SACRAMENTO, Calif., March 26 /PRNewswire-FirstCall/ -- GenCorp Inc.
(NYSE: GY) today reported results for the first quarter ended February 29,
2008.
Sales of $176.6 million for the first quarter 2008 increased 17% over
$150.8 million in the first quarter of 2007, reflecting growth in our
aerospace and defense business.
Income from continuing operations for the first quarter of 2008 was
$3.3 million ($0.06 per share), compared to a loss from continuing
operations of $2.1 million ($0.04 per share) for the first quarter of 2007.
The improved results for the first quarter of 2008 compared to the first
quarter of 2007 were primarily driven by (i) decreased retirement benefit
plan expenses, and (ii) lower costs associated with our environmental
clean-up and related activities, partially offset by the favorable
performance on the Titan program close-out activities in 2007.
Net income for the first quarter of 2008 was $3.0 million ($0.05 per
share), compared to net income of $28.5 million ($0.51 per share) for the
first quarter of 2007. The first quarter of 2007 results include a $31.2
million gain in discontinued operations from a negotiated early retirement
of a seller note and an earn-out payment associated with the divestiture of
the Fine Chemicals business in November 2005.
"We are pleased with Aerojet's sales growth in the first quarter," said
Scott Neish, GenCorp's interim president and chief executive officer. "The
year-over-year increase represents a good start to 2008 in meeting the
challenge of replacing the financial impact of our successful Titan engine
program.
"With respect to our real estate segment, the recent release of 2,300
acres of land in our Rio del Oro project by the California Department of
Toxic Substances Control from environmental order marked an important
milestone in returning this land to productive use. We continue to seek
entitlements on approximately 6,400 acres of excess Sacramento land,
enhancing the long-term value of our excess real estate holdings,"
concluded Mr. Neish.
Operations Review
Aerospace and Defense Segment
Aerojet reports its fiscal year sales and income under a 52/53 week
accounting convention. Fiscal 2008 is a 53 week year with the extra week
accounted for in the first quarter -- one more week than was reported in
the first quarter of 2007. Sales of $174.5 million for the first quarter of
2008 increased 17% over $149.1 million in the first quarter of 2007,
reflecting the added week and growth in the Standard Missile, TOW and Orion
programs, partially offset by the close-out activities of the Titan program
in 2007.
First quarter of 2008 segment performance was $10.4 million compared to
$7.2 million in the first quarter of 2007. Excluding the effect of
environmental remediation provision adjustments and retirement benefit plan
expense, segment performance for the first quarter of 2008 was $14.9
million (8.5% of sales), compared to $14.3 million (9.6% of sales) in the
first quarter of 2007. Segment performance in the first quarter of 2008
included recognition of favorable contract performance on the Atlas V(R)
program offset by declines in other programs. Segment performance in the
first quarter of 2007 included favorable results on the Titan program
close-out activities. Segment performance, which is a non-GAAP financial
measure, is defined in the Operating Segment Information table included in
this release.
As of February 29, 2008, contract backlog was $980 million. 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 $621 million at
February 29, 2008.
Real Estate Segment
Real estate sales and segment performance for the first quarter of 2008
were $2.1 million and $1.3 million, respectively, compared to $1.7 million
and $0.8 million, respectively, for the first quarter of 2007. The increase
in sales and segment performance reflects the one-time impact of completion
of negotiations with the Sacramento Regional Transit District for the
October 2004 property usage agreement relating to its existing Light Rail
station.
The Company continues to process entitlement applications on its
approximately 6,400 acres of excess Sacramento land under the brand name of
Easton.
Additional Information
On March 5, 2008, the Company entered into a second amended and
restated shareholder agreement (Shareholder Agreement) with Steel Partners
II L.P. with respect to the election of Directors for the 2008 Annual
Meeting and certain other related matters. The Company expects to incur a
charge in the range of $11 million to $15 million in the second quarter of
2008. The charge includes costs associated with Terry L. Hall's executive
severance agreement, increases in pension benefits primarily for the
Company's officers, and accelerated vesting of outstanding stock-based
payment awards.
As a result of the Shareholder Agreement, the Company was required to
fund into a grantor trust on March 12, 2008, from cash on hand, an amount
equal to $34.8 million, which represents the liabilities associated with
the Benefits Restoration Plan (BRP) and the amounts that would be payable
to certain officers of the Company who are party to the executive severance
agreements in the event of qualifying terminations of employment following
a change of control (as defined in the BRP and the executive severance
agreements) of the Company.
Retirement benefit plan expense, which is mostly non-cash, decreased to
$1.9 million in the first quarter of 2008 from $5.3 million in the first
quarter of 2007. 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.
Total debt decreased slightly to $445.4 million at February 29, 2008
from $446.3 million at November 30, 2007. Cash balances at February 29,
2008 decreased to $72.5 million compared to $92.3 million at November 30,
2007. Total debt less cash increased to $372.9 million at February 29, 2008
from $354.0 million as of November 30, 2007. The $18.9 million increase in
total debt less cash is primarily the result of cash usage due to increased
working capital and capital investment needs in the Aerospace and Defense
segment and interest payments. As of February 29, 2008, the Company had
$72.4 million in outstanding letters of credit issued under the $125.0
million letter of credit subfacility and the Company's $80.0 million
revolving credit facility was unused.
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:
-- effects of recent changes in board membership and management on the
Company's operations and/or business strategy;
-- cancellation or material modification of one or more significant
contracts;
-- future reductions or changes in U.S. government spending;
-- failure to comply with regulations applicable to contracts with the
U.S. government;
-- significant competition and the Company's inability to adapt to rapid
technological changes;
-- product failures, schedule delays or other problems with existing or
new products and systems or cost-overruns on the Company's fixed-price
contracts;
-- 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;
-- requirements to provide guarantees and/or letters of credit to
financially assure the Company's environmental obligations;
-- environmental claims related to the Company's current and former
businesses and operations;
-- the release or explosion of dangerous materials used in the Company's
businesses;
-- reduction in airbag propellant sales volume;
-- disruptions in the supply of key raw materials and difficulties in the
supplier qualification process, as well as raw materials price
increases;
-- 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;
-- 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;
-- 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;
-- the cost of servicing the Company's debt and compliance with financial
and other covenants;
-- the results of significant litigation;
-- costs and time commitment related to acquisition activities;
-- additional costs related to the Company's recent divestitures;
-- a strike or other work stoppage or the Company's inability to renew
collective bargaining agreements on favorable terms;
-- the loss of key employees and shortage of available skilled employees
to achieve anticipated growth;
-- fluctuations in sales levels causing the Company's quarterly operating
results to fluctuate;
-- occurrence of liabilities that are inadequately covered by indemnity or
insurance;
-- changes in the Company's contract-related accounting estimates;
-- new accounting standards that could result in changes to our methods of
quantifying and recording accounting transactions;
-- effects of changes in discount rates and returns on plan assets of
defined benefit pension plans;
-- failure to maintain effective internal controls in accordance with
Section 404 of the Sarbanes-Oxley Act; and
-- 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.
(Tables to follow)
Consolidated Statements of Operations
GenCorp Inc.
Three Months Ended
February 29, February 28,
(Dollars in millions, except per-share amounts) 2008 2007
(Unaudited)
Net Sales $176.6 $150.8
Costs and Expenses
Cost of products sold 158.8 135.0
Selling, general and administrative 2.2 3.0
Depreciation and amortization 6.5 6.5
Interest expense 7.3 7.2
Interest income (1.4) (1.3)
Other expense, net 0.1 2.1
Income (loss) from continuing operations
before income taxes 3.1 (1.7)
Income tax (benefit) provision (0.2) 0.4
Income (loss) from continuing operations 3.3 (2.1)
Income (loss) from discontinued operations,
net of income taxes (0.3) 30.6
Net Income $3.0 $28.5
Income Per Share of Common Stock
Basic and Diluted:
Income (loss) per share from continuing
operations $0.06 $(0.04)
Income (loss) per share from discontinued
operations, net of income taxes (0.01) 0.55
Net income per share $ 0.05 $ 0.51
Weighted average shares of common
stock outstanding 56.7 55.9
Weighted average shares of common stock
outstanding, assuming dilution 56.9 55.9
Operating Segment Information
GenCorp Inc.
Three Months Ended
February 29, February 28,
(Dollars in millions) 2008 2007
(Unaudited)
Net Sales:
Aerospace and Defense $174.5 $149.1
Real Estate 2.1 1.7
Total Net Sales $176.6 $150.8
Segment Performance:
Aerospace and Defense
Segment performance before environmental
remediation provision adjustments and
retirement benefit plan expense $14.9 $14.3
Environmental remediation provision
adjustments (0.7) (1.2)
Retirement benefit plan expense (3.8) (5.9)
Aerospace and Defense 10.4 7.2
Real Estate 1.3 0.8
Total Segment Performance $11.7 $8.0
Three Months Ended
February 29, February 28,
(Dollars in millions) 2008 2007
(Unaudited)
Reconciliation of segment performance to
income (loss) from continuing operations
before income taxes:
Segment Performance $11.7 $8.0
Interest expense (7.3) (7.2)
Interest income 1.4 1.3
Corporate and other expenses (4.6) (4.4)
Corporate retirement benefit plan income 1.9 0.6
Income (loss) from continuing operations
before income taxes $3.1 $(1.7)
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.
Condensed Consolidated Balance Sheets
GenCorp Inc.
February 29, November 30,
(In millions) 2008 2007
(Unaudited)
Current Assets
Cash and cash equivalents $72.5 $92.3
Accounts receivable 108.6 99.2
Inventories 75.1 67.5
Recoverable from U.S. government and other
third parties for environmental remediation
costs and other 46.2 46.5
Prepaid expenses and other 17.1 17.4
Income tax receivable 7.0 -
Assets of discontinued operations 0.1 0.1
Total Current Assets 326.6 323.0
Noncurrent Assets
Property, plant and equipment, net 137.7 139.8
Real estate held for entitlement and leasing 46.5 45.3
Recoverable from U.S. government and other
third parties for environmental remediation
costs and other 177.7 179.0
Prepaid pension asset 103.1 101.0
Goodwill 94.9 94.9
Intangible assets 21.3 21.7
Other noncurrent assets, net 87.8 90.5
Total Noncurrent Assets 669.0 672.2
Total Assets $995.6 $995.2
Liabilities and Shareholders' Deficit
Current Liabilities
Short-term borrowings and current portion
of long-term debt $1.5 $1.5
Accounts payable 32.4 28.9
Reserves for environmental remediation costs 67.3 66.1
Income taxes payable - 6.2
Postretirement medical and life benefits 8.8 8.8
Advance payments on contracts 44.4 49.1
Other current liabilities 80.5 84.3
Liabilities of discontinued operations 1.1 1.0
Total Current Liabilities 236.0 245.9
Noncurrent Liabilities
Convertible subordinated notes 271.4 271.4
Senior subordinated notes 97.5 97.5
Other long-term debt 75.0 75.9
Deferred income taxes 0.2 0.3
Reserves for environmental remediation costs 200.7 203.9
Postretirement medical and life benefits 77.2 78.5
Other noncurrent liabilities 72.6 73.8
Total Noncurrent Liabilities 794.6 801.3
Total Liabilities 1,030.6 1,047.2
Total Shareholders' Deficit (35.0) (52.0)
Total Liabilities and Shareholders' Deficit $995.6 $995.2
SOURCE GenCorp Inc.
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Related links:
http://www.gencorp.com
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.
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