SACRAMENTO, Calif., March 27 /PRNewswire-FirstCall/ -- GenCorp Inc. (NYSE: GY) today reported results for the first quarter 2009.
Sales for the first quarter of 2009 totaled $170.9 million compared to $176.6 million for the first quarter of 2008. The Company reports its fiscal year sales and income under a 52/53 week accounting convention. Fiscal 2008 was a 53 week year with the extra week of sales totaling $19.1 million reported in the first quarter of fiscal 2008.
Net income for the first quarter of 2009 was $21.2 million, or $0.34 diluted earnings per share, compared to net income of $3.0 million, or $0.05 diluted earnings per share for the first quarter of 2008. The increase in net income was primarily due to an income tax benefit of $20.5 million primarily as a result of new guidance clarifying which costs qualify for ten-year carryback of tax net operating losses for refund of prior years' taxes and lower retirement benefit costs, partially offset by an executive severance agreement and a legal matter related to the Company's former automotive business.
"The Company's sales and operating income were comparable on a year-over-year basis given one less week than what was reported in the first quarter of 2008," said Scott Neish, GenCorp's interim chief executive officer. "With the major regulatory approvals behind us on our 1,400 acre Glenborough project, we continue to press forward with respect to our re-zoning efforts for our other three projects, with the goal of being poised to monetize the projects when the real estate market recovers," concluded Mr. Neish.
Operations Review
Aerospace and Defense Segment
Sales of $169.3 million for the first quarter of 2009 decreased from $174.5 million in the first quarter of 2008, reflecting the additional week of net sales totaling $19.1 million in 2008, as discussed above, which was partially offset by growth in the Standard Missile and Atlas(R) V programs.
Segment performance for the first quarter of 2009 was income of $14.6 million compared to income of $10.4 million in the first quarter of 2008. The improved segment performance during the first quarter of 2009 as compared to the first quarter of 2008 is primarily the result of lower non-cash retirement benefit plan costs.
As of February 28, 2009, our total contract backlog was $1,018.9 million compared with $1,034.5 million as of November 30, 2008. Funded backlog was $743.5 million and $674.9 million at February 28, 2009 and November 30, 2008, respectively. Total backlog includes both funded backlog (the amount for which money has been directly appropriated by the U.S. Congress, or for which a purchase order has been received from a commercial customer) and unfunded backlog (firm orders for which funding has not been appropriated). Indefinite delivery and quantity contracts and unexercised options are not reported in total backlog. Backlog is subject to delivery delays or program cancellations which are beyond our control.
Real Estate Segment
Sales and segment performance for the first quarter of 2009 was $1.6 million and $1.0 million, respectively, compared to $2.1 million and $1.3 million for the first quarter of 2008, respectively. The decrease in sales and segment performance reflects completion of negotiations with the Sacramento Regional Transit District for the property usage agreement relating to its existing Light Rail Station in the first quarter of 2008.
Additional Information
Retirement benefit plan expense, which is mostly non-cash, for the first quarter of 2009, was income of $1.4 million compared to expense of $1.9 million in the first quarter of 2008. The improvement is primarily related to the freeze of the defined benefit pension and benefit restoration plans effective February 1, 2009 and the increase in the discount rate used to determine benefit obligations, partially offset by lower expected investment returns.
Corporate and other expenses for the first quarter of 2009 were $3.8 million compared to $4.6 million for the first quarter of 2008. The improvement is primarily due to lower employee compensation expenses and professional costs.
Total debt decreased to $439.7 million at February 28, 2009 from $440.6 million at November 30, 2008. Cash balances at February 28, 2009 decreased to $79.6 million compared to $92.7 million at November 30, 2008. Total debt less cash increased to $360.1 million at February 28, 2009 from $347.9 million at November 30, 2008. As of February 28, 2009, the Company had $73.8 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.
The Company's 4% Contingent Convertible Subordinated Notes (4% Notes) that were issued in January 2004 provide the holders of the 4% Notes with the right to require the Company to repurchase for cash all or a portion of the outstanding $125.0 million 4% Notes on January 16, 2010 at a price equal to 100% of the principal amount, plus accrued and unpaid interest. The Company's $280.0 million senior credit facility (Senior Credit Facility) contains certain restrictions surrounding the ability of the Company to refinance its 4% Notes. Given the Company's current and forecasted liquidity through January 2010, in the event the 4% Notes are put to the Company, the Company will not have the liquidity to immediately repay the holders of the 4% Notes. Accordingly, the Company is seeking an amendment to its Senior Credit Facility in connection with the potential required repurchases of the 4% Notes. If the Company is unable to amend the Senior Credit Facility and obtain financing to repurchase the 4% Notes on terms favorable to the Company before January 2010, the Company may need to consider other alternatives. For additional discussion of the Company's debt instruments, please see the discussion in the Company's Annual Report to the SEC on Form 10-K for the fiscal year ended November 30, 2008.
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:
- the cost of servicing the Company's debt and the Company's ability to comply with the financial and other covenants contained in the Company's debt agreements;
- economic conditions that could affect the Company's ability to refinance its existing debt;
- the ability of the Company to obtain consent of its lenders under the Senior Credit Facility on terms favorable to the Company to refinance its debt and to effect a rescission offer;
- the Company's plans to effect a rescission offer relating to its 401(k) employee benefit plan;
- the funded status of the Company's defined benefit pension plan and the Company's obligation to make cash contributions to such pension plan;
- effects of changes in discount rates, actual returns on plan assets, and government regulations of defined benefit pension plans;
- 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 or other obligations;
- changes in the amount recoverable from environmental claims;
- environmental claims related to the Company's current and former businesses and operations;
- the results of significant litigation;
- 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 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, California metropolitan area 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;
- effects of changes in board membership and management on the Company's operations and/or business strategy;
- costs and time commitment related to potential 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;
- failure to maintain effective internal controls in accordance with 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)
GenCorp Inc.
Condensed Consolidated Statements of Operations
Three Months Ended
February 28, February 29,
(In millions, except per-share amounts) 2009 2008
(Unaudited)
Net Sales $170.9 $176.6
Operating costs and expenses:
Cost of sales 148.9 158.8
Selling, general and administrative 2.1 2.2
Depreciation and amortization 7.4 6.5
Other (income) expense, net (0.4) 0.1
Unusual items:
Legal settlements and estimated loss on
legal matters 0.4 -
Shareholder agreement and related costs 1.8 -
Total operating costs and expenses 160.2 167.6
Operating income 10.7 9.0
Non-operating (income) and expense:
Interest income (0.5) (1.4)
Interest expense 6.7 7.3
Total non-operating expenses, net 6.2 5.9
Income from continuing operations before
income taxes 4.5 3.1
Income tax benefit (20.5) (0.2)
Income from continuing operations 25.0 3.3
Loss from discontinued operations, net of
income taxes (3.8) (0.3)
Net income $21.2 $3.0
Income (Loss) Per Share of Common Stock
Basic:
Income per share from continuing operations $0.43 $0.06
Loss per share from discontinued operations,
net of income taxes (0.07) (0.01)
Net income per share $0.36 $0.05
Diluted:
Income per share from continuing operations $0.40 $0.06
Loss per share from discontinued operations,
net of income taxes (0.06) (0.01)
Net income per share $0.34 $0.05
Weighted average shares of common stock
outstanding 58.3 56.7
Weighted average shares of common stock
outstanding, assuming dilution 66.4 56.9
GenCorp Inc.
Operating Segment Information
Three Months Ended
February 28, February 29,
(In millions) 2009 2008
(Unaudited)
Net Sales:
Aerospace and Defense $169.3 $174.5
Real Estate 1.6 2.1
Total Net Sales $170.9 $176.6
Segment Performance:
Aerospace and Defense
Segment performance before environmental
remediation provision adjustments, retirement
benefit plan expense, and unusual items $14.6 $14.9
Environmental remediation provision adjustments (0.3) (0.7)
Retirement benefit plan income (expense) 0.7 (3.8)
Aerospace and Defense unusual items (0.4) -
Aerospace and Defense Total 14.6 10.4
Real Estate 1.0 1.3
Total Segment Performance $15.6 $11.7
Three Months Ended
February 28, February 29,
(In millions) 2009 2008
(Unaudited)
Reconciliation of segment performance to income
from continuing operations before income taxes:
Segment Performance $15.6 $11.7
Interest expense (6.7) (7.3)
Interest income 0.5 1.4
Corporate retirement benefit plan income 0.7 1.9
Corporate and other expenses (3.8) (4.6)
Corporate unusual items (1.8) -
Income from continuing operations before income
taxes $4.5 $3.1
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, income or expenses related to divested businesses, 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 on-going business operations. It is on this basis that management internally assesses the financial performance of its segments.
GenCorp Inc.
Condensed Consolidated Balance Sheets
February 28, November 30,
(In millions) 2009 2008
(unaudited)
Current Assets
Cash and cash equivalents $79.6 $92.7
Accounts receivable 97.8 97.3
Inventories 72.1 70.4
Recoverable from U.S. government and other
third parties for environmental remediation
costs and other 42.6 43.7
Grantor trust 3.4 1.6
Prepaid expenses and other 22.4 17.6
Income tax receivable 25.7 10.6
Assets of discontinued operations 0.1 0.1
Total Current Assets 343.7 334.0
Noncurrent Assets
Property, plant and equipment, net 134.2 137.9
Real estate held for entitlement and leasing 51.1 49.3
Recoverable from U.S. government and other
third parties for environmental remediation
costs and other 166.8 169.8
Prepaid pension asset 77.2 76.5
Grantor trust 27.3 29.3
Goodwill 94.9 94.9
Intangible assets 19.7 20.1
Other noncurrent assets, net 84.5 93.9
Total Noncurrent Assets 655.7 671.7
Total Assets $999.4 $1,005.7
Liabilities and Shareholders' Deficit
Short-term borrowings and current portion of
long-term debt $127.0 $2.0
Accounts payable 30.6 32.7
Reserves for environmental remediation costs 63.7 65.2
Postretirement medical and life insurance
benefits 7.2 7.1
Advance payments on contracts 47.8 46.7
Other current liabilities 86.6 93.7
Liabilities of discontinued operations 4.4 1.0
Total Current Liabilities 367.3 248.4
Noncurrent Liabilities
Senior debt 68.1 68.3
Senior subordinated notes 97.5 97.5
Convertible subordinated notes 146.4 271.4
Other debt 0.7 1.4
Deferred income taxes 8.6 8.3
Reserves for environmental remediation costs 188.6 193.0
Postretirement medical and life insurance
benefits 65.9 66.8
Other noncurrent liabilities 63.9 78.1
Total Noncurrent Liabilities 639.7 784.8
Total Liabilities 1,007.0 1,033.2
Redeemable Common Stock 7.3 7.6
Total Shareholders' Deficit (14.9) (35.1)
Total Liabilities and Shareholders' Deficit $999.4 $1,005.7
GenCorp Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended
February 28, February 29,
(In millions) 2009 2008
(unaudited)
Operating Activities
Net income $21.2 $3.0
Adjustments to reconcile net income to net cash used
in operating activities:
Loss from discontinued operations 3.8 0.3
Depreciation and amortization 7.4 6.5
Stock-based compensation and savings plan expense,
net 1.4 2.1
Changes in assets and liabilities other than grantor
trust activity (44.2) (26.6)
Grantor trust activity 0.2 -
Net cash used in continuing operations (10.2) (14.7)
Net cash used in discontinued operations (0.3) (0.2)
Net Cash Used in Operating Activities (10.5) (14.9)
Investing Activities
Capital expenditures (1.7) (4.0)
Net Cash Used in Investing Activities (1.7) (4.0)
Financing Activities
Debt activity, net (0.9) (0.9)
Net Cash Used in Financing Activities (0.9) (0.9)
Net Decrease in Cash and Cash Equivalents (13.1) (19.8)
Cash and Cash Equivalents at Beginning of Period 92.7 92.3
Cash and Cash Equivalents at End of Period $79.6 $72.5
