UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: August 31, 2004

or

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from                     to

Commission File Number 1-1520

GenCorp Inc.

Registrant’s telephone number, including area code (916) 355-4000

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No o

     As of September 30, 2004, there were 45,322,909 outstanding shares of our Common Stock, $0.10 par value.

GenCorp Inc.

Quarterly Report on Form 10-Q
For the Quarterly Period Ended August 31, 2004

Table of Contents

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

GenCorp Inc.

See Notes to Unaudited Condensed Consolidated Financial Statements.

1

GENCORP INC.

See Notes to Unaudited Condensed Consolidated Financial Statements.

2

GenCorp Inc.

See Notes to Unaudited Condensed Consolidated Financial Statements.

3

GenCorp Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation and Nature of Operations

     We have prepared the accompanying Unaudited Condensed Consolidated Financial Statements, including our accounts and the accounts of our wholly owned and majority-owned subsidiaries, in accordance with the instructions to Form 10-Q and therefore do not include all of the information and notes required by accounting principles generally accepted in the United States (GAAP). These interim financial statements should be read in conjunction with the financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended November 30, 2003, as filed with the Securities and Exchange Commission (SEC). 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 our subsidiaries that are consolidated under GAAP.

     We believe the accompanying Unaudited Condensed Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of our financial position, results of operations and cash flows for the periods presented. All significant intercompany balances and transactions have been eliminated in consolidation. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles 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.

     Certain amounts in the prior year financial statements and notes thereto have been reclassified to conform to the current period presentation.

     We are a technology-based manufacturer operating primarily in North America. Our continuing operations are organized into two segments: Aerospace and Defense and Real Estate. The Aerospace and Defense segment includes the operations of Aerojet-General Corporation (Aerojet), which develops and manufactures propulsion systems for space and defense applications, armament systems for precision tactical weapon systems and munitions applications, and advanced airframe structures. 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). The Real Estate segment includes activities related to the development, sale and leasing of our real estate assets. Information on our operations by segment is provided in Note 15.

     During the second quarter of fiscal 2004, we classified the GDX Automotive (GDX) operating segment as a discontinued operation as a result of our plans to sell the business. During the third quarter of fiscal 2004, we signed a definitive agreement to sell GDX, including substantially all of the assets of GenCorp Inc. that were used in the GDX business and substantially all of GenCorp Inc.’s worldwide subsidiaries that were engaged in the GDX business, to Cerberus Capital Management, L.P. (Cerberus) for $147 million, subject to adjustment, of which $140 million has been received as of August 31, 2004. We closed the transaction on August 31, 2004. During the third quarter of fiscal 2004, we classified the Fine Chemicals segment as a discontinued operation as a result of our plans to sell the business. See additional discussion in Note 14. For all periods presented, we have classified the results of GDX and Fine Chemicals as discontinued operations in the Condensed Consolidated Statements of Income. The assets and liabilities of GDX have been

4

classified as Assets of Discontinued Operations and Liabilities of Discontinued Operations in the Condensed Consolidated Balance Sheets as of November 30, 2003. The assets and liabilities of the Fine Chemicals segment have been classified as Assets of Discontinued Operations and Liabilities of Discontinued Operations in the Consolidated Balance Sheets as of August 31, 2004 and November 30, 2003.

     On October 17, 2003, Aerojet completed the acquisition of substantially all of the assets of the propulsion business of Atlantic Research Corporation (ARC), a subsidiary of Sequa Corporation (Sequa), for a purchase price of $144 million, comprised of $133 million in cash and estimated direct acquisition costs and purchase price adjustments of $11 million. In March 2004, Sequa proposed purchase price adjustments which would require that Aerojet make an additional payment. The two parties have been negotiating the proposed adjustments and have reached a mutual understanding on several matters. On other matters, the parties are in disagreement and are preparing for binding arbitration. Management does not believe the resolution of these matters will have a material effect on our financial condition.

2. Earnings (Loss) Per Share of Common Stock

     A reconciliation of the numerator and denominator used to calculate basic and diluted earnings (loss) per share of common stock (EPS) is presented in the following table (dollars in millions, except per share amounts and shares in thousands):

     The effect of a conversion of our $150 million aggregate principal amount of 5.75% Convertible Subordinated Notes due 2007 issued in April 2002 (5.75% Notes) into common stock was not included in the computation of diluted earnings (loss) per share for the three and nine months ended August 31, 2004 and August 31, 2003 because the effect would have been antidilutive for these periods. Our $125 million aggregate principal amount of 4% Contingent Convertible Subordinated

5

Notes due 2024, issued in January 2004 (4% Notes) were not convertible into common stock as of August 31, 2004; accordingly, the 4% Notes were not included in the computation of diluted earnings (loss) per share for the three and nine months ended August 31, 2004. The 5.75% Notes are convertible at an initial conversion rate of 54.29 shares per $1,000 outstanding. The 4% Notes are convertible at an initial conversion rate of 64.8088 shares per $1,000 outstanding. Potentially dilutive securities that were not included in the diluted EPS calculation because they would have been antidilutive also include 3,044,673 and 3,644,518 employee stock options for the three months ended August 31, 2004 and 2003, respectively, and 3,044,673 and 2,947,089 employee stock options for the nine months ended August 31, 2004 and 2003, respectively.

3. Stock Based Compensation

     As permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure, we apply the existing accounting rules under APB Opinion No. 25, Accounting for Stock Issued to Employees, which provides that no compensation expense is charged for options granted at an exercise price equal to the market value of the underlying common stock on the date of grant. Had compensation expense for our stock option plans been determined based upon the fair value at the grant date for awards under these plans using market-based option valuation models, net income (loss) and the effect on net income (loss) per share would have been as follows (dollars in millions, except per share amounts):

     Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because our employee stock options have characteristics significantly different from those of traded options and because changes in the input assumptions can materially affect the fair value estimate, it is our opinion that the existing models do not necessarily provide a reliable single measure of the fair value of the employee stock options. Discontinued operations earnings (loss) per share would not have changed as a result of stock based compensation expense.

6

4. Inventories, Net

     During the third quarter of 2004, Aerojet recorded an inventory write-down of $16 million on a contract to design, develop and produce a solid rocket motor for Lockheed Martin’s Atlas ^® V program. This write-down relates to unanticipated transition costs from the development phase to the production phase of the contract and the value of materials rendered obsolete by a decision to proceed with qualification and production of an enhanced motor configuration. In management’s judgment, these costs will not be recoverable on the contract.

     The current contract provides for production of 44 motors over a number of years and for the order of an additional 52 motors at Lockheed Martin’s option. At August 31, 2004, the Atlas V inventory balance was $128 million. Full recovery of this investment is subject to uncertainties, including: (i) Aerojet’s ability to produce motors at its estimated average unit price, (ii) final pricing of the enhanced motor configuration, and (iii) a satisfactory renegotiation of contract terms with Lockheed Martin. Aerojet believes its Atlas V contract will be restructured during 2005 when launch services contracts between launch vehicle manufacturers and the U.S. government are modified to reflect cost pressures resulting from continued low commercial launch activity. Details of the form and terms of the anticipated changes are unknown at this time.

     Aerojet management believes that continued improvements in operational efficiency and renegotiation of contract terms will permit recovery of inventoried development and production costs. However, if management’s efforts are unsuccessful, Aerojet may be required to recognize additional material losses.

5. Property, Plant and Equipment, Net

7

6. Goodwill

     The changes in the carrying amount of goodwill for the nine months ended August 31, 2004 were as follows (dollars in millions):

     Our goodwill balance at August 31, 2004 and November 30, 2003 relates to our Aerospace and Defense segment. During the first nine months of fiscal 2004, goodwill of $3 million was recorded as a result of corrections to the valuation of assets and liabilities associated with the ARC acquisition completed in October 2003 and the acquisition of the General Dynamics Ordnance and Tactical Systems Space Propulsion and Fire Suppression business (Redmond, Washington operations) completed in October 2002. The adjustments reflect the use of more accurate data in valuing certain operations acquired as part of the transaction with Sequa which were required to be disposed of by the Federal Trade Commission as a condition to approving the ARC acquisition and in recording our post-retirement obligation associated with our acquired Redmond, Washington operation’s employees.

7. Other Noncurrent Assets, Net

8. Other Current Liabilities

8

9. Long-term Debt