EXHIBIT 99.1
[GENCORP LOGO]
NEWS RELEASE
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 2ND QUARTER SALES OF $315 MILLION,
EARNINGS OF $0.21 PER SHARE
SACRAMENTO, CA., June 26, 2003 -- GenCorp Inc. (NYSE: GY) today reported second
quarter 2003 earnings of $10 million, or $0.21 per share, compared to $6
million, or $0.14 per share, for the second quarter 2002. Earnings for the first
six months of 2003 were $13 million, or $0.30 per share compared with $9
million, or $0.21 per share last year. The earnings improvements reflect
increased operating profits from the GDX Automotive and Fine Chemicals segments.
Compared with the prior year, pre-tax income from employee retirement benefit
plans was $9 million lower for the second quarter, and $19 million lower for the
first six months.
Sales for the second quarter 2003 were $315 million, a 4% improvement over
the second quarter 2002. Sales for the first six months of 2003 were $586
million, a 6% improvement over last year. Sales increases for both periods
include the effect of Aerojet's acquisition in October 2002 of the Redmond,
Washington operations (the former General Dynamics Space Propulsion
and Fire Suppression business) as well as increased volume at Fine Chemicals and
favorable foreign currency exchange rates at GDX Automotive.
"The second quarter 2003 results reflect continued steady operating improvements
at all of our businesses," said Terry L. Hall, president and CEO. "Fine
Chemicals continued to experience strong demand in the second quarter, which
contributed to an operating profit improvement of $5 million when compared to
the operating loss of $1 million in the second quarter last year. While the
outlook for this business remains favorable, we do not expect operating margins
for the rest of the year to continue at levels experienced in the first half of
2003 due primarily to changes in product mix. GDX Automotive also had a good
quarter, despite facing increasing pricing pressures from its customers."
Mr. Hall continued, "We are making good progress towards achieving key strategic
objectives, including steps toward realizing more of the value of our real
estate holdings. Additionally, our Aerospace and Defense segment reached a major
milestone this quarter when Aerojet announced its agreement to acquire the
propulsion business of Atlantic Research Corporation. With this acquisition, we
expect that 2004 revenues of the Aerospace and Defense segment will double from
2002 levels, and that this segment will become a more substantial contributor to
GenCorp's earnings," concluded Mr. Hall.
OPERATIONS REVIEW
GDX Automotive
GDX Automotive sales for the second quarter 2003 were $214 million, up 2% from a
year ago. Sales for the first six months were $405 million, also up 2% from last
year. Sales increases for both periods reflect favorable currency exchange
rates, offset in part by lower volumes and increased price concessions to major
customers.
Operating profit for the second quarter was $16 million compared to $14 million
a year ago. For the first six months, operating profit was $21 million, up $1
million from last year. Profit improvements for both periods reflect operating
efficiencies and cost reductions and favorable currency exchange rates, offset
in part by increased price concessions, lower sales volumes and
lower income from employee retirement benefit plans of $2 million for the second
quarter and $4 million for the first six months.
Aerospace and Defense
Aerospace and Defense sales for the second quarter 2003 were $84 million,
unchanged from the second quarter 2002. Sales for the first six months of 2003
were $147 million compared to $138 million last year. Sales from the Redmond,
Washington operations contributed $14 million in the second quarter and $26
million in the first six months. Programs also contributing to sales gains
included liquid and solid systems for Missile Defense applications, Boeing HyFly
and Atlas V, while lower volumes were experienced on various other programs,
including NASA programs substantially completed in 2002.
Operating profit for the second quarter 2003 was $11 million compared to $14
million in the second quarter 2002. For the first six months of 2003, operating
profit was $20 million compared to $30 million last year. The profit declines
include lower income from employee retirement benefit plans of $5 million for
the second quarter and $10 million for the first six months. Also impacting
profits were contributions from the Redmond, Washington operations and increased
volumes on programs for liquid and solid systems for Missile Defense
applications, offset by decreased profit contributions from other programs.
During the second quarter 2002, Aerojet recorded an unusual charge of $6 million
for the final purchase price adjustment on the 2001 sale of its EIS business.
On May 5, 2003, Aerojet announced an agreement to acquire the propulsion
business of Atlantic Research Corporation (ARC Propulsion), a subsidiary of
Sequa Corporation, for $133 million. The Company continues to provide additional
documentation to the Federal Trade Commission (FTC) following the Company's
Hart-Scott-Rodino filing, which it re-filed with the FTC and Department of
Justice on June 10, 2003. The Company expects to receive regulatory and other
approvals, and close this transaction in late summer.
Contract backlog was $713 million at the end of the second quarter 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 from a commercial
customer, was $344 million at the end of the second quarter 2003 compared to
$416 million as of November 30, 2002. Funding for the Titan program was
restructured in the first quarter 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 second quarter totaled $17 million compared to $10
million in the prior year. For the first six months, sales were $34 million
compared to $15 million a year ago. As a contract manufacturer and ingredient
supplier to pharmaceutical and biotechnology companies, Fine Chemical's sales
trends reflect, to a large extent, demand for its customers' end products.
Operating profit for the second quarter was $4 million, compared to a loss of $1
million in the prior year. For the first six months of 2003, operating profit
was $6 million, compared to a loss of $4 million a year ago. The operating
profit improvements reflect higher sales volumes, operating improvements, and
higher capacity utilization. While the outlook for AFC's business remains
favorable, operating margins for the rest of the year are expected to decline
from the first half due primarily to changes in product mix.
Corporate and Other Expenses
Interest expense increased to $6 million in the second quarter 2003 from $4
million in the prior year. For the first six months, interest expense increased
to $11 million from $7 million last year. The increase is due primarily to
additional debt incurred for the acquisition of the Redmond, Washington
operations in October 2002.
Corporate and other expenses increased to $10 million in the second quarter from
$6 million last year, reflecting lower income from employee retirement benefit
plans, higher professional service fees and compensation costs. Corporate and
other expenses were $16 million in the first
six months, up $1 million from a year ago. Costs last year included $6 million
for the accounting review of prior periods' results.
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,
before the effect of the ARC Propulsion acquisition, which is still subject to
approvals, to be in the range of $0.41 to $0.46 per share. The Company reaffirms
its earnings outlook with a bias toward the upper end of the range and expects
earnings for the third quarter 2003 to be in the range of $.04 to $.06 per
share. Third quarter results reflect the expected effect of seasonally lower
operating profits from the Company's GDX Automotive segment.
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 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 reductions
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 markets, including market
disruptions, and significant currency or interest rate fluctuations, may
impede the Company's access to, or increase the cost of, external
financing for its operations and investments and/or materially affect
results of operations and cash flows.
* As a defense contractor, the Company's Aerospace and Defense segment is
subject to certain risks, including:
- - The right of the U.S. government to terminate any contract for
convenience;
- - Modification or termination of U.S. government contracts due to lack of
congressional funding;
- - Successful bids for new programs, the exercise of contract options or
follow-on contracts cannot be assured in light of the competitive bidding
atmosphere under which most contracts are awarded.
* 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.
* 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
website at http://www.GenCorp.com.
(Tables to Follow)
BUSINESS SEGMENT INFORMATION
GenCorp Inc.
Three Months Ended Six Months Ended
------------------------- --------------------------
MAY 31, May 31, MAY 31, May 31,
(Dollars in millions, 2003 2002 2003 2002
except per-share data) (UNAUDITED) (UNAUDITED)
------------------------- --------------------------
NET SALES
GDX Automotive $ 214 $ 209 $ 405 $ 399
Aerospace and Defense 84 84 147 138
Fine Chemicals 17 10 34 15
-------- -------- -------- --------
$ 315 $ 303 $ 586 $ 552
-------- -------- -------- --------
INCOME FROM OPERATIONS
GDX Automotive $ 16 $ 14 $ 21 $ 20
Aerospace and Defense 11 14 20 30
Fine Chemicals 4 (1) 6 (4)
Unusual items -- (6) -- (6)
-------- -------- -------- --------
SEGMENT OPERATING PROFIT 31 21 47 40
Interest expense (6) (4) (11) (7)
Corporate and other expenses (10) (6) (16) (15)
Unusual items -- (1) -- (3)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 15 10 20 15
-------- -------- -------- --------
Income tax provision (5) (4) (7) (6)
-------- -------- -------- --------
NET INCOME $ 10 $ 6 $ 13 $ 9
======== ======== ======== ========
-------- -------- -------- --------
BASIC EARNINGS PER COMMON SHARE: $ 0.22 $ 0.14 $ 0.30 $ 0.21
======== ======== ======== ========
-------- -------- -------- --------
DILUTED EARNINGS PER COMMON SHARE: $ 0.21 $ 0.14 $ 0.30 $ 0.21
======== ======== ======== ========
SHARES USED FOR CALCULATION OF EARNINGS PER COMMON
SHARE (IN THOUSANDS):
Basic 43,226 42,795 43,115 42,723
Diluted 51,391 43,327* 43,142* 43,166*
-------- -------- -------- --------
Capital expenditures $ 12 $ 8 $ 21 $ 14
Depreciation and amortization $ 19 $ 16 $ 37 $ 32
-------- -------- -------- --------
* Excludes convertible notes that are anti-dilutive
CONDENSED CONSOLIDATED BALANCE SHEET
GenCorp Inc.
MAY 31, November 30,
(Dollars in millions) 2003 2002
------ ------
(UNAUDITED)
ASSETS
Cash and cash equivalents $ 46 $ 48
Accounts receivable 139 139
Inventories, net 184 167
Recoverable from the U.S. government and other third parties
for environmental remediation costs 24 24
Prepaid expenses and other 11 5
------ ------
TOTAL CURRENT ASSETS 404 383
Recoverable from the U.S. government and other third parties
for environmental remediation costs 196 208
Deferred income taxes -- 9
Prepaid pension asset 345 337
Goodwill 138 126
Property, plant and equipment, net 496 481
Other noncurrent assets, net 92 92
------ ------
$1,671 $1,636
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LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings and current portion of long-term debt $ 35 $ 22
Accounts payable 87 89
Reserves for environmental remediation costs 39 39
Income taxes payable 11 22
Other current liabilities 197 201
------ ------
TOTAL CURRENT LIABILITIES 369 373
Convertible subordinated notes 150 150
Other long-term debt, net of current portion 213 215
Reserves for environmental remediation costs 285 301
Postretirement benefits other than pensions 169 176
Deferred income taxes 9 --
Other noncurrent liabilities 66 61
Total Shareholders' Equity 410 360
------ ------
$1,671 $1,636
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