UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
November 30,
2009
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to .
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Commission file number 1-1520
GenCorp Inc.
(Exact name of registrant as
specified in its charter)
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Ohio
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34-0244000
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(State or other jurisdiction
of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Highway 50 and Aerojet Road
Rancho Cordova, California
(Address of principal
executive offices)
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95742
(Zip Code)
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P.O. Box 537012
Sacramento, California
(Mailing
address)
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95853-7012
(Zip
Code)
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Registrants telephone number, including area code
(916) 355-4000
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.10 par value per share
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New York Stock Exchange and
Chicago Stock Exchange
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o The
registrant is not yet subject to this requirement.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of the registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Act.)
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Yes
þ
No
The aggregate market value of the voting common equity held by
nonaffiliates of the registrant as of May 31, 2009 was
approximately $118 million.
As of January 20, 2010, there were 58.5 million
outstanding shares of the Companys Common Stock, including
redeemable common stock, $0.10 par value.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the 2009 Proxy Statement of GenCorp Inc. relating to
its annual meeting of shareholders scheduled to be held on
March 24, 2010 are incorporated by reference into
Part III of this Report.
GENCORP
INC.
Annual Report on
Form 10-K
For the Fiscal Year Ended November 30, 2009
Table of Contents
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The information called for by Items 10, 11, 12, 13, and 14,
to the extent not included in this Report, is incorporated
herein by reference to the information to be included under the
captions Election of Directors,
Section 16(a) Beneficial Ownership Reporting
Compliance, Communication with Directors,
Board Committees, Executive
Compensation, Director Compensation,
Organization & Compensation Committee
Report Compensation Committee Interlocks and Insider
Participation, Security Ownership of Certain
Beneficial Owners, Security Ownership of Officers
and Directors, Employment Agreements and Indemnity
Agreements, Potential Payments upon Termination of
Employment or Change in Control, Determination of
Independence of Directors, and Ratification of the
Appointment of Independent Registered Public Accounting
Firm, in GenCorp Inc.s 2010 Proxy Statement, to be
filed within 120 days after the close of our fiscal year. |
PART I
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. 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.
Additional risk factors may be described from time to time in
our future filings with the Securities and Exchange Commission
(SEC).
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.). 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 2009, we are referring to the
fiscal year ended on November 30 of that year. The fiscal year
of our subsidiary, Aerojet, ends on the last Saturday of
November. As a result of the 2008 calendar, Aerojet had
53 weeks of operations in fiscal 2008 compared to
52 weeks of operations in fiscal 2009 and 2007. The
additional week of operations, which occurred in the first
quarter of fiscal 2008, accounted for $19.1 million in
additional net sales.
Sales, segment performance, total assets, and other financial
data for each segment for fiscal 2009, 2008, and 2007 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
1
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 our 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, we believe Aerojet 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, Raytheon
Company (Raytheon), Lockheed Martin Corporation
(Lockheed Martin), United Launch Alliance
(ULA), and The Boeing Company (Boeing).
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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, armament systems for precision tactical weapon systems
and munitions applications. 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.
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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.
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Industry
Overview
Broad support continues for DoD and NASA funding in the
Government Fiscal Year ending September 30 (GFY),
2010 and beyond. However, these federal department/agency
budgets are under severe pressure due to the cost impacts of
military operations in Iraq and Afghanistan, 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
Overall, U.S. defense appropriations have increased
substantially since the attacks of September 11, 2001 and
ensuing military actions in Afghanistan and Iraq. Defense
appropriations have risen to over $508 billion in GFY 2010
from $487 billion in GFY 2009. The DoD budget continues to
increase, the overall real rate of growth is expected to be
approximately 2% per year. Although the ultimate distribution of
the DoD budget remains uncertain, we believe 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 expended during combat deployments; and systems that
meet new threats world-wide.
The Obama Administration (Administration) has
indicated a commitment to maintain adequate funding for the DoD
and building defense capabilities for the 21st century.
Areas that impact Aerojet products include: fully equipping U.S
forces for the missions they face; preserving air supremacy;
maintaining at sea; protecting the U.S. in cyberspace;
ensuring freedom of space; and a pragmatic and cost-effective
development of missile defense. Congress is working closely with
the Administration on these focus areas.
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NASA
In the Administrations submitted GFY 2010 budget, the
President has indicated that NASAs GFY 2009 plans for the
future of human spaceflight may be modified. A panel of experts,
called the Augustine Committee, was commissioned to review
current space programs, alternatives and issues for moving
forward. The Augustine Committee report indicated that
significant additional funding for human spaceflight is needed
if the U.S. is to maintain its leadership. The
Administration is evaluating the human space flight program
based on the Augustine Committees report. Until the
Administration announces its new plans, the future direction of
NASAs human spaceflight program remains unclear. However,
regardless of the future direction, Aerojet is well positioned
to succeed because of its diverse offerings, innovative
technologies and its existing contracts with both traditional
and emerging launch providers.
Overall, continued strong support from the Administration for
science, particularly Earth science, aeronautics and education
programs at NASA is expected. We project steady funding with
modest growth for NASA.
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 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 table below lists primary participants in the propulsion
market:
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Company
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Parent
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Propulsion Type
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Propulsion Application
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Aerojet
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GenCorp Inc.
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Solid, liquid, air-
breathing, electric
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Launch, in-space, tactical, strategic, missile defense
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Alliant Techsystems
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Alliant Techsystems Inc.
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Solid, air-breathing
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Launch, tactical, strategic, missile defense
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American Pacific Corporation
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American Pacific Corporation
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Liquid, electric
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In-space
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Astrium
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European Aeronautics Defense and Space Company; and BAE Systems
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Solid, liquid
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In-space, tactical
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Northrop Grumman Space Technology
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Northrop Grumman Corporation (Northrop)
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Liquid
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In-space
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Pratt & Whitney Rocketdyne
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United Technologies Corporation
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Liquid, air-breathing, electric
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Launch, in-space, missile defense
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SpaceX
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SpaceX
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Liquid
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Launch, in-space
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The domestic solid and liquid propulsion markets remained
unchanged in fiscal 2009 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.
3
The principal end user customers of our products and technology
are agencies of the U.S. government and U.S. prime
contractors. Since a majority of Aerojets sales are,
directly or indirectly, to the U.S. government, funding for
the purchase of Aerojets 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 (MDA), 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.
Customers that represented more than 10% of net sales for the
fiscal years presented are as follows:
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Year Ended
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2009
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2008
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2007
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Raytheon
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31
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%
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27
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%
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28
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%
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Lockheed Martin
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26
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26
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28
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Direct sales to the U.S. government and its agencies, or
government customers, and indirect sales to U.S. government
customers via direct sales to prime contractors accounted for a
total of approximately 88% of sales, or approximately
$701.3 million, in fiscal 2009. The following are
percentages of net sales by principal end user in fiscal 2009:
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U.S. Army
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21
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%
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U.S. Navy
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19
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U.S. Air Force
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19
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MDA
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18
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NASA
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11
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Total U.S. government customers
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88
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Other customers
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12
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Total
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100
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%
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Major
Programs
Defense Systems Aerojet maintained a strong
position in the defense market segment in fiscal 2009 with key
new and follow-on awards. Significant new wins included the
propulsion system for the Joint Air to Ground Missile
(JAGM), the Critical Path Divert and Attitude
Control System (CPDACS), Patriot #2, Stinger,
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, and Standard Missile 3 Throttling Divert Attitude
Control System. These successes continue to strengthen our
position as a propulsion leader in missile defense and tactical
systems. We believe Aerojet is in a unique competitive position
due to the diversity of propulsion technologies, 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.
4
A subset of our key defense systems programs are listed below:
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Primary
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Program
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Customer
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End Users
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Program Description
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Program Status
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Advanced Second and Third Stage Booster
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U.S. Air Force
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U.S. Air Force
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Solid booster
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Development
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Army Tactical Missile System
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Lockheed Martin
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U.S. Army
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Tactical solid rocket motors
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Production
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F-22 Raptor Aircraft
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Boeing
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U.S. Air Force
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Advanced electron beam welding for airframe structures
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Production
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Ground Based Mid-Course
Defense Exoatmospheric Kill Vehicle Liquid Divert and Attitude
Control Systems
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Raytheon
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MDA
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Liquid propulsion divert and attitude control propulsion systems
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Development/
Production
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Javelin
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Lockheed Martin/Raytheon
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U.S. Army
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Tactical solid rocket motors
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Development/
Production
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Joint Air to Ground Missile
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Lockheed Martin
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U.S. Army
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Tactical solid rocket motors
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Development
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Large Class Propulsion
Application Program
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U.S. Air Force
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U.S. Air Force
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Strategic solid rocket motors
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Development
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Minuteman III
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Northrop
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U.S. Air Force
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Liquid maneuvering propulsion
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Development/
Production
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Multiple Launch Rocket System
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Lockheed Martin
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U.S. Army
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Tactical solid rocket motors
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Production
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Patriot Advanced Capability -3/ Patriot -2
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Lockheed Martin
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U.S. Army
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Tactical solid rocket motors
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Development/
Production
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Specialty Metal Products
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General Dynamics
and Others
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U.S. Army
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Specialty metal products
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Development/
Production
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Standard Missile
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Raytheon
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U.S. Navy, MDA
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Tactical solid rocket motors, throttling divert and attitude
control systems and warheads
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Development/
Production
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Supersonic Sea Skimming Target
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Orbital Sciences Corporation
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U.S. Navy
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Variable flow ducted rocket (air-breathing)
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Production
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Tactical Tomahawk
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Raytheon
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U.S. Navy
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Tactical solid rocket motors and warheads
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Production
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Terminal High Altitude Air Defense
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Lockheed Martin
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MDA
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Tactical solid rocket motors
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Development Production
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Trident D5
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Lockheed Martin
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U.S. Navy
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Post boost control system
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Production
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Tube-launched, Optically-tracked, Wire-guided Missile
(TOW)
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Raytheon
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U.S. Army
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Tactical missile warheads
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Production
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Space Systems In fiscal 2009, Aerojet
maintained its strong market position in space systems by
continued performance on existing contracts and capturing
important new propulsion contracts, the most significant new
award was the Taurus 2 program with Orbital Sciences. The
current financial crisis adversely impacted some of our programs
through restructuring
and/or
delays.
Aerojets commitment to quality and excellence in its space
systems programs was reflected in success on several space
exploration and other critical missions during fiscal 2009 using
Aerojets products, including Mercury Messenger Flyby; H-2
Transfer Vehicle (HTV) successful first mission; and
launches of Delta II, Delta IV, Atlas V, and space shuttle.
These continued space program successes strengthen our legacy of
supplying mission critical propulsion systems to the DoD and
NASA as we have since the inception of the U.S. civil and
military space programs and support our position as a critical
supplier to our space systems customers.
5
A subset of our key space system programs is listed below:
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Primary
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Program
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Customer
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End Users
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Program Description
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Program Status
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Advanced Extremely High Frequency MilSatCom
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Lockheed Martin
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U.S. Air Force
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Electric and liquid spacecraft thrusters
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Production
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Atlas V
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United Launch Alliance
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U.S. Air Force, Commercial
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Solid strap-on booster motors, upper stage
thrusters, and separation motors
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Production
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Bigelow Sundancer
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Bigelow Aerospace
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Commercial
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Integrated propulsion systems and controls
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Development/ Production
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Delta II
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United Launch Alliance
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NASA, U.S. Air Force, Commercial
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Upper stage pressure-fed liquid rocket engines
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Production
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Delta IV
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United Launch Alliance
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NASA, U.S. Air Force, Commercial
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Upper stage thrusters
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Production
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Geostationary Satellite Systems
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Lockheed Martin, Loral, Boeing, Orbital Sciences Corporation,
Astrium
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Various
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Electric and liquid spacecraft thrusters, propellant tanks and
bi-propellant apogee engines
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Development/ Production
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Global Positioning Systems
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Boeing
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U.S. Air Force
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Integrated propulsion systems
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Development/ Production
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HTV
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Mitsubishi Heavy Industries
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Japan Aerospace Exploration Agency
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Liquid spacecraft thrusters
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Production
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Hydrocarbon Booster
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Air Force Research Laboratory
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U.S. Air Force
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Liquid booster
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Development
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LOX Methane Reaction Control Engine
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NASA
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NASA
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Ascent main engine
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Development
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Mars Lander Engine
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Jet Propulsion Lab (JPL)
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JPL
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Liquid spacecraft thrusters
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Qualification/ Production
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Orion Crew Mode & Service Mode Propulsion
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Lockheed Martin/Orbital Sciences
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NASA
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Propulsion systems and engines for human spaceflight system
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Development/ Qualification
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Taurus 2
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Orbital Sciences
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NASA, Commercial
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Provide booster engines for launch vehicle
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|
Qualification/ Production
|
Upper Stage Engine Technology
|
|
U.S. Air Force Research Laboratory
|
|
NASA, U.S. Air Force
|
|
Design tools for future upper stage liquid engines
|
|
Development
|
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 programs development. Production
contracts provide for the production and delivery of mature
products for operational use. Aerojets contracts are
primarily categorized as either fixed-price or
cost-reimbursable. During fiscal 2009, approximately
51% of our net sales were from fixed-price contracts, 37% from
cost-reimbursable contracts, and 12% from other sales including
commercial contracts and real estate activities.
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
6
upon the customers 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 and regulatory
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 DoDs Defense Federal
Acquisition Regulations (DFAR) 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 contractors 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 contractors performance, cost structure, and
compliance with applicable laws, regulations, and standards. The
DCAA also reviews the adequacy of, and a contractors
compliance with, its internal control systems and policies,
including the contractors purchasing, property,
estimating, compensation, and information systems.
Backlog
A summary of our backlog is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(In millions)
|
|
|
Funded backlog
|
|
$
|
811.2
|
|
|
$
|
674.3
|
|
|
|
|
|
Unfunded backlog
|
|
|
379.6
|
|
|
|
361.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contract backlog
|
|
$
|
1,190.8
|
|
|
$
|
1,035.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 funding delays or program
restructurings/cancellations which are beyond our control. Of
our November 30, 2009 total contract backlog, approximately
53% is not expected to be filled within one year.
Research
and Development
We view research and development efforts as critical to
maintaining our leadership position in markets in which we
compete. 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
7
future. We believe customer-funded research and development
activities are vital to our ability to compete for contracts and
to enhance our technology base.
Aerojets 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.
The following table summarizes Aerojets research and
development expenditures during the past three fiscal years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Customer-funded
|
|
$
|
245
|
|
|
$
|
252
|
|
|
$
|
269
|
|
Company-funded
|
|
|
15
|
|
|
|
11
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total research and development expenditures
|
|
$
|
260
|
|
|
$
|
263
|
|
|
$
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suppliers,
Raw Materials and Seasonality
The national aerospace supply base continues to consolidate due
to economic, environmental, and marketplace circumstances beyond
Aerojets 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 ensure 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 or socio-economic criteria. 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. To date, Aerojet
has been successful in mitigating any impacts that could occur
through requalifying replacement materials and suppliers. We
continue to monitor this situation carefully and in our
engineering processes, where we have the opportunity, we are
defining materials that are known to be more sustainable and
hence, less prone to obsolescence or disruption.
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. Recently, prices
and lead times for certain commodity metals, alloy steels,
titanium and some aluminum grades have become more competitive
due to available production capacity world-wide. Unfortunately,
prices and lead times for some chemicals used in solid rocket
motor propellants have seen significant increases in recent
years. These are highly specialized chemicals such as ammonium
perchlorate and LX-14 for example. We have been able to mitigate
some of these impacts through the establishment of long term
volume agreements that provide for a steady throughput with a
corresponding price benefit to Aerojet. In addition, where
appropriate, we work closely with suppliers to schedule
purchases far enough in advance and in the most economical means
possible to minimize program impact.
Aerojets business is not subject to predictable
seasonality. Primary factors affecting the timing of
Aerojets sales include the timing of government awards,
the availability of U.S. government funding, contractual
product delivery requirements, customer acceptances, and
regulatory issues.
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 Aerojets
innovative design ability and product development capabilities.
We do not believe the loss or expiration of
8
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
We own approximately 12,200 acres of land in the Sacramento
metropolitan area which we refer to as the Sacramento Land.
Acquired in the early 1950s for our aerospace and defense
operations, there are large portions used solely to provide safe
buffer zones. Modern changes in propulsion technology coupled
with the relocation of certain of our propulsion operations led
us to determine large portions of the Sacramento Land were no
longer needed for operations in Sacramento. Consequently, our
plan has been to reposition this excess Sacramento Land to
optimize its value.
Approximately 6,000 acres have been deemed excess, and is
the land we are in the process of entitling for new development
opportunities under the brand name Easton.
Within Easton, we currently have approximately 1,450 acres
entitled, and are seeking entitlements on an additional
4,600 acres. Easton is located 15 miles east of
downtown Sacramento, California along U.S. Highway 50, a
key growth corridor in the region. We believe Easton has several
competitive advantages over other areas, including several miles
of freeway accessible frontage, one of the largest single-owner
land tracts suitable for development in the Sacramento region,
and desirable in-fill location surrounded by
residential and business properties. The master plan reflects
our efforts to make Easton one of the finest master-planned
communities in the U.S. Easton will include a broad range
of housing, office, industrial, retail, and recreational uses.
The broad range of land uses will ensure long-term value
enhancement of our excess land.
In 2009, we formed a new wholly-owned subsidiary, Easton
Development Company, LLC, to continue to execute these
entitlement and pre-development activities, and to explore how
to maximize value from Easton. Value enhancement may include
outright sales,
and/or joint
ventures with real estate developers, residential builders,
and/or other
third parties. Those parcels of land that have obtained the
necessary entitlements for development or are otherwise suitable
for sale were transferred to this new subsidiary. Additional
land may be transferred in the future as these or other
requirements are achieved.
The housing market in the Sacramento region continued to
struggle in 2009. However, we believe that this downturn does
not change the long-term prospects for the Sacramento region,
which we believe still remains an attractive and affordable
alternative to the San Francisco Bay Area and other large
metropolitan areas of California. We believe the Sacramento area
demographic and real estate market supports our objective of
creating value through new entitlements and the creation of
Easton. 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. The entitlement process in California is
long and uncertain with approvals required from various
authorities, including local jurisdictions, the U.S. Army
Corps of Engineers (USACE), and the
U.S. Department of Interior, Fish and Wildlife Service
(USFWS).
Our real estate activities are of long-term nature and involve
significant risks, including the following: (i) we may be
unable to obtain, or suffer delays in obtaining, necessary
re-zoning, land use, building, occupancy, and other required
governmental permits and authorizations, which could result in
increased costs or our abandonment of these projects;
(ii) we may be unable to complete environmental remediation
or to have state and federal environmental restrictions on our
property lifted, which could cause a delay or abandonment of
these projects; (iii) we may be unable to obtain sufficient
water sources to service our projects, which may prevent us from
executing our plans; (iv) our real estate activities
require significant capital expenditures and we may not be able
to obtain financing on favorable terms, which may render us
unable to proceed with our plans; (v) economic and
political uncertainties could have an adverse effect on consumer
buying habits, construction costs, availability of labor and
materials and other factors affecting us and the real estate
industry in general; (vi) our property is subject to
federal, state, and local regulations and restrictions that may
impose significant limitations on our plans; (vii) much of
our property is raw land that includes the natural habitats of
various endangered or protected wildlife species requiring
mitigation; (viii) if our land use plans are approved by
the appropriate governmental authorities,
9
we may face lawsuits from those who oppose such plans; and
(ix) the time frame required for approval of our plans
means that we may have to wait years for a significant cash
return.
The Sacramento Land, including Easton, is summarized below (in
acres):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Environmentally
|
|
|
Environmentally
|
|
|
|
|
|
|
|
Easton Projects
|
|
Unrestricted
|
|
|
Restricted(1)
|
|
|
Total
|
|
|
Entitled
|
|
|
Glenborough and Easton Place
|
|
|
1,043
|
|
|
|
349
|
|
|
|
1,392
|
|
|
|
1,392
|
|
Rio del Oro
|
|
|
1,818
|
|
|
|
491
|
|
|
|
2,309
|
|
|
|
|
|
Westborough
|
|
|
1,387
|
|
|
|
272
|
|
|
|
1,659
|
|
|
|
|
|
Hillsborough
|
|
|
532
|
|
|
|
97
|
|
|
|
629
|
|
|
|
|
|
Office Park and Auto Mall
|
|
|
47
|
|
|
|
8
|
|
|
|
55
|
|
|
|
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Easton acreage
|
|
|
4,827
|
|
|
|
1,217
|
|
|
|
6,044
|
|
|
|
1,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operations land(2)
|
|
|
24
|
|
|
|
5,179
|
|
|
|
5,203
|
|
|
|
|
|
Land available for future entitlement(3)
|
|
|
676
|
|
|
|
242
|
|
|
|
918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Sacramento Land
|
|
|
5,527
|
|
|
|
6,638
|
|
|
|
12,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The environmentally restricted acreage described above is
subject to restrictions imposed by state and/or federal
regulatory agencies because of our historical propulsion system
testing and manufacturing activities, even though most of the
land was never used for such activities. We are actively working
with the various regulatory agencies to have the restrictions
removed as early as practicable. See Note 7(c) in Notes to
Consolidated Financial Statements for a discussion of the
federal and/or state environmental restrictions affecting
portions of the Sacramento Land. |
|
(2) |
|
We believe that the operations land is more than adequate for
our long-term needs. As we reassess needs in the future,
portions of this land may become available for entitlement. |
|
(3) |
|
We believe it will be several years before any of this excess
Sacramento Land is available for future change in entitlement.
Some of this excess land is outside the current Urban Services
Boundary established by the County of Sacramento
(County) and all of it is far from existing
infrastructure, making it uneconomical to pursue entitlement for
this land at this time. |
Additional information concerning significant Easton projects is
set forth below.
Glenborough
at Easton and Easton Place
In 2004, we filed an application with the County for a general
plan amendment and request for re-zoning of an approximate
1,400 acre master-planned community called Glenborough at
Easton and Easton Place.
In January 2009, the Sacramento County Board of Supervisors
(County) unanimously approved the Environmental
Impact Report (EIR), County General Plan Amendments,
Large and Small Lot Tentative Subdivision Maps, and the Land Use
Master Plans for the Glenborough at Easton and Easton Place
project. In 2010, we will continue our efforts to obtain the
necessary federal permits under Section 404 of the Clean
Water Act and complete the major backbone infrastructure design
plans for the first phases of Glenborough at Easton and Easton
Place.
Approximately 350 acres in Glenborough at Easton are
subject to federal environmental restrictions. We believe the
timing on removal of these restrictions should not adversely
affect the projected phasing of the overall project.
Rio Del
Oro at Easton
In 2002, we filed an application with the County for a general
plan amendment and request for re-zoning of a project called Rio
del Oro in conjunction with Elliott Homes (Elliott).
In 2003, this application was transferred to the newly
incorporated City of Rancho Cordova (Rancho
Cordova). Elliott is obligated to pay the costs associated
with seeking entitlement for the entire Rio del Oro project,
pursuant to our agreement. The Rio del Oro project is
10
approximately 3,800 acres, of which Elliott owns
approximately 1,500 acres and we own approximately
2,300 acres.
The Rancho Cordova staff and its consultants continue work on
the EIR and Environmental Impact Statement. We continue to
negotiate with Rancho Cordova on total fee burdens, affordable
housing obligations, traffic mitigation, and other related items.
In 2008, the California Department of Toxic Substance Control
(DTSC) released approximately 2,300 acres that
were formally restricted under the DTSCs environmental
orders regarding soil contamination. The remaining
500 acres remain subject to the DTSC orders and will be
released once the soil remediation has been completed. We
believe the timing on removal of the remaining restrictions
should not adversely affect the projected phasing of the project.
Westborough
at Easton
In 2004, we filed an application with Rancho Cordova for a
general plan amendment for an approximate 1,700 acre
project named Westborough at Easton. We expect the Westborough
project to be completed in two phases. In June 2005, we
submitted an updated general plan amendment and a re-zoning
application for approximately 1,100 acres as the first
phase of Westborough. The second phase consisting of
approximately 550 acres lies partially within the
jurisdiction of Rancho Cordova and partially within the
jurisdiction of the County. Consequently, over the next few
years, we will work with Rancho Cordova and the County to reach
agreement on the terms and conditions for annexation of the
County land by Rancho Cordova. Once an agreement is achieved, we
will file a similar application for the second phase with Rancho
Cordova.
Rancho Cordova continues to work on the various technical
studies necessary for the EIR for the first phase of this
project. We are also working with the USACE to obtain the
necessary permits under Section 404 of the Clean Water Act.
In addition, in 2004, we entered into an agreement with Elliott
to sell 100 acres of the Westborough property for
$3.1 million. This transaction is expected to close in
fiscal 2010. The purchase price will be paid at the time of
closing.
Hillsborough
at Easton
The Company and other land owners that together control
approximately 3,500 acres within the City of Folsoms
Sphere of Influence (SOI) are working with the City
of Folsom (Folsom) to develop a land use plan.
Folsom has begun work on the EIR and various related technical
studies. Our Hillsborough project is within this acreage. The
proposed land uses include residential, office, and retail. The
annexation process of the SOI acreage by Folsom is expected to
be complex and lengthy. The water source for the entire SOI will
be addressed by Folsom as part of the annexation process.
Water
Supply for Rio del Oro and Westborough
In California, all applications for a change in land use must
identify a source of water to serve the proposed project. We
initially addressed this issue for both the Rio del Oro and
Westborough projects with our 2003 water agreement
(Aerojet/SCWA Agreement) with the Sacramento County
Water Agency (SCWA). Under the Aerojet/SCWA
Agreement, we transferred certain amounts of remediated
groundwater from the Sacramento Land to SCWA (Transferred
Water). Subject to conditions and limitations in the
agreement, including all required approvals under the California
Environmental Quality Act (CEQA), SCWA assumed the
responsibility for providing replacement water to those water
purveyors who lost wells as a result of groundwater
contamination (Replacement Water), and committed to
supply water to us for development of our Sacramento Land in an
amount equal to the difference between the Transferred Water and
the Replacement Water. In 2008, SCWA terminated the Aerojet/SCWA
Agreement. We are negotiating with SCWA on water supply issues
and we believe that these discussions will lead to a resolution
and a new agreement. See additional discussion on the
Aerojet/SCWA Agreement and the related legal complaint filed
against us by SCWA in Note 7(c) in Notes to Consolidated
Financial Statements.
11
Golden State Water Company (GSWC) has filed with the
California Public Utilities Commission (PUC) seeking
approval to provide water service to the Westborough project.
Westborough is contiguous to GSWCs service territory in
Eastern Sacramento County. SCWA filed a letter of protest with
the PUC with respect to GSWCs request to serve the
Westborough project principally on the basis that the
Aerojet/SCWA Agreement had terminated along with an agreement
GSWC had entered with SCWA in 2003. We believe that the ongoing
discussions between us, GSWC, and SCWA will lead to a resolution
and agreement to provide water service to the Westborough
project.
Leasing &
Other Real Estate
We currently lease to third parties approximately
300,000 square feet of office space in Sacramento. These
leasing activities generated $6.4 million in revenue in
fiscal 2009.
We own approximately 580 acres of land in Chino Hills,
California. This property was used for the manufacture and
testing of ordnance. With the sale of our ordnance business in
the mid-1990s, we closed this facility and commenced
clean-up of
the site. We continue to work with state regulators and the City
of Chino Hills to complete those efforts. Once the remediation
is complete, we will work to maximize the value of the property.
Environmental
Matters
Our current and former business operations are subject to, and
affected by, federal, state, local, and foreign environmental
laws and regulations relating to the discharge, treatment,
storage, disposal, investigation, and remediation of certain
materials, substances, and wastes. Our policy is to conduct our
business with due regard for the preservation and protection of
the environment. We continually assess compliance with these
regulations and management of environmental matters. We believe
our current operations are in compliance with all applicable
environmental laws and regulations.
Operation and maintenance costs associated with environmental
compliance and management of contaminated sites are a normal,
recurring part of our operations. Most of such costs are
incurred by our Aerospace and Defense segment and are generally
allowable costs under contracts with the U.S. government.
Under existing U.S. environmental laws, a Potentially
Responsible Party (PRP) is jointly and severally
liable, and therefore we are potentially liable to the
government or third parties for the full cost of remediating the
contamination at our facilities or former facilities or at
third-party sites where we have been designated as a PRP by the
Environmental Protection Agency or a state environmental agency.
The nature of environmental investigation and cleanup activities
often makes it difficult to determine the timing and amount of
any estimated future costs that may be required for remediation
measures. However, we review these matters and accrue for costs
associated with environmental remediation when it becomes
probable that a liability has been incurred and the amount of
the liability, usually based on proportionate sharing, can be
reasonably estimated. These liabilities have not been discounted
to their present value as the timing of cash payments is not
fixed or reliably determinable. See Managements Discussion
and Analysis in Part II, Item 7 of this Report for
additional information.
Employees
As of November 30, 2009, 13% of our 3,071 employees
were covered by collective bargaining agreements, which are due
to expire in 2011 and 2012. We believe that our relations with
our employees are good.
12
We
have a substantial amount of debt. Our ability to operate and
our financial flexibility is limited by the agreements governing
our debt.
We have a substantial amount of debt for which we are required
to make interest and principal payments. As of November 30,
2009, we had $438.6 million of debt. Subject to the limits
contained in some of the agreements governing our outstanding
debt, we may incur additional debt in the future.
Our level of debt places significant demands on our cash
resources, which could:
|
|
|
|
|
make it more difficult to satisfy our outstanding debt
obligations;
|
|
|
|
require us to dedicate a substantial portion of our cash for
payments related to our debt, reducing the amount of cash flow
available for working capital, capital expenditures, entitlement
of our real estate assets, and other general corporate purposes;
|
|
|
|
limit our flexibility in planning for, or reacting to, changes
in the industries in which we compete;
|
|
|
|
place us at a competitive disadvantage with respect to our
competitors, some of which have lower debt service obligations
and greater financial resources than we do;
|
|
|
|
limit our ability to borrow additional funds; and
|
|
|
|
increase our vulnerability to general adverse economic and
industry conditions.
|
If we are unable to generate sufficient cash flow to service our
debt and fund our operating costs, our liquidity may be
adversely affected.
See Note 15 of the Consolidated Financial Statements for a
discussion on recent changes to the Companys capital
structure.
We are
obligated to comply with financial and other covenants outlined
in our debt indentures and agreements that could restrict our
operating activities. A failure to comply could result in a
default under our $280.0 million senior credit facility
(Senior Credit Facility) which would, if not waived
by the lenders, accelerate the payment of our debt. A payment
default under the Senior Credit Facility could result in cross
defaults on our 4% Contingent Convertible Notes
(4% Notes),
21/4% Convertible
Subordinated Debentures
(21/4% Debentures),
and
91/2% Senior
Subordinated Notes
(91/2% Notes).
Our debt instruments generally contain various restrictive
covenants which include, among others, provisions restricting
our ability to:
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access the full amount of our revolving credit facility
and/or incur
additional debt;
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enter into certain leases;
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make certain distributions, investments, and other restricted
payments;
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cause our restricted subsidiaries to make payments to us;
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enter into transactions with affiliates;
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create certain liens;
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purchase assets or businesses;
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sell assets and, if sold, retain excess cash flow from these
sales;
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retain excess cash flow from operations; and
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consolidate, merge or sell all or substantially all of our
assets.
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Our secured debt also contains other customary covenants,
including, among others, provisions:
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relating to the maintenance of the property securing the
debt; and
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restricting our ability to pledge assets or create other liens.
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In addition, certain covenants in our bank facility require that
we maintain certain financial ratios, including a leverage ratio
that becomes more restrictive over time.
Based on our existing debt agreements, we were in compliance
with our financial and non-financial covenants as of
November 30, 2009. Any of the covenants described in this
risk factor may restrict our operations and our ability to
pursue potentially advantageous business opportunities. Our
failure to comply with these covenants could also result in an
event of default that, if not cured or waived, could result in
the acceleration of the Senior Credit Facility, 4% Notes,
21/4% Debentures,
and
91/2% Notes.
In addition, our failure to pay principal and interest when due
is a default under the Senior Credit Facility, and in certain
cases, would cause cross defaults on the 4% Notes,
21/4% Debentures,
and
91/2% Notes.
Our indebtedness under the Senior Credit Facility is
collateralized by substantially all of our assets, leaving us
with limited collateral for additional financing.
See Note 15 of the Consolidated Financial Statements for a
discussion on recent changes to the Companys capital
structure.
If our
operating subsidiaries do not generate sufficient cash flow or
if they are not able to pay dividends or otherwise distribute
their cash to us, or if we have insufficient funds on hand, we
may not be able to service our debt.
All of the operations of our Aerospace and Defense and Real
Estate segments are conducted through subsidiaries.
Consequently, our cash flow and ability to service our debt
obligations will be largely dependent upon the earnings and cash
flows of our operating subsidiaries and the distribution of
those earnings to us, or upon loans, advances or other payments
made by these subsidiaries to us. The ability of our
subsidiaries to pay dividends or make other payments or advances
to us will depend upon their operating results and cash flows
and will be subject to applicable laws and any contractual
restrictions contained in the agreements governing their debt,
if any.
Our
pension plan is currently underfunded and we expect to be
required to make cash contributions, which may reduce the cash
available for our businesses.
The Pension Protection Act (PPA), enacted in August
2006, requires underfunded pension plans to improve their
funding ratios within prescribed intervals based on the funded
status of the plan as of specified measurement dates. Our funded
ratio as of November 30, 2008 under the PPA for our defined
benefit pension plan was above the ratio required under the PPA,
as amended in 2008. The funded ratio as of November 30,
2008, under the PPA for our defined benefit pension plan was 93%
which was above the 92% ratio required under the PPA, as
amended. The required ratio to be met as of our
November 30, 2009 measurement date is 94%. During the
fourth quarter of fiscal 2009, we made a voluntary contribution
of $4.4 million to improve the plans PPA funded
status as of November 30, 2009, although there can be no
assurance that the amount of this contribution will be
sufficient to meet the required ratio. The final calculated PPA
funded ratio as of November 30, 2009 is expected to be
completed in the second half of 2010. 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 and July 31, 2009, future
benefit accruals for all current salaried employees and
collective bargaining unit employees were discontinued,
respectively.
The funded status of the pension plan may be adversely affected
by the investment experience of the plans 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 our plans assets does not meet our
assumptions, if there are changes to the U.S. Internal
Revenue Service regulations or other applicable law or if other
actuarial assumptions are modified, our future contributions to
our underfunded pension plan could be higher than we expect. In
addition, changes to the discount rate used to measure pension
liabilities could adversely affect the funded status of the
plan. Significant cash contribution requirements to our pension
plan may adversely affect our ability to meet certain covenants
for our Senior Credit Facility which, absent an amendment or
14
refinancing, would result in a default under our Senior Credit
Facility and cross defaults on our other debt instruments.
The
level of returns on retirement benefit plan assets, changes in
interest rates, changes in legislation, and other factors could
affect our financial results.
Our earnings may be positively or negatively impacted by the
amount of expense or income we record for our employee
retirement benefit plans. We calculate the expense for the plans
based on actuarial valuations. These valuations are based on
assumptions that we make relating to financial market and other
economic conditions. Changes in key economic indicators can
result in changes in the assumptions we use. The key assumptions
used to estimate retirement benefit plan expense for the
following year are: the discount rate and the expected long-term
rate of return on plan assets. Our pension expense/income can
also be affected by legislation and other government regulatory
actions.
Economic
conditions could materially adversely affect our ability to
amend our Senior Credit Facility, and we face the risks of
either not being able to do so, or doing so at higher interest
expense.
We inadvertently failed to register with the SEC the issuance of
certain of our common shares under our defined contribution
401(k) employee benefit plan, or the Plan. As a result, certain
purchasers of securities pursuant to the Plan may have the right
to rescind their purchases for an amount equal to the purchase
price paid for the securities (or if such security has been
disposed of, to receive damages with respect to any loss on such
disposition) plus interest from the date of purchase. We expect
to make a registered rescission offer to eligible Plan
participants, which could result in our purchase of up to
0.6 million shares of our common stock. Accordingly, we may
need to amend our Senior Credit Facility in connection with the
rescission offer. There can be no assurance that we will be able
to obtain the consent of lenders under our Senior Credit
Facility or that, as a condition to consent, the lenders will
not require that the terms of the Senior Credit Facility be
amended in a manner that is unfavorable to us, including a
possible increase in interest, fees, reduction in the amount of
the funds available and covenant changes. Furthermore, the
current financial turmoil affecting the banking system and
financial markets and the possibility that financial
institutions may consolidate or go out of business have resulted
in a tightening in the credit markets, a low level of liquidity
in many financial markets, and extreme volatility in fixed
income, credit, currency and equity markets.
Our
operations and properties are currently the subject of
significant environmental liabilities, and the numerous
environmental and other government requirements to which we are
subject may become more stringent in the future.
We are subject to federal, state and local laws and regulations
that, among other things, require us to obtain permits to
operate and install pollution control equipment and regulate the
generation, storage, handling, transportation, treatment, and
disposal of hazardous and solid wastes. These requirements may
become more stringent in the future. We may also be subject to
fines and penalties relating to the operation of our existing
and formerly owned businesses. We are subject to toxic tort and
asbestos lawsuits as well as other third-party lawsuits, due to
either our past or present use of hazardous substances or the
alleged
on-site or
off-site contamination of the environment through past or
present operations. We may incur material costs in defending
these claims and lawsuits and any similar claims and lawsuits
that may arise in the future. Contamination at our major current
and former properties is subject to investigation and
remediation requirements under the Superfund and other cleanup
programs, and the full extent of the required remediation has
not yet been determined. Any adverse judgment or cash outlay
could have a significant adverse effect on our operating
results, financial condition,
and/or cash
flows.
Although
some of our environmental costs may be recoverable and we have
established reserves, given the many uncertainties involved in
assessing liability for environmental claims, our reserves may
not be sufficient, which could adversely affect our financial
results.
As of November 30, 2009, the aggregate range of our
environmental costs was $222.7 million to
$428.9 million and the accrued amount was
$222.7 million, of which $211.1 million relates to
Aerojet sites and $11.6 million relates to non-Aerojet
sites. We believe the accrued amount for future remediation
costs represents the costs that
15
could be incurred by us over the contractual term, if any, or
the next fifteen years of the estimated remediation, to the
extent they are probable and reasonably estimable. However, in
many cases the nature and extent of the required remediation has
not yet been determined. Given the many uncertainties involved
in assessing liability for environmental claims, our reserves
may prove to be insufficient. We evaluate the adequacy of those
reserves on a quarterly basis, and they could change. In
addition, the reserves are based only on known sites and the
known contamination at those sites. It is possible that
additional sites needing remediation may be identified or that
unknown contamination at previously identified sites may be
discovered. It is also possible that the regulatory agencies may
change
clean-up
standards for chemicals of concern such as ammonium perchlorate
and trichloroethylene. This could lead to additional
expenditures for environmental remediation in the future and,
given the uncertainties involved in assessing liability for
environmental claims, our reserves may prove to be insufficient.
Under an agreement with the U.S. government, our
environmental expenses related to our Aerojet Sacramento and
former Azusa sites are allowable for reimbursement through our
government contracts up to 88% of environmental expenses (the
Global Settlement). Environmental expenses at other
Aerojet sites are eligible for reimbursement and treated under
the normal rules of cost allowability. Aerojets mix of
contracts can affect the actual reimbursement made by the
U.S. government. Because these costs are recovered through
forward pricing arrangements, our ability to continue recovering
these costs from the U.S. government depends on
Aerojets sustained business volume under
U.S. government contracts and programs and the relative
size of Aerojets commercial business. Additionally, in
conjunction with the sale of the Electronics and Information
Systems business in 2001, Aerojet entered into an agreement with
Northrop (Northrop Agreement) whereby Aerojet is
reimbursed by Northrop for a portion of environmental
expenditures eligible for recovery under the Global Settlement
subject to annual and cumulative limitations. We believe that we
may reach the cumulative limitation under the Northrop Agreement
within the next twelve (12) months. While we are seeking an
arrangement with the U.S. government to recover
environmental expenditures in excess of the current
reimbursement ceiling identified in the Northrop Agreement,
there can be no assurances that such a recovery will be
obtained, or if not obtained, that such unreimbursed
environmental expenditures will not have a materially adverse
effect on our operating results, financial condition,
and/or cash
flows. See Note 7(d) in Notes to Consolidated Financial
Statements for additional information.
Our environmental expenses related to non-Aerojet sites are
generally not recoverable and a significant increase in these
estimated environmental expenses could have a significant
adverse effect on our operating results, financial condition,
and/or cash
flows.
We are
from time to time subject to significant litigation, the outcome
of which could adversely affect our financial
results.
We and our subsidiaries are subject to material litigation. We
may be unsuccessful in defending or pursuing these lawsuits or
claims. Regardless of the outcome, litigation can be very costly
and can divert managements efforts. Adverse outcomes in
litigation, including toxic tort claims pending against Aerojet,
product liability claims by former customers of our GDX
Automotive business and the appeals of the unfair labor claims
brought by former employees of our Snappon SA subsidiary in
France, could have a significant adverse effect on our operating
results, financial condition,
and/or cash
flows.
The
cancellation or material modification of one or more significant
contracts could adversely affect our financial
results.
Sales, directly and indirectly, to the U.S. government and
its agencies accounted for approximately 88% of our total net
sales in fiscal 2009. Our contracts typically permit the
U.S. government to unilaterally modify or terminate a
contract or to discontinue funding for a particular program at
any time. The cancellation of one or more significant contracts
and/or
programs could have a material adverse effect on our ability to
realize anticipated sales and profits. The cancellation of a
contract, if terminated for cause, could also subject us to
liability for the excess costs incurred by the
U.S. government in procuring undelivered items from another
source. If terminated for convenience, our recovery of costs
would be limited to amounts already incurred or committed, and
our profit would be limited to work completed prior to
termination.
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Future
reductions or changes in U.S. government spending could
adversely affect our financial results.
Our primary aerospace and defense customers include the DoD, and
its agencies, the government prime contractors that supply
products to these customers, and NASA. As a result, we rely on
particular levels of U.S. government spending on propulsion
systems for defense and space applications and armament systems
for precision tactical weapon systems and munitions
applications, and our backlog depends, in a large part, on
continued funding by the U.S. government for the programs
in which we are involved. These spending levels are not
generally correlated with any specific economic cycle, but
rather follow the cycle of general political support for this
type of spending. Moreover, although our contracts often
contemplate that our services will be performed over a period of
several years, Congress usually must approve funds for a given
program each government fiscal year and may significantly reduce
or eliminate funding for a program. A decrease in U.S. DoD
and/or NASA
expenditures, or the elimination or curtailment of a material
program in which we are involved, could have a material adverse
effect on our operating results, financial condition,
and/or cash
flows.
If we
experience cost overruns on our contracts, we would have to
absorb the excess costs which could adversely affect our
financial results and our ability to win new
contracts.
In fiscal 2009, approximately 51% of our net sales were from
fixed-price contracts. Under fixed-price contracts, we agree to
perform specified work for a fixed price and realize all of the
profit or loss resulting from variations in the costs of
performing the contract. As a result, all fixed-price contracts
involve the inherent risk of unreimbursed cost overruns. To the
extent we were to incur unanticipated cost overruns on a program
or platform subject to a fixed-price contract, our profitability
would be adversely affected. Future profitability is subject to
risks including the ability of suppliers to deliver components
of acceptable quality on schedule and the successful
implementation of automated tooling in production processes.
In fiscal 2009, approximately 37% of our net sales were from
cost reimbursable contracts. Under cost reimbursable contracts,
we agree to be reimbursed for allowable costs and be paid a fee.
If our costs are in excess of the final target cost, fees may be
adversely affected. If our costs exceed authorized contract
funding or they do not qualify as allowable costs under
applicable regulations, we will not be reimbursed for those
costs. Cost overruns may adversely affect our financial
performance and our ability to win new contracts.
If our
subcontractors or suppliers fail to perform their contractual
obligations, our contract performance and our ability to win new
contracts may be adversely affected.
We rely on subcontractors to perform a portion of the services
we agree to provide our customers and on suppliers to provide
raw materials and component parts for our contract performance.
A failure by one or more of our subcontractors or suppliers to
satisfactorily provide on a timely basis the
agreed-upon
services or supplies may affect our ability to perform our
contractual obligations. Deficiencies in the performance of our
subcontractors and suppliers could result in our customer
terminating our contract for default. A termination for default
could expose us to liability and adversely affect our financial
performance and our ability to win new contracts.
Our
success and growth in our Aerospace and Defense segment depends
on our ability to secure contracts.
We encounter intense competition in bidding for contracts. Many
of our competitors have financial, technical, production, and
other resources substantially greater than ours. Although the
downsizing of the defense industry in the early 1990s resulted
in a reduction in the aggregate number of competitors, the
consolidation has also strengthened the capabilities of some of
the remaining competitors resulting in an increasingly
competitive environment. The U.S. government also has its
own manufacturing capabilities in some areas. We may be unable
to compete successfully with our competitors and our inability
to do so could result in a decrease in sales, profits, and cash
flows that we historically have generated from certain
contracts. Further, the U.S. government may open to
competition programs on which we are currently the sole
supplier, which could have a material adverse effect on our
operating results, financial condition,
and/or cash
flows.
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Our
Aerospace and Defense segment is subject to procurement and
other related laws and regulations inherent in contracting with
the U.S. government, non-compliance with which could adversely
affect our financial results.
In the performance of contracts with the U.S. government,
we are subject to complex and extensive procurement and other
related laws and regulations. Possible consequences of a failure
to comply, even inadvertently, with these laws and regulations
include civil and criminal fines and penalties including, in
some cases, double or triple damages, and suspension or
debarment from future government contracts and exporting of
goods for a specified period of time.
These laws and regulations provide for ongoing audits and
reviews of incurred costs as well as contract procurement,
performance and administration. The U.S. government may, if
it deems appropriate, conduct an investigation into possible
illegal or unethical activity in connection with these
contracts. Investigations of this nature are common in the
aerospace and defense industry, and lawsuits may result. In
addition, the U.S. government and its principal prime
contractors periodically investigate the financial viability of
its contractors and subcontractors as part of its risk
assessment process associated with the award of new contracts.
If the U.S. government or one or more prime contractors
were to determine that we were not financially viable, our
ability to continue to act as a government contractor or
subcontractor would be impaired.
Our
inability to adapt to rapid technological changes could impair
our ability to remain competitive.
The aerospace and defense industry continues to undergo rapid
and significant technological development. Our competitors may
implement new technologies before us, allowing them to provide
more effective products at more competitive prices. Future
technological developments could:
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adversely impact our competitive position if we are unable to
react to these developments in a timely or efficient manner;
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require us to write-down obsolete facilities, equipment, and
technology;
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require us to discontinue production of obsolete products before
we can recover any or all of our related research, development
and commercialization expenses; or
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require significant capital expenditures for research,
development, and launch of new products or processes.
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We may
experience warranty claims for product failures, schedule delays
or other problems with existing or new products and
systems.
Many of the products we develop and manufacture are
technologically advanced systems that must function under
demanding operating conditions. Even though we believe that we
employ sophisticated and rigorous design, manufacturing and
testing processes and practices, we may not be able to
successfully launch or manufacture our products on schedule or
our products may not perform as intended.
If our products fail to perform adequately, some of our
contracts require us to forfeit a portion of our expected
profit, receive reduced payments, provide a replacement product
or service or reduce the price of subsequent sales to the same
customer. Performance penalties may also be imposed if we fail
to meet delivery schedules or other measures of contract
performance. We do not generally insure against potential costs
resulting from any required remedial actions or costs or loss of
sales due to postponement or cancellation of scheduled
operations or product deliveries.
The
release or explosion of dangerous materials used in our business
could disrupt our operations and could adversely affect our
financial results.
Our business operations involve the handling and production of
potentially explosive materials and other dangerous chemicals,
including materials used in rocket propulsion and explosive
devices. Despite our use of specialized facilities to handle
dangerous materials and intensive employee training programs,
the handling and production of hazardous materials could result
in incidents that temporarily shut down or otherwise disrupt our
manufacturing operations and could cause production delays. It
is possible that a release of these chemicals or an
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explosion could result in death or significant injuries to
employees and others. Material property damage to us and third
parties could also occur. The use of these products in
applications by our customers could also result in liability if
an explosion or fire were to occur. Any release or explosion
could expose us to adverse publicity or liability for damages or
cause production delays, any of which could have a material
adverse effect on our operating results, financial condition,
and/or cash
flows.
Disruptions
in the supply of key raw materials, difficulties in the supplier
qualification process or increases in prices of raw materials
could adversely affect our financial results.
We closely monitor sources of supply to assure that 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 other materials sometimes consider
dropping low-volume items from their product lines, which may
require us to qualify new suppliers for raw materials on key
programs.
Current suppliers of some raw materials used in the
manufacturing of rocket nozzles, composite cases and explosives
have announced plans to relocate, close,
and/or
discontinue certain product lines. These materials, which
include TPB/Flexzone, iron oxide lacquer and other constituents,
are used industry-wide and are key to many of our motor and
warhead programs. In some situations, increased costs related to
new suppliers may not be recoverable under our contracts. In
addition, some of these materials may have to be procured from
offshore suppliers.
The supply of ammonium perchlorate, a principal raw material
used in solid propellant, is limited to a single source that
supplies the entire domestic solid propellant industry with
actual pricing based on the total industry demand. Significant
reductions in the total national demand, including as a result
of the termination of the space shuttle program, will likely
result in significant unit price increases.
The industry also currently relies on one primary supplier for
carbon fiber, which is used in the production of composite
materials. This supplier has multiple manufacturing lines for
such material. Although other sources of carbon fiber exist, the
addition of a new supplier would require us to qualify the new
source for use. The Japanese government has imposed export
restrictions on materials that are to be used in offensive
weapons systems, which has increased the lead times associated
with the product as its export has to be approved by the
Japanese Defense Ministry.
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 continue to
experience increases in the price and lead-times of certain
commodity metals, primarily steel and aluminum. The schedules
and pricing of titanium mill products remain well above
historical levels. Additionally, we may not be able to continue
to negotiate with our customers economic
and/or price
adjustment clauses tied to commodity indices to reduce program
impact. The DoD has begun to rigorously enforce the provisions
of the Berry Amendment (DFARS
225-7002,
252.225-7014) which imposes a requirement to procure certain
strategic materials critical to national security only from
U.S. sources. Due to the limited U.S. supply of these
metals and the requirement to use domestic sources, lead times
and cost impacts have been significant to our defense programs.
Prolonged disruptions in the supply of any of our key raw
materials, difficulty qualifying new sources of supply,
implementing use of replacement materials or new sources of
supply,
and/or a
continuing increase in the prices of raw materials could have a
material adverse effect on our operating results, financial
condition,
and/or cash
flows.
The
real estate market is inherently risky, which could adversely
affect our financial results.
Our real estate activities involve significant risks, which
could adversely affect our financial results. We are subject to
various risks, including the following:
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we may be unable to obtain, or suffer delays in obtaining,
necessary re-zoning, land use, building, occupancy, and other
required governmental permits and authorizations, which could
result in increased costs or our abandonment of these projects;
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we may be unable to complete environmental remediation or to
have state and federal environmental restrictions on our
property lifted, which could cause a delay or abandonment of
these projects;
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we may be unable to obtain sufficient water sources to service
our projects, which may prevent us from executing our plans;
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our real estate activities require significant capital
expenditures and we may not be able to obtain financing on
favorable terms, which may render us unable to proceed with our
plans;
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economic and political uncertainties could have an adverse
effect on consumer buying habits, construction costs,
availability of labor and materials and other factors affecting
us and the real estate industry in general;
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our property is subject to federal, state, and local regulations
and restrictions that may impose significant limitations on our
plans;
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much of our property is raw land that includes the natural
habitats of various endangered or protected wildlife species
requiring mitigation;
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if our land use plans are approved by the appropriate
governmental authorities, we may face lawsuits from those who
oppose such plans. Such lawsuits and the costs associated with
such opposition could be material and have an adverse effect on
our ability to sell property or realize income from our
projects; and
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the time frame required for approval of our plans means that we
may have to wait years for a significant cash return.
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Substantially
all of our excess real estate, that we are in the process of
entitling for new opportunities, is located in Sacramento
County, California making us vulnerable to changes in economic
and other conditions in that particular market.
As a result of the geographic concentration of our properties,
our long-term real estate performance and the value of our
properties will depend upon conditions in the Sacramento region,
including:
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the sustainability and growth of industries located in the
Sacramento region;
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the financial strength and spending of the State of California;
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local real estate market conditions;
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changes in neighborhood characteristics;
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changes in interest rates; and
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real estate tax rates.
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If unfavorable economic or other conditions occur in the region,
our plans and business strategy could be adversely affected.
We may
expand our operations through acquisitions, which may divert
managements attention and expose us to unanticipated
liabilities and costs. We may experience difficulties
integrating any acquired operations, and we may incur costs
relating to acquisitions that are never
consummated.
Our business strategy may lead us to expand our Aerospace and
Defense segment through acquisitions. However, our ability to
consummate any future acquisitions on terms that are favorable
to us may be limited by the number of attractive acquisition
targets, internal demands on our resources and our ability to
obtain financing. Our success in integrating newly acquired
businesses will depend upon our ability to retain key personnel,
avoid diversion of managements attention from operational
matters, integrate general and administrative services and key
information processing systems and, where necessary, re-qualify
our customer programs. In addition, future acquisitions could
result in the incurrence of additional debt, costs, and
contingent liabilities. We may also incur costs and divert
management attention to acquisitions that are never consummated.
Integration of acquired operations may take longer, or be more
costly or disruptive to our business, than originally
anticipated.
Although we undertake a due diligence investigation of each
business that we have acquired or may acquire, there may be
liabilities of the acquired companies that we fail to, or are
unable to, discover during the due diligence investigation and
for which we, as a successor owner, may be responsible. In
connection with acquisitions, we
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generally seek to minimize the impact of these types of
potential liabilities through indemnities and warranties from
the seller. However, these indemnities and warranties, if
obtained, may not fully cover the liabilities due to limitations
in scope, amount or duration, financial limitations of the
indemnitor or warrantor, or other reasons.
We may
incur additional costs related to divestitures, which could
adversely affect our financial results.
In connection with our divestitures of the Fine Chemicals and
GDX Automotive businesses in fiscal 2005 and fiscal 2004,
respectively, we have incurred and may incur additional costs,
including costs related to the closure of a manufacturing
facility in Chartres, France. As part of these and other
divestitures, we have provided customary indemnification to the
purchasers for such matters as claims arising from the operation
of the businesses prior to disposition, including warranty and
income tax matters, and liability to investigate and remediate
environmental contamination existing prior to disposition. These
additional costs and the indemnification of the purchasers of
our former businesses may require additional cash expenditures,
which could have a material adverse effect on our operating
results, financial condition,
and/or cash
flows.
A
strike or other work stoppage, or our inability to renew
collective bargaining agreements on favorable terms, could
adversely affect our financial results.
As of November 30, 2009, 13% of our 3,071 employees
were covered by collective bargaining agreements, which are due
to expire in 2011 and 2012. If we are unable to negotiate
acceptable new agreements with the unions, upon expiration of
the existing contracts, we could experience a strike or work
stoppage. Even if we are successful in negotiating new
agreements, the new agreements could call for higher wages or
benefits paid to union members, which would increase our
operating costs and could adversely affect our profitability. If
our unionized workers were to engage in a strike or other work
stoppage, or other non-unionized operations were to become
unionized, we could experience a significant disruption of
operations at our facilities or higher ongoing labor costs. A
strike or other work stoppage in the facilities of any of our
major customers or suppliers could also have similar effects on
us.
In
order to be successful, we must attract and retain key
employees.
Our business has a continuing need to attract large numbers of
skilled personnel, including personnel holding security
clearances, to support the growth of the enterprise and to
replace individuals who have terminated employment due to
retirement or for other reasons. To the extent that the demand
for qualified personnel exceeds supply, we could experience
higher labor, recruiting, or training costs in order to attract
and retain such employees, or could experience difficulties in
performing under our contracts if our needs for such employees
were unmet.
Due to
the nature of our business, our sales levels may fluctuate
causing our quarterly operating results to
fluctuate.
Changes in our operating results from quarter to quarter may
result in volatility in the market price of our common stock.
Our quarterly and annual sales are affected by a variety of
factors that may lead to significant variability in our
operating results. In our Aerospace and Defense segment, sales
earned under long-term contracts are recognized either on a cost
basis, when deliveries are made, or when contractually defined
performance milestones are achieved. The timing of deliveries or
milestones may fluctuate from quarter to quarter. In our Real
Estate segment, sales of property may be made from time to time,
which may result in variability in our operating results and
cash flows.
We
face certain significant risk exposures and potential
liabilities that may not be adequately covered by indemnity or
insurance.
A significant portion of our business relates to developing and
manufacturing propulsion systems for defense and space
applications, armament systems for precision tactical weapon
systems and munitions applications. New technologies may be
untested or unproven. In addition, we may incur significant
liabilities that are unique to our products and services. In
some, but not all, circumstances, we may receive indemnification
from the U.S. government. While we maintain insurance for
certain risks, the amount of our insurance coverage may not be
adequate to cover all claims or liabilities, and it is not
possible to obtain insurance to protect against all operational
risks and
21
liabilities. Accordingly, we may be forced to bear substantial
costs resulting from risks and uncertainties of our business,
which could have a material adverse effect on our operating
results, financial condition,
and/or cash
flows.
We use
estimates in accounting for most of our programs. Changes in our
estimates could affect our future financial
results.
Contract accounting requires judgment relative to assessing
risks, estimating contract sales and costs, and making
assumptions for schedule and technical issues. Due to the size
and nature of many of our contracts, the estimation of total
sales and cost at completion is complicated and subject to many
variables. For example, assumptions have to be made regarding
the length of time to complete the contract because costs also
include expected increases in wages and prices for materials.
Similarly, assumptions have to be made regarding the future
impacts of efficiency initiatives and cost reduction efforts.
Incentives or penalties related to performance on contracts are
considered in estimating sales and profit rates, and are
recorded when there is sufficient information for us to assess
anticipated performance. Estimates of award and incentive fees
are also used in estimating sales and profit rates based on
actual and anticipated awards. Because of the significance of
the judgments and estimation processes described above, it is
likely that materially different amounts could be recorded if we
used different assumptions or if the underlying circumstances
were to change. Changes in underlying assumptions,
circumstances, or estimates may adversely affect our future
period operating results, financial condition,
and/or cash
flows.
New
accounting standards could result in changes to our methods of
quantifying and recording accounting transactions, and could
affect our financial results.
Changes to generally accepted accounting principles in the
United States of America arise from new and revised standards,
interpretations and other guidance issued by the Financial
Accounting Standards Board (FASB), the SEC, and
others. In addition, the U.S. government may issue new or
revised Cost Accounting Standards (CAS) or Cost
Principles. The effects of such changes may include prescribing
an accounting method where none had been previously specified or
prescribing a single acceptable method of accounting from among
several acceptable methods that currently exist. Such changes
could result in unanticipated effects on our operating results,
financial condition
and/or cash
flows. In addition, should legislation and CAS alignment related
to the PPA not occur, some of our cash contributions required
under the PPA to our defined benefit pension plan may not be
immediately recoverable, which could result in material adverse
effect on our operating results, financial condition,
and/or cash
flows. Further, our current Forward Pricing Rates
(FPRs), did not yet reflect the full effect of the
PPA requirements at November 30, 2009. The PPA funding
requirements are expected to be incorporated into our FPRs when
the CAS Board revises the applicable standards, as is required
by the PPA.
The
accounting method for convertible debt securities that may be
settled in cash is the subject of recent changes that could have
a material effect on our reported financial
results.
In May 2008, the FASB issued authoritative guidance which
applies to convertible debt securities that, upon conversion,
may be settled by the issuer fully or partially in cash. Under
this new guidance, an entity must separately account for the
liability and equity components of convertible debt securities
that may be settled entirely or partially in cash upon
conversion in a manner that reflects the issuers economic
interest cost. The effect of the new guidance on the accounting
for convertible debt securities that are affected is that the
equity component would be included in the additional paid-in
capital section of shareholders deficit on our
consolidated balance sheets and the value of the equity
component would be treated as original issue discount for
purposes of accounting for the debt component of convertible
debt securities. We will adopt this guidance in the first
quarter of fiscal 2010. Going forward, we expect to report a
significant increase in non-cash interest expense in our
financial results because this guidance requires interest to
include both the current periods amortization of the debt
discount in addition to the instruments coupon interest.
Failure
to maintain effective internal controls in accordance with the
Sarbanes-Oxley Act of 2002 could negatively impact the market
price of our common stock.
If, in the future, we fail to maintain the adequacy of our
internal controls, as such standards are modified, supplemented
or amended from time to time, we may not be able to ensure that
we can conclude on an ongoing basis
22
that we have effective internal controls over financial
reporting in accordance with the Sarbanes-Oxley Act of 2002.
Failure to achieve and maintain an effective internal control
environment could negatively impact the market price of our
common stock.
|
|
Item 1B.
|
Unresolved
Staff Comments
|
None.
Significant operating, manufacturing, research, design,
and/or
marketing locations are set forth below.
Facilities
Corporate
Headquarters
GenCorp Inc.
Highway 50 and Aerojet Road
Rancho Cordova, California 95742
Mailing address:
P.O. Box 537012
Sacramento, California
95853-7012
Operating/Manufacturing/Research/Design/Marketing
Locations
|
|
|
|
|
Aerospace and Defense
Aerojet-General Corporation
Sacramento, California
|
|
Design/Manufacturing Facilities:
Camden, Arkansas*
Clearfield, Utah*
Gainesville, Virginia*
Jonesborough, Tennessee**
Orange, Virginia
Rancho Cordova, California (owned and leased)
Redmond, Washington
Socorro, New Mexico*
Vernon, California*
|
|
Marketing/Sales Offices:
Huntsville, Alabama*
Southfield, Michigan*
Arlington, Virginia*
|
Real Estate
Folsom, California *
|
|
|
|
|
|
|
|
* |
|
An asterisk next to a facility listed above indicates that it is
a leased property. |
|
** |
|
This facility is owned and operated by Aerojet Ordnance
Tennessee, Inc., a wholly-owned subsidiary of Aerojet. |
We believe each of the facilities is adequate for the business
conducted at that facility. The facilities are suitable and
adequate for their intended purpose and taking into account
current and planned future needs. A portion of Aerojets
property in California, and its Redmond, Washington and Orange,
Virginia facilities are encumbered by a deed of trust or
mortgage. In addition, we own and lease properties (primarily
machinery and warehouse and office facilities) in various
locations for use in the ordinary course of our business.
|
|
Item 3.
|
Legal
Proceedings
|
The following information pertains to legal proceedings,
including proceedings relating to environmental matters, which
are discussed in detail in Notes 7(b) and 7(c) in Notes to
Consolidated Financial Statements.
23
Groundwater
Cases
South
El Monte Operable Unit (SEMOU) Related
Cases
In October 2002, Aerojet and approximately 65 other individual
and corporate defendants were served with four civil suits filed
in the U.S. District Court for the Central District of
California that seek recovery of costs allegedly incurred or to
be incurred in response to the contamination present at the
South El Monte Operable Unit of the San Gabriel Valley
Superfund site. The cases are denominated as follows:
San Gabriel Valley Water Company v. Aerojet-General
Corporation, et al., Case
No. CV-02-6346
ABC (RCx), U.S. District Court, Central District of CA,
served October 30, 2002.
San Gabriel Basin Water Quality Authority v.
Aerojet-General Corporation, et al., Case
No. CV-02-4565
ABC (RCx), U.S. District Court, Central District of CA,
served October 30, 2002.
Southern California Water Company v. Aerojet-General
Corporation, et al., Case
No. CV-02-6340
ABC (RCx), U.S. District Court, Central District of CA,
served October 30, 2002.
The City of Monterey Park v. Aerojet-General
Corporation, et al., Case
No. CV-02-5909
ABC (RCx), U.S. District Court, Central District of CA,
served October 30, 2002.
The cases have been coordinated for ease of administration by
the court. The plaintiffs claims against Aerojet are based
upon allegations of discharges from a former site in the El
Monte area. The total cost estimate to implement projects under
a Unilateral Administrative Order (UAO) prepared by
the EPA and the water entities is approximately
$90 million. Aerojet investigations do not identify a
credible connection between the contaminants identified by the
plaintiff water entities in the SEMOU and those detected at
Aerojets former facility located in El Monte, California,
near the SEMOU (East Flair Drive site). Aerojet has
filed third-party complaints against several water entities on
the basis that they introduced perchlorate-containing Colorado
River water to the basin. Those water entities have filed
motions to dismiss Aerojets complaints. The motions as
well as discovery have been stayed, pending efforts to resolve
the litigation through mediation. During the period in which the
litigation has been stayed, EPA, the California Department of
Toxic Substances Control and the plaintiff water entities have
reached settlements through the mediation process with various
of the parties sued, which have been brought to the Federal
District Court for approval. Certain of the settlements have
been challenged by Aerojet and other defendants and are not
finally resolved.
Aerojet has recently received correspondence from EPA on behalf
of itself, the DTSC and the Water Entities regarding settlement.
Aerojet intends to try to reach a good faith settlement with
EPA, DTSC and the Water Entities to resolve claims. If
settlement negotiations fail, the litigation stay is likely to
be lifted and EPA may refer the matter to the
U.S. Department of Justice for litigation, seeking to hold
Aerojet liable for past and future costs, to recover costs of
suit and attorneys fees, and as to any accrued interest,
penalties or statutory damages. Should settlement not be
reached, Aerojet intends to vigorously defend itself.
Sacramento
Cases
In December 2007, Aerojet was named as a defendant in a lawsuit
brought by six individuals who allegedly resided in the vicinity
of Aerojets Sacramento facility. The case is entitled
Caldwell et al. v. Aerojet-General Corporation, Case
No. 34-2000-00884000CU-TT-GDS,
Sacramento County (CA) Superior Court and was served
April 3, 2008. Plaintiffs allege that Aerojet contaminated
groundwater to which plaintiffs were exposed and which caused
plaintiffs illness and economic injury. Plaintiffs filed two
subsequent amended complaints, naming additional plaintiffs.
Aerojet filed a demurrer to the second amended complaint, which
was denied by the trial court in December 2008. The court held
that the issue as to whether the plaintiffs were on actual
notice of the potential source of their injuries is an issue of
fact for trial that cannot be resolved on demurrer.
Aerojets subsequent Petition for a Writ of Mandate filed
with the California Court of Appeal Third District, seeking
reversal of the courts ruling on the demurrer was denied
without comment. Aerojet will continue to seek dismissal of
those claims at the trial court level. On December 29,
2009, plaintiffs served a Third Amended Complaint, adding four
additional plaintiffs to the action, which brings the total
number of individuals on whose behalf suit has been filed to
eighteen.
24
Aerojet will file an answer to the third amended complaint,
denying liability. Discovery is continuing. The Company is
unable to make a reasonable estimate of the future costs of
these claims.
In August 2003, the County of Sacramento and the Sacramento
County Water Agency (collectively, SCWA) and Aerojet
entered into a water agreement (Agreement). Under
the Agreement, Aerojet agreed to transfer remediated groundwater
to SCWA. This was anticipated to satisfy Aerojets water
replacement obligations in eastern Sacramento County. Subject to
various provisions of the Agreement, including approval under
the California Environmental Quality Act, SCWA assumed
Aerojets responsibility for providing replacement water to
American States Water Company and other impacted water purveyors
up to the amount of remediated water Aerojet transfers to the
County of Sacramento (County). Aerojet also agreed
to pay SCWA approximately $13 million over several years
toward the cost of constructing a replacement water supply
project. If the amount of Aerojets transferred water was
in excess of the replacement water provided to the impacted
water purveyors, SCWA committed to make such water available for
the entitlement of Aerojets land in an amount equal to the
excess.
In April 2008, SCWA unilaterally terminated the Agreement.
Subsequent to this unilateral termination of the Agreement, the
Company and The Boeing Company (Boeing, successor to
the McDonnell Douglas Corporation (MDC)), the former
owner of the Inactive Rancho Cordova Test Site
(IRCTS) entered into negotiations with SCWA in an
attempt to resolve matters and reach a new agreement.
Additionally, SCWA and Aerojet entered into a Tolling Agreement
through June 30, 2009 tolling any suits or claims arising
from environmental contamination or conditions on the former
IRCTS property.
On June 30, 2009, SCWA notified Aerojet and Boeing that it
was not prepared to extend the tolling period and intended to
file suit. On July 1, 2009, the County and SCWA filed a
complaint against Aerojet and Boeing in the U.S. District
Court for the Eastern District of California, in Sacramento,
County of Sacramento; Sacramento County Water Agency v.
Aerojet-General Corporation and The Boeing Corporation [sic],
Civ.
No. 2:09-at-1041.
In the complaint, the County and SCWA alleged that because
groundwater contamination from various sources including
Aerojet, Boeing/MDC, and the former Mather Air Force Base, was
continuing, the County and SCWA should be awarded unspecified
monetary damages as well as declaratory and equitable relief.
The complaint was served, but the parties entered into a joint
stipulation on August 27, 2009, to stay all proceedings
until May 30, 2010, pending settlement discussions. The
Company cannot predict the outcome of this proceeding with any
certainty at this time.
Vinyl
Chloride Litigation
Between the early 1950s and 1985, the Company produced polyvinyl
chloride (PVC) resin at its former Ashtabula, Ohio
facility. PVC is one of the most common forms of plastic
currently on the market. A building block compound of PVC is
vinyl chloride (VC), now listed as a known
carcinogen by several governmental agencies. The Occupational
Safety and Health Administration (OSHA) have
regulated workplace exposure to VC since 1974.
Since the mid-1990s, the Company has been named in numerous
cases involving alleged exposure to VC. In the majority of such
cases, the Company is alleged to be a
supplier/manufacturer of PVC
and/or a
civil co-conspirator with other VC and PVC manufacturers as a
result of membership in a trade association. Plaintiffs
generally allege that the Company and other defendants
suppressed information about the carcinogenic risk of VC to
industry workers, and placed VC or PVC into commerce without
sufficient warnings. A few of these cases alleged VC exposure
through various aerosol consumer products, in that VC had been
used as an aerosol propellant during the 1960s. Defendants in
these aerosol cases included numerous consumer
product manufacturers, as well as the more than 30 chemical
manufacturers. The Company used VC internally, but never
supplied VC for aerosol or any other use.
As of November 30, 2009, there was one vinyl chloride case
pending against the Company which involved an employee at a
facility owned or operated by others.
25
The following table sets forth information related to vinyl
chloride litigation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Claims filed
|
|
|
1
|
|
|
|
|
|
|
|
2
|
|
Claims dismissed
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
Claims settled
|
|
|
|
|
|
|
2
|
|
|
|
6
|
|
Claims pending
|
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
Aggregate settlement costs
|
|
$
|
|
|
|
$
|
6
|
|
|
$
|
849
|
|
Average settlement costs
|
|
$
|
|
|
|
$
|
3
|
|
|
$
|
141
|
|
Legal and administrative fees for the vinyl chloride cases for
fiscal years 2008 and 2007 were $0.3 million and
$0.3 million, respectively.
Asbestos
Litigation
The Company has been, and continues to be, named as a defendant
in lawsuits alleging personal injury or death due to exposure to
asbestos in building materials, products, or in manufacturing
operations. The majority of cases have been filed in Madison
County, Illinois and San Francisco, California. There were
134 cases pending as of November 30, 2009.
Given the lack of any significant consistency to claims (i.e.,
as to product, operational site, or other relevant assertions)
filed against the Company, the Company is unable to make a
reasonable estimate of the future costs of pending or unasserted
claims. Accordingly, no estimate of future liability has been
accrued for such contingencies.
The following table sets forth information related to asbestos
litigation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
Claims filed
|
|
|
27
|
*
|
|
|
33
|
*
|
|
|
57
|
*
|
Claims consolidated
|
|
|
23
|
|
|
|
|
|
|
|
|
|
Claims dismissed
|
|
|
25
|
|
|
|
31
|
|
|
|
43
|
|
Claims settled
|
|
|
2
|
|
|
|
5
|
|
|
|
8
|
|
Claims pending
|
|
|
134
|
|
|
|
157
|
|
|
|
160
|
|
Aggregate settlement costs
|
|
$
|
35
|
|
|
$
|
246
|
|
|
$
|
72
|
|
Average settlement costs
|
|
$
|
17
|
|
|
$
|
49
|
|
|
$
|
9
|
|
|
|
|
* |
|
This number is net of two cases tendered to a third party under
a contractual indemnity obligation. |
Legal and administrative fees for the asbestos cases for fiscal
years 2009, 2008, and 2007 were $0.4 million,
$0.5 million, and $0.9 million, respectively.
Snappon
SA Wrongful Discharge Claims
In November 2003, the Company announced the closing of a
manufacturing facility in Chartres, France owned by Snappon SA,
a subsidiary of the Company, previously involved in the
automotive business. In accordance with French law, Snappon SA
negotiated with the local works council regarding the
implementation of a social plan for the employees. Following the
implementation of the social plan, approximately 188 of the 249
former Snappon employees sued Snappon SA in the Chartres Labour
Court alleging wrongful discharge. The claims were heard in two
groups. On February 19, 2009, the Versailles Court of
Appeal issued a decision in favor of Group 2 plaintiffs and
based on this, the Court awarded damages of
1.9 million (approximately $2.7 million) plus
interest. On April 7, 2009, the Versailles Court of Appeal
issued a decision in favor of Group 1 plaintiffs and based on
this, the Court awarded damages of 1.0 million
(approximately $1.4 million) plus interest. During the
second quarter of
26
fiscal 2009, Snappon SA filed for declaration of suspensions of
payments with the clerks office of the Paris Commercial
Court, and the claims will likely be discharged through those
proceedings.
Other
Legal Proceedings
On August 31, 2004, the Company completed the sale of its
GDX business to an affiliate of Cerberus Capital Management,
L.P. (Cerberus). In accordance with the divestiture
agreement, the Company provided customary indemnification to
Cerberus for certain liabilities accruing prior to the closing
of the transaction (the Closing). Cerberus notified
the Company of a claim by a GDX customer that alleges that
certain parts manufactured by GDX prior to the Closing failed to
meet customer specifications. The Company has assumed the
defense of this matter and based on its investigation of the
facts and defenses available under the contract and local law,
and in November 2008 denied all liability for this claim. On
January 23, 2009, GenCorp received correspondence from the
GDX customer requesting that the Company provide it with a
settlement proposal by February 6, 2009, threatening that
it would initiate legal proceedings otherwise. GenCorp neither
responded nor otherwise tolled the statute of limitations with
negotiations. Nothing further has been received since then and
no legal proceedings have been initiated.
In August 2007, the Company, along with numerous other
companies, received from the USFWS a notice of a Natural
Resource Damage (NRD) Assessment Plan for the Ottawa
River and Northern Maumee Bay. The Company previously
manufactured products for the automotive industry at a Toledo,
Ohio site, which was adjacent to the Ottawa River. This facility
was divested in 1990 and the Company indemnified the buyer for
claims and liabilities arising out of certain pre-divestiture
environmental matters. A group of PRPs, including GenCorp, was
formed to respond to the NRD assessment and to pursue funding
from the Great Lakes Legacy Act for primary restoration. The
group has undertaken a restoration scoping study. Early data
collection indicates that the primary restoration project total
cost may be in the range of $47 to $49 million. The group
has received a commitment for matching federal funds for the
restoration project, which will consist of river dredging and
land-filling river sediments. Based on a review of the current
facts and circumstances with counsel, management has provided
for what is believed to be a reasonable estimate of the loss
exposure for this matter. Still unresolved at this time is the
actual Natural Resource Damage Assessment itself. It is not
possible to predict the outcome or timing of these types of
assessments, which are typically lengthy processes lasting
several years, or the amounts of or responsibility for these
damages.
In 2008, Textileather, Inc. (Textileather), the
current owner of the former Toledo, Ohio site, filed a lawsuit
against the Company claiming, among other things, that the
Company failed to indemnify and defend Textileather for certain
contractual environmental obligations. A second suit related to
past and future RCRA closure costs was filed in late 2009. A
trial is scheduled for spring 2010. The Company is vigorously
defending against both actions.
On January 6, 2010, the Company received a subpoena duces
tecum from the Defense Criminal Investigative Service of the
Office of the Inspector General of the DoD requesting that the
Company produce a variety of documents pertaining to the
allowability of certain costs under its contracts with the DoD
from October 1, 2003 to the present. The Company is
currently unable to predict what the outcome of the
investigation will be or the impact, if any, the investigation
may have on the Companys operating results, financial
condition,
and/or cash
flows. The Company intends to cooperate fully with the
investigation and is preparing its response to the subpoena.
The Company and its subsidiaries are subject to other legal
actions, governmental investigations, and proceedings relating
to a wide range of matters in addition to those discussed above.
While there can be no certainty regarding the outcome of any
litigation, investigation, or proceeding, after reviewing the
information that is currently available with respect to such
matters, we believe that any liability that may ultimately be
incurred with respect to these matters is not expected to
materially affect our consolidated financial condition. It is
possible that amounts incurred could be significant to our
results of operations or cash flows in any particular reporting
period.
|
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders
|
None.
27
PART II
|
|
Item 5.
|
Market
for Registrants Common Equity, Related Stockholders
Matters and Issuer Purchases of Equity Securities
|
As of January 20, 2010, there were 8,325 holders of record
of the common stock. On January 20, 2010, the last reported
sale price of our common stock on the New York Stock Exchange
was $6.39 per share.
Our Senior Credit Facility and
91/2% Notes
(described in Part II, Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations under the caption Liquidity and Capital
Resources) restricts the payment of dividends and we do
not anticipate paying cash dividends in the foreseeable future.
Information concerning long-term debt, including material
restrictions relating to payment of dividends on our common
stock appears in Part II, Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations under the caption Liquidity and Capital
Resources and in Part II, Item 8. Consolidated
Financial Statements and Supplementary Data at Note 5 in
Notes to Consolidated Financial Statements, which is
incorporated herein by reference. Information concerning
securities authorized for issuance under our equity compensation
plans appears in Part III, Item 12. Security Ownership
of Certain Beneficial Owners and Management and Related
Stockholder Matters under the caption Equity Compensation
Plan Information, which is incorporated herein by
reference.
Common
Stock
Our common stock is quoted on the New York Stock Exchange under
the trading symbol GY. The following table lists, on
a per share basis for the periods indicated, the high and low
closing sale prices for the common stock as reported by the New
York Stock Exchange:
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Price
|
|
Fiscal Year Ended November 30,
|
|
High
|
|
|
Low
|
|
|
2008
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
12.29
|
|
|
$
|
9.92
|
|
Second Quarter
|
|
$
|
11.50
|
|
|
$
|
7.91
|
|
Third Quarter
|
|
$
|
8.79
|
|
|
$
|
6.90
|
|
Fourth Quarter
|
|
$
|
8.85
|
|
|
$
|
1.98
|
|
2009
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
3.84
|
|
|
$
|
2.39
|
|
Second Quarter
|
|
$
|
2.91
|
|
|
$
|
1.88
|
|
Third Quarter
|
|
$
|
4.69
|
|
|
$
|
1.84
|
|
Fourth Quarter
|
|
$
|
8.99
|
|
|
$
|
4.29
|
|
28
Stock
Performance Graph
The following graph compares the cumulative total shareholder
returns on $100 invested in November 2004 assuming reinvestment
of dividends of our Common Stock with the cumulative total
return, assuming reinvestment of dividends, of (i) the
Standard & Poors 500 Composite Stock Price Index
(S&P 500 Index), and (ii) the
Standard & Poors 500 Aerospace &
Defense Index. The stock price performance shown on the graph is
not necessarily indicative of future performance.
Comparison
of Cumulative Total Shareholder Return
Among GenCorp, S&P 500 Index, and the S&P 500
Aerospace & Defense Index,
November 2004 through November 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
As of November 30,
|
Company/Index
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
GenCorp Inc.
|
|
|
$
|
100.00
|
|
|
|
$
|
108.63
|
|
|
|
$
|
82.15
|
|
|
|
$
|
71.98
|
|
|
|
$
|
17.01
|
|
|
|
$
|
46.46
|
|
S&P 500 Index
|
|
|
|
100.00
|
|
|
|
|
108.44
|
|
|
|
|
123.88
|
|
|
|
|
133.44
|
|
|
|
|
82.61
|
|
|
|
|
103.58
|
|
S&P 500 Aerospace & Defense
|
|
|
|
100.00
|
|
|
|
|
110.93
|
|
|
|
|
142.22
|
|
|
|
|
172.11
|
|
|
|
|
100.04
|
|
|
|
|
131.69
|
|
29
|
|
Item 6.
|
Selected
Financial Data
|
The following selected financial data is qualified by reference
to and should be read in conjunction with the Consolidated
Financial Statements, including the Notes thereto in
Item 8. Consolidated Financial Statements and Supplementary
Data, and Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(In millions, except per share amounts)
|
|
|
Net sales
|
|
$
|
795.4
|
|
|
$
|
742.3
|
|
|
$
|
745.4
|
|
|
$
|
621.1
|
|
|
$
|
622.4
|
|
Net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes
|
|
$
|
66.0
|
|
|
$
|
1.6
|
|
|
$
|
41.1
|
|
|
$
|
(39.0
|
)
|
|
$
|
(206.4
|
)
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(6.7
|
)
|
|
|
(0.1
|
)
|
|
|
27.9
|
|
|
|
2.4
|
|
|
|
(23.6
|
)
|
Cumulative effect of changes in accounting principles, net of
income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
59.3
|
|
|
$
|
1.5
|
|
|
$
|
69.0
|
|
|
$
|
(38.5
|
)
|
|
$
|
(230.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes
|
|
$
|
1.12
|
|
|
$
|
0.03
|
|
|
$
|
0.73
|
|
|
$
|
(0.70
|
)
|
|
$
|
(3.78
|
)
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
0.50
|
|
|
|
0.04
|
|
|
|
(0.43
|
)
|
Cumulative effect of changes in accounting principles, net of
income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1.01
|
|
|
$
|
0.03
|
|
|
$
|
1.23
|
|
|
$
|
(0.69
|
)
|
|
$
|
(4.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes
|
|
$
|
1.07
|
|
|
$
|
0.03
|
|
|
$
|
0.71
|
|
|
$
|
(0.70
|
)
|
|
$
|
(3.78
|
)
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
0.43
|
|
|
|
0.04
|
|
|
|
(0.43
|
)
|
Cumulative effect of changes in accounting principles, net of
income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
0.97
|
|
|
$
|
0.03
|
|
|
$
|
1.14
|
|
|
$
|
(0.69
|
)
|
|
$
|
(4.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other financial data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
935.7
|
|
|
$
|
1,005.7
|
|
|
$
|
995.2
|
|
|
$
|
1,021.4
|
|
|
$
|
1,057.4
|
|
Long-term debt, including current maturities
|
|
$
|
438.6
|
|
|
$
|
440.6
|
|
|
$
|
446.3
|
|
|
$
|
462.4
|
|
|
$
|
443.9
|
|
30
|
|
Item 7.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
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 (GAAP).
We begin Managements 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 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 U.S. Primary customers served include major prime
contractors to the U.S. government, the DoD, and 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 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 business. On November 30, 2005, we completed the
sale of our Fine Chemicals business. The remaining subsidiaries
after the sale of GDX Automotive, including Snappon SA, and the
Fine Chemicals business are classified as discontinued
operations in the Notes to Consolidated Financial Statements.
Business
Outlook
Retirement Benefits We estimate that our
non-cash net periodic benefit expense will be approximately
$42 million in fiscal 2010 compared to income of
$11.9 million in fiscal 2009. The significant increase in
net periodic benefit expense is primarily due to a higher
benefit obligation at November 30, 2009 and lower
investment returns. The increased retirement benefit obligation
was primarily related to a decrease in the discount rate used to
determine that liability.
New Accounting Guidance on Convertible Debt
Securities During the first quarter of fiscal
2010, we will adopt new authoritative guidance which applies to
convertible debt securities that, upon conversion, may be
settled by the issuer fully or partially in cash. Under this new
guidance, an entity must separately account for the liability
and equity components of convertible debt securities that may be
settled entirely or partially in cash upon conversion in a
manner that reflects the issuers economic interest cost.
The effect of the new guidance on the
31
accounting for convertible debt securities that are affected is
that the equity component would be included in the additional
paid-in capital section of shareholders deficit on our
consolidated balance sheets and the value of the equity
component would be treated as original issue discount for
purposes of accounting for the debt component of convertible
debt securities. We expect to report a significant increase in
non-cash interest expense beginning in the first quarter of
fiscal 2010 because this guidance requires interest to include
both the current periods amortization of the debt discount
and the instruments coupon interest.
Results
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Net sales
|
|
$
|
795.4
|
|
|
$
|
742.3
|
|
|
$
|
745.4
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of items shown separately below)
|
|
|
674.0
|
|
|
|
645.4
|
|
|
|
657.8
|
|
Selling, general and administrative
|
|
|
10.2
|
|
|
|
1.9
|
|
|
|
14.4
|
|
Depreciation and amortization
|
|
|
31.3
|
|
|
|
28.3
|
|
|
|
28.4
|
|
Other expense (income), net
|
|
|
2.9
|
|
|
|
7.6
|
|
|
|
(2.6
|
)
|
Unusual items
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder agreement and related costs
|
|
|
|
|
|
|
16.8
|
|
|
|
|
|
Executive severance agreements
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plan amendment
|
|
|
|
|
|
|
14.6
|
|
|
|
|
|
Legal settlements and estimated loss on legal matters
|
|
|
1.3
|
|
|
|
2.9
|
|
|
|
3.8
|
|
Customer reimbursement of tax matters
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
Loss on extinguishment of debt
|
|
|
0.2
|
|
|
|
|
|
|
|
0.6
|
|
Gain on settlement and recoveries
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
723.0
|
|
|
|
716.3
|
|
|
|
698.7
|
|
Operating income
|
|
|
72.4
|
|
|
|
26.0
|
|
|
|
46.7
|
|
Non-operating (income) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
25.9
|
|
|
|
27.7
|
|
|
|
28.6
|
|
Interest income
|
|
|
(1.9
|
)
|
|
|
(4.2
|
)
|
|
|
(4.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating expense, net
|
|
|
24.0
|
|
|
|
23.5
|
|
|
|
23.7
|
|
Income from continuing operations before income taxes
|
|
|
48.4
|
|
|
|
2.5
|
|
|
|
23.0
|
|
Income tax (benefit) provision
|
|
|
(17.6
|
)
|
|
|
0.9
|
|
|
|
(18.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
66.0
|
|
|
|
1.6
|
|
|
|
41.1
|
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(6.7
|
)
|
|
|
(0.1
|
)
|
|
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59.3
|
|
|
$
|
1.5
|
|
|
$
|
69.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Net sales
|
|
$
|
795.4
|
|
|
$
|
742.3
|
|
|
$
|
53.1
|
|
|
$
|
742.3
|
|
|
$
|
745.4
|
|
|
$
|
(3.1
|
)
|
|
|
|
* |
|
Primary reason for change. The increase in net
sales volume in fiscal 2009 compared to fiscal 2008 was
primarily the result of growth in the various Standard Missile
programs 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, 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 (see Note 1 in Notes to
Consolidated Financial Statements). |
|
** |
|
Primary reason for change. The decrease in net
sales volume for fiscal 2008 compared to fiscal 2007 was
primarily the result of the close-out activities of the Titan
program in fiscal 2007 partially offset by the sale of |
32
|
|
|
|
|
our Sacramento Land for $10.0 million in the second quarter
of fiscal 2008. In addition, fiscal 2008 includes an additional
week of operations in the first quarter of fiscal 2008 resulting
in $19.1 million in sales. |
Customers that represented more than 10% of net sales for the
fiscal years presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
2009
|
|
2008
|
|
2007
|
|
Raytheon
|
|
|
31
|
%
|
|
|
27
|
%
|
|
|
28
|
%
|
Lockheed Martin
|
|
|
26
|
|
|
|
26
|
|
|
|
28
|
|
Sales in fiscal 2009, 2008, and 2007 directly and indirectly to
the U.S. government and its agencies, including sales to
our significant customers discussed above, totaled
$701.3 million, $641.7 million, and
$665.9 million, respectively. The demand for certain of our
services and products is directly related to the level of
funding of government programs.
During fiscal 2009, approximately 51% of our net sales were from
fixed-price contracts, 37% from cost reimbursable contracts, and
12% from other sales including commercial contracts and real
estate activities.
Operating
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Operating income
|
|
$
|
72.4
|
|
|
$
|
26.0
|
|
|
$
|
46.4
|
|
|
$
|
26.0
|
|
|
$
|
46.7
|
|
|
$
|
(20.7
|
)
|
Percentage of net sales
|
|
|
9.1
|
%
|
|
|
3.5
|
%
|
|
|
|
|
|
|
3.5
|
%
|
|
|
6.3
|
%
|
|
|
|
|
|
|
|
* |
|
Primary reason for change. The improved
operating income for fiscal 2009 compared to fiscal 2008 was due
to the following: |
|
|
|
|
|
Decrease of $28.5 million in unusual charges. See
discussion of Unusual Items below.
|
|
|
|
Decrease of $19.9 million in retirement benefit 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.
|
|
|
|
Decrease of $6.6 million in environmental remediation costs
primarily due to the following: (i) an increase of
$2.4 million of environmental remediation obligations in
fiscal 2008 related to our legacy divested businesses and
(ii) an increase in unrecoverable environmental remediation
obligations at our Sacramento site primarily related to higher
water remediation obligations recognized in fiscal 2008.
|
|
|
|
Higher net sales and favorable contract performance on numerous
programs as a result of lower non-reimbursable overhead spending
in fiscal 2009 compared to fiscal 2008 and other resulting in a
$1.0 million increase in operating income.
|
The factors discussed above were partially offset by the
following:
|
|
|
|
|
The sale of 400 acres of our Sacramento Land in the second
quarter of fiscal 2008 resulting in a gain of $6.8 million.
|
|
|
|
Increase of $2.8 million in amortization due to the change
in the fourth quarter of fiscal 2008 in the estimated life of
the deferred financing costs for the 4% Notes and
21/4% Debentures.
|
|
|
** |
Primary reason for change. The decline in
operating income in fiscal 2008 compared to fiscal 2007 was
primarily due to the following:
|
|
|
|
|
|
Increase of $32.4 million in unusual charges. See
discussion of Unusual Items below.
|
|
|
|
Increase of $8.6 million in environmental remediation costs
primarily due to the following: (i) an increase of
$3.3 million of environmental remediation obligations in
fiscal 2008 related to our legacy divested businesses and
(ii) an increase in unrecoverable environmental remediation
obligations at our Sacramento site primarily
|
33
|
|
|
|
|
related to higher water remediation obligations in fiscal 2008.
In addition, $0.1 million of other costs decreased
operating performance 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 primarily related to an increase in the discount
rate used to determine benefit obligations and a reduction in
the impact of amortizing prior years actuarial losses.
|
|
|
|
The sale of 400 acres of our Sacramento Land in the second
quarter of fiscal 2008 resulting in a gain of $6.8 million.
|
Cost
of Sales (exclusive of items shown separately
below)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Cost of sales (exclusive of items shown separately below)
|
|
$
|
674.0
|
|
|
$
|
645.4
|
|
|
$
|
28.6
|
|
|
$
|
645.4
|
|
|
$
|
657.8
|
|
|
$
|
(12.4
|
)
|
Percentage of net sales
|
|
|
84.7
|
%
|
|
|
86.9
|
%
|
|
|
|
|
|
|
86.9
|
%
|
|
|
88.2
|
%
|
|
|
|
|
|
|
|
* |
|
Primary reason for change. The decrease in the
cost of sales as a percentage of net sales in fiscal 2009
compared to fiscal 2008 was primarily due to the following:
(i) a decrease of $23.6 million of non-cash aerospace
and defense retirement benefit plan expense and
(ii) favorable contract performance and lower
non-reimbursable overhead spending in fiscal 2009 compared to
fiscal 2008, partially offset by the recognition of a
$6.8 million gain on the sale of 400 acres of our
Sacramento Land in the second quarter of fiscal 2008. |
|
** |
|
Primary reason for change. The decrease in the
cost of sales as a percentage of net sales in fiscal 2008
compared to fiscal 2007 was primarily due to the following:
(i) a decrease of $8.1 million of non-cash aerospace
and defense retirement benefit plan expense and (ii) the
recognition of a $6.8 million gain on the sale of
400 acres of our Sacramento Land in the second quarter of
fiscal 2008; offset by the favorable performance on the
close-out of the Titan program in fiscal 2007. Additionally, the
cost of sales in fiscal 2008 included favorable contract
performance on the Atlas V program offset by declines in other
programs. |
Selling,
general and administrative (SG&A)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Selling, general and administrative
|
|
$
|
10.2
|
|
|
$
|
1.9
|
|
|
$
|
8.3
|
|
|
$
|
1.9
|
|
|
$
|
14.4
|
|
|
$
|
(12.5
|
)
|
Percentage of net sales
|
|
|
1.3
|
%
|
|
|
0.3
|
%
|
|
|
|
|
|
|
0.3
|
%
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
* |
|
Primary reason for change. The increase in
SG&A expense in fiscal 2009 compared to fiscal 2008 was
primarily the result of the following: (i) an increase of
$5.1 million in stock-based compensation due to the
increase in the fair value of stock appreciation rights in 2009
and (ii) an increase of $3.7 million in non-cash
corporate retirement benefit plan expense, partially offset by a
decrease of $0.5 million in other net SG&A costs. |
|
** |
|
Primary reason for change. The decrease in
SG&A expense in fiscal 2008 compared to fiscal 2007 was
primarily the result of the following: (i) decrease of
$5.7 million in personnel related costs including a
$3.7 million decrease primarily related to the reversal of
previously recognized stock-based compensation expense due to
the lower fair value of the stock appreciation rights, decrease
of $1.3 million in salaries and management incentives, and
decrease of $0.7 million in workers compensation
costs; (ii) decrease of $5.5 million in non-cash
corporate retirement benefit plan expenses; and
(iii) decrease of $1.3 million in other SG&A
costs including a decrease of $1.1 million in legal related
costs primarily related to vinyl chloride legal settlements in
fiscal 2007 and a $0.2 million net decrease in other costs. |
34
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Depreciation and amortization
|
|
$
|
31.3
|
|
|
$
|
28.3
|
|
|
$
|
3.0
|
|
|
$
|
28.3
|
|
|
$
|
28.4
|
|
|
$
|
(0.1
|
)
|
Percentage of net sales
|
|
|
3.9
|
%
|
|
|
3.8
|
%
|
|
|
|
|
|
|
3.8
|
%
|
|
|
3.8
|
%
|
|
|
|
|
|
|
|
* |
|
Primary reason for change. The increase in
depreciation and amortization expense was primarily due to a
reduction in the estimated life of the deferred financing costs
for the 4% Notes and
21/4% Debentures. |
|
** |
|
Primary reason for change. Depreciation and
amortization expense was essentially unchanged for fiscal 2008
and 2007. |
Other
expense (income), net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Other expense (income), net
|
|
$
|
2.9
|
|
|
$
|
7.6
|
|
|
$
|
(4.7
|
)
|
|
$
|
7.6
|
|
|
$
|
(2.6
|
)
|
|
$
|
10.2
|
|
|
|
|
* |
|
Primary reason for change. The decrease in
other expense (income), net was primarily due to lower estimated
future environmental remediation obligations in fiscal 2009
compared to fiscal 2008. See additional information of
environmental remediation provision adjustments under the
caption Environmental Matters below. |
|
** |
|
Primary reason for change. The increase in
other expense (income), net was primarily due to higher
estimated future environmental remediation obligations in fiscal
2008 compared to fiscal 2007. See additional information of
environmental remediation provision adjustments under the
caption Environmental Matters below. |
Unusual
Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Unusual items
|
|
$
|
4.6
|
|
|
$
|
33.1
|
|
|
$
|
(28.5
|
)
|
|
$
|
33.1
|
|
|
$
|
0.7
|
|
|
$
|
32.4
|
|
|
|
|
* |
|
Primary reason for change. A summary of the unusual item
charges is shown below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Aerospace and Defense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal settlements and estimated loss on legal matters
|
|
$
|
1.3
|
|
|
$
|
2.9
|
|
|
$
|
3.8
|
|
Customer reimbursements of tax recoveries
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
Defined benefit pension plan amendment
|
|
|
|
|
|
|
13.6
|
|
|
|
|
|
Gain on recoveries
|
|
|
|
|
|
|
|
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and defense unusual items
|
|
|
1.3
|
|
|
|
16.5
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive severance agreements
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
0.2
|
|
|
|
|
|
|
|
0.6
|
|
Gain on settlement
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
|
|
Defined benefit pension plan amendment
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
Shareholder agreement and related costs
|
|
|
|
|
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate unusual items
|
|
|
3.3
|
|
|
|
16.6
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unusual items
|
|
$
|
4.6
|
|
|
$
|
33.1
|
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
In fiscal 2009, we recorded a charge of $1.3 million for
realized losses and interest associated with our failure to
register with the SEC the issuance of certain of our common
shares under our defined contribution 401(k) employee benefit
plan. During fiscal 2009, we also incurred a charge of
$3.1 million associated with executive severance
agreements. Additionally, we recorded costs of $0.2 million
related to a bank amendment.
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 all current salaried
employees. No employees lost their previously earned pension
benefit. As a result of the defined benefit pension plan
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 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, during the fourth quarter of fiscal
2008, we incurred a charge of $3.0 million associated with
two executive severance agreements. The charges were comprised
of the following (in millions):
|
|
|
|
|
Increases in pension benefits primarily for certain of our
officers
|
|
$
|
5.3
|
|
Executive severance charges
|
|
|
7.1
|
|
Accelerated vesting of stock appreciation rights
|
|
|
1.1
|
|
Accelerated vesting of restricted stock, service-based
|
|
|
0.6
|
|
Accelerated vesting of restricted stock, performance-based
|
|
|
0.7
|
|
Professional fees and other
|
|
|
2.0
|
|
|
|
|
|
|
|
|
$
|
16.8
|
|
|
|
|
|
|
As a result of the Shareholder Agreement, the executive
severance agreements required us to fund into a grantor trust on
March 12, 2008, an amount equal to $34.8 million,
which represents liabilities associated with the Benefits
Restoration Plan Pension and Savings Plans (BRP) and
amounts payable to certain officers party to executive severance
agreements in the event of qualifying terminations of employment
following a change in control (as defined in the BRP and the
executive severance agreements). In addition, as a result of the
resignation of three additional Board members on May 16,
2008, we were required to fund $0.4 million into a grantor
trust on May 22, 2008, which primarily represents the
amount payable to an officer party to an executive severance
agreement in the event of a qualifying termination of employment.
In fiscal 2008, we recorded a charge of $2.9 million
related to the estimated unrecoverable costs of legal matters,
including $1.7 million associated with the failure to
register with the SEC the issuance of certain of our common
shares under our defined contribution 401(k) employee benefit
plan and $1.2 million related to a legal settlement and
other legal matters. We also recorded a $1.2 million gain
related to an insurance settlement for an environmental claim.
In fiscal 2007, we recorded an expense of $3.8 million
related to estimated costs associated with environmental toxic
tort legal matters. We recorded an expense of $2.3 million
for tax refunds that were repaid to our defense customers. We
also recorded a gain of $6.0 million related to an
adjustment of reserves for the allocation of pension benefit
costs to U.S. government contracts. We incurred a charge of
$0.6 million associated with the replacement of the
previous credit facility.
Interest
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change*
|
|
|
(In millions)
|
|
Interest expense
|
|
$
|
25.9
|
|
|
$
|
27.7
|
|
|
$
|
(1.8
|
)
|
|
$
|
27.7
|
|
|
$
|
28.6
|
|
|
$
|
(0.9
|
)
|
|
|
|
* |
|
Primary reason for change. The decrease in
interest expense was primarily due to lower average interest
rates on variable rate debt. |
36
Interest
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Interest income
|
|
$
|
1.9
|
|
|
$
|
4.2
|
|
|
$
|
(2.3
|
)
|
|
$
|
4.2
|
|
|
$
|
4.9
|
|
|
$
|
(0.7
|
)
|
|
|
|
* |
|
Primary reason for change. The decline in
interest income was primarily due to lower average rates
partially offset by higher average cash balances in fiscal 2009
compared to fiscal 2008. |
|
** |
|
Primary reason for change. The decline in
interest income was primarily due to lower average cash balances
and rates in fiscal 2008 compared to fiscal 2007. |
Income
tax (benefit) provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
|
|
(In millions)
|
|
|
|
Income tax (benefit) provision
|
|
$
|
(17.6
|
)
|
|
$
|
0.9
|
|
|
$
|
(18.1
|
)
|
The income tax benefit of $17.6 million in fiscal 2009 was
primarily related to new guidance that was published by the
Chief Counsels Office of the Internal Revenue Service
(IRS) in December 2008 clarifying which costs
qualify for ten-year carryback of tax net operating losses for
refund of prior years taxes. As a result of the clarifying
language, during the first quarter of fiscal 2009, we recorded
an income tax benefit of $19.7 million, of which
$14.5 million was for the release of the valuation
allowance associated with the utilization of the qualifying tax
net operating losses and $5.2 million was for the
recognition of affirmative claims related to previous uncertain
tax positions associated with prior years refund claims related
to the qualifying costs.
In fiscal 2008, although we generated $2.5 million in
income from continuing operations, we had a tax loss primarily
related to the impact of a fiscal 2008 change in tax method of
accounting adopted for unbilled receivables. The new tax method
of accounting adopted in fiscal 2008 in accordance with guidance
published by the IRS defers such revenue until the all events
test is met for tax purposes. The fiscal 2008 tax net operating
loss from continuing operations resulted in an income tax
benefit of $9.5 million for carryback to prior years and a
refund of previously paid taxes. Due to the tightening of the
credit market in the fourth quarter of fiscal 2008, a tax
planning strategy relied on for realizability of a portion of
the deferred tax assets ceased to be prudent and feasible,
resulting in a charge to deferred income tax expense of
$8.0 million and a corresponding increase to the valuation
allowance.
Our income tax benefit in fiscal 2007 reflects a
$6.3 million benefit from continuing operations for the
carryback of current and prior year losses resulting in refunds
of previously paid taxes and a $12.2 million benefit
primarily from U.S. federal and state income tax
settlements including research and development credit claim
benefits, manufacturers investment credit claim benefits,
and certain statute expirations, which was partially offset by
$0.4 million of current state tax expense.
The year of expiration for our state and U.S. federal net
operating loss carryforwards as of November 30, 2009 is as
follows:
|
|
|
|
|
|
|
|
|
Year Ended November 30,
|
|
State
|
|
|
Federal
|
|
|
|
(In millions)
|
|
|
2016
|
|
$
|
35.8
|
|
|
$
|
|
|
2017
|
|
|
130.3
|
|
|
|
|
|
2018
|
|
|
28.9
|
|
|
|
|
|
2019
|
|
|
15.1
|
|
|
|
|
|
2020
|
|
|
19.9
|
|
|
|
|
|
2024
|
|
|
|
|
|
|
28.5
|
|
2025
|
|
|
|
|
|
|
122.3
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
230.0
|
|
|
$
|
150.8
|
|
|
|
|
|
|
|
|
|
|
37
Approximately $9.2 million of the net operating loss
carryforward relates to the exercise of stock options, the
benefit of which will be credited to equity when realized. In
addition, we also have U.S. federal and state capital loss
carryforwards of approximately $7.8 million and
$0.2 million, respectively, which will begin to expire in
fiscal 2010. The decrease in capital loss carryforwards from the
previous fiscal year was the result of:
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
Federal
|
|
|
|
(In millions)
|
|
|
Utilization
|
|
$
|
44.7
|
|
|
$
|
41.8
|
|
Expiration
|
|
|
18.0
|
|
|
|
110.2
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62.7
|
|
|
$
|
152.0
|
|
|
|
|
|
|
|
|
|
|
We also have a U.S. federal research credit carryforward of
$7.2 million which begins expiring in fiscal 2021, and a
California research credit carryforward of $4.1 million
which has an indefinite carryforward period. Additionally, we
have a California manufacturing investment credit carryforward
of $0.6 million which will begin to expire in fiscal 2011;
and a foreign tax credit carryforward of $5.9 million which
will begin to expire in fiscal 2010, if not utilized. These tax
carryforwards are subject to examination by the tax authorities.
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. An expense of
$1.0 million was recorded during fiscal 2005 primarily
related to employee social costs that became estimable in fiscal
2005. During fiscal 2009, an expense of approximately
$4.1 million (2.9 million) was recorded related
to legal judgments rendered against Snappon SA under French law,
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
clerks office of the Paris Commercial Court (see
Note 7(b) in Notes to Consolidated Financial Statements).
During the first quarter of fiscal 2007, we entered into an
earn-out and seller note repayment agreement (Repayment
Agreement) with American Pacific Corporation
(AMPAC) under which AMPAC was required to pay
$29.7 million in consideration for the early retirement of
the seller note (including interest due thereunder), the full
payment of the earn-out amount and the release of certain
liabilities related to the sale of our Fine Chemicals business
on November 30, 2005. During the first quarter of fiscal
2007, we recorded a gain from discontinued operations of
$31.2 million as a result of receiving $29.7 million
of cash from AMPAC and being released from certain liabilities
in accordance with the Repayment Agreement.
Summarized financial information for discontinued operations is
set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
2009
|
|
2008
|
|
2007
|
|
|
(In millions)
|
|
Net sales
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
(Loss) income before income taxes
|
|
|
(6.7
|
)
|
|
|
(0.2
|
)
|
|
|
28.9
|
|
Income tax (benefit) provision
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
1.0
|
|
(Loss) income from discontinued operations
|
|
|
(6.7
|
)
|
|
|
(0.1
|
)
|
|
|
27.9
|
|
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
38
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 Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Net Sales
|
|
$
|
787.2
|
|
|
$
|
725.5
|
|
|
$
|
61.7
|
|
|
$
|
725.5
|
|
|
$
|
739.1
|
|
|
$
|
(13.6
|
)
|
Segment Performance
|
|
|
90.3
|
|
|
|
40.8
|
|
|
|
49.5
|
|
|
|
40.8
|
|
|
|
61.3
|
|
|
|
(20.5
|
)
|
|
|
|
* |
|
Primary reason for change. The increase in net
sales volume in fiscal 2009 compared to fiscal 2008 was
primarily the result of growth in the various Standard Missile
programs 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 in fiscal 2009 as compared
to fiscal 2008 was primarily the result of: (i) a decrease
of $23.6 million in non-cash retirement benefit plan
expense in fiscal 2009; (ii) decrease of $15.2 million
in unusual charges in fiscal 2009 primarily related to the
freeze of the defined benefit pension plan in fiscal 2008;
(iii) a decrease of $4.3 million for estimated future
environmental remediation obligations in fiscal 2009; and
(iv) favorable contract performance on higher net sales and
other in fiscal 2009 resulting in a $6.4 million increase
in segment performance.
|
|
|
** |
|
Primary reason for change. Aerojet reports its
fiscal year sales and income under a 52/53 week accounting
convention. Fiscal 2008 was 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. |
The decrease in segment performance in fiscal 2008 compared to
fiscal 2007 was 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.
Real
Estate Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
|
|
2009
|
|
2008
|
|
Change*
|
|
2008
|
|
2007
|
|
Change**
|
|
|
(In millions)
|
|
Net Sales
|
|
$
|
8.2
|
|
|
$
|
16.8
|
|
|
$
|
(8.6
|
)
|
|
$
|
16.8
|
|
|
$
|
6.3
|
|
|
$
|
10.5
|
|
Segment Performance
|
|
|
4.4
|
|
|
|
10.3
|
|
|
|
(5.9
|
)
|
|
|
10.3
|
|
|
|
3.5
|
|
|
|
6.8
|
|
|
|
|
* |
|
Primary reason for change. The decreases in
sales and segment performance in fiscal 2009 compared to fiscal
2008 were primarily due to the sale of 400 acres of our
Sacramento Land for $10.0 million in fiscal 2008 resulting
in a gain of $6.8 million, partially offset by a
$1.8 million land sale in fiscal 2009 resulting in a gain
of $0.6 million. |
|
** |
|
Primary reason for change. The increases in
sales and segment performance were primarily due to the sale of
400 acres of the Sacramento Land for $10.0 million in
cash during fiscal 2008. |
Environmental
Matters
Our policy is to conduct our businesses with due regard for the
preservation and protection of the environment. We devote a
significant amount of resources and management attention to
environmental matters and actively manage our ongoing processes
to comply with environmental laws and regulations. We are
involved in the
39
remediation of environmental conditions that resulted from
generally accepted manufacturing and disposal practices at
certain plants in the 1950s and 1960s. In addition, we have been
designated a potentially responsible party with other companies
at third party sites undergoing investigation and remediation.
Estimating environmental remediation costs is difficult due to
the significant uncertainties inherent in these activities,
including the extent of remediation required, changing
governmental regulations and legal standards regarding
liability, evolving technologies and the long period of time
over which most remediation efforts take place. We:
|
|
|
|
|
accrue for costs associated with the remediation of
environmental pollution when it becomes probable that a
liability has been incurred and when our proportionate share of
the costs can be reasonably estimated. In some cases, only a
range of reasonably possible costs can be estimated. In
establishing our reserves, the most probable estimate is used
when determinable and the minimum estimate is used when no
single amount is more probable; and
|
|
|
|
record related estimated recoveries when such recoveries are
deemed probable.
|
In addition to the costs associated with environmental
remediation discussed above, we incur expenditures for recurring
costs associated with managing hazardous substances or
pollutants in ongoing operations which totaled $8.4 million
in fiscal 2009, $13.5 million in fiscal 2008, and
$6.3 million in fiscal 2007.
Reserves
We review on a quarterly basis estimated future remediation
costs that could be incurred over the contractual term or next
fifteen years of the expected remediation. We have an
established practice of estimating environmental remediation
costs over a fifteen year period, except for those environmental
remediation costs with a specific contractual term. As the
period for which estimated environmental remediation costs
increases, the reliability of such estimates decrease. These
estimates consider the investigative work and analysis of
engineers, outside environmental consultants, and the advice of
legal staff regarding the status and anticipated results of
various administrative and legal proceedings. In most cases,
only a range of reasonably possible costs can be estimated. In
establishing our reserves, the most probable estimate is used
when determinable; otherwise, the minimum amount is used when no
single amount in the range is more probable. Accordingly, such
estimates can change as we periodically evaluate and revise such
estimates as new information becomes available. We cannot
predict whether new information gained as projects progress will
affect the estimated liability accrued. The timing of payment
for estimated future environmental costs is influenced by a
number of factors such as the regulatory approval process, the
time required to design the process, the time to construct the
process, and the time required to conduct the remedy itself.
A summary of our environmental reserve activity is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Environmental
|
|
|
|
Aerojet
|
|
|
Other
|
|
|
Reserve
|
|
|
|
(In millions)
|
|
|
November 30, 2006
|
|
$
|
256.5
|
|
|
$
|
9.5
|
|
|
$
|
266.0
|
|
Fiscal 2007 additions
|
|
|
57.9
|
|
|
|
2.5
|
|
|
|
60.4
|
|
Fiscal 2007 expenditures
|
|
|
(54.9
|
)
|
|
|
(1.5
|
)
|
|
|
(56.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2007
|
|
|
259.5
|
|
|
|
10.5
|
|
|
|
270.0
|
|
Fiscal 2008 additions
|
|
|
39.8
|
|
|
|
5.8
|
|
|
|
45.6
|
|
Fiscal 2008 expenditures
|
|
|
(54.1
|
)
|
|
|
(3.3
|
)
|
|
|
(57.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008
|
|
|
245.2
|
|
|
|
13.0
|
|
|
|
258.2
|
|
Fiscal 2009 additions
|
|
|
19.9
|
|
|
|
3.6
|
|
|
|
23.5
|
|
Fiscal 2009 expenditures
|
|
|
(54.0
|
)
|
|
|
(5.0
|
)
|
|
|
(59.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2009
|
|
$
|
211.1
|
|
|
$
|
11.6
|
|
|
$
|
222.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
As of November 30, 2009, the Aerojet reserves include
$152.5 million for the Sacramento site, $47.8 million
for the Baldwin Park Operable Unit, and $10.8 million for
other Aerojet reserves.
The effect of the final resolution of environmental matters and
our obligations for environmental remediation and compliance
cannot be accurately predicted due to the uncertainty concerning
both the amount and timing of future expenditures and due to
regulatory or technological changes. We believe, on the basis of
presently available information, that the resolution of
environmental matters and our obligations for environmental
remediation and compliance will not have a material adverse
effect on our results of operations, liquidity or financial
condition. We will continue our efforts to mitigate past and
future costs through pursuit of claims for recoveries from
insurance coverage and other PRPs and continued investigation of
new and more cost effective remediation alternatives and
associated technologies.
As part of the acquisition of the Atlantic Research Corporation
(ARC) propulsion business, Aerojet entered into an
agreement with ARC pursuant to which Aerojet is responsible for
up to $20.0 million of costs (Pre-Close Environmental
Costs) associated with environmental issues that arose
prior to Aerojets acquisition of the ARC propulsion
business. Pursuant to a separate agreement with the
U.S. government which was entered into prior to the
completion of the ARC acquisition, these Pre-Close Environmental
Costs are not subject to the 88% limitation under the Global
Settlement, and are recovered through the establishment of
prices for Aerojets products and services sold to the
U.S. government. A summary of the Pre-Close Environmental
Costs is shown below (in millions):
|
|
|
|
|
Pre-Close Environmental Costs
|
|
$
|
20.0
|
|
Amount spent through November 30, 2009
|
|
|
(9.5
|
)
|
Amount included as a component of reserves for environmental
remediation costs in the consolidated balance sheet as of
November 30, 2009
|
|
|
(0.9
|
)
|
|
|
|
|
|
Remaining Pre-Close Environmental Costs
|
|
$
|
9.6
|
|
|
|
|
|
|
Estimated
Recoveries
On January 12, 1999, Aerojet and the U.S. government
implemented the October 1997 Agreement in Principle
(Global Settlement) resolving certain prior
environmental and facility disagreements, with retroactive
effect to December 1, 1998. Under the Global Settlement,
Aerojet and the U.S. government resolved disagreements
about an appropriate cost-sharing ratio with respect to the
clean up costs of the environmental contamination at the
Sacramento and Azusa sites. The Global Settlement provides that
the cost-sharing ratio will continue until further modified by
Aerojet and the U.S. government. Additionally, in
conjunction with the sale of the EIS business in 2001 to
Northrop, Aerojet entered into an agreement with Northrop
(Northrop Agreement) whereby Aerojet is reimbursed
by Northrop for a portion of environmental expenditures eligible
for recovery under the Global Settlement, subject to annual and
cumulative limitations. The current annual billing limitation to
Northrop is $8.0 million, which is reduced to
$6.0 million beginning in fiscal 2011.
Pursuant to the Global Settlement covering environmental costs
associated with Aerojets Sacramento site and its former
Azusa site, we can recover up to 88% of our environmental
remediation costs for these sites through the establishment of
prices for Aerojets products and services sold to the
U.S. government. Allowable environmental costs are charged
to these contracts as the costs are incurred. Aerojets mix
of contracts can affect the actual reimbursement made by the
U.S. government. Because these costs are recovered through
forward-pricing arrangements, the ability of Aerojet to continue
recovering these costs from the U.S. government depends on
Aerojets sustained business volume under
U.S. government contracts and programs and the relative
size of Aerojets commercial business. Annually, we
evaluate Aerojets forecasted business volume under
U.S. government contracts and programs and the relative
size of Aerojets commercial business as part of our
long-term business review. In fiscal 2007, as a result of a
forecasted increase in U.S government contracts and programs
volume, future recoverable amounts from the U.S. government
increased; accordingly, we recorded a benefit of
$8.6 million in fiscal 2007.
Pursuant to the Northrop Agreement, environmental expenditures
to be reimbursed are subject to annual limitations, with excess
amounts carried over to subsequent periods, the total
reimbursements are limited to a
41
ceiling of $189.7 million over the term of the agreement,
which ends in 2028. A summary of the Northrop Agreement activity
is shown below (in millions):
|
|
|
|
|
Total reimbursable costs under the Northrop Agreement
|
|
$
|
189.7
|
|
Amount reimbursed to us through November 30, 2009
|
|
|
(74.2
|
)
|
|
|
|
|
|
Potential future cost reimbursements available
|
|
|
115.5
|
|
Receivable from Northrop in excess of the annual limitation
included as a component of other noncurrent assets in the
Consolidated Balance Sheet as of November 30, 2009
|
|
|
(53.4
|
)
|
Amounts recoverable from Northrop in future periods included as
a component of recoverable from the U.S. government and other
third parties for environmental remediation costs in the
Consolidated Balance Sheet as of November 30, 2009
|
|
|
(55.7
|
)
|
|
|
|
|
|
Potential future recoverable amounts available under the
Northrop Agreement
|
|
$
|
6.4
|
|
|
|
|
|
|
We believe that we may reach the cumulative limitation under the
Northrop Agreement within the next twelve (12) months.
While we are seeking an arrangement with the
U.S. government to recover environmental expenditures in
excess of the current reimbursement ceiling identified in the
Northrop Agreement, there can be no assurances that such a
recovery will be obtained, or if not obtained, that such
unreimbursed environmental expenditures will not have a
materially adverse effect on our operating results, financial
condition,
and/or cash
flows.
Environmental
reserves and recoveries impact to Consolidated Statement of
Operations
The expenses and benefits associated with adjustments to the
environmental reserves are recorded as a component of other
(income) expense, net in the Consolidated Statements of
Operations. Summarized financial information for the impact of
environmental reserves and recoveries to the Consolidated
Statements of Operations is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Estimated
|
|
Estimated
|
|
Recoverable
|
|
Charge to
|
|
Total
|
|
|
Recoverable
|
|
Recoverable
|
|
Amounts Under
|
|
Consolidated
|
|
Environmental
|
|
|
Amounts from
|
|
Amounts from
|
|
U.S. Government
|
|
Statement of
|
|
Reserve
|
|
|
Northrop
|
|
U.S. Government
|
|
Contracts
|
|
Operations
|
|
Additions
|
|
|
|
|
|
|
(In millions)
|
|
|
|
|
|
Fiscal 2009
|
|
$
|
4.8
|
|
|
$
|
14.6
|
|
|
$
|
19.4
|
|
|
$
|
4.1
|
|
|
$
|
23.5
|
|
Fiscal 2008
|
|
|
9.7
|
|
|
|
25.2
|
|
|
|
34.9
|
|
|
|
10.7
|
|
|
|
45.6
|
|
Fiscal 2007(1)
|
|
|
12.0
|
|
|
|
46.3
|
|
|
|
58.3
|
|
|
|
2.1
|
|
|
|
60.4
|
|
|
|
|
(1) |
|
In fiscal 2007, the net charge of $2.1 million includes a
benefit of $8.6 million due to a decrease in the forecasted
commercial business base. |
Adoption
of New Accounting Principles
On December 1, 2007, we adopted the new standards that
specified the accounting for uncertainty in income taxes. 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.
On December 1, 2007, we adopted new standards that
specified fair value measurements for financial instruments.
Although the adoption of the new standards did not materially
impact our financial condition, results of operations, or cash
flows, we are now required to provide additional disclosures in
the notes to our financial statements.
On December 1, 2007, we adopted the new standards related
to accounting for the fair value option for financial assets and
liabilities. At the date of adoption, we did not elect to use
the fair value option for any of our
42
outstanding financial assets or liabilities. Accordingly, the
adoption of the new standards did not have an impact on our
financial position, results of operations, or cash flows.
As of December 1, 2008, we adopted the new standards
related to accounting for non-refundable advance payments for
goods or services to be used in future research and development
activities. The new standards 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 the new standards did not have a material impact
on our financial position, results of operations, or cash flows.
As of December 1, 2008, we adopted the new standards that
specified fair value measurements as it relates to non-financial
assets and liabilities.
As of August 31, 2009, we adopted new standards which
provides authoritative accounting literature related to
subsequent events, which was previously addressed only in the
auditing literature. The new guidance 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 the new standards did not have a
material impact on our financial position, results of
operations, or cash flows.
As of November 30, 2009, we adopted the FASB Accounting
Standards Codification (Codification) which 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. There were no changes 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.
As of November 30, 2009, we adopted the accounting
standards which require the measurement of the pension and
postretirement plans assets and benefit obligations at our
fiscal year end. We performed this measurement as of August 31
in prior years. As a result of implementing the measurement date
provision, we recorded an additional quarter of pension and
other postretirement benefit costs as of November 30, 2009
as a $0.4 million increase to accumulated deficit and a
$0.2 million decrease to accumulated other comprehensive
loss.
Liquidity
and Capital Resources
Liquidity
Requirements
Short-term liquidity requirements consist primarily of recurring
operating expenses; costs related to divested businesses,
including but not limited to costs related to our retirement
benefit plans; capital expenditures; debt service requirements;
and rescission obligations on certain shares sold under our
defined contribution 401(k) employee benefit plan. We expect to
meet these requirements through available cash, generation of
cash from our operations, and our $60.0 million revolving
credit facility (Revolver) of which
$59.2 million was available as of November 30, 2009.
Net
Cash Provided by (Used in) Operating, Investing, and Financing
Activities
Cash and cash equivalents increased by $33.6 million during
the year ended November 30, 2009. The change in cash and
cash equivalents is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Net Cash Provided by Operating Activities
|
|
$
|
50.3
|
|
|
$
|
28.0
|
|
|
$
|
23.8
|
|
Net Cash (Used in) Provided by Investing Activities
|
|
|
(14.3
|
)
|
|
|
(21.3
|
)
|
|
|
27.7
|
|
Net Cash Used in Financing Activities
|
|
|
(2.4
|
)
|
|
|
(6.3
|
)
|
|
|
(20.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
$
|
33.6
|
|
|
$
|
0.4
|
|
|
$
|
31.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
Net
Cash Provided by Operating Activities
Operating activities generated cash of $50.3 million in
fiscal 2009 compared to cash generated of $28.0 million in
fiscal 2008. The improvement in cash from operations is
primarily due to the following: (i) $30.9 million of
net funding of a grantor trust during fiscal 2008, which
represents the liabilities associated with our BRP and the
amounts that would be payable to officers who are party to
executive severance agreements in the event of qualifying
terminations of employment; (ii) receipt of
$26.3 million in tax refunds in fiscal 2009; and
(iii) receipt of $10.7 million from the grantor trust
in fiscal 2009; partially offset by the sale of 400 acres
of our Sacramento Land for a cash price of $10.0 million in
the second quarter of fiscal 2008 and $35.6 million of net
cash used from other changes in our working capital, including
an increase of $19.0 million in accounts receivable and a
$14.3 million decrease in accounts payable from
November 30, 2008.
Operating activities generated cash of $28.0 million in
fiscal 2008 compared to $23.8 million in fiscal 2007. The
cash generated from continuing operations in fiscal 2008 is
primarily due to the sale of 400 acres of our Sacramento
Land for a cash price of $10.0 million in fiscal 2008 and
$48.9 million change in working capital. The change in
working capital was primarily due to a decrease in our prepaid
pension asset of $24.0 million, $11.3 million increase
in other current liabilities, and a $8.0 million increase
in deferred income taxes from November 30, 2007. These
improvements were partially offset by the net funding of
$30.9 million in fiscal 2008, which represents the
liabilities associated with our BRP and the amounts that would
be payable to officers who are party to executive severance
agreements in the event of qualifying terminations of employment
(as defined in the BRP and the executive severance agreements).
Net
Cash (Used In) Provided by Investing Activities
During fiscal 2009, 2008, and 2007, we had capital expenditures
of $14.3 million, $21.3 million, and
$21.8 million, respectively. The majority of our capital
expenditures directly supports our contract and customer
requirements and is primarily made for asset replacement,
capacity expansion, development of new projects, and safety and
productivity improvements.
As of November 30, 2006, we designated $19.8 million
as restricted cash related to the cash collateralization of the
53/4% Convertible
Subordinated Notes
(53/4% Notes).
In April 2007, the $19.8 million of restricted cash was
used to repay the
53/4% Notes.
During fiscal 2007, we received $29.7 million from AMPAC in
consideration for the cancellation and termination of a
non-collateralized subordinated note receivable from AMPAC,
including any interest due thereunder, and AMPACs
obligation to make an earnings target payment associated with
the sale of the Fine Chemicals business.
Net
Cash Used in Financing Activities
During fiscal 2009, net cash used for debt principal payments
were $2.0 million (see table below). Additionally, we
incurred $0.4 million in debt issuance costs in fiscal 2009.
During fiscal 2008, cash of $6.3 million was used for debt
principal payments, $5.0 million of which was required to
be repaid in conjunction with a real estate sale. Under the
terms of the Senior Credit Facility, we were required to use 50%
of the net cash proceeds, as defined, from the
$10.0 million sale of 400 acres of our Sacramento Land
in the second quarter of fiscal 2008, or $5.0 million, to
repay outstanding principal on the term loan subfacilty.
Cash of $20.4 million was used in fiscal 2007 primarily for
the net retirements of approximately $18.9 million of debt.
44
Borrowing
Activity and Senior Credit Facility:
Our borrowing activity in fiscal 2009 and our debt balances as
of November 30, 2008 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30,
|
|
|
|
|
|
|
|
|
November 30,
|
|
|
|
2008
|
|
|
Additions
|
|
|
Payments
|
|
|
2009
|
|
|
|
(In millions)
|
|
|
Term loan
|
|
$
|
69.0
|
|
|
$
|
|
|
|
$
|
(0.7
|
)
|
|
$
|
68.3
|
|
91/2% Notes
|
|
|
97.5
|
|
|
|
|
|
|
|
|
|
|
|
97.5
|
|
4% Notes
|
|
|
125.0
|
|
|
|
|
|
|
|
|
|
|
|
125.0
|
|
21/4% Debentures
|
|
|
146.4
|
|
|
|
|
|
|
|
|
|
|
|
146.4
|
|
Promissory notes
|
|
|
2.7
|
|
|
|
|
|
|
|
(1.3
|
)
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt and Borrowing Activity
|
|
$
|
440.6
|
|
|
$
|
|
|
|
$
|
(2.0
|
)
|
|
$
|
438.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our Senior Credit Facility provided for an $80.0 million
Revolver and a $200.0 million credit-linked facility,
consisting of a $125.0 million letter of credit subfacility
and a $75.0 million term loan subfacility. On May 1,
2009, we entered into the First Amendment and Consent to Credit
Agreement (the Amendment) to our existing Amended
and Restated Credit Agreement (the Credit
Agreement), originally entered into as of June 21,
2007, by and among us, as borrower, the subsidiaries from time
to time party thereto, as guarantors, the lenders from time to
time party thereto (the Lenders) and Wachovia Bank,
National Association, as administrative agent for the Lenders
(the Administrative Agent), which comprises our
Senior Credit Facility. Snappon SA, a French subsidiary of the
Company (Snappon), that is neither a Credit Party
nor Significant Subsidiary under the Credit Agreement and has no
operations, has had legal judgments rendered against it under
French law, aggregating 2.9 million related to
wrongful discharge claims by certain former employees of Snappon
(see Note 7(b) of Notes to Consolidated Financial
Statements). The Amendment provides for, among other things, the
consent of the Required Lenders (as defined therein) in order to
allow Snappon to commence voluntary bankruptcy, insolvency or
similar proceedings or to allow for an involuntary bankruptcy,
insolvency or similar proceedings against Snappon.
Under the Amendment, the Required Lenders agreed (i) that
an event of default will not be triggered with respect to the
legal judgments rendered against Snappon, unless the judgments
equal or exceed $10.0 million and shall not have been paid
and satisfied, vacated, discharged, stayed or bonded pending
appeal within thirty (30) days from the entry thereof and
(ii) to consent to the commencement of voluntary or
involuntary bankruptcy, insolvency or similar proceedings with
respect to Snappon and that any such proceeding would not
constitute an Event of Default under the Credit Agreement.
Additionally, we agreed to temporarily reduce our borrowing
availability under the Revolving Loan (as defined therein) from
$80.0 million to $60.0 million commencing on
May 1, 2009 and ending on the earlier of (i) the date
on which an amendment that permits the renewal, refinancing, or
extension of the 4% Notes (as defined therein) has been
approved by the Required Lenders and (ii) the date on which
we redeem the 4% Notes in accordance with the terms of the
Credit Agreement.
As of November 30, 2009, the borrowing limit under the
Revolver was $60.0 million with $59.2 million
available due to an outstanding letter of credit in the amount
of $0.8 million. Also as of November 30, 2009, we had
$84.5 million outstanding letters of credit under the
$125.0 million letter of credit subfacility and had
permanently reduced the amount of our term loan subfacility to
the $68.3 million outstanding.
During fiscal 2010, we will be required to make a principal
payment of $16.6 million on the term loan subfacility due
to the excess cash flow provisions of the Credit Agreement. The
principal payment must be made within 110 days of
November 30, 2009. In the event that the leverage ratio is
less than or equal to 3.0 to 1.0, as defined, at the end of any
fiscal year during the term of the Senior Credit Facility, no
excess cash flow pre-payment would be required under this
provision.
The Senior Credit Facility is collateralized by a substantial
portion of our real property holdings and substantially all of
our other assets, including the stock and assets of our material
domestic subsidiaries that are guarantors of the facility. We
are subject to certain limitations including the ability to:
incur additional senior debt; release collateral, retain
proceeds from asset sales, retain proceeds from operations and
issuances of debt or equity, make certain investments and
acquisitions, grant additional liens, and make restricted
payments, including
45
stock repurchases and dividends. In addition, the Credit
Agreement contains certain restrictions surrounding the ability
to refinance our subordinated debt, including provisions that,
except on terms no less favorable to the Credit Agreement, our
subordinated debt cannot be refinanced prior to maturity.
Furthermore, provided that we have cash and cash equivalents of
at least $25.0 million after giving effect thereto, we may
redeem (with funds other than Senior Credit Facility proceeds)
the subordinated notes to the extent required by the mandatory
redemption provisions of the subordinated note indenture. We are
also subject to the following financial covenants:
|
|
|
|
|
|
|
|
|
|
|
Actual Ratios as of
|
|
Required Ratios
|
|
Required Ratios
|
|
|
November 30,
|
|
Through November 30,
|
|
December 1,
|
Financial Covenant
|
|
2009
|
|
2009
|
|
2009 and thereafter
|
|
Interest coverage ratio
|
|
|
3.97 to 1.00
|
|
|
Not less than: 2.25 to 1.00
|
|
Not less than: 2.25 to 1.00
|
Leverage ratio
|
|
|
3.56 to 1.00
|
|
|
Not greater than: 5.75 to 1.00
|
|
Not greater than: 5.50 to 1.00
|
We were in compliance with our financial and non-financial
covenants as of November 30, 2009.
Outlook
Short-term liquidity requirements consist primarily of recurring
operating expenses; costs related to divested businesses,
including but not limited to costs related to our retirement
benefit plans, capital expenditures, and debt service
requirements. We believe that our existing cash and cash
equivalents and existing credit facilities will provide
sufficient funds to meet our operating plan for the next twelve
(12) months. The operating plan for this period provides
for full operation of our businesses, and interest and principal
payments on our debt.
In December 2009, we issued $200.0 million in aggregate
principal amount of 4.0625% Convertible Subordinated
Debentures
(41/16% Debentures)
in a private placement to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933.
Issuance of the
41/16% Debentures
generated net proceeds of approximately $195.0 million,
which were used to repurchase $124.7 million of the
4% Notes and will be used to redeem a portion of the
91/2% Notes;
pay accrued interest on the 4% Notes and
91/2% Notes;
and pay other debt issuance costs. See additional information in
Note 15 in Notes to Consolidated Financial Statements,
included in Item 8 in this Report.
The PPA requires underfunded pension plans to improve their
funding ratios within prescribed intervals based on the funded
status of the plan as of specified measurement dates. Our funded
ratio as of November 30, 2008 under the PPA for our defined
benefit pension plan was above the ratio required under the PPA,
as amended in 2008. The required ratio to be met as of our
November 30, 2009 measurement date is 94%. During the
fourth quarter of fiscal 2009, we made a voluntary contribution
of $4.4 million to improve the plans PPA funded
status as of November 30, 2009, although there can be no
assurance that the amount of this contribution will be
sufficient to meet the required ratio. The final calculated PPA
funded ratio as of November 30, 2009 is expected to be
completed in the second half of 2010. 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 and July 31, 2009, future
benefit accruals for all current salaried employees and
collective bargaining unit employees were discontinued,
respectively.
We inadvertently failed to register with the SEC the issuance of
certain of our common shares under our defined contribution
401(k) employee benefit plan (the Plan). As a
result, certain purchasers of securities pursuant to the Plan
may have the right to rescind their purchases for an amount
equal to the purchase price paid for the securities (or if such
security has been disposed of, to receive consideration with
respect to any loss on such disposition) plus interest from the
date of purchase. Subject to an amendment to our Senior Credit
Facility, we intend to make a registered rescission offer to
eligible Plan participants which could result in the purchase of
up to 0.6 million shares of common stock (see Note 8
in Notes to Consolidated Financial Statements).
As disclosed in Notes 7(b) and 7(c) of Notes to
Consolidated Financial Statements, we have exposure for certain
legal and environmental matters. We believe that it is currently
not possible to estimate the impact, if any, that the ultimate
resolution of certain of these matters will have on our
financial position, results of operations,
and/or cash
flows.
Major factors that could adversely impact our forecasted
operating cash flows and our financial condition are described
in Part I, Item 1A. Risk Factors. In addition, our
liquidity and financial condition will continue to be affected
by changes in prevailing interest rates on the portion of debt
that bears interest at variable interest rates.
46
Contractual
Obligations
We have contractual obligations and commitments in the form of
debt obligations, operating leases, certain other liabilities,
and purchase commitments. The following table summarizes our
contractual obligations as of November 30, 2009 and their
expected effect on our liquidity and cash flows in future
periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by Period
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
3-5
|
|
|
After
|
|
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
|
|
(In millions)
|
|
|
Contractual Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term Loans
|
|
$
|
68.3
|
|
|
$
|
17.1
|
|
|
$
|
1.1
|
|
|
$
|
50.1
|
|
|
$
|
|
|
91/2% Notes
|
|
|
97.5
|
|
|
|
|
|
|
|
|
|
|
|
97.5
|
|
|
|
|
|
4% Notes(1)
|
|
|
125.0
|
|
|
|
125.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21/4% Debentures(2)
|
|
|
146.4
|
|
|
|
|
|
|
|
146.4
|
|
|
|
|
|
|
|
|
|
Promissory Notes
|
|
|
1.4
|
|
|
|
0.7
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
Interest on long-term debt(3)
|
|
|
61.7
|
|
|
|
19.8
|
|
|
|
30.9
|
|
|
|
11.0
|
|
|
|
|
|
Postretirement medical and life benefits(4)
|
|
|
74.6
|
|
|
|
7.2
|
|
|
|
15.2
|
|
|
|
16.6
|
|
|
|
35.6
|
|
Operating leases
|
|
|
24.1
|
|
|
|
8.3
|
|
|
|
10.0
|
|
|
|
1.8
|
|
|
|
4.0
|
|
Conditional asset retirement obligations
|
|
|
13.6
|
|
|
|
|
|
|
|
|
|
|
|
1.4
|
|
|
|
12.2
|
|
Liabilities associated with legal settlements
|
|
|
30.3
|
|
|
|
11.3
|
|
|
|
12.4
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
642.9
|
|
|
$
|
189.4
|
|
|
$
|
216.7
|
|
|
$
|
185.0
|
|
|
$
|
51.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the $125.0 million 4% Notes due January
2024 that can be put to us in January 2010 at a price equal to
100% of the principal amount, plus accrued and unpaid interest,
including contingent interest and liquidated damages, if any.
The 4% Notes are classified as non-current on the
consolidated balance sheet as of November 30, 2009 since we
refinanced the 4% Notes in January 2010 with the proceeds
from the issuance of the 4
1/16% Debentures
in December 2009 (see Note 5 and 15 to Notes to the
Consolidated Financial Statements). |
|
(2) |
|
Represents the $146.4 million
21/4% Debentures
due November 2024 that can be put to us in November 2011 at a
price equal to 100% of the principal amount plus accrued and
unpaid interest, including liquidated damages, if any, payable
in cash, to but not including the repurchase date, plus, in
certain circumstances, a make-whole premium, payable in common
stock. |
|
(3) |
|
Includes interest on variable debt calculated based on interest
rates at November 30, 2009. |
|
(4) |
|
The payments presented above are expected payments for the next
10 years. The payments for postretirement medical and life
benefits reflect the estimated benefit payments of the plans
using the provisions currently in effect. The obligation related
to postretirement medical and life benefits is actuarially
determined on an annual basis. The estimated payments have been
reduced to reflect the provisions of the Medicare Prescription
Drug, Improvement and Modernization Act of 2003. |
As of November 30, 2009, the liability for uncertain income
tax positions was $1.5 million. Due to the uncertainty
regarding the timing of potential future cash flows associated
with these liabilities, we are unable to make a reasonably
reliable estimate of the amount and period in which these
liabilities might be paid.
The PPA, as discussed above, will require underfunded pension
plans to improve their funding ratios within prescribed
intervals based on the level of their underfunding. We may be
required to make significant cash contributions in the future to
fund our defined benefit pension plan, a portion of which we may
not be able to immediately recover from our government contracts.
We also issue purchase orders and make other commitments to
suppliers for equipment, materials, and supplies in the normal
course of business. These purchase commitments are generally for
volumes consistent with
47
anticipated requirements to fulfill purchase orders or contracts
for product deliveries received, or expected to be received,
from customers and would be subject to reimbursement if a
cost-plus contract were terminated.
Arrangements
with Off-Balance Sheet Risk
As of November 30, 2009, arrangements with off-balance
sheet risk, consisted of:
$85.3 million in outstanding commercial letters
of credit expiring within the next twelve months, the majority
of which may be renewed, primarily to collateralize obligations
for environmental remediation and insurance coverage.
Up to $120.0 million aggregate in guarantees by
GenCorp of Aerojets obligations to U.S. government
agencies for environmental remediation activities.
Up to $1.5 million of reimbursements to Granite
Construction Company (Granite) if we request Granite
to cease mining operations on certain portions of the Sacramento
Land.
Guarantees, jointly and severally, by our material
domestic subsidiaries of its obligations under its Senior Credit
Facility and its
91/2% Notes.
In addition to the items discussed above, we will from time to
time enter into certain types of contracts that require us to
indemnify parties against potential third-party and other
claims. These contracts primarily relate to:
(i) divestiture agreements, under which we may provide
customary indemnification to purchasers of our businesses or
assets including, for example, claims arising from the operation
of the businesses prior to disposition, liability to investigate
and remediate environmental contamination existing prior to
disposition; (ii) certain real estate leases, under which
we may be required to indemnify property owners for claims
arising from the use of the applicable premises; and
(iii) certain agreements with officers and directors, under
which we may be required to indemnify such persons for
liabilities arising out of their relationship with us. The terms
of such obligations vary. Generally, a maximum obligation is not
explicitly stated.
Warranties
We provide product warranties in conjunction with certain
product sales. The majority of our warranties are a one-year
standard warranty for parts, workmanship, and compliance with
specifications. On occasion, we have made commitments beyond the
standard warranty obligation. While we have contracts with
warranty provisions, there is not a history of any significant
warranty claims experience. A reserve for warranty exposure is
made on a product by product basis when it is both estimable and
probable. These costs are included in the programs
estimate at completion and are expensed in accordance with our
revenue recognition methodology.
Critical
Accounting Policies
Our financial statements are prepared in accordance with GAAP
that offer acceptable alternative methods for accounting for
certain items affecting our financial results, such as
determining inventory cost, depreciating long-lived assets, and
recognizing revenues.
The preparation of financial statements requires the use of
estimates, assumptions, judgments, and interpretations that can
affect the reported amounts of assets, liabilities, revenues,
and expenses, the disclosure of contingent assets and
liabilities and other supplemental disclosures. The development
of accounting estimates is the responsibility of our management.
Management discusses those areas that require significant
judgment with the audit committee of our board of directors. All
of our financial disclosures in our filings with the SEC have
been reviewed with the audit committee. Although we believe that
the positions we have taken with regard to uncertainties are
reasonable, others might reach different conclusions and our
positions can change over time as more information becomes
available. If an accounting estimate changes, its effects are
accounted for prospectively and, if significant, disclosed in
the Notes to Consolidated Financial Statements.
The areas most affected by our accounting policies and estimates
are revenue recognition, other contract considerations,
goodwill, retirement benefit plans, litigation, environmental
remediation costs and recoveries, and
48
income taxes. Except for income taxes and litigation matters
related to discontinued operations, which are not allocated to
our operating segments, these areas affect the financial results
of our business segments.
For a discussion of all of our accounting policies, including
the accounting policies discussed below, see Note 1 in
Notes to Consolidated Financial Statements.
Revenue
Recognition
In our Aerospace and Defense segment, recognition of profit on
long-term contracts requires the use of assumptions and
estimates related to the contract value or total contract
revenue, the total cost at completion and the measurement of
progress towards completion. Due to the nature of the programs,
developing the estimated total cost at completion requires the
use of significant judgment. Estimates are continually evaluated
as work progresses and are revised as necessary. Factors that
must be considered in estimating the work to be completed
include labor productivity, the nature and technical complexity
of the work to be performed, availability and cost volatility of
materials, subcontractor and vendor performance, warranty costs,
volume assumptions, anticipated labor agreements and
inflationary trends, schedule and performance delays,
availability of funding from the customer, and the
recoverability of costs incurred outside the original contract
included in any estimates to complete. Aerojet reviews contract
performance and cost estimates for some contracts at least
monthly and for others at least quarterly and more frequently
when circumstances significantly change. When a change in
estimate is determined to have an impact on contract earnings,
Aerojet records a positive or negative adjustment to earnings
when identified. Changes in estimates and assumptions related to
the status of certain long-term contracts may have a material
effect on the amounts reported for net sales and segment
performance.
We consider the nature of the individual underlying contract and
the type of products and services provided in determining the
proper accounting for a particular contract. Each method is
applied consistently to all contracts having similar
characteristics, as described below. We typically account for
these contracts using the
percentage-of-completion
method, and progress is measured on a
cost-to-cost
or
units-of-delivery
basis. Sales are recognized using various measures of progress
depending on the contractual terms and scope of work of the
contract. We recognize revenue on a
units-of-delivery
basis when contracts require unit deliveries on a frequent and
routine basis. Sales using this measure of progress are
recognized at the contractually agreed upon unit price. Where
the scope of work on contracts principally relates to research
and/or
development efforts, or the contract is predominantly a
development effort with few deliverable units, we recognize
revenue on a
cost-to-cost
basis. In this case, sales are recognized as costs are incurred
and include estimated earned fees or profits calculated on the
basis of the relationship between costs incurred and total
estimated costs at completion. Revenue on service or time and
material contracts is recognized when performed. If at any time
expected costs exceed the value of the contract, the loss is
recognized immediately.
Certain government contracts contain cost or performance
incentive provisions that provide for increased or decreased
fees or profits based upon actual performance against
established targets or other criteria. Incentive and award fees,
which are generally awarded at the discretion of the customer,
are considered in estimating profit rates at the time the
amounts can be reasonably determined and are reasonably assured
based on historical experience and anticipated performance.
Aerojet continually evaluates its performance and incorporates
any anticipated changes in penalties and cost incentives into
its revenue and earnings calculations. Performance incentives,
which increase or decrease earnings based solely on a single
significant event, generally are not recognized until an event
occurs.
Revenue from real estate asset sales is recognized when a
sufficient down-payment has been received, financing has been
arranged and title, possession and other attributes of ownership
have been transferred to the buyer. The allocation to cost of
sales on real estate asset sales is based on a relative fair
market value computation of the land sold which includes the
basis on our books, capitalized entitlement costs, and an
estimate of our continuing financial commitment.
Revenue that is not derived from long-term development and
production contracts, or real estate asset transactions, is
recognized when persuasive evidence of a final agreement exists,
delivery has occurred, the selling price is fixed or
determinable and payment from the customer is reasonably
assured. Sales are recorded net of provisions for customer
pricing allowances.
49
Other
Contract Accounting Considerations
Our sales are driven by pricing based on costs incurred to
produce products or perform services under contracts with the
U.S. government. Cost-based pricing is determined under the
FAR and CAS. The FAR and CAS provide guidance on the types of
costs that are allowable and allocable in establishing prices
for goods and services under U.S. government contracts. For
example, costs such as those related to pension contributions in
accordance with PPA that are in excess of CAS allowable pension
costs, charitable contributions, advertising, interest expense,
and public relations are unallowable, and therefore not
recoverable through sales. In addition, we may enter into
agreements with the U.S. government that address the
subjects of allowability and allocability of costs to contracts
for specific matters.
We closely monitor compliance with and the consistent
application of our critical accounting policies related to
contract accounting. We review the status of contracts through
periodic contract status and performance reviews. Also, regular
and recurring evaluations of contract cost, scheduling and
technical matters are performed by management personnel
independent from the business segment performing work under the
contract. Costs incurred and allocated to contracts with the
U.S. government are reviewed for compliance with regulatory
standards by our personnel, and are subject to audit by the
Defense Contract Audit Agency.
Goodwill
Goodwill represents the excess of the purchase price of an
acquired enterprise or assets over the fair values of the
identifiable assets acquired and liabilities assumed. Tests for
impairment of goodwill are performed on an annual basis, or at
any other time, if events occur or circumstances indicate that
the carrying amount of goodwill may not be recoverable. We
performed the impairment test for goodwill as of
September 1, 2009 and determined that goodwill was not
impaired.
Circumstances that could trigger an impairment test include but
are not limited to: a significant adverse change in the business
climate or legal factors; adverse cash flow trends; an adverse
action or assessment by a regulator; unanticipated competition;
loss of key personnel; decline in stock price; and results of
testing for recoverability of a significant asset group within a
reporting unit. If the carrying amount of the reporting
units goodwill exceeds the implied fair value of that
goodwill, an impairment loss is recorded.
All of our recorded goodwill resides in the Aerospace and
Defense reporting unit. To determine the fair value of our
Aerospace and Defense reporting unit, we primarily relied upon a
discounted cash flow analysis which requires significant
assumptions and estimates about future operations, including
judgments about expected revenue growth and operating margins,
and timing and amounts of expected future cash flows. The cash
flows employed in the discounted cash flow analysis are based on
ten-year financial forecasts developed internally by management.
The analysis also involves discounting the future cash flows to
a present value using a discount rate that properly accounts for
the risk and nature of the reporting unit cash flows and the
rates of return debt and equity holders would require to invest
their capital in the Aerospace and Defense reporting unit. In
assessing the reasonableness of our estimated fair value of the
Aerospace and Defense reporting unit, we evaluate the results of
the discounted cash flow analysis in light of what investors are
paying for similar interests in comparable aerospace and defense
companies as of the valuation date. We also ensure that the
reporting unit fair value is reasonable given the market value
of the entire Company as of the valuation date.
There can be no assurance that our estimates and assumptions
made for purposes of our goodwill impairment testing as of
September 1, 2009 will prove to be accurate predictions of
the future. If our assumptions regarding forecasted revenue or
margin growth rates are not achieved, we may be required to
record goodwill impairment charges in future periods, whether in
connection with our next annual impairment testing on
September 1, 2010 or prior to that, if any such change
constitutes a triggering event outside of the quarter from when
the annual goodwill impairment test is performed. It is not
possible at this time to determine if any such future impairment
charge would result or, if it does, whether such charge would be
material.
50
Retirement
Benefit Plans
Retirement benefit plans include defined benefit pension plans
and postretirement benefit plans (medical and life
benefits). Retirement benefits are a significant cost of
doing business and represent obligations that will be ultimately
settled far in the future and therefore are subject to
estimates. Our pension and medical and life benefit obligations
and related costs are calculated using actuarial concepts in
accordance with GAAP. We are required to make assumptions
regarding such variables as the expected long-term rate of
return on assets and the discount rate applied to determine
service cost and interest cost to arrive at pension income or
expense for the year.
The discount rate represents the current market interest rate
used to determine the present value of future cash flows
currently expected to be required to settle pension obligations.
Based on market conditions discount rates can experience
significant variability. Changes in discount rates can
significantly change the liability and accordingly the funded
status of the pension plan. The discount rate was determined at
November 30, 2009 for our pension plans, and is subject to
change each year based on changes in overall market interest
rates. The assumed discount rate represents the market rate
available for investments in high-quality fixed income
instruments with maturities matched to the expected benefit
payments for pension and medical and life benefit plans. For
fiscal 2009 pension benefit obligations, the discount rate was
decreased by 145 basis points to 5.65% for the qualified
pension plan and decreased by 145 basis points to 5.60% for
the non qualified BRP, and for medical and life benefit
obligations the discount rate was decreased by 176 basis
points to 5.09%.
The expected long-term rate of return on plan assets represents
the rate of earnings expected in the funds invested to provide
for anticipated benefit payments. With input from our investment
advisors and actuaries, we analyzed the expected rates of return
on assets and determined that a long term rate of 8.00% is
reasonable based on the current and expected asset allocations
and on the plans historical investment performance and
best estimates for future investment performance. Our asset
managers regularly review actual asset allocations and
periodically rebalance investments to targeted allocations when
considered appropriate.
Market conditions and interest rates significantly affect assets
and liabilities of our pension plans. Pension accounting
requires that market gains and losses be deferred and recognized
over a period of years. This smoothing results in
the creation of other accumulated income or loss which will be
amortized to pension costs in future years. The accounting
method we utilize recognizes one-fifth of the unamortized gains
and losses in the market-related value of pension assets and all
other gains and losses including changes in the discount rate
used to calculate benefit costs each year. Investment gains or
losses for this purpose are the difference between the expected
return and the actual return on the market-related value of
assets which smoothes asset values over three years. Although
the smoothing period mitigates some volatility in the
calculation of annual pension costs, future pension costs are
impacted by changes in the market value of pension plan assets
and changes in interest rates.
In addition, we maintain medical and life benefits other than
pensions that are not funded.
A one percentage point change in the key assumptions would have
the following effects on the projected benefit obligations as of
November 30, 2009 and on expense for fiscal 2010:
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Pension Benefits and
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Medical and Life Benefits
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Expected Long-term
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Assumed Healthcare
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Discount Rate
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Rate of Return
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Cost Trend Rate
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Projected
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Net Periodic
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Accumulated
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Net Periodic
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Benefit
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Net Periodic Pension
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Medical and Life
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Benefit
|
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Benefit Expense
|
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Obligation
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Benefit Expense
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Benefit Expense
|
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Obligation
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(In millions)
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1% decrease
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$
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18.5
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$
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116.0
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$
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13.4
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$
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(0.1
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$
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(1.9
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)
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1% increase
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(15.7
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)
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(96.8
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)
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(13.4
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0.1
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2.1
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Contingencies
and Litigation
We are currently involved in certain legal proceedings and, as
required, have accrued our estimate of the probable costs for
resolution of these claims. These estimates are based upon an
analysis of potential results, assuming a combination of
litigation and settlement strategies. It is possible, however,
that future results of operations for any particular quarterly
or annual period could be materially affected by changes in
assumptions or
51
the effectiveness of strategies related to these proceedings.
See Note 7(b) in Notes to Consolidated Financial Statements
for more detailed information on litigation exposure.
Reserves
for Environmental Remediation and Recoverable from the U.S.
Government and Other Third Parties for Environmental Remediation
Costs
For a discussion of our accounting for environmental remediation
obligations and costs and related legal matters, see
Environmental Matters above and Note 7(c) in
Notes to Consolidated Financial Statements.
We accrue for costs associated with the remediation of
environmental contamination when it becomes probable that a
liability has been incurred, and when our costs can be
reasonably estimated. Management has a well-established process
in place to identify and monitor our environmental exposures. In
most cases, only a range of reasonably probable costs can be
estimated. In establishing the reserves, the most probable
estimated amount is used when determinable, and the minimum
amount is used when no single amount in the range is more
probable. Environmental reserves include the costs of completing
remedial investigation and feasibility studies, remedial and
corrective actions, regulatory oversight costs, the cost of
operation and maintenance of the remedial action plan, and
employee compensation costs for employees who are expected to
devote a significant amount of time to remediation efforts.
Calculation of environmental reserves is based on the evaluation
of currently available information with respect to each
individual environmental site and considers factors such as
existing technology, presently enacted laws and regulations, and
prior experience in remediation of contaminated sites. Such
estimates are based on the expected costs of investigation and
remediation and the likelihood that other potentially
responsible parties will be able to fulfill their commitments at
sites where we may be jointly or severally liable.
As of November 30, 2009, the aggregate range of our
environmental costs was $222.7 million to
$428.9 million and the accrued amount was
$222.7 million, of which $211.1 million relates to
Aerojet sites and $11.6 million relates to non-Aerojet
sites. Environmental remediation cost estimation involves
significant uncertainties, including the extent of the
remediation required, changing governmental regulations and
legal standards regarding liability, evolving technologies and
the long periods of time over which most remediation efforts
take place. A number of factors could substantially change
environmental remediation cost estimates, examples of which
include: regulatory changes reducing the allowable levels of
contaminants such as perchlorate, nitrosodimethylamine or
others; enhanced monitoring and testing technology or protocols
which could result in the discovery of previously undetected
contaminants; and the implementation of new remediation
technologies which could reduce future remediation costs.
On January 12, 1999, Aerojet and the U.S. government
implemented the Global Settlement resolving certain prior
environmental and facility disagreements, with retroactive
effect to December 1, 1998. The Global Settlement covered
all environmental contamination at the Sacramento and Azusa
sites. Under the Global Settlement, Aerojet and the
U.S. government resolved disagreements about an appropriate
cost-sharing ratio. The Global Settlement provides that the
cost-sharing ratio will continue for a number of years.
Pursuant to the Global Settlement covering environmental costs
associated with Aerojets Sacramento site and its former
Azusa site, Aerojet can recover up to 88% of its environmental
remediation costs for these sites through the establishment of
prices for Aerojets products and services sold to the
U.S. government. Allowable environmental costs are charged
to these contracts as the costs are incurred. Aerojets mix
of contracts can affect the actual reimbursement made by the
U.S. government. Because these costs are recovered through
forward-pricing arrangements, the ability to continue recovering
these costs depends on Aerojets sustained business volume
under U.S. government contracts and programs and the
relative size of Aerojets commercial business.
Based on Aerojets projected business volume and the
proportion of its business expected to be covered by the Global
Settlement, Aerojet currently believes that, as of
November 30, 2009, approximately $184.9 million of its
estimated recorded future environmental costs will be
recoverable. Significant estimates and assumptions that could
affect the future recovery of environmental remediation costs
include: the proportion of Aerojets future business base
and total business volume which will be subject to the Global
Settlement; limitations on the amount of recoveries available
under the Northrop Agreement; the ability of Aerojet to
competitively bid and win future government contracts if
estimated environmental costs significantly increase; the
relative size of Aerojets
52
commercial business base; the timing of environmental
expenditures; and uncertainties inherent in long-term cost
projections of environmental remediation projects.
Our environmental expenses related to non-Aerojet sites are
generally not recoverable and a significant increase in the
estimated environmental expenses for our non-Aerojet sites could
have a material adverse effect on our operating results,
financial condition,
and/or cash
flows.
Income
Taxes
We file a consolidated U.S. federal income tax return for
the Company and our wholly-owned consolidated subsidiaries. The
deferred tax assets
and/or
liabilities are determined by multiplying the differences
between the financial reporting and tax reporting bases for
assets and liabilities by the enacted tax rates expected to be
in effect when such differences are recovered or settled. The
effect on deferred taxes of a change in tax rates is recognized
in the period of the enactment date of the change.
The carrying value of our deferred tax assets is dependent upon
our ability to generate sufficient taxable income in the future.
We have established a full valuation allowance against our net
deferred tax assets for continuing operations to reflect the
uncertainty of realizing the deferred tax benefits, given
historical losses including accumulated other comprehensive
losses. A valuation allowance is required when it is
more-likely-than-not that all or a portion of a deferred tax
asset will not be realized. A review of all available positive
and negative evidence is considered, including our past and
future performance, the market environment in which we operate,
the utilization of tax attributes in the past, the length of
carryback and carryforward periods, and evaluation of potential
tax planning strategies.
Despite our belief that our tax return positions are consistent
with applicable tax laws, we believe that certain positions are
likely to be challenged by taxing authorities. Settlement of any
challenge can result in no change, a complete disallowance, or
some partial adjustment reached through negotiations or
litigation. Our tax reserves reflect the difference between the
tax benefit claimed on tax returns and the amount recognized in
the financial statements. The accounting standards provide
guidance for the recognition and measurement in financial
statements for uncertain tax positions taken or expected to be
taken in a tax return. The evaluation of a tax position is a
two-step process, the first step being recognition. We determine
whether it is more-likely-than-not that a tax position will be
sustained upon tax examination, including resolution of any
related appeals or litigation, based on only the technical
merits of the position. The technical merits of a tax position
are derived from both statutory and judicial authority
(legislation and statutes, legislative intent, regulations,
rulings, and case law) and their applicability to the facts and
circumstances of the tax position. If a tax position does not
meet the more-likely-than-not recognition threshold, the benefit
of that position is not recognized in the financial statements.
The second step is measurement. A tax position that meets the
more-likely-than-not recognition threshold is measured to
determine the amount of benefit to recognize in the financial
statements. The tax position is measured as the largest amount
of benefit that is greater than 50 percent likely of being
realized upon ultimate resolution with a taxing authority. As
the examination process progresses with tax authorities,
adjustments to tax reserves may be necessary to reflect taxes
payable upon settlement. Tax reserve adjustments related to
positions impacting the effective tax rate affect the provision
for income taxes. Tax reserve adjustments related to positions
impacting the timing of deductions impact deferred tax assets
and liabilities.
Recently
Issued Accounting Standards
In May 2008, the FASB issued authoritative guidance which
applies to convertible debt securities that, upon conversion,
may be settled by the issuer fully or partially in cash. Under
this new guidance, an entity must separately account for the
liability and equity components of convertible debt securities
that may be settled entirely or partially in cash upon
conversion in a manner that reflects the issuers economic
interest cost. The effect of the new guidance on the accounting
for convertible debt securities that are affected is that the
equity component would be included in the additional paid-in
capital section of shareholders deficit on our
consolidated balance sheets and the value of the equity
component would be treated as original issue discount for
purposes of accounting for the debt component of convertible
debt securities. We will adopt this guidance in the first
quarter of fiscal 2010. Going forward, we expect
53
to report a significant increase in non-cash interest expense in
our financial results because this guidance requires interest to
include both the current periods amortization of the debt
discount and the instruments coupon interest.
In December 2008, the FASB issued additional disclosure
requirements for plan assets of defined benefit pension or other
postretirement plans. The required disclosures include a
description of our investment policies and strategies, the fair
value of each major category of plan assets, the inputs and
valuation techniques used to measure the fair value of plan
assets, the effect of fair value measurements using significant
unobservable inputs on changes in plan assets, and the
significant concentrations of risk within plan assets. The
disclosures are required for fiscal years ending after
December 15, 2009. We are currently evaluating the impact
of this guidance on our reporting requirements.
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Item 7A.
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Quantitative
and Qualitative Disclosures about Market Risk
|
Policies
and Procedures
As an element of our normal business practice, we have
established policies and procedures for managing our exposure to
changes in interest rates.
The objective in managing exposure to interest rate changes is
to limit the impact of interest rate changes on earnings and
cash flow and to make overall borrowing costs more predictable.
To achieve this objective, we may use interest rate hedge
transactions or other interest rate hedge instruments to manage
the net exposure to interest rate changes related to our
portfolio of borrowings and to balance our fixed rate compared
to floating rate debt. We did not enter into any interest rate
hedge transactions or instruments during the past three fiscal
years.
Interest
Rate Risk
We are exposed to market risk principally due to changes in
interest rates. Debt with interest rate risk includes borrowings
under our Senior Credit Facility. Other than pension assets, we
do not have any significant exposure to interest rate risk
related to our investments.
As of November 30, 2009, our debt totaled
$438.6 million: $370.3 million, or 84%, was at an
average fixed rate of 4.76%; and $68.3 million, or 16%, was
at a variable rate of 2.51%.
The estimated fair value of our total debt was
$415.9 million as of November 30, 2009 compared to a
carrying value of $438.6 million. The fair values of the
term loan, convertible subordinated notes, senior subordinated
notes, and convertible subordinated debentures were determined
using broker quotes that are based on open markets of our debt
securities as of November 30, 2009. The fair value of the
remaining debt was determined to approximate carrying value.
54
|
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Item 8.
|
Consolidated
Financial Statements and Supplementary Data
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REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Shareholders of GenCorp Inc.:
In our opinion, the consolidated financial statements listed in
the index appearing under Item 15(a)(1) present fairly, in
all material respects, the financial position of GenCorp Inc.
and its subsidiaries at November 30, 2009 and 2008, and the
results of their operations and their cash flows for each of the
three years in the period ended November 30, 2009 in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule for the years ended
November 30, 2009, 2008 and 2007 listed in the index
appearing under Item 15(a)(2) presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of November 30, 2009, based on criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Report on
Internal Control over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and
on the Companys internal control over financial reporting
based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As discussed in Note 1 to the consolidated financial
statements, the Company adopted a new measurement date for
pension and retirement plan assets and benefit obligations as of
November 30, 2009, new fair value measurements related to
non-financial assets and liabilities as of December 1,
2008, new fair value measurement and disclosure accounting
principles during the year ended November 30, 2008, and
changed its method of accounting for uncertainty in income taxes
as of December 1, 2007, and accounting for defined benefit
pension and other postretirement plans as of November 30,
2007.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Sacramento, California
February 3, 2010
55
GENCORP
INC.
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Year Ended
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2009
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2008
|
|
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2007
|
|
|
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(In millions, except per share amounts)
|
|
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Net sales
|
|
$
|
795.4
|
|
|
$
|
742.3
|
|
|
$
|
745.4
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales (exclusive of items shown separately below)
|
|
|
674.0
|
|
|
|
645.4
|
|
|
|
657.8
|
|
Selling, general and administrative
|
|
|
10.2
|
|
|
|
1.9
|
|
|
|
14.4
|
|
Depreciation and amortization
|
|
|
31.3
|
|
|
|
28.3
|
|
|
|
28.4
|
|
Other expense (income), net
|
|
|
2.9
|
|
|
|
7.6
|
|
|
|
(2.6
|
)
|
Unusual items
|
|
|
|
|
|
|
|
|
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Shareholder agreement and related costs
|
|
|
|
|
|
|
16.8
|
|
|
|
|
|
Executive severance agreements
|
|
|
3.1
|
|
|
|
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|
|
|
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Defined benefit pension plan amendment
|
|
|
|
|
|
|
14.6
|
|
|
|
|
|
Legal settlements and estimated loss on legal matters
|
|
|
1.3
|
|
|
|
2.9
|
|
|
|
3.8
|
|
Customer reimbursement of tax matters
|
|
|
|
|
|
|
|
|
|
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2.3
|
|
Loss on extinguishment of debt
|
|
|
0.2
|
|
|
|
|
|
|
|
0.6
|
|
Gain on settlement and recoveries
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
723.0
|
|
|
|
716.3
|
|
|
|
698.7
|
|
Operating income
|
|
|
72.4
|
|
|
|
26.0
|
|
|
|
46.7
|
|
Non-operating (income) expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
25.9
|
|
|
|
27.7
|
|
|
|
28.6
|
|
Interest income
|
|
|
(1.9
|
)
|
|
|
(4.2
|
)
|
|
|
(4.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating expense, net
|
|
|
24.0
|
|
|
|
23.5
|
|
|
|
23.7
|
|
Income from continuing operations before income taxes
|
|
|
48.4
|
|
|
|
2.5
|
|
|
|
23.0
|
|
Income tax (benefit) provision
|
|
|
(17.6
|
)
|
|
|
0.9
|
|
|
|
(18.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
66.0
|
|
|
|
1.6
|
|
|
|
41.1
|
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(6.7
|
)
|
|
|
(0.1
|
)
|
|
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59.3
|
|
|
$
|
1.5
|
|
|
$
|
69.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share from continuing operations
|
|
$
|
1.12
|
|
|
$
|
0.03
|
|
|
$
|
0.73
|
|
(Loss) income per share from discontinued operations, net of
income taxes
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
1.01
|
|
|
$
|
0.03
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share from continuing operations
|
|
$
|
1.07
|
|
|
$
|
0.03
|
|
|
$
|
0.71
|
|
(Loss) income per share from discontinued operations, net of
income taxes
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.97
|
|
|
$
|
0.03
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding
|
|
|
58.4
|
|
|
|
57.2
|
|
|
|
56.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock outstanding, assuming
dilution
|
|
|
66.6
|
|
|
|
57.2
|
|
|
|
64.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
56
GENCORP
INC.
|
|
|
|
|
|
|
|
|
|
|
November 30,
|
|
|
November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions, except per share amounts)
|
|
|
ASSETS
|
Current Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
126.3
|
|
|
$
|
92.7
|
|
Accounts receivable
|
|
|
116.3
|
|
|
|
97.3
|
|
Inventories
|
|
|
61.8
|
|
|
|
70.4
|
|
Recoverable from the U.S. government and other third parties for
environmental remediation costs and other
|
|
|
30.6
|
|
|
|
43.7
|
|
Grantor trust
|
|
|
2.4
|
|
|
|
1.6
|
|
Other receivables, prepaid expenses and other
|
|
|
32.8
|
|
|
|
17.6
|
|
Income taxes
|
|
|
2.4
|
|
|
|
10.6
|
|
Assets of discontinued operations
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
372.6
|
|
|
|
334.0
|
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
129.9
|
|
|
|
137.9
|
|
Real estate held for entitlement and leasing
|
|
|
55.3
|
|
|
|
49.3
|
|
Recoverable from the U.S. government and other third parties for
environmental remediation costs and other
|
|
|
154.3
|
|
|
|
169.8
|
|
Prepaid pension asset
|
|
|
|
|
|
|
76.5
|
|
Grantor trust
|
|
|
17.8
|
|
|
|
29.3
|
|
Goodwill
|
|
|
94.9
|
|
|
|
94.9
|
|
Intangible assets
|
|
|
18.5
|
|
|
|
20.1
|
|
Other noncurrent assets, net
|
|
|
92.4
|
|
|
|
93.9
|
|
|
|
|
|
|
|
|
|
|
Total Noncurrent Assets
|
|
|
563.1
|
|
|
|
671.7
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
935.7
|
|
|
$
|
1,005.7
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE COMMON STOCK, AND SHAREHOLDERS
DEFICIT
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
|
$
|
17.8
|
|
|
$
|
2.0
|
|
Accounts payable
|
|
|
18.4
|
|
|
|
32.7
|
|
Reserves for environmental remediation costs
|
|
|
44.5
|
|
|
|
65.2
|
|
Postretirement medical and life benefits
|
|
|
7.2
|
|
|
|
7.1
|
|
Advance payments on contracts
|
|
|
66.0
|
|
|
|
46.7
|
|
Other current liabilities
|
|
|
107.5
|
|
|
|
93.7
|
|
Liabilities of discontinued operations
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
261.4
|
|
|
|
248.4
|
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
Senior debt
|
|
|
51.2
|
|
|
|
68.3
|
|
Senior subordinated notes
|
|
|
97.5
|
|
|
|
97.5
|
|
Convertible subordinated notes
|
|
|
271.4
|
|
|
|
271.4
|
|
Other debt
|
|
|
0.7
|
|
|
|
1.4
|
|
Deferred income taxes
|
|
|
9.6
|
|
|
|
8.3
|
|
Reserves for environmental remediation costs
|
|
|
178.2
|
|
|
|
193.0
|
|
Pension benefits
|
|
|
225.0
|
|
|
|
13.1
|
|
Postretirement medical and life benefits
|
|
|
75.7
|
|
|
|
66.8
|
|
Other noncurrent liabilities
|
|
|
54.1
|
|
|
|
65.0
|
|
|
|
|
|
|
|
|
|
|
Total Noncurrent Liabilities
|
|
|
963.4
|
|
|
|
784.8
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,224.8
|
|
|
|
1,033.2
|
|
Commitments and Contingencies (Note 7)
|
|
|
|
|
|
|
|
|
Redeemable common stock, par value of $0.10; 0.6 million
shares issued and outstanding as of November 30, 2009;
0.8 million shares issued and outstanding as of
November 30, 2008 (Note 8)
|
|
|
6.0
|
|
|
|
7.6
|
|
Shareholders Deficit
|
|
|
|
|
|
|
|
|
Preference stock, par value of $1.00; 15.0 million shares
authorized; none issued or outstanding
|
|
|
|
|
|
|
|
|
Common stock, par value of $0.10; 150.0 million shares
authorized; 57.9 million shares issued and outstanding as
of November 30, 2009; 57.3 million shares issued and
outstanding as of November 30, 2008
|
|
|
5.9
|
|
|
|
5.7
|
|
Other capital
|
|
|
210.7
|
|
|
|
207.7
|
|
Accumulated deficit
|
|
|
(157.9
|
)
|
|
|
(216.8
|
)
|
Accumulated other comprehensive loss, net of income taxes
|
|
|
(353.8
|
)
|
|
|
(31.7
|
)
|
|
|
|
|
|
|
|
|
|
Total Shareholders Deficit
|
|
|
(295.1
|
)
|
|
|
(35.1
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities, Redeemable Common Stock and
Shareholders Deficit
|
|
$
|
935.7
|
|
|
$
|
1,005.7
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
57
GENCORP
INC.
COMPREHENSIVE
INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Income
|
|
|
Common Stock
|
|
|
Other
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Shareholders
|
|
|
|
(Loss)
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Loss
|
|
|
Deficit
|
|
|
|
(In millions, except share amounts)
|
|
|
November 30, 2006
|
|
|
|
|
|
|
55,815,828
|
|
|
$
|
5.6
|
|
|
$
|
194.8
|
|
|
$
|
(296.4
|
)
|
|
$
|
|
|
|
$
|
(96.0
|
)
|
Net income
|
|
$
|
69.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69.0
|
|
|
|
|
|
|
|
69.0
|
|
New defined benefit pension plan accounting standards transition
amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35.5
|
)
|
|
|
(35.5
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
Shares issued under stock option and stock incentive plans
|
|
|
|
|
|
|
770,892
|
|
|
|
0.1
|
|
|
|
9.4
|
|
|
|
|
|
|
|
|
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2007
|
|
$
|
69.0
|
|
|
|
56,586,720
|
|
|
|
5.7
|
|
|
|
205.2
|
|
|
|
(227.4
|
)
|
|
|
(35.5
|
)
|
|
|
(52.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.5
|
|
|
|
|
|
|
|
1.5
|
|
Amortization of net actuarial losses
|
|
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.9
|
|
|
|
7.9
|
|
Actuarial losses arising during the period, net
|
|
|
(51.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(51.8
|
)
|
|
|
(51.8
|
)
|
Amortization of prior service costs
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
|
|
2.1
|
|
Prior service costs arising during the period, net
|
|
|
(5.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5.3
|
)
|
|
|
(5.3
|
)
|
Curtailment (Note 6)
|
|
|
50.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50.9
|
|
|
|
50.9
|
|
Cumulative effect adjustment related to the adoption of new
income tax related accounting standards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9.1
|
|
|
|
|
|
|
|
9.1
|
|
Reclassification to redeemable common stock
|
|
|
|
|
|
|
(754,863
|
)
|
|
|
(0.1
|
)
|
|
|
(7.5
|
)
|
|
|
|
|
|
|
|
|
|
|
(7.6
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
Shares issued under stock option and stock incentive plans, net
|
|
|
|
|
|
|
1,421,544
|
|
|
|
0.1
|
|
|
|
8.4
|
|
|
|
|
|
|
|
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008
|
|
$
|
5.3
|
|
|
|
57,253,401
|
|
|
|
5.7
|
|
|
|
207.7
|
|
|
|
(216.8
|
)
|
|
|
(31.7
|
)
|
|
|
(35.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59.3
|
|
|
|
|
|
|
|
59.3
|
|
Amortization of net actuarial gains
|
|
|
(9.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9.0
|
)
|
|
|
(9.0
|
)
|
Actuarial losses arising during the period, net
|
|
|
(313.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(313.4
|
)
|
|
|
(313.4
|
)
|
Amortization of prior service costs
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Reclassification from redeemable common stock
|
|
|
|
|
|
|
183,105
|
|
|
|
0.1
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
Cumulative effect adjustment related to the adoption of defined
benefit pension plan accounting standards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
0.2
|
|
|
|
(0.2
|
)
|
Shares issued under stock option and stock incentive plans, net
|
|
|
|
|
|
|
487,257
|
|
|
|
0.1
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2009
|
|
$
|
(263.0
|
)
|
|
|
57,923,763
|
|
|
$
|
5.9
|
|
|
$
|
210.7
|
|
|
$
|
(157.9
|
)
|
|
$
|
(353.8
|
)
|
|
$
|
(295.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Consolidated Financial Statements.
58
GENCORP
INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
59.3
|
|
|
$
|
1.5
|
|
|
$
|
69.0
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (income) from discontinued operations, net of income taxes
|
|
|
6.7
|
|
|
|
0.1
|
|
|
|
(27.9
|
)
|
Depreciation and amortization
|
|
|
31.3
|
|
|
|
28.3
|
|
|
|
28.4
|
|
Stock-based compensation
|
|
|
2.9
|
|
|
|
0.2
|
|
|
|
1.5
|
|
Savings plan expense
|
|
|
1.5
|
|
|
|
9.2
|
|
|
|
9.1
|
|
Loss on extinguishment of debt
|
|
|
0.2
|
|
|
|
|
|
|
|
0.6
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(19.0
|
)
|
|
|
1.9
|
|
|
|
(28.1
|
)
|
Inventories
|
|
|
8.6
|
|
|
|
(2.9
|
)
|
|
|
2.0
|
|
Grantor trust
|
|
|
10.7
|
|
|
|
(30.9
|
)
|
|
|
|
|
Other receivables, prepaid expenses and other
|
|
|
0.2
|
|
|
|
1.1
|
|
|
|
6.0
|
|
Income tax receivable
|
|
|
8.2
|
|
|
|
(10.5
|
)
|
|
|
|
|
Real estate held for entitlement and leasing
|
|
|
(5.9
|
)
|
|
|
(8.0
|
)
|
|
|
(7.4
|
)
|
Other noncurrent assets
|
|
|
10.1
|
|
|
|
7.4
|
|
|
|
(22.8
|
)
|
Accounts payable
|
|
|
(14.3
|
)
|
|
|
3.8
|
|
|
|
(3.6
|
)
|
Income taxes payable
|
|
|
|
|
|
|
3.5
|
|
|
|
(5.3
|
)
|
Pension benefits
|
|
|
(14.3
|
)
|
|
|
24.0
|
|
|
|
11.2
|
|
Postretirement medical and life benefits
|
|
|
(10.7
|
)
|
|
|
(9.7
|
)
|
|
|
(8.7
|
)
|
Advance payments on contracts
|
|
|
19.3
|
|
|
|
(2.4
|
)
|
|
|
(8.0
|
)
|
Other current liabilities
|
|
|
(17.9
|
)
|
|
|
11.3
|
|
|
|
(3.5
|
)
|
Deferred income taxes
|
|
|
1.3
|
|
|
|
8.0
|
|
|
|
0.3
|
|
Other noncurrent liabilities and other
|
|
|
(26.7
|
)
|
|
|
(7.1
|
)
|
|
|
13.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by continuing operations
|
|
|
51.5
|
|
|
|
28.8
|
|
|
|
26.2
|
|
Net cash used in discontinued operations
|
|
|
(1.2
|
)
|
|
|
(0.8
|
)
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
50.3
|
|
|
|
28.0
|
|
|
|
23.8
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(14.3
|
)
|
|
|
(21.3
|
)
|
|
|
(21.8
|
)
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
19.8
|
|
Proceeds from sale of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
29.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used in) Provided by Investing Activities
|
|
|
(14.3
|
)
|
|
|
(21.3
|
)
|
|
|
27.7
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of debt
|
|
|
|
|
|
|
|
|
|
|
75.0
|
|
Repayments on debt
|
|
|
(2.0
|
)
|
|
|
(6.3
|
)
|
|
|
(93.9
|
)
|
Debt issuance costs
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
(1.9
|
)
|
Proceeds from shares issued under stock option and equity
incentive plans
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Financing Activities
|
|
|
(2.4
|
)
|
|
|
(6.3
|
)
|
|
|
(20.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
33.6
|
|
|
|
0.4
|
|
|
|
31.1
|
|
Cash and cash equivalents at beginning of year
|
|
|
92.7
|
|
|
|
92.3
|
|
|
|
61.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Year
|
|
$
|
126.3
|
|
|
$
|
92.7
|
|
|
$
|
92.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditure purchased with a promissory note
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2.8
|
|
Financing of an environmental remediation settlement with a
promissory note
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
Cash paid for income taxes
|
|
|
3.3
|
|
|
|
0.5
|
|
|
|
0.8
|
|
Cash paid for interest
|
|
|
23.7
|
|
|
|
25.3
|
|
|
|
27.6
|
|
See Notes to Consolidated Financial Statements.
59
GENCORP
INC.
|
|
1.
|
Summary
of Significant Accounting Policies
|
a. Basis
of Presentation and Nature of Operations
The consolidated financial statements of GenCorp Inc. (GenCorp
or the Company) include the accounts of the parent company and
its wholly owned and majority owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. Certain reclassifications have been
made to financial information for prior years to conform to the
current years presentation.
See Note 15 for a discussion on recent changes to the
Companys capital structure.
The Company is a manufacturer of aerospace and defense products
and systems with a real estate segment that includes activities
related to the re-zoning, entitlement, sale, and leasing of the
Companys excess real estate assets. The Companys
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. Aerojet is one of the
largest providers of such propulsion systems in the United
States (U.S.). Primary customers served include
major prime contractors to the U.S. government, the
Department of Defense (DoD), and the National
Aeronautics and Space Administration.
Real Estate includes activities related to
the entitlement, sale, and leasing of the Companys excess
real estate assets. The Company owns approximately
12,200 acres of land adjacent to U.S. Highway 50
between Rancho Cordova and Folsom, California east of Sacramento
(Sacramento Land). The Company is currently in the
process of seeking zoning changes and other governmental
approvals on a portion of the Sacramento Land to optimize its
value. The Company has 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. The Company also owns approximately
580 acres in Chino Hills, California. The Company is
currently seeking removal of environmental restrictions on the
Chino Hills property to optimize the value of such land.
The Companys fiscal year ends on November 30 of each year.
The fiscal year of the Companys subsidiary, Aerojet, ends
on the last Saturday of November. As a result of the 2008
calendar, Aerojet had 53 weeks of operations in fiscal 2008
compared to 52 weeks of operations in fiscal 2009 and 2007.
The additional week of operations, which occurred in the first
quarter of fiscal 2008, accounted for $19.1 million in
additional net sales.
On August 31, 2004, the Company completed the sale of its
GDX Automotive (GDX) business. On November 30,
2005, the Company completed the sale of its Fine Chemicals
business. The remaining subsidiaries of GDX, including Snappon
SA, and the Fine Chemicals business are classified as
discontinued operations (see Note 12).
The preparation of the consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America (GAAP) requires the Company
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.
b. Cash
and Cash Equivalents
All highly liquid debt instruments purchased with a remaining
maturity at the date of purchase of three months or less are
considered to be cash equivalents. The Company aggregates its
cash balances by bank, and reclassifies any negative balances,
if applicable, to accounts payable.
c. Fair
Value of Financial Instruments
The accounting standards use a three-tier fair value hierarchy,
which prioritizes the inputs used in measuring fair value. These
tiers include: Level 1, defined as observable inputs such
as quoted prices in active markets;
60
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs in
which little or no market data exists, therefore requiring an
entity to develop its own assumptions. As of November 30,
2009 and 2008, the Companys only financial instruments,
other than investments held by its defined benefit pension plan,
were the Companys investments in money market funds. The
estimated fair value and carrying value of the Companys
investments in money market funds was $136.2 million,
including $20.2 million net money market funds in the
grantor trust, as of November 30, 2009. The estimated fair
value and carrying value of the Companys investments in
money market funds was $116.9 million, including
$30.9 million net money market funds in the grantor trust,
as of November 30, 2008. The fair value of the money market
fund investments was determined based on quoted market prices.
In addition, the Company determined that the money market fund
investments were a Level 1 asset.
The carrying amounts of certain of the Companys financial
instruments, including cash and cash equivalents, accounts
receivable, accounts payable, accrued compensation, and other
accrued liabilities, approximate fair value because of their
short maturities. The estimated fair value and carrying value
for the Companys long-term debt is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Carrying Value
|
|
|
|
As of November 30,
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Term loan
|
|
$
|
62.8
|
|
|
$
|
53.4
|
|
|
$
|
68.3
|
|
|
$
|
69.0
|
|
91/2% Senior
Subordinated Notes
(91/2% Notes)
|
|
|
96.0
|
|
|
|
76.1
|
|
|
|
97.5
|
|
|
|
97.5
|
|
4% contingent convertible subordinated notes
(4% Notes)
|
|
|
124.7
|
|
|
|
77.5
|
|
|
|
125.0
|
|
|
|
125.0
|
|
21/4% Convertible
Subordinated Debentures
(21/4% Debentures)
|
|
|
131.0
|
|
|
|
82.0
|
|
|
|
146.4
|
|
|
|
146.4
|
|
Other debt
|
|
|
1.4
|
|
|
|
2.7
|
|
|
|
1.4
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
415.9
|
|
|
$
|
291.7
|
|
|
$
|
438.6
|
|
|
$
|
440.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of the term loan,
91/2% Notes,
4% Notes, and
21/4% Debentures
were determined using broker quotes that are based on open
markets of the Companys debt securities as of
November 30, 2009. The fair value of the remaining debt was
determined to approximate carrying value.
d. Accounts
Receivable
Accounts receivable associated with long-term contracts consist
of billed and unbilled amounts. Billed amounts include invoices
presented to customers that have not been paid. Unbilled amounts
relate to revenues that have been recorded and billings that
have not been presented to customers. Amounts for overhead
disallowances are reflected in unbilled receivables and
primarily represent estimates of overhead costs which may not be
successfully negotiated and collected.
Other receivables represent amounts billed where revenues were
not derived from long-term contracts.
e. Inventories
Inventories are stated at the lower of cost or market, generally
using the average cost method. Costs on long-term contracts and
programs in progress represent recoverable costs incurred for
production, contract-specific facilities and equipment,
allocable operating overhead, advances to suppliers,
environmental expenses and, in the case of contracts with the
U.S. government, bid and proposal, research and
development, and general and administrative expenses. Pursuant
to contract provisions, agencies of the U.S. government and
certain other customers have title to, or a security interest
in, inventories related to such contracts as a result of
performance-based and progress payments. Such progress payments
are reflected as an offset against the related inventory
balances.
61
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
f. Income
Taxes
The Company files a consolidated U.S. federal income tax
return with its consolidated wholly-owned subsidiaries. The
deferred tax assets
and/or
liabilities are determined by multiplying the differences
between the financial reporting and tax reporting bases for
assets and liabilities by the enacted tax rates expected to be
in effect when such differences are recovered or settled. The
effect on deferred taxes of a change in tax rates is recognized
in the period of the enactment date of the change.
The carrying value of the Companys deferred tax assets is
dependent upon its ability to generate sufficient taxable income
in the future. The Company has established a full valuation
allowance against its net deferred tax assets for continuing
operations to reflect the uncertainty of realizing the deferred
tax benefits, given historical losses including accumulated
other comprehensive losses. A valuation allowance is required
when it is more likely than not that all or a portion of a
deferred tax asset will not be realized. A review of all
available positive and negative evidence is considered,
including the Companys past and future performance, the
market environment in which it operates, the utilization of tax
attributes in the past, the length of carryback and carryforward
periods, and evaluation of potential tax planning strategies.
Despite the Companys belief that its tax return positions
are consistent with applicable tax laws, the Company believes
that certain positions are likely to be challenged by taxing
authorities. Settlement of any challenge can result in no
change, a complete disallowance, or some partial adjustment
reached through negotiations or litigation. The Companys
tax reserves reflect the difference between the tax benefit
claimed on tax returns and the amount recognized in the
financial statements. The accounting standards provide guidance
for the recognition and measurement in financial statements for
uncertain tax positions taken or expected to be taken in a tax
return. The evaluation of a tax position is a two-step process,
the first step being recognition. The Company determines whether
it is more-likely-than-not that a tax position will be sustained
upon tax examination, including resolution of any related
appeals or litigation, based on only the technical merits of the
position. The technical merits of a tax position are derived
from both statutory and judicial authority (legislation and
statutes, legislative intent, regulations, rulings, and case
law) and their applicability to the facts and circumstances of
the tax position. If a tax position does not meet the
more-likely-than-not recognition threshold, the benefit of that
position is not recognized in the financial statements. The
second step is measurement. A tax position that meets the
more-likely-than-not recognition threshold is measured to
determine the amount of benefit to recognize in the financial
statements. The tax position is measured as the largest amount
of benefit that is greater than 50 percent likely of being
realized upon ultimate resolution with a taxing authority. As
the examination process progresses with tax authorities,
adjustments to tax reserves may be necessary to reflect taxes
payable upon settlement. Tax reserve adjustments related to
positions impacting the effective tax rate affect the provision
for income taxes. Tax reserve adjustments related to positions
impacting the timing of deductions impact deferred tax assets
and liabilities.
g. Property,
Plant and Equipment, net
Property, plant and equipment are recorded at cost.
Refurbishment costs are capitalized in the property accounts,
whereas ordinary maintenance and repair costs are expensed as
incurred. Depreciation is computed principally by accelerated
methods based on the following useful lives:
|
|
|
|
|
Buildings and improvements
|
|
|
6 40 years
|
|
Machinery and equipment
|
|
|
3 19 years
|
|
h. Real
Estate Held for Entitlement and Leasing
The Company capitalizes all costs associated with the real
estate entitlement and leasing process. The Company classifies
activities related to the entitlement, sale, and leasing of its
excess real estate assets as operating activities in the
consolidated statements of cash flows.
62
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
i. Goodwill
Goodwill represents the excess of the purchase price of an
acquired enterprise or assets over the fair values of the
identifiable assets acquired and liabilities assumed. Tests for
impairment of goodwill are performed on an annual basis, or at
any other time, if events occur or circumstances indicate that
the carrying amount of goodwill may not be recoverable. The
Company performed the impairment test for goodwill as of
September 1, 2009 and determined that goodwill was not
impaired.
Circumstances that could trigger an impairment test include but
are not limited to: a significant adverse change in the business
climate or legal factors; adverse cash flow trends; an adverse
action or assessment by a regulator; unanticipated competition;
loss of key personnel; decline in stock price; and results of
testing for recoverability of a significant asset group within a
reporting unit. If the carrying amount of the reporting
units goodwill exceeds the implied fair value of that
goodwill, an impairment loss is recorded.
All of the Companys recorded goodwill resides in the
Aerospace and Defense reporting unit. To determine the fair
value of the Companys Aerospace and Defense reporting
unit, the Company primarily relies upon a discounted cash flow
analysis which requires significant assumptions and estimates
about future operations, including judgments about expected
revenue growth and operating margins, and timing and amounts of
expected future cash flows. The cash flows employed in the
discounted cash flow analysis are based on ten-year financial
forecasts developed internally by management. The analysis also
involves discounting the future cash flows to a present value
using a discount rate that properly accounts for the risk and
nature of the reporting unit cash flows and the rates of return
debt and equity holders would require to invest their capital in
the Aerospace and Defense reporting unit. In assessing the
reasonableness of the Companys estimated fair value of the
Aerospace and Defense reporting unit, the Company evaluates the
results of the discounted cash flow analysis in light of what
investors are paying for similar interests in comparable
aerospace and defense companies as of the valuation date. The
Company also ensures that the reporting unit fair value is
reasonable given the market value of the entire Company as of
the valuation date.
There can be no assurance that the Companys estimates and
assumptions made for purposes of its goodwill impairment testing
as of September 1, 2009 will prove to be accurate
predictions of the future. If the Companys assumptions
regarding forecasted revenue or margin growth rates are not
achieved, the Company may be required to record goodwill
impairment charges in future periods, whether in connection with
the Companys next annual impairment testing on
September 1, 2010 or prior to that, if any such change
constitutes a triggering event outside of the quarter from when
the annual goodwill impairment test is performed. It is not
possible at this time to determine if any such future impairment
charge would result or, if it does, whether such charge would be
material.
j. Intangible
Assets
Identifiable intangible assets, such as patents, trademarks, and
licenses are recorded at cost or when acquired as part of a
business combination at estimated fair value. Identifiable
intangible assets are amortized based on when they provide the
Company economic benefit, or using the straight-line method,
over their estimated useful life. Amortization periods for
identifiable intangible assets range from 20 years to
27 years.
k. Environmental
Remediation
The Company expenses, on a current basis, recurring costs
associated with managing hazardous substances and contamination
in ongoing operations. The Company accrues for costs associated
with the remediation of environmental contamination when it
becomes probable that a liability has been incurred, and the
amount can be reasonably estimated. In most cases only a range
of reasonably probable costs can be estimated. In establishing
the Companys reserves, the most probable estimated amount
is used when determinable, and the minimum amount is used when
no single amount in the range is more probable. The
Companys environmental reserves include the costs of
completing remedial investigation and feasibility studies,
remedial and corrective actions, regulatory oversight
63
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
costs, the cost of operation and maintenance of the remedial
action plan, and employee compensation costs for employees who
are expected to devote a significant amount of time to
remediation efforts. Calculation of environmental reserves is
based on the evaluation of currently available information with
respect to each individual environmental site and considers
factors such as existing technology, presently enacted laws and
regulations, and prior experience in remediation of contaminated
sites. Such estimates are based on the expected costs of
investigation and remediation and the likelihood that other
potentially responsible parties will be able to fulfill their
commitments at sites where the Company may be jointly or
severally liable. The Company recognizes amounts recoverable
from insurance carriers, the U.S. government or other third
parties, when the collection of such amounts is probable (see
Note 7(c) and (d)).
l. Retirement
Benefits
The Company previously had a defined benefit pension plan
covering substantially all salaried and hourly employees (see
discussion below). In addition, the Company provides medical and
life insurance benefits (postretirement benefits) to
certain eligible retired employees, with varied coverage by
employee group. Annual charges to income are made for the cost
of the plans, including current service costs, interest costs on
benefit obligations, and net amortization and deferrals,
increased or reduced by the return on assets.
On November 25, 2008, the Company decided to amend the
defined benefit pension and benefits restoration plans to freeze
future accruals under such plans. Effective February 1,
2009 and July 31, 2009, future benefit accruals for all
current salaried employees and collective bargaining unit
employees were discontinued, respectively. No employees lost
their previously earned pension benefits. As a result of the
amendment and freeze, the Company 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 (see Note 6).
m. Conditional
Asset Retirement Obligations
Conditional asset retirement obligations (CARO) are
legal obligations associated with the retirement of long-lived
assets. These liabilities are initially recorded at fair value
and the related asset retirement costs are capitalized by
increasing the carrying amount of the related assets by the same
amount as the liability. Asset retirement costs are subsequently
depreciated over the useful lives of the related assets.
Subsequent to initial recognition, the Company records
period-to-period
changes in the CARO liability resulting from the passage of time
and revisions to either the timing or the amount of the estimate
of the undiscounted cash flows.
The Companys estimate of CAROs associated with owned
properties relates to estimated costs necessary for the legally
required removal or remediation of various regulated materials,
primarily asbestos disposal and radiological decontamination of
an ordnance manufacturing facility. For CAROs that are not
expected to be retired in the next fifteen (15) years, the
Company estimated the retirement date of such asset retirement
obligations to be thirty (30) years from the date of
adoption. For leased properties, such obligations relate to the
estimated cost of contractually required property restoration.
The changes in the carrying amount of CAROs since
November 30, 2007 were as follows (in millions):
|
|
|
|
|
Balance as of November 30, 2007
|
|
$
|
13.4
|
|
Additions and other, net
|
|
|
(0.9
|
)
|
Accretion
|
|
|
1.0
|
|
|
|
|
|
|
Balance as of November 30, 2008
|
|
|
13.5
|
|
Additions and other, net
|
|
|
(1.0
|
)
|
Accretion
|
|
|
1.1
|
|
|
|
|
|
|
Balance as of November 30, 2009
|
|
$
|
13.6
|
|
|
|
|
|
|
64
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
n. Advance
Payments on Contracts
The Company receives advances from customers which may exceed
costs incurred on certain contracts. Such advances, other than
those reflected as a reduction of inventories as progress
payments, are classified as current liabilities.
o. Loss
Contingencies
The Company is currently involved in certain legal proceedings
and, as required, has accrued its estimate of the probable costs
for resolution of these claims. These estimates are based upon
an analysis of potential results, assuming a combination of
litigation and settlement strategies. It is possible, however,
that future results of operations or cash flows for any
particular period could be materially affected by changes in
estimates or the effectiveness of strategies related to these
proceedings.
p. Warranties
The Company provides product warranties in conjunction with
certain product sales. The majority of the Companys
warranties are a one-year standard warranty for parts,
workmanship, and compliance with specifications. On occasion,
the Company has made commitments beyond the standard warranty
obligation. While the Company has contracts with warranty
provisions, there is not a history of any significant warranty
claims experience. A reserve for warranty exposure is made on a
product by product basis when it is both estimable and probable.
These costs are included in the programs estimate at
completion and are expensed in accordance with the
Companys revenue recognition methodology as allowed under
GAAP for that particular contract.
q. Revenue
Recognition
The Company considers the nature of the individual underlying
contract and the type of products and services provided in
determining the proper accounting for a particular contract.
Each method is applied consistently to all contracts having
similar characteristics, as described below. The Company
typically accounts for these contracts using the
percentage-of-completion
method, and progress is measured on a
cost-to-cost
or
units-of-delivery
basis. Sales are recognized using various measures of progress
depending on the contractual terms and scope of work of the
contract. The Company recognizes revenue on a
units-of-delivery
basis when contracts require unit deliveries on a frequent and
routine basis. Sales using this measure of progress are
recognized at the contractually agreed upon unit price. Where
the scope of work on contracts principally relates to research
and/or
development efforts, or the contract is predominantly a
development effort with few deliverable units, the Company
recognizes revenue on a
cost-to-cost
basis. In this case, sales are recognized as costs are incurred
and include estimated earned fees or profits calculated on the
basis of the relationship between costs incurred and total
estimated costs at completion. Revenue on service or time and
material contracts is recognized when performed. If at any time
expected costs exceed the value of the contract, the loss is
recognized immediately.
Certain government contracts contain cost or performance
incentive provisions that provide for increased or decreased
fees or profits based upon actual performance against
established targets or other criteria. Incentive and award fees,
which are generally awarded at the discretion of the customer,
are included in estimated contract revenue at the time the
amounts can be reasonably determined and are reasonably assured
based on historical experience and anticipated performance. The
Company continually evaluates its performance and incorporates
any anticipated changes in penalties and cost incentives into
its revenue and earnings calculations. Performance incentives,
which increase or decrease earnings based solely on a single
significant event, generally are not recognized until an event
occurs.
Revenue from real estate asset sales is recognized when a
sufficient down-payment has been received, financing has been
arranged and title, possession and other attributes of ownership
have been transferred to the buyer. The allocation to cost of
sales on real estate asset sales is based on a relative fair
market value computation of
65
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the land sold which includes the basis on the Companys
book value, capitalized entitlement costs, and an estimate of
the Companys continuing financial commitment.
Revenue that is not derived from long-term development and
production contracts, or real estate asset transactions, is
recognized when persuasive evidence of a final agreement exists,
delivery has occurred, the selling price is fixed or
determinable and payment from the customer is reasonably
assured. Sales are recorded net of provisions for customer
pricing allowances.
r. Research
and Development
Company-sponsored research and development
(R&D) expenses were $15.4 million in
fiscal 2009, $11.4 million in fiscal 2008, and
$17.0 million in fiscal 2007. Company-sponsored R&D
expenses include the costs of technical activities that are
useful in developing new products, services, processes, or
techniques, as well as expenses for technical activities that
may significantly improve existing products or processes. These
expenses are generally allocated among all contracts and
programs in progress under U.S. government contractual
arrangements.
Customer-sponsored R&D expenditures, which are funded under
government contracts, totaled $245.3 million in fiscal
2009, $252.4 million in fiscal 2008, and
$269.0 million in fiscal 2007. Expenditures under
customer-sponsored R&D funded government contracts are
accounted for as sales and cost of products sold.
s. Stock-based
Compensation
The Company recognizes stock-based compensation in the statement
of operations at the grant-date fair value of stock awards
issued to employees and directors. The Company elected to use
the short-cut method for determining the historical pool of
windfall tax benefits and the tax law ordering approach for
purposes of determining whether an excess tax benefit has been
realized.
t. Impairment
or Disposal of Long-Lived Assets
Impairment of long-lived assets is recognized when events or
circumstances indicate that the carrying amount of the asset, or
related groups of assets, may not be recoverable. Circumstances
which could trigger a review include, but are not limited to:
significant decreases in the market price of the asset;
significant adverse changes in the business climate or legal
factors; accumulation of costs significantly in excess of the
amount originally expected for the acquisition or construction
of the asset; current period cash flow or operating losses
combined with a history of losses or a forecast of continuing
losses associated with the use of the asset; or a current
expectation that the asset will more likely than not be sold or
disposed of significantly before the end of its estimated useful
life. The carrying amount of a long-lived asset is not
recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the
asset. If the Company determines that an asset is not
recoverable, then the Company would record an impairment charge
if the carrying value of the asset exceeds its fair value.
A long-lived asset classified as held for sale is
initially measured at the lower of its carrying amount or fair
value less costs to sell. In the period that the held for
sale criteria are met, the Company recognizes an
impairment charge for any initial adjustment of the long-lived
asset amount. Gains or losses not previously recognized
resulting from the sale of a long-lived asset is recognized on
the date of sale.
u. Foreign
Currency Transactions
Foreign currency transaction (losses) and gains were
($1.6) million in fiscal 2009, $0.6 million in fiscal
2008, and ($0.1) million in fiscal 2007 which are reported
as a component of discontinued operations. The Companys
foreign currency transactions were associated with the
Companys former GDX business, including Snappon SA, which
is classified as a discontinued operations in these consolidated
financial statements and notes to consolidated financial
statements.
66
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
v. Concentrations
Dependence
upon government programs and contracts
Sales in fiscal 2009, 2008, and 2007 directly and indirectly to
the U.S. government and its agencies, including sales to
the Companys significant customers discussed below,
totaled $701.3 million, $641.7 million, and
$665.9 million, respectively. The demand for certain of the
Companys services and products is directly related to the
level of funding of government programs.
Major
customers
Customers that represented more than 10% of net sales for the
fiscal years presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
2009
|
|
2008
|
|
2007
|
|
Raytheon
|
|
|
31
|
%
|
|
|
27
|
%
|
|
|
28
|
%
|
Lockheed Martin
|
|
|
26
|
|
|
|
26
|
|
|
|
28
|
|
Credit
Risk
Financial instruments that potentially subject the Company to
concentration of credit risk consist primarily of cash
equivalents and trade receivables. The Companys cash and
cash equivalents are held and managed by recognized financial
institutions that follow the Companys investment policy.
The investment policy limits the amount of credit exposure to
any one security issue or issuer and the Company does not
believe significant concentration of credit risk exists with
respect to these investments. The Company performs ongoing
credit evaluations of its customers financial condition
and maintains an appropriate allowance for uncollectible
accounts receivable based upon the expected collectiblity of all
accounts receivable. The Companys accounts receivables are
generally unsecured and are not backed by collateral from its
customers. Customers that represented more than 10% of accounts
receivable for the periods presented are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
2009
|
|
2008
|
|
Lockheed Martin
|
|
|
38
|
%
|
|
|
35
|
%
|
Raytheon
|
|
|
29
|
|
|
|
26
|
|
Dependence
on Single Source and Other Third Party Suppliers
The Company depends on a single or limited number of outside
suppliers for raw materials. The Company closely monitors
sources of supply to assure that adequate raw materials and
other supplies needed in the manufacturing processes are
available. As a U.S. government contractor, the Company is
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 other materials sometime consider
dropping low-volume items from their product lines, which may
require us to qualify new suppliers for raw materials on key
programs. Current suppliers of some raw materials used in the
manufacturing of rocket nozzles, composite cases and explosives
have announced plans to relocate, close,
and/or
discontinue certain product lines. These materials, which
include TPB/Flexzone, Iron Oxide lacquer and other constituents,
are used industry-wide and are key to many of the Companys
motor and warhead programs. The Company continues its efforts at
qualifying new suppliers and products for these materials and
expects that materials will be available in time to meet future
production needs. In some situations, increased costs related to
new suppliers may not be recoverable under government contracts.
In addition, some of these materials may have to be procured
from offshore suppliers.
67
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The supply of ammonium perchlorate, a principal raw material
used in solid propellant, is limited to a single source that
supplies the entire domestic solid propellant industry with
actual pricing based on the total industry demand. Significant
reductions in the total national demand will likely result in
significant unit price increases. Where possible, Aerojet has
protective price re-determinable language incorporated into
contracts with its customers. The industry also currently relies
on one primary supplier for carbon fiber, which is used in the
production of composite materials. This supplier has multiple
manufacturing lines for such material. Although other sources of
carbon fiber exist, the addition of a new supplier would require
the Company to qualify the new source for use. The Japanese
government has imposed export restrictions on materials that are
to be used in offensive weapons systems. To date, this has not
impacted production but has increased the lead times associated
with the product as its export has to be approved by the
Japanese Defense Ministry. Characterization of domestic sources
of carbon fiber is underway by the extended aerospace industry.
The Company is 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. Additionally, where
possible, the Company has negotiated with its customers economic
and/or price
adjustment clauses tied to commodity indices. The Companys
past success in negotiating these terms is no indication of its
ability to continue to do so. The U.S. DoD has begun to
rigorously enforce the provisions of the Berry
Amendment (Defense Federal Acquisition Regulations
225-7002,
252.225-7014) which imposes a requirement to procure only
certain strategic materials critical to national security from
U.S. sources. Due to limited U.S. supply of these
materials and the requirement to use domestic sources, lead
times and cost impacts have been significant.
Prolonged disruptions in the supply of any of the Companys
key raw materials, difficulty qualifying new sources of supply,
implementing use of replacement materials or new sources of
supply,
and/or a
continuing increase in the prices of raw materials could have a
material adverse effect on the Companys operating results,
financial condition,
and/or cash
flows.
Workforce
As of November 30, 2009, 13% of the Companys
3,071 employees were covered by collective bargaining
agreements which are due to expire in 2011 and 2012.
w. Recently
Adopted Accounting Pronouncements
On December 1, 2007, the Company adopted the new standards
that specified the accounting for uncertainty in income taxes.
As of December 1, 2007, the Company had $3.2 million
of unrecognized tax benefits, $3.0 million of which would
impact their 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 the
accumulated deficit. The Company recognizes 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
November 30, 2009, the Company had approximately
$0.2 million of accrued interest and penalties related to
uncertain tax positions. The tax years ended November 30,
2006 through November 30, 2009 remain open to examination
for U.S. federal income tax purposes. For the
Companys other major taxing jurisdictions, the tax years
ended November 30, 2005 through November 30, 2009
remain open to examination.
On December 1, 2007, the Company adopted new standards that
specified fair value measurements for financial instruments.
Although the adoption of the new standards did not materially
impact the Companys financial condition, results of
operations, or cash flows, the Company is now required to
provide additional disclosures in the notes to consolidated
financial statements.
On December 1, 2007, the Company adopted the new standards
related to accounting for the fair value option for financial
assets and liabilities. At the date of adoption, the Company did
not elect to use the fair value option for
68
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
any of its outstanding financial assets or liabilities.
Accordingly, the adoption of the new standards did not have an
impact on the Companys financial position, results of
operations, or cash flows.
As of December 1, 2008, the Company adopted the new
standards related to accounting for non-refundable advance
payments for goods or services to be used in future research and
development activities. The new standards 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 the new standards did not have a material impact
on the Companys financial position, results of operations,
or cash flows.
As of December 1, 2008, the Company adopted new standards
that specified fair value measurements as it relates to
non-financial assets and liabilities.
As of August 31, 2009, the Company adopted new standards
which provides authoritative accounting literature related to
subsequent events, which was previously addressed only in the
auditing literature. The new guidance is largely 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 the new standards did not have a
material impact on the Companys financial position,
results of operations, or cash flows.
As of November 30, 2009, the Company adopted Financial
Accounting Standards Board (FASB) Accounting
Standards Codification (Codification) which 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. There were no changes to the Companys
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.
As of November 30, 2009, the Company adopted the accounting
standards which require the measurement of the pension and
postretirement plans assets and benefit obligations at the
Companys fiscal year end. Previously, the Company
performed the measurement as of August 31 of each fiscal year.
As a result of implementing the measurement date provision, the
Company recorded an additional quarter of pension and other
postretirement benefit costs as of November 30, 2009 as a
$0.4 million increase to accumulated deficit and a
$0.2 million decrease to accumulated other comprehensive
loss.
x. New
Accounting Pronouncements
In May 2008, the FASB issued authoritative guidance which
applies to convertible debt securities that, upon conversion,
may be settled by the issuer fully or partially in cash. Under
this new guidance, an entity must separately account for the
liability and equity components of convertible debt securities
that may be settled entirely or partially in cash upon
conversion in a manner that reflects the issuers economic
interest cost. The effect of the new guidance on the accounting
for convertible debt securities that are affected is that the
equity component would be included in the additional paid-in
capital section of shareholders deficit on the
Companys consolidated balance sheets and the value of the
equity component would be treated as original issue discount for
purposes of accounting for the debt component of convertible
debt securities. The Company will adopt this guidance in the
first quarter of fiscal 2010. Going forward, the Company expects
to report a significant increase in non-cash interest expense in
its financial results because this guidance requires interest to
include both the current periods amortization of the debt
discount and the instruments coupon interest.
In December 2008, the FASB issued additional disclosure
requirements for plan assets of defined benefit pension or other
postretirement plans. The required disclosures include a
description of the Companys investment policies and
strategies, the fair value of each major category of plan
assets, the inputs and valuation techniques used to measure the
fair value of plan assets, the effect of fair value measurements
using significant unobservable inputs on changes in plan assets,
and the significant concentrations of risk within plan assets.
The disclosures are required
69
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
for fiscal years ending after December 15, 2009. The
Company is currently evaluating the impact of this guidance on
its reporting requirements.
y. Subsequent
Events
The Company evaluates events or transactions that occur after
the balance sheet date but before financial statements are
issued for potential recognition or disclosure in the financial
statements. The issuance of financial statements is the earlier
of when the financial statements are widely distributed to all
shareholders and other financial statements users or filed with
the Securities Exchange Commission (SEC). The
Company has evaluated all subsequent events through
February 3, 2010, the date the financial statements were
issued. See Note 15.
|
|
2.
|
Income
(Loss) Per Share of Common Stock
|
A reconciliation of the numerator and denominator used to
calculate basic and diluted income (loss) per share of common
stock (EPS) is presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions, except per share amounts; shares in
thousands)
|
|
|
Numerator for Basic and Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
66.0
|
|
|
$
|
1.6
|
|
|
$
|
41.1
|
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(6.7
|
)
|
|
|
(0.1
|
)
|
|
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for basic earnings per share
|
|
|
59.3
|
|
|
|
1.5
|
|
|
|
69.0
|
|
Interest on contingent convertible subordinated notes
|
|
|
5.0
|
|
|
|
|
|
|
|
5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders, as adjusted for
diluted earnings per share
|
|
$
|
64.3
|
|
|
$
|
1.5
|
|
|
$
|
74.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares
|
|
|
58,429
|
|
|
|
57,230
|
|
|
|
56,213
|
|
Effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent convertible subordinated notes
|
|
|
8,101
|
|
|
|
|
|
|
|
8,101
|
|
Employee stock options
|
|
|
|
|
|
|
17
|
|
|
|
190
|
|
Restricted stock awards
|
|
|
20
|
|
|
|
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
|
|
|
66,550
|
|
|
|
57,247
|
|
|
|
64,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share from continuing operations
|
|
$
|
1.12
|
|
|
$
|
0.03
|
|
|
$
|
0.73
|
|
(Loss) income per share from discontinued operations, net of
income taxes
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
1.01
|
|
|
$
|
0.03
|
|
|
$
|
1.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share from continuing operations
|
|
$
|
1.07
|
|
|
$
|
0.03
|
|
|
$
|
0.71
|
|
(Loss) income per share from discontinued operations, net of
income taxes
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share
|
|
$
|
0.97
|
|
|
$
|
0.03
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table sets forth the potentially dilutive
securities excluded from the computation because their effect
would have been anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
(In thousands)
|
|
|
|
|
|
4% Notes(1)
|
|
|
|
|
|
|
8,101
|
|
|
|
|
|
53/4%
convertible subordinated notes
(53/4%Notes)(2)
|
|
|
|
|
|
|
|
|
|
|
449
|
|
Employee stock options
|
|
|
1,291
|
|
|
|
1,077
|
|
|
|
329
|
|
Restricted stock awards
|
|
|
16
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total potentially dilutive securities
|
|
|
1,307
|
|
|
|
9,193
|
|
|
|
778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In January 2010, the Company redeemed $124.7 million
principal amount of 4% Notes which were presented to the
Company for payment (see Note 15). |
|
(2) |
|
The
53/4% Notes
matured in April 2007. |
The Companys
21/4% Debentures
were not included in the computation of diluted earnings per
share because the market price of the common stock did not
exceed the conversion price and only the conversion premium for
these debentures is settled in common shares.
|
|
3.
|
Balance
Sheet Accounts and Supplemental Disclosures
|
a. Accounts
Receivable
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Billed
|
|
$
|
83.0
|
|
|
$
|
49.3
|
|
Unbilled
|
|
|
29.9
|
|
|
|
45.8
|
|
|
|
|
|
|
|
|
|
|
Total receivables under long-term contracts
|
|
|
112.9
|
|
|
|
95.1
|
|
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
3.4
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
116.3
|
|
|
$
|
97.3
|
|
|
|
|
|
|
|
|
|
|
The unbilled receivable amounts as of November 30, 2009
expected to be collected after one year is $3.0 million.
Such amounts are billed either upon delivery of completed units
or settlement of contracts.
71
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
b. Inventories
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Long-term contracts at average cost
|
|
$
|
212.2
|
|
|
$
|
214.4
|
|
Progress payments
|
|
|
(153.6
|
)
|
|
|
(147.3
|
)
|
|
|
|
|
|
|
|
|
|
Total long-term contract inventories
|
|
|
58.6
|
|
|
|
67.1
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
0.3
|
|
|
|
0.2
|
|
Work in progress
|
|
|
2.9
|
|
|
|
2.7
|
|
Finished goods
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Total other inventories
|
|
|
3.2
|
|
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
$
|
61.8
|
|
|
$
|
70.4
|
|
|
|
|
|
|
|
|
|
|
As of November 30, 2009 and 2008, long-term contract
inventories include $8.7 million and $9.6 million,
respectively, of deferred qualification costs. Realization of
the deferred costs at November 30, 2009 is dependent upon
receipt of future firm orders. The Company believes recovery of
these costs to be probable and specifically identifiable to
future contracts. In addition, long-term contract inventories
included an allocation of general and administrative costs
incurred throughout fiscal 2009 and fiscal 2008 estimated to be
$110.3 million and $113.4 million, respectively, and
the cumulative amount of general and administrative costs in
long-term contract inventories is estimated to be
$6.6 million and $8.4 million at November 30,
2009 and 2008, respectively.
c. Property,
Plant and Equipment, net
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Land
|
|
$
|
33.2
|
|
|
$
|
33.2
|
|
Buildings and improvements
|
|
|
148.9
|
|
|
|
146.2
|
|
Machinery and equipment
|
|
|
376.6
|
|
|
|
364.8
|
|
Construction-in-progress
|
|
|
7.4
|
|
|
|
14.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
566.1
|
|
|
|
558.2
|
|
Less: accumulated depreciation
|
|
|
(436.2
|
)
|
|
|
(420.3
|
)
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
129.9
|
|
|
$
|
137.9
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense for fiscal 2009, 2008, and 2007 was
$23.0 million, $22.9 million, and $23.9 million,
respectively.
d. Intangible
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
As of November 30, 2009
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In millions)
|
|
|
Customer related
|
|
$
|
10.7
|
|
|
$
|
3.6
|
|
|
$
|
7.1
|
|
Acquired technology
|
|
|
18.3
|
|
|
|
6.9
|
|
|
|
11.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
29.0
|
|
|
$
|
10.5
|
|
|
$
|
18.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
Carrying
|
|
|
Accumulated
|
|
|
Net Carrying
|
|
As of November 30, 2008
|
|
Amount
|
|
|
Amortization
|
|
|
Amount
|
|
|
|
(In millions)
|
|
|
Customer related
|
|
$
|
10.7
|
|
|
$
|
3.1
|
|
|
$
|
7.6
|
|
Acquired technology
|
|
|
18.3
|
|
|
|
5.8
|
|
|
|
12.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
$
|
29.0
|
|
|
$
|
8.9
|
|
|
$
|
20.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to intangible assets was
$1.6 million in fiscal 2009, 2008, and 2007. Amortization
expense for fiscal 2010 related to intangible assets is
estimated to be approximately $1.6 million annually.
Amortization expense for fiscal 2011 through 2014 related to
intangible assets is estimated to be approximately
$1.5 million annually.
e. Other
Noncurrent Assets, net
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Receivable from Northrop Grumman Corporation
(Northrop)
|
|
$
|
53.4
|
|
|
$
|
45.7
|
|
Deferred financing costs
|
|
|
6.9
|
|
|
|
12.8
|
|
Other
|
|
|
32.1
|
|
|
|
35.4
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets, net
|
|
$
|
92.4
|
|
|
$
|
93.9
|
|
|
|
|
|
|
|
|
|
|
The Company amortizes deferred financing costs over the
estimated life of the related debt. Amortization of financing
costs was $5.6 million, $2.8 million, and
$2.0 million in fiscal 2009, 2008, and 2007, respectively.
f. Other
Current Liabilities
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Accrued compensation and employee benefits
|
|
$
|
47.8
|
|
|
$
|
43.8
|
|
Legal settlements
|
|
|
11.4
|
|
|
|
6.3
|
|
Interest payable
|
|
|
6.1
|
|
|
|
5.6
|
|
Contract loss provisions
|
|
|
3.0
|
|
|
|
4.3
|
|
Deferred revenue
|
|
|
2.2
|
|
|
|
2.1
|
|
Other
|
|
|
37.0
|
|
|
|
31.6
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
$
|
107.5
|
|
|
$
|
93.7
|
|
|
|
|
|
|
|
|
|
|
73
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
g. Other
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Legal settlements
|
|
$
|
18.9
|
|
|
$
|
26.6
|
|
Conditional asset retirement obligations
|
|
|
13.6
|
|
|
|
13.5
|
|
Deferred revenue
|
|
|
10.4
|
|
|
|
11.2
|
|
Deferred compensation
|
|
|
7.1
|
|
|
|
6.2
|
|
Other
|
|
|
4.1
|
|
|
|
7.5
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent liabilities
|
|
$
|
54.1
|
|
|
$
|
65.0
|
|
|
|
|
|
|
|
|
|
|
h. Accumulated
Other Comprehensive Loss, Net of Income Taxes
The components of accumulated other comprehensive loss related
to the Companys retirement benefit plans and the related
income tax effects are presented in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Actuarial losses, net
|
|
$
|
(358.4
|
)
|
|
$
|
(35.7
|
)
|
|
$
|
(27.6
|
)
|
Prior service credits (costs)
|
|
|
4.6
|
|
|
|
4.0
|
|
|
|
(7.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
(353.8
|
)
|
|
$
|
(31.7
|
)
|
|
$
|
(35.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated amounts that will be amortized from accumulated
other comprehensive loss into net periodic benefit (income)
expense in fiscal 2010 are as follows:
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
Medical and
|
|
|
|
Benefits
|
|
|
Life Benefits
|
|
|
|
(In millions)
|
|
|
Recognized actuarial losses (gains), net
|
|
$
|
58.8
|
|
|
$
|
(3.9
|
)
|
Amortization of prior service costs
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
58.8
|
|
|
$
|
(3.8
|
)
|
|
|
|
|
|
|
|
|
|
74
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company files a consolidated U.S. federal income tax
return with its wholly-owned subsidiaries. The components of the
Companys income tax (benefit) provision from continuing
operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
(21.3
|
)
|
|
$
|
(7.3
|
)
|
|
$
|
(13.3
|
)
|
State and local
|
|
|
2.4
|
|
|
|
0.2
|
|
|
|
(5.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18.9
|
)
|
|
|
(7.1
|
)
|
|
|
(18.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
1.1
|
|
|
|
6.5
|
|
|
|
0.3
|
|
State and local
|
|
|
0.2
|
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.3
|
|
|
|
8.0
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) provision
|
|
$
|
(17.6
|
)
|
|
$
|
0.9
|
|
|
$
|
(18.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the U.S. federal statutory income tax
rate to the Companys effective income tax rate on earnings
from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Statutory U.S. federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
State and local income taxes, net of U.S. federal income tax
effect
|
|
|
2.0
|
|
|
|
5.6
|
|
|
|
10.0
|
|
Tax settlements and refund claims, including interest
|
|
|
(35.2
|
)
|
|
|
(16.4
|
)
|
|
|
(25.5
|
)
|
Reserve adjustments
|
|
|
(8.6
|
)
|
|
|
106.3
|
|
|
|
(29.1
|
)
|
Valuation allowance adjustments
|
|
|
(33.2
|
)
|
|
|
(136.9
|
)
|
|
|
(67.1
|
)
|
Unregistered stock rescission
|
|
|
1.0
|
|
|
|
24.4
|
|
|
|
|
|
Other, net
|
|
|
2.7
|
|
|
|
17.8
|
|
|
|
(2.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
(36.3
|
)%
|
|
|
35.8
|
%
|
|
|
(78.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax benefit of $17.6 million in fiscal 2009 is
primarily related to new guidance that was published by the
Chief Counsels Office of the Internal Revenue Service
(IRS) in December 2008 clarifying which costs
qualify for ten-year carryback of tax net operating losses for
refund of prior years taxes. As a result of the clarifying
language, the Company recorded during the first quarter of
fiscal 2009 an income tax benefit of $19.7 million, of
which $14.5 million was for the release of the valuation
allowance associated with the utilization of the qualifying tax
net operating losses and $5.2 million was for the
recognition of affirmative claims related to previous uncertain
tax positions associated with prior years refund claims related
to the qualifying costs.
In fiscal 2008, although the Company generated $2.5 million
in income from continuing operations, the Company had a tax loss
primarily related to the impact of the fiscal 2008 change in tax
method of accounting adopted for unbilled receivables. The new
tax method of accounting adopted in fiscal 2008 in accordance
with guidance published by the IRS defers such revenue until the
all events test is met for tax purposes. The fiscal 2008 tax net
operating loss from continuing operations resulted in an income
tax benefit of $9.5 million for carryback to prior years
and a refund of previously paid taxes. Due to the tightening of
the credit market in the fourth quarter of fiscal 2008, a tax
planning strategy relied on for realizability of a portion of
the deferred tax assets ceased to be
75
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
prudent and feasible, resulting in a charge to deferred income
tax expense of $8.0 million and a corresponding increase to
the valuation allowance.
The income tax benefit in fiscal 2007 reflects a
$6.3 million benefit from continuing operations for the
carryback of current and prior year losses resulting in refunds
of previously paid taxes and a $12.2 million benefit
primarily from U.S. federal and state income tax
settlements including research and development credit claim
benefits, manufacturers investment credit claim benefits,
and certain statute expirations, which is partially offset by
$0.4 million of current state tax expense.
A valuation allowance has been recorded to offset the net
deferred tax assets at November 30, 2009 and 2008 to
reflect the uncertainty of realization. A valuation allowance is
required when it is more-likely-than-not that all or a portion
of net deferred tax assets may not be realized. A review of all
available positive and negative evidence is considered,
including past and future performance, the market environment in
which the Company operates, utilization of tax attributes in the
past, length of carryback and carryforward periods, and
evaluation of potential tax planning strategies when evaluating
the realizability of deferred tax assets.
Forming a conclusion that a valuation allowance is not required
is difficult when there is negative evidence such as cumulative
losses in recent years. The Company determines cumulative losses
on a rolling twelve-quarter basis and the analysis includes the
retirement benefit plan losses in accumulated other
comprehensive loss. Accordingly, the Company has maintained a
full valuation allowance on all of its net deferred tax assets.
The Company is routinely examined by domestic and foreign tax
authorities. While it is difficult to predict the outcome or
timing of a particular tax matter, the Company believes it has
adequately provided reserves for any reasonable foreseeable
outcome related to these matters.
A reconciliation of the change in unrecognized tax benefits from
December 1, 2007 to November 30, 2009 is as follows
(in millions):
|
|
|
|
|
Unrecognized tax benefits at December 1, 2007
|
|
$
|
3.2
|
|
Gross increases for tax positions taken during the year
|
|
|
2.7
|
|
Lapse of statue of limitations
|
|
|
(0.1
|
)
|
|
|
|
|
|
Unrecognized tax benefits at November 30, 2008
|
|
|
5.8
|
|
Gross increases for tax positions taken during the year
|
|
|
1.9
|
|
Gross decreases for resolved tax controversies during the year
|
|
|
(5.2
|
)
|
|
|
|
|
|
Unrecognized tax benefits at November 30, 2009
|
|
$
|
2.5
|
|
|
|
|
|
|
The increase in reserves during fiscal 2009 is primarily related
to potential for double taxed income in certain states; and
state deferred tax liabilities, the current period recognition
of which is uncertain. The decrease in the reserve balance is
the result of new guidance published by the IRS clarifying which
costs qualify for ten-year carryback. The reserve was reduced by
$5.2 million for the recognition of affirmative claims
related to uncertain tax positions associated with prior years
refund claims related to such qualifying costs. Due to the high
degree of uncertainty regarding the timing of potential future
cash flows associated with these liabilities, the Company is
unable to make a reasonably reliable estimate of the amount and
period in which these liabilities might be paid.
The increase in reserves during fiscal 2008 is primarily related
to affirmative claims under ten-year carryback provisions of the
Internal Revenue Code.
76
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and liabilities
for continuing operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Deferred Tax Assets
|
|
|
|
|
|
|
|
|
Accrued estimated costs
|
|
$
|
55.4
|
|
|
$
|
30.8
|
|
Tax losses and credit carryforwards
|
|
|
94.8
|
|
|
|
178.8
|
|
Net cumulative defined benefit pension plan losses
|
|
|
89.2
|
|
|
|
|
|
Depreciation
|
|
|
|
|
|
|
1.9
|
|
Retiree medical and life benefits
|
|
|
33.9
|
|
|
|
31.0
|
|
Valuation allowance
|
|
|
(251.5
|
)
|
|
|
(197.0
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
21.8
|
|
|
|
45.5
|
|
Deferred Tax Liabilities
|
|
|
|
|
|
|
|
|
Net cumulative defined benefit pension plan gains
|
|
|
|
|
|
|
32.4
|
|
Depreciation
|
|
|
1.7
|
|
|
|
|
|
U.S. federal effect of state deferred taxes
|
|
|
18.3
|
|
|
|
12.2
|
|
Other
|
|
|
11.4
|
|
|
|
9.2
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
31.4
|
|
|
|
53.8
|
|
|
|
|
|
|
|
|
|
|
Total net deferred tax liabilities
|
|
|
(9.6
|
)
|
|
|
(8.3
|
)
|
Less: deferred tax assets (liabilities) expected to be realized
within one year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term deferred tax liabilities
|
|
$
|
(9.6
|
)
|
|
$
|
(8.3
|
)
|
|
|
|
|
|
|
|
|
|
The year of expiration for the Companys state and
U.S. federal net operating loss carryforwards as of
November 30, 2009 were as follows:
|
|
|
|
|
|
|
|
|
Year Ended November 30,
|
|
State
|
|
|
Federal
|
|
|
|
(In millions)
|
|
|
2016
|
|
$
|
35.8
|
|
|
$
|
|
|
2017
|
|
|
130.3
|
|
|
|
|
|
2018
|
|
|
28.9
|
|
|
|
|
|
2019
|
|
|
15.1
|
|
|
|
|
|
2020
|
|
|
19.9
|
|
|
|
|
|
2024
|
|
|
|
|
|
|
28.5
|
|
2025
|
|
|
|
|
|
|
122.3
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
230.0
|
|
|
$
|
150.8
|
|
|
|
|
|
|
|
|
|
|
Approximately $9.2 million of the net operating loss
carryforwards relate to the exercise of stock options, the
benefit of which will be credited to equity when realized. In
addition, the Company has U.S. federal and state capital
77
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
loss carryforwards of approximately $7.8 million and
$0.2 million, respectively, which begins expiring in fiscal
2010. The decrease in capital loss carryforwards from the
previous fiscal year is the result of:
|
|
|
|
|
|
|
|
|
|
|
State
|
|
|
Federal
|
|
|
|
(In millions)
|
|
|
Utilization
|
|
$
|
44.7
|
|
|
$
|
41.8
|
|
Expiration
|
|
|
18.0
|
|
|
|
110.2
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
62.7
|
|
|
$
|
152.0
|
|
|
|
|
|
|
|
|
|
|
The Company also has a U.S. federal research credit
carryforward of $7.2 million which begins expiring in
fiscal 2021, and a California research credit carryforward of
$4.1 million which has an indefinite carryforward period.
Additionally, the Company has a California manufacturing
investment credit carryforward of $0.6 million which begins
expiring in fiscal 2011; and a foreign tax credit carryforward
of $5.9 million which begins expiring in fiscal 2010, if
not utilized. These tax carryforwards are subject to examination
by the tax authorities.
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Senior debt
|
|
$
|
68.3
|
|
|
$
|
69.0
|
|
Senior subordinated notes
|
|
|
97.5
|
|
|
|
97.5
|
|
Convertible subordinated notes
|
|
|
271.4
|
|
|
|
271.4
|
|
Other debt
|
|
|
1.4
|
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
438.6
|
|
|
|
440.6
|
|
Less: Amounts due within one year
|
|
|
|
|
|
|
|
|
Senior debt
|
|
|
17.1
|
|
|
|
0.6
|
|
Other debt
|
|
|
0.7
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
Total long-term debt
|
|
$
|
420.8
|
|
|
$
|
438.6
|
|
|
|
|
|
|
|
|
|
|
See Note 15 for a discussion on recent changes to the
Companys capital structure.
As of November 30, 2009, the Companys annual fiscal
year debt contractual maturities are summarized as follows (in
millions):
|
|
|
|
|
2010(1)
|
|
$
|
142.8
|
|
2011(2)
|
|
|
147.7
|
|
2012
|
|
|
0.5
|
|
2013
|
|
|
147.6
|
|
|
|
|
|
|
Total debt
|
|
$
|
438.6
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes the $125.0 million 4% Notes due January 2024
that can be put to the Company in January 2010 at a price equal
to 100% of the principal amount, plus accrued and unpaid
interest, including contingent interest and liquidated damages,
if any. The 4% Notes are classified as non-current on the
consolidated balance sheet as of November 30, 2009 since
the Company refinanced the 4% Notes with the issuance of
new debt instruments in December 2009 (see Note 15). |
|
(2) |
|
Includes the $146.4 million
21/4% Debentures
due November 2024 that can be put to the Company in November
2011 at a price equal to 100% of the principal amount plus
accrued and unpaid interest, including liquidated damages, if
any, payable in cash, to but not including the repurchase date,
plus, in certain circumstances, a make-whole premium, payable in
common stock. |
78
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Term loan, bearing interest at various rates (rate of 2.51% as
of November 30, 2009), payable in quarterly installments of
$175,019 plus interest, maturing in 2013
|
|
$
|
68.3
|
|
|
$
|
69.0
|
|
|
|
|
|
|
|
|
|
|
$280 million
senior credit facility (Senior Credit
Facility)
In June 2007, the Company entered into an amended and restated
Senior Credit Facility with Wachovia Bank, National Association
as administrative agent (the Administrative Agent),
JP Morgan Chase Bank, N.A. as Syndication Agent, the
subsidiaries of the Company from time to time party thereto, as
guarantors, and a syndicate of lenders from time to time party
thereto for an $80.0 million revolving credit facility
(Revolver) maturing in June 2012, and a
$200.0 million credit-linked facility maturing in April
2013, which comprises the Senior Credit Facility. The
credit-linked facility consists of a $75.0 million term
loan subfacility and a $125.0 million letter of credit
subfacility.
On May 1, 2009, the Company entered into the First
Amendment and Consent (the Amendment) to the
Companys existing Credit Agreement. Snappon SA, a French
subsidiary of the Company, that is neither a Credit Party nor
Significant Subsidiary (as defined under the Credit Agreement)
and has no operations, has had legal judgments rendered against
it under French law, aggregating 2.9 million plus
interest related to wrongful discharge claims by certain former
employees of Snappon SA. Under the Amendment, the Required
Lenders (as defined under the Credit Agreement) agreed
(i) that an event of default will not be triggered with
respect to the legal judgments rendered against Snappon SA,
unless the judgments equal or exceed $10.0 million and
shall not have been paid and satisfied, vacated, discharged,
stayed or bonded pending appeal within thirty (30) days
from the entry thereof and (ii) to consent to the
commencement of voluntary or involuntary bankruptcy, insolvency
or similar proceedings with respect to Snappon SA and that any
such proceeding would not constitute an Event of Default under
the Credit Agreement. Additionally, the Company agreed to
temporarily reduce its borrowing availability under the
Revolving Loan (as defined therein) from $80.0 million to
$60.0 million commencing on May 1, 2009 and ending on
the earlier of (i) the date on which an amendment that
permits the renewal, refinancing, or extension of the
4% Notes (as defined therein) has been approved by the
Required Lenders and (ii) the date on which the Company
redeems the 4% Notes in accordance with the terms of the
Credit Agreement.
On November 24, 2009, the Company entered into a joinder
agreement to add Easton Development Company, LLC as a guarantor
party to the indenture.
The interest rate on LIBOR rate borrowings under the Revolver is
LIBOR plus 225 basis points, subject to downward adjustment
if the leverage ratio, as defined, is less than 4.00 to 1.00,
and the interest rate on the term loan is LIBOR plus
225 basis points. The Company is charged a fee on the total
letter of credit subfacility in the amount of 225 basis
points per annum plus a fronting fee of 10 basis points per
annum on outstanding letters of credit and other customary
charges applicable to facilities of this type. The Company is
also charged a commitment fee on the unused portion of the
Revolver in the amount of 50 basis points per annum,
subject to downward adjustment after fiscal 2007 if the leverage
ratio, as defined, is less than 4.00 to 1.00.
As of November 30, 2009, the borrowing limit under the
Revolver was $60.0 million with $59.2 million
available due to an outstanding letter of credit in the amount
of $0.8 million. Also as of November 30, 2009, the
Company had $84.5 million outstanding letters of credit
under the $125.0 million letter of credit subfacility and
had permanently reduced the amount of its term loan subfacility
to the $68.3 million outstanding.
79
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During fiscal 2010, the Company will be required to make a
principal payment of $16.6 million on the term loan
subfacility due to the excess cash flow provisions of the Credit
Agreement. The principal payment must be made within
110 days of November 30, 2009. In the event that the
leverage ratio is less than or equal to 3.0 to 1.0, as defined,
at the end of any fiscal year during the term of the Senior
Credit Facility, no excess cash flow pre-payment would be
required under this provision.
The Senior Credit Facility is collateralized by a substantial
portion of the Companys real property holdings and
substantially all of the Companys other assets, including
the stock and assets of its material domestic subsidiaries that
are guarantors of the facility. The Company is subject to
certain limitations including the ability to: incur additional
senior debt, release collateral, retain proceeds from asset
sales and issuances of debt or equity, make certain investments
and acquisitions, grant additional liens, and make restricted
payments, including stock repurchases and dividends. In
addition, the Credit Agreement contains certain restrictions
surrounding the ability of the Company to refinance its
subordinated debt, including provisions that, except on terms no
less favorable to the Credit Agreement, the Companys
subordinated debt cannot be refinanced prior to maturity.
Furthermore, provided that the Company has cash and cash
equivalents of at least $25.0 million after giving effect
thereto, the Company may redeem (with funds other than Senior
Credit Facility proceeds) the subordinated notes to the extent
required by the mandatory redemption provisions of the
subordinated note indenture. The Company is also subject to the
following financial covenants:
|
|
|
|
|
|
|
|
|
Actual Ratios as of
|
|
Required Ratios
|
|
Required Ratios
|
Financial Covenant
|
|
November 30, 2009
|
|
Through November 30, 2009
|
|
December 1, 2009 and thereafter
|
|
Interest coverage ratio
|
|
3.97 to 1.00
|
|
Not less than: 2.25 to 1.00
|
|
Not less than: 2.25 to 1.00
|
Leverage ratio
|
|
3.56 to 1.00
|
|
Not greater than: 5.75 to 1.00
|
|
Not greater than: 5.50 to 1.00
|
The Company was in compliance with its financial and
non-financial covenants as of November 30, 2009.
|
|
b.
|
Senior
Subordinated Notes:
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Senior subordinated notes, bearing interest at 9.50% per annum,
interest payments due in February and August, maturing in 2013
|
|
$
|
97.5
|
|
|
$
|
97.5
|
|
|
|
|
|
|
|
|
|
|
91/2% Senior
Subordinated Notes
In August 2003, the Company issued $150.0 million aggregate
principal amount of its
91/2% Notes
due 2013 in a private placement pursuant to Section 4(2)
and Rule 144A under the Securities Act of 1933. The
91/2% Notes
have been exchanged for registered, publicly tradable notes with
substantially identical terms. The
91/2% Notes
mature in August 2013. All or any portion of the
91/2% Notes
may be redeemed by the Company at any time on or after
August 15, 2008 at redemption prices beginning at 104.75%
of the principal amount and reducing to 100% of the principal
amount by August 15, 2011.
In February 2005, the Company redeemed $52.5 million
principal amount of its
91/2% Notes,
representing 35% of the $150 million aggregate principal
outstanding. In accordance with the indenture governing the
notes, the redemption price was 109.5% of the principal amount
of the
91/2% Notes
redeemed, plus accrued and unpaid interest.
If the Company undergoes a change of control (as defined in the
91/2% Notes
indenture) or sells assets, it may be required to offer to
purchase the
91/2% Notes
from the holders of such notes.
80
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The
91/2% Notes
are non-collateralized and subordinated to all of the
Companys existing and future senior indebtedness,
including borrowings under its Senior Credit Facility. The
91/2% Notes
rank senior to the 4% Notes and the
21/4% Debentures.
The
91/2% Notes
are guaranteed by the Companys material domestic
subsidiaries. Each subsidiary guarantee is non-collateralized
and subordinated to the respective subsidiarys existing
and future senior indebtedness, including guarantees of
borrowings under the Senior Credit Facility. The
91/2% Notes
and related guarantees are effectively subordinated to the
Companys and the subsidiary guarantors
collateralized debt and to any and all debt and liabilities,
including trade debt of the Companys non-guarantor
subsidiaries.
The indenture governing the
91/2% Notes
limits the Companys ability and the ability of the
Companys restricted subsidiaries, as defined in the
indenture, to incur or guarantee additional indebtedness, make
restricted payments, pay dividends or distributions on, or
redeem or repurchase, its capital stock, make investments, issue
or sell capital stock of restricted subsidiaries, create liens
on assets to secure indebtedness, enter into transactions with
affiliates and consolidate, merge or transfer all or
substantially all of the assets of the Company. The indenture
also contains customary events of default, including failure to
pay principal or interest when due, cross-acceleration to other
specified indebtedness, failure of any of the guarantees to be
in full force and effect, failure to comply with covenants and
certain events of bankruptcy, insolvency, and reorganization,
subject in some cases to notice and applicable grace periods.
Issuance of the
91/2% Notes
generated net proceeds of approximately $145.0 million. The
Company used a portion of the net proceeds to repay outstanding
revolving loans under the Companys prior credit facility,
and the balance of the net proceeds to finance a portion of the
purchase price of the acquisition of substantially all of the
assets of the propulsion business of Atlantic Research
Corporation and to pay related fees and expenses.
In October 2004, the Company entered into a supplemental
indenture to amend the indenture dated August 11, 2003 to
(i) permit the refinancing of its outstanding
53/4% Notes
with new subordinated debt having a final maturity or redemption
date later than the final maturity or redemption date of the
53/4% Notes
being refinanced, and (ii) provide that the Company will
have up to ten (10) business days to apply the proceeds of
refinancing indebtedness toward the redemption or repurchase of
outstanding indebtedness. The supplemental indenture also
amended the definition of refinancing indebtedness to include
indebtedness, the proceeds of which are used to pay a premium
necessary to accomplish a refinancing.
In June 2006, the Company entered into a second supplemental
indenture for the
91/2% Notes
to amend the indenture dated August 11, 2003, as amended
October 2004, to permit the Company to incur additional
indebtedness under its previous credit facility.
On November 24, 2009, the Company entered into a third
supplemental indenture for the
91/2% Notes
to amend the indenture dated August 11, 2003, as amended
October 2004 and June 2006, to add Easton Development Company,
LLC as a guarantor party to the indenture.
|
|
c.
|
Convertible
Subordinated Notes:
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Convertible subordinated debentures, bearing interest at 2.25%
per annum, interest payments due in May and November, maturing
in 2024
|
|
$
|
146.4
|
|
|
$
|
146.4
|
|
Contingent convertible subordinated notes, bearing interest at
4.00% per annum, interest payments due in January and July,
maturing in 2024
|
|
|
125.0
|
|
|
|
125.0
|
|
|
|
|
|
|
|
|
|
|
Total convertible subordinated notes
|
|
$
|
271.4
|
|
|
$
|
271.4
|
|
|
|
|
|
|
|
|
|
|
81
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
21/4% Convertible
Subordinated Debentures
In November 2004, the Company issued $80.0 million in
aggregate principal amount of its
21/4% Debentures
in a private placement pursuant to Section 4(2) and
Rule 144A under the Securities Act of 1933. In December
2004, an initial purchaser exercised its option to purchase
additional
21/4% Debentures
totaling $66.4 million aggregate principal amount. The
21/4% Debentures
have been registered for resale for the purchasers who requested
registration. The
21/4% Debentures
mature in November 2024. Interest on the
21/4% Debentures
accrues at a rate of 2.25% per annum and is payable on May 15
and November 15, beginning May 15, 2005.
The
21/4% Debentures
are general unsecured obligations and rank equal in right of
payment to all of the Companys other existing and future
subordinated indebtedness, including the 4% Notes. The
21/4% Debentures
rank junior in right of payment to all of the Companys
existing and future senior indebtedness, including all of its
obligations under its Senior Credit Facility and all of its
existing and future senior subordinated indebtedness, including
the Companys outstanding
91/2% Notes.
In addition, the
21/4% Debentures
are effectively subordinated to any of the Companys
collateralized debt and to any and all debt and liabilities,
including trade debt of its subsidiaries.
Each $1,000 principal of the
21/4% Debentures
is convertible at each holders option, into cash and, if
applicable, the Companys common stock at an initial
conversion price of $20 per share (subject to adjustment as
provided in the indenture governing the
21/4% Debentures)
only if: (i) during any fiscal quarter the closing price of
the common stock for at least twenty (20) trading days in
the thirty (30) consecutive trading day period ending on
the last trading day of the preceding fiscal quarter exceeds
130% of the conversion price; (ii) the Company has called
the
21/4% Debentures
for redemption and redemption has not yet occurred;
(iii) subject to certain exceptions, during the five
(5) business days after any five consecutive trading day
period in which the trading price per $1,000 principal amount of
the
21/4% Debentures
for each day of such period is less than 95% of the product of
the common stock price on that day multiplied by the conversion
rate then in effect; (iv) specified corporate transactions
have occurred; or (v) occurrence of a transaction or event
constituting a designated event. The Company may be required to
pay a make-whole premium in shares of common stock and accrued
but unpaid interest if the
21/4% Debentures
are converted in connection with certain specified designated
events occurring on or prior to November 20, 2011. The
initial conversion rate of 50 shares for each $1,000
principal amount of the
21/4% Debentures
is equivalent to a conversion price of $20 per share, subject to
certain adjustments. None of these events has occurred
subsequent to the issuance of the debentures.
In the event of conversion of the
21/4% Debentures,
the Company will deliver, in respect of each $1,000 principal
amount of
21/4% Debentures
tendered for conversion, (1) an amount in cash
(principal return) equal to the lesser of
(a) the principal amount of the converted
21/4% Debentures
and (b) the conversion value (such value equal to the
conversion rate multiplied by the average closing price of
common shares over a 10
consecutive-day
trading period beginning on the second trading day following the
day the Debentures are tendered) and (2) if the conversion
value is greater than the principal return, an amount in common
shares, with a value equal to the difference between the
conversion value and the principal return. Fractional shares
will be paid in cash.
The Company may, at its option, redeem some or all of its
21/4% Debentures
for cash on or after November 15, 2014, at a redemption
price equal to 100% of the principal amount to be redeemed, plus
accrued and unpaid interest, including liquidated damages, if
any, to but not including the redemption date. In addition, the
Company may, at its option, redeem some or all of its
21/4% Debentures
on or after November 20, 2011 and prior to
November 15, 2014, if the closing price of its common stock
for at least twenty (20) trading days in any thirty
(30) consecutive
trading-day
period is more than 140% of the conversion price, at a
redemption price equal to 100% of the principal amount to be
redeemed, plus accrued and unpaid interest, including liquidated
damages, if any, payable in cash. If the Company so redeems the
21/4% Debentures,
it will make an additional payment in cash, Company common stock
or a combination thereof, at its option, equal to the present
value of all remaining scheduled payments of interest on the
redeemed debentures through November 15, 2014.
82
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Each holder may require the Company to repurchase all or part of
their
21/4% Debentures
on November 20, 2011, November 15, 2014 and
November 15, 2019, or upon the occurrence of certain
events, at a price equal to 100% of the principal amount of the
21/4% Debentures
plus accrued and unpaid interest, including liquidated damages,
if any, payable in cash, to but not including the repurchase
date, plus, in certain circumstances, a make-whole premium,
payable in Company common stock.
The indenture governing the
21/4% Debentures
limits the Companys ability to, among other things,
consolidate with or merge into any other person, or convey,
transfer or lease its properties and assets substantially as an
entirety to any other person unless certain conditions are
satisfied. The indenture also contains customary events of
default, including failure to pay principal or interest when
due, cross-acceleration to other specified indebtedness, failure
to deliver cash or shares of common stock as required, failure
to comply with covenants and certain events of bankruptcy,
insolvency and reorganization, subject in some cases to notice
and applicable grace periods.
Issuance of the
21/4% Debentures
during fiscal 2004 generated net proceeds of approximately
$77.0 million, which were used to repurchase
$70.3 million of the
53/4% Notes.
During fiscal 2005, the initial purchaser exercised its option
to purchase an additional $66.4 million of
21/4% Debentures;
net cash proceeds of approximately $64.0 million were
generated which were used to repurchase $59.9 million of
the
53/4% Notes.
|
|
4%
|
Contingent
Convertible Subordinated Notes
|
In January 2004, the Company issued $125.0 million
aggregate principal amount of its 4% Notes in a private
placement pursuant to Section 4(2) and Rule 144A under
the Securities Act of 1933. The 4% Notes have been
registered for resale for the purchasers who requested
registration. The 4% Notes mature in January 2024. Interest
on the 4% Notes accrues at a rate of 4.00% per annum and is
payable on January 16 and July 16, beginning July 16,
2004. In addition, contingent interest is payable during any
six-month period, commencing with the six-month period beginning
January 16, 2008, if the average market price of a
4% Note for the five (5) trading days ending on the
third trading day immediately preceding the relevant six-month
period equals 120% or more of the principal amount of the notes.
Contingent interest has not been payable subsequent to the
issuance of the 4% Notes nor will it be payable during the
six-month period beginning January 16, 2009.
In January 2010, the Company redeemed $124.7 million
principal amount of its 4% Notes which were presented to
the Company for payment (See Note 15).
The 4% Notes are general unsecured obligations and rank
equal in right of payment to all of the Companys other
existing and future subordinated indebtedness, including the
21/4% Debentures.
The 4% Notes rank junior in right of payment to all of the
Companys existing and future senior indebtedness,
including all of its obligations under its Senior Credit
Facility, and all of its existing and future senior subordinated
indebtedness, including the Companys outstanding
91/2% Notes.
In addition, the 4% Notes are effectively subordinated to
any of the Companys collateralized debt and to any and all
debt and liabilities, including trade debt of its subsidiaries.
Each $1,000 principal amount of the 4% Notes is convertible
at each holders option into 64.81 shares of the
Companys common stock (subject to adjustment as provided
in the indenture governing the 4% Notes) only if:
(i) during any calendar quarter the closing price of the
common stock for at least twenty (20) trading days in the
thirty
(30) trading-day
period ending on the last trading day of the preceding calendar
quarter exceeds 120% of the conversion price; (ii) the
Company has called the 4% Notes for redemption and
redemption has not yet occurred; (iii) during the five
trading day period after any five consecutive trading day period
in which the average trading price of the 4% Notes for each
day of such period is less than 95% of the product of the common
stock price on that day multiplied by the number of shares of
common stock issuable upon conversion of $1,000 principal amount
of the 4% Notes; or (iv) certain corporate events have
occurred. The initial conversion rate of 64.81 shares for
each $1,000 principal amount of the 4% Notes is equivalent
to a conversion price of $15.43 per share subject to certain
adjustments.
83
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company may redeem, at its option, some or all of its
4% Notes for cash on or after January 19, 2010,
subject to the consent of the Administrative Agent of the Senior
Credit Facility. In addition, the Company may, at its option,
redeem some or all of its 4% Notes for cash on or after
January 19, 2008 and prior to January 19, 2010, if the
closing price of its common stock for at least twenty
(20) trading days in the thirty
(30) trading-day
period ending on the last trading day of the preceding calendar
month is more than 125% of the conversion price. Each holder may
require the Company to repurchase for cash all or a portion of
its 4% Notes on January 16, 2010, 2014, and 2019, or,
subject to certain exceptions, upon a change of control (as
defined in the 4% Notes indenture). In all cases for either
redemption of the 4% Notes or repurchase of the
4% Notes at the option of the holder, the price is equal to
100% of the principal amount of the 4% Notes, plus accrued
and unpaid interest, including contingent interest and
liquidated damages, if any.
The indenture governing the 4% Notes limits the
Companys ability to, among other things, consolidate with
or merge into any other person, or convey, transfer or lease its
properties and assets substantially as an entirety to any other
person unless certain conditions are satisfied. The indenture
also contains customary events of default, including failure to
pay principal or interest when due, cross-acceleration to other
specified indebtedness, failure to deliver shares of common
stock as required, failure to comply with covenants and certain
events of bankruptcy, insolvency, and reorganization, subject in
some cases to notice and applicable grace periods.
Issuance of the 4% Notes generated net proceeds of
approximately $120.0 million, which were first used to
repay outstanding revolving loans and prepay twelve
(12) months of scheduled term loan principal amortization
under the Companys prior credit facility. The remaining
net proceeds were available to be used for general corporate
purposes.
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Promissory note, bearing interest at 5.00% per annum, payable in
annual installments of $700,000 plus interest, maturing in 2011
|
|
$
|
1.4
|
|
|
$
|
2.1
|
|
Promissory note, bearing no interest through maturity in 2009
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
Total other debt
|
|
$
|
1.4
|
|
|
$
|
2.7
|
|
|
|
|
|
|
|
|
|
|
In January 2007, the Company purchased, for $4.3 million,
approximately 180 acres of land which had been previously
leased by the Company. The purchase was financed with
$1.5 million of cash and a $2.8 million promissory
note. The promissory note is payable in four equal annual
installments, matures in January 2011, and bears interest at a
per annum rate of 5.00%.
In March 2008, the Company settled an environmental remediation
matter for $1.2 million. Under the terms of the settlement,
the Company paid half of the settlement in cash in the second
quarter of fiscal 2008 and the remaining amount, collateralized
by a promissory note, was paid in the second quarter of fiscal
2009.
Pension Benefits On November 25, 2008,
the Company decided to amend the defined benefit pension and
benefits restoration plans to freeze future accruals under such
plans. Effective February 1, 2009 and July 31, 2009,
future benefit accruals for all current salaried employees and
collective bargaining unit employees were discontinued,
respectively. No employees lost their previously earned pension
benefits. As a result of the amendment and freeze, the Company
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.
84
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Normal retirement age is 65, but certain plan provisions allow
for earlier retirement. Pension benefits are calculated under
formulas based on average earnings and length of service for
salaried employees and under negotiated non-wage based formulas
for hourly employees. The Company also sponsors a non-qualified
Benefit Restoration Plan (BRP), which restores
benefits that cannot be paid under the qualified pension plan
due to IRS limitations. Effective February 1, 2009, future
pension benefit accruals for BRP participants were discontinued.
As a result of the second amended and restated shareholder
agreement (Shareholder Agreement), the Company was
required to fund into a grantor trust during fiscal 2008 an
amount equal to $35.2 million which includes the
non-qualified BRP pension liabilities.
The Pension Protection Act (PPA), enacted in August
2006, requires underfunded pension plans to improve their
funding ratios within prescribed intervals based on the funded
status of the plan as of specified measurement dates. The funded
ratio as of November 30, 2008 under the PPA for the
Companys defined benefit pension plan was above the ratio
required under the PPA, as amended in 2008. The required ratio
to be met as of the Companys November 30, 2009
measurement date is 94%. During the fourth quarter of fiscal
2009, the Company made a voluntary contribution of
$4.4 million to improve the plans PPA funded status
as of November 30, 2009, although there can be no assurance
that the amount of this contribution will be sufficient to meet
the required ratio. The final calculated PPA funded ratio as of
November 30, 2009 is expected to be completed in the second
half of 2010.
The funded status of the pension plan may be adversely affected
by the investment experience of the plans 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 Companys plans assets does
not meet our assumptions, if there are changes to the IRS
regulations or other applicable law or if other actuarial
assumptions are modified, our future contributions to our
underfunded pension plan could be higher than we expect. In
addition, changes to the discount rate used to measure pension
liabilities could adversely affect the funded status of the
plan. Significant cash contribution requirements to the
Companys pension plan may adversely affect the
Companys ability to meet certain covenants under its
Senior Credit Facility which, absent an amendment or
refinancing, would result in a default under the Senior Credit
Facility and cross defaults on other debt instruments.
Medical and Life Benefits The Company
provides postretirement benefits to certain eligible retired
employees, with varied coverage by employee group. Medical and
life benefit obligations are unfunded.
Defined Contribution 401(k) Benefits The
Company sponsors a defined contribution 401(k) plan and
participation in the plan is available to all employees. Company
contributions to the plan generally have been based on a
percentage of employee contributions and, prior to
April 15, 2009, the Companys contributions to the
plan had been directed entirely in the GenCorp Stock Fund.
Effective January 15, 2009, the Company discontinued the
employer matching component to the defined contribution 401(k)
plan for non-union employees. Effective March 15, 2009,
exchanges into the GenCorp Stock Fund were no longer permitted.
Effective April 15, 2009, all future contribution
investment elections directed into the GenCorp Stock Fund were
redirected to other investment options and the Companys
union employee matching contributions are being made in cash.
The cost of the 401(k) plan was $2.0 million in fiscal
2009, $9.2 million in fiscal 2008, and $9.1 million in
fiscal 2007. The Company also sponsors a BRP defined
contribution plan designed to enable participants to continue to
defer their compensation on a pre-tax basis when such
compensation or the participants deferrals to
tax-qualified plans exceed applicable Internal Revenue Code of
1986, as amended (IRC) limits. Under the BRP defined
contribution plan, employees who are projected to be impacted by
the IRC limits may, on an annual basis, elect to defer
compensation earned in the current year such as salary and
certain other incentive compensation. Any amounts that are
deferred are recorded as liabilities. As a result of the
Shareholder Agreement, the Company was required to fund into a
grantor trust during fiscal 2008 an amount equal to
$35.2 million which includes the BRP defined contribution
plan liabilities.
85
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Summarized below is the balance sheet impact of the
Companys pension benefits and medical and life benefits.
Pension benefits include the consolidated qualified plan, and
the unfunded non-qualified plan for benefits provided to
employees beyond those provided by the Companys qualified
plans. Plan assets, benefit obligations, and the funded status
of the plans were determined at November 30, 2009 and
August 31, 2008 for fiscal 2009 and 2008, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical and
|
|
|
|
Pension Benefits
|
|
|
Life Benefits
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Change in fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value beginning of year
|
|
$
|
1,543.3
|
|
|
$
|
1,712.2
|
|
|
$
|
|
|
|
$
|
|
|
Loss on plan assets
|
|
|
(46.6
|
)
|
|
|
(29.5
|
)
|
|
|
|
|
|
|
|
|
Employer contributions(1)
|
|
|
5.8
|
|
|
|
1.7
|
|
|
|
10.1
|
|
|
|
7.9
|
|
Benefits paid
|
|
|
(167.0
|
)
|
|
|
(141.1
|
)
|
|
|
(10.1
|
)
|
|
|
(7.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value end of year
|
|
$
|
1,335.5
|
|
|
$
|
1,543.3
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation beginning of year
|
|
$
|
1,481.7
|
|
|
$
|
1,623.2
|
|
|
$
|
76.1
|
|
|
$
|
88.8
|
|
Service cost
|
|
|
10.8
|
|
|
|
19.7
|
|
|
|
0.2
|
|
|
|
0.3
|
|
Interest cost
|
|
|
113.1
|
|
|
|
96.5
|
|
|
|
6.2
|
|
|
|
5.3
|
|
Actuarial losses (gains)
|
|
|
123.0
|
|
|
|
(88.6
|
)
|
|
|
10.5
|
|
|
|
(12.7
|
)
|
Plan amendments
|
|
|
|
|
|
|
3.0
|
|
|
|
|
|
|
|
2.3
|
|
Curtailment(2)
|
|
|
|
|
|
|
(36.3
|
)
|
|
|
|
|
|
|
|
|
Impact of Shareholder Agreement (Note 13)
|
|
|
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
(167.0
|
)
|
|
|
(141.1
|
)
|
|
|
(10.1
|
)
|
|
|
(7.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation end of year(3)
|
|
$
|
1,561.6
|
|
|
$
|
1,481.7
|
|
|
$
|
82.9
|
|
|
$
|
76.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plans
|
|
$
|
(226.1
|
)
|
|
$
|
61.6
|
|
|
$
|
(82.9
|
)
|
|
$
|
(76.1
|
)
|
Employer contributions/benefit payments from August 31 to
November 30
|
|
|
|
|
|
|
0.6
|
|
|
|
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Liability) Asset Recognized in the Consolidated Balance
Sheets(4)
|
|
$
|
(226.1
|
)
|
|
$
|
62.2
|
|
|
$
|
(82.9
|
)
|
|
$
|
(73.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid pension asset
|
|
$
|
|
|
|
$
|
76.5
|
|
|
$
|
|
|
|
$
|
|
|
Pension liability, current (component of other current
liabilities)
|
|
|
(1.1
|
)
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
Postretirement medical and life benefits, current
|
|
|
|
|
|
|
|
|
|
|
(7.2
|
)
|
|
|
(7.1
|
)
|
Postretirement medical and life benefits, noncurrent
|
|
|
|
|
|
|
|
|
|
|
(75.7
|
)
|
|
|
(66.8
|
)
|
Pension benefits, noncurrent
|
|
|
(225.0
|
)
|
|
|
(13.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Liability) Asset Recognized in the Consolidated Balance
Sheets
|
|
$
|
(226.1
|
)
|
|
$
|
62.2
|
|
|
$
|
(82.9
|
)
|
|
$
|
(73.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
During the fourth quarter of fiscal 2009, the Company made a
voluntary contribution of $4.4 million. |
|
(2) |
|
On November 25, 2008, the Company decided to amend and
freeze its defined benefit pension plan effective
February 1, 2009 for all current salaried employees and
July 31, 2009 for collective bargaining unit employees. |
|
(3) |
|
Pension amounts include $15.8 million in fiscal 2009 and
$14.9 million in fiscal 2008 for unfunded plans. |
|
(4) |
|
Pension amounts include $15.8 million in fiscal 2009 and
$14.3 million in fiscal 2008 for unfunded plans. |
86
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The accumulated benefit obligation for the defined benefit
pension plans was $1,561.6 million and
$1,480.4 million as of the November 30, 2009 and
August 31, 2008 measurement dates, respectively.
Components of net periodic benefit expense (income) for
continuing operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical and
|
|
|
|
Pension Benefits
|
|
|
Life Benefits
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Service cost(1)
|
|
$
|
6.3
|
|
|
$
|
19.7
|
|
|
$
|
17.2
|
|
|
$
|
0.2
|
|
|
$
|
0.3
|
|
|
$
|
0.3
|
|
Interest cost on benefit obligation
|
|
|
89.3
|
|
|
|
96.5
|
|
|
|
96.2
|
|
|
|
5.0
|
|
|
|
5.3
|
|
|
|
5.5
|
|
Assumed return on plan assets(2)
|
|
|
(103.8
|
)
|
|
|
(123.8
|
)
|
|
|
(122.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service (credits) costs
|
|
|
|
|
|
|
2.0
|
|
|
|
2.0
|
|
|
|
0.1
|
|
|
|
0.1
|
|
|
|
(0.1
|
)
|
Amortization of net (gains) losses
|
|
|
(1.0
|
)
|
|
|
14.7
|
|
|
|
29.8
|
|
|
|
(8.0
|
)
|
|
|
(6.8
|
)
|
|
|
(6.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit (income) expense
|
|
$
|
(9.2
|
)
|
|
$
|
9.1
|
|
|
$
|
22.4
|
|
|
$
|
(2.7
|
)
|
|
$
|
(1.1
|
)
|
|
$
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Service cost for pension benefits is the actuarial present value
of benefits attributed by the defined benefit pension
plans benefit formulas for services rendered by
participants during the period, including the administrative
costs. For fiscal 2009, service cost for pension benefits
include administrative costs and service cost for all current
salaried employees until February 1, 2009 and collective
bargaining unit employees until July 31, 2009. |
|
(2) |
|
The actual (loss) return on plan assets was $(46.6) million
in fiscal 2009, $(29.5) million in fiscal 2008, and
$145.5 million in fiscal 2007. |
Market conditions and interest rates significantly affect assets
and liabilities of the pension plans. Pension accounting
requires that market gains and losses be deferred and recognized
over a period of years. This smoothing results in
the creation of other accumulated income or loss which will be
amortized to pension costs in future years. The accounting
method the Company utilizes recognizes one-fifth of the
unamortized gains and losses in the market-related value of
pension assets and all other gains and losses including changes
in the discount rate used to calculate benefit costs each year.
Investment gains or losses for this purpose are the difference
between the expected return and the actual return on the
market-related value of assets which smoothes asset values over
three years. Although the smoothing period mitigates some
volatility in the calculation of annual pension costs, future
pension costs are impacted by changes in the market value of
pension plan assets and changes in interest rates.
87
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company used the following assumptions, calculated based on
a weighted-average, to determine the benefit obligations and net
periodic benefit expense for the applicable fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Medical and
|
|
|
Benefits
|
|
Life Benefits
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Discount rate (benefit obligations)
|
|
|
5.65
|
%
|
|
|
7.10
|
%
|
|
|
5.09
|
%
|
|
|
6.85
|
%
|
Discount rate (benefit restoration plan benefit obligations)
|
|
|
5.60
|
%
|
|
|
7.05
|
%
|
|
|
*
|
|
|
|
*
|
|
Discount rate (net periodic benefit expense)
|
|
|
7.60
|
%
|
|
|
6.40
|
%
|
|
|
6.85
|
%
|
|
|
6.25
|
%
|
Expected long-term rate of return on plan assets
|
|
|
8.00
|
%
|
|
|
8.75
|
%
|
|
|
*
|
|
|
|
*
|
|
Rate of compensation increase
|
|
|
*
|
|
|
|
4.50
|
%
|
|
|
*
|
|
|
|
*
|
|
Ultimate healthcare trend rate
|
|
|
*
|
|
|
|
*
|
|
|
|
4.50
|
%
|
|
|
5.00
|
%
|
Initial healthcare trend rate (pre-65)
|
|
|
*
|
|
|
|
*
|
|
|
|
10.60
|
%
|
|
|
9.00
|
%
|
Year ultimate rate attained (pre-65)
|
|
|
*
|
|
|
|
*
|
|
|
|
2028
|
|
|
|
2016
|
|
Initial healthcare trend rate (post 65)
|
|
|
*
|
|
|
|
*
|
|
|
|
9.00
|
%
|
|
|
10.00
|
%
|
Year ultimate rate attained (post 65)
|
|
|
*
|
|
|
|
*
|
|
|
|
2028
|
|
|
|
2016
|
|
Certain actuarial assumptions, such as assumed discount rate,
long-term rate of return, rate of compensation increase, and
assumed healthcare cost trend rates can have a significant
effect on amounts reported for periodic cost of pension benefits
and medical and life benefits, as well as respective benefit
obligation amounts. The assumed discount rate represents the
market rate available for investments in high-quality fixed
income instruments with maturities matched to the expected
benefit payments for pension and medical and life benefit plans.
The expected long-term rate of return on plan assets represents
the rate of earnings expected in the funds invested to provide
for anticipated benefit payments. With input from the
Companys investment advisors and actuaries, the Company
has analyzed the expected rates of return on assets and
determined that a long term rate of 8.00% is reasonable based on
the current and expected asset allocations and on the
plans historical investment performance and best estimates
for future investment performance. The Companys asset
managers regularly review actual asset allocations and
periodically rebalance investments to targeted allocations when
considered appropriate.
The Company reviews external data and its own historical trends
for healthcare costs to determine the healthcare cost trend
rates for the medical benefit plans. For fiscal 2009 medical
benefit obligations, the Company assumed a 10.60% annual rate of
increase for pre 65 participants and a 9.00% annual rate of
increase for post 65 participants in the per capita cost of
covered healthcare claims with the rate decreasing over
19 years until reaching 4.50%.
A one percentage point change in the key assumptions would have
the following effects on the projected benefit obligations as of
November 30, 2009 and on expense for fiscal 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits and
|
|
|
|
|
|
|
Medical and Life Benefits
|
|
Expected Long-term
|
|
Assumed Healthcare
|
|
|
Discount Rate
|
|
Rate of Return
|
|
Cost Trend Rate
|
|
|
|
|
Projected
|
|
|
|
Net Periodic
|
|
Accumulated
|
|
|
Net Periodic
|
|
Benefit
|
|
Net Periodic Pension
|
|
Medical and Life
|
|
Benefit
|
|
|
Benefit Expense
|
|
Obligation
|
|
Benefit Expense
|
|
Benefit Expense
|
|
Obligation
|
|
|
(In millions)
|
|
1% decrease
|
|
$
|
18.5
|
|
|
$
|
116.0
|
|
|
$
|
13.4
|
|
|
$
|
(0.1
|
)
|
|
$
|
(1.9
|
)
|
1% increase
|
|
|
(15.7
|
)
|
|
|
(96.8
|
)
|
|
|
(13.4
|
)
|
|
|
0.1
|
|
|
|
2.1
|
|
88
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
d.
|
Plan
Assets and Investment Policy
|
The Companys pension plans weighted average asset
allocation and the investment policy asset allocation targets at
November 30, 2009 and August 31, 2008, by asset
category, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
Actual
|
|
|
Target(1)
|
|
|
Actual
|
|
|
Target(1)
|
|
|
Domestic equity securities
|
|
|
17
|
%
|
|
|
21
|
%
|
|
|
18
|
%
|
|
|
21
|
%
|
International equity securities
|
|
|
10
|
|
|
|
11
|
|
|
|
10
|
|
|
|
11
|
|
Fixed income
|
|
|
28
|
|
|
|
50
|
|
|
|
49
|
|
|
|
50
|
|
Real estate
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
|
|
2
|
|
Alternative investments(2)
|
|
|
43
|
|
|
|
16
|
|
|
|
21
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Assets rebalanced periodically to remain within a reasonable
range of the target. During the fourth quarter of fiscal 2009,
the Company was in the process of evaluating and updating its
overall investment strategy. |
|
(2) |
|
As of November 30, 2009, alternative investments included
an asset allocation of approximately 14% of interest only
government mortgage-backed securities, 6% of interest only
non-government backed collateralized mortgage obligations, and
8% of investments with an investment firm that invests in
securities using a long/short equity strategy, which is an
investment strategy generally associated with hedge funds. |
The Companys investment strategy consists of a long-term,
risk-controlled approach using diversified investment options.
Plan assets are invested in asset classes that are expected to
produce a sufficient level of diversification and investment
return over the long term. The investment goals are to achieve
the long term rate of return within reasonable and prudent
levels of risk and to preserve the value of assets to meet
future obligations. Alternative investments include hedge funds,
venture capital funds, private equity investments, and other
investments. Within each type of investment the allocation may
change as a result of changing market conditions and dynamic
tactical investment opportunities.
The following presents estimated future benefit payments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
Medical and Life Benefits
|
|
|
Benefit
|
|
Gross Benefit
|
|
Medicare D
|
|
Net Benefit
|
Year Ended November 30,
|
|
Payments
|
|
Payments
|
|
Subsidy
|
|
Payments
|
|
|
(In millions)
|
|
2010
|
|
$
|
133.8
|
|
|
$
|
8.0
|
|
|
$
|
0.8
|
|
|
$
|
7.2
|
|
2011
|
|
|
132.9
|
|
|
|
8.0
|
|
|
|
0.3
|
|
|
|
7.7
|
|
2012
|
|
|
131.6
|
|
|
|
7.8
|
|
|
|
0.3
|
|
|
|
7.5
|
|
2013
|
|
|
129.9
|
|
|
|
8.7
|
|
|
|
0.3
|
|
|
|
8.4
|
|
2014
|
|
|
127.8
|
|
|
|
8.5
|
|
|
|
0.3
|
|
|
|
8.2
|
|
Years 2015 2019
|
|
|
599.0
|
|
|
|
36.8
|
|
|
|
1.2
|
|
|
|
35.6
|
|
|
|
7.
|
Commitments
and Contingencies
|
|
|
a.
|
Lease
Commitments and Income
|
The Company and its subsidiaries lease certain facilities,
machinery and equipment, and office buildings under long-term,
non-cancelable operating leases. The leases generally provide
for renewal options ranging from one to
89
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
ten years and require the Company to pay for utilities,
insurance, taxes, and maintenance. Rent expense was
$11.6 million in fiscal 2009, $10.3 million in fiscal
2008, and $8.7 million in fiscal 2007.
The Company also leases certain surplus facilities to third
parties. The Company recorded lease income of $6.4 million
in fiscal 2009, $6.1 million in fiscal 2008, and
$6.3 million in fiscal 2007 related to these arrangements,
which have been included in net sales.
The future minimum rental commitments under non-cancelable
operating leases with initial or remaining terms of one year or
more and lease revenue in effect as of November 30, 2009
were as follows:
|
|
|
|
|
|
|
|
|
|
|
Future Minimum
|
|
|
Future Minimum
|
|
Year Ended November 30,
|
|
Rental Commitments
|
|
|
Rental Income
|
|
|
|
(In millions)
|
|
|
2010
|
|
$
|
8.3
|
|
|
$
|
6.0
|
|
2011
|
|
|
6.1
|
|
|
|
2.3
|
|
2012
|
|
|
3.9
|
|
|
|
0.2
|
|
2013
|
|
|
1.3
|
|
|
|
|
|
2014
|
|
|
0.5
|
|
|
|
|
|
Thereafter
|
|
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24.1
|
|
|
$
|
8.5
|
|
|
|
|
|
|
|
|
|
|
The Company and its subsidiaries are subject to legal
proceedings, including litigation in U.S. federal and state
courts, which arise out of, and are incidental to, the ordinary
course of the Companys on-going and historical businesses.
The Company is also subject from time to time to governmental
investigations by state and federal agencies. The Company cannot
predict the outcome of such proceedings with any degree of
certainty. Loss contingency provisions are recorded for probable
losses at managements best estimate of a loss, or when a
best estimate cannot be made, a minimum loss contingency amount
is recorded. These estimates are often initially developed
substantially earlier than when the ultimate loss is known, and
are refined each quarterly reporting period as additional
information becomes known. For legal settlements where there is
no stated amount for interest, the Company will estimate an
interest factor and discount the liability accordingly.
Groundwater
Cases
In October 2002, Aerojet and approximately 65 other individual
and corporate defendants were served with four civil suits filed
in the U.S. District Court for the Central District of
California that seek recovery of costs allegedly incurred or to
be incurred in response to the contamination present at the
South El Monte Operable Unit (SEMOU) of the
San Gabriel Valley Superfund site. The cases are
denominated as follows: The City of Monterey Park v.
Aerojet-General Corporation, et al., (CV-02-5909 ABC (RCx));
San Gabriel Basin Water Quality Authority v.
Aerojet-General Corporation, et al., (CV-02-4565 ABC (RCx));
San Gabriel Valley Water Company v. Aerojet-General
Corporation, et al., (CV-02-6346 ABC (RCx)); and Southern
California Water Company v. Aerojet-General Corporation, et
al., (CV-02-6340 ABC (RCx)). The cases have been coordinated
for ease of administration by the court. The plaintiffs
claims against Aerojet are based upon allegations of discharges
from a former site in the El Monte area, as more fully discussed
below under the headings San Gabriel Valley Basin,
California Site South El Monte Operable
Unit. The total cost estimate to implement projects under
the Unilateral Administrative Order (UAO) prepared
by the EPA and the water entities is approximately
$90 million. Aerojet investigations do not identify a
credible connection between the contaminants identified by the
plaintiff water entities in the SEMOU and those detected at
Aerojets former facility located in El Monte, California,
near the SEMOU (East Flair Drive site). Aerojet has
filed third-party complaints against several water entities on
the basis that they introduced perchlorate-containing Colorado
River water to the basin. Those water entities have filed
motions to dismiss Aerojets complaints. The motions as
well as discovery have been stayed until April 12, 2010,
pending efforts to resolve the litigation through mediation.
During the period in which the litigation has been stayed,
90
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
EPA, the California Department of Toxic Substances Control and
the plaintiff water entities have reached settlements through
the mediation process with various of the parties sued, which
have been brought to the Federal District Court for approval.
Certain of the settlements have been challenged by Aerojet and
other defendants and are not finally resolved.
Aerojet has recently received correspondence from EPA on behalf
of itself, the DTSC and the Water Entities regarding settlement.
Aerojet intends to try to reach a good faith settlement with
EPA, DTSC and the Water Entities to resolve claims. If
settlement negotiations fail, the litigation stay is likely to
be lifted and EPA may refer the matter to the
U.S. Department of Justice for litigation, seeking to hold
Aerojet liable for past and future costs, to recover costs of
suit and attorneys fees, and as to any accrued interest,
penalties or statutory damages. Should settlement not be
reached, Aerojet intends to vigorously defend itself.
In December 2007, Aerojet was named as a defendant in a lawsuit
brought by six individuals who allegedly resided in the vicinity
of Aerojets Sacramento facility. The case is entitled
Caldwell et al. v. Aerojet-General Corporation, Case
No. 34-2000-00884000CU-TT-GDS,
Sacramento County (CA) Superior Court and was served
April 3, 2008. Plaintiffs allege that Aerojet contaminated
groundwater to which plaintiffs were exposed and which caused
plaintiffs illness and economic injury. Plaintiffs filed two
subsequent amended complaints, naming additional plaintiffs.
Aerojet filed a demurrer to the second amended complaint, which
was denied by the trial court in December 2008. The court held
that the issue as to whether the plaintiffs were on actual
notice of the potential source of their injuries is an issue of
fact for trial that cannot be resolved on demurrer.
Aerojets subsequent Petition for a Writ of Mandate filed
with the California Court of Appeal Third District, seeking
reversal of the courts ruling on the demurrer was denied
without comment. Aerojet will continue to seek dismissal of
those claims at the trial court level. On December 29,
2009, plaintiffs served a Third Amended Complaint, adding four
additional plaintiffs to the action, which brings the total
number of individuals on whose behalf suit has been filed to
eighteen. Aerojet will file an answer to the third amended
complaint, denying liability. Discovery is continuing. The
Company is unable to make a reasonable estimate of the future
costs of these claims.
In August 2003, the County of Sacramento and the Sacramento
County Water Agency (collectively, SCWA) and Aerojet
entered into a water agreement (Agreement). Under
the Agreement, Aerojet agreed to transfer remediated groundwater
to SCWA. This was anticipated to satisfy Aerojets water
replacement obligations in eastern Sacramento County. Subject to
various provisions of the Agreement, including approval under
the California Environmental Quality Act, SCWA assumed
Aerojets responsibility for providing replacement water to
American States Water Company and other impacted water purveyors
up to the amount of remediated water Aerojet transfers to the
County of Sacramento (County). Aerojet also agreed
to pay SCWA approximately $13 million over several years
toward the cost of constructing a replacement water supply
project. If the amount of Aerojets transferred water was
in excess of the replacement water provided to the impacted
water purveyors, SCWA committed to make such water available for
the entitlement of Aerojets land in an amount equal to the
excess.
In April 2008, SCWA unilaterally terminated the Agreement.
Subsequent to this unilateral termination of the Agreement, the
Company and The Boeing Company (Boeing, successor to
the McDonnell Douglas Corporation (MDC)), the former
owner of the Inactive Rancho Cordova Test Site
(IRCTS) entered into negotiations with SCWA in an
attempt to resolve matters and reach a new agreement.
Additionally, SCWA and Aerojet entered into a Tolling Agreement
through June 30, 2009 tolling any suits or claims arising
from environmental contamination or conditions on the former
IRCTS property.
On June 30, 2009, SCWA notified Aerojet and Boeing that it
was not prepared to extend the tolling period and intended to
file suit. On July 1, 2009, the County and SCWA filed a
complaint against Aerojet and Boeing in the U.S. District
Court for the Eastern District of California, in Sacramento,
County of Sacramento; Sacramento County Water Agency v.
Aerojet-General Corporation and The Boeing Corporation [sic],
Civ.
No. 2:09-at-1041.
In the complaint, the County and SCWA alleged that because
groundwater contamination from various sources including
Aerojet, Boeing/MDC, and the former Mather Air Force Base, was
continuing, the County and SCWA should be awarded unspecified
monetary damages as well as declaratory and equitable relief.
The complaint was served, but
91
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
the parties entered into a joint stipulation on August 27,
2009, to stay all proceedings until May 30, 2010, pending
settlement discussions. The Company cannot predict the outcome
of this proceeding with any certainty at this time.
Vinyl
Chloride Litigation
Between the early 1950s and 1985, the Company produced polyvinyl
chloride (PVC) resin at its former Ashtabula, Ohio
facility. PVC is one of the most common forms of plastic
currently on the market. A building block compound of PVC is
vinyl chloride (VC), now listed as a known
carcinogen by several governmental agencies. The Occupational
Safety and Health Administration (OSHA) has
regulated workplace exposure to VC since 1974.
Since the mid-1990s, the Company has been named in numerous
cases involving alleged exposure to VC. In the majority of such
cases, the Company is alleged to be a
supplier/manufacturer of PVC
and/or a
civil co-conspirator with other VC and PVC manufacturers as a
result of membership in a trade association. Plaintiffs
generally allege that the Company and other defendants
suppressed information about the carcinogenic risk of VC to
industry workers, and placed VC or PVC into commerce without
sufficient warnings. A few of these cases alleged VC exposure
through various aerosol consumer products, in that VC had been
used as an aerosol propellant during the 1960s. Defendants in
these aerosol cases included numerous consumer
product manufacturers, as well as the more than 30 chemical
manufacturers. The Company used VC internally, but never
supplied VC for aerosol or any other use.
As of November 30, 2009, there was one vinyl chloride case
pending against the Company which involves an employee at a
facility owned or operated by others. The Company is unable to
make a reasonable estimate of the future cost of the pending
claim. Accordingly, no estimate of future liability has been
accrued.
Asbestos
Litigation
The Company has been, and continues to be, named as a defendant
in lawsuits alleging personal injury or death due to exposure to
asbestos in building materials, products, or in manufacturing
operations. The majority of cases have been filed in Madison
County, Illinois and San Francisco, California. There were
134 asbestos cases pending as of November 30, 2009.
Given the lack of any significant consistency to claims (i.e.,
as to product, operational site, or other relevant assertions)
filed against the Company, the Company is unable to make a
reasonable estimate of the future costs of pending claims or
unasserted claims. Accordingly, no estimate of future liability
has been accrued for such contingencies.
Snappon
SA Wrongful Discharge Claims
In November 2003, the Company announced the closing of a
manufacturing facility in Chartres, France owned by Snappon SA,
a subsidiary of the Company, previously involved in the
automotive business. In accordance with French law, Snappon SA
negotiated with the local works council regarding the
implementation of a social plan for the employees. Following the
implementation of the social plan, approximately 188 of the 249
former Snappon employees sued Snappon SA in the Chartres Labour
Court alleging wrongful discharge. The claims were heard in two
groups. On February 19, 2009, the Versailles Court of
Appeal issued a decision in favor of Group 2 plaintiffs and
based on this, the Court awarded 1.9 million
(approximately $2.7 million) plus interest. On
April 7, 2009, the Versailles Court of Appeal issued a
decision in favor of Group 1 plaintiffs and based on this, the
Court awarded 1.0 million (approximately
$1.4 million) plus interest. During the second quarter of
fiscal 2009, Snappon SA filed for declaration of suspensions of
payments with the clerks office of the Paris Commercial
Court, and the claims will likely be discharged through those
proceedings.
92
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other
Legal Matters
On August 31, 2004, the Company completed the sale of its
GDX business to an affiliate of Cerberus Capital Management,
L.P. (Cerberus). In accordance with the divestiture
agreement, the Company provided customary indemnification to
Cerberus for certain liabilities accruing prior to the closing
of the transaction (the Closing). Cerberus notified
the Company of a claim by a GDX customer that alleges that
certain parts manufactured by GDX prior to the Closing failed to
meet customer specifications. The Company has assumed the
defense of this matter and based on its investigation of the
facts and defenses available under the contract and local law,
and in November 2008 denied all liability for this claim. On
January 23, 2009, GenCorp received correspondence from the
GDX customer requesting that the Company provide it with a
settlement proposal by February 6, 2009, threatening that
it would initiate legal proceedings otherwise. GenCorp neither
responded nor otherwise tolled the statute of limitations with
negotiations. Nothing further has been received since then and
no legal proceedings have been initiated.
On January 6, 2010, the Company received a subpoena duces
tecum from the Defense Criminal Investigative Service of the
Office of the Inspector General of the DoD requesting that the
Company produce a variety of documents pertaining to the
allowability of certain costs under its contracts with the DoD
from October 1, 2003 to the present. The Company is
currently unable to predict what the outcome of the
investigation will be or the impact, if any, the investigation
may have on the Companys operating results, financial
condition,
and/or cash
flows. The Company intends to cooperate fully with the
investigation and is preparing its response to the subpoena.
The Company and its subsidiaries are subject to other legal
actions, governmental investigations, and proceedings relating
to a wide range of matters in addition to those discussed above.
While there can be no certainty regarding the outcome of any
litigation, investigation or proceeding, after reviewing the
information that is currently available with respect to such
matters, any liability that may ultimately be incurred with
respect to these matters is not expected to materially affect
the Companys consolidated financial condition. It is
possible that amounts could be significant to the Companys
results of operations or cash flows in any particular reporting
period.
The Company is involved in over forty environmental matters
under the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA), the Resource Conservation
Recovery Act (RCRA), and other federal, state,
local, and foreign laws relating to soil and groundwater
contamination, hazardous waste management activities, and other
environmental matters at some of its current and former
facilities. The Company is also involved in a number of remedial
activities at third party sites, not owned by the Company, where
it is designated a potentially responsible party
(PRP) by either the United States Environmental
Protection Agency (U.S. EPA) or a state agency.
In many of these matters, the Company is involved with other
PRPs. In many instances, the Companys liability and
proportionate share of costs have not been determined largely
due to uncertainties as to the nature and extent of site
conditions and the Companys involvement. While government
agencies frequently claim PRPs are jointly and severally liable
at such sites, in the Companys experience, interim and
final allocations of liability and costs are generally made
based on relative contributions of waste or contamination.
Anticipated costs associated with environmental remediation that
are probable and estimable are accrued. In cases where a date to
complete remedial activities at a particular site cannot be
determined by reference to agreements or otherwise, the Company
projects costs over an appropriate time period not exceeding
fifteen years; in such cases, generally the Company does not
have the ability to reasonably estimate environmental
remediation costs that are beyond this period. Factors that
could result in changes to the Companys estimates include
completion of current and future soil and groundwater
investigations, new claims, future agency demands, discovery of
more or less contamination than expected, discovery of new
contaminants, modification of planned remedial actions, changes
in estimated time required to remediate, new technologies, and
changes in laws and regulations.
93
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As of November 30, 2009, the aggregate range of these
anticipated environmental costs was $222.7 million to
$428.9 million and the accrued amount was
$222.7 million. See Note 7(d) for a summary of the
environmental reserve activity for fiscal 2009. Of these accrued
liabilities, approximately 68% relates to the Sacramento,
California site and approximately 21% to the Baldwin Park
Operable Unit of the San Gabriel Valley, California site.
Each of those two sites is discussed below. The balance of the
accrued liabilities relates to other sites for which the
Companys obligations are probable and estimable.
Sacramento,
California Site
In 1989, a federal district court in California approved a
Partial Consent Decree (PCD) requiring Aerojet,
among other things, to conduct a Remedial Investigation and
Feasibility Study (RI/FS) to determine the nature
and extent of impacts due to the release of chemicals from the
Sacramento, California site, monitor the American River and
offsite public water supply wells, operate Groundwater
Extraction and Treatment facilities (GETs) that
collect groundwater at the site perimeter, and pay certain
government oversight costs. The primary chemicals of concern for
both on-site
and off-site groundwater are trichloroethylene
(TCE), perchlorate, and n-nitrosodimethylamine
(NDMA). The PCD has been revised several times, most
recently in 2002. The 2002 PCD revision (a) separated the
Sacramento site into multiple operable units to allow quicker
implementation of remedy for critical areas; (b) required
the Company to guarantee up to $75 million (in addition to
a prior $20 million guarantee) to assure that
Aerojets Sacramento remediation activities are fully
funded; and (c) removed approximately 2,600 acres of
non-contaminated land from the U.S. EPA superfund
designation.
Aerojet is involved in various stages of soil and groundwater
investigation, remedy selection, design, and remedy construction
associated with the operable units. In 2002, the U.S. EPA
issued a UAO requiring Aerojet to implement the
U.S. EPA-approved remedial action in the Western
Groundwater Operable Unit. An identical order was issued by the
California Regional Water Quality Control Board, Central Valley
(Central Valley RWQCB). Aerojet submitted a final
Remedial Investigation/Feasibility Study for the Perimeter
Groundwater Operable Unit in 2008, for which the U.S. EPA
will issue a record of decision sometime in the future. Aerojet
submitted a draft Remedial Investigation/Feasibility Study for
the Boundary Operable Unit in 2008. The remaining operable units
are under various stages of investigation.
Until March 2008, the entire southern portion of the site known
as Rio Del Oro was under state orders issued in the 1990s from
the California Department of Toxic Substances Control
(DTSC) to investigate and remediate environmental
contamination in the soils and the Central Valley RWQCB to
investigate and remediate groundwater environmental
contamination. On March 14, 2008, the DTSC released all but
approximately 400 acres of the Rio Del Oro property from
DTSCs environmental orders regarding soil contamination.
Aerojet expects the approximately 400 acres of Rio Del Oro
property that remain subject to the DTSC orders to be released
once the soil remediation has been completed. The Rio Del Oro
property remains subject to the Central Valley RWQCBs
orders to investigate and remediate groundwater environmental
contamination emanating offsite from such property. Aerojet
leased the Rio Del Oro property to Douglas Aircraft for rocket
assembly and testing from 1957 to 1961 and sold approximately
4,000 acres, including the formerly leased portion, to
Douglas Aircraft in 1961. Aerojet reacquired the property in
1984 from MDC, the successor to Douglas Aircraft. As a result,
the state orders referenced above were issued to both MDC and
Aerojet. Aerojet and MDCs parent, Boeing, have entered
into an allocation agreement, some of which is subject to
reallocation that establishes lead roles and payment
obligations. Aerojet and Boeing are actively remediating soil on
portions of the property as well as
on-site and
off-site groundwater contamination. Following lengthy settlement
negotiations, Aerojet and Boeing executed a confidential Partial
Settlement and Mutual Release on August 13, 2009 which
established final cost allocations with respect to environmental
projects associated with the site, and also defined
responsibilities with respect to future costs and environmental
projects.
94
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
San Gabriel
Valley Basin, California Site
Baldwin Park Operable Unit (BPOU)
As a result of its former Azusa, California operations, in 1994
Aerojet was named a PRP by the U.S. EPA, primarily due to
volatile organic compound (VOC) contamination in the
area of the San Gabriel Valley Basin superfund site known
as the BPOU. Between 1995 and 1997, the U.S. EPA issued
Special Notice Letters to Aerojet and eighteen other companies
requesting that they implement a groundwater remedy.
Subsequently, additional contaminates were identified, namely:
perchlorate, NDMA, and 1,4-dioxane. On June 30, 2000, the
U.S. EPA issued a UAO ordering the PRPs to implement a
remedy consistent with the 1994 record of decision. Aerojet,
along with seven other PRPs (the Cooperating
Respondents) signed a Project Agreement in late March 2002
with the San Gabriel Basin Water Quality Authority, the
Main San Gabriel Basin Watermaster, and five water
companies. The Project Agreement, which has a term of fifteen
years, became effective May 9, 2002. Pursuant to the
Project Agreement, the Cooperating Respondents fund through an
escrow account: the capital, operational, maintenance, and
administrative costs of certain treatment and water distribution
facilities to be owned and operated by the water companies.
There are also provisions in the Project Agreement for
maintaining financial assurance in the form of cash or letters
of credit. A significant amount of public funding is available
to offset project costs. To date, Congress has appropriated
approximately $77 million (so called Title 16 and
Dreier funds), a portion of which is potentially available for
payment of project costs. Approximately $41 million of the
funding has been allocated to costs associated with the Project
Agreement and additional funds may follow in later years.
Aerojet and the other Cooperating Respondents entered into an
interim allocation agreement that establishes the interim
payment obligations of the Cooperating Respondents for the costs
incurred pursuant to the Project Agreement. Under the interim
allocation, Aerojet is responsible for approximately two-thirds
of all project costs, including government oversight costs. All
project costs are subject to reallocation among the Cooperating
Respondents. The interim allocation agreement expired, but until
recently all Cooperating Respondents were paying in accordance
with their interim allocations. In July 2008, Fairchild Holding
Corporation sued Aerojet and the other Cooperating Respondents
in Federal District Court in Los Angeles in the action
Fairchild Holding Corp et al v. Aerojet-General
Corp, et al SA 08CV
722-ABC
claiming that it did not have any liability and that it
should recover amounts paid of approximately $2.6 million
and should as between the Cooperating
Respondents have no further obligation to pay
project costs. Fairchild stopped making payments to the escrow
account under the Project Agreement and claimed that it would
not do so in the future unless ordered to do so by a court.
Fairchild had been paying approximately 2.5% of the project
costs as its allocation until it stopped paying. At the request
of one of the Cooperating Respondents, the Court stayed all
actions until mid-December 2008 to allow the parties an
opportunity to participate in mediation. The mediation occurred
in December 2008 and was not successful. Aerojet and the other
Cooperating Respondents answered Fairchilds complaint and
many (including Aerojet) filed counterclaims against Fairchild
Holding and third-party complaints against entities affiliated
with Fairchild. Fairchild subsequently filed a First Amended
Complaint adding the third-party affiliated entities as
Plaintiffs in the litigation and Aerojet answered and filed
counterclaims. To date, no other Cooperating Respondent has
filed a claim against any non-Fairchild Cooperating Respondents
to seek a reallocation. On March 18th, 2009, Fairchild
filed for voluntary chapter 11 bankruptcy reorganization in
the District of Delaware and as a result, the Federal District
Court in Los Angeles has stayed the Fairchild litigation. In
light of Fairchilds insolvency, the other Cooperating
Respondents, including Aerojet, must make up Fairchilds
share of Project costs and its interim share of financial
assurances required by the Project Agreement, although the
amounts each Cooperating Respondent would be required to fund or
pay has not been resolved.
As part of Aerojets sale of its Electronics and
Information Systems (EIS) business to Northrop in
October 2001, the U.S. EPA approved a Prospective Purchaser
Agreement with Northrop to absolve it of pre-closing liability
for contamination caused by the Azusa, California operations,
which liability remains with Aerojet. As part of that agreement,
the Company agreed to provide a $25 million guarantee of
Aerojets obligations under the Project Agreement.
95
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
South El Monte Operable Unit
Aerojet previously owned and operated manufacturing facilities
located on East Flair Drive in El Monte, California. On
December 21, 2000, Aerojet received an order from the Los
Angeles RWQCB requiring a work plan for investigation of this
former site. On January 22, 2001, Aerojet filed an appeal
of the order with the Los Angeles RWQCB asserting selective
enforcement. The appeal had been held in abeyance pending
negotiations with the Los Angeles RWQCB, but due to a two-year
limitation on the abeyance period, the appeal was dismissed
without prejudice. In September 2001, Aerojet submitted a
limited work plan to the Los Angeles RWQCB.
On February 21, 2001, Aerojet received a General Notice
Letter from the U.S. EPA naming Aerojet as a PRP with
regard to the SEMOU of the San Gabriel Valley Basin,
California Superfund site. On April 1, 2002, Aerojet
received a Special Notice Letter from the U.S. EPA that
requested Aerojet enter into negotiations with it regarding the
performance of a remedial design and remedial action for the
SEMOU. In light of this letter, Aerojet performed a limited site
investigation of the East Flair Drive site. The data collected
and summarized in the report showed that chemicals including TCE
and PCE were present in the soil and groundwater at, and near,
the El Monte location. Site investigations are ongoing.
On August 29, 2003, the U.S. EPA issued a UAO against
Aerojet and approximately 40 other parties requiring them to
conduct the remedial design and remedial action in the SEMOU.
The impact of the UAO on the recipients is not clear as much of
the remedy is already being implemented by the water entities.
The cost estimate to implement projects under the UAO prepared
by the U.S. EPA and the water entities is approximately
$90 million. The Company is working diligently with the
U.S. EPA and the other PRPs to resolve this matter and
ensure compliance with the UAO. The Companys share of
responsibility has not yet been determined. The status of the
negotiations with the U.S. EPA is further described in
Note 7(b).
On November 17, 2005, Aerojet notified the Los Angeles
RWQCB and the U.S. EPA that Aerojet was involved in
research and development at the East Flair Drive site that
included the use of 1,4-dioxane. Aerojets investigation of
that issue is continuing. Oversight of the East Flair Drive site
was transferred from the RWQCB to the DTSC in 2007 and Aerojet
has entered into a Voluntary Cleanup Agreement with DTSC.
Toledo,
Ohio Site
In August 2007, the Company, along with numerous other
companies, received from the United States Department of
Interior Fish and Wildlife Service (USFWS) a notice
of a Natural Resource Damage (NRD) Assessment Plan
for the Ottawa River and Northern Maumee Bay. The Company
previously manufactured products for the automotive industry at
a Toledo, Ohio site, which was adjacent to the Ottawa River.
This facility was divested in 1990 and the Company indemnified
the buyer for claims and liabilities arising out of certain
pre-divestiture environmental matters. A group of PRPs,
including GenCorp, was formed to respond to the NRD assessment
and to pursue funding from the Great Lakes Legacy Act for
primary restoration. The group has undertaken a restoration
scoping study. Early data collection indicates that the primary
restoration project total cost may be in the range of $47 to
$49 million. The group has received a commitment for
matching federal funds for the restoration project, which will
consist of river dredging and land-filling river sediments.
Based on a review of the current facts and circumstances with
counsel, management has provided for what is believed to be a
reasonable estimate of the loss exposure for this matter. Still
unresolved at this time is the actual Natural Resource Damage
Assessment itself. It is not possible to predict the outcome or
timing of these types of assessments, which are typically
lengthy processes lasting several years, or the amounts of or
responsibility for these damages.
In 2008, Textileather, Inc. (Textileather), the
current owner of the former Toledo, Ohio site, filed a lawsuit
against the Company claiming, among other things, that the
Company failed to indemnify and defend Textileather for certain
contractual environmental obligations. A second suit related to
past and future RCRA closure costs was filed in late 2009. A
trial is scheduled for spring 2010. The Company is vigorously
defending against both actions.
96
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
d.
|
Environmental
Reserves and Estimated Recoveries
|
Reserves
The Company reviews on a quarterly basis estimated future
remediation costs that could be incurred over the contractual
term or next fifteen years of the expected remediation. The
Company has an established practice of estimating environmental
remediation costs over a fifteen year period, except for those
environmental remediation costs with a specific contractual
term. As the period for which estimated environmental
remediation costs increases, the reliability of such estimates
decrease. These estimates consider the investigative work and
analysis of engineers, outside environmental consultants, and
the advice of legal staff regarding the status and anticipated
results of various administrative and legal proceedings. In most
cases, only a range of reasonably possible costs can be
estimated. In establishing the Companys reserves, the most
probable estimate is used when determinable; otherwise, the
minimum amount is used when no single amount in the range is
more probable. Accordingly, such estimates can change as the
Company periodically evaluates and revises such estimates as new
information becomes available. The Company cannot predict
whether new information gained as projects progress will affect
the estimated liability accrued. The timing of payment for
estimated future environmental costs is influenced by a number
of factors such as the regulatory approval process, the time
required to design the process, the time to construct the
process, and the time required to conduct the remedy itself.
A summary of the Companys environmental reserve activity
is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Environmental
|
|
|
|
Aerojet
|
|
|
Other
|
|
|
Reserve
|
|
|
|
(In millions)
|
|
|
November 30, 2006
|
|
$
|
256.5
|
|
|
$
|
9.5
|
|
|
$
|
266.0
|
|
Fiscal 2007 additions
|
|
|
57.9
|
|
|
|
2.5
|
|
|
|
60.4
|
|
Fiscal 2007 expenditures
|
|
|
(54.9
|
)
|
|
|
(1.5
|
)
|
|
|
(56.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2007
|
|
|
259.5
|
|
|
|
10.5
|
|
|
|
270.0
|
|
Fiscal 2008 additions
|
|
|
39.8
|
|
|
|
5.8
|
|
|
|
45.6
|
|
Fiscal 2008 expenditures
|
|
|
(54.1
|
)
|
|
|
(3.3
|
)
|
|
|
(57.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2008
|
|
|
245.2
|
|
|
|
13.0
|
|
|
|
258.2
|
|
Fiscal 2009 additions
|
|
|
19.9
|
|
|
|
3.6
|
|
|
|
23.5
|
|
Fiscal 2009 expenditures
|
|
|
(54.0
|
)
|
|
|
(5.0
|
)
|
|
|
(59.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2009
|
|
$
|
211.1
|
|
|
$
|
11.6
|
|
|
$
|
222.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30, 2009, the Aerojet reserves include
$152.5 million for the Sacramento site, $47.8 million
for BPOU, and $10.8 million for other Aerojet reserves.
The effect of the final resolution of environmental matters and
the Companys obligations for environmental remediation and
compliance cannot be accurately predicted due to the uncertainty
concerning both the amount and timing of future expenditures and
due to regulatory or technological changes. The Company
believes, on the basis of presently available information, that
the resolution of environmental matters and the Companys
obligations for environmental remediation and compliance will
not have a material adverse effect on the Companys results
of operations, liquidity or financial condition. The Company
will continue its efforts to mitigate past and future costs
through pursuit of claims for recoveries from insurance coverage
and other PRPs and continued investigation of new and more cost
effective remediation alternatives and associated technologies.
As part of the acquisition of the Atlantic Research Corporation
(ARC) propulsion business, Aerojet entered into an
agreement with ARC pursuant to which Aerojet is responsible for
up to $20.0 million of costs (Pre-Close Environmental
Costs) associated with environmental issues that arose
prior to Aerojets acquisition of the ARC
97
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
propulsion business. Pursuant to a separate agreement with the
U.S. government which was entered into prior to the
completion of the ARC acquisition, these Pre-Close Environmental
Costs are not subject to the 88% limitation under the Global
Settlement, and are recovered through the establishment of
prices for Aerojets products and services sold to the
U.S. government. A summary of the Pre-Close Environmental
Costs is shown below (in millions):
|
|
|
|
|
Pre-Close Environmental Costs
|
|
$
|
20.0
|
|
Amount spent through November 30, 2009
|
|
|
(9.5
|
)
|
Amount included as a component of reserves for environmental
remediation costs in the consolidated balance sheet as of
November 30, 2009
|
|
|
(0.9
|
)
|
|
|
|
|
|
Remaining Pre-Close Environmental Costs
|
|
$
|
9.6
|
|
|
|
|
|
|
Estimated
Recoveries
On January 12, 1999, Aerojet and the U.S. government
implemented the October 1997 Agreement in Principle
(Global Settlement) resolving certain prior
environmental and facility disagreements, with retroactive
effect to December 1, 1998. Under the Global Settlement,
Aerojet and the U.S. government resolved disagreements
about an appropriate cost-sharing ratio with respect to the
clean up costs of the environmental contamination at the
Sacramento and Azusa sites. The Global Settlement provides that
the cost-sharing ratio will continue for a number of years.
Additionally, in conjunction with the sale of the EIS business
in 2001, Aerojet entered into an agreement with Northrop (the
Northrop Agreement) whereby Aerojet is reimbursed by
Northrop for a portion of environmental expenditures eligible
for recovery under the Global Settlement, subject to annual and
cumulative limitations. The current annual billing limitations
to Northrop is $8.0 million, which is reduced to
$6.0 million beginning in fiscal 2011.
Pursuant to the Global Settlement covering environmental costs
associated with Aerojets Sacramento site and its former
Azusa site, the Company can recover up to 88% of its
environmental remediation costs for these sites through the
establishment of prices for Aerojets products and services
sold to the U.S. government. Allowable environmental costs
are charged to these contracts as the costs are incurred.
Aerojets mix of contracts can affect the actual
reimbursement made by the U.S. government. Because these
costs are recovered through forward-pricing arrangements, the
ability of Aerojet to continue recovering these costs from the
U.S. government depends on Aerojets sustained
business volume under U.S. government contracts and
programs and the relative size of Aerojets commercial
business. Annually, the Company evaluates Aerojets
forecasted business volume under U.S. government contracts
and programs and the relative size of Aerojets commercial
business as part of its long-term business review.
Pursuant to the Northrop Agreement, environmental expenditures
to be reimbursed are subject to annual limitations, with excess
reimbursable amounts carried forward to subsequent periods, and
the total reimbursements are limited to a ceiling of
$189.7 million over the term of the agreement, which ends
in 2028. A summary of the Northrop Agreement activity is shown
below (in millions):
|
|
|
|
|
Total reimbursable costs under the Northrop Agreement
|
|
$
|
189.7
|
|
Amount reimbursed to the Company through November 30, 2009
|
|
|
(74.2
|
)
|
|
|
|
|
|
Potential future cost reimbursements available
|
|
|
115.5
|
|
Receivable from Northrop in excess of the annual limitation
included as a component of other noncurrent assets in the
Consolidated Balance Sheet as of November 30, 2009
|
|
|
(53.4
|
)
|
Amounts recoverable from Northrop in future periods included as
a component of recoverable from the U.S. government and other
third parties for environmental remediation costs in the
Consolidated Balance Sheet as of November 30, 2009
|
|
|
(55.7
|
)
|
|
|
|
|
|
Potential future recoverable amounts available under the
Northrop Agreement
|
|
$
|
6.4
|
|
|
|
|
|
|
The Company believes it may reach the cumulative limitation
under the Northrop Agreement within the next twelve
(12) months. While the Company is seeking an arrangement
with the U.S. government to recover
98
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
environmental expenditures in excess of the current
reimbursement ceiling identified in the Northrop Agreement,
there can be no assurances that such a recovery will be
obtained, or if not obtained, that such unreimbursed
environmental expenditures will not have a materially adverse
effect on the Companys operating results, financial
condition,
and/or cash
flows.
Environmental
reserves and estimated recoveries impact to Statements of
Operations
The expenses and benefits associated with adjustments to the
environmental reserves are recorded as a component of other
expense (income), net in the consolidated statements of
operations. Summarized financial information for the impact of
environmental reserves and recoveries to the consolidated
statements of operations is set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
Estimated
|
|
Estimated
|
|
Recoverable
|
|
Charge to
|
|
Total
|
|
|
Recoverable
|
|
Recoverable
|
|
Amounts Under
|
|
Consolidated
|
|
Environmental
|
|
|
Amounts from
|
|
Amounts from
|
|
U.S. Government
|
|
Statement of
|
|
Reserve
|
|
|
Northrop
|
|
U.S. Government
|
|
Contracts
|
|
Operations
|
|
Additions
|
|
|
(In millions)
|
|
Fiscal 2009
|
|
$
|
4.8
|
|
|
$
|
14.6
|
|
|
$
|
19.4
|
|
|
$
|
4.1
|
|
|
$
|
23.5
|
|
Fiscal 2008
|
|
|
9.7
|
|
|
|
25.2
|
|
|
|
34.9
|
|
|
|
10.7
|
|
|
|
45.6
|
|
Fiscal 2007(1)
|
|
|
12.0
|
|
|
|
46.3
|
|
|
|
58.3
|
|
|
|
2.1
|
|
|
|
60.4
|
|
|
|
|
(1) |
|
In fiscal 2007, the net charge of $2.1 million includes a
benefit of $8.6 million due to changes in the forecasted
commercial business base. |
|
|
e.
|
Arrangements
with Off-Balance Sheet Risk
|
As of November 30, 2009, arrangements with off-balance
sheet risk consisted of:
$85.3 million in outstanding commercial letters
of credit expiring within the next twelve months, the majority
of which may be renewed, primarily to collateralize obligations
for environmental remediation and insurance coverage.
Up to $120.0 million aggregate in guarantees by
GenCorp of Aerojets obligations to U.S. government
agencies for environmental remediation activities.
Up to $1.5 million of reimbursements to Granite
Construction Company (Granite) if the Company
requests Granite to cease mining operations on certain portions
of the Sacramento Land.
Guarantees, jointly and severally, by the
Companys material domestic subsidiaries of its obligations
under its Senior Credit Facility and its
91/2% Notes.
In addition to the items discussed above, the Company will from
time to time enter into certain types of contracts that require
us to indemnify parties against potential third-party and other
claims. These contracts primarily relate to:
(i) divestiture agreements, under which the Company may
provide customary indemnification to purchasers of its
businesses or assets including, for example, claims arising from
the operation of the businesses prior to disposition, liability
to investigate and remediate environmental contamination
existing prior to disposition; (ii) certain real estate
leases, under which the Company may be required to indemnify
property owners for claims arising from the use of the
applicable premises; and (iii) certain agreements with
officers and directors, under which the Company may be required
to indemnify such persons for liabilities arising out of their
relationship with the Company. The terms of such obligations
vary. Generally, a maximum obligation is not explicitly stated.
99
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
8.
|
Redeemable
Common Stock
|
The Company inadvertently failed to register with the SEC the
issuance of certain of its common shares in its defined
contribution 401(k) employee benefit plan (the
Plan). As a result, certain Plan participants who
purchased such securities pursuant to the Plan may have the
right to rescind certain of their purchases for consideration
equal to the purchase price paid for the securities (or if such
security has been sold, to receive consideration with respect to
any loss incurred on such sale) plus interest from the date of
purchase. As of November 30, 2009 and 2008, the Company has
classified 0.6 million and 0.8 million shares,
respectively, as redeemable common stock because the redemption
features are not within the control of the Company. The Company
may also be subject to civil and other penalties by regulatory
authorities as a result of the failure to register these shares.
These shares have always been treated as outstanding for
financial reporting purposes. In June 2008, the Company filed a
registration statement on
Form S-8
to register future transactions in the GenCorp Stock Fund in the
Plan. The Company intends to make a registered rescission offer
to eligible plan participants which will require an amendment to
the Companys Senior Credit Facility. The Company is
seeking an amendment to the Senior Credit Facility. During
fiscal 2009 and 2008, the Company recorded a charge of
$1.3 million and $1.7 million, respectively, for
realized losses and interest associated with this matter.
As of November 30, 2009 and 2008, 15.0 million shares
of preferred stock were authorized and none were issued or
outstanding.
As of November 30, 2009, the Company had 150.0 million
authorized shares of common stock, par value $0.10 per
share, of which 57.9 million shares were issued and
outstanding, and 24.7 million shares were reserved for
future issuance for discretionary payments of the Companys
portion of retirement savings plan contributions, exercise of
stock options (ten year contractual life) and restricted stock
(no maximum contractual life), payment of awards under
stock-based compensation plans, and conversion of the
Companys Notes. See Note 8 for information about the
Companys redeemable common stock.
|
|
c.
|
Stock-based
Compensation
|
Total stock-based compensation expense by type of award was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Stock appreciation rights (SARS)
|
|
$
|
2.8
|
|
|
$
|
(1.4
|
)
|
|
$
|
0.5
|
|
Restricted stock, service-based
|
|
|
0.1
|
|
|
|
0.7
|
|
|
|
0.3
|
|
Restricted stock, performance-based
|
|
|
|
|
|
|
0.9
|
|
|
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation expense
|
|
$
|
2.9
|
|
|
$
|
0.2
|
|
|
$
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company recorded an unusual charge of $2.4 million in
the second quarter of fiscal 2008 related to the accelerated
vesting of outstanding stock-based payment awards as a result of
the Shareholder Agreement (see Note 13).
Stock Appreciation Rights: As of
November 30, 2009, a total of 1,054,158 SARS was
outstanding under the 1999 Equity and Performance Incentive Plan
(1999 Plan) and 2009 Equity and Performance
Incentive Plan (2009 Plan). SARS granted to
employees are generally exercisable in one-third increments at
one year, two years,
100
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
and three years from the date of grant and have a ten year
contractual life under the 1999 Plan and a seven year
contractual life under the 2009 Plan. SARS granted to directors
of the Company typically vest over a one year service period
(half after six months and half after one year) and have a ten
year contractual life under the 1999 Plan and a seven year
contractual life under the 2009 Plan. These awards are similar
to the Companys employee stock options, but are settled in
cash rather than in shares of common stock, and are classified
as liability awards. Compensation cost for these awards is
determined using a fair-value method and remeasured at each
reporting date until the date of settlement. Stock-based
compensation expense recognized is based on SARS ultimately
expected to vest, and therefore it has been reduced for
estimated forfeitures.
A summary of the status of the Companys SARS as of
November 30, 2009 and changes during fiscal 2009 is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
Aggregate
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
SARS
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Value
|
|
|
|
(000s)
|
|
|
Price
|
|
|
Life (years)
|
|
|
(In millions)
|
|
|
Outstanding at November 30, 2008
|
|
|
936
|
|
|
$
|
15.76
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
162
|
|
|
|
4.09
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(44
|
)
|
|
|
15.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2009
|
|
|
1,054
|
|
|
$
|
13.03
|
|
|
|
7.0
|
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at November 30, 2009
|
|
|
909
|
|
|
$
|
14.40
|
|
|
|
6.9
|
|
|
$
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to vest at November 30, 2009
|
|
|
143
|
|
|
$
|
4.39
|
|
|
|
7.9
|
|
|
$
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value for SARS granted in
fiscal 2009, 2008, and 2007 was $3.85, $5.20, and $7.57,
respectively. None of the SARS were exercised in fiscal 2009,
2008, and 2007. As of November 30, 2009, there was
$0.7 million of total stock-based compensation related to
nonvested SARS. That cost is expected to be recognized over an
estimated weighted-average amortization period of eleven
(11) months.
Restricted Stock, service-based: As of
November 30, 2009, a total of 29,625 shares of
service-based restricted stock was outstanding which vest based
on years of service under the 1999 Plan and 2009 Plan.
Restricted shares are granted to key employees and directors of
the Company. The fair value of the restricted stock awards was
based on the closing market price of the Companys common
stock on the date of award and is being amortized on a straight
line basis over the service period. Stock-based compensation
expense recognized is based on service-based restricted stock
ultimately expected to vest, and therefore it has been reduced
for estimated forfeitures.
The following is summary of the status of the Companys
service-based restricted stock as of November 30, 2009 and
changes during fiscal 2009:
|
|
|
|
|
|
|
|
|
|
|
Service
|
|
|
|
|
|
|
Based
|
|
|
Weighted
|
|
|
|
Restricted
|
|
|
Average
|
|
|
|
Stock
|
|
|
Grant Date
|
|
|
|
(000s)
|
|
|
Fair Value
|
|
|
Outstanding at November 30, 2008
|
|
|
16
|
|
|
$
|
10.51
|
|
Granted
|
|
|
14
|
|
|
|
2.39
|
|
|
|
|
|
|
|
|
|
|
Outstanding and expected to vest at November 30, 2009
|
|
|
30
|
|
|
$
|
6.55
|
|
|
|
|
|
|
|
|
|
|
As of November 30, 2009, there was $0.1 million of
total stock-based compensation related to nonvested
service-based restricted stock. That cost is expected to be
recognized over an estimated weighted-average amortization
period of twenty (20) months. The intrinsic value of the
service-based restricted stock outstanding and expected to vest
at November 30, 2009 was $0.2 million. Additionally,
the intrinsic value of the service-based
101
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
restricted stock vested during fiscal 2008 and 2007 was
$1.1 million and $0.1 million, respectively. The
weighted average grant date fair values for service-based
restricted stock granted in fiscal 2008 and 2007 was $10.84 and
$13.66, respectively.
Restricted Stock, performance-based: As of
November 30, 2009, a total of 137,334 shares of
performance-based restricted shares was outstanding under the
1999 Plan and 2009 Plan. The performance-based restricted stock
vest if the Company meets various operations and earnings
targets set by the Organization & Compensation
Committee of the Board. The fair value of the performance-based
restricted stock awards was based on the closing market price of
the Companys common stock on the date of award and is
being amortized over the estimated service period to achieve the
operations and earnings targets. If certain operations and
earnings targets are exceeded, additional restricted stock may
be required to be granted to individuals up to a maximum
additional grant of 25% of the initial grant. Stock-based
compensation expense recognized for all years presented is based
on performance-based restricted stock ultimately expected to
vest, and therefore it has been reduced for estimated
forfeitures.
The following is a summary of the status of the Companys
performance-based restricted stock as of November 30, 2009
and changes during fiscal 2009:
|
|
|
|
|
|
|
|
|
|
|
Performance
|
|
|
|
|
|
|
Based
|
|
|
Weighted
|
|
|
|
Restricted
|
|
|
Average
|
|
|
|
Stock
|
|
|
Grant Date
|
|
|
|
(000s)
|
|
|
Fair Value
|
|
|
Outstanding at November 30, 2008
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
137
|
|
|
|
4.54
|
|
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2009
|
|
|
137
|
|
|
$
|
4.54
|
|
|
|
|
|
|
|
|
|
|
Expected to vest at November 30, 2009
|
|
|
62
|
|
|
$
|
4.54
|
|
|
|
|
|
|
|
|
|
|
As of November 30, 2009, there was $0.6 million of
total stock-based compensation related to nonvested
performance-based restricted stock. That cost is expected to be
recognized over an estimated weighted-average amortization
period of twenty-seven (27) months. The intrinsic value of
the performance-based restricted stock outstanding and expected
to vest at November 30, 2009 was $1.1 million and
$0.5 million, respectively. The intrinsic value of the
performance-based restricted stock vested during fiscal 2008 and
2007 was $1.4 million and $0.6 million, respectively.
The weighted average grant date fair value for performance-based
restricted stock granted in fiscal 2007 was $13.73.
Stock Options: As of November 30, 2009, a
total of 1,290,859 stock options was outstanding under the 1999
Plan and 2009 Plan. The 2009 stock option grants are
performance-based and vest if the Company meets various
operations and earnings targets set by the
Organization & Compensation Committee of the Board.
The fair value is being amortized over the estimated service
period to achieve the operations and earnings targets. If
certain operations and earnings targets are exceeded, additional
stock options may be required to be granted to individuals up to
a maximum additional grant of 25% of the initial grant.
102
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
A summary of the status of the Companys stock options as
of November 30, 2009 and changes during fiscal 2009 is
presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Stock
|
|
|
Average
|
|
|
Remaining
|
|
|
Intrinsic
|
|
|
|
Options
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Value
|
|
|
|
(000s)
|
|
|
Price
|
|
|
Life
|
|
|
(In millions)
|
|
|
Outstanding at November 30, 2008
|
|
|
1,326
|
|
|
$
|
10.11
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
196
|
|
|
|
4.54
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(231
|
)
|
|
|
10.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at November 30, 2009
|
|
|
1,291
|
|
|
$
|
9.28
|
|
|
|
3.0
|
|
|
$
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at November 30, 2009
|
|
|
1,095
|
|
|
$
|
10.13
|
|
|
|
1.8
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to vest at November 30, 2009
|
|
|
88
|
|
|
$
|
4.54
|
|
|
|
9.7
|
|
|
$
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30, 2009, there was $0.5 million of
total stock-based compensation related to stock options. That
cost is expected to be recognized over an estimated
weighted-average amortization period of twenty-seven
(27) months. The total intrinsic value of options exercised
during fiscal 2007 was $0.2 million. The weighted average
grant date fair value for stock options granted in fiscal 2009
was $2.77.
The following table summarizes the range of exercise prices and
weighted-average exercise prices for options outstanding as of
November 30, 2009 under the Companys stock option
plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
Year in
|
|
|
|
|
|
|
|
Weighted
|
Which Stock
|
|
|
|
Stock
|
|
Weighted
|
|
Average
|
Options
|
|
|
|
Options
|
|
Average
|
|
Remaining
|
Were
|
|
Range of Exercise
|
|
Outstanding
|
|
Exercise
|
|
Contractual
|
Granted
|
|
Prices
|
|
(000s)
|
|
Price
|
|
Life (years)
|
|
2000
|
|
$ 8.19 $10.13
|
|
|
261
|
|
|
$
|
9.49
|
|
|
0.1
|
|
2001
|
|
$10.44 $12.30
|
|
|
322
|
|
|
$
|
10.85
|
|
|
1.2
|
|
2002
|
|
$ 9.77 $15.43
|
|
|
201
|
|
|
$
|
12.62
|
|
|
2.5
|
|
2003
|
|
$ 6.53 $ 9.29
|
|
|
282
|
|
|
$
|
8.04
|
|
|
3.3
|
|
2004
|
|
$10.92
|
|
|
29
|
|
|
$
|
10.92
|
|
|
4.2
|
|
2009
|
|
$ 4.54
|
|
|
196
|
|
|
$
|
4.54
|
|
|
9.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,291
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
Assumptions
The fair value of the stock options granted during fiscal 2009
were estimated using a Black-Scholes Model with the following
weighted average assumptions:
|
|
|
|
|
Expected life (in years)
|
|
|
8.0
|
|
Volatility
|
|
|
53.93
|
%
|
Risk-free interest rate
|
|
|
3.24
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
103
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The fair value of SARS were estimated using a Black-Scholes
Model with the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Expected life (in years)
|
|
|
6.1
|
|
|
|
5.9
|
|
|
|
5.7
|
|
Volatility
|
|
|
58.83
|
%
|
|
|
43.25
|
%
|
|
|
34.96
|
%
|
Risk-free interest rate
|
|
|
2.47
|
%
|
|
|
2.44
|
%
|
|
|
3.56
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
Expected Term: The Companys expected
term represents the period that the Companys stock-based
awards are expected to be outstanding and was determined based
on historical experience of similar awards, giving consideration
to the contractual terms of the stock-based awards and vesting
schedules.
Expected Volatility: The fair value of
stock-based payments were valued using the Black-Scholes Model
with a volatility factor based on the Companys historical
stock prices. The range of expected volatility used in the
Black-Scholes Model was 54% to 71% in fiscal 2009.
Expected Dividend: The Black-Scholes Model
requires a single expected dividend yield as an input. The
Senior Credit Facility and
91/2% Notes
restrict the payment of dividends and the Company does not
anticipate paying cash dividends in the foreseeable future.
Risk-Free Interest Rate: The Company bases the
risk-free interest rate used in the Black-Scholes Model on the
implied yield currently available on U.S. Treasury
zero-coupon issues with an equivalent remaining term. The range
of risk-free interest rates used in the Black-Scholes Model was
1.24% to 3.80% in fiscal 2009.
Estimated Pre-vesting Forfeitures: When
estimating forfeitures, the Company considers historical
terminations as well as anticipated retirements.
|
|
10.
|
Operating
Segments and Related Disclosures
|
The Companys operations are organized into two operating
segments based on different products and customer bases:
Aerospace and Defense, and Real Estate. The accounting policies
of the operating segments are the same as those described in the
summary of significant accounting policies (see Note 1).
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.
104
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Selected financial information for each reportable segment is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense
|
|
$
|
787.2
|
|
|
$
|
725.5
|
|
|
$
|
739.1
|
|
Real Estate
|
|
|
8.2
|
|
|
|
16.8
|
|
|
|
6.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
795.4
|
|
|
$
|
742.3
|
|
|
$
|
745.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Performance:
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense
|
|
$
|
84.4
|
|
|
$
|
78.0
|
|
|
$
|
84.8
|
|
Environmental remediation provision adjustments
|
|
|
(0.7
|
)
|
|
|
(5.0
|
)
|
|
|
0.4
|
|
Retirement benefit plan income (expense)
|
|
|
7.9
|
|
|
|
(15.7
|
)
|
|
|
(23.8
|
)
|
Unusual items (see Note 13)
|
|
|
(1.3
|
)
|
|
|
(16.5
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense Total
|
|
|
90.3
|
|
|
|
40.8
|
|
|
|
61.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
|
4.4
|
|
|
|
10.3
|
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
94.7
|
|
|
$
|
51.1
|
|
|
$
|
64.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of segment performance to income from
continuing operations before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Performance
|
|
$
|
94.7
|
|
|
$
|
51.1
|
|
|
$
|
64.8
|
|
Interest expense
|
|
|
(25.9
|
)
|
|
|
(27.7
|
)
|
|
|
(28.6
|
)
|
Interest income
|
|
|
1.9
|
|
|
|
4.2
|
|
|
|
4.9
|
|
Corporate retirement benefit plan income
|
|
|
4.0
|
|
|
|
7.7
|
|
|
|
2.2
|
|
Corporate and other expenses
|
|
|
(23.0
|
)
|
|
|
(16.2
|
)
|
|
|
(19.7
|
)
|
Corporate unusual items (see Note 13)
|
|
|
(3.3
|
)
|
|
|
(16.6
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes
|
|
$
|
48.4
|
|
|
$
|
2.5
|
|
|
$
|
23.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense
|
|
$
|
14.3
|
|
|
$
|
21.3
|
|
|
$
|
20.3
|
|
Real Estate
|
|
|
|
|
|
|
|
|
|
|
1.5
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
$
|
14.3
|
|
|
$
|
21.3
|
|
|
$
|
21.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and Defense
|
|
$
|
25.1
|
|
|
$
|
24.7
|
|
|
$
|
25.4
|
|
Real Estate
|
|
|
0.6
|
|
|
|
0.8
|
|
|
|
0.9
|
|
Corporate
|
|
|
5.6
|
|
|
|
2.8
|
|
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
$
|
31.3
|
|
|
$
|
28.3
|
|
|
$
|
28.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Aerospace and Defense
|
|
$
|
663.0
|
|
|
$
|
709.3
|
|
Real Estate
|
|
|
70.9
|
|
|
|
62.6
|
|
|
|
|
|
|
|
|
|
|
Identifiable assets
|
|
|
733.9
|
|
|
|
771.9
|
|
Corporate
|
|
|
201.8
|
|
|
|
233.7
|
|
Discontinued operations
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
935.7
|
|
|
$
|
1,005.7
|
|
|
|
|
|
|
|
|
|
|
The Companys continuing operations are located in the
United States. Inter-area sales are not significant to the total
sales of any geographic area. Unusual items included in segment
performance pertained only to the United States.
106
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
11.
|
Quarterly
Financial Data (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
|
(In millions, except per share amounts)
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
170.9
|
|
|
$
|
183.0
|
|
|
$
|
201.4
|
|
|
$
|
240.1
|
|
Cost of sales (exclusive of items shown separately on Statement
of Operations on page 56)
|
|
|
148.9
|
|
|
|
152.7
|
|
|
|
172.2
|
|
|
|
200.2
|
|
Unusual items
|
|
|
2.2
|
|
|
|
0.4
|
|
|
|
1.8
|
|
|
|
0.2
|
|
Income from continuing operations before income taxes
|
|
|
4.5
|
|
|
|
13.9
|
|
|
|
11.9
|
|
|
|
18.1
|
|
Income from continuing operations
|
|
|
25.0
|
|
|
|
12.4
|
|
|
|
12.6
|
|
|
|
16.0
|
|
Loss from discontinued operations, net of income taxes
|
|
|
(3.8
|
)
|
|
|
(1.4
|
)
|
|
|
(0.5
|
)
|
|
|
(1.0
|
)
|
Net income
|
|
|
21.2
|
|
|
|
11.0
|
|
|
|
12.1
|
|
|
|
15.0
|
|
Basic income per share from continuing operations
|
|
|
0.43
|
|
|
|
0.21
|
|
|
|
0.21
|
|
|
|
0.27
|
|
Basic loss per share from discontinued operations, net of income
taxes
|
|
|
(0.07
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Basic net income per share
|
|
|
0.36
|
|
|
|
0.19
|
|
|
|
0.20
|
|
|
|
0.26
|
|
Diluted income per share from continuing operations
|
|
|
0.40
|
|
|
|
0.20
|
|
|
|
0.21
|
|
|
|
0.25
|
|
Diluted loss per share from discontinued operations, net of
income taxes
|
|
|
(0.06
|
)
|
|
|
(0.02
|
)
|
|
|
(0.01
|
)
|
|
|
(0.01
|
)
|
Diluted net income per share
|
|
$
|
0.34
|
|
|
$
|
0.18
|
|
|
$
|
0.20
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
|
(In millions, except per share amounts)
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
176.6
|
|
|
$
|
194.7
|
|
|
$
|
172.5
|
|
|
$
|
198.5
|
|
Cost of sales (exclusive of items shown separately on Statement
of Operations on page 56)
|
|
|
158.8
|
|
|
|
161.7
|
|
|
|
153.2
|
|
|
|
171.7
|
|
Unusual items
|
|
|
1.1
|
|
|
|
13.8
|
|
|
|
1.0
|
|
|
|
17.2
|
|
Income (loss) from continuing operations before income taxes
|
|
|
3.1
|
|
|
|
6.5
|
|
|
|
(1.9
|
)
|
|
|
(5.2
|
)
|
Income (loss) from continuing operations
|
|
|
3.3
|
|
|
|
6.9
|
|
|
|
(2.9
|
)
|
|
|
(5.7
|
)
|
(Loss) income from discontinued operations, net of income taxes
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
0.2
|
|
|
|
|
|
Net income (loss)
|
|
|
3.0
|
|
|
|
6.9
|
|
|
|
(2.7
|
)
|
|
|
(5.7
|
)
|
Basic and diluted income (loss) per share from continuing
operations
|
|
|
0.06
|
|
|
|
0.12
|
|
|
|
(0.05
|
)
|
|
|
(0.10
|
)
|
Basic and diluted loss per share from discontinued operations,
net of income taxes
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share
|
|
$
|
0.05
|
|
|
$
|
0.12
|
|
|
$
|
(0.05
|
)
|
|
$
|
(0.10
|
)
|
|
|
12.
|
Discontinued
Operations
|
During the first quarter of fiscal 2007, the Company entered
into an earn-out and seller note repayment agreement
(Repayment Agreement) related to the sale of the
Fine Chemicals business to American Pacific Corporation
(AMPAC) under which AMPAC was required to pay
$29.7 million in consideration for the early retirement of
a seller note (including interest due thereunder), the full
payment of the earn-out amount and the release of the Company
from certain liabilities. Accordingly, during the first quarter
of fiscal 2007, the Company recorded a gain from discontinued
operations of $31.2 million as a result of receiving
$29.7 million of cash from AMPAC and being released from
certain liabilities in accordance with the Repayment Agreement.
For operating segment reporting, the Fine Chemicals business was
previously reported as a separate operating segment.
107
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In November 2003, the Company 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, the Company 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. An expense of
$1.0 million was recorded during fiscal 2005 primarily
related to employee social costs that became estimable in fiscal
2005. During fiscal 2009, Snappon SA had legal judgments
rendered against it under French law, aggregating
2.9 million plus interest (approximately
$4.1 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 clerks office of the
Paris Commercial Court (see Note 7(b)).
Summarized financial information for discontinued operations is
set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
(Loss) income before income taxes
|
|
|
(6.7
|
)
|
|
|
(0.2
|
)
|
|
|
28.9
|
|
Income tax (benefit) provision
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
1.0
|
|
(Loss) income from discontinued operations
|
|
|
(6.7
|
)
|
|
|
(0.1
|
)
|
|
|
27.9
|
|
As of November 30, 2008, the components of assets and
liabilities of discontinued operations in the consolidated
balance sheets are as follows:
|
|
|
|
|
|
|
November 30,
|
|
|
|
2008
|
|
|
|
(In millions)
|
|
|
Assets of discontinued operations, consisting of other assets
|
|
$
|
0.1
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
0.3
|
|
Other liabilities
|
|
|
0.7
|
|
|
|
|
|
|
Liabilities of discontinued operations
|
|
$
|
1.0
|
|
|
|
|
|
|
108
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Charges and gains associated with unusual items are summarized
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
(In millions)
|
|
|
Aerospace and Defense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Legal settlements and estimated loss on legal matters
|
|
$
|
1.3
|
|
|
$
|
2.9
|
|
|
$
|
3.8
|
|
Customer reimbursements of tax recoveries
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
Defined benefit pension plan amendment
|
|
|
|
|
|
|
13.6
|
|
|
|
|
|
Gain on recoveries
|
|
|
|
|
|
|
|
|
|
|
(6.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aerospace and defense unusual items
|
|
|
1.3
|
|
|
|
16.5
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive severance agreements
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt
|
|
|
0.2
|
|
|
|
|
|
|
|
0.6
|
|
Gain on settlement
|
|
|
|
|
|
|
(1.2
|
)
|
|
|
|
|
Defined benefit pension plan amendment
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
Shareholder agreement and related costs
|
|
|
|
|
|
|
16.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate unusual items
|
|
|
3.3
|
|
|
|
16.6
|
|
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total unusual items
|
|
$
|
4.6
|
|
|
$
|
33.1
|
|
|
$
|
0.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In fiscal 2009, the Company recorded a charge of
$1.3 million for realized losses and interest associated
with its failure to register with the SEC the issuance of
certain of the Companys common shares under its defined
contribution 401(k) employee benefit plan. During fiscal 2009,
the Company also incurred a charge of $3.1 million
associated with executive severance agreements. Additionally,
the Company recorded costs of $0.2 million related to a
bank amendment.
On November 25, 2008, the Company decided to amend the
defined benefit pension and benefits restoration plans to freeze
future accruals under such plans. Effective February 1,
2009 and July 31, 2009, future benefit accruals for all
current salaried employees and collective bargaining unit
employees were discontinued, respectively. No employees lost
their previously earned pension benefits. As a result of the
amendment and freeze, the Company 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, the Company entered the Shareholder
Agreement with respect to the election of Directors for the 2008
Annual Meeting and certain other related matters which resulted
in a charge of $16.8 million in fiscal 2008 comprised of
the following (in millions):
|
|
|
|
|
Increases in pension benefits primarily for certain of the
Companys officers
|
|
$
|
5.3
|
|
Executive severance charges
|
|
|
7.1
|
|
Accelerated vesting of stock appreciation rights
|
|
|
1.1
|
|
Accelerated vesting of restricted stock, service-based
|
|
|
0.6
|
|
Accelerated vesting of restricted stock, performance-based
|
|
|
0.7
|
|
Professional fees and other
|
|
|
2.0
|
|
|
|
|
|
|
|
|
$
|
16.8
|
|
|
|
|
|
|
109
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
As a result of the Shareholder Agreement, the executive
severance agreements required the Company to fund into a grantor
trust on March 12, 2008, an amount equal to
$34.8 million, which represents liabilities associated with
the BRP and amounts payable to certain officers of the Company
party to executive severance agreements in the event of
qualifying terminations of employment following a change in
control (as defined in the BRP and the executive severance
agreements) of the Company. In addition, as a result of the
resignation of three additional Board members on May 16,
2008, the Company was required to fund $0.4 million into a
grantor trust on May 22, 2008, which primarily represents
the amount payable to an officer party to an executive severance
agreement in the event of a qualifying termination of employment.
In fiscal 2008, the Company recorded a charge of
$2.9 million related to the estimated unrecoverable costs
of legal matters, including $1.7 million associated with
the failure to register with the SEC the issuance of certain of
its common shares under its defined contribution 401(k) employee
benefit plan and $1.2 million related to a legal settlement
and other legal matters. The Company recorded a
$1.2 million gain related to an insurance settlement for an
environmental claim.
In fiscal 2007, the Company recorded an expense of
$3.8 million related to estimated costs associated with
environmental toxic tort legal matters. The Company recorded an
expense of $2.3 million for tax refunds that were repaid to
the Companys defense customers. The Company also recorded
an unusual gain of $6.0 million related to an adjustment of
reserves for the allocation of pension benefit costs to
U.S. government contracts. The Company incurred a charge of
$0.6 million associated with the replacement of the
previous credit facility.
|
|
14.
|
Condensed
Consolidating Financial Information
|
The Company is providing condensed consolidating financial
information for its material domestic subsidiaries that have
guaranteed the
91/2% Notes,
and for those subsidiaries that have not guaranteed the
91/2% Notes.
These 100% owned subsidiary guarantors have, jointly and
severally, fully and unconditionally guaranteed the
91/2% Notes.
The subsidiary guarantees are senior subordinated obligations of
each subsidiary guarantor and rank (i) junior in right of
payment with all senior indebtedness, (ii) equal in right
of payment with all senior subordinated indebtedness, and
(iii) senior in right of payment to all subordinated
indebtedness, in each case, of that subsidiary guarantor. The
subsidiary guarantees will also be effectively subordinated to
any collateralized indebtedness of the subsidiary guarantor with
respect to the assets collateralizing that indebtedness. Absent
both default and notice as specified in the Companys
Senior Credit Facility and agreements governing the
Companys outstanding convertible notes and the
91/2% Notes,
there are no restrictions on the Companys ability to
obtain funds from its 100% owned subsidiary guarantors by
dividend or loan.
The Company has not presented separate financial and narrative
information for each of the subsidiary guarantors, because it
believes that such financial and narrative information would not
provide investors with any additional information that would be
material in evaluating the sufficiency of the guarantees.
Therefore, the following condensed consolidating financial
information summarizes the financial position, results of
operations, and cash flows for the Companys guarantor and
non-guarantor subsidiaries.
110
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2009 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
795.4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
795.4
|
|
Cost of sales (exclusive of items shown separately below)
|
|
|
|
|
|
|
674.0
|
|
|
|
|
|
|
|
|
|
|
|
674.0
|
|
Selling, general and administrative
|
|
|
(2.2
|
)
|
|
|
12.4
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Depreciation and amortization
|
|
|
5.5
|
|
|
|
25.8
|
|
|
|
|
|
|
|
|
|
|
|
31.3
|
|
Interest expense
|
|
|
20.4
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
25.9
|
|
Other, net
|
|
|
7.2
|
|
|
|
(1.6
|
)
|
|
|
|
|
|
|
|
|
|
|
5.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
|
|
|
(30.9
|
)
|
|
|
79.3
|
|
|
|
|
|
|
|
|
|
|
|
48.4
|
|
Income tax (benefit) provision
|
|
|
(63.0
|
)
|
|
|
45.4
|
|
|
|
|
|
|
|
|
|
|
|
(17.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
32.1
|
|
|
|
33.9
|
|
|
|
|
|
|
|
|
|
|
|
66.0
|
|
Loss from discontinued operations
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
(3.8
|
)
|
|
|
|
|
|
|
(6.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity earnings (losses) of subsidiaries
|
|
|
29.2
|
|
|
|
33.9
|
|
|
|
(3.8
|
)
|
|
|
|
|
|
|
59.3
|
|
Equity earnings (losses) of subsidiaries
|
|
|
30.1
|
|
|
|
|
|
|
|
|
|
|
|
(30.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
59.3
|
|
|
$
|
33.9
|
|
|
$
|
(3.8
|
)
|
|
$
|
(30.1
|
)
|
|
$
|
59.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2008 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
742.3
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
742.3
|
|
Cost of sales (exclusive of items shown separately below)
|
|
|
|
|
|
|
645.4
|
|
|
|
|
|
|
|
|
|
|
|
645.4
|
|
Selling, general and administrative
|
|
|
(19.8
|
)
|
|
|
21.7
|
|
|
|
|
|
|
|
|
|
|
|
1.9
|
|
Depreciation and amortization
|
|
|
2.8
|
|
|
|
25.5
|
|
|
|
|
|
|
|
|
|
|
|
28.3
|
|
Interest expense
|
|
|
22.2
|
|
|
|
5.5
|
|
|
|
|
|
|
|
|
|
|
|
27.7
|
|
Other, net
|
|
|
18.7
|
|
|
|
17.8
|
|
|
|
|
|
|
|
|
|
|
|
36.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
|
|
|
(23.9
|
)
|
|
|
26.4
|
|
|
|
|
|
|
|
|
|
|
|
2.5
|
|
Income tax (benefit) provision
|
|
|
(8.6
|
)
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(15.3
|
)
|
|
|
16.9
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
Income (loss) from discontinued operations
|
|
|
0.2
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before equity earnings (losses) of subsidiaries
|
|
|
(15.1
|
)
|
|
|
16.9
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
1.5
|
|
Equity earnings (losses) of subsidiaries
|
|
|
16.6
|
|
|
|
|
|
|
|
|
|
|
|
(16.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1.5
|
|
|
$
|
16.9
|
|
|
$
|
(0.3
|
)
|
|
$
|
(16.6
|
)
|
|
$
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2007 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
745.4
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
745.4
|
|
Cost of sales (exclusive of items shown separately below)
|
|
|
|
|
|
|
657.8
|
|
|
|
|
|
|
|
|
|
|
|
657.8
|
|
Selling, general and administrative
|
|
|
1.4
|
|
|
|
13.0
|
|
|
|
|
|
|
|
|
|
|
|
14.4
|
|
Depreciation and amortization
|
|
|
2.1
|
|
|
|
26.3
|
|
|
|
|
|
|
|
|
|
|
|
28.4
|
|
Interest expense
|
|
|
24.7
|
|
|
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
28.6
|
|
Other, net
|
|
|
(1.9
|
)
|
|
|
(4.9
|
)
|
|
|
|
|
|
|
|
|
|
|
(6.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations before income taxes
|
|
|
(26.3
|
)
|
|
|
49.3
|
|
|
|
|
|
|
|
|
|
|
|
23.0
|
|
Income tax (benefit) provision
|
|
|
(25.2
|
)
|
|
|
7.1
|
|
|
|
|
|
|
|
|
|
|
|
(18.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(1.1
|
)
|
|
|
42.2
|
|
|
|
|
|
|
|
|
|
|
|
41.1
|
|
Income (loss) from discontinued operations
|
|
|
28.8
|
|
|
|
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
27.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before equity earnings (losses) of subsidiaries
|
|
|
27.7
|
|
|
|
42.2
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
69.0
|
|
Equity earnings (losses) of subsidiaries
|
|
|
41.3
|
|
|
|
|
|
|
|
|
|
|
|
(41.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
69.0
|
|
|
$
|
42.2
|
|
|
$
|
(0.9
|
)
|
|
$
|
(41.3
|
)
|
|
$
|
69.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2009 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash and cash equivalents
|
|
$
|
166.0
|
|
|
$
|
(39.8
|
)
|
|
$
|
0.1
|
|
|
$
|
|
|
|
$
|
126.3
|
|
Accounts receivable
|
|
|
|
|
|
|
116.3
|
|
|
|
|
|
|
|
|
|
|
|
116.3
|
|
Inventories
|
|
|
|
|
|
|
61.8
|
|
|
|
|
|
|
|
|
|
|
|
61.8
|
|
Recoverable from the U.S. government and other third parties for
environmental remediation costs and other
|
|
|
0.1
|
|
|
|
30.5
|
|
|
|
|
|
|
|
|
|
|
|
30.6
|
|
Grantor trust
|
|
|
1.5
|
|
|
|
0.9
|
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
Other receivables, prepaid expenses and other
|
|
|
12.7
|
|
|
|
20.1
|
|
|
|
|
|
|
|
|
|
|
|
32.8
|
|
Income taxes
|
|
|
43.2
|
|
|
|
(40.8
|
)
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
223.5
|
|
|
|
149.0
|
|
|
|
0.1
|
|
|
|
|
|
|
|
372.6
|
|
Property, plant and equipment, net
|
|
|
0.4
|
|
|
|
129.5
|
|
|
|
|
|
|
|
|
|
|
|
129.9
|
|
Recoverable from the U.S. government and other third parties for
environmental remediation costs and other
|
|
|
0.2
|
|
|
|
154.1
|
|
|
|
|
|
|
|
|
|
|
|
154.3
|
|
Grantor trust
|
|
|
11.6
|
|
|
|
6.2
|
|
|
|
|
|
|
|
|
|
|
|
17.8
|
|
Goodwill
|
|
|
|
|
|
|
94.9
|
|
|
|
|
|
|
|
|
|
|
|
94.9
|
|
Intercompany (payable) receivable, net
|
|
|
(77.4
|
)
|
|
|
97.1
|
|
|
|
(19.7
|
)
|
|
|
|
|
|
|
|
|
Other noncurrent assets and intangibles, net
|
|
|
117.7
|
|
|
|
159.3
|
|
|
|
9.9
|
|
|
|
(120.7
|
)
|
|
|
166.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
276.0
|
|
|
$
|
790.1
|
|
|
$
|
(9.7
|
)
|
|
$
|
(120.7
|
)
|
|
$
|
935.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
|
$
|
17.8
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17.8
|
|
Accounts payable
|
|
|
0.4
|
|
|
|
18.0
|
|
|
|
|
|
|
|
|
|
|
|
18.4
|
|
Reserves for environmental remediation costs
|
|
|
7.2
|
|
|
|
37.3
|
|
|
|
|
|
|
|
|
|
|
|
44.5
|
|
Other current liabilities, advance payments on contracts, and
postretirement medical and life insurance benefits
|
|
|
38.9
|
|
|
|
141.8
|
|
|
|
|
|
|
|
|
|
|
|
180.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
64.3
|
|
|
|
197.1
|
|
|
|
|
|
|
|
|
|
|
|
261.4
|
|
Long-term debt
|
|
|
420.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420.8
|
|
Reserves for environmental remediation costs
|
|
|
4.4
|
|
|
|
173.8
|
|
|
|
|
|
|
|
|
|
|
|
178.2
|
|
Pension benefits
|
|
|
22.1
|
|
|
|
202.9
|
|
|
|
|
|
|
|
|
|
|
|
225.0
|
|
Other noncurrent liabilities
|
|
|
53.5
|
|
|
|
85.9
|
|
|
|
|
|
|
|
|
|
|
|
139.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
565.1
|
|
|
|
659.7
|
|
|
|
|
|
|
|
|
|
|
|
1,224.8
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable common stock (Note 8)
|
|
|
6.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.0
|
|
Total shareholders (deficit) equity
|
|
|
(295.1
|
)
|
|
|
130.4
|
|
|
|
(9.7
|
)
|
|
|
(120.7
|
)
|
|
|
(295.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable common stock, and
shareholders equity (deficit)
|
|
$
|
276.0
|
|
|
$
|
790.1
|
|
|
$
|
(9.7
|
)
|
|
$
|
(120.7
|
)
|
|
$
|
935.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2008 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Cash and cash equivalents
|
|
$
|
103.7
|
|
|
$
|
(11.2
|
)
|
|
$
|
0.2
|
|
|
$
|
|
|
|
$
|
92.7
|
|
Accounts receivable
|
|
|
|
|
|
|
97.3
|
|
|
|
|
|
|
|
|
|
|
|
97.3
|
|
Inventories
|
|
|
|
|
|
|
70.4
|
|
|
|
|
|
|
|
|
|
|
|
70.4
|
|
Recoverable from the U.S. government and other third parties for
environmental remediation costs and other
|
|
|
|
|
|
|
43.7
|
|
|
|
|
|
|
|
|
|
|
|
43.7
|
|
Grantor trust
|
|
|
1.3
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
1.6
|
|
Other receivables, prepaid expenses and other
|
|
|
8.3
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
|
|
|
17.6
|
|
Income taxes
|
|
|
11.5
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
Assets of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
124.8
|
|
|
|
208.9
|
|
|
|
0.3
|
|
|
|
|
|
|
|
334.0
|
|
Property, plant and equipment, net
|
|
|
0.4
|
|
|
|
137.5
|
|
|
|
|
|
|
|
|
|
|
|
137.9
|
|
Recoverable from the U.S. government and other third parties for
environmental remediation costs and other
|
|
|
|
|
|
|
169.8
|
|
|
|
|
|
|
|
|
|
|
|
169.8
|
|
Prepaid pension asset
|
|
|
76.8
|
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
|
|
|
76.5
|
|
Grantor trust
|
|
|
19.8
|
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
|
29.3
|
|
Goodwill
|
|
|
|
|
|
|
94.9
|
|
|
|
|
|
|
|
|
|
|
|
94.9
|
|
Intercompany (payable) receivable, net
|
|
|
(14.5
|
)
|
|
|
29.6
|
|
|
|
(15.1
|
)
|
|
|
|
|
|
|
|
|
Other noncurrent assets and intangibles, net
|
|
|
309.8
|
|
|
|
150.5
|
|
|
|
9.9
|
|
|
|
(306.9
|
)
|
|
|
163.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
517.1
|
|
|
$
|
800.4
|
|
|
$
|
(4.9
|
)
|
|
$
|
(306.9
|
)
|
|
$
|
1,005.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings and current portion of long-term debt
|
|
$
|
1.4
|
|
|
$
|
0.6
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2.0
|
|
Accounts payable
|
|
|
0.7
|
|
|
|
32.0
|
|
|
|
|
|
|
|
|
|
|
|
32.7
|
|
Reserves for environmental remediation costs
|
|
|
6.4
|
|
|
|
58.8
|
|
|
|
|
|
|
|
|
|
|
|
65.2
|
|
Other current liabilities, advance payments on contracts, and
postretirement medical and life insurance benefits
|
|
|
28.9
|
|
|
|
118.6
|
|
|
|
|
|
|
|
|
|
|
|
147.5
|
|
Liabilities of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
37.4
|
|
|
|
210.0
|
|
|
|
1.0
|
|
|
|
|
|
|
|
248.4
|
|
Long-term debt
|
|
|
438.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438.6
|
|
Reserves for environmental remediation costs
|
|
|
6.6
|
|
|
|
186.4
|
|
|
|
|
|
|
|
|
|
|
|
193.0
|
|
Other noncurrent liabilities
|
|
|
62.0
|
|
|
|
91.2
|
|
|
|
|
|
|
|
|
|
|
|
153.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
544.6
|
|
|
|
487.6
|
|
|
|
1.0
|
|
|
|
|
|
|
|
1,033.2
|
|
Commitments and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable common stock (Note 8)
|
|
|
7.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.6
|
|
Total shareholders (deficit) equity
|
|
|
(35.1
|
)
|
|
|
312.8
|
|
|
|
(5.9
|
)
|
|
|
(306.9
|
)
|
|
|
(35.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable common stock, and
shareholders equity (deficit)
|
|
$
|
517.1
|
|
|
$
|
800.4
|
|
|
$
|
(4.9
|
)
|
|
$
|
(306.9
|
)
|
|
$
|
1,005.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Condensed
Consolidating Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2009 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(0.2
|
)
|
|
$
|
55.3
|
|
|
$
|
(4.8
|
)
|
|
$
|
|
|
|
$
|
50.3
|
|
Net transfers from (to) parent
|
|
|
64.3
|
|
|
|
(69.0
|
)
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
64.1
|
|
|
|
(13.7
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
50.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
(14.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(14.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(14.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(14.3
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments on debt
|
|
|
(1.4
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
(2.0
|
)
|
Other financing activities
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(1.8
|
)
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
62.3
|
|
|
|
(28.6
|
)
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
33.6
|
|
Cash and cash equivalents at beginning of year
|
|
|
103.7
|
|
|
|
(11.2
|
)
|
|
|
0.2
|
|
|
|
|
|
|
|
92.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
166.0
|
|
|
$
|
(39.8
|
)
|
|
$
|
0.1
|
|
|
$
|
|
|
|
$
|
126.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2008 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(36.1
|
)
|
|
$
|
63.7
|
|
|
$
|
0.4
|
|
|
$
|
|
|
|
$
|
28.0
|
|
Net transfers from (to) parent
|
|
|
47.7
|
|
|
|
(46.9
|
)
|
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
11.6
|
|
|
|
16.8
|
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
28.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
(21.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(21.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(21.3
|
)
|
|
|
|
|
|
|
|
|
|
|
(21.3
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments on debt
|
|
|
(6.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(6.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
5.3
|
|
|
|
(4.5
|
)
|
|
|
(0.4
|
)
|
|
|
|
|
|
|
0.4
|
|
Cash and cash equivalents at beginning of year
|
|
|
98.4
|
|
|
|
(6.7
|
)
|
|
|
0.6
|
|
|
|
|
|
|
|
92.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
103.7
|
|
|
$
|
(11.2
|
)
|
|
$
|
0.2
|
|
|
$
|
|
|
|
$
|
92.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantor
|
|
|
Non-guarantor
|
|
|
|
|
|
|
|
November 30, 2007 (In millions):
|
|
Parent
|
|
|
Subsidiaries
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(4.8
|
)
|
|
$
|
30.0
|
|
|
$
|
(1.4
|
)
|
|
$
|
|
|
|
$
|
23.8
|
|
Net transfers from (to) parent
|
|
|
3.6
|
|
|
|
(5.1
|
)
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(1.2
|
)
|
|
|
24.9
|
|
|
|
0.1
|
|
|
|
|
|
|
|
23.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
(21.8
|
)
|
|
|
|
|
|
|
|
|
|
|
(21.8
|
)
|
Proceeds from business disposition
|
|
|
29.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29.7
|
|
Other investing activities
|
|
|
19.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
49.5
|
|
|
|
(21.8
|
)
|
|
|
|
|
|
|
|
|
|
|
27.7
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments on debt, net
|
|
|
(20.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20.8
|
)
|
Other financing activities
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(20.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
27.9
|
|
|
|
3.1
|
|
|
|
0.1
|
|
|
|
|
|
|
|
31.1
|
|
Cash and cash equivalents at beginning of year
|
|
|
70.5
|
|
|
|
(9.8
|
)
|
|
|
0.5
|
|
|
|
|
|
|
|
61.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year
|
|
$
|
98.4
|
|
|
$
|
(6.7
|
)
|
|
$
|
0.6
|
|
|
$
|
|
|
|
$
|
92.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In December 2009, the Company issued $200.0 million in
aggregate principal amount of 4.0625% Convertible
Subordinated Debentures
(41/16% Debentures)
in a private placement to qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933. The
41/16% Debentures
mature on December 31, 2039. Interest on the
41/16% Debentures
accrues at 4.0625% per annum and is payable semiannually in
arrears on June 30 and December 31 of each year, beginning
June 30, 2010 (or if any such day is not a business day,
payable on the following business day), and the Company may
elect to pay interest in cash or, generally on any interest
payment that is at least one year after the original issuance
date of the
41/16% Debentures,
in shares of the Companys common stock or a combination of
cash and shares of the Companys common stock, at the
Companys option. The valuation methodology the Company
will use in determining the value of any shares to be so
delivered is discussed in the indenture governing the
41/16% Debentures.
The
41/16% Debentures
are general unsecured obligations and rank equal in right of
payment to all of the Companys other existing and future
unsecured subordinated indebtedness, including the 4% Notes
and
21/4% Debentures.
The
41/16% Debentures
rank junior in right of payment to all of the Companys
existing and future senior indebtedness, including all of its
obligations under its Senior Credit Facility and all of its
existing and future senior subordinated indebtedness, including
the Companys outstanding
91/2% Notes.
In addition, the
41/16% Debentures
are effectively subordinated to any of the Companys
collateralized debt and to any and all debt and liabilities,
including trade debt of its subsidiaries.
Each holder of the
41/16% Debentures
may convert their
41/16% Debentures
into shares of the Companys common stock at a conversion
rate of 111.0926 shares per $1,000 principal amount,
representing a conversion price of approximately $9.00 per
share, subject to adjustment. In addition, if the holders elect
to convert their
41/16% Debentures
in connection with the occurrence of certain fundamental
changes, the holders will be entitled to receive additional
shares of common stock upon conversion in some circumstances.
Upon any conversion of the
41/16% Debentures,
subject to certain exceptions, the holders will not receive any
cash payment representing accrued and unpaid interest.
116
GENCORP
INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Company may at any time redeem any
41/16% Debentures
for cash (except as described below with respect to any
make-whole premium that may be payable) if the last reported
sale price of the Companys common stock has been at least
150% of the conversion price then in effect for at least twenty
(20) trading days during any thirty (30) consecutive
trading day period ending within five (5) trading days
prior to the date on which the Company provides the notice of
redemption.
The Company may redeem the
41/16% Debentures
either in whole or in part at a redemption price equal to
(i) 100% of the principal amount of the
41/16% Debentures
to be redeemed, plus (ii) accrued and unpaid interest, if
any, up to, but excluding, the redemption date, plus
(iii) if the Company redeems the
41/16% Debentures
prior to December 31, 2014, a make-whole
premium equal to the present value of the remaining
scheduled payments of interest that would have been made on the
41/16% Debentures
to be redeemed had such
41/16% Debentures
remained outstanding from the redemption date to
December 31, 2014. Any make-whole premium is payable in
cash, shares of the Companys common stock or a combination
of cash and shares, at the Companys option, subject to
certain conditions.
Each holder may require the Company to repurchase all or part of
their
41/16% Debentures
on December 31, 2014, 2019, 2024, 2029 and 2034 (each, an
optional repurchase date) at an optional repurchase
price equal to (1) 100% of their principal amount plus
(2) accrued and unpaid interest, if any, up to, but
excluding, the date of repurchase. The Company may elect to pay
the optional repurchase price in cash, shares of the
Companys common stock, or a combination of cash and shares
of the Companys common stock, at the Companys
option, subject to certain conditions.
If a fundamental change, as described in the indenture governing
the
41/16% Debentures,
occurs prior to maturity, each holder will have the right to
require the Company to purchase all or part of their
41/16% Debentures
for cash at a repurchase price equal to 100% of their principal
amount, plus accrued and unpaid interest, if any, up to, but
excluding, the repurchase date.
If the Company delivers shares of its common stock as all or
part of any interest payment, any make-whole premium or any
optional repurchase price, such shares will be valued at the
product of (x) the price per share of the Companys
common stock determined during: (i) in the case of any
interest payment, the twenty (20) consecutive trading days
ending on the second trading day immediately preceding the
record date for such interest payment; (ii) in the case of
any make-whole premium payable as part of the redemption price,
the twenty (20) consecutive trading days ending on the
second trading day immediately preceding the redemption date;
and (iii) in the case of any optional repurchase price, the
forty (40) consecutive trading days ending on the second
trading day immediately preceding the optional repurchase date;
(in each case, the averaging period with respect to
such date) using the sum of the daily price fractions (where
daily price fraction means, for each trading day
during the relevant averaging period, 5% in the case of any
interest payment or any make-whole premium or 2.5% in the case
of any optional repurchase, multiplied by the daily VWAP (VWAP
as defined by the indenture), per share of the Companys
common stock for such day), multiplied by (y) 97.5%. The
Company will notify holders at least five (5) business days
prior to the start of the relevant averaging period of the
extent to which the Company will pay any portion of the related
payment using shares of common stock.
Issuance of the
41/16% Debentures
generated net proceeds of $195.0 million, which were used
to repurchase $124.7 million of the 4% Notes and will
be used to redeem a portion of the
91/2% Notes;
pay accrued interest on the 4% Notes and
91/2% Notes;
and pay other debt issuance costs.
117
|
|
Item 9.
|
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
|
None.
|
|
Item 9A.
|
Controls
and Procedures
|
Disclosure
Controls and Procedures
As of November 30, 2009, we conducted an evaluation under
the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. The term disclosure
controls and procedures, as defined in
Rules 13a-15(e)
and
15d-15(e)
under the Securities and Exchange Act of 1934, as amended
(Exchange Act), means controls and other procedures
of a company that are designed to provide reasonable assurance
that information required to be disclosed by the Company in the
reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods
specified in the SECs rules and forms. Disclosure controls
and procedures are also designed to provide reasonable assurance
that such information is accumulated and communicated to the
Companys management, including its principal executive and
principal financial officers, or persons performing similar
functions, as appropriate, to allow timely decisions regarding
required disclosure. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded as of
November 30, 2009 that our disclosure controls and
procedures were effective at the reasonable assurance level.
Managements
Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting,
as defined in
Rules 13a-15(f)
and
15d-15(f)
under the Exchange Act. This rule defines internal control over
financial reporting as a process designed by, or under the
supervision of, the Companys Chief Executive Officer and
Chief Financial Officer, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our
internal control over financial reporting includes those
policies and procedures that:
|
|
|
|
|
Pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and
dispositions of the assets of the Company;
|
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with generally accepted accounting principals in the
United States of America, and that receipts and expenditures of
the Company are being made only in accordance with
authorizations of management and directors of the
Company; and
|
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the
Companys assets that could have a material effect on the
financial statements.
|
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. In
addition, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
With the participation of the Chief Executive Officer and the
Chief Financial Officer, our management conducted an evaluation
of the effectiveness of our internal control over financial
reporting based on the criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission. Based on
this evaluation, our management has concluded that our internal
control over financial reporting was effective as of
November 30, 2009.
The effectiveness of our internal control over financial
reporting as of November 30, 2009 has been audited by
PricewaterhouseCoopers LLP, our independent registered public
accounting firm. Their report appears in Item 8.
Changes
In Internal Control Over Financial Reporting
There was no change in the Companys internal controls over
financial reporting during the fourth quarter of fiscal 2009
that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
118
|
|
Item 9B.
|
Other
Information
|
None.
PART III
|
|
Item 10.
|
Directors,
Executive Officers and Corporate Governance
|
Directors
of the Registrant
Information with respect to directors of the Company who will
stand for election at the 2010 Annual Meeting of Shareholders is
set forth under the heading PROPOSAL 1
ELECTION OF DIRECTORS in our 2010 Proxy Statement for our
2010 Annual Meeting (2010 Proxy Statement), which
will be filed with the Securities and Exchange Commission within
120 days after the close of our fiscal year. Such
information is incorporated herein by reference.
The information in our 2010 Proxy Statement set forth under the
caption Section 16(a) Beneficial Ownership Reporting
Compliance is incorporated herein by reference.
Information regarding shareholder communications with our Board
of Directors may be found under the caption Communications
with Directors in our 2010 Proxy Statement and is
incorporated herein by reference.
Executive
Officers of the Registrant
The following information is given as of January 15, 2010
and, except as otherwise indicated, each individual has held the
same office during the preceding five-year period.
|
|
|
|
|
|
|
|
|
Name
|
|
Title
|
|
Other Business Experience
|
|
Age
|
|
Scott J. Seymour
|
|
Chief Executive Officer and President of the Company (since
January 2010)
|
|
Consultant to Northrop March 2008 January 2010;
Corporate Vice President and President of Integrated Systems
Sector of Northrop 2002 March 2008; Vice
President, Air Combat Systems of Northrop 1998 2001;
Vice President and B-2 Program Manager of Northrop
1996 1998; and Vice President, Palmdale Operations,
of Northrop 1993 1996.
|
|
|
59
|
|
Kathleen E. Redd
|
|
Vice President, Chief Financial Officer (since January 2009),
and Secretary (since February 2009)
|
|
Vice President, Controller and Acting Chief Financial Officer
(September 2008 January 2009); Vice President,
Finance 2006 2008; Assistant Corporate Controller,
2002 2006; Acting Vice President Controller GDX
Automotive, 2003 2004 (concurrent with Assistant
Corporate Controller position during divestiture activities);
Vice President, Finance, for Grass Valley Group,
2001 2002; Vice President, Finance for JOMED, Inc.,
2000 2001; Controller for EndoSonics Corporation,
1996 2000.
|
|
|
48
|
|
Chris W. Conley
|
|
Vice President, Environmental, Health and Safety (since October
1999)
|
|
Director Environmental, Health and Safety, March
1996 October 1999; Environmental Manager,
1994 1996.
|
|
|
51
|
|
Robert E. Shenton
|
|
Vice President and Chief Operating Officer of Aerojet (since
February 2008)
|
|
Vice President Operations and Tactical Programs, May
2000 February 2008.
|
|
|
54
|
|
The Companys executive officers generally hold terms of
office of one year
and/or until
their successors are elected.
119
Code of
Ethics and Corporate Governance Guidelines
The Company has adopted a code of ethics known as the Code
of Business Conduct that applies to the Companys
employees including the principal executive officer, principal
financial officer and principal accounting officer. The Company
makes available on its website at www.GenCorp.com (and in print
to any shareholder or other interested party who requests them)
the Companys current Code of Business Conduct and the
Companys corporate governance guidelines. Amendments to,
or waivers from, a provision of the Code of Business Conduct
that applies to our directors or executive officers will be
posted to our website within five (5) business days
following the date of the amendment or waiver.
Audit
Committee and Audit Committee Financial Expert
Information regarding the Audit Committee and the Audit
Committees Financial Expert is set forth under the heading
Board Committees in our 2010 Proxy Statement and is
incorporated herein by reference.
|
|
Item 11.
|
Executive
Compensation
|
Information concerning executive compensation may be found under
the captions Executive Compensation, Director
Compensation, Organization & Compensation
Committee Report and Compensation Committee
Interlocks and Insider Participation of our 2010 Proxy
Statement. Such information is incorporated herein by reference.
|
|
Item 12.
|
Security
Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
|
The information under the headings Security Ownership of
Certain Beneficial Owners and Security Ownership of
Officers and Directors in our 2010 Proxy Statement is
incorporated herein by reference.
Equity
Compensation Plan Information
The table below sets forth certain information regarding the
following equity compensation plans of the Company, pursuant to
which we have made equity compensation available to eligible
persons, as of November 30, 2009: (i) GenCorp Inc.
1999 Equity and Performance Incentive Plan; and
(ii) GenCorp Inc. 2009 Equity and Performance Incentive
Plan. Both plans have been approved by our shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available for
|
|
|
|
|
|
|
|
|
|
Future Issuance Under
|
|
|
|
Number of Securities to be
|
|
|
Weighted-Average
|
|
|
Equity Compensation
|
|
|
|
Issued Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Securities Reflected in
|
|
Plan Category
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by shareholders
|
|
|
1,290,859
|
|
|
$
|
9.28
|
|
|
|
399,966
|
(1)(2)
|
Equity compensation plans not approved by shareholders(3)
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,290,859
|
|
|
$
|
9.28
|
|
|
|
399,966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of November 30, 2009, there are no more shares available
to be issued under any type of incentive award under the GenCorp
Inc. 1999 Equity and Performance Incentive Plan. The maximum
number of shares available for issuance to participants under
the GenCorp Inc. 2009 Equity and Performance Incentive Plan is
500,000 shares, all of which may be awarded as incentive
stock options. Subject to the total shares available to be
issued under the plan, the following specific limits apply:
(A) no more than 250,000 shares may be issued pursuant
to awards other than stock options or stock appreciation rights;
(B) no more than 50,000 shares may be issued to
nonemployee directors and no nonemployee director may receive
more than 10,000 shares in any fiscal year; (C) no
more than 50,000 shares subject to stock options, including
incentive stock options, may be granted to any participant in
any fiscal year; (D) no more than 50,000 shares
subject to stock appreciation rights may be granted to any
participant in any fiscal year; (E) no more than
50,000 shares may be granted to any participant in any
fiscal year pursuant to an award of restricted stock or
restricted stock units; (F) no more than |
120
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|
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50,000 shares may be granted to any participant in any
fiscal year pursuant to an award of performance shares or
performance units; and (G) no more than 100,000 shares
may be granted to any participant in any fiscal year pursuant to
a stock-based award other than described above. Our 2010 Proxy
Statement contains a proposal to increase the number of shares
reserved for issuance under the GenCorp Inc. 2009 Equity and
Performance Incentive Plan by 1,000,000. If this proposal is
approved by shareholders, the maximum number of shares available
for issuance under the GenCorp Inc. 2009 Equity and Performance
Incentive Plan will be 1,500,000. |
|
(2) |
|
The number of securities in Column (c) is net of the
maximum 83,240 shares that may be issued pursuant to
additional stock options and restricted stock awards that will
be granted in 2012 if the Company attains performance goals
specified in equity awards made during 2009. |
|
(3) |
|
The Company also maintains the GenCorp Inc. and Participating
Subsidiaries Deferred Bonus Plan. This plan allows participating
employees to defer a portion of their compensation for future
distribution. All or a portion of such deferrals made prior to
November 30, 2009 could be allocated to an account based on
the Companys common stock and does permit limited
distributions in the form of Company common shares. However,
distributions in the form of common shares are permitted only at
the election of the Organization & Compensation
Committee of the Board of Directors and, according to the terms
of the plan, individuals serving as officers or directors of the
Company are not permitted to receive distributions in the form
of Company common shares until at least six months after such
individual ceases to be an officer or director of the Company.
The table does not include information about this plan because
no options, warrants or rights are available under this plan and
no specific number of shares is set aside under this plan as
available for future issuance. Based upon the price of Company
common shares on November 30, 2009, the maximum number of
shares that could be distributed to employees not subject to the
restrictions on officers and directors (if permitted by the
Organization & Compensation Committee) would be
30,014. This plan was amended effective November 30, 2009
to prevent the application of future deferrals to the Company
common stock investment program. |
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Item 13.
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Certain
Relationships and Related Transactions, and Director
Independence
|
Information regarding certain transactions and employment
agreements with management is set under the headings
Employment Agreements and Indemnity Agreements and
Potential Payments upon Termination of Employment or
Change in Control in our 2010 Proxy Statement and is
incorporated herein by reference. Information regarding director
independence is set forth under the heading Determination
of Independence of Directors in our 2010 Proxy Statement
and is incorporated herein by reference.
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Item 14.
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Principal
Accountant Fees and Services
|
The information in our 2010 Proxy Statement set forth under the
captions Proposal 4 Ratification of the
Appointment of Independent Registered Public Accounting
Firm, Audit Fees, Audit-Related
Fees, Tax Fees, All Other Fees,
and Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Registered Public
Accounting Firm is incorporated herein by reference.
121
PART IV
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Item 15.
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Exhibits
and Financial Statement Schedules
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(a) The following documents are filed as part of this
report:
(1) FINANCIAL STATEMENTS
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Page
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Number
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55
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56
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57
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58
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59
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60
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(2) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule is filed as part of
this Annual Report on
Form 10-K.
All other financial statement schedules have been omitted
because they are either not applicable, not required by the
instructions, or because the required information is either
incorporated herein by reference or included in the financial
statements or notes thereto included in this report.
122
GENCORP
INC.
SCHEDULE II-VALUATION
AND QUALIFYING ACCOUNTS
(In millions)
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Balance at
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Charged to
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Balance at
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Beginning of
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Costs and
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End of
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Period
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Expenses
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Deductions(1)
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Period
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Allowance for doubtful accounts (current and noncurrent):
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Year ended November 30, 2009
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$
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$
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$
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$
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Year ended November 30, 2008
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0.3
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0.3
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Year ended November 30, 2007
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$
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31.6
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$
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0.2
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$
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31.5
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$
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0.3
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(1) |
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During fiscal 2007, the Company entered into an earnout and
seller note repayment agreement with American Pacific
Corporation (see Note 12 in Notes to Consolidated Financial
Statements). |
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Tax
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Tax
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Valuation
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Valuation
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Allowance
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Allowance
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Charged to
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Credited to
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Balance at
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Income
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Charged
|
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Income
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Balance at
|
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Beginning of
|
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Tax
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to Other
|
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Tax
|
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End of
|
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Period
|
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Provision
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Accounts
|
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Provision
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Period
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Tax Valuation Allowance:
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Year ended November 30, 2009
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$
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197.0
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$
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155.9
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$
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(0.4
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)
|
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$
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(101.0
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)
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$
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251.5
|
|
Year ended November 30, 2008
|
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202.5
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19.9
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(1.0
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)
|
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(24.4
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)
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197.0
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Year ended November 30, 2007
|
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$
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219.8
|
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$
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10.2
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$
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14.1
|
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$
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(41.6
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)
|
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$
|
202.5
|
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(b) EXHIBITS
|
|
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Table
|
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Item No.
|
|
Exhibit Description
|
|
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2
|
.1
|
|
Purchase Agreement, dated May 2, 2003, between Atlantic Research
Corporation and Aerojet-General Corporation was filed as Exhibit
10.1 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the fiscal quarter ended May 31, 2003 (File No. 1-1520) and is
incorporated herein by reference.**
|
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2
|
.2
|
|
First Amendment to Purchase Agreement, dated August 29, 2003,
between Aerojet-General Corporation and Atlantic Research
Corporation was filed as Exhibit 2.2 to GenCorps Form S-4
Registration Statement dated October 6, 2003 (File No.
333-109518) and is incorporated herein by reference.**
|
|
2
|
.3
|
|
Second Amendment to Purchase Agreement, dated September 30,
2003, between Aerojet-General Corporation and Atlantic Research
Corporation was filed as Exhibit 2.2 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2003 (File No. 1-1520) and is incorporated herein by
reference.**
|
|
2
|
.4
|
|
Third Amendment to Purchase Agreement, dated October 16, 2003,
between Aerojet-General Corporation and Atlantic Research
Corporation was filed as Exhibit 2.4 to GenCorps Amendment
No. 1 to Form S-4 Registration Statement dated December 15, 2003
(file no. 333-109518) and is incorporated herein by reference.**
|
|
2
|
.5
|
|
Stock and Asset Purchase Agreement by and between GDX Holdings
LLC and GenCorp Inc. dated July 16, 2004 was filed as Exhibit
2.1 to GenCorp Inc.s Current Report on Form 8-K dated
September 7, 2004 (File No. 1-1520) and incorporated herein by
reference.**
|
|
2
|
.6
|
|
First Amendment to Stock and Asset Purchase Agreement by and
between GenCorp Inc. and GDX Holdings LLC dated as of August 31,
2004 was filed as Exhibit 2.2 to GenCorp Inc.s Current
Report on Form 8-K dated September 7, 2004 (File No. 1-1520) and
incorporated herein by reference.**
|
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2
|
.7
|
|
Second Amendment to Stock and Asset Purchase Agreement by and
between GenCorp Inc. and GDX Holdings LLC dated as of October
14, 2004 was filed as Exhibit 2.3 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2004 (File No. 1-1520), as amended, and incorporated
herein by reference.**
|
123
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|
|
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Table
|
|
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Item No.
|
|
Exhibit Description
|
|
|
2
|
.8
|
|
Asset Purchase Agreement, dated as of July 12, 2005, by and
among Aerojet Fine Chemicals LLC, Aerojet-General Corporation
and American Pacific Corporation was filed as Exhibit 2.1 to
GenCorp Inc.s Current Report on Form 8-K filed on July 18,
2005 (File No. 1-1520), and is incorporated herein by
reference.**
|
|
2
|
.9
|
|
First Amendment to Asset Purchase Agreement by and among
American Pacific Corporation, Aerojet Fine Chemicals LLC and
Aerojet-General Corporation dated as of November 30, 2005 was
filed as Exhibit 2.1 to GenCorp Inc.s Current Report on
Form 8-K filed on December 1, 2005 (File No. 1-1520) and
incorporated herein by reference.**
|
|
3
|
.1
|
|
Amended Articles of Incorporation of GenCorp filed with the
Secretary of State of Ohio on March 28, 2007 was filed as
Exhibit 3.1 to GenCorp Inc.s Annual Report on Form 10-K
for the fiscal year ended November 30, 2007 (File No. 1-1520)
and incorporated herein by reference.
|
|
3
|
.2
|
|
The Amended Code of Regulations of GenCorp, as amended on March
28, 2007 was filed as Exhibit 3.2 to GenCorp Inc.s Annual
Report on Form 10-K for the fiscal year ended November 30, 2007
(File No. 1-1520) and incorporated herein by reference.
|
|
4
|
.1
|
|
Indenture, dated as of August 11, 2003, between GenCorp Inc.,
the Guarantors named therein and The Bank of New York as trustee
relating to GenCorps
91/2% Senior
Subordinated Notes was filed as Exhibit 4.1 to GenCorps
Form S-4 Registration Statement dated October 6, 2003 (File No.
333-109518) and is incorporated herein by reference.
|
|
4
|
.2
|
|
Form of
91/2% Senior
Subordinated Notes was filed as Exhibit 4.4 to GenCorps
Form S-4 Registration Statement dated October 6, 2003 (File No.
333-109518) and is incorporated herein by reference.
|
|
4
|
.3
|
|
First Supplemental Indenture dated as of October 29, 2004 to the
Indenture between GenCorp Inc. and The Bank of New York, as
trustee relating to GenCorps
91/2% Senior
Subordinated Notes due 2013 was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K dated November 1, 2004
(File No. 1-1520) and incorporated herein by reference.
|
|
4
|
.4
|
|
Second Supplemental Indenture dated as of June 27, 2006 to
Indenture dated as of August 11, 2003, as amended, between
GenCorp Inc. as Issuer, the Guarantors party thereto as
Guarantors, and The Bank of New York Trust Company, N.A., as
trustee, relating to GenCorps
91/2% Senior
Subordinated Notes due 2013, was filed as Exhibit 10.1 to
GenCorp Inc.s Current Report on Form 8-K filed on June 28,
2006 (File No. 1-1520), and is incorporated herein by reference.
|
|
4
|
.5
|
|
Indenture dated January 16, 2004 between GenCorp and The Bank of
New York, as trustee, relating to GenCorps 4% Contingent
Convertible Subordinated Notes due 2024 was filed as Exhibit
4.11 to GenCorp Inc.s Annual Report on Form 10-K for the
fiscal year ended November 30, 2003 (File No. 1-1520) and is
incorporated herein by reference.
|
|
4
|
.6
|
|
Registration Rights Agreement dated January 16, 2004 by and
among GenCorp, Deutsche Bank Securities Inc., Wachovia Capital
Markets, LLC, Scotia Capital (USA) Inc., BNY Capital Markets,
Inc., NatCity Investments, Inc. and Wells Fargo Securities, LLC
was filed as Exhibit 4.12 to GenCorp Inc.s Annual Report
on Form 10-K for the fiscal year ended November 30, 2003 (File
No. 1-1520) and is incorporated herein by reference.
|
|
4
|
.7
|
|
Form of 4% Contingent Convertible Subordinated Notes was filed
as Exhibit 4.13 to GenCorp Inc.s Annual Report on Form
10-K for the fiscal year ended November 30, 2003 (File No.
1-1520) and is incorporated herein by reference.
|
|
4
|
.8
|
|
Indenture, dated as of November 23, 2004, between GenCorp Inc.
and The Bank of New York Trust Company, N.A., as trustee
relating to GenCorp Inc.s
21/4% Convertible
Subordinated Debentures due 2024 was filed as Exhibit 4.01 to
GenCorp Inc.s Current Report on Form 8-K dated November
23, 2004 (File No. 1-1520), as amended, and incorporated herein
by reference.
|
|
4
|
.9
|
|
Registration Rights Agreement, dated as of November 23, 2004, by
and between GenCorp Inc. and Wachovia Capital Markets, LLC, as
representative for the several initial purchasers of the
21/4% Convertible
Subordinated Debentures due 2024 was filed as Exhibit 4.14 to
GenCorp Inc.s Form S-3 Registration Statement dated
January 11, 2005 (File No. 333-121948) and incorporated herein
by reference.
|
124
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|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
4
|
.10
|
|
Form of
21/4% Convertible
Subordinated Debenture was filed as Exhibit 4.02 to GenCorp
Inc.s Current Report on Form 8-K dated November 23, 2004
(File No. 1-1520), as amended, and incorporated herein by
reference.
|
|
4
|
.11
|
|
GenCorp Retirement Savings Plan was filed as Exhibit 4.1 to
GenCorp Inc.s Registration Statement on Form S-8 filed on
June 30, 2008 (File No. 333-152032) and incorporated herein by
reference.
|
|
4
|
.12
|
|
GenCorp Inc. 2009 Equity and Performance Incentive Plan was
filed as Exhibit 4.1 to GenCorp Inc.s Form S-8
Registration Statement dated April 28, 2009 (File No.
333-158870), and is incorporated herein by reference.
|
|
4
|
.13
|
|
Indenture, dated as of December 21, 2009, between GenCorp Inc.
and The Bank of New York Mellon Trust Company, N.A., as
trustee., relating to GenCorps 4.0625% Convertible
Subordinated Debentures due 2039 was filed as Exhibit 4.1 to
GenCorp Inc.s Current Report on Form 8-K filed on December
21, 2009 (File 1-1520) and is incorporated herein by reference.
|
|
4
|
.14.
|
|
Form of 4.0625% Convertible Subordinated Debenture due 2039
was filed as Exhibit 4.2 to GenCorp Inc.s Current Report
on Form 8-K dated December 21, 2009 (File No. 1-1520), as
amended, and incorporated herein by reference.
|
|
4
|
.15
|
|
Third Supplemental Indenture dated as of November 24, 2009, by
and among GenCorp Inc., Easton Development Company, LLC, and The
Bank of New York Mellon Trust Company, N.A. (formerly known as
The Bank of New York Trust Company, N.A. and successor to The
Bank of New York), to the Indenture dated as of August 11, 2003,
as amended, between GenCorp Inc. as Issuer, the Guarantors party
thereto as Guarantors, and The Bank of New York Mellon Trust
Company, N.A., as Trustee was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K filed on November 30,
2009 (File No. 1-1520), and is incorporated herein by reference.
|
|
10
|
.1
|
|
Distribution Agreement dated September 30, 1999 between GenCorp
Inc. and OMNOVA Solutions Inc. (OMNOVA) was filed as Exhibit B
to GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 19, 1999 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.2
|
|
Amended and Restated Environmental Agreement by and between
Aerojet and Northrop Grumman, dated October 19, 2001 was filed
as Exhibit 2.4 to the Companys Current Report on Form 8-K
dated November 5, 2001 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.3
|
|
GenCorp 1996 Supplemental Retirement Plan for Management
Employees effective March 1, 1996 was filed as Exhibit B to
GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 1996 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.4
|
|
2009 Benefit Restoration Plan for the GenCorp Inc. Pension Plan
was filed as Exhibit 10.1 to GenCorp Inc.s Current Report
on Form 8-K filed on January 7, 2009 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.5
|
|
2009 Benefit Restoration Plan for the GenCorp Inc. 401(k) Plan
was filed as Exhibit 10.2 to GenCorp Inc.s Current Report
on Form 8-K filed on January 7, 2009 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.6
|
|
Deferred Bonus Plan of GenCorp Inc. and Participating
Subsidiaries was filed as Exhibit 10.6 to GenCorp Inc.s
Annual Report on Form 10-K for the fiscal year ended November
30, 2008 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.7
|
|
GenCorp Inc. Deferred Compensation Plan for Nonemployee
Directors, as amended was filed as Exhibit 10.7 to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 2008 (File No. 1-1520), and is incorporated herein
by reference.
|
|
10
|
.8
|
|
GenCorp Inc. 1993 Stock Option Plan effective March 31, 1993 was
filed as Exhibit 4.1 to Form S-8 Registration Statement No.
33-61928 dated April 30, 1993 and is incorporated herein by
reference.
|
|
10
|
.9
|
|
GenCorp Inc. 1997 Stock Option Plan effective March 26, 1997 was
filed as Exhibit 4.1 to Form S-8 Registration Statement No.
333-35621 dated September 15, 1997 and is incorporated herein by
reference.
|
|
10
|
.10
|
|
GenCorp Inc. 1999 Equity and Performance Incentive Plan as
amended was filed as Exhibit 10.11 to GenCorp Inc.s Annual
Report on Form 10-K for the fiscal year ended November 30, 2007
(File No. 1-1520), and is incorporated herein by reference.
|
125
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
10
|
.11
|
|
GenCorp Inc. Executive Incentive Compensation Program, amended
September 8, 1995 to be effective for the 1996 fiscal year was
filed as Exhibit E to GenCorp Inc.s Annual Report on Form
10-K for the fiscal year ended November 30, 1997 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.12
|
|
2001 Supplemental Retirement Plan For GenCorp Executives
effective December 1, 2001, incorporating GenCorp Inc.s
Voluntary Enhanced Retirement Program was filed as Exhibit 10.29
to GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 2001 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.13
|
|
Form of Restricted Stock Agreement between the Company and
Nonemployee Directors providing for payment of part of
Directors compensation for service on the Board of
Directors in Company stock was filed as Exhibit 10.1 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1998 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.14
|
|
Form of Restricted Stock Agreement between the Company and
Nonemployee Directors providing for payment of part of
Directors compensation for service on the Board of
Directors in Company stock was filed as Exhibit 10.1 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1999 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.15
|
|
Form of Restricted Stock Agreement between the Company and
Directors or Employees for grants of time-based vesting of
restricted stock under the GenCorp Inc. 1999 Equity and
Performance Incentive Plan was filed as Exhibit 10.26 to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 2004 (File No. 1-1520), and is incorporated herein
by reference.
|
|
10
|
.16
|
|
Form of Stock Appreciation Rights Agreement between the Company
and Employees for grants of stock appreciation rights under the
GenCorp Inc. 1999 Equity and Performance Incentive Plan was
filed as Exhibit 10.27 to GenCorp Inc.s Annual Report on
Form 10-K for the fiscal year ended November 30, 2004 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.17
|
|
Form of Stock Appreciation Rights Agreement between the Company
and Directors for grants of stock appreciation rights under the
GenCorp Inc. 1999 Equity and Performance Incentive Plan was
filed as Exhibit 10.28 to GenCorp Inc.s Annual Report on
Form 10-K for the fiscal year ended November 30, 2004 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.18
|
|
Form of Restricted Stock Agreement between the Company and
Employees for grants of performance-based vesting of restricted
stock under the GenCorp Inc. 1999 Equity and Performance
Incentive Plan was filed as Exhibit 10.29 to GenCorp Inc.s
Annual Report on Form 10-K for the fiscal year ended November
30, 2004 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.19
|
|
Form of Director Nonqualified Stock Option Agreement between the
Company and Nonemployee Directors providing for annual grant of
nonqualified stock options prior to February 28, 2002, valued at
$30,000 was filed as Exhibit 10.1 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the fiscal quarter ended May
31, 2002 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.20
|
|
Form of Director Nonqualified Stock Option Agreement between the
Company and Nonemployee Directors providing for an annual grant
of nonqualified stock options on or after February 28, 2002,
valued at $30,000 in lieu of further participation in Retirement
Plan for Nonemployee Directors was filed as Exhibit 10.2 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 2002 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.21*
|
|
Form of Director and Officer Indemnification Agreement.
|
|
10
|
.22
|
|
Form of Director Indemnification Agreement was filed as Exhibit
M to GenCorp Inc.s Annual Report on Form 10-K for the
fiscal year ended November 30, 1999 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.23
|
|
Form of Officer Indemnification Agreement was filed as Exhibit N
to GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 1999 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.24
|
|
Form of Severance Agreement granted to certain executive
officers of the Company was filed as Exhibit D to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 1997 (File No. 1-1520), and is incorporated herein
by reference.
|
126
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
10
|
.25
|
|
Amended and Restated Shareholder Agreement by and between
GenCorp Inc. and Steel Partners II L.P. dated February 16,
2007 was filed as Exhibit 10.1 to GenCorp Inc.s Current
Report on Form 8-K filed on February 21, 2007 (File No. 1-1520)
and is incorporated herein by reference.
|
|
10
|
.26
|
|
Employment Letter Agreement dated April 12, 2005 by and between
GenCorp Inc. and Philip W. Cyburt was filed as Exhibit 10.1 to
GenCorp Inc.s Current Report on Form 8-K filed on April
14, 2005 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.27
|
|
American Pacific Corporation Subordinated Promissory Note, dated
November 30, 2005, in the principal amount of $25,500,000 was
filed as Exhibit 10.1 to GenCorp Inc.s Current Report on
Form 8-K dated November 30, 2005 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.28
|
|
Employment Offer Letter dated January 11, 2006 by and between
GenCorp Inc. and R. Leon Blackburn was filed as Exhibit 10.32 to
GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 2006 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.29
|
|
Form of Restricted Stock Agreement Version 2 between the Company
and Employees for grants of performance-based vesting of
restricted stock under the GenCorp Inc. 1999 Equity and
Performance Incentive Plan was filed as Exhibit 10.33 to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 2005 (File No. 1-1520) and is incorporated herein
by reference.
|
|
10
|
.30
|
|
Consulting Agreement dated February 28, 2006 by and between
Joseph Carleone and GenCorp Inc. was filed as Exhibit 10.1 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2006 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.31
|
|
Form of Director and Officer Indemnification Agreement was filed
as Exhibit 10.1 to GenCorp, Inc.s Current Report on Form
8-K filed on May 23, 2006 (File No. 1-1520) and is incorporated
herein by reference.
|
|
10
|
.32
|
|
Form of Severance Agreement for executive officers of the
Company was filed as Exhibit 10.1 to GenCorp Inc.s Current
Report on Form 8-K filed on August 11, 2006 (File No. 1-1520),
and is incorporated herein by reference.
|
|
10
|
.33
|
|
Agreement and Release by and between GenCorp Inc. and William A.
Purdy Jr. dated January 29, 2007 was filed as Exhibit 10.1 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2007 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.34
|
|
Credit Agreement, dated as of June 21, 2007, among GenCorp, as
the Borrower, each of those Material Domestic Subsidiaries of
the Borrower identified as a Guarantor on the
signature pages thereto and such other Material Domestic
Subsidiaries of the Borrower as may from time to time become a
party thereto, the several banks and other financial
institutions from time to time parties to such Credit Agreement,
and Wachovia Bank, National Association, a national banking
association, as Administrative Agent, was filed as Exhibit 10.1
to GenCorp Inc.s Quarterly Report on Form 10-Q for the
second quarter ended May 30, 2007 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.35
|
|
Second Amended and Restated Shareholder Agreement dated as of
March 5, 2008, by and between GenCorp Inc. and Steel
Partners II L.P. was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K filed on March 10, 2008
(File No. 1-1520), and is incorporated herein by reference.
|
|
10
|
.36
|
|
Letter Agreement dated as of March 5, 2008 by and between
GenCorp Inc. and Terry L. Hall was filed as Exhibit 10.1 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2008 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.37
|
|
Letter Agreement dated as of March 5, 2008 by and between
GenCorp Inc. and J. Scott Neish was filed as Exhibit 10.2 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2008 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.38
|
|
Retention Agreement dated April 15, 2009 between Chris W. Conley
and GenCorp Inc. was filed as Exhibit 10.1 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the second quarter
ended May 31, 2009 (File No. 1-1520), and is incorporated herein
by reference.
|
127
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
10
|
.39
|
|
Joinder Agreement dated as of November 24, 2009, by and among
GenCorp Inc., Easton Development Company, LLC, and Wachovia
Bank, National Association, a national banking association, as
Administrative Agent in its capacity as administrative agent
under the Amended Credit Agreement dated as of June 27, 2006,
among GenCorp Inc., as the Borrower, each of those Material
Domestic Subsidiaries of the Borrower identified as a
Guarantor on the signature pages thereto and
Wachovia Bank, National Association, a national banking
association, as Administrative Agent was filed as
Exhibit 10.2 to GenCorp Inc.s Current Report on Form
8-K filed November 30, 2009 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.40
|
|
First Amendment and Consent to Credit Agreement, dated as of May
1, 2009, by and among, GenCorp Inc., as borrower, the
subsidiaries of the Borrower from time to time party thereto, as
guarantors, the lenders from time to time party thereto and
Wachovia Bank, National Association, as administrative agent for
the lenders, was filed as Exhibit 10.1 to GenCorp Inc.s
Current Report on Form 8-K dated May 6, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.41
|
|
Employment Agreement dated July 2, 2009 between John Joy and
GenCorp Inc. was filed as Exhibit 10.1 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the third quarter ended August
31, 2009 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.42
|
|
Amendment to the GenCorp Inc. 1999 Equity and Performance
Incentive Plan, effective October 6, 2009 was filed as Exhibit
10.2 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the third quarter ended August 31, 2009 (File No. 1-1520), and
is incorporated herein by reference.
|
|
10
|
.43
|
|
Amendment to the GenCorp Inc. 2009 Equity and Performance
Incentive Plan, effective October 6, 2009 was filed as Exhibit
10.3 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the third quarter ended August 31, 2009 (File No. 1-1520), and
is incorporated herein by reference.
|
|
10
|
.44
|
|
Director Stock Appreciation Rights Agreement between GenCorp
Inc. and Directors for grants of stock appreciation rights under
the GenCorp Inc. 2009 Equity and Performance Incentive Plan was
filed as Exhibit 10.4 to GenCorp Inc.s Quarterly Report on
Form 10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.45
|
|
Amendment to the Benefits Restoration Plan for Salaried
Employees of GenCorp Inc. and Certain Subsidiary Companies,
effective October 6, 2009 was filed as Exhibit 10.5 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the third quarter
ended August 31, 2009 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.46
|
|
Amendment to the 2009 Benefit Restoration Plan for the GenCorp
Inc. 401(k) Plan, effective October 6, 2009 was filed as Exhibit
10.6 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the third quarter ended August 31, 2009 (File No. 1-1520), and
is incorporated herein by reference.
|
|
10
|
.47
|
|
Amendment to the 2009 Benefits Restoration Plan for the GenCorp
Inc. Pension Plan, effective October 6, 2009 was filed as
Exhibit 10.7 to GenCorp Inc.s Quarterly Report on Form
10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.48
|
|
Amendment to the Deferred Bonus Plan of GenCorp Inc. and
Participating Subsidiaries, effective October 6, 2009 was filed
as Exhibit 10.8 to GenCorp Inc.s Quarterly Report on Form
10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.49
|
|
Amendment to the GenCorp Inc. Deferred Compensation Plan for
Nonemployee Directors, as amended, effective October 6, 2009 was
filed as Exhibit 10.9 to GenCorp Inc.s Quarterly Report on
Form 10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.50
|
|
Amendment to the GenCorp Inc. 1996 Supplemental Retirement Plan
for Management Employees, effective October 6, 2009 was filed as
Exhibit 10.10 to GenCorp Inc.s Quarterly Report on Form
10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.51
|
|
Employment Agreement dated January 6, 2010 between Scott Seymour
and GenCorp Inc. was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K dated May 6, 2009 (File
No. 1-1520), and is incorporated herein by reference.
|
|
10
|
.52*
|
|
Settlement Agreement by and between Aerojet and United States of
America, dated November 29, 1992.
|
|
10
|
.53*
|
|
Modification No. 1 to the November 29, 1992 Settlement Agreement
by and between Aerojet and United States of America, dated
October 27, 1998.
|
128
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
21
|
.1*
|
|
Subsidiaries of the Company.
|
|
23
|
.1*
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
24
|
.1*
|
|
Power of Attorney.
|
|
31
|
.1*
|
|
Certification of Principal Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of Principal Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1*
|
|
Certification of Principal Executive Officer and Principal
Accounting Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934 as amended, and 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
* |
|
Filed herewith. All other exhibits have been previously filed. |
|
** |
|
Schedules and Exhibits have been omitted, but will be furnished
to the SEC upon request. |
|
|
|
Management contract or compensatory plan or arrangement. |
129
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
February 3, 2010
GENCORP INC.
Scott J. Seymour
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
By:
|
|
/s/ SCOTT
J. SEYMOUR
Scott
J. Seymour
|
|
President and Chief Executive Officer (Principal Executive
Officer)
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ KATHLEEN
E. REDD
Kathleen
E. Redd
|
|
Vice President, Chief Financial Officer and Secretary (Principal
Financial Officer and Principal Accounting Officer)
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ *
Thomas
A. Corcoran
|
|
Director
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ *
James
R. Henderson
|
|
Director
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ *
Warren
G. Lichtenstein
|
|
Director
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ *
David
A. Lorber
|
|
Director
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ *
James
H. Perry
|
|
Director
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ *
Martin
Turchin
|
|
Director
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ *
Robert
C. Woods
|
|
Director
|
|
February 3, 2010
|
|
|
|
|
|
|
|
By:
|
|
/s/ KATHLEEN
E. REDD
Kathleen
E. Redd
|
|
Attorney-in-Fact
pursuant to Powers
of Attorney filed herewith
|
|
February 3, 2010
|
130
Exhibit Index
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
2
|
.1
|
|
Purchase Agreement, dated May 2, 2003, between Atlantic Research
Corporation and Aerojet-General Corporation was filed as Exhibit
10.1 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the fiscal quarter ended May 31, 2003 (File No. 1-1520) and is
incorporated herein by reference.**
|
|
2
|
.2
|
|
First Amendment to Purchase Agreement, dated August 29, 2003,
between Aerojet-General Corporation and Atlantic Research
Corporation was filed as Exhibit 2.2 to GenCorps Form S-4
Registration Statement dated October 6, 2003 (File No.
333-109518) and is incorporated herein by reference.**
|
|
2
|
.3
|
|
Second Amendment to Purchase Agreement, dated September 30,
2003, between Aerojet-General Corporation and Atlantic Research
Corporation was filed as Exhibit 2.2 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2003 (File No. 1-1520) and is incorporated herein by
reference.**
|
|
2
|
.4
|
|
Third Amendment to Purchase Agreement, dated October 16, 2003,
between Aerojet-General Corporation and Atlantic Research
Corporation was filed as Exhibit 2.4 to GenCorps Amendment
No. 1 to Form S-4 Registration Statement dated December 15, 2003
(file no. 333-109518) and is incorporated herein by reference.**
|
|
2
|
.5
|
|
Stock and Asset Purchase Agreement by and between GDX Holdings
LLC and GenCorp Inc. dated July 16, 2004 was filed as
Exhibit 2.1 to GenCorp Inc.s Current Report on Form 8-K
dated September 7, 2004 (File No. 1-1520) and incorporated
herein by reference.**
|
|
2
|
.6
|
|
First Amendment to Stock and Asset Purchase Agreement by and
between GenCorp Inc. and GDX Holdings LLC dated as of August 31,
2004 was filed as Exhibit 2.2 to GenCorp Inc.s Current
Report on Form 8-K dated September 7, 2004 (File No. 1-1520) and
incorporated herein by reference.**
|
|
2
|
.7
|
|
Second Amendment to Stock and Asset Purchase Agreement by and
between GenCorp Inc. and GDX Holdings LLC dated as of October
14, 2004 was filed as Exhibit 2.3 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the fiscal quarter ended
August 31, 2004 (File No. 1-1520), as amended, and incorporated
herein by reference.**
|
|
2
|
.8
|
|
Asset Purchase Agreement, dated as of July 12, 2005, by and
among Aerojet Fine Chemicals LLC, Aerojet-General Corporation
and American Pacific Corporation was filed as Exhibit 2.1 to
GenCorp Inc.s Current Report on Form 8-K filed on July 18,
2005 (File No. 1-1520), and is incorporated herein by
reference.**
|
|
2
|
.9
|
|
First Amendment to Asset Purchase Agreement by and among
American Pacific Corporation, Aerojet Fine Chemicals LLC and
Aerojet-General Corporation dated as of November 30, 2005 was
filed as Exhibit 2.1 to GenCorp Inc.s Current Report on
Form 8-K filed on December 1, 2005 (File No. 1-1520) and
incorporated herein by reference.**
|
|
3
|
.1
|
|
Amended Articles of Incorporation of GenCorp filed with the
Secretary of State of Ohio on March 28, 2007 was filed as
Exhibit 3.1 to GenCorp Inc.s Annual Report on Form 10-K
for the fiscal year ended November 30, 2007 (File No. 1-1520)
and incorporated herein by reference.
|
|
3
|
.2
|
|
The Amended Code of Regulations of GenCorp, as amended on March
28, 2007 was filed as Exhibit 3.2 to GenCorp Inc.s Annual
Report on Form 10-K for the fiscal year ended November 30, 2007
(File No. 1-1520) and incorporated herein by reference.
|
|
4
|
.1
|
|
Indenture, dated as of August 11, 2003, between GenCorp Inc.,
the Guarantors named therein and The Bank of New York as trustee
relating to GenCorps
91/2% Senior
Subordinated Notes was filed as Exhibit 4.1 to
GenCorps Form S-4 Registration Statement dated October 6,
2003 (File No. 333-109518) and is incorporated herein by
reference.
|
|
4
|
.2
|
|
Form of
91/2% Senior
Subordinated Notes was filed as Exhibit 4.4 to GenCorps
Form S-4 Registration Statement dated October 6, 2003 (File No.
333-109518) and is incorporated herein by reference.
|
|
4
|
.3
|
|
First Supplemental Indenture dated as of October 29, 2004 to the
Indenture between GenCorp Inc. and The Bank of New York, as
trustee relating to GenCorps
91/2% Senior
Subordinated Notes due 2013 was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K dated November 1, 2004
(File No. 1-1520) and incorporated herein by reference.
|
131
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
4
|
.4
|
|
Second Supplemental Indenture dated as of June 27, 2006 to
Indenture dated as of August 11, 2003, as amended, between
GenCorp Inc. as Issuer, the Guarantors party thereto as
Guarantors, and The Bank of New York Trust Company, N.A., as
trustee, relating to GenCorps
91/2% Senior
Subordinated Notes due 2013, was filed as Exhibit 10.1 to
GenCorp Inc.s Current Report on Form 8-K filed on June 28,
2006 (File No. 1-1520), and is incorporated herein by reference.
|
|
4
|
.5
|
|
Indenture dated January 16, 2004 between GenCorp and The Bank of
New York, as trustee, relating to GenCorps 4% Contingent
Convertible Subordinated Notes due 2024 was filed as Exhibit
4.11 to GenCorp Inc.s Annual Report on Form 10-K for the
fiscal year ended November 30, 2003 (File No. 1-1520) and is
incorporated herein by reference.
|
|
4
|
.6
|
|
Registration Rights Agreement dated January 16, 2004 by and
among GenCorp, Deutsche Bank Securities Inc., Wachovia Capital
Markets, LLC, Scotia Capital (USA) Inc., BNY Capital Markets,
Inc., NatCity Investments, Inc. and Wells Fargo Securities, LLC
was filed as Exhibit 4.12 to GenCorp Inc.s Annual Report
on Form 10-K for the fiscal year ended November 30, 2003 (File
No. 1-1520) and is incorporated herein by reference.
|
|
4
|
.7
|
|
Form of 4% Contingent Convertible Subordinated Notes was filed
as Exhibit 4.13 to GenCorp Inc.s Annual Report on Form
10-K for the fiscal year ended November 30, 2003 (File No.
1-1520) and is incorporated herein by reference.
|
|
4
|
.8
|
|
Indenture, dated as of November 23, 2004, between GenCorp Inc.
and The Bank of New York Trust Company, N.A., as trustee
relating to GenCorp Inc.s
21/4% Convertible
Subordinated Debentures due 2024 was filed as Exhibit 4.01 to
GenCorp Inc.s Current Report on Form 8-K dated November
23, 2004 (File No. 1-1520), as amended, and incorporated herein
by reference.
|
|
4
|
.9
|
|
Registration Rights Agreement, dated as of November 23, 2004, by
and between GenCorp Inc. and Wachovia Capital Markets, LLC, as
representative for the several initial purchasers of the
21/4% Convertible
Subordinated Debentures due 2024 was filed as Exhibit 4.14 to
GenCorp Inc.s Form S-3 Registration Statement dated
January 11, 2005 (File No. 333-121948) and incorporated herein
by reference.
|
|
4
|
.10
|
|
Form of
21/4% Convertible
Subordinated Debenture was filed as Exhibit 4.02 to GenCorp
Inc.s Current Report on Form 8-K dated November 23, 2004
(File No. 1-1520), as amended, and incorporated herein by
reference.
|
|
4
|
.11
|
|
GenCorp Retirement Savings Plan was filed as Exhibit 4.1 to
GenCorp Inc.s Registration Statement on Form S-8 filed on
June 30, 2008 (File No. 333-152032) and incorporated herein by
reference.
|
|
4
|
.12
|
|
GenCorp Inc. 2009 Equity and Performance Incentive Plan was
filed as Exhibit 4.1 to GenCorp Inc.s Form S-8
Registration Statement dated April 28, 2009 (File No.
333-158870), and is incorporated herein by reference.
|
|
4
|
.13
|
|
Indenture, dated as of December 21, 2009, between GenCorp Inc.
and The Bank of New York Mellon Trust Company, N.A., as
trustee., relating to GenCorps 4.0625% Convertible
Subordinated Debentures due 2039 was filed as Exhibit 4.1 to
GenCorp Inc.s Current Report on Form 8-K filed on December
21, 2009 (File 1-1520) and is incorporated herein by reference.
|
|
4
|
.14
|
|
Form of 4.0625% Convertible Subordinated Debenture due 2039
was filed as Exhibit 4.2 to GenCorp Inc.s Current Report
on Form 8-K dated December 21, 2009 (File No. 1-1520), as
amended, and incorporated herein by reference.
|
|
4
|
.15
|
|
Third Supplemental Indenture dated as of November 24, 2009, by
and among GenCorp Inc., Easton Development Company, LLC, and The
Bank of New York Mellon Trust Company, N.A. (formerly known as
The Bank of New York Trust Company, N.A. and successor to The
Bank of New York), to the Indenture dated as of August 11, 2003,
as amended, between GenCorp Inc. as Issuer, the Guarantors party
thereto as Guarantors, and The Bank of New York Mellon Trust
Company, N.A., as Trustee was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K filed on November 30,
2009 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.1
|
|
Distribution Agreement dated September 30, 1999 between GenCorp
Inc. and OMNOVA Solutions Inc. (OMNOVA) was filed as Exhibit B
to GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 19, 1999 (File No. 1-1520), and is
incorporated herein by reference.
|
132
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
10
|
.2
|
|
Amended and Restated Environmental Agreement by and between
Aerojet and Northrop Grumman, dated October 19, 2001 was filed
as Exhibit 2.4 to the Companys Current Report on Form 8-K
dated November 5, 2001 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.3
|
|
GenCorp 1996 Supplemental Retirement Plan for Management
Employees effective March 1, 1996 was filed as Exhibit B to
GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 1996 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.4
|
|
2009 Benefit Restoration Plan for the GenCorp Inc. Pension Plan
was filed as Exhibit 10.1 to GenCorp Inc.s Current Report
on Form 8-K filed on January 7, 2009 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.5
|
|
2009 Benefit Restoration Plan for the GenCorp Inc. 401(k) Plan
was filed as Exhibit 10.2 to GenCorp Inc.s Current Report
on Form 8-K filed on January 7, 2009 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.6
|
|
Deferred Bonus Plan of GenCorp Inc. and Participating
Subsidiaries was filed as Exhibit 10.6 to GenCorp Inc.s
Annual Report on Form 10-K for the fiscal year ended November
30, 2008 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.7
|
|
GenCorp Inc. Deferred Compensation Plan for Nonemployee
Directors, as amended was filed as Exhibit 10.7 to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 2008 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.8
|
|
GenCorp Inc. 1993 Stock Option Plan effective March 31, 1993 was
filed as Exhibit 4.1 to Form S-8 Registration Statement No.
33-61928 dated April 30, 1993 and is incorporated herein by
reference.
|
|
10
|
.9
|
|
GenCorp Inc. 1997 Stock Option Plan effective March 26, 1997 was
filed as Exhibit 4.1 to Form S-8 Registration Statement No.
333-35621 dated September 15, 1997 and is incorporated herein by
reference.
|
|
10
|
.10
|
|
GenCorp Inc. 1999 Equity and Performance Incentive Plan as
amended was filed as Exhibit 10.11 to GenCorp Inc.s Annual
Report on Form 10-K for the fiscal year ended November 30, 2007
(File No. 1-1520), and is incorporated herein by reference.
|
|
10
|
.11
|
|
GenCorp Inc. Executive Incentive Compensation Program, amended
September 8, 1995 to be effective for the 1996 fiscal year was
filed as Exhibit E to GenCorp Inc.s Annual Report on Form
10-K for the fiscal year ended November 30, 1997 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.12
|
|
2001 Supplemental Retirement Plan For GenCorp Executives
effective December 1, 2001, incorporating GenCorp Inc.s
Voluntary Enhanced Retirement Program was filed as Exhibit 10.29
to GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 2001 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.13
|
|
Form of Restricted Stock Agreement between the Company and
Nonemployee Directors providing for payment of part of
Directors compensation for service on the Board of
Directors in Company stock was filed as Exhibit 10.1 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1998 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.14
|
|
Form of Restricted Stock Agreement between the Company and
Nonemployee Directors providing for payment of part of
Directors compensation for service on the Board of
Directors in Company stock was filed as Exhibit 10.1 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the fiscal quarter
ended February 28, 1999 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.15
|
|
Form of Restricted Stock Agreement between the Company and
Directors or Employees for grants of time-based vesting of
restricted stock under the GenCorp Inc. 1999 Equity and
Performance Incentive Plan was filed as Exhibit 10.26 to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 2004 (File No. 1-1520), and is incorporated herein
by reference.
|
|
10
|
.16
|
|
Form of Stock Appreciation Rights Agreement between the Company
and Employees for grants of stock appreciation rights under the
GenCorp Inc. 1999 Equity and Performance Incentive Plan was
filed as Exhibit 10.27 to GenCorp Inc.s Annual Report on
Form 10-K for the fiscal year ended November 30, 2004 (File No.
1-1520), and is incorporated herein by reference.
|
133
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
10
|
.17
|
|
Form of Stock Appreciation Rights Agreement between the Company
and Directors for grants of stock appreciation rights under the
GenCorp Inc. 1999 Equity and Performance Incentive Plan was
filed as Exhibit 10.28 to GenCorp Inc.s Annual Report on
Form 10-K for the fiscal year ended November 30, 2004 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.18
|
|
Form of Restricted Stock Agreement between the Company and
Employees for grants of performance-based vesting of restricted
stock under the GenCorp Inc. 1999 Equity and Performance
Incentive Plan was filed as Exhibit 10.29 to GenCorp Inc.s
Annual Report on Form 10-K for the fiscal year ended November
30, 2004 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.19
|
|
Form of Director Nonqualified Stock Option Agreement between the
Company and Nonemployee Directors providing for annual grant of
nonqualified stock options prior to February 28, 2002, valued at
$30,000 was filed as Exhibit 10.1 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the fiscal quarter ended May
31, 2002 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.20
|
|
Form of Director Nonqualified Stock Option Agreement between the
Company and Nonemployee Directors providing for an annual grant
of nonqualified stock options on or after February 28, 2002,
valued at $30,000 in lieu of further participation in Retirement
Plan for Nonemployee Directors was filed as Exhibit 10.2 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the fiscal
quarter ended May 31, 2002 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.21*
|
|
Form of Director and Officer Indemnification Agreement.
|
|
10
|
.22
|
|
Form of Director Indemnification Agreement was filed as Exhibit
M to GenCorp Inc.s Annual Report on Form 10-K for the
fiscal year ended November 30, 1999 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.23
|
|
Form of Officer Indemnification Agreement was filed as Exhibit N
to GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 1999 (File No. 1-1520), and is
incorporated herein by reference.
|
|
10
|
.24
|
|
Form of Severance Agreement granted to certain executive
officers of the Company was filed as Exhibit D to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 1997 (File No. 1-1520), and is incorporated herein
by reference.
|
|
10
|
.25
|
|
Amended and Restated Shareholder Agreement by and between
GenCorp Inc. and Steel Partners II L.P. dated February 16,
2007 was filed as Exhibit 10.1 to GenCorp Inc.s Current
Report on Form 8-K filed on February 21, 2007 (File No. 1-1520)
and is incorporated herein by reference.
|
|
10
|
.26
|
|
Employment Letter Agreement dated April 12, 2005 by and between
GenCorp Inc. and Philip W. Cyburt was filed as Exhibit 10.1 to
GenCorp Inc.s Current Report on Form 8-K filed on April
14, 2005 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.27
|
|
American Pacific Corporation Subordinated Promissory Note, dated
November 30, 2005, in the principal amount of $25,500,000 was
filed as Exhibit 10.1 to GenCorp Inc.s Current Report on
Form 8-K dated November 30, 2005 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.28
|
|
Employment Offer Letter dated January 11, 2006 by and between
GenCorp Inc. and R. Leon Blackburn was filed as Exhibit 10.32 to
GenCorp Inc.s Annual Report on Form 10-K for the fiscal
year ended November 30, 2006 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.29
|
|
Form of Restricted Stock Agreement Version 2 between the Company
and Employees for grants of performance-based vesting of
restricted stock under the GenCorp Inc. 1999 Equity and
Performance Incentive Plan was filed as Exhibit 10.33 to GenCorp
Inc.s Annual Report on Form 10-K for the fiscal year ended
November 30, 2005 (File No. 1-1520) and is incorporated herein
by reference.
|
|
10
|
.30
|
|
Consulting Agreement dated February 28, 2006 by and between
Joseph Carleone and GenCorp Inc. was filed as Exhibit 10.1 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2006 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.31
|
|
Form of Director and Officer Indemnification Agreement was filed
as Exhibit 10.1 to GenCorp, Inc.s Current Report on Form
8-K filed on May 23, 2006 (File No. 1-1520) and is incorporated
herein by reference.
|
134
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
10
|
.32
|
|
Form of Severance Agreement for executive officers of the
Company was filed as Exhibit 10.1 to GenCorp Inc.s Current
Report on Form 8-K filed on August 11, 2006 (File No. 1-1520),
and is incorporated herein by reference.
|
|
10
|
.33
|
|
Agreement and Release by and between GenCorp Inc. and William A.
Purdy Jr. dated January 29, 2007 was filed as Exhibit 10.1 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2007 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.34
|
|
Credit Agreement, dated as of June 21, 2007, among GenCorp, as
the Borrower, each of those Material Domestic Subsidiaries of
the Borrower identified as a Guarantor on the
signature pages thereto and such other Material Domestic
Subsidiaries of the Borrower as may from time to time become a
party thereto, the several banks and other financial
institutions from time to time parties to such Credit Agreement,
and Wachovia Bank, National Association, a national banking
association, as Administrative Agent, was filed as Exhibit 10.1
to GenCorp Inc.s Quarterly Report on Form 10-Q for the
second quarter ended May 30, 2007 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.35
|
|
Second Amended and Restated Shareholder Agreement dated as of
March 5, 2008, by and between GenCorp Inc. and Steel
Partners II L.P. was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K filed on March 10, 2008
(File No. 1-1520), and is incorporated herein by reference.
|
|
10
|
.36
|
|
Letter Agreement dated as of March 5, 2008 by and between
GenCorp Inc. and Terry L. Hall was filed as Exhibit 10.1 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2008 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.37
|
|
Letter Agreement dated as of March 5, 2008 by and between
GenCorp Inc. and J. Scott Neish was filed as Exhibit 10.2 to
GenCorp Inc.s Quarterly Report on Form 10-Q for the first
quarter ended February 28, 2008 (File No. 1-1520) and is
incorporated herein by reference.
|
|
10
|
.38
|
|
Retention Agreement dated April 15, 2009 between Chris W. Conley
and GenCorp Inc. was filed as Exhibit 10.1 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the second quarter
ended May 31, 2009 (File No. 1-1520), and is incorporated herein
by reference.
|
|
10
|
.39
|
|
Joinder Agreement dated as of November 24, 2009, by and among
GenCorp Inc., Easton Development Company, LLC, and Wachovia
Bank, National Association, a national banking association, as
Administrative Agent in its capacity as administrative agent
under the Amended Credit Agreement dated as of June 27, 2006,
among GenCorp Inc., as the Borrower, each of those Material
Domestic Subsidiaries of the Borrower identified as a
Guarantor on the signature pages thereto and
Wachovia Bank, National Association, a national banking
association, as Administrative Agent was filed as Exhibit 10.2
to GenCorp Inc.s Current Report on Form 8-K filed November
30, 2009 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.40
|
|
First Amendment and Consent to Credit Agreement, dated as of May
1, 2009, by and among, GenCorp Inc., as borrower, the
subsidiaries of the Borrower from time to time party thereto, as
guarantors, the lenders from time to time party thereto and
Wachovia Bank, National Association, as administrative agent for
the lenders, was filed as Exhibit 10.1 to GenCorp Inc.s
Current Report on Form 8-K dated May 6, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.41
|
|
Employment Agreement dated July 2, 2009 between John Joy and
GenCorp Inc. was filed as Exhibit 10.1 to GenCorp Inc.s
Quarterly Report on Form 10-Q for the third quarter ended August
31, 2009 (File No. 1-1520), and is incorporated herein by
reference.
|
|
10
|
.42
|
|
Amendment to the GenCorp Inc. 1999 Equity and Performance
Incentive Plan, effective October 6, 2009 was filed as Exhibit
10.2 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the third quarter ended August 31, 2009 (File No. 1-1520), and
is incorporated herein by reference.
|
|
10
|
.43
|
|
Amendment to the GenCorp Inc. 2009 Equity and Performance
Incentive Plan, effective October 6, 2009 was filed as Exhibit
10.3 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the third quarter ended August 31, 2009 (File No. 1-1520), and
is incorporated herein by reference.
|
|
10
|
.44
|
|
Director Stock Appreciation Rights Agreement between GenCorp
Inc. and Directors for grants of stock appreciation rights under
the GenCorp Inc. 2009 Equity and Performance Incentive Plan was
filed as Exhibit 10.4 to GenCorp Inc.s Quarterly Report on
Form 10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
135
|
|
|
|
|
Table
|
|
|
Item No.
|
|
Exhibit Description
|
|
|
10
|
.45
|
|
Amendment to the Benefits Restoration Plan for Salaried
Employees of GenCorp Inc. and Certain Subsidiary Companies,
effective October 6, 2009 was filed as Exhibit 10.5 to GenCorp
Inc.s Quarterly Report on Form 10-Q for the third quarter
ended August 31, 2009 (File No. 1-1520), and is incorporated
herein by reference.
|
|
10
|
.46
|
|
Amendment to the 2009 Benefit Restoration Plan for the GenCorp
Inc. 401(k) Plan, effective October 6, 2009 was filed as Exhibit
10.6 to GenCorp Inc.s Quarterly Report on Form 10-Q for
the third quarter ended August 31, 2009 (File No. 1-1520), and
is incorporated herein by reference.
|
|
10
|
.47
|
|
Amendment to the 2009 Benefits Restoration Plan for the GenCorp
Inc. Pension Plan, effective October 6, 2009 was filed as
Exhibit 10.7 to GenCorp Inc.s Quarterly Report on Form
10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.48
|
|
Amendment to the Deferred Bonus Plan of GenCorp Inc. and
Participating Subsidiaries, effective October 6, 2009 was filed
as Exhibit 10.8 to GenCorp Inc.s Quarterly Report on Form
10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.49
|
|
Amendment to the GenCorp Inc. Deferred Compensation Plan for
Nonemployee Directors, as amended, effective October 6, 2009 was
filed as Exhibit 10.9 to GenCorp Inc.s Quarterly Report on
Form 10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.50
|
|
Amendment to the GenCorp Inc. 1996 Supplemental Retirement Plan
for Management Employees, effective October 6, 2009 was filed as
Exhibit 10.10 to GenCorp Inc.s Quarterly Report on Form
10-Q for the third quarter ended August 31, 2009 (File No.
1-1520), and is incorporated herein by reference.
|
|
10
|
.51
|
|
Employment Agreement dated January 6, 2010 between Scott Seymour
and GenCorp Inc. was filed as Exhibit 10.1 to GenCorp
Inc.s Current Report on Form 8-K dated May 6, 2009 (File
No. 1-1520), and is incorporated herein by reference.
|
|
10
|
.52*
|
|
Settlement Agreement by and between Aerojet and United States of
America, dated November 29, 1992.
|
|
10
|
.53*
|
|
Modification No. 1 to the November 29, 1992 Settlement Agreement
by and between Aerojet and United States of America, dated
October 27, 1998.
|
|
21
|
.1*
|
|
Subsidiaries of the Company.
|
|
23
|
.1*
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
24
|
.1*
|
|
Power of Attorney.
|
|
31
|
.1*
|
|
Certification of Principal Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of Principal Financial Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1*
|
|
Certification of Principal Executive Officer and Principal
Accounting Officer pursuant to Rule 13a-14(b) under the
Securities Exchange Act of 1934 as amended, and 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
* |
|
Filed herewith. All other exhibits have been previously filed. |
|
** |
|
Schedules and Exhibits have been omitted, but will be furnished
to the SEC upon request. |
|
|
|
Management contract or compensatory plan or arrangement. |
136