SACRAMENTO, Calif., Sept. 26 /PRNewswire-FirstCall/ -- GenCorp Inc.
(NYSE: GY) today reported results for the third quarter ended August 31,
2008.
Sales for the third quarter of 2008 totaled $172.5 million compared to
$198.5 million for the third quarter of 2007. Sales for the first nine
months of 2008 were $543.8 million compared to $541.6 million for the first
nine months of 2007.
Net loss for the third quarter of 2008 was $2.7 million, or $0.05 loss
per share. Net income for the third quarter of 2007 was $15.6 million, or
$0.26 diluted earnings per share, including a $12.4 million income tax
benefit.
Net income for the first nine months of 2008 was $7.2 million, or $0.13
diluted earnings per share, including a $13.8 million charge as a result of
the second amended and restated shareholder agreement (Shareholder
Agreement) with Steel Partners II L.P. with respect to the election of
Directors at the 2008 Annual Meeting and other related matters. Net income
for the first nine months of 2007 was $56.6 million, or $0.94 diluted
earnings per share, including 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, and a $15.6 million income tax benefit.
"During the third quarter and through the first nine months of the year
we continued to work toward replacing the business volume of our Titan
program which was completed in 2007," said Scott Neish, GenCorp's interim
president and chief executive officer. "With respect to our re-zoning
efforts for our excess Sacramento land, the Sacramento County Policy
Planning Commission voted unanimously in July to recommend approval of our
Glenborough at Easton and Easton Place project to the Board of Supervisors.
We expect the Board to certify the Environmental Impact Report and approve
the project by the end of 2008," concluded Mr. Neish.
Operations Review
Aerospace and Defense Segment
Sales for the third quarter of 2008 decreased to $171.0 million
compared to $197.1 million for the third quarter of 2007, reflecting lower
overall volume in defense programs and the close-out of the Titan program
in 2007. Sales for the first nine months of 2008 decreased to $528.6
million compared to $536.9 million for the first nine months of 2007,
reflecting the close-out activities of the Titan program in 2007, partially
offset by growth in the Orion program and higher overall volume in defense
programs. 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 nine months of 2008, or one more week than
as reported in the first nine months of 2007.
Segment performance for the third quarter of 2008 was income of $8.8
million compared to income of $15.0 million in the third quarter of 2007.
Segment performance in the first nine months of 2008 was income of $37.0
million compared to income of $41.5 million in the first nine months of
2007. The decrease in segment performance for both 2008 periods is
primarily the result of: (i) the favorable performance on the Titan program
close-out in 2007 and (ii) higher charges for future environmental
remediation obligations in 2008, partially offset by decreased retirement
benefit plan expense in 2008.
As of August 31, 2008, funded contract 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 $690 million. As of August 31, 2008, total
contract backlog was approximately $1.0 billion.
Real Estate Segment
Sales for the third quarter of 2008 were $1.5 million compared to $1.4
million for the third quarter of 2007. Segment performance was $1.0 million
and $1.4 million for the third quarters of 2008 and 2007, respectively.
Sales for the third quarter of 2008 and 2007 consist of rental property
operations.
Sales for the first nine months of 2008 were $15.2 million compared to
$4.7 million for the first nine months of 2007. Segment performance was
$9.4 million and $2.8 million for the first nine months of 2008 and 2007,
respectively. The increases in sales and segment performance are primarily
due to the sale of 400 acres of the Rio Del Oro property to Elliott Homes
Inc. for $10 million in cash during the second quarter of 2008.
Additional Information
Retirement benefit plan expense, which is mostly non-cash, for the
third quarter of 2008 was $1.8 million compared to $5.6 million in the
third quarter of 2007. Retirement benefit plan expense decreased to $5.7
million in the first nine months of 2008 from $16.2 million in the first
nine months of 2007. These decreases are primarily related to an increase
in the discount rate used to determine benefit obligations and a reduction
in the impact of amortizing prior years' actuarial losses.
Corporate and other expenses for the third quarter of 2008 were $7.9
million compared to $6.2 million for the third quarter of 2007. The
increase was primarily related to higher charges for future environmental
remediation obligations, partially offset by lower costs in the third
quarter of 2008 associated with legacy matters. Corporate and other
expenses decreased to $13.1 million in the first nine months of 2008 from
$15.8 million in the first nine months of 2007 primarily related to the
reversal of previously recognized stock-based compensation due to the lower
fair value of the stock appreciation rights and management incentive
expenses, partially offset by higher charges for future environmental
remediation obligations in the third quarter of 2008.
Total debt decreased to $440.7 million at August 31, 2008 from $446.3
million at November 30, 2007. Cash balances at August 31, 2008 decreased to
$57.7 million compared to $92.3 million at November 30, 2007. Total debt
less cash increased to $383.0 million at August 31, 2008 from $354.0
million at November 30, 2007. The $29.0 million increase in debt less cash
primarily represents cash of $35.2 million used to fund a grantor trust as
a result of the Shareholder Agreement. As of August 31, 2008, the Company
had $73.0 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 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 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 the
Company's methods of quantifying and recording accounting
transactions;
* effects of changes in discount rates, returns on plan assets, and
government regulations of defined benefit pension plans;
* failure to maintain effective internal controls in accordance with
Section 404 of the Sarbanes-Oxley Act;
* the Company's plans to effect a rescission offer relating to its
401(k) employee benefit plan;
* the ability of the Company to obtain consent of its lenders under
the Senior Credit Facility to effect a rescission offer on terms
favorable to the Company; 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)
Condensed Consolidated Statements of Operations
GenCorp Inc.
Three Months Ended Nine Months Ended
(in millions, except August 31, August 31, August 31, August 31,
per-share amounts) 2008 2007 2008 2007
(Unaudited) (Unaudited)
Net Sales $172.5 $198.5 $543.8 $541.6
Costs and Expenses
Cost of sales 153.2 175.4 473.7 473.7
Selling, general and
administrative 1.0 4.7 1.9 11.4
Depreciation and
amortization 6.7 7.2 19.8 20.6
Interest expense 6.8 7.4 20.9 21.6
Interest income (1.0) (1.1) (3.3) (3.6)
Other expense
(income), net 6.7 (3.4) 7.2 (0.9)
Unusual items:
Shareholder agreement
and related costs - - 13.8 -
Customer
reimbursements of
tax recoveries - 2.3 - 2.3
Replacement of senior
credit facility - 0.6 - 0.6
Unrecoverable portion
of legal matters 1.0 1.8 2.1 4.4
Income (loss) from
continuing operations
before income taxes (1.9) 3.6 7.7 11.5
Income tax provision
(benefit) 1.0 (12.4) 0.4 (15.6)
Income (loss) from
continuing
operations (2.9) 16.0 7.3 27.1
Income (loss) from
discontinued
operations, net of
income taxes 0.2 (0.4) (0.1) 29.5
Net Income (Loss) $(2.7) $15.6 $7.2 $56.6
Income (Loss) Per Share
of Common Stock
Basic:
Income (loss) per
share from
continuing
operations $(0.05) $0.29 $0.13 $0.48
Income (loss) per
share from
discontinued
operations, net of
income taxes - (0.01) - 0.53
Net income (loss) per
share $(0.05) $ 0.28 $0.13 $1.01
Diluted:
Income (loss) per
share from
continuing
operations $(0.05) $0.27 $0.13 $0.48
Income (loss) per
share from
discontinued
operations, net of
income taxes - (0.01) - 0.46
Net income (loss)
per share $(0.05) $ 0.26 $0.13 $0.94
Weighted average
shares of common
stock outstanding 57.4 56.3 57.1 56.1
Weighted average
shares of common
stock outstanding,
assuming dilution 57.4 64.7 57.1 64.5
Operating Segment Information
GenCorp Inc.
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
(in millions) 2008 2007 2008 2007
(Unaudited) (Unaudited)
Net Sales:
Aerospace and Defense $171.0 $197.1 $528.6 $536.9
Real Estate 1.5 1.4 15.2 4.7
Total Net Sales $172.5 $198.5 $543.8 $541.6
Segment Performance:
Aerospace and Defense
Segment performance
before environmental
remediation provision
adjustments, retirement
benefit plan expense,
and unusual items $16.3 $22.0 $54.7 $65.7
Environmental
remediation provision
adjustments (2.7) 3.0 (4.1) 0.3
Retirement benefit
plan expense (3.8) (5.9) (11.5) (17.8)
Unusual items (1.0) (4.1) (2.1) (6.7)
Aerospace and Defense 8.8 15.0 37.0 41.5
Real Estate 1.0 1.4 9.4 2.8
Total Segment
Performance $9.8 $16.4 $46.4 $44.3
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
(in millions) 2008 2007 2008 2007
(Unaudited) (Unaudited)
Reconciliation of
segment performance
to income (loss) from
continuing operations
before income taxes:
Segment Performance $9.8 $16.4 $46.4 $44.3
Interest expense (6.8) (7.4) (20.9) (21.6)
Interest income 1.0 1.1 3.3 3.6
Corporate and other
expenses (7.9) (6.2) (13.1) (15.8)
Corporate and other
retirement benefit
plan income 2.0 0.3 5.8 1.6
Unusual items - (0.6) (13.8) (0.6)
Income (loss) from
continuing operations
before income taxes $(1.9) $3.6 $7.7 $11.5
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.
August 31, November 30,
(in millions) 2008 2007
(Unaudited)
Current Assets
Cash and cash equivalents $57.7 $92.3
Accounts receivable, net 106.3 99.2
Inventories 70.9 67.5
Recoverable from U.S. government and other third
parties for environmental remediation costs and
other 45.5 46.5
Grantor trust 1.9 -
Prepaid expenses and other 20.1 17.4
Income tax receivable 7.5 -
Assets of discontinued operations 0.1 0.1
Total Current Assets 310.0 323.0
Noncurrent Assets
Property, plant and equipment, net 135.6 139.8
Real estate held for entitlement and leasing 47.9 45.3
Recoverable from U.S. government and other third
parties for environmental remediation costs and
other 174.5 179.0
Prepaid pension asset 105.3 101.0
Grantor trust 33.1 -
Goodwill 94.9 94.9
Intangible assets, net 20.5 21.7
Other noncurrent assets, net 92.2 90.5
Total Noncurrent Assets 704.0 672.2
Total Assets $1,014.0 $995.2
Liabilities and Shareholders' Deficit
Short-term borrowings and current portion of
long-term debt $2.0 $1.5
Accounts payable 31.3 28.9
Reserves for environmental remediation costs 69.9 66.1
Income taxes payable - 6.2
Postretirement medical and life insurance benefits 8.8 8.8
Advance payments on contracts 47.4 49.1
Other current liabilities 84.1 84.3
Liabilities of discontinued operations 1.0 1.0
Total Current Liabilities 244.5 245.9
Noncurrent Liabilities
Convertible subordinated notes 271.4 271.4
Senior subordinated notes 97.5 97.5
Other long-term debt 69.8 75.9
Deferred income taxes 0.9 0.3
Reserves for environmental remediation costs 197.5 203.9
Postretirement medical and life insurance benefits 76.3 78.5
Other noncurrent liabilities 78.1 73.8
Total Noncurrent Liabilities 791.5 801.3
Total Liabilities 1,036.0 1,047.2
Redeemable Common Stock 8.9 -
Total Shareholders' Deficit (30.9) (52.0)
Total Liabilities and Shareholders' Deficit $1,014.0 $995.2
Condensed Consolidated Statements of Cash Flows
GenCorp Inc.
Nine months ended
August 31, August 31,
(in millions) 2008 2007
(Unaudited)
Operating Activities
Net income $7.2 $56.6
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Loss (income) from discontinued operations 0.1 (29.5)
Depreciation and amortization 19.8 20.6
Stock-based compensation and savings plan expense,
net 7.3 7.4
Changes in assets and liabilities (49.7) (51.1)
Net cash (used in) provided by continuing
operations (15.3) 4.0
Net cash used in discontinued operations (0.5) (1.8)
Net Cash (Used in) Provided by Operating
Activities (15.8) 2.2
Investing Activities
Capital expenditures (12.6) (10.8)
Proceeds from discontinued operations - 29.7
Decrease in restricted cash - 19.8
Net Cash (Used in) Provided by Investing
Activities (12.6) 38.7
Financing Activities
Debt activity, net (6.2) (20.6)
Tax benefit on stock-based compensation - 0.3
Proceeds from shares issued under stock option
and equity incentive plans - 0.4
Net Cash Used in Financing Activities (6.2) (19.9)
Net (Decrease) Increase in Cash and Cash
Equivalents (34.6) 21.0
Cash and Cash Equivalents at Beginning of Period 92.3 61.2
Cash and Cash Equivalents at End of Period $57.7 $82.2
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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