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 *Net sales for the fourth quarter of fiscal 2012 totaled $298.2 million compared to $252.2 million for the fourth quarter of fiscal 2011. *Net income for the fourth quarter of fiscal 2012 was $2.8 million, or $0.05 diluted income per share, compared to a net income of $0.5 million, or $0.01 diluted income per share, for the fourth quarter of fiscal 2011. *Adjusted EBITDAP (Non-GAAP measure) for the fourth quarter of fiscal 2012 was $34.0 million or 11.4% of net sales, compared to $32.3 million or 12.8% of net sales, for the fourth quarter of fiscal 2011. *Segment performance (Non-GAAP measure) before environmental remediation provision adjustments, retirement benefit plan expense, and unusual items was $34.9 million for the fourth quarter of fiscal 2012, compared to $32.3 million for the fourth quarter of fiscal 2011. *Cash provided by operating activities in the fourth quarter of fiscal 2012 totaled $23.2 million, compared to $26.4 million in the fourth quarter of fiscal 2011. *Free cash flow (Non-GAAP measure) in the fourth quarter of fiscal 2012 totaled $4.8 million, compared to $17.5 million in the fourth quarter of fiscal 2011. *Net debt (Non-GAAP measure) was $86.6 million as of November 30, 2012 compared to $138.4 million as of November 30, 2011. *Funded backlog was $1,018 million as of November 30, 2012 compared to $902 million as of November 30, 2011. Fiscal 2012 compared to Fiscal 2011 *Net sales for fiscal 2012 totaled $994.9 million compared to $918.1 million for fiscal 2011. *Net loss for fiscal 2012 was ($2.6) million, or ($0.04) loss per share, compared to net income of $2.9 million, or $0.05 diluted income per share, for fiscal 2011. *Adjusted EBITDAP (Non-GAAP measure) for fiscal 2012 was $110.9 million or 11.1% of net sales, compared to $115.4 million or 12.6% of net sales, for fiscal 2011. *Segment performance (Non-GAAP measure) before environmental remediation provision adjustments, retirement benefit plan expense, and unusual items was $119.2 million for fiscal 2012, compared to $114.2 million for fiscal 2011. *Cash provided by operating activities in fiscal 2012 totaled $86.2 million, compared to $76.8 million in fiscal 2011. *Free cash flow (Non-GAAP measure) in fiscal 2012 totaled $49.0 million, compared to $55.7 million in 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: November30, Cash November 30, 2011 Payments 2012 (In millions) Term loan $50.0 $(2.5) $47.5 9½% Senior Subordinated Notes 75.0 (75.0) — 4 1/16%Convertible Subordinated 200.0 — 200.0 Debentures 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 $44.8million of outstanding letters of credit under the $100.0million 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/%Notes").The 7^1/%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/%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/%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/%Notes at a price equal to 100% of the issue price of the 7^1/%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 $64million 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: *cancellation or material modification of one or more significant contracts; *future reductions or changes in U.S. government spending; *negative audit of the Company's business by the U.S. government; *conditions relating to the acquisition of the Rocketdyne Business which could delay or materially adversely affect the timing of its completion, or prevent it from occurring; *inability to satisfy the conditions or obtain the approvals required to complete acquisition of the Rocketdyne Business or material restrictions or conditions on such approvals; *failure to complete the acquisition of the Rocketdyne Business; *following the acquisition of the Rocketdyne Business, if consummated, integration difficulties or inability to integrate the Rocketdyne Business into the Company's existing operations successfully or to realize the anticipated benefits of the Acquisition; *ability to effectively manage the Company's expanded operations following the acquisition of the Rocketdyne Business; *expenses related to the acquisition of the Rocketdyne Business and the integration of our operations with the Rocketdyne Business if the acquisition is consummated; *the increase in the Company's leverage and debt service obligations as a result of the Acquisition; *cost overruns on the Company's contracts that require the Company to absorb excess costs; *failure of the Company's subcontractors or suppliers to perform their contractual obligations; *failure to secure contracts; *failure to comply with regulations applicable to contracts with the U.S. government; *failure to comply with applicable laws relating to export controls; *costs and time commitment related to potential acquisition activities; *the Company's inability to adapt to rapid technological changes; *failure of the Company's information technology infrastructure; *failure to effectively implement the Company's enterprise resource planning system; *product failures, schedule delays or other problems with existing or new products and systems; *the release, or explosion, or unplanned ignition of dangerous materials used in the Company's businesses; *loss of key qualified suppliers of technologies, components, and materials; *the funded status of the Company's defined benefit pension plan and the Company's obligation to make cash contributions in excess of the amount that the Company can recover in its current period overhead rates; *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; *environmental claims related to the Company's current and former businesses and operations; *reductions in the amount recoverable from environmental claims; *the results of significant litigation; *occurrence of liabilities that are inadequately covered by indemnity or insurance; *inability to protect the Company's patents and proprietary rights; *business disruptions; *the earnings and cash flow of the Company's subsidiaries and the distribution of those earnings to the Company; *the substantial amount of debt which places significant demands on the Company's cash resources and could limit the Company's ability to borrow additional funds or expand its operations; *the Company's ability to comply with the financial and other covenants contained in the Company's debt agreements; *risks inherent to the real estate market; *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; *additional costs related to the Company's divestitures; *the loss of key employees and shortage of available skilled employees to achieve anticipated growth; *a strike or other work stoppage or the Company's inability to renew collective bargaining agreements on favorable terms; *fluctuations in sales levels causing the Company's quarterly operating results and cash flows to fluctuate; *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 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 Year ended November 30, 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 261.3 218.2 869.6 799.3 shown separately below) 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 4.4 1.9 13.2 9.0 before income taxes Income tax provision 5.1 2.7 18.9 6.1 (Loss) income from continuing (0.7) (0.8) (5.7) 2.9 operations Income from discontinued operations, 3.5 1.3 3.1 — net of income taxes 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 $ (0.01) $(0.01) $(0.09) $0.05 continuing operations Income per share from discontinued 0.06 0.02 0.05 — operations, net of income taxes Net income (loss) per share $0.05 $0.01 $ (0.04) $0.05 Weighted average shares of common 59.2 58.8 59.0 58.7 stock outstanding – basic and diluted GenCorp Inc. Operating Segment Information Three months ended Year ended November 30, 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 (2.1) (1.9) (11.4) (8.9) adjustments 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 (5.5) (6.3) (22.1) (25.4) expense 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 $4.4 $1.9 $13.2 $9.0 before income taxes 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 November30, November30, 2012 2011 (Inmillions) (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 22.3 23.6 parties for environmental remediation cost Receivable from Northrop Grumman Corporation 6.0 6.0 ("Northrop") 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 107.9 114.1 parties for environmental remediation cost 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 $2.7 $2.8 long-term debt 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 (486.3) (299.4 ) taxes Total Shareholders' Deficit (392.7) (211.6 ) Total Liabilities, Redeemable Common Stock and $919.3 $939.5 Shareholders' Deficit GenCorp Inc. Condensed Consolidated Statements of Cash Flows Year ended November30, 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 Year ended November 30, November 30, 2012 2011 2012 2011 (In millions, except percentage amounts) (Unaudited) Income from continuing operations $4.4 $1.9 $13.2 $9.0 before income taxes 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 0.1 3.5 0.7 4.1 settlements Rocketdyne Business acquisition 7.5 — 11.6 — related costs 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 11.4% 12.8% 11.1% 12.6% net sales 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 Year ended November 30, 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, November 30, 2012 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 company logo
GenCorp Reports 2012 Fourth Quarter and Annual Results
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