EXHIBIT 99.1
[GENCORP logo]
NEWS RELEASE
INVESTOR CONTACT: YASMIN SEYAL
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
GENCORP INC.
916-351-8585
PRESS CONTACT: LINDA BEECH CUTLER
VICE PRESIDENT, CORPORATE COMMUNICATIONS
GENCORP INC.
916-351-8650
FOR IMMEDIATE RELEASE
GENCORP REPORTS 2002 4TH QUARTER AND ANNUAL RESULTS
SACRAMENTO, CA - January 23, 2002 - GenCorp Inc. (NYSE: GY) today reported net
income for 2002 of $30 million ($0.69 per share) compared to net income of $128
million ($3.00 per share) for 2001. Results for 2002 reflect performance
improvements in the Company's operations, driven by lower cost structures for
GDX Automotive and Fine Chemicals, increased sales for Aerospace and Defense and
Fine Chemicals, and improved production efficiencies at GDX Automotive and Fine
Chemicals. The decline in earnings from 2001 reflects several events that
improved earnings in 2001 and reduced earnings in 2002, and lower income from
employee retirement benefit plans. The most significant of these events were
sales of the Company's space electronics business (EIS) and 1,100 acres of
Sacramento land, both in the fourth quarter of 2001. Sales for 2002 totaled $1.1
billion compared to $1.5 billion in 2001, which included $398 million in sales
from the EIS business.
Net income for the fourth quarter totaled $13 million ($0.28 per share) for 2002
compared to net income of $106 million ($2.47 per share) for 2001. Sales for the
fourth quarter in 2002 were $317 million, compared to $367 million reported in
2001.
Our guidance for the year was the lower end of $0.90 to $1.00 per share
excluding unusual items and restructuring charges, which totaled $17 million for
2002. On this basis the company met its guidance at the low end of the range of
$0.90 per share.
The following table summarizes significant year over year changes in income
before taxes for the fourth quarter and full year (in millions):
Income before taxes
---------------------------
Fourth
Quarter Annual
Year-to-year changes
- -------------------------------------------------------
2002 $15 $42
2001 172 187
------------ ------------
($157) ($145)
============ ============
Description of year-to-year changes
- -------------------------------------------------------
GDX AUTOMOTIVE OPERATIONS $18 $48 IMPROVED RESULTS
Employee retirement benefit plans income (2) (6)
------------ ------------
GDX Automotive operating profit 16 42
------------ ------------
AEROSPACE AND DEFENSE OPERATIONS 3 5 IMPROVED RESULTS
Employee retirement benefit plans income (5) (24)
EIS contribution before sale (5) (30)
2001 real estate sale (23) (23)
------------ ------------
Aerospace and Defense operating profit (30) (72)
------------ ------------
FINE CHEMICALS OPERATING PROFIT 3 17 IMPROVED RESULTS
Restructuring and unusual items (146) (128)
Interest, corporate and other -- (4)
------------ ------------
($157) ($145)
============ ============
"We are pleased with our 2002 operating performance and our earnings, which were
in accordance with our earlier guidance," said Terry L. Hall, president and CEO.
"Both our GDX Automotive and Fine Chemicals businesses returned to profitability
in 2002, successfully implementing restructuring programs which improved their
cost structures. We anticipate both of these businesses continuing to improve
their profitability in 2003."
"At our Aerospace and Defense business, Aerojet, we saw solid operating
performance with revenues up $63 million when compared to 2001, excluding sales
from our former EIS business and a 2001 real estate sale. In 2002 we took a
major step in our goal to grow this business by acquiring General Dynamics Space
Propulsion and Fire Suppression business (GDSS). In 2003 we anticipate
continuing to grow our Aerospace and Defense business. We were pleased this
December when Aerojet's liquid propulsion Exoatmospheric Kill Vehicle (EKV) was
selected by the U.S. Missile Defense Agency for the nation's first defensive
missile deployment. We are waiting for announcements regarding volume and
production schedules to determine the revenue impact of this decision."
"In 2002 we reached a major milestone in our real estate strategy when we
completed the successful release of approximately 2,600 acres from the Aerojet
Superfund Site designation. Our goal is to develop our real property to maximize
the value embedded in these assets by selling or leasing parcels for development
by others or through developing the property, alone or in conjunction with one
or more partners. During the year we added real estate professionals to our
management team to help us execute our real estate strategy," concluded Mr.
Hall.
OPERATIONS REVIEW
GDX Automotive
GDX Automotive returned to profitability in 2002, with operating profit
improving to $38 million, compared to an operating loss of $4 million in 2001.
Excluding a decrease in income from employee retirement benefit plans, operating
profit for the segment increased by $48 million in 2002 compared to the prior
year. In 2001, GDX Automotive initiated restructuring programs to lower
production costs and improve efficiency. Benefits from these programs were
realized in 2002 with improvement in manufacturing costs (labor, overhead and
scrap). Also
contributing to improved results were further integration and consolidation of
the Draftex acquisition and improvements in asset management. Operating income
was adversely impacted by a pricing concession of $21 million to GDX
Automotive's major customers and a $6 million decline in income from employee
retirement benefit plans. Sales were $806 million in 2002, essentially unchanged
from 2001 ($808 million). Sales increases resulting from favorable exchange rate
impacts were offset by $21 million in pricing concessions to GDX Automotive's
major customers.
Operating profit for the fourth quarter in 2002 was $13 million compared to a
loss of $3 million for the prior year quarter. The improved earnings reflect the
effects of restructuring activities initiated in 2001. Fourth quarter sales for
GDX Automotive were $217 million compared to $210 million in 2001.
Aerospace and Defense
In October 2002, Aerojet completed the previously announced acquisition of GDSS
from General Dynamics' Ordnance and Tactical Systems Division for cash of $93
million, including transaction costs.
Operating profit for the Aerospace and Defense segment was $59 million for 2002,
compared to $131 million in 2001. Excluding results of the EIS business, gain on
the real estate sale, and a decrease in income from employee retirement benefit
plans, operating profit for the segment increased by $5 million in 2002 compared
to the prior year. Aerojet's sales totaled $277 million for 2002, compared to
$640 million in 2001. Excluding results of the EIS business and the real estate
sale, sales for the segment increased $63 million in 2002 compared to the prior
year. The increase is attributable to the delivery of a NASA X-38 DeOrbit
Propulsion Stage, Aerojet's work on the COBRA booster engine, the GDSS
acquisition, and other programs.
Fourth quarter operating profit in 2002 was $15 million compared to $45 million
in 2001. Excluding the results of the EIS business, gain on a real estate sale,
and a decrease in income from employee retirement benefit plans, the operating
profit for the segment increased by $3 million as compared to the fourth quarter
of 2001. Fourth quarter sales for Aerojet were $76
million as compared to $129 million for the comparable quarter in 2001.
Excluding EIS and the real estate sale, sales for the fourth quarter of 2002
increased $25 million over fourth quarter 2001, due largely to increased volume
in missile defense and armaments programs, and the GDSS acquisition.
As of November 30, 2002, Aerojet's contract backlog was $773 million. 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 $416 million
as of November 30, 2002. Aerojet was recently notified that funding for the
Titan program will be restructured in 2003 reducing Aerojet's funded backlog by
$58 million with no change to total contract backlog; Aerojet expects this
funding to be incrementally restored in future years.
Fine Chemicals
Fine Chemicals' operating profit for 2002 was $3 million compared to an
operating loss of $14 million for 2001. The significant improvement in Fine
Chemicals' financial performance reflects its success in recent strategic sales
initiatives, the benefit of volume-related production efficiencies, and a
restructuring of its operations in late 2001. Fine Chemicals' 2001 financial
performance was adversely affected by the cost of start-up activities and
production inefficiencies associated with the launch of several new products.
Sales for Fine Chemicals totaled $52 million in 2002, compared to $38 million
for 2001. The improved sales volume in 2002 results from improved sales and
marketing strategies and increased sales from new products launched in 2001.
Fourth quarter operating profit for Fine Chemicals totaled $4 million compared
to $1 million in the prior year, reflecting the benefit of 2001 restructuring
activities and higher margin products. Sales for the quarter totaled $24 million
compared to $28 million reported in the prior year's fourth quarter.
RESTRUCTURING AND UNUSUAL ITEMS
The following table summarizes the activity in restructuring and unusual charges
(in millions):
FOURTH QUARTER ANNUAL
------------------------ ------------------------
2002 2001 2002 2001
RESTRUCTURING:
GDX Automotive $2 $10 $2 $29
Fine Chemicals -- 1 -- 1
Corporate headquarters -- 10 -- 10
---------- ---------- ---------- ----------
$2 $21 $2 $40
========== ========== ========== ==========
UNUSUAL:
Write-off GDSS in-process R&D $6 -- $6 --
Purchase price adjustment on EIS sale -- -- 6 --
Gain on EIS sale (206) (206)
Aerojet inventory write-down related to
commercial reusable launch vehicle program 48 48
Tax related (customer reimbursements of
tax recoveries) -- -- -- 9
Other -- (1) 3 (2)
---------- ---------- ---------- ----------
$6 ($159) $15 ($151)
========== ========== ========== ==========
TOTAL RESTRUCTURING AND UNUSUAL ITEMS $8 ($138) $17 ($111)
========== ========== ========== ==========
OTHER INFORMATION
Interest expense decreased to $16 million in 2002 from $33 million in 2001 due
to lower debt levels and lower interest rates. Average debt balances during 2002
were approximately $285 million compared to $408 million during 2001. The
Company's average interest rates decreased to 5.2 percent in 2002 from 7.7
percent in 2001. Long-term debt increased from $214 million as of November 30,
2001 to $387 million as of November 30, 2002 due to the acquisition of GDSS and
increased working capital requirements, including requirements for Aerojet
programs.
Corporate and other expenses in 2002 were $25 million compared to $4 million in
2001. The increase in 2002 is due primarily to $7 million in costs for the
accounting review related to the restatement of prior years' financial results,
as announced March 6, 2002, and lower income from employee retirement plans of
$6 million. Also, corporate and other expenses in 2001 included a gain of $11
million related to the settlement of foreign currency forward contracts.
Corporate and other expenses included amortization of debt financing costs of $4
million in 2002 and $3 million in 2001.
The Company's effective tax rate in 2002 was 28 percent compared to 32 percent
in 2001. 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 statements are based on current expectations. These statements are
forward-looking, and 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 after November 30, 2002.
The Company expects net earnings in 2003 to be lower than 2002 primarily
attributable to the decrease in pre-tax income from employee retirement benefit
plans of $37 million in 2002 to a minimal amount of income or expense for 2003.
The Company expects diluted earnings per share for 2003 to be in the range of
$0.41 to $0.46 per share and for the first quarter to be in the range of $0.04
to $0.06 per share. Excluding income from employee retirement benefit plans, the
Company expects 2003 net earnings from operations to increase by approximately
20 percent over 2002.
The Company's GDX Automotive segment is forecasting 2003 sales to be in the
range of $700 to $730 million. This forecast reflects a reduction when compared
to 2002 sales, and is driven primarily by a combination of anticipated OEM price
reductions and the discontinuation of unprofitable platforms. GDX Automotive
expects its segment operating profit margins to be between 5.5 percent and 7.0
percent in 2003. GDX Automotive expects to continue realizing
production efficiencies from its continuing consolidation and integration
efforts. However, results are largely dependent on vehicle sales and production
rates associated with platforms for which the segment provides parts.
The Company's Aerospace and Defense segment is forecasting 2003 sales to be in
the range of $265 to $275 million. Expected 2003 sales increases are partially
offset by NASA funding issues, which resulted in the cancellation of the COBRA
booster engine program. In addition, fiscal 2002 sales included sales from a
NASA X-38 De-Orbit Propulsion Stage contract, which was completed in 2002.
Aerojet's projected 2003 segment operating profit margin is expected to be
between 11.0 percent and 13.0 percent.
The Company's Fine Chemicals segment is forecasting 2003 sales in the range of
$52 million to $57 million and operating margins between 6.5 percent and 8.5
percent. During 2002, Fine Chemicals' increased production volumes and focus on
improving operational and manufacturing efficiencies yielded improved operating
margins, a trend that is expected to continue into 2003.
Interest expense is forecasted to total $22 million to $26 million in 2003. A
portion of the Company's debt carries variable interest rates; material changes
in interest rates could impact this forecast.
The tax rate for 2003 is expected to be approximately 38 percent compared to 28
percent in 2002.
Depreciation and amortization is expected to be in the range of $67 million to
$70 million in 2003.
Capital spending is expected to be in the range of $50 million to $60 million in
2003.
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 may present (without limitation) management's expectations, beliefs,
plans and objectives, future financial performance and assumptions or judgments
concerning such matters. 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 the Company's actual results or
outcomes to differ from those expressed in its forward-looking statements
include, but are not limited to, the following:
o Legal and regulatory developments that may have an adverse impact on the
Company or its segments. For example:
-- The reported results of 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 Inc. (U.S. District Court for the
Northern District of Ohio, Eastern Division) is, notwithstanding the
Company's current position, determined to be an enforceable judgment.
-- Restrictions on real estate development that could delay the Company's
proposed real estate development activities.
-- A change in toxic tort or asbestos litigation trends which is adverse
to the Company.
-- Changes in international tax laws or currency controls.
o 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.
o 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 and 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.
o Changes in U.S. and global financial and equity markets, including market
disruptions and significant interest rate fluctuations, which may impede
the Company's access to, or increase the cost of, external financing for
its operations and investments.
o 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.
- Consolidation in the aerospace and defense industry has been underway
for several years. The resulting reduction in the number of prime
contractors, increased scale of certain competitors and the reduction
in alternative suppliers could negatively affect the Aerospace and
Defense segment's ability to expand.
o 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.
o Changes in product mix, which may affect automotive vehicle preferences and
demand for the Company's GDX Automotive segment's products.
o 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.
o 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, 2001 and its subsequent
periodic and other 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.
(Tables to Follow)
BUSINESS SEGMENT INFORMATION
GenCorp Inc.
THREE MONTHS ENDED YEAR ENDED
- -------------------------------------------------------------------------------------------------------------------------
NOVEMBER 30, November 30, NOVEMBER 30, November 30,
(Dollars in millions, 2002 2001 2002 2001
except per-share data) (UNAUDITED) (UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
NET SALES
GDX Automotive $ 217 $ 210 $ 806 $ 808
Aerospace and Defense 76 129 277 640
Fine Chemicals 24 28 52 38
- -------------------------------------------------------------------------------------------------------------------------
$ 317 $ 367 $ 1,135 $ 1,486
- -------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS
GDX Automotive $ 13 $ (3) $ 38 $ (4)
Aerospace and Defense 15 45 59 131
Fine Chemicals 4 1 3 (14)
Restructuring charge (2) (11) (2) (30)
Unusual items (6) 158 (12) 149
- -------------------------------------------------------------------------------------------------------------------------
SEGMENT OPERATING PROFIT 24 190 86 232
Interest expense (5) (5) (16) (33)
Corporate and other expenses (4) (4) (25) (4)
Restructuring charge - (10) - (10)
Unusual items - 1 (3) 2
- -------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 15 172 42 187
- -------------------------------------------------------------------------------------------------------------------------
Income tax provision (2) (66) (12) (59)
- -------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 13 $ 106 $ 30 $ 128
=========================================================================================================================
BASIC EARNINGS PER COMMON SHARE: $ 0.30 $ 2.49 $ 0.71 $ 3.03
DILUTED EARNINGS PER COMMON SHARE: $ 0.28 $ 2.47 $ 0.69 $ 3.00
SHARES USED FOR CALCULATION OF EARNINGS PER COMMON
SHARE (IN THOUSANDS):
Basic 42,971 42,518 42,830 42,228
Diluted 51,174 42,911 48,562 42,583
- -------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 14 $ 20 $ 45 $ 49
Depreciation and amortization $ 18 $ 19 $ 66 $ 77
- -------------------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
GenCorp Inc.
- -----------------------------------------------------------------------------------------------------------
NOVEMBER 30, November 30,
(Dollars in millions) 2002 2001
- -----------------------------------------------------------------------------------------------------------
(UNAUDITED)
ASSETS
Cash and equivalents $ 48 $ 44
Accounts receivable 139 173
Inventories, net 167 167
Recoverable from U.S. government and other third parties for
environmental remediation 24 18
Current deferred income tax -- 14
Prepaid expenses and other 5 4
- -----------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 383 420
Property, plant and equipment, net 481 454
Recoverable from U.S. government and other third parties
for environmental remediation 208 140
Deferred income taxes 9 6
Prepaid pension asset 337 287
Goodwill, net 126 65
Other noncurrent assets, net 92 96
- -----------------------------------------------------------------------------------------------------------
$ 1,636 $ 1,468
===========================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings and current portion of long-term debt $ 22 $ 17
Accounts payable 89 140
Reserves for environmental remediation 39 35
Income taxes payable 22 29
Current deferred income taxes 1 --
Other current liabilities 200 220
- -----------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 373 441
Long-term debt, net of current portion 365 197
Postretirement benefits other than pensions 176 194
Reserves for environmental remediation 301 244
Other noncurrent liabilities 61 82
Total shareholders' equity 360 310
- -----------------------------------------------------------------------------------------------------------
$ 1,636 $ 1,468
===========================================================================================================