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GenCorp Reports 2008 Fourth Quarter and Annual Results

February 12, 2009

SACRAMENTO, Calif., Feb. 12 /PRNewswire-FirstCall/ — GenCorp Inc.
(NYSE: GY) today reported results for the fourth quarter and fiscal year ended
November 30, 2008.

(Logo: http://www.newscom.com/cgi-bin/prnh/20010108/SFM125LOGO)

Sales for the fourth quarter of 2008 totaled $198.5 million compared to
$203.8 million for the fourth quarter of 2007. Sales for 2008 were $742.3
million
compared to $745.4 in 2007.

Net loss for the fourth quarter of 2008 was $5.7 million, or $0.10 loss
per share, compared to net income of $12.4 million, or $0.21 diluted earnings
per share for the fourth quarter 2007. The decrease in operating results was
primarily due to a charge of $14.6 million related to the freeze of the
defined benefit pension plan discussed below.

Net income for 2008 was $1.5 million, or $0.03 income per share compared
to net income of $69.0 million, or $1.14 diluted earnings per share for 2007.
The decrease in operating results was primarily the result of: (i) $31.2
million
gain in discontinued operations from a negotiated early retirement of
a seller note and an earn-out payment associated with the divestiture of the
Fine Chemicals business in 2007; (ii) $18.1 million income tax benefit related
to income tax settlements and the carryback of net operating losses to prior
years in 2007; (iii) $16.8 million of charges in 2008 as a result of the
second amended and restated shareholder agreement with Steel Partners II L.P.
with respect to the election of Directors at the 2008 Annual Meeting and other
related matters; (iv) a charge of $14.6 million in 2008 related to the freeze
of the defined benefit pension plan as described below, partially offset by a
$13.6 million decrease in retirement benefit plan expense in 2008.

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, the Company discontinued future benefit
accruals for current salaried employees. No employees lost their previously
earned pension benefit. As a result of the amendment and freeze, the Company
incurred a curtailment charge of $14.6 million in the fourth quarter of 2008
primarily due to the immediate recognition of unrecognized prior service
costs.

“The year 2008 was one of significant transition, change and challenge for
the Company. However, we remained focused on delivering solid operational
performance,” said Scott Neish, GenCorp’s interim chief executive officer.
“Sales in 2008 were $742 million, bolstered by progress on the replacement of
our highly profitable 50-year Titan business and a $10 million real estate
transaction.

“Additionally, we reached a major milestone in our real estate strategy.
After more than four years of dedicated effort and without any public
opposition, the Sacramento County Board of Supervisors approved the Final
Environmental Impact Report and County General Plan amendments for the
1,400 acre master-planned community called Glenborough at Easton and Easton
Place,” concluded Mr. Neish.

Operations Review

Aerospace and Defense Segment

Sales for the fourth quarter of 2008 decreased to $196.9 million compared
to $202.2 million for the fourth quarter of 2007, reflecting lower overall
volume in defense programs partially offset by higher space propulsion volume.
Aerojet reports its fiscal year sales and income under a 52/53 week accounting
convention. Fiscal 2008 is a 53 week year compared to a 52 week year in
fiscal 2007. Sales for 2008 decreased to $725.5 million compared to
$739.1 million for 2007, reflecting the close-out activities of the Titan
program in 2007, partially offset by the additional week of net sales of
approximately $19 million in 2008.

Segment performance for the fourth quarter of 2008 declined to
$3.8 million compared to income of $19.8 million in the fourth quarter of 2007
primarily due to the charge related to the freeze of the defined benefit
pension plan in the fourth quarter of 2008. Segment performance was income of
$40.8 million in 2008 compared to income of $61.3 million in 2007. The
decrease in segment performance is primarily the result of: (i) the favorable
performance on the close-out of the Titan program in 2007; (ii) the charge in
2008 related to the freeze of the defined benefit pension plan; and (iii)
higher environmental remediation provision adjustments in 2008, partially
offset by decreased retirement benefit plan expense in 2008.

As of November 30, 2008, funded contract backlog, which includes only
those contracts for which money has been directly authorized by the U.S.
Congress, or for which a firm purchase order has been received from a
commercial customer, was $675 million compared to $566 million as of November
30, 2007
. As of November 30, 2008 and 2007, total contract backlog was $1,035
million
and $912 million, respectively.

Real Estate Segment

Sales for both the fourth quarter of 2008 and 2007 were $1.6 million and
related to rental property operations. Segment performance was $0.9 million
and $0.7 million for the fourth quarters of 2008 and 2007, respectively.

Sales for 2008 were $16.8 million compared to $6.3 million for 2007.
Segment performance was $10.3 million and $3.5 million for 2008 and 2007,
respectively. The increases in sales and segment performance are primarily due
to the sale of 400 acres of the Rio Del Oro property to Elliott Homes Inc. for
$10 million in cash during the second quarter of 2008.

Additional Information

Retirement benefit plan expense, which is mostly non-cash, for the fourth
quarter of 2008 was $2.3 million compared to $5.4 million in the fourth
quarter of 2007. Retirement benefit plan expense decreased to $8.0 million in
2008 from $21.6 million in 2007. These decreases are 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.

Corporate and other expenses for the fourth quarter of 2008 were
$3.1 million compared to $3.9 million for the fourth quarter of 2007. The
decrease was primarily related to the fourth quarter of 2008 reversal of
previously recognized stock-based compensation due to the lower fair value of
the stock appreciation rights. Corporate and other expenses decreased to
$16.2 million in 2008 from $19.7 million in 2007 primarily related to the 2008
reversal of previously recognized stock-based compensation due to the lower
fair value of the stock appreciation rights, partially offset by higher
charges for estimated future environmental remediation obligations.

Total debt decreased to $440.6 million at November 30, 2008 from $446.3
million
at November 30, 2007. Cash balances at November 30, 2008 increased to
$92.7 million compared to $92.3 million at November 30, 2007. Total debt less
cash decreased to $347.9 million at November 30, 2008 from $354.0 million at
November 30, 2007. As of November 30, 2008, the Company had $73.9 million in
outstanding letters of credit issued under the $125.0 million letter of credit
subfacility, and the Company’s $80.0 million revolving credit facility was
unused.

As of November 30, 2008, the Company’s defined benefit pension plan assets
and projected benefit obligations were $1.3 billion and $1.4 billion,
respectively. The Pension Protection Act, enacted in August 2006, will
require underfunded pension plans to improve their funding ratios within
prescribed intervals based on the level of their underfunding. The Company
may be required to make significant cash contributions in the future, a
portion of which the Company may not be able to charge immediately through its
government contracts.

Forward-Looking Statements

This release may contain certain “forward-looking statements” within the
meaning of the United States Private Securities Litigation Reform Act of 1995.
Such statements in this release and in subsequent discussions with the
Company’s management are based on management’s current expectations and are
subject to risks, uncertainty and changes in circumstances, which may cause
actual results, performance or achievements to differ materially from
anticipated results, performance or achievements. All statements contained
herein and in subsequent discussions with the Company’s management that are
not clearly historical in nature are forward-looking and the words
“anticipate,” “believe,” “expect,” “estimate,” “plan,” and similar expressions
are generally intended to identify forward-looking statements. A variety of
factors could cause actual results or outcomes to differ materially from those
expected and expressed in the Company’s forward-looking statements. Some
important risk factors that could cause actual results or outcomes to differ
from those expressed in the forward-looking statements include, but are not
limited to, the following:

    -- effects of changes in board membership and management on the Company's
       operations and/or business strategy;
    -- the cost of servicing the Company's debt and compliance with financial
       and other covenants;
    -- economic conditions could affect our ability to refinance the Company's
       debt;
    -- the ability of the Company to obtain consent of its lenders under the
       Senior Credit Facility to effect a rescission offer on terms favorable
       to the Company and refinance other debt;
    -- the Company's plans to effect a rescission offer relating to its 401(k)
       employee benefit plan;
    -- funding status of the Company's defined benefit pension plan;
    -- effects of changes in discount rates, returns on plan assets, and
       government regulations of defined benefit pension plans;
    -- the possibility that environmental and other government regulations
       that impact the Company become more stringent or subject the Company to
       material liability in excess of its established reserves;
    -- requirements to provide guarantees and/or letters of credit to
       financially assure the Company's environmental or other obligations;
    -- changes in the amount recoverable from environmental claims;
    -- environmental claims related to the Company's current and former
       businesses and operations;
    -- the results of significant litigation;
    -- cancellation or material modification of one or more significant
       contracts;
    -- future reductions or changes in U.S. government spending;
    -- failure to comply with regulations applicable to contracts with the
       U.S. government;
    -- significant competition and the Company's inability to adapt to rapid
       technological changes;
    -- product failures, schedule delays or other problems with existing or
       new products and systems or cost-overruns on the Company's fixed-price
       contracts;
    -- the release or explosion of dangerous materials used in the Company's
       businesses;
    -- reduction in airbag propellant sales volume;
    -- disruptions in the supply of key raw materials and difficulties in the
       supplier qualification process, as well as raw materials price
       increases;
    -- changes in economic and other conditions in the Sacramento metropolitan
       area, California real estate market or changes in interest rates
       affecting real estate values in that market;
    -- the Company's limited experience in real estate activities and the
       ability to execute its real estate business plan including the
       Company's ability to obtain or caused to be obtained, the necessary
       final governmental zoning, land use and environmental approvals and
       building permits;
    -- the Company's property being subject to federal, state and local
       regulations and restrictions that may impose significant limitations on
       the Company's plans, with much of the Company's property being raw land
       located in areas that include the natural habitats of various
       endangered or protected wildlife species;
    -- costs and time commitment related to acquisition activities;
    -- additional costs related to the Company's divestitures;
    -- a strike or other work stoppage or the Company's inability to renew
       collective bargaining agreements on favorable terms;
    -- the loss of key employees and shortage of available skilled employees
       to achieve anticipated growth;
    -- fluctuations in sales levels causing the Company's quarterly operating
       results to fluctuate;
    -- occurrence of liabilities that are inadequately covered by indemnity or
       insurance;
    -- changes in the Company's contract-related accounting estimates;
    -- new accounting standards that could result in changes to the Company's
       methods of quantifying and recording accounting transactions;
    -- failure to maintain effective internal controls in accordance with the
       Sarbanes-Oxley Act; and
    -- those risks detailed from time to time in the Company's reports filed
       with the SEC.

About GenCorp

GenCorp is a leading technology-based manufacturer of aerospace and
defense products and systems with a real estate segment that includes
activities related to the entitlement, sale and leasing of the Company’s
excess real estate assets. Additional information about the Company can be
obtained by visiting the Company’s web site at http://www.GenCorp.com.

     Contact information:
     Investors: Kathy Redd, chief financial officer
     916.355.2361
     Media: Linda Cutler, vice president, corporate communications
     916.351.8650

                              (Tables to follow)

    GenCorp Inc.
    Condensed Consolidated Statements of Operations

    (in millions,            Three Months Ended            Year Ended
     except               November 30, November 30, November 30, November 30,
     per-share amounts)       2008         2007         2008         2007
                                 (Unaudited)

    Net Sales               $198.5       $203.8       $742.3       $745.4

    Costs and Expenses
       Cost of sales         171.7        184.1        645.4        657.8
       Selling, general
        and administrative       -          3.0          1.9         14.4
       Depreciation and
        amortization           8.5          7.8         28.3         28.4
       Interest expense        6.8          7.0         27.7         28.6
       Interest income        (0.9)        (1.3)        (4.2)        (4.9)
       Other expense
        (income), net          0.4         (1.7)         7.6         (2.6)
       Unusual items:
          Shareholder
           agreement and
           related costs       3.0            -         16.8            -
          Defined benefit
           pension plan
           amendment          14.6            -         14.6            -
          Legal settlements
           and estimated
           loss on legal
           matters             0.8         (0.6)         2.9          3.8
          Customer
           reimbursements
           of tax matters        -            -            -          2.3
          Loss on repayment
           of debt               -            -            -          0.6
          Gain on recoveries  (1.2)        (6.0)        (1.2)        (6.0)
    (Loss) income from
     continuing
     operations before
     income taxes             (5.2)        11.5          2.5         23.0
    Income tax provision
     (benefit)                 0.5         (2.5)         0.9        (18.1)
    (Loss) income from
     continuing
     operations               (5.7)        14.0          1.6         41.1
    (Loss) income from
     discontinued
     operations, net of
     income taxes                -         (1.6)        (0.1)        27.9
    Net (Loss) Income        $(5.7)       $12.4         $1.5        $69.0
    (Loss) Income Per
     Share of Common Stock
    Basic:
       (Loss) income per
        share from
        continuing
        operations          $(0.10)       $0.25        $0.03        $0.73
       (Loss) income per
        share from
        discontinued
        operations, net
        of income taxes          -        (0.03)           -         0.50
       Net (loss) income
        per share           $(0.10)      $ 0.22        $0.03        $1.23
    Diluted:
       (Loss) income per
        share from
        continuing
        operations          $(0.10)       $0.24        $0.03        $0.71
       (Loss) income per
        share from
        discontinued
        operations, net of
        income taxes             -        (0.03)           -         0.43
       Net (loss) income
        per share           $(0.10)      $ 0.21        $0.03        $1.14

       Weighted average
        shares of common
        stock outstanding     57.7         56.5         57.2         56.2
       Weighted average
        shares of common
        stock outstanding,
        assuming dilution     57.7         64.8         57.2         64.6

    GenCorp Inc.
    Operating Segment Information

                            Three Months Ended             Year Ended
                         November 30, November 30,  November 30, November 30,
    (in millions)            2008         2007          2008         2007
                                (Unaudited)

    Net Sales:
       Aerospace and
        Defense            $196.9        $202.2       $725.5       $739.1
       Real Estate            1.6           1.6         16.8          6.3
          Total Net Sales  $198.5        $203.8       $742.3       $745.4
    Segment Performance:
    Aerospace and Defense
       Segment performance
        before environmental
        remediation
        provision
        adjustments,
        retirement benefit
        plan expense, and
        unusual items       $23.3         $19.1        $78.0        $84.8
       Environmental
        remediation
        provision
        adjustments          (0.9)          0.1         (5.0)         0.4
       Retirement benefit
        plan expense         (4.2)         (6.0)       (15.7)       (23.8)
       Unusual items        (14.4)          6.6        (16.5)        (0.1)
       Aerospace and
        Defense               3.8          19.8         40.8         61.3
       Real Estate            0.9           0.7         10.3          3.5
          Total Segment
           Performance       $4.7         $20.5        $51.1        $64.8

                            Three Months Ended             Year Ended
                         November 30,  November 30, November 30, November 30,
    (in millions)            2008          2007         2008         2007
                                (Unaudited)

    Reconciliation of
     segment performance to
     (loss) income from
     continuing operations
     before income taxes:
    Segment Performance      $4.7         $20.5        $51.1        $64.8
       Interest expense      (6.8)         (7.0)       (27.7)       (28.6)
       Interest income        0.9           1.3          4.2          4.9
       Corporate retirement
        benefit plan income   1.9           0.6          7.7          2.2
       Corporate and other
        expenses             (3.1)         (3.9)       (16.2)       (19.7)
       Corporate unusual
        items                (2.8)            -        (16.6)        (0.6)
    (Loss) income from
     continuing operations
     before income taxes    $(5.2)        $11.5         $2.5        $23.0

       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 restructuring and unusual
     items relating to operations. Segment performance excludes corporate
     income and expenses, income or expenses related to divested businesses,
     provisions for unusual items not related to the operations, interest
     expense, interest income, cumulative effect of changes in accounting
     principles, and income taxes.  The Company believes that segment
     performance provides information useful to investors in understanding its
     underlying operational performance.  Specifically, the Company believes
     the exclusion of the items listed above permits an evaluation and a
     comparison of results for on-going business operations. It is on this
     basis that management internally assesses the financial performance of
     its segments.

    GenCorp Inc.
    Condensed Consolidated Balance Sheets
                                                   November 30,   November 30,
    (in millions)                                       2008           2007

    Current Assets
    Cash and cash equivalents                          $92.7          $92.3
    Accounts receivable                                 97.3           99.2
    Inventories                                         70.4           67.5
    Recoverable from U.S. government and
     other third parties for environmental
     remediation costs and other                        43.7           46.5
    Grantor trust                                        1.6              -
    Prepaid expenses and other                          17.6           17.4
    Income tax receivable                               10.6              -
    Assets of discontinued operations                    0.1            0.1
    Total Current Assets                               334.0          323.0

    Noncurrent Assets
    Property, plant and equipment, net                 137.9          139.8
    Real estate held for entitlement and leasing        49.3           45.3
    Recoverable from U.S. government and
     other third parties for environmental
     remediation costs and other                       169.8          179.0
    Prepaid pension asset                               76.5          101.0
    Grantor trust                                       29.3              -
    Goodwill                                            94.9           94.9
    Intangible assets                                   20.1           21.7
    Other noncurrent assets, net                        93.9           90.5
    Total Noncurrent Assets                            671.7          672.2
    Total Assets                                    $1,005.7         $995.2

    Liabilities and Shareholders' Deficit
    Short-term borrowings and current portion
     of long-term debt                                  $2.0           $1.5
    Accounts payable                                    32.7           28.9
    Reserves for environmental remediation costs        65.2           66.1
    Income taxes payable                                   -            6.2
    Postretirement medical and life insurance benefits   7.1            8.8
    Advance payments on contracts                       46.7           49.1
    Other current liabilities                           93.7           84.3
    Liabilities of discontinued operations               1.0            1.0
    Total Current Liabilities                          248.4          245.9

    Noncurrent Liabilities
    Senior debt                                         68.3           73.1
    Senior subordinated notes                           97.5           97.5
    Convertible subordinated notes                     271.4          271.4
    Other debt                                           1.4            2.8
    Deferred income taxes                                8.3            0.3
    Reserves for environmental remediation costs       193.0          203.9
    Postretirement medical and life insurance
     benefits                                           66.8           78.5
    Other noncurrent liabilities                        78.1           73.8
    Total Noncurrent Liabilities                       784.8          801.3
    Total Liabilities                                1,033.2        1,047.2
    Redeemable Common Stock                              7.6              -
    Total Shareholders' Deficit                       (35.1)         (52.0)
    Total Liabilities and Shareholders' Deficit     $1,005.7         $995.2

    GenCorp Inc.
    Condensed Consolidated Statements of Cash Flows
                                                            Year Ended
                                                   November 30,   November 30,
    (in millions)                                       2008           2007

    Operating Activities
    Net income                                          $1.5          $69.0
    Adjustments to reconcile net income
     to net cash provided by operating
     activities:
       Loss (income) from discontinued operations        0.1         (27.9)
       Depreciation and amortization                    28.3           28.4
       Stock-based compensation and savings
        plan expense, net                                9.4           10.6
       Changes in assets and liabilities other
        than grantor trust activity                     20.4          (53.9)
       Grantor trust activity                          (30.9)             -
          Net cash provided by continuing operations    28.8           26.2
          Net cash used in discontinued operations      (0.8)          (2.4)
          Net Cash Provided by Operating Activities     28.0           23.8
    Investing Activities
    Capital expenditures                               (21.3)         (21.8)
    Restricted cash                                        -           19.8
    Proceeds from sale of discontinued operations          -           29.7
          Net Cash (Used in) Provided by Investing
           Activities                                  (21.3)          27.7
    Financing Activities
    Debt activity, net                                  (6.3)         (20.8)
    Proceeds from shares issued under stock
     option and equity incentive plans                     -            0.4
          Net Cash Used in Financing Activities         (6.3)         (20.4)
    Net Increase in Cash and Cash Equivalents            0.4           31.1
    Cash and Cash Equivalents at Beginning of Period    92.3           61.2
    Cash and Cash Equivalents at End of Period         $92.7          $92.3

    Supplemental Disclosures of Cash Flow Information
    Cash paid for interest                             $25.3          $27.6
    Cash paid for income taxes                           0.5            0.8
    Financing of an environmental remediation
     settlement with a promissory
     note                                                0.6              -
    Capital expenditure purchased with a promissory note   -            2.8

SOURCE GenCorp Inc.


Source: newswire



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