[GenCorp LOGO]
News Release
For Immediate Release
GenCorp Reports 2007 Second Quarter Results
SACRAMENTO, Calif. - June 27, 2007 - GenCorp Inc. (NYSE: GY) today reported
results for the second quarter ended May 31, 2007.
Sales from continuing operations for the second quarter 2007 totaled $192.3
million, 15% above the $167.2 million for the second quarter 2006. Sales for the
first half of 2007 were $343.1 million compared to $295.5 million for the first
half of 2006, an increase of 16%. Sales increases in 2007 reflect growth in the
Company's Aerospace and Defense business.
Net income for the second quarter 2007 was $12.5 million, or $0.20 diluted
earnings per share, compared to a net loss of $7.3 million, or $0.13 loss per
share, for the second quarter 2006. The Company's improved results were driven
by (i) improved Aerospace and Defense operating performance; (ii) lower expenses
in 2007 related to legal matters; and (iii) lower corporate costs.
"We are pleased with the second quarter operating results of our Aerospace and
Defense segment as revenue growth, margin, and cash flow performance continue on
a favorable trend," said Terry Hall, president and chief executive officer. "Our
Real Estate segment continues to move forward towards entitling 6,400 acres of
our Sacramento land," concluded Mr. Hall.
Operations Review
Aerospace and Defense Segment
Second quarter 2007 sales increased 15% to $190.7 million compared to $165.5
million in the second quarter 2006. Sales for the first half of 2007 were $339.8
million compared to $292.3 million for the first half of 2006. The increase in
sales is primarily attributable to higher sales on numerous space and defense
programs including Standard Missile, Orion, and Titan.
Segment performance improved to $19.3 million for the second quarter 2007
compared to a loss of $0.4 million for the second quarter 2006. Excluding the
effect of environmental remediation provision adjustments, impact of retirement
benefit plan expense, and unusual items, segment performance was $29.4 million
in the second quarter 2007 compared to $17.2 million for the second quarter
2006. Segment performance was $26.5 million for the first half of 2007 compared
to a loss of $1.0 million for the first half of 2006. Excluding the effect of
environmental remediation provision adjustments, impact of retirement benefit
plan expense, and unusual items, segment performance was $43.7 million for the
first half of 2007 compared to $25.5 million for the first half of 2006. Factors
contributing to the improved 2007 segment performance include: (i) higher sales
volume; (ii) higher margin on the Titan program reflecting the Company's
favorable performance on close-out activities; and (iii) lower retirement
benefit plan expense. Segment performance, which is a non-GAAP financial
measure, is defined in the Operating Segment Information table included in this
release.
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Aerojet strengthened its portfolio of space and defense programs with backlog
additions and continuing successes on development programs, including flight
tests of the Terminal High Altitude Area Defense missile defense system. As of
May 31, 2007, contract backlog increased to $973 million from $882 million as of
February 28, 2007. 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 $713 million at
May 31, 2007 compared to $632 million as of February 28, 2007. Contract and
funded backlog growth reflects increases in the Orion program and other defense
programs.
Additional highlights were:
o Successful design reviews on NASA's Orion Command and Service Module
propulsion systems.
o Award of a cost plus fixed fee contract, with a potential value of
$8 million, to develop a monopropellant engine for use on NASA's
Ares 1 launch vehicle. Ares 1 is designated to replace NASA's
current space Shuttle.
o Agreement with United Launch Alliance (Lockheed Martin and Boeing
Joint Venture) for additional Atlas V solid rocket booster
production. The combined 2008-2009 option is valued at approximately
$111 million and the 2010 option is valued at approximately $58
million.
Real Estate Segment
Sales for the first half of 2007 and 2006 consist of rental property operations.
Segment performance was $1.4 million and $1.6 million in the first half of 2007
and 2006, respectively.
The Company continues to process entitlement applications with the City of
Rancho Cordova (Rancho Cordova) on the Rio Del Oro (2,716 acres) and Westborough
(1,654 acres) projects; the County of Sacramento (County) on the Glenborough and
Easton Place projects (1,385 acres); and the City of Folsom (Folsom) with regard
to the Hillsborough project, previously referred to as the Folsom Sphere of
Influence (625 acres).
The current project status for each of the pending applications is summarized
below:
o Rancho Cordova expects a final draft Environmental Impact Review /
Environmental Impact Statement (EIR/EIS) on the Rio Del Oro project
to be ready for formal hearings later this summer, in anticipation
of entitlement before year end.
o The County continues working on the draft EIR for the Glenborough
and Easton Place projects. The County anticipates completion of the
administrative draft of the EIR by the end of 2007.
o Rancho Cordova plans to issue the Notice of Preparation for the
Westborough EIR in the summer. The technical studies required by the
environmental review have started and are moving forward. Rancho
Cordova anticipates an administrative draft EIR in late 2008.
o Folsom has issued its draft plan for the development of
approximately 3,500 acres within its sphere of influence where the
Company's 625 acre Hillsborough project is located. This is an
important first step for the Hillsborough entitlement process.
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Additional Information
Retirement benefit plan expense, which is mostly non-cash, decreased to $5.3
million in the second quarter 2007 from $10.8 million in the second quarter
2006. Retirement benefit plan expense decreased to $10.6 million in the first
half of 2007 from $21.8 million in the first half of 2006. The decrease is
primarily related to an increase in the discount rate used to determine benefit
obligations and a reduction in the impact of amortizing prior years' actuarial
losses.
Corporate and other expenses decreased to $5.3 million for the second quarter
2007 from $6.8 million for the second quarter 2006 and to $9.6 million in the
first half of 2007 from $12.6 million in the first half of 2006. The decrease is
primarily related to higher costs associated with the Company's annual meeting
and election of the board of directors in 2006.
Total debt decreased to $444.7 million at May 31, 2007 from $464.8 million at
February 28, 2007. The cash balance, including restricted cash, at May 31, 2007
decreased to $82.9 million compared to $93.9 million at February 28, 2007. The
Company used $19.8 million of restricted cash during the second quarter 2007 to
repay its 5 3/4% Notes. Total debt less cash decreased from $370.9 million at
February 28, 2007 to $361.8 million as of May 31, 2007. The $9.1 million
decrease in total debt less cash is the result of improved operating performance
and net working capital from the Aerospace and Defense segment. As of May 31,
2007, the Company had $72.4 million in outstanding letters of credit issued
under the $80.0 million letter of credit subfacility and the Company's $80.0
million revolving credit facility was unused.
In June 2007, the Company entered into an amended and restated $280.0 million
credit facility that replaced the senior credit facility that was in place as of
May 31, 2007. The amended credit facility consists of an $80.0 million revolver,
a $75.0 million term loan facility, and a letter of credit facility of $125.0
million. The amended credit facility extended the maturity of the existing
facility and will provide the Company with more flexibility to manage its
operations and real estate assets.
Forward-Looking Statements
This release may contain certain "forward-looking statements" within the meaning
of the United States Private Securities Litigation Reform Act of 1995. Such
statements in this release and in subsequent discussions with the Company's
management are based on management's current expectations and are subject to
risks, uncertainty and changes in circumstances, which may cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements. All statements contained herein and in subsequent
discussions with the Company's management that are not clearly historical in
nature are forward-looking and the words "anticipate," "believe," "expect,"
"estimate," "plan," and similar expressions are generally intended to identify
forward-looking statements. A variety of factors could cause actual results or
outcomes to differ materially from those expected and expressed in the Company's
forward-looking statements. Some important risk factors that could cause actual
results or outcomes to differ from those expressed in the forward-looking
statements include, but are not limited to, the following:
o cancellation or material modification of one or more significant
contracts;
o future reductions or changes in U.S. government spending;
o failure to comply with regulations applicable to contracts with the
U.S. government;
o significant competition and the Company's inability to adapt to
rapid technological changes;
o product failures, schedule delays or other problems with existing or
new products and systems or cost-overruns on the Company's
fixed-price contracts;
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o the possibility that environmental and other government regulations
that impact the Company become more stringent or subject the Company
to material liability in excess of its established reserves;
o requirements to provide guarantees and/or letters of credit to
financially assure the Company's environmental obligations;
o environmental claims related to the Company's current and former
businesses and operations;
o the release or explosion of dangerous materials used in the
Company's businesses;
o reduction in airbag propellant sales volume;
o disruptions in the supply of key raw materials and difficulties in
the supplier qualification process, as well as raw materials price
increases;
o changes in economic and other conditions in the Sacramento
metropolitan area, California real estate market or changes in
interest rates affecting real estate values in that market;
o the Company's limited experience in real estate activities and the
ability to execute its real estate business plan, including the
Company's ability to obtain or caused to be obtained, the necessary
final governmental zoning, land use and environmental approvals and
building permits;
o the Company's property being subject to federal, state and local
regulations and restrictions that may impose significant limitations
on the Company's plans, with much of the Company's property being
raw land located in areas that include the natural habitats of
various endangered or protected wildlife species;
o the cost of servicing the Company's debt and compliance with
financial and other covenants;
o the results of significant litigation;
o costs and time commitment related to acquisition activities;
o additional costs related to the Company's recent divestitures;
o a strike or other work stoppage or the Company's inability to renew
collective bargaining agreements on favorable terms;
o fluctuations in sales levels causing the Company's quarterly
operating results to fluctuate;
o effects of changes in discount rates and returns on plan assets of
defined benefit pension plans that may require the Company to
increase its shareholders' deficit;
o the loss of key employees and shortage of available skilled
employees to achieve anticipated growth;
o failure to maintain effective internal controls in accordance with
Section 404 of the Sarbanes-Oxley Act; and
o those risks detailed from time to time in the Company's reports
filed with the SEC.
About GenCorp
GenCorp is a leading technology-based manufacturer of aerospace and defense
products and systems with a real estate segment that includes activities related
to the entitlement, sale, and leasing of the Company's excess real estate
assets. Additional information about the Company can be obtained by visiting the
Company's web site at http://www.GenCorp.com.
Contact information:
Investors: Yasmin Seyal, senior vice president and chief financial officer
916.351.8585 Media: Linda Cutler, vice president, corporate communications
916.351.8650
(Tables to follow)
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Condensed Consolidated Statements of Operations
GenCorp Inc.
Three Months Ended Six Months Ended
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May 31, May 31, May 31, May 31,
(Dollars in millions, except per-share amounts) 2007 2006 2007 2006
(Unaudited) (Unaudited)
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Net Sales $ 192.3 $ 167.2 $ 343.1 $ 295.5
Costs and Expenses
Cost of products sold 163.3 151.4 298.3 272.7
Selling, general and administrative 3.7 7.8 6.7 15.8
Depreciation and amortization 6.9 6.6 13.4 13.1
Interest expense 7.0 6.4 14.2 12.7
Interest income (1.3) (0.5) (2.5) (1.0)
Other expense (income), net 0.5 1.4 2.5 1.8
Unusual items
Unrecoverable portion of settlements and
reserves for legal matters 2.6 8.5 2.6 8.5
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Income (loss) from continuing operations before income taxes and
cumulative effect of a change in accounting principle 9.6 (14.4) 7.9 (28.1)
Income tax benefit (3.6) (4.0) (3.2) (3.4)
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Income (loss) from continuing operations before cumulative effect of
a change in accounting principle 13.2 (10.4) 11.1 (24.7)
Income (loss) from discontinued operations, net of income taxes (0.7) 3.1 29.9 2.1
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Income (loss) before the cumulative effect of a change in 12.5 (7.3) 41.0 (22.6)
accounting principle
Cumulative effect of a change in accounting principle,
net of income taxes -- -- -- (0.7)
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Net Income (Loss) $ 12.5 $ (7.3) $ 41.0 $ (23.3)
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Income (Loss) Per Share of Common Stock
Basic:
Income (loss) per share from continuing operations before cumulative
effect of a change in accounting principle $ 0.23 $ (0.19) $ 0.20 $ (0.45)
Income (loss) per share from discontinued operations, net of
income taxes (0.01) 0.06 0.53 0.04
Loss per share from cumulative effect of a change in accounting
principle, net of income taxes -- -- -- (0.01)
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Net income (loss) per share $ 0.22 $ (0.13) $ 0.73 $ (0.42)
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Diluted:
Income (loss) per share from continuing operations before cumulative
effect of a change in accounting principle $ 0.21 $ (0.19) $ 0.20 $ (0.45)
Income (loss) per share from discontinued operations, net of income
taxes (0.01) 0.06 0.53 0.04
Loss per share from cumulative effect of a change in accounting
principle, net of income taxes -- -- -- (0.01)
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Net income (loss) per share $ 0.20 $ (0.13) $ 0.73 $ (0.42)
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Weighted average shares of common stock outstanding 56.1 55.4 56.0 55.2
Weighted average shares of common stock outstanding, assuming
dilution 71.8 55.4 56.3 55.2
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Operating Segment Information
GenCorp Inc.
Three Months Ended Six Months Ended
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May 31, May 31, May 31, May 31,
(Dollars in millions) 2007 2006 2007 2006
(Unaudited) (Unaudited)
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Net Sales:
Aerospace and Defense $190.7 $165.5 $339.8 $292.3
Real Estate 1.6 1.7 3.3 3.2
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Total Net Sales $192.3 $167.2 $343.1 $295.5
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Segment Performance:
Aerospace and Defense
Segment performance before retirement benefit plan expense
and unusual items $ 29.4 $ 17.2 $ 43.7 $ 25.5
Environmental remediation provision adjustments (1.5) (0.4) (2.7) (0.6)
Retirement benefit plan expense (6.0) (8.7) (11.9) (17.4)
Unusual Items - Unrecoverable portion of settlements and reserves for
legal matters (2.6) (8.5) (2.6) (8.5)
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Aerospace and Defense 19.3 (0.4) 26.5 (1.0)
Real Estate 0.6 0.8 1.4 1.6
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Total Segment Performance $ 19.9 $ 0.4 $ 27.9 $ 0.6
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Three Months Ended Six Months Ended
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May 31, May 31, May 31, May 31,
(Dollars in millions) 2007 2006 2007 2006
(Unaudited) (Unaudited)
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Reconciliation of segment performance to income (loss) from continuing
operations before income taxes and cumulative effect of a change in
accounting principle:
Segment Performance $ 19.9 $ 0.4 $ 27.9 $ 0.6
Interest expense (7.0) (6.4) (14.2) (12.7)
Interest income 1.3 0.5 2.5 1.0
Corporate and other expenses (5.3) (6.8) (9.6) (12.6)
Corporate and other retirement benefit plan income (expense) 0.7 (2.1) 1.3 (4.4)
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Income (loss) from continuing operations before income taxes and
cumulative effect of a change in accounting principle $ 9.6 $(14.4) $ 7.9 $(28.1)
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The Company evaluates its operating segments based on several factors, of
which the primary financial measure is segment performance. Segment performance
represents net sales from continuing operations less applicable costs, expenses,
and provisions for restructuring and unusual items relating to operations.
Segment performance excludes corporate income and expenses, commercial legacy
income and expenses, provisions for unusual items not related to the operations,
interest expense, interest income, cumulative effect of changes in accounting
principles, and income taxes. The Company believes that segment performance
provides information useful to investors in understanding its underlying
operational performance. Specifically, the Company believes the exclusion of the
items listed above permits an evaluation and a comparison of results for ongoing
business operations, and it is on this basis that management internally assesses
the financial performance of its segments.
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Condensed Consolidated Balance Sheets
GenCorp Inc.
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May 31, November 30,
(Dollars in millions) 2007 2006
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(Unaudited)
Current Assets
Cash and cash equivalents $ 82.9 $ 61.2
Restricted cash -- 19.8
Accounts receivable 86.1 71.1
Inventories 71.0 69.5
Recoverable from U.S. government and other third parties for
environmental remediation costs and other 38.3 37.6
Prepaid expenses and other 13.5 23.5
Assets of discontinued operations 0.1 0.5
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Total Current Assets 291.9 283.2
Noncurrent Assets
Property, plant and equipment, net 134.3 136.8
Recoverable from U.S. government and other third parties for
environmental remediation costs and other 179.7 177.0
Prepaid pension asset 176.8 187.3
Goodwill 101.3 101.3
Intangible assets 23.8 24.6
Other noncurrent assets, net 125.4 111.2
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Total Noncurrent Assets 741.3 738.2
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Total Assets $1,033.2 $1,021.4
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Liabilities and Shareholders' Deficit
Short-term borrowings and current portion of long-term debt $ 2.3 $ 21.3
Accounts payable 22.1 32.6
Reserves for environmental remediation costs 58.0 55.6
Income taxes payable 8.7 12.2
Postretirement medical and life benefits 9.7 9.7
Advanced payments on contracts 58.1 57.1
Other current liabilities 79.9 88.9
Liabilities of discontinued operations 1.2 1.8
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Total Current Liabilities 240.0 279.2
Noncurrent Liabilities
Convertible subordinated notes 271.4 271.4
Senior subordinated notes 97.5 97.5
Other long-term debt 73.5 72.2
Reserves for environmental remediation costs 211.0 210.4
Postretirement medical and life benefits 122.4 127.1
Other noncurrent liabilities 67.1 59.6
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Total Noncurrent Liabilities 842.9 838.2
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Total Liabilities 1,082.9 1,117.4
Total Shareholders' Deficit (49.7) (96.0)
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Total Liabilities and Shareholders' Deficit $1,033.2 $1,021.4
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