Exhibit 99.1
[LOGO OF GENCORP]
News Release
For Immediate Release
GENCORP REPORTS 2005 THIRD QUARTER RESULTS
SACRAMENTO, Calif. - October 7, 2005 - GenCorp Inc. (NYSE: GY) today reported
results for the third quarter ended August 31, 2005.
THIRD QUARTER 2005 HIGHLIGHTS
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o The Company's sales continue to grow, up 16% from the third quarter of
2004
o Progress towards entitlement of 5,800 acres continues
o Company announces agreement to sell Fine Chemicals. Sale expected to
close in October
Sales from continuing operations for the third quarter 2005 totaled $134
million, 16% above the $116 million in the third quarter 2004. Sales for the
first nine months of 2005 were $421 million compared to $350 million for the
first nine months of 2004, an increase of 20%. Sales in 2005 reflect growth in
the Company's Aerospace and Defense business.
The Company's net loss for the third quarter 2005 was $29 million ($0.53 per
share), compared to a net loss of $47 million ($1.05 per share) for the third
quarter 2004. The net loss for the first nine months of 2005 was $54 million
($1.00 per share), compared to a net loss of $378 million ($8.54 per share) for
the first nine months of 2004. The loss in 2004 included a one-time charge of
$261 million associated with the disposition of the GDX Automotive segment and a
$33 million tax provision to reflect the uncertainty of realizing deferred tax
benefits, given historical losses. The loss in the third quarter 2005 includes a
one-time charge of $28 million associated with the anticipated disposition of
the Fine Chemicals business.
The third quarter and nine month periods in 2005 and 2004 reflect the Company's
decision to classify its GDX Automotive and Fine Chemicals segments as
discontinued operations. The GDX Automotive sale was completed on August 31,
2004.
In July 2005, the Company announced its plan to sell the Fine Chemicals business
to American Pacific Corporation for $119 million, consisting of $100 million of
cash, seller note of $19 million, and the assumption by the buyer of certain
liabilities. American Pacific Corporation and the Company recently agreed to
amend the purchase agreement to modify the sale price and payment terms related
to the Fine Chemicals sale. The revised purchase price will consist of $89
million of cash payable at closing, seller note of
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$25 million delivered at closing, a contingent payment of up to $5 million if
the Fine Chemicals business achieves specified earning targets in the twelve
month period ending September 30, 2006, and the assumption by the buyer of
certain liabilities. The Company has recorded a loss of $28 million in the third
quarter based on the difference between current estimated cash proceeds to be
received on disposition less the carrying value of net assets being sold and
related transaction selling costs. The loss is reflected in Discontinued
Operations. Income will be recorded in the future as the seller note of $25
million and any contingent payments are realized. The Company continues to
expect the transaction to close in October 2005.
"The sale of Fine Chemicals allows us to focus our attention and our capital on
our two core segments: Aerospace and Defense and Real Estate. Both segments
continue to make good progress toward the Company's strategic goals," said Terry
Hall, chairman, president and chief executive officer.
"The increase in Aerojet's sales both in the third quarter and in the year to
date period supports our strategic objective to strengthen our position as a
critical supplier of propulsion technologies to our customers. Aerojet's nine
month sales were up $62 million over 2004 and contract backlog exceeded $935
million at August 31, 2005. With the recent completion of the Rocketdyne
Propulsion Unit purchase by United Technologies, U.S. industry consolidation
within the solid and liquid propulsion markets in which we compete is
essentially complete with Aerojet firmly established as one of two major
suppliers in each of those markets.
"In our Real Estate segment, the rezoning applications for the Rio Del Oro,
Glenborough and Westborough projects are moving through the administrative
process of the City of Rancho Cordova and Sacramento County. The schedule for
the final approvals of all three projects remains on track with our previous
guidance," concluded Hall.
OPERATIONS REVIEW
Aerospace and Defense Segment
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Third quarter sales from continuing operations increased 14% to $132 million
compared to $116 million in the third quarter 2004. Sales for the first nine
months of 2005 were $416 million compared to $354 million last year. Sales
improvements during the third quarter of 2005 as compared to the prior year
quarter include increases in three important programs: Standard Missile,
Atlas(R) V and Terminal High-Altitude Area Defense (THAAD).
Third quarter segment performance in 2005 was $7 million compared to $11 million
in 2004. Excluding the impact of employee retirement benefit plan expense and
unusual items, segment performance was $16 million (12.1% of sales) in the third
quarter of 2005, compared to $18 million (15.5% of sales) in the third quarter
of 2004. For the first nine months of 2005, segment performance was $15 million
compared to $23 million in 2004. Excluding the effect of employee retirement
benefit plan expense and unusual items, segment performance was $43 million
(10.3 % of sales) in 2005 compared to
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$44 million (12.4% of sales) in 2004. The change in segment performance compared
to prior periods is primarily related to lower gross margins due to a change in
product mix. Segment performance, which is a non-GAAP financial measure, is
defined in the Operating Segment Information table included in this release.
Aerojet's accomplishments during the third quarter included:
o Signed a multi-year agreement with Raytheon Missile Systems to
fabricate warheads for the Tube-launched, Optically tracked,
Wire-guided (TOW) Weapon system. The initial-year contract is valued
at over $19 million with options for additional order quantities
through 2009.
o Provided propulsion systems for the Mars Reconnaissance Orbiter (MRO),
which was successfully launched on August 12, 2005, including engines
for the spacecraft's seven-month journey to Mars, Mars orbit insertion
and in-orbit maintenance during its multiyear mission at Mars.
o Opened a new facility to produce a fire suppression system for the
Ford Crown Victoria Police Interceptor (CVPI). Ford delivered the
first Aerojet-equipped CVPI in August 2005. The fire suppression
system is designed to prevent crash related fires or explosions as a
result of a fuel tank rupture.
o Selected to produce 100 prototype fire suppression systems for
operational testing on Humvee vehicles in Iraq.
As of August 31, 2005, contract backlog was $936 million compared to $879
million as of November 30, 2004. 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, totaled approximately $562 million as of August 31, 2005 compared to
$538 million as of November 30, 2004.
Real Estate Segment
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No real estate assets were sold in either the first nine months of 2005 or 2004.
Sales for this segment in the first nine months of 2005 and 2004 consist of
rental property operations. Segment performance was $1 million during the third
quarter and $3 million for the first nine months in both 2005 and 2004.
Processing of the rezoning applications for the Rio Del Oro, Glenborough, and
Westborough projects is proceeding as anticipated and no new significant
developments occurred during the third quarter 2005.
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ADDITIONAL INFORMATION
Corporate and other expenses were $4 million in the third quarter 2005 compared
to $10 million in the third quarter 2004. The third quarter 2004 expenses
included a charge of approximately $2 million for environmental costs related to
a former GenCorp operating site. Corporate and other expenses were $13 million
for the first nine months of 2005 compared to $26 million for the first nine
months of 2004. The decrease in both periods reflects lower amortization of
deferred financing costs in 2005 compared to 2004 as a result of the Company's
recapitalization transactions initiated in November 2004 and completed in
February 2005.
Interest expense decreased to $6 million in the third quarter 2005 from $9
million in the third quarter 2004. Interest expense decreased to $19 million in
the first nine months of 2005 from $25 million in the first nine months of 2004.
The decrease in both periods reflects the impact of lower average debt and
interest rates as a result of the sale of the GDX Automotive business in August
2004, and the benefits resulting from the Company's recapitalization
transactions from November 2004 to February 2005.
Total debt decreased to $424 million at August 31, 2005 from $577 million at
November 30, 2004. Total debt less cash increased from $308 million at November
30, 2004 to $421 million as of August 31, 2005. The $113 million increase
resulted from costs associated with the recapitalization transactions completed
in the first quarter of 2005, working capital requirements due to the timing of
payables and receivables and associated with the growth in Aerojet's business
volume, Atlas V inventory increases relating to deliveries scheduled for later
in 2005, capital expenditure requirements, non-recurring investment in the Fine
Chemicals business, and cash interest expense. The Company believes that with
its existing cash combined with the anticipated proceeds from sale of the Fine
Chemicals business, and $70 million of borrowings available under its credit
facilities, it will have sufficient funds to meet the operating plan for the
next twelve months.
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FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking statements within the meaning of
the Securities Exchange Act of 1934. 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:
o the cancellation or material modification of one or more significant
contracts or future reductions or changes in U.S. government spending;
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, including the Atlas V program contract that has not been
profitable to date, and for which, unless the Company successfully
renegotiates the contract, the Company may not recover its full cost
of investment, resulting in additional write-downs;
o significant competition and the Company's inability to adapt to rapid
technological changes;
o failure to comply with regulations applicable to contracts with the
U.S. government;
o environmental claims related to the Company's current and former
businesses and operations, including any costs the Company may incur
if the offsets to 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) to which the Company believes it is entitled
are not realized;
o the possibility that the 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 effects of changes in discount rates and returns on plan assets of
defined benefit pension plans could require the Company to reduce its
shareholders' equity;
o the release or explosion of dangerous materials used in the Company's
businesses;
o 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;
o 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;
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o the Company's limited experience in real estate development and the
ability to execute its real estate business plan, including the
Company's ability to obtain all necessary zoning, land use and
environmental approvals;
o the cost of servicing the Company's debt and compliance with financial
and other covenants;
o costs and time commitment related to acquisition activities;
o the Company's ability to monetize its real estate assets;
o a strike or other work stoppage or the Company's inability to renew
collective bargaining agreements on favorable terms;
o the loss of key employees and shortage of available skilled employees
to achieve anticipated growth;
o fluctuations in sales levels causing the Company's quarterly operating
results to fluctuate;
o a delay in, or inability to close on, the sale of the Fine Chemicals
operations;
o risks related to the Fine Chemicals business prior to its sale,
including competition in the pharmaceutical fine chemicals market, the
capital intensive nature of operations, the lack of availability of
raw materials and highly energetic and potent nature of chemical
compounds used in production; and
o those risks detailed from time to time in the Company's reports filed
with the SEC.
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, 2004 and its subsequent filings with
the SEC. Additional risks may be described from time-to-time in future filings
with the SEC. 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.
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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Consolidated Statements of Income
GenCorp Inc.
Three Months Ended Nine Months Ended
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August 31, August 31, August 31, August 31,
(in millions, 2005 2004 2005 2004
except per-share amounts) (Unaudited) (Unaudited)
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Net sales $ 134 $ 116 $ 421 $ 350
Costs and expenses:
Cost of products sold 120 114 381 319
Selling, general and
administrative 6 11 22 34
Depreciation and
amortization 7 8 21 25
Interest expense 6 9 19 25
Unusual items, net -- -- 20 --
Other (income)
expense, net -- (14) -- (14)
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Loss from continuing
operations before
income taxes (5) (12) (42) (39)
Income tax
benefit (provision) -- (3) 13 (33)
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Loss from continuing
operations (5) (15) (29) (72)
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Loss from discontinued
operations, net of
tax (24) (32) (25) (306)
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Net loss $ (29) $ (47) $ (54) $ (378)
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Loss Per Share of Common Stock
Basic and Diluted:
Loss per share from
continuing
operations $ (0.08) $ (0.33) $ (0.53) $ (1.63)
Loss per share from
discontinued
operations (0.45) (0.72) (0.47) (6.91)
---------- ---------- ---------- ----------
Loss per share $ (0.53) $ (1.05) $ (1.00) $ (8.54)
========== ========== ========== ==========
Weighted average shares
of common stock
outstanding 54.7 44.5 54.5 44.2
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Dividends Declared
Per Share of
Common Stock $ -- $ -- $ -- $ 0.06
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Operating Segment Information
GenCorp Inc.
Three Months Ended Nine Months Ended
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August 31, August 31, August 31, August 31,
(in millions) 2005 2004 2005 2004
(Unaudited) (Unaudited)
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Net Sales:
Aerospace and Defense $ 132 $ 116 $ 416 $ 354
Real Estate 2 2 5 4
Intersegment sales
elimination -- (2) -- (8)
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Total $ 134 $ 116 $ 421 $ 350
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Segment Performance:
Aerospace and
Defense $ 16 $ 18 $ 43 $ 44
Retirement benefit
plan expense (9) (7) (26) (21)
Unusual items -- -- (2) --
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Aerospace and
Defense Total 7 11 15 23
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Real Estate 1 1 3 3
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Total $ 8 $ 12 $ 18 $ 26
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Reconciliation of segment
performance to loss from
continuing operations
before income taxes:
Segment Performance $ 8 $ 12 $ 18 $ 26
Interest expense (6) (9) (19) (25)
Corporate retirement
benefit plan expense (3) (5) (10) (14)
Corporate and other
expenses (4) (10) (13) (26)
Unusual items -- -- (18) --
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Loss from continuing
operations before
income taxes (5) (12) (42) (39)
Income tax benefit
(provision) - (3) 13 (33)
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Loss from continuing
operations (5) (15) (29) (72)
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Loss from discontinued
operations, net of tax (24) (32) (25) (306)
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Net loss $ (29) $ (47) $ (54) $ (378)
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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 restructuring and 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 an evaluation and a comparison of results for ongoing
business operations, and it is on this basis that management internally assesses
the performance of its segments.
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Condensed Consolidated Balance Sheets
GenCorp Inc.
August 31, November 30,
(in millions) 2005 2004
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(Unaudited)
Assets
Cash and cash equivalents $ 3 $ 68
Restricted cash -- 23
Accounts receivable, net 96 88
Inventories, net 194 159
Recoverable from U.S. government and
other third parties for environmental
remediation costs 47 36
Prepaid expenses and other 11 6
Assets of discontinued operations 110 94
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Total current assets 461 474
Noncurrent assets
Restricted cash -- 178
Property, plant and equipment, net 137 145
Recoverable from U.S. government and
other third parties for environmental
remediation costs 171 197
Prepaid pension asset 245 278
Goodwill 103 103
Other noncurrent assets, net 125 120
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Total noncurrent assets 781 1,021
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Total assets $ 1,242 $ 1,495
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Liabilities and shareholders' equity
Short-term borrowings and
current portion of long-term debt $ 2 $ 23
Accounts payable 35 55
Reserves for environmental remediation 64 51
Income taxes payable 23 35
Postretirement benefits other than pensions 14 15
Other current liabilities 134 141
Liabilities of discontinued operations 26 18
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Total current liabilities 298 338
Noncurrent liabilities
Convertible subordinated notes 291 285
Senior subordinated notes 98 150
Other long-term debt, net of current portion 33 119
Reserves for environmental remediation 220 253
Postretirement benefits other than pensions 139 149
Other noncurrent liabilities 61 60
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Total noncurrent liabilities 842 1,016
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Total liabilities 1,140 1,354
Total shareholders' equity 102 141
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Total liabilities and shareholders' equity $ 1,242 $ 1,495
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