EXHIBIT 99.3
[GENCORP LOGO]
NEWS RELEASE
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INVESTOR CONTACTS: YASMIN SEYAL
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
GENCORP INC.
916-351-8585
PRESS CONTACTS: LINDA BEECH CUTLER
VICE PRESIDENT, CORPORATE COMMUNICATIONS
GENCORP INC.
916-351-8650
FOR IMMEDIATE RELEASE
GENCORP REPORTS 3RD QUARTER 2002 EARNINGS
OF $0.19 VS. $0.07 IN 2001
SACRAMENTO, CA - OCTOBER 2, 2002 - GenCorp Inc. (NYSE:GY) today reported
earnings per share of $0.19 for the third quarter compared to $0.07 for the
comparable 2001 quarter, as operating profit margins increased. Third-quarter
segment operating profits increased 16% to $22 million versus $19 million in the
third quarter 2001. Revenue for the third quarter totaled $266 million versus
$356 million for the comparable 2001 quarter, which included $107 million of
revenue from Aerojet's Electronic and Information Systems (EIS) business that
was sold in October 2001.
"I am very pleased with the progress that GenCorp is making," said
Terry Hall, CEO. "We are seeing a trend of increased earnings from operations
and we have initiated the first step in our growth plan for our Aerojet unit by
acquiring General Dynamics Space Propulsion and Fire Suppression Unit (GDSS)."
"We are also moving forward with our real estate strategy. The
Company has commenced negotiations on potential joint ventures related to the
commercial development of some of its entitled land in Sacramento, and hopes to
conclude these negotiations soon, " he continued. "Also during the quarter, the
Company completed an extensive review of its estimated future environmental
costs on existing sites. This review was based upon updated technical, legal and
cost analyses. As a result of this review, the Company increased its
environmental reserves to $346 million from $253 million at May 31, 2002. The
Company also increased the estimated amounts expected to be recovered from the
U. S. Government to $235 million from $142 million at May 31, 2002. The
adjustment to the environmental remediation reserves and estimated future cost
recoveries did not affect net income for the quarter. Our net environmental
remediation liability, the excess of environmental reserves over expected cost
recoveries, was $111 million at August 31, 2002 and May 31, 2002," concluded Mr.
Hall.
OPERATIONS REVIEW
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GDX AUTOMOTIVE
Operating profit for the third quarter was $5 million compared to a
loss of $5 million for the prior year quarter. The improvement in earnings is a
direct result of restructuring which took place after the Draftex acquisition
in December 2000. Since that time, the Company has closed four facilities and
reduced headcount by 1600 positions.
In September, GDX initiated plans to further improve its cost structure
by closing a facility in Germany and reducing the size of its headquarters
organization. Total costs of this restructuring will be $2 million. The
restructuring charge will be included in the fourth quarter 2002 results.
Third quarter operating margins were 3% compared to year-to-date
margins of 4%. Operating margins are historically lower in the third quarter and
reflect shutdown and retooling efforts by GDX's major automotive customers.
Historically, GDX has experienced higher margins in its second and
fourth quarters. The Company expects that trend to continue in the fourth
quarter of 2002.
AEROJET
Aerojet's sales for the third quarter were $63 million as compared to
$161 million for the comparable quarter in 2001. The change is primarily
attributable to the divestiture of Aerojet's
EIS business in October 2001. Excluding EIS, sales increased 17% over the prior
year quarter. Third-quarter income from operations, excluding EIS and the
decrease in income from employee benefit plans, increased slightly from the same
quarter in 2001.
Highlights since the last earnings release include: the acquisition of
GDSS; the successful demonstration of Lockheed Martin's Atlas V core launch
vehicle which will eventually be powered by Aerojet's Solid Rocket Motors; and a
$43 million sole source contract award from Boeing Phantom works to develop
"HyFly" dual combustion ramjet test flight engines for the Defense Advanced
Research Projects Agency and Office of Naval Research.
Contract backlog totaled $563 million and funded backlog totaled $350
million at August 31, 2002.
AEROJET FINE CHEMICALS
Sales at Aerojet Fine Chemicals (AFC) increased to $13 million in the
third quarter, up substantially from the $5 million reported in the prior year,
reflecting higher production volumes. AFC's operating profit for the third
quarter totaled $3 million compared to a loss of $6 million in the prior year.
The improved operating performance reflects operational improvements and the
realization of cost savings from restructuring programs completed in 2001. Prior
year results were also negatively affected by inefficiencies caused by start-up
production for several new products. Contract backlog totaled $43 million at
August 31, 2002. The Company expects that AFC will be profitable in the fourth
quarter of 2002.
OTHER INFORMATION AND UNUSUAL ITEMS
Third-quarter interest expense was $4 million versus $10 million in the
prior year quarter due to lower average outstanding debt balances and lower
interest rates. Debt outstanding at November 2001 of $214 million reflected debt
reduction in the fourth quarter of 2001 from the sale of EIS.
During 2002, debt increased to $292 million at the end of the third
quarter due primarily to working capital requirements, including needs for
Aerojet's Atlas V Solid Rocket Motor contract.
During the third quarter, the Company contributed property located in
Michigan to the County of Muskegon. The Company will receive a tax deduction for
this contribution that has decreased the Company's year-to-date effective tax
rate by two percentage points.
In October, the Company amended its existing credit facilities to
include a new $115 million term loan which will mature in March 2007. Proceeds
of the term loan were used to finance the acquisition of GDSS and to reduce
amounts outstanding under its existing revolving credit facility.
Third quarter income from retiree benefit plans, net of tax, totaled $5
million.
Three senior management appointments were announced: Gregory Kellam
Scott joined the Company as senior vice president, Law and general counsel and
secretary. Mr. Scott replaces William Phillips who retired in accordance with
previously announced plans. Also, Douglas Jeffries joined the Company as vice
president and controller and Kari Van Gundy was hired as vice president and
treasurer.
OUTLOOK
The Company expects diluted earnings per share for fiscal year 2002 to
be at the lower end of the guidance given previously of $0.90 to $1.00 per
share, excluding unusual items and restructuring charges. Although the Company's
forecasts are subject to numerous variables and uncertainties, the main risks in
achieving the forecasted results include: (1) automotive production rates; (2)
the timing of potential real estate transactions; (3) our ability to
successfully complete testing and qualification of the Atlas V Solid Rocket
Motor - currently a test is scheduled for late October and absent any unforeseen
delays, testing should be completed by fiscal year end; and (4) the ability of
Aerojet Fine Chemicals to sustain targeted product delivery levels.
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. 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 of these factors include, but are not limited to, the following:
general economic conditions and trends affecting the Company's markets and
product offerings; changes in the short-term and long-term plans of major
customers and potential customers; governmental policies and regulatory
practices, including environmental regulations, and increases in the amount or
timing of environmental remediation and compliance costs; an unexpected adverse
result or required cash outlay in the toxic tort cases, environmental or other
litigation, or change in proceedings or investigations pending against the
Company; the Company's ability to secure additional financing as needed; the
Company's acquisition, disposition and joint venture activities; vehicle sales
and production rates of major automotive programs in the U.S. and abroad,
particularly vehicles for which the Company supplies components; a reduction in
appropriations or other spending by the Department of Defense or NASA or other
funding for aerospace and defense programs for which the Company is a supplier
or competes for new business; future funding for commercial launch vehicles and
propulsion systems; the ability of the Company to achieve the anticipated
savings from ongoing restructuring and other financial management programs;
restrictions on the Company's operating activities imposed from time to time by
the agreements relating to the indebtedness; the ability of the Company to
successfully complete the entitlement process for its real property and related
pre-development activities for its real estate in Northern California; the
market for the Company's real estate in California; fluctuations in exchange
rates of foreign currencies and other risks associated with foreign operations,
particularly in the GDX Automotive segment which delivers a significant amount
of sales overseas; the ability of the Company to satisfy contract performance
criteria; the ability of the Company to maintain a high level of product
performance, particularly related to the continued success of the Company's
propulsion systems for launch vehicle platforms; the Company's mix of fixed
price and cost-plus contracts; an unexpected adverse decision in any patent
infringement suit, or settlement of a patent infringement suit impacting the
Company's right to utilize technology, particularly in the Fine Chemicals
segment; intensified competition; pricing pressures from the Company's major
customers, particularly in the GDX Automotive segment; adverse changes in
foreign laws or regulations that impact European and other operations of GDX
Automotive; potential liabilities which could arise from any release or
explosion of dangerous or hazardous materials; work stoppages at a Company
facility or in the facility of one of the Company's significant customers; and
cost escalation and availability of power in Northern California.
These factors are described in more detail in the Company's Annual
Report on Form 10-K for the year ended November 30, 2001 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 leading
positions 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.
(TABLES FOLLOW)
BUSINESS SEGMENT INFORMATION
GenCorp Inc.
THREE MONTHS ENDED NINE MONTHS ENDED
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AUGUST 31, August 31, AUGUST 31, August 31,
(Dollars in millions, 2002 2001 2002 2001
except per-share data) (UNAUDITED) (UNAUDITED)
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NET SALES
GDX Automotive $ 190 $ 190 $ 589 $ 598
Aerospace and Defense 63 161 201 511
Fine Chemicals 13 5 28 10
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$ 266 $ 356 $ 818 $ 1,119
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INCOME FROM OPERATIONS
GDX Automotive $ 5 $ (5) $ 25 $ (2)
Aerospace and Defense 14 30 44 86
Fine Chemicals 3 (6) (1) (15)
Restructuring Charge - - - (19)
Unusual items - - (6) (9)
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SEGMENT OPERATING PROFIT 22 19 62 41
Interest expense (4) (10) (11) (28)
Corporate, other expenses and foreign exchange
gains & losses (6) (4) (21) -
Unusual items - - (3) 2
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INCOME BEFORE INCOME TAXES 12 5 27 15
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Income tax (provision) benefit (4) (2) (10) 7
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NET INCOME $ 8 $ 3 $ 17 $ 22
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BASIC EARNINGS PER COMMON SHARE: $ 0.19 $ 0.07 $ 0.40 $ 0.52
DILUTED EARNINGS PER COMMON SHARE: $ 0.19 $ 0.07 $ 0.40 $ 0.51
SHARES USED FOR CALCULATION OF EARNINGS PER COMMON
SHARE (IN THOUSANDS):
Basic 42,919 42,254 42,788 42,134
Diluted* 51,382 42,792 43,198 42,544
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Capital expenditures $ 17 $ 13 $ 31 $ 29
Depreciation and amortization $ 18 $ 21 $ 48 $ 58
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* Excludes convertible notes, sold in April 2002, that are anti-dilutive for the
nine month period ending August 31, 2002.
CONDENSED CONSOLIDATED BALANCE SHEET
GenCorp Inc.
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AUGUST 31, November 30,
(Dollars in millions) 2002 2001
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(UNAUDITED)
ASSETS
Cash and equivalents $ 37 $ 44
Accounts receivable 128 173
Inventories, net 184 167
Current deferred income tax 7 14
Recoverable from U.S. government and other third parties for
environmental remediation 18 18
Prepaid expenses and other 5 4
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TOTAL CURRENT ASSETS 379 420
Recoverable from U.S. government and other third parties for
environmental remediation 217 140
Deferred income taxes - 6
Prepaid pension asset 326 287
Goodwill, net 83 65
Property, plant and equipment, net 453 454
Other noncurrent assets, net 74 96
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$ 1,532 $ 1,468
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LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings and current portion of long-term debt $ 20 $ 17
Accounts payable 79 87
Income taxes payable 6 29
Reserves for environmental remediation 30 35
Other current liabilities 242 301
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TOTAL CURRENT LIABILITIES 377 469
Long-term debt, net of current portion 272 197
Postretirement benefits other than pensions 177 194
Reserves for environmental remediation 316 244
Deferred income taxes 11 -
Other noncurrent liabilities 33 54
Total shareholders' equity 346 310
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$ 1,532 $ 1,468
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