Dailystocks.com - Ticker-based level links to all the information for the Stocks you own. Portal for Daytrading and Finance and Investing Web Sites
DailyStocks.com
What's New
Site Map
Help
FAQ
Log In
Home Quotes/Data/Chart Warren Buffett Fund Letters Ticker-based Links Education/Tips Insider Buying Index Quotes Forums Finance Site Directory
OTCBB Investors Daily Glossary News/Edtrl Company Overviews PowerRatings China Stocks Buy/Sell Indicators Company Profiles About Us
Nanotech List Videos Magic Formula Value Investing Daytrading/TA Analysis Activist Stocks Wi-fi List FOREX Quote ETF Quotes Commodities
Make DailyStocks Your Home Page AAII Ranked this System #1 Since 1998 Bookmark and Share


Welcome!
Welcome to the investing community at DailyStocks where we believe we have some of the most intelligent investors around. While we have had an online presence since 1997 as a portal, we are just beginning the forums section now. Our moderators are serious investors with MBA and CFAs with practical experience wwell-versed in fundamental, value, or technical investing. We look forward to your contribution to this community.

Recent Topics
Article by DailyStocks_admin    (01-12-10 11:12 PM)

Filed with the SEC from Dec 24 to Dec 30:

GenCorp (GY)
Gamco Investors (GBL) increased its holdings to 6,732,426 shares (11.37%), by purchasing 125,250 from Oct. 29 to Dec. 24 at ranging from $6.83 to $8.34 per share.

BUSINESS OVERVIEW

Unless otherwise indicated or required by the context, as used in this Annual Report on Form 10-K, the terms “we,” “our,” and “us” refer to GenCorp Inc. and all of its subsidiaries that are consolidated in conformity with accounting principles generally accepted in the United States of America.

Certain information contained in this Annual Report on Form 10-K should be considered “forward-looking statements” as defined by Section 21E of the Private Securities Litigation Reform Act of 1995. All statements in this report other than historical information may be deemed forward-looking statements. These statements present (without limitation) the expectations, beliefs, plans, and objectives of management and future financial performance and assumptions underlying, or judgments concerning, the matters discussed in the statements. The words “believe,” “estimate,” “anticipate,” “project” and “expect,” and similar expressions, are intended to identify forward-looking statements. Forward-looking statements involve certain risks, estimates, assumptions, and uncertainties, including with respect to future sales and activity levels, cash flows, contract performance, the outcome of litigation and contingencies, environmental remediation, availability of capital, and anticipated costs of capital. A variety of factors could cause actual results or outcomes to differ materially from those expected and expressed in our forward-looking statements. Some important risk factors that could cause actual results or outcomes to differ from those expressed in the forward-looking statements are described in the section “Risk Factors” in Item 1A of this Report.

The list of factors that may affect future performance and the accuracy of forward-looking statements described in the section “Risk Factors” in Item 1A of this Report is illustrative, but by no means exhaustive. Additional risk factors may be described from time to time in our future filings with the Securities and Exchange Commission (SEC). Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. All such risk factors are difficult to predict, contain material uncertainties that may affect actual results and may be beyond our control.

We are a manufacturer of aerospace and defense systems with a real estate segment that includes activities related to the entitlement, sale, and leasing of our excess real estate assets. Our continuing operations are organized into two segments:

Aerospace and Defense — includes the operations of Aerojet-General Corporation (Aerojet) which develops and manufactures propulsion systems for defense and space applications, armament systems for precision tactical weapon systems and munitions applications. We are one of the largest providers of such propulsion systems in the United States (U.S.) and the only U.S. company that provides both solid and liquid propellant based systems. Primary customers served include major prime contractors to the U.S. government, the Department of Defense (DoD), and the National Aeronautics and Space Administration (NASA).

Real Estate — includes activities related to the entitlement, sale, and leasing of our excess real estate assets. We own approximately 12,200 acres of land adjacent to U.S. Highway 50 between Rancho Cordova and Folsom, California, east of Sacramento (Sacramento Land). We are currently in the process of seeking zoning changes, removal of environmental restrictions and other governmental approvals on a portion of the Sacramento Land to optimize its value. We have filed applications with and submitted information to governmental and regulatory authorities for approvals necessary to re-zone approximately 6,000 acres of the Sacramento Land. We also own approximately 580 acres in Chino Hills, California. We are currently seeking removal of environmental restrictions on the Chino Hills property to optimize the value of such land.

Our fiscal year ends on November 30 of each year. When we refer to a fiscal year, such as fiscal 2008, we are referring to the fiscal year ended on November 30 of that year.

Sales, segment performance, total assets, and other financial data for each segment for fiscal 2008, 2007, and 2006 are set forth in Note 10 to the Consolidated Financial Statements, included in Item 8 of this Report.

We were incorporated in Ohio in 1915 and our principal executive offices are located at Highway 50 and Aerojet Road, Rancho Cordova, CA 95742. Our mailing address is P.O. Box 537012, Sacramento, CA 95853-7012 and our telephone number is 916-355-4000.

Our Internet website address is www.GenCorp.com. We have made available through our Internet website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and

amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC. We also make available on our Internet web site our corporate governance guidelines and the charters for each of the following committees of the Company’s Board of Directors: Audit; Corporate Governance & Nominating; and Organization & Compensation. Our corporate governance guidelines and such charters are also available in print to anyone who requests them.

Aerospace and Defense

For over 60 years, Aerojet has been an industry leader and pioneer in the development of critical products and technologies that have strengthened the U.S. military and enabled the exploration of space. Aerojet focuses on developing military, civil, and commercial systems and components that address the needs of the aerospace and defense industry markets. Due to the diversity of its propulsion technologies and the synergy of its product lines, Aerojet believes it is in a unique competitive position to offer its customers the most innovative and advanced solutions available in the domestic propulsion market. Aerojet has been able to capitalize on its strong technical capabilities to become a critical provider of components and systems for major propulsion programs. Aerojet propulsion systems have flown on human and robotic missions for NASA since the inception of the U.S. Space Program, and Aerojet has been a major supplier of propulsion products to the DoD since the founding of Aerojet. Principal customers include the DoD, NASA, United Launch Alliance (ULA), The Boeing Company (Boeing), Lockheed Martin Corporation (Lockheed Martin), and Raytheon Company (Raytheon).


• Defense systems — Our defense system products include liquid, solid, and air-breathing propulsion systems and components. In addition, Aerojet is a supplier of both composite and metallic aerospace structural components, fire suppression systems and armament systems to the DoD and its prime customers. Product applications for our defense systems include strategic, tactical and precision strike missiles, missile defense systems, maneuvering propulsion systems, precision war-fighting systems, and specialty metal products.

• Space systems — Our space systems products include liquid, solid, and electric propulsion systems and components. Product applications for space systems include expendable and reusable launch vehicles, transatmospheric vehicles and spacecraft, separation and maneuvering systems, upper stage engines, satellites, large solid boosters, and integrated propulsion subsystems.

Industry Overview

Broad support continues for DoD and NASA funding in the Government Fiscal Year ending September 30 (GFY), 2009 and beyond. However, these Federal department/agency budgets are under severe pressure due to the cost impacts of the global war on terrorism, the cost of military operations in Iraq and Afghanistan, the ongoing world-wide financial crisis, and a rising U.S. federal deficit. As a result, both the DoD and NASA budgets are expected to grow at modest levels through 2012.

Department of Defense

The Obama Administration has indicated that it is committed to maintaining adequate funding for the Department of Defense and building Defense capabilities for the 21 st century. President Obama’s stated focus areas that directly relate to Aerojet products are: fully equipping U.S forces for the missions they face; preserving global reach in the Air; maintaining power projection at Sea; protecting the U.S in cyberspace; ensuring freedom of Space; and a pragmatic and cost-effective development of Missile Defense. Congress has indicated they plan to work closely with the new Administration on these focus areas.

Following a period of budget decreases in the post-Cold War era, the U.S. defense appropriations have increased in recent years. Defense appropriations have risen to over $487 billion in GFY 2009 from $439 billion in GFY 2008. We expect the U.S. defense budgets for research, development, test and evaluation (RDT&E) and procurement, the primary funding sources for Aerojet’s programs, to remain level, with annual forecasts for RDT&E declining slightly, while procurement continues to show a slight increase through GFY 2012. While the top line DoD budget continues to increase, the Pentagon has announced it plans to reduce the overall rate of growth. Although the ultimate distribution of the Defense budget remains uncertain, Aerojet is well positioned to benefit from DoD investment in: high-priority, transformational systems that address current war fighting requirements; the re-capitalization of weapon systems and equipment being expended during combat deployments; and, systems that meet new threats world-wide.

NASA

Congress and the Obama Administration have indicated they believe NASA funding needs to be increased and more balanced across exploration, science, and aeronautics. NASA is operating under a Continuing Resolution through March 2009, at an annual funding level of $17.3 billion. The Obama Administration and Congress are expected to increase NASA GFY 2009 appropriations above the current Continuing Resolution annual funding level. In addition, there is broad support to fund the Constellation Program which will provide a new crew exploration spacecraft and launch system to replace the Space Shuttle. Earth Science, Space Science, and Aeronautics should receive funding increases.

In 2009, NASA’s primary space exploration objectives will be to: (i) complete construction of the International Space Station; (ii) phase out the Space Shuttle by 2010 at the earliest; (iii) develop Orion, a new crew exploration spacecraft and its launch vehicle Ares I; and (iv) move forward with the Commercial Orbital Transport System, which is designed to resupply the International Space Station.

The Orion prime contractor, Lockheed Martin, selected Aerojet to develop and produce all in-space propulsion for the Orion service and crew modules. In addition, Orbital Sciences, under contract to Lockheed Martin for the Orion launch abort system (LAS) selected Aerojet for significant propulsion work on the LAS program. The Orion program as currently envisioned represents potentially a decade’s long production program for Aerojet that will be the focal point for future U.S. human space exploration.

In addition, we believe Aerojet is well-positioned to provide propulsion solutions for some of NASA’s special interest areas: advanced propellant technology, attitude/reaction control systems, and robotic exploration propulsion. Furthermore, as a result of NASA’s intention to retire the Space Shuttle from service as early as 2010, we believe that NASA will focus on maneuvering and long-duration propulsion systems that are currently available and flight-proven, which may present additional opportunities for existing Aerojet product lines.

Competition

As the only domestic supplier of all four propulsion types — solid, liquid, air-breathing, and electric — we believe that Aerojet is in a unique competitive position. The diversity of its technologies and synergy of its product lines offer Aerojet customers the most innovative and advanced solutions available in the domestic propulsion market. The basis on which Aerojet competes in the Aerospace and Defense industry varies by program, but generally is based upon technology, quality, service, and price. Although market competition is intense, we believe Aerojet possesses innovative and advanced propulsion solutions, combined with adequate resources to continue to compete successfully.

Participation in the defense and space propulsion market can be capital intensive requiring long research and development periods that represent significant barriers to entry. Aerojet may partner on various programs with its major customers or suppliers, some of whom are, from time to time, competitors on other programs.
The domestic solid and liquid propulsion markets remained unchanged in fiscal 2008 with Aerojet in the number two position in both markets, second to Alliant Techsystems in solid propulsion (solids) and Pratt & Whitney Rocketdyne in liquid propulsion (liquids).

Major Customers

As a merchant supplier to the Aerospace and Defense industry, we do not align ourselves with any single prime contractor except on a project-by-project basis. We believe that our position as a merchant supplier has helped us become a trusted partner to our customers, enabling us to maintain strong long-term relationships with a variety of prime contractors. Under each of our contracts, we act either as a subcontractor, where we sell our products to other prime contractors, or as a prime contractor, where we sell directly to the end user.

The principal end user customers of our products and technology are agencies of the U.S. government, U.S. prime contractors, and government agencies. Since a majority of Aerojet’s sales are, directly or indirectly, to the U.S. government, funding for the purchase of Aerojet’s products and services generally follows trends in U.S. defense spending. However, individual government agencies, which include the military services, the Defense Advanced Research Projects Agency, NASA, the Missile Defense Agency, and the prime contractors that serve these agencies, exercise independent purchasing power within “budget top-line” limits. Therefore, sales to the U.S. government are not regarded as sales to one customer, but rather each contracting agency is viewed as a separate customer.

Major Programs

Defense Systems — Aerojet maintained a strong position in the defense market segment in fiscal 2008 with key new and follow-on awards. Significant new wins included the propulsion system for the Joint Air to Ground Missile (JAGM), the Multiple Kill Vehicle System, and other controllable solids programs. Important follow-on awards were received on the propulsion system for the Ground Based Midcourse Defense Exoatmospheric Kill Vehicle Divert and Attitude Controls System (GMD EKV DACS), Standard Missile 3, Standard Missile 3 Throttling Divert Attitude Control System, and F-22 programs. These successes continue to strengthen our position as a propulsion leader in missile defense and tactical systems. In addition, in April 2008, the Company again earned the Boeing Company’s “Supplier of the Year Award” for its commitment to superior performance and customer satisfaction.

Aerojet, who also won a Boeing supplier of the year award in 2005, was one of eleven (11) companies honored for its 2007 performance. We believe Aerojet is in a unique competitive position due to the diversity of propulsion technologies (solid, liquid, and air-breathing), complete warhead capabilities, composites and metallic structures expertise, and the synergy of its product lines to offer defense customers the most innovative and advanced solutions available in the domestic market.

Contract Types

Under each of its contracts, Aerojet acts either as a prime contractor, where it sells directly to the end user, or as a subcontractor, selling its products to other prime contractors. Research and development contracts are awarded during the inception stage of a program’s development. Production contracts provide for the production and delivery of mature products for operational use. Aerojet’s contracts are primarily categorized as either “fixed-price” or “cost-reimbursable.” During fiscal 2008, approximately 46% of our net sales was from fixed-price contracts and 41% from cost-reimbursable contracts.

Fixed-price contracts are typically (i) fixed-price, (ii) fixed-price-incentive fee, or (iii) fixed-price level of effort contracts. For fixed-price contracts, Aerojet performs work for a fixed price and realizes all of the profit or loss resulting from variations in costs of performance. For fixed-price-incentive contracts, Aerojet receives increased or decreased fees or profits based upon actual performance against established targets or other criteria. For fixed-price level of effort contracts, Aerojet generally receives a structured fixed price per labor hour, dependent upon the customer’s labor hour needs. All fixed-price contracts present the risk of unreimbursed cost overruns potentially resulting in losses.

Cost-reimbursable contracts are typically (i) cost plus fixed fee, (ii) cost plus incentive fee, or (iii) cost plus award fee contracts. For cost plus fixed fee contracts, Aerojet typically receives reimbursement of its costs, to the extent the costs are allowable under contractual provisions, in addition to receiving a fixed fee. For cost plus incentive fee contracts and cost plus award fee contracts, Aerojet receives adjustments to the contract fee, within designated limits, based on actual results as compared to contractual targets for factors such as cost, performance, quality, and schedule.

Many programs under contract have product life cycles exceeding 10 years, such as the Standard Missile, TOW, and Tomahawk programs. It is typical for U.S. government propulsion contracts to be relatively small during development phases that can last from two to five years, followed by low-rate and then full-rate production, where annual funding can grow as high as approximately $30 million to $60 million per year over many years.

Government Contracts and Regulations

Our sales are driven by pricing based on costs incurred to produce products or perform services under contracts with the U.S. government. U.S. government contracts generally are subject to Federal Acquisition Regulations (FAR), agency-specific regulations that implement or supplement FAR, such as the DoD’s Defense Federal Acquisition Regulations and other applicable laws and regulations. These regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustment, and audit requirements. A contractor’s failure to comply with these regulations and requirements could result in reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines and could lead to suspension or debarment from government contracting or subcontracting for a period of time. In addition, government contractors are also subject to routine audits and investigations by U.S. government agencies such as the Defense Contract Audit Agency (DCAA). These agencies review a contractor’s performance, cost structure, and compliance with applicable laws, regulations, and standards. The DCAA also reviews the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation, and information systems.

Backlog

As of November 30, 2008, our total contract backlog was $1,035 million compared with $912 million as of November 30, 2007. Of our November 30, 2008 contract backlog, approximately $535 million, or 52%, is not expected to be filled within one year. Funded backlog was $675 million and $566 million at November 30, 2008 and 2007, respectively.

Total backlog includes both funded backlog (the amount for which money has been directly authorized 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.

Research and Development

We view Aerojet research and development efforts as critical to maintain its leadership position in markets in which it competes. We maintain an active research and development effort supported primarily by customer funding. Customer-funded research and development expenditures are funded under contract specifications, typically research and development contracts, several of which we believe may become key programs in the future. We believe customer-funded research and development activities are vital to our ability to compete for contracts and to enhance our technology base.

Aerojet’s company-funded research and development efforts include expenditures for technical activities that are vital to the development of new products, services, processes or techniques, as well as those expenses for significant improvements to existing products or processes.

Suppliers, Raw Materials and Seasonality

The national aerospace supply base continues to consolidate due to economic, environmental, and marketplace circumstances beyond Aerojet’s control. The loss of key qualified suppliers of technologies, components, and materials can cause significant disruption to Aerojet program performance and cost.

Availability of raw materials and supplies to Aerojet is generally sufficient. Aerojet is sometimes dependent, for a variety of reasons, upon sole-source or flight qualified suppliers and has in some instances in the past experienced difficulties meeting production and delivery obligations because of delays in delivery or reliance on such suppliers. We closely monitor sources of supply to assure adequate raw materials and other supplies needed in our manufacturing processes are available. As a U.S. government contractor, we are frequently limited to procuring materials and components from sources of supply that meet rigorous customer and/or government specifications. In addition, as business conditions, DoD budgets, and Congressional allocations change, suppliers of specialty chemicals and materials sometimes consider dropping low-volume items from their product lines. This may require us to qualify new suppliers for raw materials on key programs.

We are also impacted, as is the rest of the industry, by increases in the prices and lead-times of raw materials used in production on various fixed-price contracts. We have seen an increase in the price and lead-times for commodity metals, primarily steel, titanium and aluminum. Aerojet monitors the price and supply of these materials and wherever possible works closely with suppliers to schedule purchases far enough in advance and in the most economical means possible to minimize program impact.

Aerojet’s business is not subject to predictable seasonality. Primary factors affecting the timing of Aerojet’s sales include the timing of government awards, the availability of U.S. government funding, contractual product delivery requirements, and customer acceptances.

Intellectual Property

Where appropriate, Aerojet obtains patents in the U.S. and other countries covering various aspects of the design and manufacture of its products. We consider these patents to be important to Aerojet as they illustrate Aerojet’s innovative design ability and product development capabilities. We do not believe the loss or expiration of any single patent would have a material adverse effect on the business or financial results of Aerojet or on our business as a whole.

Real Estate

Through our Aerojet subsidiary, we own approximately 12,200 acres of land in the Sacramento metropolitan area (Sacramento Land). The Sacramento Land is located 15 miles east of downtown Sacramento, California along U.S. Highway 50, a key growth corridor in the region. We believe the Sacramento Land has competitive advantages over other land in the area, including being one of the largest single-owner land tracts suitable for development in the Sacramento region and being a desirable “in-fill” location surrounded by residential and business properties.

The Sacramento Land was acquired in the early 1950s for our aerospace and defense operations. Most of the Sacramento Land was used to provide safe buffer zones for testing and manufacturing operations. Changes in propulsion technology coupled with the relocation of certain of our propulsion operations led us to determine that some portions of the Sacramento Land were no longer needed for our operations in Sacramento. Consequently, our plan has been to reposition the excess Sacramento Land to optimize its value. We currently have entitlement requests pending for the re-zoning of approximately 6,000 acres of excess Sacramento Land. Our entitlement efforts are expected to increase the excess land value over its current value. The term “entitlements” is generally used to denote the set of regulatory approvals required to allow land to be zoned for requested uses. Required regulatory approvals vary with each land zoning proposal and may include permits, land use master plans, zoning designations, state and federal environmental documentation, and other regulatory approvals unique to the land.

CEO BACKGROUND

Name Date of First Election

Thomas A. Corcoran September 24, 2008
James R. Henderson March 5, 2008
Warren G. Lichtenstein March 5, 2008
David A. Lorber March 31, 2006
James H. Perry May 16, 2008
Martin Turchin March 5, 2008
Robert C. Woods March 31, 2006


MANAGEMENT DISCUSSION FROM LATEST 10K

We begin Management’s Discussion and Analysis of Financial Condition and Results of Operations with an overview of our business and operations, followed by a discussion of our business outlook and results of operations, including results of our operating segments, for the past two fiscal years. We then provide an analysis of our liquidity and capital resources, including discussions of our cash flows, debt arrangements, sources of capital, and financial commitments. In the next section, we discuss the critical accounting policies that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

The following discussion should be read in conjunction with the other sections of this Report, including the Consolidated Financial Statements and Notes thereto appearing in Item 8. Consolidated Financial Statements and Supplementary Data of this Report, the risk factors appearing in Item 1A. Risk Factors of this Report and the disclaimer regarding forward-looking statements appearing at the beginning of Item 1. Business of this Report. Historical results set forth in Item 6. Selected Financial Data and Item 8. Consolidated Financial Statements and Supplementary Data of this Report should not be taken as indicative of our future operations.

Overview

We are a manufacturer of aerospace and defense systems with a real estate segment that includes activities related to the entitlement, sale, and leasing of our excess real estate assets. Our continuing operations are organized into two segments:

Aerospace and Defense — includes the operations of Aerojet-General Corporation, or Aerojet, which develops and manufactures propulsion systems for defense and space applications, armament systems for precision tactical weapon systems and munitions applications. We are one of the largest providers of such propulsion systems in the United States (U.S.) and the only U.S. company that provides both solid and liquid propellant based systems. Primary customers served include major prime contractors to the U.S. government, the Department of Defense (DoD), and the National Aeronautics and Space Administration (NASA).

Real Estate — includes activities related to the entitlement, sale, and leasing of our excess real estate assets. We own approximately 12,200 acres of land adjacent to U.S. Highway 50 between Rancho Cordova and Folsom, California, east of Sacramento (Sacramento Land). We are currently in the process of seeking zoning changes, removal of environmental restrictions and other governmental approvals on a portion of the Sacramento Land to optimize its value. We have filed applications with and submitted information to governmental and regulatory authorities for approvals necessary to re-zone approximately 6,000 acres of the Sacramento Land. We also own approximately 580 acres in Chino Hills, California. We are currently seeking removal of environmental restrictions on the Chino Hills property to optimize the value of such land.

On August 31, 2004, we completed the sale of our GDX business. On November 30, 2005, we completed the sale of our Fine Chemicals business. On November 17, 2006, we completed the sale of our Turbo product line. The GDX and Fine Chemicals businesses and the Turbo product line are classified as discontinued operations in the Consolidated Financial Statements and Notes to Consolidated Financial Statements (see Note 12 in Notes to Consolidated Financial Statements).

Net Sales

Consolidated net sales decreased to $742.3 million in fiscal 2008 compared to $745.4 million in fiscal 2007. The decrease was primarily the result of the close-out activities of the Titan program in fiscal 2007 partially offset by the $10.0 million sale of 400 acres of our Sacramento Land in the second quarter of fiscal 2008. In addition, fiscal 2008 includes one additional week of net sales of $19.1 million from Aerojet compared to the comparable periods in fiscal 2007 (see Note 1 in Notes to Consolidated Financial Statements).

Consolidated net sales increased to $745.4 million in fiscal 2007 compared to $621.1 million in fiscal 2006. The increase was the result of higher sales on numerous space and defense programs, including the Standard Missile, Orion, and Titan programs. The increase in the Standard Missile program was primarily due to deliveries associated with awards received in fiscal 2006 and the award of a new contract in fiscal 2007 to develop and qualify the Throttling Divert Attitude Control Systems for the Standard Missile 3 program. Capturing the Orion award in fiscal 2006 is another factor driving the fiscal 2007 increase in net sales. The increase in Titan sales during fiscal 2007 was the result of the final close-out activities of the program.

Effective December 1, 2006, Lockheed Martin and Boeing formed the joint venture United Launch Alliance (ULA). ULA operates the space launch systems using the Atlas V, Delta II, and Delta IV. The formation of ULA impacts the comparability of the net sales in fiscal 2008 and fiscal 2007 to fiscal 2006 for Lockheed Martin and Boeing.

Sales in fiscal 2008, 2007, and 2006 directly and indirectly to the U.S. government and its agencies, including sales to the Company’s significant customers discussed above, totaled $641.7 million, $665.9 million, and $523.5 million, respectively. The demand for certain of the Company’s services and products is directly related to the level of funding of government programs.

During fiscal 2008, approximately 46% of our net sales were from fixed-price contracts and 41% from cost reimbursable contracts.

Income (Loss) from Continuing Operations Before Income Taxes and Cumulative Effect of Changes in Accounting Principles

For fiscal 2008, we reported income from continuing operations before income taxes and cumulative effect of changes in accounting principles of $2.5 million compared to $23.0 million for fiscal 2007. The lower operating results were primarily due to the following:


• Increase of $32.4 million in unusual charges. See discussion of “Unusual Items” below.

• Decline of $12.2 million in segment performance, including environmental provision adjustments, of our Aerospace and Defense segment. See discussion of “Segment Performance” below.

• Decrease of $0.7 million in interest income. The decrease was primarily due to lower average cash levels and rates in fiscal 2008 compared to fiscal 2007.

The factors discussed above were partially offset by the following:


• Decrease of $13.6 million related to employee retirement benefit expense. See discussion of “Retirement Benefit Plans” below.

• Improvement of $6.8 million in segment performance of our Real Estate segment. See discussion of “Segment Performance” below.

• Decrease of $3.5 million related to corporate and other expenses. See discussion of “Corporate and Other Expenses” below.

• Decrease of $0.9 million in interest expense. The decline was primarily due to lower average interest rates on variable rate debt in fiscal 2008.

For fiscal 2007, we reported income from continuing operations before income taxes and cumulative effect of changes in accounting principles of $23.0 million compared to a loss of $43.7 million for fiscal 2006. The improved operating results were primarily due to the following:


• Improvement of $50.8 million in segment performance of our Aerospace and Defense segment. See discussion of “Segment Performance” below.

• Decrease of $21.9 million related to employee retirement benefit expense. See discussion of “Retirement Benefit Plans” below.



• Decrease of $7.8 million in unusual charges. See discussion of “Unusual Items” below.

• Decrease of $4.5 million related to corporate and other expenses. See discussion of “Corporate and Other Expenses” below.

• Increase of $1.3 million in interest income. The increase was primarily due to higher average cash levels and rates during fiscal 2007 compared to fiscal 2006.

The factors discussed above were partially offset by the following:


• Increased interest expense of $1.4 million. The increase was primarily due to higher rates and letter of credit levels during fiscal 2007 compared to fiscal 2006.

Segment Results

We evaluate our operating segments based on several factors, of which the primary financial measure is segment performance. Segment performance, which is a non-GAAP financial measure, represents net sales from continuing operations less applicable costs, expenses and provisions for unusual items relating to the segment. Excluded from segment performance are: corporate income and expenses, interest expense, interest income, income taxes, income or expenses related to divested businesses, and provisions for unusual items not related to the segment. We believe that segment performance provides information useful to investors in understanding our underlying operational performance. Specifically, we believe the exclusion of the items listed above permits an evaluation and a comparison of results for ongoing business operations, and it is on this basis that management internally assesses operational performance.



Aerospace and Defense

Fiscal 2008

Aerojet reports its fiscal year sales and income under a 52/53 week accounting convention. Fiscal 2008 is a 53 week year with the extra week accounted for in the first quarter of fiscal 2008, or one more week than as reported in fiscal 2007. Sales of $725.5 million for fiscal 2008 decreased from $739.1 million in fiscal 2007, reflecting decreases in various programs, including the Titan program, partially offset by the additional week of net sales of $19.1 million in fiscal 2008.

Segment performance was income of $40.8 million in fiscal 2008 compared to income of $61.3 million in fiscal 2007. The decrease in segment performance is primarily the result of: (i) the favorable performance on the close-out of the Titan program in fiscal 2007; (ii) an unusual charge in fiscal 2008 related to the freeze of the defined benefit pension plan; and (iii) higher estimated environmental remediation costs in fiscal 2008; partially offset by decreased retirement benefit plan expense in fiscal 2008.

Fiscal 2007

Sales for fiscal 2007 were $739.1 million compared to $614.6 million for fiscal 2006, representing a 20% increase. Higher sales volume on numerous space and defense system programs generated the improvement in fiscal 2007. Individual programs with sales increases of greater than $20.0 million during fiscal 2007 compared to fiscal 2006 were Standard Missile, Orion, and Titan.

The $50.8 million improvement in segment performance during fiscal 2007 compared to fiscal 2006 is the result of the following: (i) significantly improved margin on the Titan program as the result of favorable performance on close-out activities; (ii) higher sales volume; (iii) lower retirement benefit plan expense; (iv) lower estimated environmental remediation costs in fiscal 2007; and (v) higher expenses in fiscal 2006 related to legal matters.

Real Estate

Fiscal 2008

Sales for fiscal 2008 were $16.8 million compared to $6.3 million for fiscal 2007. Segment performance was $10.3 million and $3.5 million for fiscal 2008 and 2007, respectively. The increases in sales and segment performance are primarily due to the sale of 400 acres of the Sacramento Land to Elliott Homes Inc. (Elliott) for $10.0 million in cash during the second quarter of fiscal 2008.

Fiscal 2007

Real Estate sales and segment performance for fiscal 2007 were $6.3 million and $3.5 million, respectively, compared to $6.5 million and $2.3 million, respectively, for fiscal 2006. Results for fiscal 2007 and 2006 consist of rental property operations and there were no significant sales of real estate assets. During the third quarter of fiscal 2007, we began recognizing nominal royalty income on a mining agreement with Granite Construction Company.

Corporate and Other Expenses

Corporate and other expenses decreased to $16.2 million for fiscal 2008 compared to $19.7 million for fiscal 2007. The decrease primarily related to the reversal of previously recognized stock-based compensation due to the lower fair value of the stock appreciation rights, partially offset by higher charges for estimated future environmental remediation obligations in fiscal 2008.

Corporate and other expenses decreased to $19.7 million in fiscal 2007 compared to $24.2 million in fiscal 2006. The decrease was primarily due to higher expenses related to the election of the Company’s directors in fiscal 2006 and lower costs in fiscal 2007 associated with workers’ compensation matters, partially offset by higher charges for estimated future environmental remediation obligations in fiscal 2007.

On November 25, 2008, we decided to amend our defined benefit pension and benefits restoration plans to freeze future accruals under such plans. Effective February 1, 2009, we discontinued future benefit accruals for current salaried employees. No employees lost their previously earned pension benefit. As a result of the amendment and freeze, we incurred a curtailment charge of $14.6 million in the fourth quarter of fiscal 2008 primarily due to the immediate recognition of unrecognized prior service costs.

On March 5, 2008, we entered into a second amended and restated shareholder agreement (Shareholder Agreement) with Steel Partners II L.P. with respect to the election of Directors for the 2008 Annual Meeting and certain other related matters which resulted in a charge of $13.8 million in the first half of fiscal 2008. Additionally,

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Unless otherwise indicated or required by the context, as used in this Quarterly Report on Form 10-Q, the terms " we, ” “ our” and " us” refer to GenCorp Inc. and all of its subsidiaries that are consolidated in conformity with accounting principles generally accepted in the United States of America.
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In addition, our operating results for interim periods may not be indicative of the results of operations for a full year. This section contains a number of forward-looking statements, all of which are based on current expectations and are subject to risks and uncertainties including those described in this Quarterly Report under the heading “Forward-Looking Statements.” Actual results may differ materially. This section should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended November 30, 2008, and periodic reports subsequently filed with the Securities and Exchange Commission (“SEC”).
Overview
We are a manufacturer of aerospace and defense systems with a real estate segment that includes activities related to the entitlement, sale, and leasing of our excess real estate assets. Our continuing operations are organized into two segments:
Aerospace and Defense — includes the operations of Aerojet-General Corporation (“Aerojet”) which develops and manufactures propulsion systems for defense and space applications, armament systems for precision tactical weapon systems and munitions applications. We are one of the largest providers of such propulsion systems in the United States (“U.S.”) and the only U.S. company that provides both solid and liquid propellant based systems. Primary customers served include major prime contractors to the U.S. government, the Department of Defense (“DoD”), and the National Aeronautics and Space Administration (“NASA”).
Real Estate — includes activities related to the entitlement, sale, and leasing of our excess real estate assets. We own approximately 12,200 acres of land adjacent to U.S. Highway 50 between Rancho Cordova and Folsom, California, east of Sacramento (“Sacramento Land”). We are currently in the process of seeking zoning changes, removal of environmental restrictions and other governmental approvals on a portion of the Sacramento Land to optimize its value. We have filed applications with and submitted information to governmental and regulatory authorities for approvals necessary to re-zone approximately 6,000 acres of the Sacramento Land. We also own approximately 580 acres in Chino Hills, California. We are currently seeking removal of environmental restrictions on the Chino Hills property to optimize the value of such land.
On August 31, 2004, we completed the sale of our GDX Automotive (“GDX”) business. The remaining subsidiaries after the sale of GDX, including Snappon SA, are classified as discontinued operations in these Unaudited Condensed Consolidated Financial Statements (see Note 12 of the Unaudited Condensed Consolidated Financial Statements).

Primary reason for change. The increase in net sales for the third quarter of fiscal 2009 compared to the third quarter of fiscal 2008 was primarily the result of growth in the various Standard Missile programs and increased deliveries on the Patriot Advanced Capability — 3 and Atlas V programs, partially offset by lower sales volume on the Orion program as a result of NASA funding constraints.

Primary reason for change. The increase in net sales volume for the first nine months of fiscal 2009 compared to the first nine months of fiscal 2008 was primarily the result of growth in the various Standard Missile programs, partially offset by lower sales volume on the Orion program as a result of NASA funding constraints, sale of our Sacramento Land for $10.0 million in the second quarter of fiscal 2008, and an additional week of operations in the first quarter of fiscal 2008 resulting in $19.1 million in sales.


Discontinued Operations:
In November 2003, we announced the closing of a GDX manufacturing facility in Chartres, France owned by Snappon SA, a subsidiary of the Company. The decision resulted primarily from declining sales volumes with French automobile manufacturers. In June 2004, we completed the legal process for closing the facility and establishing a social plan. In fiscal 2004, an expense of approximately $14.0 million related to employee social costs was recorded in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. An expense of $1.0 million was recorded during fiscal 2005 primarily related to employee social costs that became estimable in fiscal 2005. During the first nine months of fiscal 2009, Snappon SA had legal judgments rendered against it under French law, aggregating $4.0 million related to wrongful discharge claims by certain former employees of Snappon SA. During the second quarter of fiscal 2009, Snappon SA filed for declaration of suspensions of payments with the clerk’s office of the Paris Commercial Court (see Note 8(a) of the Unaudited Condensed Consolidated Financial Statements).

Recently Adopted Accounting Pronouncements
As of November 30, 2007, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 158 (“SFAS 158”), Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans , which requires that the consolidated balance sheets reflect the funded status of the pension and postretirement plans. Effective November 30, 2009, we will adopt the measurement provision of SFAS 158 which requires measurement of the pension and postretirement plans assets and benefit obligations at our fiscal year end. We currently perform this measurement as of August 31 of each fiscal year.
On December 1, 2007, we adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). As of December 1, 2007, we had $3.2 million of unrecognized tax benefits, $3.0 million of which would impact our effective tax rate if recognized. The adoption resulted in a reclassification of certain tax liabilities from current to non-current, a reclassification of certain tax indemnification liabilities from income taxes payable to other current liabilities, and a cumulative effect adjustment benefit of $9.1 million that was recorded directly to our accumulated deficit. We recognize interest and penalties related to uncertain tax positions in income tax expense. Interest and penalties are immaterial at the date of adoption and are included in unrecognized tax benefits. As of August 31, 2009, our accrued interest and penalties related to uncertain tax positions is immaterial. The tax years ended November 30, 2005 through November 30, 2008 remain open to examination for U.S. federal income tax purposes. For our other major taxing jurisdictions, the tax years ended November 30, 2004 through November 30, 2008 remain open to examination.
On December 1, 2007, we adopted the provisions of SFAS No. 157 (“SFAS 157”), Fair Value Measurements , for financial instruments. Although the adoption of SFAS 157 did not materially impact our financial position or results of operations, we are now required to provide additional disclosures in the notes to our financial statements.
On December 1, 2007, we adopted SFAS No. 159 (“SFAS 159”), The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 . At the date of adoption, we did not elect to use the fair value option for any of our outstanding financial assets or liabilities. Accordingly, the adoption of SFAS 159 did not have an impact on our financial position, results of operations, or cash flows.
As of December 1, 2008, we adopted Emerging Issues Task Force (“EITF”) No. 07-03 (“EITF 07-03”), Accounting for Non-Refundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities . EITF 07-03 provides guidance on whether non-refundable advance payments for goods that will be used or services that will be performed in future research and development activities should be accounted for as research and development costs or deferred and capitalized until the goods have been delivered or the related services have been rendered. The adoption of EITF 07-03 did not have a material impact on our financial position, results of operations, or cash flows.
As of December 1, 2008, we adopted Staff Position SFAS 157-2, Effective Date of FASB Statement No. 157, which approved a one-year deferral of SFAS 157 as it relates to non-financial assets and liabilities.
As of August 31, 2009, we adopted SFAS No. 165 (“SFAS 165”), Subsequent Events , which provides authoritative accounting literature for a topic that was previously addressed only in the auditing literature. The guidance in SFAS 165 largely is similar to the current guidance in the auditing literature with some exceptions that are not intended to result in significant changes in practice. The adoption of SFAS 165 in the third quarter of fiscal 2009 did not have a material impact on our financial position, results of operations, or cash flows.

New Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”). Under SFAS 141(R), an entity is required to recognize the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. It further requires that acquisition-related costs be recognized separately from the acquisition and expensed as incurred; that restructuring costs generally be expensed in periods subsequent to the acquisition date; and that changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after the measurement period be recognized as a component of the provision for taxes. In addition, acquired in-process research and development is capitalized as an intangible asset and amortized over its estimated useful life. The adoption of SFAS 141(R) will change our accounting treatment for business combinations on a prospective basis beginning December 1, 2009.
In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. SFAS 160 changes the accounting and reporting for minority interests, which will be recharacterized as non-controlling interests and classified as a component of equity. The adoption of SFAS 160 will change the accounting treatment for minority interests on a prospective basis beginning December 1, 2009. As of August 31, 2009, we did not have any minority interests. Accordingly, the adoption of SFAS 160 is not expected to impact our consolidated financial statements.
In May 2008, the FASB issued Staff Position No. Accounting Principles Board 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement (“FSP APB 14-1”), which is effective for fiscal years beginning after December 15, 2008. FSP APB 14-1 clarifies that convertible debt instruments that may be settled in cash upon conversion are not addressed by paragraph 12 of Accounting Principles Board Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants . FSP APB 14-1 also specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. We are currently evaluating the effect of FSP APB 14-1, and we have not yet determined the impact of the standard on our financial position or results of operations. However, we believe the adoption of FSP APB 14-1 will significantly increase non-cash interest expense.
In December 2008, the FASB issued Staff Position SFAS No. 132(R)-1 (“SFAS 132(R)-1”), Employers’ Disclosures about Postretirement Benefit Plan Assets, which provides guidance on disclosures about plan assets of a defined benefit pension or other postretirement plans. SFAS 132(R)-1 is effective for fiscal years beginning after December 15, 2009. The adoption of SFAS 132(R)-1 will not impact our financial position or results of operations, however, it will require us to provide additional disclosures as part of our financial statements.
In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 (the “Codification”). The Codification, which was launched on July 1, 2009, became the single source of authoritative non-governmental GAAP, superseding various existing authoritative accounting pronouncements. The Codification establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We will adopt the Codification in the fourth quarter of fiscal 2009. There will be no change to our consolidated financial statements due to the implementation of the Codification other than changes in reference to various authoritative accounting pronouncements in the consolidated financial statements.
Operating Segment Information:



We evaluate our operating segments based on several factors, of which the primary financial measure is segment performance. Segment performance, which is a non-GAAP financial measure, represents net sales from continuing operations less applicable costs, expenses and provisions for unusual items relating to the segment. Excluded from segment performance are: corporate income and expenses, interest expense, interest income, income taxes, legacy income or expenses, and provisions for unusual items not related to the segment. We believe that segment performance provides information useful to investors in understanding our underlying operational performance. Specifically, we believe the exclusion of the items listed above permits an evaluation and a comparison of results for ongoing business operations, and it is on this basis that management internally assesses operational performance.

Primary reason for change. The increase in net sales for the third quarter of fiscal 2009 compared to the third quarter of fiscal 2008 was primarily the result of growth in the various Standard Missile programs and increased deliveries on the Patriot Advanced Capability — 3 and Atlas V programs, partially offset by lower sales volume on the Orion program as a result of NASA funding constraints.

Significant factors impacting the increase in segment performance were as follows: (i) a decrease of $5.6 million in non-cash retirement benefit plan expense primarily due to the freeze of the defined benefit pension and benefit restoration plans as well as the increase in the discount rate used to determine benefit obligations partially offset by lower expected investment returns; (ii) a decrease of $2.1 million for estimated future environmental remediation obligations; and (iii) favorable contract performance on higher net sales as a result of a decrease in overhead spending in the third quarter of fiscal 2009 compared to the third quarter of fiscal 2008 and other resulting in a $4.1 million increase in segment performance.

Primary reason for change . The increase in net sales volume for the first nine months of fiscal 2009 compared to the first nine months of fiscal 2008 was primarily the result of growth in the various Standard Missile programs, including deliveries to qualify the Throttling Divert Attitude Control Systems, and increased deliveries on the Patriot Advanced Capability — 3 program, partially offset by lower sales volume on the Orion program as a result of NASA funding constraints and an additional week of operations in the first quarter of fiscal 2008 resulting in $19.1 million in sales.

The increase in segment performance during the first nine months of fiscal 2009 as compared to the first nine months of fiscal 2008 period is primarily the result of: (i) a decrease of $16.9 million in non-cash retirement benefit plan expense primarily due to the freeze of the defined benefit pension and benefit restoration plans as well as the increase in the discount rate used to determine benefit obligations partially offset by lower expected investment returns and (ii) a decrease of $3.7 million for estimated future environmental remediation obligations.

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
We believe that the long-term prospects for the Sacramento real estate market remain attractive despite current economic conditions. We are continuing our efforts to enhance the value of our excess real estate assets by entitling approximately 6,000 acres of our Sacramento land as a master-planned community under the brand name “Easton.” Comprised of four “boroughs” located along a major state highway and transit corridor, the Easton plan is subject to the authority of three jurisdictions: the County of Sacramento, the City of Folsom, and the City of Rancho Cordova, as well as numerous state and federal regulatory agencies. As envisioned, Easton will provide a diversified range of residential, commercial and recreational uses in a desirable in-fill location.

CONF CALL

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.

Looking at our Real Estate segment and segment performance, it was $1 million for the third quarter compared to $1.4 million in 2007. Both periods reflect only our normal ongoing lease activities.

Commenting briefly on the other comments of continuing operation, our combined interest expense and interest income are slightly lower at $5.8 million in the third quarter of 2008 compared to $6.3 million in 2007. Third quarter 2008 corporate and other expenses were

$7.9 million compared to $6.2 million in 2007.

This increase is primarily related to higher legacy environmental provisions, $4.6 million in the third quarter of 2008 compared to $1.6 million in the third quarter of 2007. Partially offsetting this increase were some more workers compensation expenses as compared to 2007.

Turning next to our debt and cash flow positions, net debt which is total debt less cash as of August 31, 2008 was $383 million which represents a $29 million increase from $354 million as of November 30, 2007. The increase reflects the $35 million that was used to fund the Grand Tour Trust earlier on in the year.

Net cash usage for the year is used by corporate interest, retiree medical and legacy matters with Aerojet generating cash to offset these cash usages. And certainly the sale of our 400 acres early on in the year did also generate some cash. Essentially if you look at the cash usage for the quarter it’s pretty flat.

On an overall basis, excluding the transfer to the Grand Tour Trust for the full year basis we still do hope to be in a breakeven cash flow position or in a slight cash generation position for the full year as we pretty much consistently stated from the beginning of the year.

Our liquidity position of core brand remains good with cash balances of $58 million on the hand and an un-drawn revolver of $80 million.

With that I’d like to turn the call back to Scott for his comments.

Scott Neish

Looking at our operational performance the third quarter was marked by a number of positives, including most notably the successful completion of the qualification testing of Aerojet’s boost motor for the Terminal High Altitude Area Defense program. These tests clear the way for Aerojet to deliver qualified boost motors to the U.S. Army for fielding in 2009.

Our work on NASA’s Orion crew and service modules continues to make excellent progress and passed significant development milestones. The program successfully completed a number of engine tests and reviews, paving the way for the first deliverable flight motor associated with NASA’s space shuttle replacement program. The first Orion jettison motor is scheduled for delivery later this year.

Aerojet received authority to proceed on development and qualification on stage one propulsion hardware for the Taurus II launch vehicle. This contract from Orbital Sciences will ultimately qualify hardware and deliver NK33 engines for flight. Orbital’s first flight of the Taurus II vehicle is planned for December of 2010 and will demonstrate capability to re-supply the International Space Station for NASA and provide another launch vehicle for the commercial market.

On the defense side of our business, Aerojet shipped its 10,000th fire suppression system for the Ford Crown Victoria Police Interceptor. This is a significant milestone for this safety system and the shipments of the current system will exceed our original sales forecast for the year as a result of the program extension into 2009.

Other programs strengthening defense revenues include the guided MLRS program, the [Tobe] Missile Program and SM3 [Tdax]. Aerojet’s ongoing solid rocket motor development missile defense systems, warhead and production contract performance continues to give us additional opportunities to strengthen our portfolio.

Turning to Real Estate, we continue to make meaningful advances on our major projects. On Glenborough at Easton and Easton Place projects Sacramento County has begun its work on the final environmental impact report. The Planning Commission unanimously voted to recommend approval to the Board of Supervisors at its July 8 meeting. Hearings went very well with support voiced by commissioners and no public opposition testimony. We still anticipate receiving entitlement from the County Board of Supervisors by the end of the year.

With that, we will open the call up for questions that you may have.


SHARE THIS PAGE:  Add to Delicious Delicious  Share    Bookmark and Share



 
Icon Legend Permissions Topic Options
You can comment on this topic
Print Topic

Email Topic

1817 Views