Exhibit 99.1
GENCORP REPORTS 2004 FOURTH QUARTER AND ANNUAL RESULTS
SACRAMENTO, Calif., Feb. 9 /PRNewswire-FirstCall/ -- GenCorp Inc.
(NYSE: GY) today reported results for the fourth quarter and the fiscal year
ended November 30, 2004.
2004 Highlights
-- Aerospace & Defense 2004 sales rose 53%, both from higher sales in
existing programs, as well as contributions from the Atlantic Research
Corporation (ARC) acquisition in late 2003.
-- The Company's Sacramento area property in process for development
expanded in the fourth quarter by an additional 1,600 acres. Total
real estate development projects now in the entitlement process exceed
5,800 acres.
-- The under-performing GDX Automotive unit sale was completed August 31,
2004, and in the third quarter the Company classified Aerojet Fine
Chemicals (AFC) as a discontinued operation, in accordance with a
corporate decision to divest that business.
-- A major recapitalization via a series of successful debt and equity
offerings and a new credit facility began in the fourth quarter and was
completed in the first quarter of 2005.
Sales from continuing operations for 2004 totaled $499 million, compared
to $348 million in 2003, an increase of 43%. The increase in sales for 2004
primarily reflects contributions from the ARC acquisition, as well as other
growth in the Company's Aerospace and Defense business, partially offset by
lower real estate sales.
The Company's net loss for 2004 was $398 million ($8.82 per share),
compared to net income of $22 million ($0.50 per share) for 2003. The loss
from continuing operations for 2004 was $86 million ($1.91 per share) compared
to income of $12 million ($0.26 per share) for 2003. The decrease in earnings
from continuing operations primarily reflects the impact of increases in
employee retirement benefit plan expense and interest expense, a tax provision
to reflect the uncertainty of realizing deferred tax benefits, given
historical losses, and lower real estate income. The earnings decrease was
partially offset by contributions from the propulsion business of ARC, which
was acquired in October 2003.
Sales from continuing operations for the fourth quarter 2004 were
$149 million, compared to $103 million in the same 2003 period. The Company
reported a fourth quarter net loss of $20 million ($0.42 per share), compared
to net income of $12 million ($0.27 per share) for the 2003 period. Loss from
continuing operations for the fourth quarter was $14 million ($0.30 per share)
compared to income of $8 million ($0.18 per share) for the same 2003 period.
The 2004 fourth quarter and full year period reflect both the GDX
Automotive segment and Aerojet Fine Chemicals (AFC) segment as discontinued
operations. The sale of GDX Automotive was completed on August 31, 2004. In
addition, during the third quarter the Company made a strategic decision to
divest its AFC business and focus on its Aerospace and Defense and Real Estate
segments. The Company will continue to operate AFC in the ordinary course of
business pending any sale.
"GenCorp is a significantly different and stronger company than it was at
this time last year. We are smaller -- with two business segments -- but the
2004 operating performance of our Aerospace and Defense segment and the
milestones we achieved in executing our real estate development plans are
solid indicators of the strength of the strategy we pursued in 2004," said
Terry L. Hall, chairman of the Board, president and chief executive officer.
"We have transformed the business portfolio and improved the capital structure
of the Company, with the goal of delivering shareholder value over the long
term."
"Our Aerospace and Defense business experienced significant and impressive
growth this year, reinforced by recent strategic acquisitions that expanded
both our technology and our market presence," Hall continued. "Aerojet
contributed significantly to several important national space and defense
missions. Aerojet propulsion systems supported the spectacularly successful
NASA Mars and Saturn missions, and are aboard a spacecraft launched in 2004 to
Mercury. We continued to strengthen Aerojet's record of participation in all
major missile defense systems. With important ongoing and new national
initiatives in both defense and space exploration, we expect to capitalize on
our market and technology leadership in these important markets in 2005."
"Likewise, our Real Estate business achieved important milestones in 2004.
We settled a major water dispute that should ensure an adequate water supply
to serve our development projects, and we entered into a unique long-term
agreement to sell the rights to mine excess aggregates from portions of our
property, which will both produce income and reduce the development costs of
the property. Most significantly, we increased the amount of our real estate
holdings undergoing the entitlement process to approximately 5,800 acres.
These actions, together with our work with state and federal authorities to
advance the process toward real estate development, are bringing us closer to
our long-term goal of monetizing the significant value of our real estate
holdings."
"Lastly, our recent equity and debt offerings, both in the fourth quarter
of 2004 and continuing through the first quarter of 2005, have reduced debt
and extended debt maturities. These actions strengthened our balance sheet
and improved our financial flexibility going forward. During 2004 we faced
impacts of higher corporate expense, employee retirement benefit plan expense,
interest expense, and significant expense associated with the Company's
balance sheet restructuring. In 2005 we will implement strategies to bring our
operations into better conformity with the current size of the Company,"
concluded Hall.
Operations Review
Aerospace and Defense Segment
Total Year
Sales were $492 million for 2004, 53% higher than 2003 sales of $321
million. The ARC acquisition contributed $156 million of the increase. The
2004 sales growth included increased deliveries to Boeing on the F/A-22
program, volume on the Terminal High Altitude Air Defense (THAAD) program that
was acquired in 2004 from Pratt & Whitney for a nominal amount, and higher
sales on programs utilizing electric and liquid thrusters for orbit and
attitude maintenance. These increases were partially offset by lower volume
on a variety of defense and armament programs.
Segment performance was $30 million for 2004, compared to $43 million in
2003. Excluding the impacts of employee retirement benefit plan expense and
unusual items, segment performance was $57 million, compared with $45 million
the prior year. The increase in segment performance reflects the impact of
higher sales, mainly driven by the ARC acquisition. Segment performance,
which is a non-GAAP financial measure, is defined in the footnotes to the
Operating Segment Information table at the end of this release.
Fourth Quarter
Fourth quarter sales increased to $138 million compared to $95 million in
the fourth quarter 2003. Higher sales on the Atlas(R) V and THAAD programs
and the ARC acquisition contributed to the increase.
Fourth quarter segment performance in 2004 was $7 million compared to
$17 million in 2003. Excluding the impacts of employee retirement benefit
plan expense and unusual items, segment performance was $13 million, compared
with $19 million in the same period in 2003. In 2003, the Company benefited
from favorable contract performance on space systems programs, including the
Delta program.
Aerojet continued to make advances in its NASA business during the
quarter. Aerojet's engines powered the Genesis Discovery Mission. Aerojet also
tested a new Mars Lander and non-toxic Reaction Control Engines. We view
these milestones as highly relevant to our ability to participate in NASA's
manned and robotic space exploration initiatives. In the missile defense area,
Aerojet successfully tested an advanced Throttling Divert and Attitude Control
System (TDACS) for interceptor applications and delivered the first THAAD
flight test motor. Aerojet also began installation of production equipment at
its Socorro, New Mexico facility to support manufacturing of fire suppression
systems for the Ford Crown Victoria police cruiser.
As of November 30, 2004, Aerojet's contract backlog was $879 million
compared to $830 million as of November 30, 2003. 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 $538 million as of
November 30, 2004 compared to $425 million as of November 30, 2003. The
increase in funded backlog primarily reflects growth and/or timing of funding
on tactical solid rocket motors, missile defense and F/A-22 programs, new
funding for design upgrades on the Atlas V program, and additional Crown
Victoria business with Ford.
Real Estate Segment
Real Estate sales and segment performance for 2004 were $15 million and
$12 million, respectively, compared to $32 million and $23 million,
respectively, for 2003. The 2003 results included sales of several real
estate assets. Results for 2004 do not include any sales of real estate
assets, but do include a property usage agreement with the Sacramento Regional
Transit for construction of a Light Rail station adjacent to property the
Company intends to develop. The Company also finalized an agreement with
Granite Construction Company for the exclusive rights to mine excess
aggregates from certain portions of our Sacramento property. These two
transactions occurred in the fourth quarter 2004.
Additional Information
Corporate and other expenses increased to $38 million in 2004 compared to
$31 million in 2003. The increase is primarily due to higher Sarbanes-Oxley
compliance costs, higher insurance costs, an increase in amortization of
deferred financing costs, and a provision of $2 million for environmental
remediation costs related to a former operating site.
Corporate employee retirement benefit plan expense was $17 million in
2004, compared to $2 million in 2003. This change, as well as the change in
segment employee retirement benefit plan expense, is primarily due to the
recognition of the underperformance of the U.S. pension plan assets in prior
years and a decrease in the discount rate used to determine benefit
obligations.
Interest expense increased to $35 million in 2004 from $22 million in
2003. The increase is due to higher debt levels and higher average interest
rates. The additional debt includes amounts incurred in August 2003 to finance
the ARC acquisition.
Total debt of $538 million at November 30, 2003 increased to $577 million
at November 30, 2004. Total debt less total cash decreased from $474 million
at November 30, 2003 to $308 million as of November 30, 2004. The decrease of
$166 million primarily reflects proceeds received from the sale of the GDX
Automotive business and our recent equity offering, offset by increased
working capital.
In November 2004, the Company initiated the following financing
transactions in order to recapitalize its balance sheet and reduce future
interest costs:
-- A public equity offering of common stock raised net cash proceeds of
approximately $131 million, of which approximately $58 million
(including premiums) will be used today to redeem outstanding 9 1/2%
Senior Subordinated Notes.
-- The Company issued $80 million of aggregate principal amount of 2 1/4%
Convertible Subordinated Debentures due in 2024. The proceeds were used
to repurchase $70 million in aggregate principal amount of the Company's
5 3/4% Convertible Subordinated Notes due in 2007. In the first quarter
of 2005, the Company issued an additional $66 million of its 2 1/4%
Convertible Subordinated Debentures, the proceeds of which were used to
repurchase an additional $60 million in aggregate principal amount of
the 5 3/4% Notes.
-- In the first quarter of 2005, the Company closed a new $180 million
credit facility that replaced the senior credit facility in place as of
November 30, 2004. The new credit facility consists of an $80 million
undrawn revolver, a $25 million term loan and a letter of credit
facility of $75 million. Using cash on hand, the Company repaid, in
full, $141 million of outstanding term loans that existed under the
former facility.
In 2004, the Company recorded pre-tax charges of $9 million related to the
write-off of deferred financing fees and the premium associated with the
repurchase of the 5 3/4% Notes. In addition, in the first quarter of 2005 the
Company will record additional pre-tax charges of $19 million which includes the
write-off of deferred fees associated with the former senior credit facility,
redemption of the 9 1/2% Notes, and the write-off of deferred financing fees and
premium associated with the repurchase of the additional 5 3/4% Notes. Together,
these actions should save the Company approximately $9 million annually in
interest costs, while they also extend the debt maturities.
For 2004, the Company recorded an income tax provision consisting of $34
million primarily to reflect the uncertainty of realizing tax benefits in the
future, given historical losses, offset by $5 million of benefit related
primarily to research tax credit claims. The Company recorded a provision of $6
million relating to discontinued operations in the fourth quarter for foreign
tax obligations. No tax benefit has been included in the charge related to the
GDX Automotive business divestiture, as realization of the tax benefit in the
future is uncertain.
Shareholders' equity at November 30, 2004 was $141 million compared to
shareholders' equity as of November 30, 2003 of $428 million. The decline
includes losses from the continuing and discontinued operations of
$433 million, resulting mostly from the sale of GDX Automotive, partially
offset by $146 million of other shareholders' equity adjustments, primarily
proceeds from the equity offering and stock option exercises.
Business Outlook
The following forward-looking statements are based on current expectations
and assumptions. Actual results may differ materially. Unless otherwise
specifically stated, these statements do not include the potential impact of
any mergers, acquisitions, asset sales or other strategic transactions that
may be completed during 2005. See "Forward-Looking Statements" below.
We expect that Aerospace and Defense revenue growth will continue over the
long-term, however, margins will be under slight pressure in the near-term due
to our projected 2005 program mix. Real Estate prospects remain positive with
current levels of leasing activities continuing to provide a stable income
base going forward. Our primary near-term focus in this segment will be to
concentrate on securing the entitlements of the 5,800 acres that are currently
in process.
We expect to incur approximately $48 million in non-cash expense from
employee retirement benefit plans evenly throughout 2005.
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 present (without limitation) the
expectations, beliefs, plans and objectives of management and future financial
performance and assumptions underlying, or judgments concerning, the matters
discussed in such statements. The words "believe," "estimate," "anticipate,"
"project" and "expect," and similar expressions, are intended to identify
forward-looking statements. Forward-looking statements involve certain risks,
estimates, assumptions and uncertainties, including with respect to future
sales and activity levels, cash flows, contract performance, the outcome of
litigation and contingencies, environmental remediation and anticipated costs
of capital. 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:
-- the cancellation or material modification of one or more significant
contracts or future reductions or changes in U.S. government spending;
-- product failures, schedule delays or other problems with existing or
new products and systems or cost-overruns on our fixed-price contracts;
-- significant competition and our inability to adapt to rapid
technological changes;
-- failure to comply with regulations applicable to contracts with the
U.S. government;
-- environmental claims related to the Company's business and operations,
including any costs the Company may incur if its petition for rehearing
to the Sixth Circuit Court of Appeals regarding the affirmation by a
three judge panel of the Sixth Circuit on November 22, 2004 of 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 not granted, and the offsets to which the Company believes
it is entitled are not realized;
-- the environmental and other government regulations the Company is
subject to becoming more stringent or subjecting the Company to
material liability in excess of its established reserves;
-- the release or explosion of dangerous materials used in the Company's
businesses;
-- disruptions in the supply of key raw materials and difficulties in the
supplier qualification process, as well as increases in the prices of
raw materials;
-- changes in economic and other conditions in the Sacramento County,
California, real estate market or changes in interest rates affecting
real estate values in that market;
-- the Company's limited experience in real estate development and the
ability to execute its real estate business plan, including our ability
to obtain all necessary zoning, land use and environmental approvals;
-- the cost of servicing the Company's debt and compliance with financial
and other covenants;
-- costs and time commitment related to acquisition activities;
-- recent changes in the Company's operating strategies, such as its
recent decisions to divest the GDX Automotive and AFC businesses, which
result in changes in the types or mix of business in which the Company
is involved;
-- delay in identifying a buyer and negotiating the sale of the AFC
operations on terms acceptable to the Company;
-- a strike or other work stoppage or the Company's inability to renew
collective bargaining agreements on favorable terms;
-- the loss of key employees;
-- fluctuations in sales levels causing the Company's quarterly operating
results to fluctuate;
-- risks related to the AFC business prior to its sale, including
competition in the pharmaceutical fine chemicals market, capital
intensive nature of operations, lack of availability of raw materials
and highly energetic and potent nature of chemical compounds used on
production; and
-- those risks detailed from time to time in the Company's SEC reports.
This list of factors that may affect future performance and the accuracy
of forward-looking statements are illustrative, but by no means exhaustive.
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, 2003 and its subsequent
filings with the U.S. Securities and Exchange Commission. Additional risks may
be described from time-to-time in future filings with the U.S. Securities and
Exchange Commission. Accordingly, all forward-looking statements should be
evaluated with the understanding of their inherent uncertainty. All such risk
factors are difficult to predict, contain material uncertainties that may
affect actual results and may be beyond the Company's control.
About GenCorp
GenCorp is a leading technology-based manufacturer of aerospace and
defense products and systems with a real estate business segment that includes
activities related to the development, sale and leasing of the Company's real
estate assets. Additional information about the Company can be obtained by
visiting the Company's web site at http://www.GenCorp.com .
Consolidated Statements of Income
GenCorp Inc.
Three Months Ended Year Ended
------------------ ------------------
(Dollars in millions, Nov 30, Nov 30, Nov 30, Nov 30,
except per-share data) 2004 2003 2004 2003
- ----------------------------------- ------- ------- ------- -------
(Unaudited)
Net sales $ 149 $ 103 $ 499 $ 348
Costs and expenses:
Cost of products sold 128 72 447 260
Selling, general
and administrative 15 11 49 31
Depreciation and
amortization 6 8 31 28
Interest expense 10 9 35 22
Other income, net (1) (6) (15) (9)
Unusual items, net 9 2 9 5
Income (loss) from
continuing operations
before income taxes (18) 7 (57) 11
Income tax (benefit)
provision (4) (1) 29 (1)
Income (loss) from
continuing operations (14) 8 (86) 12
Income (loss) from
discontinued
operations,
net of tax (6) 4 (312) 10
Net income (loss) $ (20) $ 12 $ (398) $ 22
Earnings (loss) per
share of common stock
basic and diluted:
Income (loss) per share
from continuing
operations: $ (0.30) $ 0.18 $ (1.91) $ 0.26
Income (loss) per
share from discontinued
operations: (0.12) 0.09 (6.91) 0.24
Net income (loss)
per share: $ (0.42) $ 0.27 $ (8.82) $ 0.50
Weighted average
shares of common
stock outstanding 47.2 43.7 45.1 43.3
Weighted average
shares of common
stock outstanding,
assuming dilution 47.2 43.8 45.1 43.4
Dividends declared per
share of common stock $ -- $ 0.03 $ 0.06 $ 0.12
Operating Segment Information
GenCorp Inc.
Three Months Ended Year Ended
------------------ ------------------
Nov 30, Nov 30, Nov 30, Nov 30,
(Dollars in millions) 2004 2003 2004 2003
- ------------------------------------ ------- ------- ------- -------
(Unaudited)
Net sales:
Aerospace and Defense $ 138 $ 95 $ 492 $ 321
Real Estate 11 12 15 32
Intersegment sales
elimination -- (4) (8) (5)
Total $ 149 $ 103 $ 499 $ 348
Segment performance:
Aerospace and Defense $ 13 $ 19 $ 57 $ 45
Unusual items -- (2) -- (5)
Retirement benefit
plan income (expense) (6) -- (27) 3
Aerospace and
Defense total 7 17 30 43
Real Estate 9 10 12 23
Total $ 16 $ 27 $ 42 $ 66
Three Months Ended Year Ended
------------------ ------------------
Nov 30, Nov 30, Nov 30, Nov 30,
(Dollars in millions) 2004 2003 2004 2003
- ------------------------------------ ------- ------- ------- -------
Reconciliation of
segment performance
to income (loss)
from continuing
operations before
income taxes:
Segment performance $ 16 $ 27 $ 42 $ 66
Interest expense (10) (9) (35) (22)
Corporate retirement
benefit plan expense (3) (2) (17) (2)
Corporate unusual items (9) -- (9) --
Corporate and
other expenses (12) (9) (38) (31)
Income (loss) from
continuing operations
before income taxes (18) 7 (57) 11
Income tax (benefit)
provision (4) (1) 29 (1)
Income (loss) from
continuing operations (14) 8 (86) 12
Income (loss) from
discontinued operations,
net of tax (6) 4 (312) 10
Net income (loss) $ (20) $ 12 $ (398) $ 22
The Company evaluates its operating segments based on several factors, of which
the primary financial and performance measure is segment performance. Segment
performance represents net sales from continuing operations less applicable
costs, expenses, and provisions for unusual items relating to operations.
Segment performance excludes corporate income and expenses, provisions for
unusual items not related to the operations, interest expense, 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 evaluation
and a comparison of results for ongoing business operations, and it is on this
basis that management internally assesses performance.
Condensed Consolidated Balance Sheets
GenCorp Inc.
Nov 30, Nov 30,
(Dollars in millions, except per share data) 2004 2003
- --------------------------------------------------------- ------- -------
Assets
Cash and cash equivalents $ 68 $ 64
Restricted cash 23 --
Accounts receivable, net 88 88
Inventories, net 159 142
Recoverable from U.S. government and other
third parties for environmental remediation costs 36 37
Prepaid expenses and other 6 13
Assets of discontinued operations 94 692
Total current assets 474 1,036
Noncurrent assets
Restricted cash 178 --
Property, plant and equipment, net 145 148
Recoverable from U.S. government and other
third parties for environmental remediation costs 197 183
Deferred income taxes -- 28
Prepaid pension asset 278 314
Goodwill 103 100
Other noncurrent assets, net 120 120
Total noncurrent assets 1,021 893
Total assets $ 1,495 $ 1,929
Liabilities and shareholders' equity
Short-term borrowings and
current portion of long-term debt $ 23 $ 52
Accounts payable 55 37
Reserves for environmental remediation 51 53
Income taxes payable 35 36
Current deferred income taxes -- 1
Other current liabilities 156 164
Liabilities of discontinued operations 18 189
Total current liabilities 338 532
Noncurrent liabilities
Convertible subordinated notes 285 150
Senior subordinated notes 150 150
Other long-term debt, net of current portion 119 186
Reserves for environmental remediation 253 262
Postretirement benefits other than pensions 149 148
Other noncurrent liabilities 60 73
Total noncurrent liabilities 1,016 969
Total liabilities 1,354 1,501
Total shareholders' equity 141 428
Total liabilities and shareholders' equity $ 1,495 $ 1,929
SOURCE GenCorp Inc.
-0- 02/09/2005
/CONTACT: investors, Yasmin Seyal, senior vice president and chief
financial officer, +1-916-351-8585, or media, Linda Cutler, vice president,
corporate communications, +1-916-351-8650, both of GenCorp Inc./
/Web site: http://www.gencorp.com/