Exhibit 99.1
[LOGO OF GENCORP]
NEWS RELEASE
FOR IMMEDIATE RELEASE
GENCORP REPORTS 2005 FOURTH QUARTER AND ANNUAL RESULTS
SACRAMENTO, Calif. - February 9, 2006 - GenCorp Inc. (NYSE: GY) today reported
results for the fourth quarter and the fiscal year ended November 30, 2005.
2005 FOURTH QUARTER HIGHLIGHTS AND EVENTS
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o The Company wrote down Atlas(R) V inventory of $169 million and
completed sale of its Aerojet Fine Chemicals business for $114
million.
o Fourth quarter 2005 sales from continuing operations increased 38%
compared to fourth quarter 2004. Year-over-year annual sales increased
25%.
o The Company announced it is exploring entering into a transaction on
its 2,700 acre Rio Del Oro project.
o The Company continued discussions with the City of Folsom regarding
the annexation and entitlement of 625 acres, bringing the total amount
of Company-owned land currently in the entitlement and re-zoning
process to approximately 10 square miles.
Sales from continuing operations for the fourth quarter 2005 totaled $205
million, 38% above $149 million in the fourth quarter 2004. Sales for 2005 were
$624 million compared to $499 million for 2004, an increase of 25%. Excluding
Atlas sales of $84 million in 2005 and $13 million in 2004, year-over-year
growth was 11%. Sales in 2005 reflect growth in the Company's Aerospace and
Defense business.
The Company's net loss from continuing operations was $175 million ($3.19 per
share) for the fourth quarter 2005 and $206 million ($3.78 per share) for the
full year. The losses included a $169 million write-down of inventory on the
Atlas V program and a $29 million charge for Olin litigation. Also included for
the full year is a net charge for resolution of additional legacy litigation
matters, recapitalization costs, other settlements, and a $29 million tax
benefit for the carryback of current and prior year losses resulting in refunds
of previously paid taxes.
The Company's net loss from continuing operations was $14 million ($0.30 per
share) for the fourth quarter 2004 and $86 million ($1.91 per share) for 2004.
The loss for the full year included a net charge of $9 million related to the
recapitalization costs and a $29 million tax provision.
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Terry Hall, chairman, president and chief executive officer said, "In the fourth
quarter and throughout the year, GenCorp steered its way through a number of
legacy liability issues which predate our 1999 spin-off of the polymer products
segment (now OMNOVA Solutions, Inc.). We achieved acceptable settlements of
retiree medical claims in the Wotus litigation and in our toxic tort cases in
Southern California. While we were disappointed with having to write-down the
Atlas V inventory and recognize the $29 million charge for the Olin litigation,
these necessary actions, combined with the sale of our Fine Chemicals business,
allow us to put many legacy uncertainties behind us with results going forward
more reflective of our two core businesses.
"Aerojet's revenue growth this year is a confirmation of our strategy to
participate in the consolidation of the U.S. propulsion market and to grow
Aerojet to assure effective funding of our environmental remediation programs.
As a result of our discussions with the City of Folsom regarding annexation of
625 acres, we now have approximately 10 square miles of land in the re-zoning
and entitlement process in Northern California, and look forward to the approval
of our first project, Rio Del Oro, later this year," continued Mr. Hall.
OPERATIONS REVIEW
Aerospace and Defense Segment
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Fourth quarter sales from continuing operations increased 47% to $203 million
compared to $138 million in the fourth quarter 2004, including Atlas sales of
$68 million in the fourth quarter 2005 and $12 million in the fourth quarter
2004. Excluding Atlas, fourth quarter sales increased 7% to $135 million
compared to $126 million in the fourth quarter 2004.
Sales for 2005 increased 25% to $617 million compared to $492 million last year.
Included in these amounts were Atlas sales of $84 million in 2005 and $13
million in 2004. Excluding Atlas, 2005 sales increased 11% to $533 million
compared to $479 million last year. Most of Aerojet's product areas contributed
to the growth, with individual program increases of greater than $10 million
related to Standard Missile, Terminal High-Altitude Area Defense (THAAD) and
Tomahawk.
Fourth quarter 2005 segment performance was a loss of $150 million compared to
income of $7 million in the fourth quarter 2004. Excluding the impact of
employee retirement benefit plan expense and unusual items, segment performance
for the fourth quarter 2005 was a loss of $154 million, compared to income of
$13 million in the fourth quarter of 2004. 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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Segment performance for the full year 2005 was a loss of $137 million compared
to income of $30 million in 2004. Excluding the impact of employee retirement
benefit plan expense and unusual items, 2005 segment performance was a loss of
$113 million compared to income of $57 million in 2004. Significant factors
impacting the change in segment performance compared to the prior year were: (i)
$169 million and $16 million write-down of inventory associated with the Atlas V
program in 2005 and 2004, respectively (see Additional Information section below
for more detail); (ii) environmental reserve and recovery adjustments that
resulted in $4 million expense in 2005 compared to a $16 million favorable
impact to segment performance in 2004; and (iii) changes in product mix that
resulted in lower margins during 2005.
With the recent completion of deliveries on the Titan program and restructure of
the Atlas V contract, sales for these two programs in 2006 are expected to
decline by approximately $70 million from 2005 sales. Titan sales are expected
to rebound in 2007 and 2008 when final facilities conversion and other related
close-out activities are funded by the U.S. Air Force.
Aerojet, which Boeing Integrated Defense Systems selected as "Supplier of the
Year," had a number of fourth quarter successes:
o awarded a $20 million contract to develop and demonstrate a new ICBM
motor for the Air Force Applications Advanced Second Stage Booster
Development program;
o demonstrated its rocket motor for the THAAD missile flight test;
o negotiated a production contract for the Guided Multiple-Launch Rocket
System; and
o expanded its propulsion support of the TOW program with a new Bunker
Buster contract.
Mr. Hall commented, "Aerojet's engines performed flawlessly on seven launches
during 2005 with 100% mission success, including the final Titan IV flight in
October, marking the last milestone for Aerojet's 50 years of Titan program
work. Aerojet's launch and in-space technology also supported several other high
profile deep space missions during the year, including the Mars Reconnaissance
Orbiter and the Stardust project. In January 2006, five of Aerojet's solid
rocket boosters launched the New Horizons spacecraft on its journey to Pluto.
"Aerojet's accomplishments over the last year and the breadth of our technology
and products position us to benefit from multiple new opportunities emerging
from the Department of Defense and NASA," continued Mr. Hall.
As of November 30, 2005, contract backlog was $696 million compared to $879
million as of November 30, 2004. The decrease in the contract backlog is
primarily a result of the renegotiated Atlas V contract. Excluding Atlas, other
program contract backlog grew by $69 million, a 13% increase. Funded backlog,
which includes only the amount for which money has been directly authorized by
the U.S. Congress, or for which a purchase order has been received from a
commercial customer, was $498 million as of November 30, 2005, compared to $538
million on November 30, 2004. Excluding Atlas, funded backlog grew by $27
million, a 7% increase.
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Real Estate Segment
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Real Estate sales and segment performance for 2005 were $7 million and $4
million, respectively, compared to $15 million and $12 million, respectively,
for 2004. The 2004 results included revenue from a property usage agreement and
an exclusive mining rights agreement. Results for 2005 consist of rental
property revenue only, as there were no significant sales of real estate assets.
In 2005, the Company continued its efforts to enhance shareholder value by
repositioning excess Sacramento land holdings for higher and better uses. The
City of Rancho Cordova is the planning and entitlement authority for the
Company's 2,716-acre Rio Del Oro project application. The City, which is
awaiting comments from the U.S. Army Corps of Engineers, expects to release its
Environmental Impact Review (EIR) in March 2006, with approval of the
application anticipated in late 2006.
Rancho Cordova also has jurisdiction over the Company's 1,654-acre Westborough
project. The City expects to start the EIR for this project in the next few
months, with project approval anticipated in 2008.
The County of Sacramento is the planning and entitlement authority for the
1,385-acre Glenborough and Easton place project. The County began preparation of
the EIR for this project in June 2005. A draft EIR generally takes at least a
year to prepare; therefore, the Company expects this document to be released for
comments in the second half of 2006, with project approval anticipated in 2007.
The Company, along with several other property owners, is engaged in discussions
with the City of Folsom regarding the annexation, re-zoning and entitlement of
3,500 acres of County land, 625 of which are owned by the Company, in Folsom's
sphere of influence. With this additional acreage, 6,400 acres, or approximately
10 square miles, of the Company's Sacramento land is in process for re-zoning
and entitlement.
Mr. Hall noted, "The key to creating shareholder value with our real estate
holdings is obtaining the re-zoning and entitlement approvals required to return
this land to higher and better uses. In California, this is a complex and
lengthy process, the timing of which is difficult to predict. The Rio Del Oro
application is currently dependent upon the response from the Corps of
Engineers. We continue to work closely with the City of Rancho Cordova in its
efforts to keep this project on track for approval in late 2006.
"We will continue to explore real estate structures or transactions which add
to shareholder value, such as our recent announcement regarding the exploration
of a possible real estate transaction on our Rio Del Oro project," concluded Mr.
Hall.
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ADDITIONAL INFORMATION
The loss from discontinued operations was $24 million in 2005 ($0.43 per share)
compared to $312 million ($6.91 per share) in 2004. The loss in 2005 included a
$29 million charge associated with the disposition of the Fine Chemicals
business, primarily reflecting the seller note of $26 million for which income
will be recorded as the note is realized. The loss in 2004 included a one-time
charge of $279 million associated with the disposition of the GDX Automotive
business.
As previously discussed, the Company recorded an inventory write-down of $169
million in the fourth quarter of 2005 on a contract to design, develop and
produce a solid rocket motor for Lockheed Martin's Atlas V program. Recovery of
the Atlas V inventory has been subject to several uncertainties. Until recently,
the Company believed that a contract restructuring, projected to occur in late
2005, would permit recovery of inventoried development and production costs.
This belief was based on prior statements by government officials regarding
funding for the Evolved Expendable Launch Vehicle program, and ongoing
discussions with the prime contractor over a long period of time, including
requests for historical costs and past investment. Recently, the Company learned
that government funding is not available to recover past costs, and as a result,
the Company concluded renegotiation of the contract was in its best interest to
prevent further unrecoverable investment in this historically unprofitable
program. Accordingly, on December 22, 2005, the Company reached an agreement
with Lockheed Martin Corporation, which spells out the renegotiated terms.
On November 30, 2005, the Company sold its Fine Chemicals business to American
Pacific Corporation (AMPAC) for $114 million, subject to adjustment, consisting
of $88 million of cash, unsecured subordinated seller note of $26 million.
Additionally, AMPAC will pay us up to $5 million based on the Fine Chemical
business achieving specified earning targets in the twelve month period ending
September 30, 2006.
Interest expense decreased to $24 million in 2005 from $35 million in 2004. The
decrease is the result of lower average debt and interest rates as a result of
the sale of the GDX Automotive business in August 2004 and the recapitalization
transactions initiated in November 2004 and completed in February 2005.
Total debt decreased to $444 million at November 30, 2005 from $577 million at
November 30, 2004. The cash balance at November 30, 2005 was $91 million, all of
which was unrestricted, whereas the cash balance at November 30, 2004 totaled
$269 million, of which $201 million was restricted. The restricted cash was used
in the first quarter of 2005 to pay down debt. Total debt less cash increased
from $308 million at November 30, 2004 to $353 million as of November 30, 2005.
The $45 million increase resulted primarily from (i) costs associated with the
recapitalization transactions completed in the first quarter of 2005; (ii)
payment for the Olin judgment; (iii) costs associated with legacy business
matters, including costs related to postretirement plans; (iv) interest payments
on debt; (v) corporate expenses; and (vi) capital expenditures offset by cash
received from the sale of the Fine Chemicals business and cash generated by the
Aerospace and Defense segment. As of November 30, 2005, the Company's $80
million revolving credit facility was unused.
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In connection with the Company's preparation of its consolidated financial
statements for the year ended November 30, 2005, adjustments were identified and
recorded related to the Company's previously reported financial results for the
first and second quarters of 2005. These restated results are reflected in the
year 2005 financial results reported herein. The adjustments did not have an
effect on our full year financial results. The determination to restate the
financial data was made by management in consultation with the audit committee
as a result of identification of errors related to (i) the application of
consistent revenue recognition policies and procedures for an acquired
operation; and (ii) the application of SFAS 52, Foreign Currency Translation,
subsequent to the divestiture of the GDX Automotive business.
The Company is required to assess the effectiveness of its internal control over
financial reporting as of the end of its year ended November 30, 2005. This
assessment will be included in the Company's 2005 Annual Report on Form 10-K. In
making its assessment of internal control over financial reporting, the Company
uses the criteria used by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control-Integrated Framework. In the Company's
2005 Form 10-K, management expects to report a material weakness in internal
control over financial reporting concerning insufficient processes and controls
to communicate information in sufficient detail as it relates to accounting for
complex, non-routine transactions. As a result, management is expected to
conclude that its internal control over financial reporting was not effective at
November 30, 2005.
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:
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o cancellation or material modification of one or more significant
contracts, such as the recent renegotiation of our Atlas V contract;
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 product failures, schedule delays or other problems with existing or
new products and systems or cost-overruns on the Company's fixed-price
contracts;
o significant competition and the Company's inability to adapt to rapid
technological changes;
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 reduction in airbag propellant volume;
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 environmental claims related to the Company's current and former
businesses and operations;
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 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;
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 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 effects of changes in discount rates and returns on plan assets of
defined benefit pension plans could require the Company to increase
its shareholders' deficit;
o fluctuations in sales levels causing the Company's quarterly operating
results to fluctuate;
o additional costs related to the Company's recent divestitures;
o costs and time commitment related to acquisition activities;
o inability to effectively and efficiently implement the necessary
initiatives to eliminate the material weakness we expect to report in
our internal controls over financial reporting; and
o those risks detailed from time to time in the Company's reports filed
with the SEC.
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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 will be described in more detail in the Company's Annual
Report on Form 10-K for the year ended November 30, 2005 and in the Company's
subsequent filings with the SEC. 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. The Company is under no
obligation to (and expressly disclaims any such obligation to) update or alter
its forward-looking statements whether as a result of new information, future
events or otherwise.
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 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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CONSOLIDATED STATEMENTS OF OPERATIONS
GenCorp Inc.
THREE MONTHS ENDED YEAR ENDED
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NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
(in millions, except per-share amounts) 2005 2004 2005 2004
- ------------------------------------------------------- ------------ ------------ ------------ ------------
(Unaudited)
Net sales $ 205 $ 149 $ 624 $ 499
COSTS AND EXPENSES:
Cost of products sold 358 128 739 447
Selling, general and administrative 8 15 30 49
Depreciation and amortization 7 6 28 31
Interest expense 5 10 24 35
Unusual items, net 17 9 37 9
Other (income) expense 1 (1) 1 (15)
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Loss from continuing operations before income taxes (191) (18) (235) (57)
Income tax benefit (provision) 16 4 29 (29)
------------ ------------ ------------ ------------
Loss from continuing operations (175) (14) (206) (86)
------------ ------------ ------------ ------------
Income (loss) from discontinued operations,
net of tax -- (6) (24) (312)
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Net loss $ (175) $ (20) $ (230) $ (398)
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LOSS PER SHARE OF COMMON STOCK
BASIC AND DILUTED:
Loss per share from continuing operations $ (3.19) $ (0.30) $ (3.78) $ (1.91)
Loss per share from discontinued operations 0.01 (0.12) (0.43) (6.91)
------------ ------------ ------------ ------------
Loss per share $ (3.18) $ (0.42) $ (4.21) $ (8.82)
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Weighted average shares of common stock
outstanding 54.9 47.2 54.6 45.1
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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 YEAR ENDED
------------ ------------ ------------ ------------
NOVEMBER 30, NOVEMBER 30, NOVEMBER 30, NOVEMBER 30,
(in millions) 2005 2004 2005 2004
- ------------------------------------------------------- ------------ ------------ ------------ ------------
(Unaudited)
NET SALES:
Aerospace and Defense $ 203 $ 138 $ 617 $ 492
Real Estate 2 11 7 15
Intersegment sales elimination -- -- -- (8)
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Total $ 205 $ 149 $ 624 $ 499
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SEGMENT PERFORMANCE:
Aerospace and Defense $ (154) $ 13 $ (113) $ 57
Retirement benefit plan expense (8) (6) (34) (27)
Unusual items 12 -- 10 --
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Aerospace and Defense Total (150) 7 (137) 30
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Real Estate 1 9 4 12
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Total $ (149) $ 16 $ (133) $ 42
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RECONCILIATION OF SEGMENT PERFORMANCE TO LOSS FROM
CONTINUING OPERATIONS BEFORE INCOME TAXES:
Segment Performance $ (149) $ 16 $ (133) $ 42
Interest expense (5) (10) (24) (35)
Corporate retirement benefit plan expense (4) (3) (14) (17)
Corporate and other expenses (4) (12) (17) (38)
Unusual items (29) (9) (47) (9)
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Loss from continuing operations before income taxes (191) (18) (235) (57)
Income tax benefit (provision) 16 4 29 (29)
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Loss from continuing operations (175) (14) (206) (86)
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Income (loss) from discontinued operations,
net of tax -- (6) (24) (312)
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Net loss $ (175) $ (20) $ (230) $ (398)
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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.
NOVEMBER 30, NOVEMBER 30,
(in millions) 2005 2004
- ------------------------------------------------------------ ------------ ------------
ASSETS
Cash and cash equivalents $ 91 $ 68
Restricted cash -- 23
Accounts receivable, net 82 82
Inventories 57 159
Recoverable from U.S. government and other third parties for
environmental remediation costs 25 36
Prepaid expenses and other 26 12
Assets of discontinued operations -- 94
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Total current assets 281 474
NONCURRENT ASSETS
Restricted cash -- 178
Property, plant and equipment, net 140 145
Recoverable from U.S. government and other third parties for
environmental remediation costs 171 197
Prepaid pension asset 233 278
Goodwill 102 103
Other noncurrent assets, net 130 120
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Total noncurrent assets 776 1,021
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Total assets $ 1,057 $ 1,495
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LIABILITIES AND SHAREHOLDERS' (deficit) EQUITY
Short-term borrowings and current portion of long-term debt $ 1 $ 23
Accounts payable 57 55
Reserves for environmental remediation 52 51
Income taxes payable 6 35
Postretirement benefits other than pensions 12 15
Other current liabilities 142 141
Liabilities of discontinued operations 2 18
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Total current liabilities 272 338
NONCURRENT LIABILITIES
Convertible subordinated notes 291 285
Senior subordinated notes 98 150
Other long-term debt, net of current portion 54 119
Reserves for environmental remediation 216 253
Postretirement benefits other than pensions 138 149
Other noncurrent liabilities 61 60
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Total noncurrent liabilities 858 1,016
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Total liabilities 1,130 1,354
Total shareholders' (deficit) equity (73) 141
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Total liabilities and shareholders' (deficit) equity $ 1,057 $ 1,495
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