
performance was $12 million compared to $18 million in 2003. Excluding the
effect of employee retirement plan income or expense, segment performance for
the first six months was $26 million in 2004 compared to $16 million in 2003.
For both the second quarter and the first six months, the increase reflects
the impact of higher sales, favorable contract performance and net positive
changes in program mix.
During the second quarter of 2004, an Aerojet/Roxel U.K. team was selected
by Lockheed Martin to supply the rocket motor for the Joint Common Missile
(JCM) program. The U.S. Army, Navy and Marine Corps are expected to procure
up to 54,000 JCM rounds, which are forecasted to be in use by 2010. The
Company expects a contract award for the system design and development phase
during the third quarter of 2004.
As of May 31, 2004, Aerojet's contract backlog was $876 million compared
to $830 million as of November 30, 2003. 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 $504 million as of May 31, 2004,
compared to $425 million as of November 30, 2003.
Real Estate Segment
The Company did not sell any real estate assets in the first six months of
either 2004 or 2003. Segment performance, consisting of income from leasing
activities, was $1 million in both second-quarter periods, and $2 million in
both six-month periods.
Fine Chemicals Segment
Second quarter 2004 sales were $13 million compared to $17 million for the
second quarter 2003. For the first six months, sales were $26 million compared
to $34 million last year. The decrease reflects the timing of sales of large
production orders with extended manufacturing schedules. Currently, Fine
Chemicals is expected to run at full capacity for the remainder of the fiscal
year, and is expected to have improved segment performance for the last two
quarters of 2004.
Second quarter segment performance in 2004 was break-even compared to
$4 million in the prior year period. Segment performance was also break-even
for the first six months, compared to $6 million in the first six months of
2003.
As of May 31, 2004, Fine Chemicals' backlog was $48 million compared to
$57 million as of November 30, 2003.
Additional Information
Interest expense increased to $8 million in the second quarter 2004 from
$5 million in 2003. Interest expense increased to $16 million in the first six
months of 2004 from $9 million in the first six months of 2003. The increase
in both periods is due to higher debt levels and higher average interest
rates. Additional debt includes amounts incurred to finance the ARC
acquisition.
Total debt increased from $538 million as of November 30, 2003 to $595
million as of May 31, 2004 and cash decreased from $64 million as of November
30, 2003 to $51 million as of May 31, 2004. The increase in net debt reflects
increased working capital needs in the first six months of 2004 for Aerojet,
Fine Chemicals and discontinued operations, partially offset by the full
payment of an outstanding receivable in the amount of $20 million for a land
sale in 2001.
As of May 31, 2004, the Company had availability under its credit
facilities of $89 million, including $8 million related to discontinued
operations, compared to $63 million, including $11 million related to
discontinued operations, as of November 30, 2003.
Corporate and other expenses were $8 million in the second quarter of 2004
compared to $10 million in the second quarter of 2003, and $15 million for the
first six months of both 2004 and 2003.
An income tax provision relating to continuing operations of $24 million
for the second quarter of 2004 and $18 million for the first six months of
2004 was recorded to reflect the uncertainty of realizing the deferred tax
benefits, given historical losses. Similarly, no tax benefit has been
included in the charge related to the classification of the GDX Automotive
business as a discontinued operation, as realization is also uncertain.
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) the
expectations, beliefs, plans and objectives of management and 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 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 Company's operations and
financial condition could be adversely impacted if 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), is upheld on appeal and the offsets 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; or 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) customer funding for the purchase of aerospace
and defense products, which may impact the Aerospace and Defense segment's
business base and, as a result, impact its ability to recover environmental
costs; 2) healthcare spending and demand for the pharmaceutical ingredients
produced by the Fine Chemicals segment; 3) the Company's ability to
successfully complete its real estate activities; and 4) the funded status and
costs related to the Company's employee retirement benefit plans;
-- risks associated with the Company's Aerospace and Defense segment's
role as 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, or that
customers will exercise contract options or seek or follow-on contracts with
the Company due to the competitive marketplace in which the Company competes;
-- changes in U.S. and global financial and equity markets, including
market disruptions and significant currency or interest rate fluctuations,
that may impede the Company's access to, or increase the cost of, external
financing for its operations and investments or materially affect the
Company's results of operations and cash flows;
-- increased competitive pressures, which may, among other things, affect
the performance of the Company's Aerospace and Defense and Fine Chemicals
segments, as well as the GDX Automotive discontinued operations;
-- labor disputes, which may lead to increased costs or disruption of
operations in the Company's Aerospace and Defense, and Fine Chemicals
segments, as well as the GDX Automotive discontinued operations;
-- technological developments or patent infringement claims; which may
impact the use of critical technologies in the Company's Aerospace and
Defense, and Fine Chemicals segments, as well as its GDX Automotive
discontinued operations, leading to reduced sales 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;
-- other risks associated with the GDX Automotive discontinued operations,
such as, 1) changes in U.S., global or regional economic conditions, which may
affect, among other things, consumer spending on new vehicles thereby reducing
demand for products made by the GDX Automotive business; 2) increased
outsourcing of production of key vehicle sub-assemblies requiring industry
suppliers, such as the GDX Automotive business, to demonstrate the ability to
be reliable supplier of integrated components to maintain and increase market
share; and 3) changes in product mix, which may affect automotive vehicle
preferences and demand for GDX Automotive's products; and
-- risks attendant to the sale of the GDX Automotive business, including
the ability of the Company to identify a buyer for the business as well as the
timing and terms of any proposed sale and its ultimate consummation.
This list of factors that may affect future performance and the accuracy
of forward-looking statements is illustrative, but by no means exhaustive.
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, 2003 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. Accordingly, all forward-looking statements should be
evaluated with the understanding of their inherent uncertainty. 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 Six Months Ended
(Dollars in millions, except May 31, May 31, May 31, May 31,
per share amounts) 2004 2003 2004 2003
(Unaudited) (Unaudited)
Net Sales $136 $101 $260 $181
Costs and Expenses:
Cost of products sold 115 78 224 137
Selling, general and administrative 15 10 28 19
Depreciation and amortization 10 8 20 17
Interest expense 8 5 16 9
Other income, net -- -- (1) (3)
Income (loss) from continuing
operations before income taxes (12) -- (27) 2
Income tax benefit (provision) (24) 1 (18) --
Income (loss) from continuing
operations (36) 1 (45) 2
Income (loss) from discontinued
operations, net of tax (276) 9 (286) 11
Net (Loss) Income $(312) $10 $(331) $13
Income (Loss) Per Share of Common
Stock
Basic and Diluted:
Income (loss) per share from
continuing operations $(0.81) $0.02 $(1.03) $0.06
Income (loss) per share from
discontinued operations (6.25) 0.20 (6.48) 0.24
Income (loss) per share $(7.06) $0.22 $(7.51) $0.30
Basic and Diluted:
Weighted average shares of common
stock outstanding 44.2 43.2 44.0 43.1
Capital expenditures from
continuing operations $5 $2 $9 $4
Business Segment Information
GenCorp Inc.
Three Months Ended Six Months Ended
(Dollars in millions, except May 31, May 31, May 31, May 31,
per-share data) 2004 2003 2004 2003
(Unaudited) (Unaudited)
Net Sales:
Aerospace and Defense $125 $82 $238 $144
Real Estate 2 2 3 3
Fine Chemicals 13 17 26 34
Intersegment sales elimination (4) -- (7) --
Total $136 $101 $260 $181
Segment Performance:
Aerospace and Defense $15 $9 $26 $16
Retirement benefit plan income
(expense) (7) 1 (14) 2
Aerospace and Defense Segment
Performance 8 10 12 18
Real Estate Segment Performance 1 1 2 2
Fine Chemicals Segment
Performance -- 4 -- 6
Total Segment Performance 9 15 14 26
Interest expense (8) (5) (16) (9)
Corporate retirement benefit
plan expense (5) -- (10) --
Corporate and other expenses (8) (10) (15) (15)
Income (Loss) from continuing
operations before income taxes $(12) $-- $(27) $2
Segment performance excludes corporate retirement benefit plan income
(expense), corporate income and expenses, interest expense, income taxes, and
discontinued operations.
Condensed Consolidated Balance Sheet
GenCorp Inc.
May 31, November 30,
(Dollars in millions) 2004 2003
(Unaudited)
Assets
Cash and equivalents $51 $64
Accounts receivable 91 92
Inventories, net 197 170
Recoverable form U.S. government and other
third parties for environmental remediation 32 37
Current deferred tax asset -- 2
Prepaid expenses and other 8 14
Assets of discontinued operations 319 571
Total Current Assets 698 950
Property, plant and equipment, net 211 217
Recoverable from U.S. government and other
third parties for environmental remediation 176 183
Prepaid pension asset 302 320
Goodwill, net 103 100
Deferred income taxes -- 17
Other noncurrent assets, net 107 120
$1,597 $1,907
Liabilities and Shareholders' Equity
Short-term borrowings and current portion of
long-term debt $28 $52
Accounts payable 29 41
Reserves for environmental remediation 47 53
Income taxes payable 41 23
Other current liabilities 158 181
Liabilities of discontinued operations 154 160
Total Current Liabilities 457 510
Long-term debt, net of current portion 567 486
Postretirement benefits other than pensions 148 148
Reserves for environmental remediation 250 262
Other noncurrent liabilities 76 73
Total shareholders' equity 99 428
$1,597 $1,907
SOURCE GenCorp Inc.
-0- 07/15/2004
/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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(GY)
CO: GenCorp Inc.
ST: California
IN: ARO CPR CHM AIR
SU: ERN CCA