EXHIBIT 99.2
[GENCORP LOGO]
NEWS RELEASE
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INVESTOR CONTACT: YASMIN SEYAL
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
916-351-8585
PRESS CONTACT: LINDA BEECH CUTLER
VICE PRESIDENT, CORPORATE COMMUNICATIONS
916-351-8650
FOR IMMEDIATE RELEASE
GENCORP REPORTS 1ST QUARTER 2003 RESULTS
SACRAMENTO, CA - March 26, 2003 - GenCorp Inc. (NYSE: GY) today reported net
income for the first quarter of 2003 of $3 million ($0.07 per diluted share)
unchanged from the first quarter of 2002. Sales for the quarter increased to
$271 million from $249 million in the prior year reflecting increases at both
its Aerospace and Defense and Fine Chemicals businesses. Net income did not
increase commensurate with sales year-over-year due primarily to a $10 million
reduction of pre-tax income from employee retirement benefit plans.
"We are pleased with our first quarter operating performance," said Terry L.
Hall, president and CEO. "Particularly notable was the performance of our Fine
Chemicals business which produced an improvement in operating earnings of $5
million when compared to the first quarter of 2002. We are experiencing stronger
than expected sales growth in this business."
"In addition, we continue to make good progress in our strategy to monetize real
estate assets and will be announcing today that we have entered into a
Memorandum of Understanding to form a joint venture for the development of
office space in Sacramento County."
OPERATIONS REVIEW
GDX Automotive
GDX Automotive sales for the first quarter of 2003 were $191 million compared to
$190 million in the first quarter of 2002. Sales increases from favorable
exchange rates of $16 million in the first quarter of 2003 were offset by lower
volumes and pricing concessions to major customers.
Operating profit was $5 million for the first quarter of 2003 compared to $6
million for the first quarter of 2002. Operating profit improvements from
favorable exchange rates and cost reductions of $6 million from operating
efficiencies in the first quarter of 2003 were offset by reduced income from
employee retirement benefit plans of $2 million, pricing concessions and lower
sales volumes.
During the first quarter of 2003, GDX Automotive was awarded a five-year
contract from the Volkswagen Automotive Group expected to total $180 million.
Aerospace and Defense
Aerospace and Defense sales for the first quarter of 2003 were $63 million,
including $12 million from General Dynamics Space Propulsion and Fire
Suppression business (GDSS), compared to $54 million reported in the first
quarter of 2002. Contributing to the increase in sales were increased volumes on
programs for the national missile defense system and the Boeing Phantom HyFly
program. These sales increases were offset by lower sales on various other
programs.
Operating profit of $9 million for the first quarter of 2003 was $7 million
lower than the first quarter of 2002, attributable primarily to a $5 million
reduction in income from employee retirement benefit plans.
During the first quarter of 2003, Aerospace and Defense successfully completed
the final test firing of the Atlas V solid rocket motor and the successful
testing of the Boeing Phantom HyFly dual combustion ramjet test flight engines
for the Defense Advanced Research Projects Agency and the Office of Naval
Research.
Contract backlog was $751 million at the end of the first quarter of 2003
compared to $773 million as of November 30, 2002. Funded backlog, which includes
only 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 $363 million at the end of the first quarter of 2003 compared to
$416 million as of November 30, 2002. Funding for the Titan program was
restructured in the first quarter of 2003, reducing funded backlog by $58
million. Aerojet expects this funding to be incrementally restored in future
years.
Fine Chemicals
Fine Chemicals sales in the first quarter of 2003 totaled $17 million compared
to $5 million in the first quarter of 2002. The improvement reflects strong
demand for products launched in 2001 and 2002.
Fine Chemicals reported an operating profit of $2 million for the first quarter
of 2003 compared to a loss of $3 million for the first quarter of 2002. The
significant improvement in Fine Chemicals' operating profit reflects higher
sales volumes and reduced labor costs resulting from restructuring initiatives.
Corporate
Interest expense increased to $5 million in the first quarter of 2003 from $3
million in the first quarter of 2002 due primarily to debt resulting from the
acquisition of GDSS.
Corporate and other expenses decreased in the first quarter of 2003 to $6
million compared to $9 million in the first quarter of 2002. Corporate and other
expenses in 2003 include $3 million in foreign currency exchange rate gains,
increases in professional service fees and compensation costs, and a reduction
of $3 million in income from employee retirement benefit plans. Corporate and
other expenses in the first quarter of 2002 included $6 million in costs for the
accounting review related to the restatement of 1999 and 2000 financial results.
On November 21, 2002, the Ohio court issued a memorandum opinion and judgment
order entering a partial final judgment in favor of Olin in the case of GenCorp
Inc. v. Olin Corporation. The Company has announced its decision to appeal a
partial judgment issued by the United States Sixth Circuit Court of Appeals. In
order to proceed with its appeal, the Company posted a bond covering the
judgment and related interest in the amount of $30 million. Based on the merits
of its case, the Company believes it will prevail on appeal. Posting the bond
has reduced borrowings available under the Company's credit facilities, however
the Company currently believes that its existing cash and cash equivalents,
forecasted operating cash flows and borrowings available under its credit
facilities will provide sufficient funds to meet its requirements for the next
twelve months.
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.
The Company has previously stated that it expects earnings per share for 2003 to
be in the range of $0.41 to $0.46 per share. The Company expects diluted
earnings per share for the second quarter of 2003 to be in the range of $0.15 to
$0.17 per share.
ADDITIONAL INFORMATION
The Company also announced today that it had signed a Memorandum of
Understanding under which GenCorp intends to enter into a joint venture with
Panattoni Development Corporation, a real estate development and management
firm. The joint venture intends to develop a commercial office complex on land
at the Aerojet Sacramento facility.
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:
- - Legal and regulatory developments that may have an adverse impact on the
Company or its segments. For example:
- 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.
- 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 that is adverse
to the Company.
- 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 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.
- - 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.
- - 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 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 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
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FEBRUARY 28, February 28,
(Dollars in millions, 2003 2002
except per-share data) (UNAUDITED)
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NET SALES
GDX Automotive $ 191 $ 190
Aerospace and Defense 63 54
Fine Chemicals 17 5
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$ 271 $ 249
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INCOME (LOSS) FROM OPERATIONS
GDX Automotive $ 5 $ 6
Aerospace and Defense 9 16
Fine Chemicals 2 (3)
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SEGMENT OPERATING PROFIT 16 19
Interest expense (5) (3)
Corporate and other expenses (6) (9)
Unusual items - (2)
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INCOME BEFORE INCOME TAXES 5 5
Provision for income taxes 2 2
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NET INCOME $ 3 $ 3
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BASIC EARNINGS PER COMMON SHARE: $ 0.07 $ 0.07
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DILUTED EARNINGS PER COMMON SHARE: $ 0.07 $ 0.07
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SHARES USED FOR CALCULATION OF EARNINGS
PER COMMON SHARE (IN THOUSANDS):
Basic 42,968 42,652
Diluted 42,998 43,044
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Capital expenditures $ 9 $ 6
Depreciation and amortization $ 18 $ 16
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CONDENSED CONSOLIDATED BALANCE SHEET
GenCorp Inc.
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FEBRUARY 28, November 30,
(Dollars in millions) 2003 2002
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(UNAUDITED)
ASSETS
Cash and cash equivalents $ 45 $ 48
Accounts receivable 140 139
Inventories, net 178 167
Recoverable from the U.S. government and other third
parties for environmental remediation costs 24 24
Current deferred income taxes 4 -
Prepaid expenses and other 12 5
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TOTAL CURRENT ASSETS 403 383
Recoverable from the U.S. government and other third parties for
environmental remediation costs 205 208
Deferred income taxes - 9
Prepaid pension asset 341 337
Goodwill 132 126
Property, plant and equipment, net 482 481
Other noncurrent assets, net 94 92
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$ 1,657 $ 1,636
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LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings and current portion of long-term $ 21 $ 22
debt
Accounts payable 87 89
Reserves for environmental remediation 39 39
Income taxes payable 17 22
Current deferred income taxes - 1
Other current liabilities 201 200
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TOTAL CURRENT LIABILITIES 365 373
Convertible subordinated notes 150 150
Other long-term debt, net of current portion 226 215
Reserves for environmental remediation 297 301
Postretirement benefits other than pensions 172 176
Deferred income taxes 1 -
Other noncurrent liabilities 67 61
Total shareholders' equity 379 360
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$ 1,657 $ 1,636
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