EXHIBIT 99.1
GenCorp Inc.
Unaudited Pro Forma Combined Consolidated Financial Statements
The following unaudited pro forma combined consolidated financial statements
have been prepared to reflect the sale of Aerojet's EIS business unit and the
previously disclosed December 2000 acquisition of The Laird Group's Draftex
International Car Body Seals Division (Draftex). The unaudited pro forma
combined consolidated statements of operations have been prepared as if both of
these transactions occurred on December 1, 1999, while the unaudited pro forma
combined consolidated balance sheet has been prepared as if both of these
transactions occurred on August 31, 2001.
The Draftex acquisition was accounted for under the "purchase method". Under
this method of accounting, the assets acquired and liabilities assumed were
recorded at estimated fair values. A final allocation is expected to be made in
late 2001 after negotiations with the seller as to any purchase price
adjustments have been completed. The final valuation of the assets acquired and
liabilities assumed in connection with the acquisition may differ significantly
from the estimates reflected in the pro forma financial statements.
The unaudited pro forma financial statements and other data have been prepared
based on preliminary estimates, available information and the assumptions
described in the notes thereto and may be revised as additional information
becomes available. The unaudited pro forma combined consolidated financial
statements should be read in conjunction with the Draftex combined consolidated
consolidated financial statements and notes thereto, and GenCorp's historical
consolidated financial statements included in its Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q as filed with the Securities and Exchange
Commission. The following unaudited pro forma financial statements and other
data do not purport to be indicative of the financial position or results of
operations that would have been reported had the transactions been effected on
the dates indicated, or which may be reported in the future. The unaudited pro
forma financial information does not give effect to anticipated cost savings or
incremental costs that may occur as a result of restructuring, integration and
consolidation of the Draftex operations.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED ENDED NOVEMBER 30, 2000
(dollars in millions except per share data, shares in thousands)
Historical
---------------------------------- Pro Forma Pro Forma
GenCorp Draftex EIS Adjust. (l) Combined
------------------------------------------------ ------------
Net Sales $ 1,047 $ 437 $ 323 $ - $ 1,161
Costs and expenses
Cost of products sold 855 421 278 - 998
Selling, general and administrative 40 9 5 - 44
Depreciation and amortization 50 14 11 3 (a)(b) 56
Interest expense 18 2 - (1) (c) 19
Other (income) expense, net (12) 12 - (9) (d) (9)
Foreign exchange (gain) loss 8 - - (8) (e) -
Unusual items, net (4) 11 - - 7
------------------------------------------------ ------------
955 469 294 (15) 1,115
------------------------------------------------ ------------
Income (loss) from continuing operations
before income taxes 92 (32) 29 15 46
Income tax (provision) benefit (37) (1) (12) (6) (f) (32)
------------------------------------------------ ------------
Income (loss) from continuing operations $ 55 $ (33) $ 17 $ 9 $ 14
================================================ ============
Earnings per share:
Basic $ 1.31 $ 0.33
============ ============
Diluted $ 1.31 $ 0.33
============ ============
Shares used to compute earnings per share:
Basic 41,933 41,933
============ ============
Diluted 42,052 42,052
============ ============
The accompanying notes are an integral part of these
pro forma financial statements.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED AUGUST 31, 2001
(dollars in millions except per share data, shares in thousands)
Historical
---------------------------------- Pro Forma Pro Forma
GenCorp Draftex EIS Adjust. (l) Combined
------------------------------------------------ ------------
Net Sales $ 1,119 $ 36 $ 348 $ - $ 807
Costs and expenses
Cost of products sold 972 34 303 - 703
Selling, general and administrative 34 - 4 - 30
Depreciation and amortization 59 1 10 (2) (a)(b) 48
Interest expense 28 - - (14) (c) 14
Other (income) expense, net (9) - - - (9)
Foreign exchange (gain) loss (11) - - 11 (d) -
Restructuring charge 19 - - - 19
Unusual items, net 8 - - - 8
------------------------------------------------ ------------
1,100 35 317 (5) 813
------------------------------------------------ ------------
Income (loss) from continuing operations
before income taxes 19 1 31 5 (6)
Income tax (provision) benefit 6 - (13) (2) (f) 17
------------------------------------------------ ------------
Income (loss) from continuing operations $ 25 $ 1 $ 18 $ 3 $ 11
================================================ ============
Earnings per share:
Basic $ 0.59 $ 0.26
============ ============
Diluted $ 0.59 $ 0.26
============ ============
Shares used to compute earnings per share:
Basic 42,134 42,134
============ ============
Diluted 42,544 42,544
============ ============
The accompanying notes are an integral part of these
pro forma financial statements.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 2001
(dollars in millions)
Historical
------------------------- Pro Forma Pro Forma
GenCorp EIS Adjust. Combined
------------------------------------- -----------
Current assets
Cash and cash equivalents $ 36 $ 5 $ -- $ 31
Accounts receivable 216 43 -- 173
Inventories, net 195 5 35 (g) 225
Current deferred income taxes 51 -- 6 (h) 57
Prepaid expenses and other 14 1 -- 13
----------------------------- -------
Total current assets 512 54 41 499
Other asseets
Recoverable from U.S. Government and other
third parties for environmental remediation costs 188 -- (35)(g) 153
Deferred income taxes 17 -- (20)(h) (3)
Prepaid pension 339 49 -- 290
Investment and other assets 157 -- -- 157
Property, plant and equipment, net 512 58 -- 454
----------------------------- -------
Total other assets 1,213 107 (55) 1,051
----------------------------- -------
Total assets $ 1,725 $ 161 $ (14) $ 1,550
============================= =======
Current liabilities
Short-term borrowing and current portion
of long-term debt $ 25 $ -- $ (3)(i) $ 22
Accounts payable 68 5 -- 63
Income taxes payable 5 -- 70 (h) 75
Other current liabilities 359 18 -- 341
----------------------------- -------
Total current liabilities 457 23 67 501
Other liabilities
Long-term debt, net of current portion 456 -- (272)(i) 184
Post-retirement penefits other than pension 224 31 -- 193
Reserves for environmental remediation costs 311 -- (40)(g) 271
Other liabilities 58 -- -- 58
----------------------------- -------
Total other liabilities 1,049 31 (312) 706
----------------------------- -------
Total liabilities 1,506 54 (245) 1,207
Shareholders' equity
Preference stock -- -- -- --
Common stock 4 -- -- 4
Other capital 7 -- -- 7
Retained earnings 238 107 231(j)(k) 362
Accumulated other comprehensive loss (30) -- -- (30)
----------------------------- -------
Total shareholders' equity 219 107 231 343
----------------------------- -------
Total liabilities and shareholders'
equity $ 1,725 $ 161 $ (14) $ 1,550
============================= =======
The accompanying notes are an integral part of these
pro forma financial statements.
GENCORP
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
PRO FORMA ADJUSTMENTS - The following adjustments have been made to the
unaudited pro forma combined consolidated financial statements:
(a) Amortization of estimated purchased intangible assets of $60 million
assuming the Draftex acquisition had taken place at the beginning of
the periods presented. Purchased intangible assets are being amortized
using the straight-line method over a useful life of 20 years.
(b) Reduction in amortization of debt origination fees associated with
GenCorp's existing senior credit facilities. This reduction assumes
that if both the EIS sale and the Draftex acquisition had occurred as
of the beginning of the periods presented, a new senior credit
facility would not have been needed (the net proceeds from the
EIS sale exceeded the cash cost of Draftex) and related debt
origination fees would not have been incurred. No reduction of
amortization of debt origination fees is required for the year ended
November 30, 2000 since the new senior credit facilities agreement
was entered into on December 28, 2000.
(c) Reduction of interest expense assuming that the net proceeds from the
sale of EIS were applied to debt outstanding at the beginning of the
periods presented. The average interest rate on debt outstanding at
the beginning of periods presented was 8.0% for the year ended
November 30, 2000 and 7.25% for the nine months ended August 31, 2001.
The effect of this pro forma adjustment is partially offset during the
year ended November 30, 2000 by an increase in interest expense for
debt incurred relating to the purchase of Draftex assuming this
transaction had occurred at the beginning of the periods presented.
(d) Adjustment for allocations of interest and management fees from Laird
which are included in the historical financial statements of Draftex
for the year ended December 31, 2000. These allocations were based on
the intercompany balances that each company within the division had
with Laird. These management fees primarily related to salaries and
related costs of executive management and their support staff,
including the legal, human resources, finance, and other
administrative functions. No such amounts are included in the
historical Draftex financial statements for the nine months periods
ended August 31, 2001 presented herein, and therefore, no pro forma
adjustment is required for this period.
(e) Adjustment related to foreign currency option and forward contracts
entered into in connection with the Draftex acquisition. The purchase
and settlement of these foreign currency contracts resulted in GenCorp
recognizing a loss of $8 million during the year ended November 30,
2000 and a gain of $11 million during the nine months ended August 31,
2001.
(f) Income tax effect of pro forma adjustments computed using GenCorp's
effective income tax rate of 40% for the year ended November 30, 2000
and 39% for the nine months ended August 31, 2001.
(g) Aerojet currently has an agreement with the U.S. government under
which the government recognizes as allowable for government contract
cost purposes 88% of Aerojet's environmental costs relating to
operations including EIS. The remaining 12% of these costs must be
borne by Aerojet. Adjustments assume a $40 million escrow payment
would have been made on August 31, 2001 which reduces reserves for
environmental remediation costs and provides for recovery of 88% of
this amount through existing government contracts.
(h) Income tax effect assuming the sale of EIS at August 31, 2001 for
gross proceeds of $315 million and resulting in an after-tax gain of
$124 million.
(i) Application of gross proceeds of $315 million from the sale of EIS,
less the $40 million escrow payment described in (g) above, to debt
outstanding at August 31, 2001.
(j) Recognition of a gain from the EIS, net of tax assuming the
transaction occurred at August 31, 2001.
(k) Adjustment to retain the historical earnings and profits of EIS
through August 31, 2001, assuming the sale of EIS occurred at August
31, 2001.
(l) Draftex's fiscal year ends on December 31 each year. Accordingly, the
historical statements of operations for the year ended November 30,
2001 include the results of operations for Draftex for the period
January 1, 2000 through December 29, 2000. The GenCorp historical
statements of operations for the nine months ended August 31, 2001
include the results of operations for Draftex for eight months in this
period because of the December 29, 2000 acquisition date. Accordingly,
the Draftex historical statement of operations for this period
represents the results of operations for one month.