Aerojet Rocketdyne Holdings
Feb 6, 2012

GenCorp Reports 2011 Annual and Fourth Quarter Results

SACRAMENTO, Calif., Feb. 6, 2012 /PRNewswire/ -- GenCorp Inc. (NYSE: GY) today reported results for the fiscal year and fourth quarter ended November 30, 2011.

Financial Overview

The Company provides Non-GAAP measures as a supplement to financial results based on GAAP. A reconciliation of the Non-GAAP measures to the most directly comparable GAAP measures is included at the end of the release.

Fiscal 2011 compared to Fiscal 2010


Fourth Quarter of 2011 compared to Fourth Quarter of 2010


"We are very pleased to report continued improvement in our core operating results," said Scott J. Seymour, GenCorp Inc. President and CEO, and President, Aerojet - General Corporation. "We will remain focused in 2012 on delivering excellent performance to our customers, driving efficiencies across our operations, and creating value through the expansion of our business."

Operations Review

Aerospace and Defense Segment

Net sales for the fourth quarter of 2011 increased to $249.0 million compared to $224.5 million for the fourth quarter of 2010. The increase in net sales was primarily due to the following: (i) awards received in fiscal 2010 on the Bomb Live Unit – 129B composite case resulting in $9.0 million of additional net sales; (ii) awards received in fiscal 2010 on the Stinger 346 contract resulting in $7.8 million of additional net sales; and (iii) an increase of $6.5 million on the Atlas V contract due to increased deliveries in the current period.

Net sales for 2011 increased to $909.7 million compared to $850.7 million for 2010. The increase in net sales was primarily due to the following: (i) an increase of $27.7 million in the various air-breathing propulsion programs primarily due to the prior year's awards on Supersonic Sea Skimming Target and Triple Target Terminator contracts; (ii) awards received in fiscal 2010 on the Hawk program resulting in $24.8 million of additional net sales; and (iii) awards received in fiscal 2010 on the Bomb Live Unit — 129B composite case resulting in $22.2 million of additional net sales. The increase in net sales was partially offset by a decrease of $22.0 million on the Orion program due to NASA funding constraints.

Segment performance for the fourth quarter of 2011 was income of $19.5 million, 7.8% of net sales, compared to income of $15.6 million, 6.9% of net sales, in the fourth quarter of 2010. The increase in segment margin compared to the comparable prior year period was primarily driven by: (i) higher sales and favorable contract performance across multiple product lines and (ii) decrease in retirement benefit expense. These factors were partially offset by an increase in unusual item charges.

Segment performance for 2011 was income of $74.6 million, 8.2% of net sales, compared to income of $67.3 million, 7.9% of net sales, in 2010. The increase in the 2011 segment margin was driven by (i) a decrease in retirement benefit expense and (ii) favorable contract performance across multiple product lines. These factors were partially offset by (i) higher environmental related costs; (ii) an increase in costs on a space contract related to a test failure; and (iii) an increase in costs on missile defense contracts related to inefficiencies and a test failure/re-work on rocket motors.

The Company's funded backlog grew by 12.2% in 2011 compared to 2010. A summary of the Company's backlog is as follows:



November 30,

November 30,


2011

2010


(In millions)

Funded backlog

$  902

$  804

Unfunded backlog

520

573

Total contract backlog

$  1,422

$  1,377




Total backlog includes both funded backlog (unfilled orders for which funding is authorized, appropriated and contractually obligated by the 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 funding delays or program restructurings/cancellations which are beyond the Company's control.

Real Estate Segment

Sales and segment performance for the fourth quarter of 2011 were $3.2 million and $2.1 million, respectively, compared to $1.8 million and $1.3 million for the fourth quarter of 2010, respectively. Sales and segment performance for 2011 were $8.4 million and $5.6 million, respectively, compared to $7.2 million and $5.3 million for 2010, respectively. 2011 results included $1.7 million in land sales resulting in a gain of $1.2 million.

Corporate and other

Corporate and other expenses decreased to $3.1 million in the fourth quarter of 2011 from $6.9 million in the fourth quarter of 2010. Corporate and other expenses decreased to $10.8 million in 2011 from $21.5 million in 2010. The decrease was primarily due to lower environmental remediation costs in 2011.

Additional Information

Debt Activity

As of November 30, 2011, the Company had $67.1 million of outstanding letters of credit under the $150.0 million revolving credit facility and had $50.0 million outstanding under the term loan facility.

The Company's debt activity during 2011 was as follows:






November 30,

2010

Debt

Discount

Amortization


Cash

Payments

Non-cash

Repurchase

Activity


November 30,

2011


(In millions)

Term loan

$  51.1

$  —

$  (1.1)

$  —

$    50.0

9½% Senior Subordinated Notes

75.0

75.0

4 1/16% Convertible Subordinated Debentures

200.0

200.0

2¼% Convertible Subordinated Debentures ("2¼% Debentures")

68.6

(68.2)

(0.2)

0.2

Debt discount on 2¼% Debentures

(4.0)

3.5

0.5

Other debt

2.0

(0.8)

1.2

Total Debt and Borrowing Activity

$  392.7

$  3.5

$  (70.1)

$  0.3

$  326.4




Retirement Benefit Plans

Components of retirement benefit expense are:



Three months ended

Year ended



November 30,

2011

November 30,

2010

November 30,

2011

November 30,

2010


(In millions)

Service cost

$  1.0

$  1.1

$  4.0

$  4.6

Interest cost on benefit obligation

20.4

22.6

81.9

90.1

Assumed return on plan assets

(25.6)

(27.1)

(102.4)

(107.8)

Amortization of net losses and other

15.8

13.8

62.9

55.0

Retirement benefit expense

$  11.6

$  10.4

$  46.4

$  41.9




The increase in retirement benefit expense was primarily due to the recognition of higher actuarial losses recognized in 2011 compared to 2010. The increase in actuarial losses was primarily the result of a decrease in the discount rate due to lower market interest rates used to determine the retirement benefit obligation. The discount rate was 5.21% as of November 30, 2010 compared to 5.65% as of November 30, 2009.

The Company estimates that its retirement benefit expense will be approximately $41 million in 2012.

As of the last measurement date at November 30, 2011, the Company's total defined benefit pension plan assets, total projected benefit obligations, and unfunded pension obligation for the Company's qualified plan were approximately $1,296.8 million, $1,550.4 million, and $236.4 million, respectively. The Pension Protection Act (the "PPA") requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the funded status of the plan as of specified measurement dates. The Company's funded ratio as of November 30, 2010 under the PPA for its tax-qualified defined benefit pension plan was 96.2% which was above the 96.0% funding target ratio required under the PPA. The required funded ratio to be met as of the November 30, 2011 measurement date is 100%. While the final calculated PPA funded ratio as of November 30, 2011 is expected to be completed in the second half of 2012, the Company does not anticipate meeting the 100% requirement which could trigger funding requirements in the future, but not prior to 2013, which is the earliest possible date funding would be required. The Company does not expect to make significant contributions to the tax-qualified defined benefit pension plan in 2012.

The Company has accumulated $59.5 million in prepayment credits as of November 30, 2011. Companies may prepay contributions and, under certain circumstances, use those prepayment credits to satisfy the required funding of the pension plan's annual required contribution thereby allowing companies to defer cash payments into the pension plan.

Further, with the Office of Federal Procurement Policy issuance of the final rule harmonizing Cost Accounting Standard ("CAS") 412, Composition and Measurement of Pension Cost, and CAS 413, Adjustment and Allocation of Pension Cost, with the PPA, on December 27, 2011, the Company expects to recover portions of any required pension funding through its government contracts on a more favorable basis. The Company is currently evaluating the impact of the harmonization of CAS 412 and CAS 413 on its financial statements.

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 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:


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 website at http://www.GenCorp.com.

(Tables to follow)


GenCorp Inc.



Condensed Consolidated Statements of Operations






(In millions, except per share amounts)

Three months ended November 30,

Year ended November 30,


2011

2010

2011

2010


(Unaudited)

Net Sales

$  252.2

$  226.3

$  918.1

$  857.9

Operating costs and expenses:





Cost of sales (exclusive of items shown separately below)

218.2

197.9

799.3

753.9

Selling, general and administrative

10.9

8.2

40.9

26.7

Depreciation and amortization

6.4

8.7

24.6

27.9

Other expense, net

2.4

5.0

8.9

8.5

Unusual items:





Executive severance agreement

1.4

Loss on debt repurchased

0.4

0.1

0.2

1.2

Loss on bank amendment

1.3

1.3

0.7

Gain on legal settlement

(2.7)

(2.7)

Loss on legal matters and settlements

3.5

0.3

4.1

2.8

Total operating costs and expenses

243.1

217.5

879.3

820.4

Operating income

9.1

8.8

38.8

37.5

Non-operating (income) expense





Interest income

(0.2)

(0.4)

(1.0)

(1.6)

Interest expense

7.4

8.4

30.8

37.0

Total non-operating expense, net

7.2

8.0

29.8

35.4

Income from continuing operations before income taxes

1.9

0.8

9.0

2.1

Income tax provision (benefit)

2.7

1.3

6.1

(3.9)

(Loss) income from continuing operations

(0.8)

(0.5)

2.9

6.0

Income (loss)  from discontinued operations, net of income taxes

1.3

(0.1)

0.8

Net income (loss)

$         0.5

$  (0.6)

$  2.9

$  6.8






Income Per Share of Common Stock





Basic:





(Loss) income per share from continuing operations

$  (0.01)

$  (0.01)

$  0.05

$  0.11

Income per share from discontinued operations, net of income taxes

0.02

0.01

Net income (loss) per share

$  0.01

$  (0.01)

$  0.05

$  0.12

Diluted:





(Loss) income per share from continuing operations

$  (0.01)

$  (0.01)

$  0.05

$  0.11

Income per share from discontinued operations, net of income taxes

0.02

0.01

Net income (loss) per share

$  0.01

$  (0.01)

$  0.05

$  0.12

Weighted average shares of common stock outstanding

58.8

58.6

58.7

58.5

Weighted average shares of common stock outstanding, assuming dilution

58.8

58.6

58.7

58.6





GenCorp Inc.



Operating Segment Information









(In millions)

Three months ended November 30,

Year ended November 30,


2011

2010

2011

2010

Net Sales:

(Unaudited)

Aerospace and Defense

$  249.0

$  224.5

$  909.7

$  850.7

Real Estate

3.2

1.8

8.4

7.2

Total Net Sales

$    252.2

$  226.3

$    918.1

$  857.9

Segment Performance:





Aerospace and Defense

$  30.2

$  25.2

$  108.6

$  99.6

Environmental remediation provision adjustments

(1.9)

(1.9)

(8.9)

(0.2)

Retirement benefit plan expense

(5.3)

(7.4)

(21.0)

(29.3)

Unusual items

(3.5)

(0.3)

(4.1)

(2.8)

Aerospace and Defense Total

19.5

15.6

74.6

67.3

   Real Estate

2.1

1.3

5.6

5.3

Total Segment Performance

$  21.6

$  16.9

$  80.2

$  72.6

Reconciliation of segment performance to income from continuing operations before income taxes:





Segment performance

$  21.6

$  16.9

$  80.2

$  72.6

Interest expense

(7.4)

(8.4)

(30.8)

(37.0)

Interest income

0.2

0.4

1.0

1.6

Stock-based compensation expense

(1.4)

(0.8)

(3.7)

(0.4)

Corporate retirement benefit plan expense

(6.3)

(3.0)

(25.4)

(12.6)

Corporate and other

(3.1)

(6.9)

(10.8)

(21.5)

Unusual items

(1.7)

2.6

(1.5)

(0.6)

Income from continuing operations before income taxes

$  1.9

$  0.8

$  9.0

$  2.1




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 unusual items relating to the segment operations. Segment performance excludes corporate income and expenses, legacy income or expenses, provisions for unusual items not related to the segment operations, interest expense, interest income, 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




(In millions)


November 30,
2011


November 30,
2010

ASSETS

(Unaudited) 

Current Assets



Cash and cash equivalents

$  188.0

$  181.5

Marketable securities

26.7

Accounts receivable

107.0

106.7

Inventories

49.5

51.1

Recoverable from the U.S. government and other third parties for environmental remediation costs

29.6

32.0

Grantor trust

1.3

1.8

Other receivables, prepaid expenses and other

20.2

25.3

Income taxes

5.3

7.5

Total Current Assets

400.9

432.6

Noncurrent Assets



Property, plant and equipment, net

126.9

126.4

Real estate held for entitlement and leasing

63.3

59.9

Recoverable from the U.S. government and other third parties for environmental remediation costs

114.1

140.8

Grantor trust

13.3

14.5

Goodwill

94.9

94.9

Intangible assets

15.4

16.9

Other noncurrent assets, net

110.7

105.5

Total Noncurrent Assets

538.6

558.9

Total Assets

$  939.5

$  991.5

LIABILITIES, REDEEMABLE COMMON STOCK, AND SHAREHOLDERS' DEFICIT



Current Liabilities



Short-term borrowings and current portion of long-term debt

$  2.8

$  66.0

Accounts payable

33.8

27.1

Reserves for environmental remediation costs

40.7

40.7

Postretirement medical and life benefits

6.8

7.1

Advance payments on contracts

108.5

110.0

Deferred income taxes

3.1

Other current liabilities

104.1

110.3

Total Current Liabilities

299.8

361.2

Noncurrent Liabilities



Senior debt

47.5

50.6

Senior subordinated notes

75.0

75.0

Convertible subordinated notes

200.2

200.0

Other debt

0.9

1.1

Deferred income taxes

4.5

7.6

Reserves for environmental remediation costs

149.9

177.0

Pension benefits

236.4

175.5

Postretirement medical and life benefits

68.4

71.8

Other noncurrent liabilities

64.1

66.8

Total Noncurrent Liabilities

846.9

825.4

Total Liabilities

1,146.7

1,186.6

Redeemable common stock

4.4

5.1

Shareholders' Deficit



Common stock

5.9

5.9

Other capital

261.2

257.3

Accumulated deficit

(179.3)

(182.2)

Accumulated other comprehensive loss, net of income taxes

(299.4)

(281.2)

Total Shareholders' Deficit

(211.6)

(200.2)

Total Liabilities, Redeemable Common Stock and Shareholders' Deficit

$  939.5

$  991.5





GenCorp Inc.



Condensed Consolidated Statements of Cash Flows




Year ended November 30,

(In millions)

2011

2010


(Unaudited)

Operating Activities



Net income

$  2.9

$  6.8

Adjustments to reconcile net income to net cash provided by operating activities:



 Income from discontinued operations 

(0.8)

 Depreciation and amortization       

24.6

27.9

 Amortization of debt discount and financing costs       

6.7

10.5

 Stock-based compensation 

3.7

0.4

 Tax benefit from stock-based awards

(0.2)

 Loss on debt repurchased and bank amendment

1.5

1.9

 Changes in assets and liabilities other than grantor trust

36.2

98.6

 Grantor trust    

1.7

3.9

      Net cash provided by continuing operations 

77.1

149.2

      Net cash used in discontinued operations   

(0.3)

(1.1)

      Net Cash Provided by Operating Activities   

76.8

148.1

Investing Activities



Marketable securities activity, net

26.7

(26.6)

Capital expenditures       

(21.1)

(16.9)

      Net Cash Provided by (Used in) Investing Activities   

5.6

(43.5)

Financing Activities



Proceeds from issuance of debt

200.0

Debt issuance costs

(4.2)

(7.7)

Debt repayments

(70.1)

(240.2)

Tax benefit from stock-based awards

0.2

Vendor financing repayments

(1.8)

(1.5)

      Net Cash Used in Financing Activities      

(75.9)

(49.4)

Net Increase in Cash and Cash Equivalents 

6.5

55.2

Cash and Cash Equivalents at Beginning of Year 

181.5

126.3

Cash and Cash Equivalents at End of Year

$  188.0

$  181.5







Use of Non-GAAP Financial Measures

In addition to segment performance, free cash flow, and net debt (discussed earlier in this release), the Company provides a Non-GAAP financial measure of the Company's operational performance called Adjusted EBITDAP.  Management uses this metric to further its own understanding of the Company's historical and prospective consolidated core operating performance of its segments, net of expenses incurred by its corporate activities in the ordinary, ongoing and customary course of its operations.  Further, the Company believes that to effectively compare the core operating performance metric from period to period on a historical and prospective basis, the metric should exclude items relating to retirement benefits (pension and postretirement benefits), significant non-cash expenses, the impacts of financing decisions on the earnings of the Company, and items incurred outside the ordinary, ongoing and customary course of its operations.  Accordingly, management defines Adjusted EBITDAP as GAAP income (loss) from continuing operations before income taxes adjusted by interest expense, interest income, depreciation and amortization, retirement benefit plan costs (pension and postretirement benefits), and unusual items which management does not believe are reflective of such ordinary, ongoing and customary course activities.

The Company believes that providing this additional information is useful to better understand and assess the Company's operating performance.  The measure allows investors, analysts, lenders, and other parties to better evaluate the Company's financial performance and prospects in the same manner as management.  Because the Company's method for calculating the Non-GAAP measure may differ from other companies' methods, the Non-GAAP measure presented below may not be comparable to similarly titled measures reported by other companies.  This measure is not recognized in accordance with GAAP, and the Company does not intend for this information to be considered in isolation or as a substitute for GAAP measures.


GenCorp Inc.






( In millions, except percentage amounts )

Three months ended November 30,

  Year ended November 30,   


    2011     

    2010     

    2011     

    2010     


(Unaudited)

GAAP income from continuing operations before income taxes

$  1.9

$  0.8

$  9.0

$  2.1

Interest expense

7.4

8.4

30.8

37.0

Interest income

(0.2)

(0.4)

(1.0)

(1.6)

Depreciation and amortization

6.4

8.7

24.6

27.9

Retirement benefit plan expense

11.6

10.4

46.4

41.9

Unusual items

5.2

(2.3)

5.6

3.4

Adjusted EBITDAP

$  32.3

$  25.6

$  115.4

$  110.7

Adjusted EBITDAP as a percentage of net sales

12.8%

11.3%

12.6%

12.9%




SOURCE GenCorp Inc.



Investors: Kathy Redd, chief financial officer, +1-916-355-2361; Media: Glenn Mahone, vice president, communications, +1-202-302-9941

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding GenCorp Inc.'s business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.