GenCorp Inc. (GY)

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GenCorp Inc. (GY)

F3Q08 Earnings Call

September 26, 2008 11:00 am ET

Executives

Linda Cutler – Vice President, Corporate Communications

J. Scott Neish – Interim President, Interim Chief Executive Officer

Yasmin Seyal – Senior Vice President, Chief Financial Officer

Analysts

[Unidentified Analyst] – J. P. Morgan

Andrew [Sudoti] – Markstone Capital

Presentation

Operator

Welcome to the GenCorp 2008 third quarter earnings conference call. (Operator Instructions) I would now like to turn the conference over to your host Linda Cutler.

Linda Cutler

Before we start I’d like to remind you that during this conference call GenCorp’s management team may make forward-looking statements as defined by the Private Litigation Reform Act of 1995.

All statements in this conference call and in subsequent discussions other than historical information are forward-looking statements. These statements represent management’s current judgment on expectations for future operations. We encourage you to review the cautionary language regarding the forward-looking statements and the factors contained in the earnings release issued today, as well as management’s discussion and analysis and elsewhere in our most recent Form 10-K and other filings with the SEC.

These statements and factors could cause business conditions and actual results to differ materially from those expected by the company or as expressed in our forward-looking statements.

With that, now I’d like to turn the call over to Scott Neish.

J. Scott Neish

Also joining me this morning to discuss our third quarter results is our Chief Financial Officer, Yasmin Seyal.

As most of you probably know, this is a very sad time for us. Last week an employee at our Camden facility was fatally injured in a fire that resulted from the unplanned ignition of a rocket motor. We have formed a team to investigate the accident. We are also forming an independent review team of highly respected senior government and industry officials to evaluate the work of the internal investigation team. We’re very early in this process and have no conclusions to provide at this time.

I started out in our last call by indicating that the new board and management were working closely together how best to enhance shareholder value and that we had begun the process of looking at various options and scenarios. The current status is that this evaluation has not yet been completed and is still in process, and given the current market disruptions may take some time longer. Therefore the company is not yet in a position to share with you any further information.

Now I’m going to turn the call over to Yasmin to review our financial results for the quarter. Following her remarks I will then briefly address how Aerojet’s doing operationally and some key successes since we last talked with you. I’ll also give you an update with where we are with regards to our Real Estate projects.

But first Yasmin.

Yasmin Seyal

My comments this morning will focus on the financial results of our continuing operations, Aerojet and Real Estate. The company today reported a net loss of $2.7 million or $0.05 diluted loss per share for the third quarter 2008, compared to net income of $15.6 million or $0.26 diluted earnings per share in the third quarter of 2007.

The third quarter 2008 number includes approximately $7 million of charges associated with adjustments to our environmental reserves and $1 million of unusual items associated with unrecoverable portion of legal settlements. The third quarter 2007 number includes a net benefit of $1 million associated with adjustments to environmental reserves but $5 million of unusual items and it also included a $12 million income tax benefit related to certain tax settlements and statute expirations.

Commenting next on sales for the Corporation, which for the third quarter of 2008 were

$173 million compared to $199 million in 2007. Sales for the first nine months of 2008 were

$544 million compared to $542 million in 2007. With regard to Aerojet compared to 2007, sales were down for the third quarter and $8 million on a year-to-date basis as compared to 2007.

I think as many of you – we’ve talked to you in prior calls and as many of you will understand, the major driver here is really the completion of our Titan program in 2007, which had about

$31 million in sales in ’07. We have been working hard in 2008 and we continue our efforts to replace this Titan business with NASA and defense [programs] the results of which we hope you will see as we go forward.

With respect to Real Estate, the year-to-date totals include proceeds from the sale of 400 acres of the Sacramento land to Elliott Homes for $10 million in cash which occurred earlier on in the year.

Talking next on segment performance, which you know as a non-GAAP financial measure and is defined in the operating segment information table included in our release that we issued earlier today. Aerojet’s segment performance for the third quarter, excluding environmental remediation provision adjustments, retirement benefit plan expense and unusual items, was $16.3 million representing a 9.5% return on its sales.

This compares to $22 million and an 11.2% return on sales for the same period in 2007. Margins in 2007 were helped by our favorable Titan contract. On a year-to-date basis, Aerojet’s segment performance in the first nine months of 2008 was $54.7 million representing a 10.3% return on sales compared to $65.7 million and 12.2% in the first nine months of 2007. Again, 2007 margins were helped by our favorable Titan contract; 2008 margins on an overall basis for the first nine months of the year are holding up to our expectations.

Read the rest of this transcript for free on seekingalpha.com