Aerojet Rocketdyne Holdings
Feb 11, 2013

GenCorp Reports 2012 Fourth Quarter and Annual Results

SACRAMENTO, Calif., Feb. 11, 2013 (GLOBE NEWSWIRE) -- GenCorp Inc. (NYSE:GY) today reported results for the fourth quarter and fiscal year ended November 30, 2012.

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.

Fourth Quarter of Fiscal 2012 compared to Fourth Quarter of Fiscal 2011

Fiscal 2012 compared to Fiscal 2011

"Growth in sales and backlog continued to record levels in 2012," said GenCorp Inc. President and CEO, Scott J. Seymour. "Our business imperative continues to be a dedicated focus on the programs and customers we support including those actions required to improve the affordability of our products."

Operations Review

Aerospace and Defense Segment

Net sales for the fourth quarter of fiscal 2012 were $294.5 million compared to $249.0 million for the fourth quarter of fiscal 2011. The increase in net sales was primarily due to (i) increase of $36.0 million in the various Standard Missile programs primarily from the timing of deliveries and (ii) increased deliveries on the Terminal High Altitude Area Defense ("THAAD") program generating $15.7 million in additional net sales.

Segment margin before environmental remediation provision adjustments, retirement benefit plan expense, and unusual items (Non-GAAP measure) was 11.6% for the fourth quarter of fiscal 2012, compared to 12.1% for the fourth quarter of fiscal 2011. The decrease in the segment margin is primarily due to an increase in contract loss reserves on a fixed-price space contract as a result of higher than anticipated manufacturing costs.

Net sales for fiscal 2012 were $986.1 million compared to $909.7 million for fiscal 2011. The increase in net sales was primarily due to (i) increased deliveries on the THAAD program generating $39.6 million in additional net sales; (ii) increase of $34.5 million in the various Standard Missile programs primarily from the timing of deliveries; and (iii) increased engineering technology activities on the Triple Target Terminator contracts resulting in $17.7 million of additional net sales. The increase in net sales was partially offset by a reduction of $24.9 million on the Hawk program due to the completion of the production contract in the first quarter of fiscal 2012.

Segment margin before environmental remediation provision adjustments, retirement benefit plan expense, and unusual items (Non-GAAP measure) was 11.7% for fiscal 2012, compared to 11.9% for fiscal 2011.

A summary of the Company's backlog is as follows:

  November 30, November 30,
    2012    2011 
  (In millions)
Funded backlog $ 1,018 $ 902
Unfunded backlog  508  520
Total contract backlog $ 1,526 $ 1,422

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 fiscal 2012 were $3.7 million and $0.8 million, respectively, compared to $3.2 million and $2.1 million for the fourth quarter of fiscal 2011, respectively. Sales and segment performance for fiscal 2012 were $8.8 million and $3.7 million, respectively, compared to $8.4 million and $5.6 million for fiscal 2011, respectively. Net sales and segment performance consist primarily of rental property operations.

Additional Information

Liquid Divert and Attitude Control Systems ("LDACS")

As of November 30, 2012, the Company classified its LDACS program as assets held for sale. The Company expects that it will be required to divest the LDACS product line in order to finalize the acquisition of the Pratt & Whitney Rocketdyne division (the "Rocketdyne Business") from United Technologies Corporation. The net sales associated with the LDACS program totaled $34.3 million in fiscal 2012.

Debt Activity

The Company's debt activity during fiscal 2012 was as follows:

 
 
November 30,
 2011  
Cash
Payments 
November 30,
 2012 
  (In millions)
Term loan  $ 50.0 $ (2.5)  $ 47.5
9½% Senior Subordinated Notes  75.0  (75.0)  —
4 1/16% Convertible Subordinated Debentures  200.0  —   200.0
2¼% Convertible Subordinated Debentures  0.2  —  0.2
Other debt   1.2  (0.2)   1.0
Total Debt and Borrowing Activity  $ 326.4 $ (77.7)  $ 248.7

In addition, as of November 30, 2012, the Company had $44.8 million of outstanding letters of credit under the $100.0 million letters of credit subfacility compared to $67.1 million as of November 30, 2011.

On January 28, 2013, the Company issued $460.0 million in aggregate principal amount of its 7.125% Second-Priority Senior Secured Notes due 2021 (the "7 1/8% Notes"). The 7 1/8% Notes were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act") and outside the U.S. in accordance with Regulation S under the Securities Act. The Company intends to use the net proceeds of the 7 1/8% Notes offering to fund, in part, the proposed acquisition of the Rocketdyne Business, and to pay related fees and expenses. The gross proceeds from the 7 1/8% Notes offering were deposited into escrow pending the consummation of the proposed Acquisition. If the Acquisition is not consummated on or prior to July 21, 2013 (subject to a one-month extension upon satisfaction of certain conditions) or upon the occurrence of certain other events, the Company will be required to redeem the 7 1/8% Notes at a price equal to 100% of the issue price of the 7 1/8% Notes, plus accrued and unpaid interest, if any, to, but not including the date of redemption.

Retirement Benefit Plans

The decline in the discount rate used to measure the present value of the defined benefit pension liabilities from the Company's fiscal year end 2011 to its fiscal year-end 2012 resulted in a significant increase in the unfunded pension obligation for the Company's tax-qualified defined benefit pension plan. The unfunded pension obligation for the Company's tax-qualified defined benefit pension plan was $454.5 million as of November 30, 2012 with total defined benefit pension assets of $1,243.1 million as of such date. However, as a result of the Moving Ahead for Progress in the 21st Century Act, which was signed into law on July 6, 2012 and provides temporary relief for employers who sponsor defined benefit pension plans, the Company does not expect to make any cash contributions to its tax-qualified defined benefit pension plan until fiscal 2015 or later. In addition, under the Office of Federal Procurement Policy rules, the Company will recover portions of any required pension funding through its government contracts and the Company estimates that approximately 84% of its unfunded pension obligation as of November 30, 2012 is related to its government contracting business.

The Company estimates that its non-cash retirement benefit expense will be approximately $64 million in fiscal 2013.

The funded status of the pension plan may be adversely affected by the investment experience of the plan's assets, by any changes in U.S. law and by changes in the statutory interest rates used by tax-qualified pension plans in the U.S. to calculate funding requirements. Accordingly, if the performance of the Company's plan's assets does not meet assumptions, if there are changes to the Internal Revenue Service regulations or other applicable law or if other actuarial assumptions are modified, future contributions to the underfunded pension plan could be higher than the Company expects.

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.

The GenCorp Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=12049

 
GenCorp Inc.
Condensed Consolidated Statements of Operations
    Three months ended
November 30, 
Year ended
November 30,
  2012 2011   2012   2011 
  (In millions, except per share amounts)
  (Unaudited)
Net sales  $ 298.2  $ 252.2  $ 994.9  $ 918.1
Operating costs and expenses:        
Cost of sales (exclusive of items shown separately below)  261.3  218.2  869.6  799.3
Selling, general and administrative  10.0  10.9  41.9  40.9
Depreciation and amortization  6.2  6.4  22.3  24.6
Other expense, net   10.7   7.6   26.2   14.5
Total operating costs and expenses  288.2  243.1  960.0  879.3
Operating income  10.0  9.1  34.9  38.8
Non-operating (income) expense:        
Interest income  (0.1)  (0.2)  (0.6)  (1.0)
Interest expense   5.7   7.4   22.3   30.8
Total non-operating expense, net  5.6  7.2  21.7  29.8
Income from continuing operations before income taxes  4.4  1.9  13.2  9.0
Income tax provision   5.1   2.7   18.9   6.1
(Loss) income from continuing operations  (0.7)  (0.8)  (5.7)  2.9
Income from discontinued operations, net of income taxes   3.5   1.3   3.1   —
Net income (loss)  $ 2.8  $ 0.5  $ (2.6)  $ 2.9
Income (Loss) Per Share of Common Stock        
Basic and Diluted        
(Loss) income per share from continuing operations  $  (0.01)  $ (0.01)  $ (0.09)  $ 0.05
Income per share from discontinued operations, net of income taxes   0.06    0.02   0.05   —
Net income (loss) per share  $ 0.05  $ 0.01  $  (0.04)  $ 0.05
Weighted average shares of common stock outstanding — basic and diluted   59.2   58.8   59.0   58.7
     
     
GenCorp Inc.    
Operating Segment Information    
    Three months ended
November 30, 
Year ended
November 30,
   2012   2011   2012   2011 
  (In millions)
  (Unaudited)
Net Sales:        
Aerospace and Defense  $ 294.5  $ 249.0  $ 986.1  $ 909.7
Real Estate   3.7   3.2   8.8   8.4
Total Net Sales  $ 298.2  $ 252.2  $ 994.9  $ 918.1
Segment Performance:        
Aerospace and Defense  $ 34.1  $ 30.2  $ 115.5  $ 108.6
Environmental remediation provision adjustments  (2.1)  (1.9)  (11.4)  (8.9)
Retirement benefit plan expense  (4.7)  (5.3)  (18.9)  (21.0)
Unusual items   (0.2)   (3.5)   (0.7)   (4.1)
Aerospace and Defense Total  27.1  19.5  84.5  74.6
Real Estate   0.8   2.1   3.7   5.6
Total Segment Performance  $ 27.9  $ 21.6  $ 88.2  $ 80.2
Reconciliation of segment performance to income from continuing operations before income taxes:        
Segment performance  $ 27.9  $ 21.6  $ 88.2  $ 80.2
Interest expense  (5.7)  (7.4)  (22.3)  (30.8)
Interest income  0.1  0.2  0.6  1.0
Stock-based compensation expense  (1.4)  (1.4)  (6.5)  (3.7)
Corporate retirement benefit plan expense  (5.5)  (6.3)  (22.1)  (25.4)
Corporate and other  (3.6)  (3.1)  (12.7)  (10.8)
Unusual items   (7.4)   (1.7)   (12.0)   (1.5)
Income from continuing operations before income taxes  $ 4.4  $ 1.9  $ 13.2  $ 9.0

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    
  November 30,
2012
November 30,
2011
  (In millions)
  (Unaudited)
ASSETS    
Current Assets    
Cash and cash equivalents  $  162.1 $ 188.0
Accounts receivable   111.5  107.0
Inventories   46.9  49.5
Recoverable from the U.S. government and other third parties for environmental remediation cost   22.3  23.6
Receivable from Northrop Grumman Corporation ("Northrop")   6.0  6.0
Other receivables, prepaid expenses and other   16.8  21.5
Income taxes   2.5  5.3
Total Current Assets   368.1  400.9
Noncurrent Assets    
Property, plant and equipment, net   143.9  126.9
Real estate held for entitlement and leasing   70.2  63.3
Recoverable from the U.S. government and other third parties for environmental remediation cost   107.9  114.1
Receivable from Northrop   69.3  66.3
Goodwill  94.9  94.9
Intangible assets   13.9  15.4
Other noncurrent assets, net   51.1  57.7
Total Noncurrent Assets   551.2  538.6
Total Assets  $ 919.3 $ 939.5
     
LIABILITIES, REDEEMABLE COMMON STOCK, AND SHAREHOLDERS' DEFICIT    
Current Liabilities    
Short-term borrowings and current portion of long-term debt  $ 2.7 $ 2.8
Accounts payable   56.1  33.8
Reserves for environmental remediation costs   39.5  40.7
Postretirement medical and life benefits   7.5  6.8
Advance payments on contracts   100.1  108.5
Deferred income taxes   9.4  3.1
Other current liabilities   103.3  104.1
Total Current Liabilities   318.6  299.8
Noncurrent Liabilities    
Senior debt   45.0  47.5
Senior subordinated notes   —   75.0
Convertible subordinated notes   200.2  200.2
Other debt   0.8  0.9
Deferred income taxes   2.2  4.5
Reserves for environmental remediation costs   150.0  149.9
Pension benefits   454.5  236.4
Postretirement medical and life benefits   68.3  68.4
Other noncurrent liabilities   68.5  64.1
Total Noncurrent Liabilities   989.5  846.9
Total Liabilities   1,308.1  1,146.7
Commitments and contingencies    
Redeemable common stock   3.9  4.4
Shareholders' Deficit    
Preference stock  —  —  
Common stock  5.9  5.9
Other capital   269.6  261.2
Accumulated deficit  (181.9)  (179.3 )
Accumulated other comprehensive loss, net of income taxes   (486.3)  (299.4 )
Total Shareholders' Deficit   (392.7)  (211.6 )
Total Liabilities, Redeemable Common Stock and Shareholders' Deficit  $ 919.3 $ 939.5
     
     
GenCorp Inc.    
Condensed Consolidated Statements of Cash Flows    
  Year ended  November 30,
   2012    2011
  (In millions)
  (Unaudited)
Operating Activities    
Net (loss) income     $ (2.6)  $ 2.9
Adjustments to reconcile net (loss) income to net cash provided by operating activities:    
Income from discontinued operations    (3.1)   —
Depreciation and amortization   22.3  24.6
Amortization of debt discount and financing costs   2.9  6.7
Stock-based compensation   6.5  3.7
Retirement benefit expense   41.0  46.4
Tax benefit on stock-based awards  (3.3)  (0.2)
Loss on debt repurchased and bank amendment  0.4  1.5
Changes in assets and liabilities   24.2   (8.5)
Net cash provided by continuing operations   88.3  77.1
Net cash used in discontinued operations    (2.1)   (0.3)
Net Cash Provided by Operating Activities   86.2  76.8
Investing Activities    
Marketable securities activity, net   —  26.7
Proceeds from sale of land  0.6   —
Capital expenditures    (37.2)   (21.1)
Net Cash (Used in) Provided by Investing Activities   (36.6)  5.6
Financing Activities    
Tax benefit on stock-based awards  3.3  0.2
Proceeds from shares issued equity plans  1.0   —
Debt issuance costs  (1.3)  (4.2)
Debt repayments  (77.7)  (70.1)
Vendor financing repayments   (0.8)   (1.8)
Net Cash Used in Financing Activities    (75.5)   (75.9)
Net (Decrease) Increase in Cash and Cash Equivalents  (25.9)  6.5
Cash and Cash Equivalents at Beginning of Year    188.0   181.5
Cash and Cash Equivalents at End of Year  $ 162.1  $ 188.0

Use of Non-GAAP Financial Measures

In addition to segment performance (discussed above), the Company provides the Non-GAAP financial measures of its operational performance called Adjusted EBITDAP. The Company uses this metric to further its understanding of the historical and prospective consolidated core operating performance of its segments, net of expenses incurred by its corporate activities in the ordinary, on-going and customary course of its operations. Further, the Company believes that to effectively compare the core operating performance metrics 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, and items incurred outside the ordinary, on-going and customary course of its operations. Accordingly, the Company defines Adjusted EBITDAP as GAAP income from continuing operations before income taxes adjusted by interest expense, interest income, depreciation and amortization, retirement benefit expense, and unusual items which the Company does not believe are reflective of such ordinary, on-going and customary activities. Adjusted EBITDAP does not represent, and should not be considered an alternative to, net income (loss), as determined in accordance with GAAP.

  Three months ended
November 30,
Year ended
November 30, 
   2012   2011  2012  2011 
  (In millions, except percentage amounts)
  (Unaudited)
Income from continuing operations before income taxes  $ 4.4  $ 1.9  $ 13.2  $ 9.0
Interest expense  5.7  7.4  22.3  30.8
Interest income  (0.1)  (0.2)  (0.6)  (1.0)
Depreciation and amortization  6.2  6.4  22.3  24.6
Retirement benefit expense  10.2  11.6  41.0  46.4
Unusual items        
Loss on legal related matters and settlements  0.1  3.5  0.7  4.1
Rocketdyne Business acquisition related costs  7.5  —  11.6  —
Loss on bank amendment  —  1.3  —  1.3
Loss on debt repurchased   —   0.4   0.4   0.2
Adjusted EBITDAP  $ 34.0  $ 32.3  $ 110.9  $115.4
Adjusted EBITDAP as a percentage of net sales  11.4%  12.8%  11.1%  12.6%

Adjusted EBITDAP adjusted for stock-based compensation for the fourth quarter of fiscal 2012 was $35.4 million or 11.9% of net sales, compared to $33.7 million or 13.4% of net sales, for the fourth quarter of fiscal 2011. Adjusted EBITDAP adjusted for stock-based compensation for fiscal 2012 was $117.4 million or 11.8% of net sales, compared to $119.1 million or 13.0% of net sales, for fiscal 2011.

In addition to segment performance and Adjusted EBITDAP, the Company provides the Non-GAAP financial measures of free cash flow and net debt. The Company uses these financial measures, both in presenting its results to stockholders and the investment community, and in its internal evaluation and management of the business. Management believes that these financial measures are useful to investors because they permit investors to view the Company's business using the same tools that management uses to gauge progress in achieving its goals.

  Three months ended
November 30,
Year ended
November 30, 
   2012   2011   2012   2011 
  (In millions)
  (Unaudited)
Cash provided by operating activities  $ 23.2  $ 26.4  $ 86.2  $ 76.8
Capital expenditures   (18.4)   (8.9)   (37.2)   (21.1)
Free cash flow  $ 4.8  $ 17.5  $ 49.0   $ 55.7
     
 
 
November 30,
 2012 
 November 30,
 2011 
  (In millions)
  (Unaudited)
Debt principal  $ 248.7  $ 326.4
Cash and cash equivalents   (162.1)   (188.0)
 Net debt  $ 86.6  $ 138.4

Because the Company's method for calculating the Non-GAAP measures may differ from other companies' methods, the Non-GAAP measures presented above may not be comparable to similarly titled measures reported by other companies. These measures are 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.

CONTACT: Investors:

         Kathy Redd, chief financial officer

         916.355.2361

         Media:

         Glenn Mahone, vice president, communications

         202.302.9941

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Source: GenCorp Inc.

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