10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended November 30, 2007
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to          .

Commission file number 1-1520

GenCorp Inc.

(Exact name of registrant as specified in its charter)

Ohio	34-0244000
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Highway 50 and Aerojet Road	95742
Rancho Cordova, California (Address of principal executive offices)	(Zip Code)
P.O. Box 537012 Sacramento, California (Mailing address)	95853-7012 (Zip Code)

Registrant’s telephone number, including area code

(916) 355-4000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.10 par value per share	New York Stock Exchange and Chicago Stock Exchange

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 þ     No o

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 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 registrant’s 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 definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o Smaller reporting company o  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) o Yes þ No

The aggregate market value of the voting common equity held by nonaffiliates of the registrant as of May 31, 2007 was approximately $754 million.

As of January 22, 2008, there were 56.7 million outstanding shares of the Company’s Common Stock, $0.10 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2008 Proxy Statement of GenCorp Inc. relating to its annual meeting of shareholders scheduled to be held on March 26, 2008 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, 2007

Table of Contents

Item
Number
PART I
	1.	Business	1
	1A.	Risk Factors	15
	1B.	Unresolved Staff Comments	23
	2.	Properties	24
	3.	Legal Proceedings	24
	4.	Submission of Matters to a Vote of Security Holders	27
PART II
	5.	Market for Registrant’s Common Equity, Related Stockholders’ Matters, and Issuer Purchases of Equity Securities	27
	6.	Selected Financial Data	30
	7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	7A.	Quantitative and Qualitative Disclosures about Market Risk	51
	8.	Consolidated Financial Statements and Supplementary Data	52
	9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	112
	9A.	Controls and Procedures	112
	9B.	Other Information	113
PART III
	10.	Directors, Executive Officers, and Corporate Governance	113
	11.	Executive Compensation	115
	12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	115
	13.	Certain Relationships and Related Transactions, and Director Independence	116
	14.	Principal Accountant Fees and Services	116
PART IV
	15.	Exhibits and Financial Statement Schedules	117
Signatures			123
Exhibit Index			125
EXHIBIT 3.1
EXHIBIT 3.2
EXHIBIT 10.5
EXHIBIT 10.8
EXHIBIT 10.11
EXHIBIT 21.1
EXHIBIT 23.1
EXHIBIT 23.2
EXHIBIT 24.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

* 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,” “Board Committees,” “Executive Compensation,” “Director Compensation,” “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,” “Change in Control Severance Agreements,” “Determination of Independence of Directors,” and “Ratification of the Appointment of Independent Registered Public Accounting Firm,” in GenCorp Inc.’s 2008 Proxy Statement, within 120 days after the close of our fiscal year.

PART I

Item 1.   Business

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, and anticipated costs of capital. A variety of factors could cause actual results or outcomes to differ materially from those expected and expressed in our forward-looking statements. Some important risk factors that could cause actual results or outcomes to differ from those expressed in the forward-looking statements are described in the section “Risk Factors” in Item 1A of this Report.

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

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

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

Real Estate — includes activities related to the entitlement, sale, and leasing of our excess real estate assets. We own approximately 12,600 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 6,400 acres of the Sacramento Land. We also own approximately 580 acres in Chino Hills, California. We are currently seeking removal of environmental restrictions. Once completed, we will work to maximize the value of the land.

Sales, segment performance, total assets, and other financial data for each segment for the three years ended November 30, 2007 are set forth in Note 9 to the Consolidated Financial Statements, included in Item 8 of this Report.

Our fiscal year ends on November 30 of each year. When we refer to a fiscal year, such as fiscal 2007, we are referring to the fiscal year ended on November 30 of that year.

1

We were incorporated in Ohio in 1915 and our principal executive offices are located at Highway 50 and Aerojet Road, Rancho Cordova, CA 95670. Our mailing address is P.O. Box 537012, Sacramento, CA 95853-7012 and our telephone number is 916-355-4000.

Our Internet website address is www.GenCorp.com. We have made available through our Internet website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC. We also make available on our Internet web site our corporate governance guidelines and the charters for each of the following committees of the Company’s Board of Directors: Audit; Corporate Governance & Nominating; Finance; and Organization & Compensation. Our corporate governance guidelines and such charters are also available in print to anyone who requests them.

Aerospace and Defense

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

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

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

Industry Overview

While broad support continues for DoD and NASA budgets in the Government Fiscal Year (GFY) 2008 and beyond, the impact of the global war on terrorism, the cost of military support in Iraq and Afghanistan and the rising federal deficit has resulted in modest budget growth through 2012.

Department of Defense

Following a period of budget decreases in the post-Cold War era, the U.S. defense budget, as approved by Congress, has increased in recent years. The defense appropriations budget has risen to over $439 billion in GFY 2008 from $319 billion in GFY 2001. We expect the U.S. defense budgets for research, development, test and evaluation (RDT&E) and procurement, the primary funding sources for Aerojet’s programs, to remain level, with annual forecasts for RDT&E declining slightly, while procurement continues to show a slight increase through GFY 2012. While the top line DoD budget continues to increase, the Pentagon has announced it favors reductions in the overall rate of growth. Although the ultimate distribution of the defense budget remains uncertain, Aerojet is well positioned to benefit from DoD investment in high priority transformational systems that address current war fighting requirements as well as the re-capitalization of weapon systems and equipment being expended during deployment.

2

NASA

Congress continues to support the Constellation Program (previously the Vision for Space Exploration) unveiled by the Bush Administration in 2004, which renews commitments to space and planetary exploration. NASA’s 2007 appropriations, provided under a Continuing Resolution, were made equivalent to GFY 2006 appropriations of $16.2 billion. The President’s Budget Request for GFY 2008 looks to increase this spending to over $16.8 billion.

NASA has indicated its primary objectives for the initial phases of the Constellation Program will be to: (i) complete construction of the International Space Station; (ii) retire the Space Shuttle by 2010; (iii) develop Orion, a new crew exploration spacecraft and its launch vehicle Ares I; and (iv) the Commercial Orbital Transport System, designed to shuttle supplies to the International Space Station.

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

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

Competition

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

Company	Parent	Propulsion Type	Propulsion Application
Aerojet	GenCorp Inc.	Solid, liquid, air- breathing, electric	Launch, in-space, tactical, strategic, missile defense
Alliant Techsystems	Alliant Techsystems Inc.	Solid, air-breathing	Launch, tactical, strategic, missile defense
Astrium	European Aeronautics Defense and Space Company and BAE Systems	Solid, liquid	In-space, tactical
Northrop Grumman Space Technology	Northrop Grumman Corporation	Liquid	In-space
Pratt & Whitney Rocketdyne	United Technologies Corporation	Liquid, air-breathing, electric	Launch, in-space, missile defense
American Pacific Corporation	American Pacific Corporation	Liquid, electric	In-space

3

The domestic liquid and solid propulsion markets remained unchanged in fiscal 2007 with Aerojet in the number two position in both markets, behind Alliant Techsystems in solids and Pratt & Whitney Rocketdyne in liquids.

Major Customers

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

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

Customers that represented more than 10% of net sales for the fiscal years presented are as follows:

	Year Ended November 30,
	2007			2006			2005
Lockheed Martin		28	%		39	%		39	%
Raytheon		28			19			16
Boeing		—			10			—

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

Direct sales to the U.S. government and its agencies, or government customers, and indirect sales to government customers via direct sales to prime contractors accounted for a total of approximately 89% of sales, or approximately $665.9 million, in fiscal 2007. The following are approximate percentages of net sales by principal end user in fiscal 2007:

U.S. Air Force	31	%
U.S. Navy	27
U.S. Army	21
NASA	10
Total U.S. government customers	89
Other customers	11
Total	100	%

Major Programs

Defense Systems — Aerojet maintained its strong market position in the defense market segment in fiscal 2007 with key new and follow-on awards. Significant new wins included the Standard Missile Block 3 Throttling Divert and Attitude Control System and the Terminal High Altitude Air Defense (THAAD) Booster Fire Unit Fielding programs which represent long term production business support of both domestic and international needs. Important follow-on awards were received on the Exoatmospheric Kill Vehicle Divert and Attitude Controls System (EKV DACS), Standard Missile, and F-22 programs. 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

4

to the diversity of its propulsion technologies (solid, liquid, and air-breathing), its complete warhead capabilities, its composites and metallic structures expertise, and the synergy of its product lines to offer its defense customers the most innovative and advanced solutions available in the domestic market.

A subset of our key defense systems programs are listed below:

	Primary
Program	Customer	End Users	Program Description	Program Status
Advanced Second and Third Stage Booster	U.S. Air Force	U.S. Air Force	Solid booster	Development
Army Tactical Missile System	Lockheed Martin	U.S. Army	Tactical solid rocket motors	Production
F-22 Raptor Aircraft	Boeing	U.S. Air Force	Advanced electron beam welding for airframe structures	Production
Ford Crown Victoria Police Interceptor	Ford Motor Co.	Ford Motor Co.	Fire suppression systems	Production
Ground Based Mid-Course Defense Exoatmospheric Kill Vehicle Liquid Divert and Attitude Control Systems	Raytheon	Missile Defense Agency	Liquid propulsion divert and attitude control propulsion systems	Development/ Production
Javelin	Lockheed Martin/ Raytheon	U.S. Army	Tactical solid rocket motors	Development/ Production
Joint Air to Ground Missile	Lockheed Martin	U.S. Army	Tactical solid rocket motors	Development
Minuteman III	Northrop Grumman Corporation	U.S. Air Force	Liquid maneuvering propulsion	Development/ Production
Multiple Launch Rocket System	Lockheed Martin	U.S. Army	Tactical solid rocket motors	Production
Patriot Advanced Capability -3	Lockheed Martin	U.S. Army, Missile Defense Agency	Tactical solid rocket motors	Development/ Production
Standard Missile	Raytheon	U.S. Navy, Missile Defense Agency	Tactical solid rocket motors, throttling divert and attitude control systems and warhead	Development/ Production
Small Diameter Bomb/Focus Lethality Munition	Boeing	U.S. Air Force	Precision munitions	Development/ Production
Specialty Metal Products	General Dynamics and Others	U.S. Army	Specialty metal products	Development/ Production
Supersonic Sea Skimming Target	Orbital Sciences Corporation	U.S. Navy	Variable flow ducted rocket (air-breathing)	Production
Tactical Tomahawk	Raytheon	U.S. Navy	Tactical solid rocket motors and warheads	Production
Terminal High Altitude Air Defense	Lockheed Martin	U.S. Army, Missile Defense Agency	Tactical solid rocket motors	Development Production
Trident D5	Lockheed Martin	U.S. Navy	Post boost control system	Production
Tube-launched, Optically-tracked, Wire-guided Missile (TOW)	Raytheon	U.S. Army	Tactical missile warheads	Production

Space Systems — In fiscal 2007, Aerojet maintained its strong market position in space systems by capturing important propulsion contracts, the first of which was a U.S. Air Force hydrocarbon booster engine technology demonstrator which positions us to participate in the next generation U.S. Air Force liquid propulsion powered

5

launch vehicle. In addition, Aerojet was awarded a contract for the first stage roll control liquid propulsion system for the Ares I launch vehicle, which as envisioned today represents a long term opportunity for Aerojet.

Aerojet’s commitment to quality and excellence in its space systems programs was reflected in its fiscal 2007 100% success on several space exploration and other critical missions using Aerojet’s products, including NASA’s Themis, Dawn, and Phoenix Mars Lander spacecraft missions; three Space Shuttle flights; and the launch of six Delta II vehicles and one Atlas V mission. These 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.

A subset of our key space system programs is listed below:

	Primary
Program	Customer	End Users	Program Description	Program Status
Advanced Extremely High Frequency MilSatCom	Lockheed Martin	U.S. Air Force	Electric and liquid spacecraft thrusters	Production
Atlas V	United Launch Alliance	U.S. Air Force, Commercial	Solid “strap-on” booster motors, upper stage thrusters, and separation motors	Production
Geostationary Satellite Systems	Lockheed Martin, Loral, Boeing, Orbital Sciences Corporation, Astrium	Various	Electric and liquid spacecraft thrusters, propellant tanks and Bi-propellant apogee engines	Production
Delta II	United Launch Alliance	NASA, U.S. Air Force, Commercial	Upper stage pressure-fed liquid rocket engines	Production
Delta IV	United Launch Alliance	NASA, U.S. Air Force, Commercial	Upper stage thrusters	Production
Hydrocarbon Booster	Air Force Research Laboratory	U.S. Air Force	Liquid Booster	Development
Global Positioning Systems	Boeing	U.S. Air Force	Intergrated propulsion systems	Development/ Production
LOX Methane Reaction Control Engine	NASA	NASA	Develop fuels for reaction control engine	Development
Mars Lander Engine	Jet Propulsion Lab (JPL)	JPL	Liquid spacecraft thrusters	Qualification and production
Orion Crew Mode & Service Mode Propulsion	Lockheed Martin/Orbital Sciences	NASA	Develop and qualify engines and propulsion systems for Human spaceflight system	Development
Space Shuttle	United Space Alliance	NASA	Thrusters, gas generators and spares	Production
Titan IV	Lockheed Martin	U.S. Air Force	Program in contract and facility close out	Final Titan IV launched in 2005
Upper Stage Engine Technology	U.S. Air Force Research Laboratory	NASA, U.S. Air Force	Develop 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 program’s development. Production contracts provide for the production and delivery of mature products for operational use. Aerojet’s contracts are primarily categorized as either “fixed-price” or “cost-reimbursable.” During fiscal 2007, approximately 46% of our net sales were from fixed-price contracts and 44% from cost-reimbursable contracts.

Fixed-price contracts are typically (i) fixed-price, (ii) fixed-price-incentive, 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

6

resulting from variations in costs of performance. For fixed-price-incentive contracts, Aerojet receives increased or decreased fees or profits based upon actual performance against established targets or other criteria. For fixed-price level of effort contracts, Aerojet generally receives a structured fixed price per labor hour, dependent upon the customer’s labor hour needs. All fixed-price contracts present the risk of unreimbursed cost overruns.

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

Many programs under contract have product life cycles exceeding 10 years, such as the Delta, 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 a year over many years.

Government Contracts and Regulations

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

Backlog

As of November 30, 2007, our total backlog was $912 million compared with $718 million as of November 30, 2006. Of our November 30, 2007 backlog, approximately $465 million, or 51%, is not expected to be filled within one year.

Total backlog includes both funded backlog (the amount for which money has been directly authorized by the U.S. Congress, or for which a purchase order has been received from a commercial customer) and unfunded backlog (firm orders for which funding has not been appropriated). Indefinite delivery and quantity contracts and unexercised options are not reported in total backlog. Backlog is subject to delivery delays or program cancellations which are beyond our control. Funded backlog was $566 million and $565 million at November 30, 2007 and 2006, respectively.

Research and Development

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

7

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

The following table summarizes Aerojet’s research and development expenditures during the past three fiscal years:

	Year Ended
	November 30,
	2007		2006		2005
	(In millions)
Customer-funded	$	269	$	220	$	177
Company-funded		17		14		13
Total research and development expenditures	$	286	$	234	$	190

Suppliers, Raw Materials and Seasonality

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

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

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

Intellectual Property

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

Real Estate

Through our Aerojet subsidiary, we own approximately 12,600 acres of land in the Sacramento metropolitan area (Sacramento Land). The property is located 15 miles east of downtown Sacramento, California along U.S. Highway 50, a key growth corridor in the region. We believe our land has competitive advantages over other land in the area, including being one of the largest single-owner land tracts suitable for development in the Sacramento region and being a desirable “in-fill” location surrounded by residential and business properties.

The Sacramento Land was acquired by Aerojet in the early 1950s for Aerojet’s operations. Most of the Sacramento Land was used to provide safe buffer zones for Aerojet’s testing and manufacturing operations. Changes in propulsion technology coupled with the relocation of certain of our propulsion operations led us to determine that some portions of the Sacramento Land were no longer needed for Aerojet’s operations in

8

Sacramento. Consequently, our plan has been to reposition the excess Sacramento Land to optimize its value. We currently have entitlement requests pending for the re-zoning of approximately 6,400 acres of excess Sacramento Land. Our entitlement efforts are expected to increase the excess land value over its current value. The term “entitlements” is generally used to denote the set of regulatory approvals required to allow land to be zoned for requested uses. Required regulatory approvals vary with each land zoning proposal and may include permits, land use master plans, zoning designations, state and federal environmental documentation, and other regulatory approvals unique to the land.

The housing market in the Sacramento region continued to struggle in 2007. 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. The excess Sacramento Land is positioned in one of the strongest growth corridors of the region, and commands a unique location advantage. We believe the compelling Sacramento area demographic and real estate fundamentals support our objective of creating value by re-zoning a substantial portion of the excess Sacramento Land.

Concurrent with our entitlements efforts, we will continue to explore how we might best obtain value from our excess Sacramento Land, including outright sales, and/or joint ventures with real estate developers, residential builders, and/or other third parties.

The Sacramento Land is comprised as follows:

	Environmentally		Environmentally
	Unrestricted		Restricted(1)		Total
Excess Sacramento Land for which we are currently seeking entitlement		3,014		3,435		6,449
Land available for future entitlement(2)		1,003		—		1,003
Aerojet operations land(3)		24		5,094		5,118
Total Sacramento Land		4,041		8,529		12,570

(1)	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 it will be several years before any of this excess Sacramento Land is available for future entitlement will be processed for a 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.
(3)	We believe that the Aerojet operations land is more than adequate for Aerojet’s long-term needs. As we reassess Aerojet’s needs in the future, portions of this land may become available for entitlement.

Sacramento Land for Which We are Seeking Entitlement

We are currently seeking entitlement on approximately 6,400 acres of excess Sacramento Land under the brand name of Easton. Our Easton master plans reflect efforts to make Easton one of the finest master-planned communities in the region. Easton will include a broad range of housing as well as office, industrial, retail, and recreational uses. The broad range of land uses will ensure long-term value enhancement of our excess 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).

9

The acreage, our current estimate of when local entitlements may be achieved based on information currently available and other information regarding the various Easton projects is summarized as follows:

	Expected			Environmentally		Environmentally
Easton Projects	Entitlement Dates(1)			Unrestricted		Restricted(3)		Total
Rio del Oro		2008			—		2,709		2,709
Glenborough and Easton Place		2008			1,043		349		1,392
Westborough		2010	(2)		1,387		272		1,659
Hillsborough		After 2010			532		97		629
Office Park and Auto Mall		Approved			52		8		60
Total Easton acreage					3,014		3,435		6,449

(1)	Does not include removal of state and federal environmental restrictions. Dates do not reflect the possibility of litigation subsequent to project approvals.
(2)	This date reflects our estimate of the entitlement of the first phase of Westborough. We do not expect the second phase to receive entitlement until after 2010.
(3)	The environmentally restricted acreage described above is subject to restrictions imposed by state and/or federal regulatory agencies because of Aerojet’s historical propulsion activities, even though most of the land was never used for propulsion testing and manufacturing. We are actively working with the various regulatory agencies to have the restrictions removed as early as practicable.

Additional information concerning each of Easton projects is set forth below.

Rio del Oro

Background — In 2002, we filed an application with the County for a general plan amendment and request for re-zoning of an approximately 2,700 acre project called Rio del Oro. In 2003, this application was transferred to the newly incorporated City of Rancho Cordova (Rancho Cordova). Our application was submitted in conjunction with an application by Elliott Homes (Elliott) for an approximately 1,100 acre parcel of land that we sold to Elliott in 2001 adjacent to our Rio del Oro property. Pursuant to our agreement with Elliott, Elliott is obligated to pay costs associated with seeking entitlement for the entire Rio del Oro project. The general categories of land use by acreage for the Rio del Oro project are estimated as follows:

	Total
Residential		1,920
Village services and employment		521
Education		152
Open space and public		1,236
Total Rio del Oro acreage		3,829

There are no assurances that Rancho Cordova will approve any plan, and if it approves a plan, that the final plan would conform to these general use categories and areas.

Status — We have been working with the Rancho Cordova staff on the Environmental Impact Review (EIR) and Environmental Impact Statement (EIS) since December 2003. In December 2006, the draft EIR/EIS was released for public review. After public comments were received on the draft EIR/EIS and after consideration of recent court decisions involving other properties, Rancho Cordova decided that limited portions of the EIR/EIS should be re-written and re-circulated for public review and comment. Rancho Cordova currently estimates completing its review and changes to the EIR/EIS with the USACE, completing the limited public comments re-circulation, and having a final EIR/EIS ready for approval by the City Council and the USACE in the first half of 2008.

10

We are in the process of negotiating a development agreement with the City of Rancho Cordova with respect to the Rio del Oro project. A development agreement is a contract between a landowner and the entitling authority that governs some or all of the development rights for a project. Development agreements vest the rights of the entitling authority and the landowner in an effort to ensure long-term value is enhanced for both parties.

The Rio del Oro project has extensive wetland conservation areas and preserved habitats for certain species on the Federal Endangered Species List. Accordingly, we are working with USFWS on a conservation plan that we expect to complete within the next year and that will be a part of the approval of the land use application by Rancho Cordova and federal agencies.

We are working with the USACE to obtain the necessary permits under Section 404 of the Clean Water Act (Section 404 Permit) for this project.

Environmental Restrictions — Our Rio del Oro property is subject to certain California state environmental restrictions. We are working with state regulators to remove such restrictions. We believe approximately 2,200 acres of the Rio del Oro land should have environmental restrictions lifted in 2008. We will then work to have the environmental restrictions lifted on the remaining 500 acres. We believe the timing on removal of the remaining restrictions should not adversely affect the projected phasing of the project.

Water Supply — 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 the Rio del Oro and Westborough projects with our 2003 water agreement (Aerojet/SCWA Agreement) with the Sacramento Country Water Agency (SCWA). Under the Aerojet/SCWA Agreement, Aerojet 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. SCWA has requested modifications to the existing Aerojet/SCWA Agreement. Aerojet is working with SCWA on water supply issues and anticipates that these discussions will lead to a mutually satisfactory resolution and a modified agreement between Aerojet and SCWA.

Other — In 2001, we granted Elliott an option to purchase 400 acres of our Rio del Oro property, at a fixed purchase price of $10 million. The option must be exercised within 60 days after the environmental restrictions have been lifted from the Rio del Oro property and a separate legal parcel has been created. The purchase price will be paid at the time of closing.

Glenborough at Easton and Easton Place

Background — In 2002, 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. The general categories of land use by acreage are estimated as follows:

	Total
Residential		530
Commercial, retail, mixed-use, and office		202
Roads and parkways		140
Open space		391
Schools		40
Community resources and parks		89
Total Glenborough and Easton Place acreage		1,392

There are no assurances that the County will approve any plan, and if it approves a plan, that the final plan will conform to these uses and areas.

11

Status — The County began preparation of the EIR for Glenborough at Easton and Easton Place in June 2005. The administrative draft EIR was delivered by the EIR consultant to the County in December 2007. We expect the County to release the draft EIR for public review and comment in the first half of 2008. We are in the process of drafting a development agreement with the County with respect to the Glenborough at Easton project.

The Glenborough at Easton project has extensive habitat for the Valley Elderberry Long-horned Beetle (VELB). We are working with the USFWS to develop a comprehensive mitigation plan that will provide suitable mitigation for the impact caused by the project.

We are working with the USACE to obtain the necessary permits under Section 404 of the Clean Water Act (Section 404 Permit) for this project.

Environmental Restrictions — Approximately 350 acres in Glenborough at Easton are subject to federal environmental restrictions. A portion of such 350 acres includes a closed landfill. Before these 330 acres can be utilized, the existing federal environmental restrictions must be removed, and the landfill must be removed. In 2007, the Sacramento County approved our landfill removal plan. We believe the timing on removal of these restrictions should not adversely affect the projected phasing of the project.

Water Supply — In 2007, we entered into an agreement with the City of Folsom (Folsom) under which, among other things, Aerojet transfer the right to certain other remediated groundwater from the Sacramento Land to Folsom. In exchange, Folsom agreed to serve Aerojet water for its own use, and to provide water to the Glenborough at Easton and Easton Place projects when actual development begins.

Westborough

Background — In 2004, we filed an application with Rancho Cordova for a general plan amendment for an approximate 1,700 acre project named Westborough. 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 be working 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.

Status — Rancho Cordova released the EIR Notice of Preparation in October 2007 and the City’s EIR consultant continues to work on the various technical studies necessary for the EIR for the initial phase. The Westborough project also has extensive habitat for the VELB. We are working with the USFWS to develop a comprehensive mitigation plan that will provide suitable mitigation for the impact caused by the project.

We are also working with the USACE to obtain the necessary permits under Section 404 of the Clean Water Act (Section 404 Permit) for this project.

Environmental Restrictions — Approximately 270 acres of the second phase of Westborough is subject to federal environmental restrictions which we do not expect to be removed for several years. These environmental restrictions do not affect the first phase of the Westborough project.

Water Supply — Golden State Water Company (GSWC) has made filings with the California Public Utilities Commission (PUC) seeking approval to provide water service to the Westborough project. Westborough is contiguous to GSWC’s service territory in Eastern Sacramento County. GSWC entered into an agreement with SCWA in 2003 at the same time Aerojet and SCWA entered into the Aerojet/SCWA Agreement. SCWA has filed a letter of protest with the PUC with respect to GSWC’s request to serve the Westborough project. Aerojet, GSWC and SCWA have had ongoing discussions regarding amending their respective water agreements. We expect that these discussions will lead to a mutually satisfactory resolution and modified agreements, and that GSWC will ultimately be approved by the PUC to provide water service to the Westborough project.

12

Other — In 2004, we entered into an agreement with Elliott Homes to sell 100 acres of the Westborough property for $3.1 million. This transaction is expected to close after a new legal parcel is created. The purchase price will be paid at the time of closing. As partial consideration for this agreement, Elliott also agreed to remove a restriction on residential development of Westborough that had extended through 2009 and that had been granted to Elliott pursuant to a fiscal 2001 transaction.

Hillsborough

Aerojet and other land owners that together control approximately 3,500 acres within the City of Folsom’s Sphere of Influence (SOI) are working with Folsom to develop a land use plan, and are conducting overall market and technical studies. Our 629 acre Hillsborough project is within this acreage. The proposed land uses for the 629 acres include residential, office, and retail. The annexation process is expected to be complex and lengthy. The water source for the SOI will be addressed by Folsom as part of the annexation process. We currently estimate that the required regulatory approvals for the Hillsborough project will be received after 2010.

Office Park and Auto Mall

In March 2003, we signed a memorandum of understanding with respect to entering into a joint venture with Panattoni Development Company for the creation of an office park. An office park is consistent with the existing zoning for the property. We are working with Panattoni and the USACE to obtain the necessary governmental approvals.

In fiscal 2006, we obtained County approval for a thirty-acre auto mall on Folsom Boulevard. We sold two parcels totaling approximately twenty acres to two automobile dealers in fiscal 2003 for $5.9 million. Aerojet is obligated to provide certain land improvements necessary to bring utilities to each of these parcels. These improvements are expected to be completed in the first half of 2008.

Other Real Estate

Aerojet owns approximately 580 acres of excess land in Chino Hills, California, which includes 180 acres that were previously leased by Aerojet. This property was used for the manufacture and testing of ordnance. With the sale of its ordnance business in the mid-1990s, Aerojet closed this facility and commenced clean-up of the site. Aerojet continues to work with state regulators and the City of Chino Hills (Chino Hills) to complete those efforts. Once the remediation is complete, Aerojet will work to maximize the value of the property.

We currently lease to third parties approximately 313,000 square feet of office space and three acres of land. These leasing activities generated $6.3 million in revenue in fiscal 2007.

Environmental Matters

Our current and legacy 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 substantial 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. These costs are not significant relative to total operating costs and 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

13

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 Management’s Discussion and Analysis in Part II, Item 7 of this Report for additional information.

Employees

As of November 30, 2007, 16% of our 3,252 employees were covered by collective bargaining agreements which are due to expire in the summer of 2008. We believe that our relations with our employees are good.

Executive Officers of the Registrant

See Part III, Item 10 of this Report for information about Executive Officers of the Company.

14

Item 1A.   Risk Factors

Set forth below are the risks that we believe are material to our investors. This section contains forward-looking statements. You should refer to the explanation of the qualifications and limitations on forward-looking statements set forth at the beginning of Item 1 of this Report.

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 89% of our total net sales in fiscal 2007. 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.

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. military 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 our cash flows.

A significant percentage of our sales are generated from fixed-price contracts. If we experience cost overruns on these contracts, we would have to absorb the excess costs and could adversely affect our financial results.

In fiscal 2007, approximately 46% 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.

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 has 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 revenues that we historically have generated from certain contracts. Further, the U.S. government may open to competition programs

15

on which we are currently the sole supplier, could have a material adverse effect on our operating results, financial condition, and/or our cash flows.

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, 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 undergone rapid and significant technological development. Our competitors may implement new technologies before we are able to, allowing them to provide more effective products at more competitive prices. Future technological developments could:

•  adversely impact our competitive position if we are unable to react to these developments in a timely or efficient manner;

•  require us to write-down obsolete facilities, equipment, and technology;

•  require us to discontinue production of obsolete products before we can recover any or all of our related research, development and commercialization expenses; or

•  require significant capital expenditures for research, development, and launch of new products or processes.

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.

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 if our products fail to perform adequately. 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.

16

Our operations and properties are currently the subject of significant environmental liabilities, and the numerous environmental and other government regulations 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. 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. Any adverse judgment or cash outlay could have a material adverse effect on our operating results, financial condition, and/or our cash flows.

For additional discussion of legal and environmental matters, please see the discussion in Note 7 in Notes to Consolidated Financial Statements.

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.

Under an agreement with the U.S. government, the U.S. government recognizes as allowable for government contract cost purposes up to 88% of environmental expenses at our Sacramento and former Azusa sites. Environmental expenses at other sites are treated under the normal rules of cost allowability. Aerojet’s 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 Aerojet’s sustained business volume under U.S. government contracts and programs and the relative size of Aerojet’s commercial business.

As of November 30, 2007, we had established environmental reserves of $270.0 million, which we believe to be sufficient to cover our future remediation costs that could be incurred by us over the contractual term, if any, or next fifteen years of the estimated remediation. However, 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.

For additional discussion of environmental matters, please see the environmental discussion in Note 7 in Notes to Consolidated Financial Statements.

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 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 our cash flows.

17

Future reductions in airbag propellant volume could adversely affect our financial results.

One of our plants produces large volumes of propellants used in automobile airbags sold to a single customer. These products are subject to cost competition from other domestic and foreign suppliers. The loss of significant volume could affect fixed cost absorption for the plant, which could have a material adverse effect on our operating results, financial condition, and/or our cash flows.

Disruptions in the supply of key raw materials and difficulties in the supplier qualification process, as well as 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 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. We continue our efforts at qualifying new suppliers and materials for these materials and we expect that such new materials can be available in time to meet our future production needs. 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. This single source, however, maintains two separate manufacturing lines a reasonable distance apart which helps mitigate the likelihood of a fire, explosion, or other problem impacting supply. The industry also currently relies on one primary supplier for graphite fiber, which is used in the production of composite materials. This supplier has multiple manufacturing lines for such material. Although other sources of graphite fiber exist, the addition of a new supplier would require us to qualify the new source for use. Recently, the Japanese government has imposed export restrictions on materials that are to be used in offensive weapons systems. To date, this has not impacted our production but 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. Titanium mill products continue to be monitored and we have seen some softening in the schedules and pricing, however, both remain well above historical levels. We monitor the price and supply of these materials and work closely with suppliers to schedule purchases far enough in advance and in the most economical means possible to reduce program impact. Additionally, whenever possible, we have negotiated with our customers economic and/or price adjustment clauses tied to commodity indices. Our past success in negotiating these terms is no indication of our ability to continue to do so. The U.S. Department of Defense has begun to rigorously enforce the provisions of the “Berry Amendment” (DFARS 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 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 our cash flows.

18

The real estate market is inherently risky.

Our real estate activities may subject us to various risks including the following:

•  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;

•  we may be unable to complete environmental remediation or to have lifted state and federal environmental restrictions on our property, which could cause a delay or abandonment of these projects;

•  we may be unable to obtain sufficient water sources to service our projects, which may prevent us from executing our plans;

•  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;

•  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;

•  our property is subject to federal, state, and local regulations and restrictions that may impose significant limitations on our plans;

•  much of our property is raw land which includes the natural habitats of various endangered or protected wildlife species requiring mitigation;

•  if our land use plans are approved by the appropriate governmental authorities, we may face potential 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

•  the time frame required for approval of our plans means that we may have to wait years for a significant cash return.

Substantially all of our real estate 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 performance and the value of our properties will depend upon conditions in the Sacramento region, including:

•  the sustainability and growth of industries located in the Sacramento region;

•  the financial strength and spending of the State of California;

•  local real estate market conditions;

•  changes in neighborhood characteristics;

•  changes in interest rates; and

•  real estate tax rates.

If unfavorable economic or other conditions occur in the region, our plans and business strategy could be adversely affected.

We have limited experience in real estate activities.

While we have owned our Sacramento real estate for over 50 years, we have limited real estate experience. Therefore, we do not have substantial history from which you can draw conclusions about our ability to execute our real estate plans.

19

We have a substantial amount of debt.

We have a substantial amount of debt for which we are required to make interest and principal payments. As of November 30, 2007, we had $446.3 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 on 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 compared 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.

We are obligated to comply with financial and other covenants outlined in our debt indentures and agreements that could restrict our operating activities and the failure to comply could result in defaults that accelerate the payment of our debt.

Our debt instruments generally contain various restrictive covenants which include, among others, provisions restricting our ability to:

•  incur additional debt;

•  enter into certain leases;

•  make certain distributions, investments and other restricted payments;

•  limit the ability of restricted subsidiaries to make payments to us;

•  enter into transactions with affiliates;

•  create certain liens;

•  purchase assets or businesses;

•  sell assets and if sold, use the proceeds; and

•  consolidate, merge or sell all or substantially all of our assets.

Our secured debt also contains other customary covenants, including, among others, provisions:

•  relating to the maintenance of the property securing the debt; and

•  restricting our ability to pledge assets or create other liens.

In addition, certain covenants in our bank facilities require us and our subsidiaries to maintain certain financial ratios. 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 all or a substantial portion of our debt.

20

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.

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 management’s efforts. Adverse outcomes in litigation, including toxic tort claims pending against Aerojet and the appeals of the unfair labor claims brought by former employees of the Company’s Snappon SA subsidiary in France could have a material adverse effect on our operating results, financial condition, and/or our cash flows. See Item 3, Legal Proceedings and Note 7 in Notes to Consolidated Financial Statements for more detailed information on legal proceedings.

We may expand our operations through acquisitions, which may divert management’s 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 include continued expansion of our Aerospace and Defense segment through acquisitions that make both strategic and economic sense. 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 management’s 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 diligence investigation of each business that we have or may acquire, there may be liabilities of the acquired companies that we fail to, or are unable to, discover during the diligence investigation and for which we, as a successor owner, may be responsible. In connection with acquisitions, we 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 (GDX) 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, 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 would have a material adverse effect on our operating results, financial condition, and/or our cash flows.

21

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, 2007, 16% of our 3,252 employees were covered by collective bargaining agreements that are due to expire in the summer of 2008. If we are unable to negotiate acceptable new agreements with the unions representing our employees upon expiration of the existing contracts, we could experience strikes or work stoppages. 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 could also have similar effects on us.

A loss of key personnel or highly skilled employees could disrupt our operations.

Our executive officers are critical to the management and direction of our businesses. Our future success depends, in large part, on our ability to retain these officers and other capable management personnel. In general, we do not enter into employment agreements with our executive officers. We have entered into severance agreements with our executive officers that allow those officers to terminate their employment under particular circumstances following a change of control of the Company. Although we believe that we will be able to attract and retain talented personnel and replace key personnel should the need arise, our inability to do so could disrupt our operations. In addition, because of the complex nature of many of our products and programs, we are generally dependent on an educated and highly-skilled engineering staff and workforce. Our operations could be disrupted by a shortage of available skilled employees.

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; and

•  in our Real Estate segment, sales of property may be made from time to time, which may result in variability in our operating results.

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 liabilities. Accordingly, we may be forced to bear substantial costs resulting from risks and uncertainties of our business which would have a material adverse effect on our operating results, financial condition, and/or our 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

22

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 future period operating results, financial condition, and/or our cash flows. For an additional discussion of our revenue recognition policy refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Critical Accounting Policies” and Note 1 in Notes to Consolidated Financial Statements.

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 (GAAP) arise from new and revised standards, interpretations and other guidance issued by the Financial Accounting Standards Board, the SEC, and others. In addition, the U.S. government may issue new or revised Cost Accounting Standards or Cost Principles. The effects of such changes may include prescribing an accounting method where none had been previously specified, prescribing a single acceptable method of accounting from among several acceptable methods that currently exist, or revoking the acceptability of a current method and replacing it with an entirely different method, among others. Such changes could result in unanticipated effects on our operating results, financial condition, and/or our cash flows.

The level of returns on retirement benefit plan assets, changes in interest rates, 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. GAAP requires that we calculate expense for the plans using 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; the expected long-term rate of return on plan assets; and the rate of increase in future compensation levels. Our pension expense\income can also be affected by legislation and other government regulatory actions. For an additional discussion of our retirement benefits accounting policies refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations under the caption “Critical Accounting Policies” and Note 6 in Notes to Consolidated Financial Statements.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could negatively impact the market price of our stock price.

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 that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act. 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.

23

Item 2.   Properties

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 P.O. Box 13222 Sacramento, California 95813-6000	Design/Manufacturing Facilities: Camden, Arkansas* Clearfield, Utah* El Segundo, California* 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 620 Coolidge Drive, Suite 100 Folsom, California 95630*

*	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 Aerojet’s 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.

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 pursuant to which plaintiff water purveyors seek recovery of costs allegedly incurred in response to the contamination present at the SEMOU 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.

24

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. Plaintiffs allege that groundwater in the SEMOU is contaminated with chlorinated solvents and ammonium perchlorate that were released into the environment by Aerojet and other defendants, causing plaintiffs to incur unspecified response costs and other damages.

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 Aerojet’s complaints. The motions as well as discovery have been stayed by the court, which stay has been recently extended through February 28, 2008, pending efforts to resolve the litigation through mediation.

Southern California Case

In June 2007, Aerojet was sued by seven individual plaintiffs residing in the vicinity of Aerojet’s former facility in Azusa, California. The case is entitled Gatter et al. v. Aerojet-General Corporation, Case No. K050503R, Los Angeles County (CA) Superior Court and was served June 21, 2007. The plaintiffs allege that Aerojet and unnamed defendants contaminated groundwater, which plaintiffs consumed causing illness and economic injury. Discovery is ongoing. Trial has been set for October 2008.

Sacramento Case

Aerojet has been recently named as a defendant in a lawsuit brought by six individuals who allegedly resided in the vicinity of Aerojet’s Sacramento facility. Plaintiffs allege that Aerojet contaminated groundwater to which plaintiffs were exposed and which caused plaintiffs illness and economic injury. Aerojet has not been served with the complaint.

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.

Of the cases that have been filed, the majority have been dismissed or settled on terms favorable to the Company. There were three vinyl chloride cases pending against the Company as of November 30, 2007, all involving employees at VC or PVC facilities owned or operated by others. One of the pending cases is an action seeking class certification and a medical monitoring program for former employees at a PVC facility in New Jersey.

25

The following table sets forth information related to vinyl chloride litigation:

	Year Ended November 30,
	2007		2006		2005
	(Dollars in thousands)
Claims filed		2		1		4
Claims dismissed		1		1		9
Claims settled		6		2		9
Claims pending		3		8		10
Aggregate settlement costs	$	849	$	76	$	18
Average settlement costs	$	141	$	38	$	2

Legal and administrative fees for the vinyl chloride cases for fiscal years 2007, 2006, and 2005 were $0.3 million, $0.4 million, and $0.4 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. Since 1998, more than 200 of these asbestos lawsuits have been resolved with the majority being dismissed.

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.

The following table sets forth information related to asbestos litigation:

	Year Ended November 30,
	2007			2006		2005
	(Dollars in thousands)
Claims filed		57	*		62		149	**
Claims dismissed		43			55		65
Claims settled		8			5		2
Claims pending		160			154		152
Aggregate settlement costs	$	72		$	67	$	50
Average settlement costs	$	9		$	14	$	25

*	This number is net of two cases tendered to a third party under a contractual indemnity obligation.
**	Includes 30 cases tendered to the Company by PCC Flow Technologies, Inc. and its affiliates (PCC). PCC had originally tendered 57 cases, but 27 of such cases were dismissed prior to the Company’s and PCC’s August 31, 2005 settlement agreement.

Legal and administrative fees for the asbestos cases for fiscal years 2007, 2006, and 2005 were $0.9 million, $0.5 million, and $0.5 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 April 11, 2006, the Labour Court rejected most of the claims of the first group of 44 former

26

employees and held Snappon SA responsible for €12,000 (approximately $17,000) as damages. After two hearings, the Labour Court rejected the claims filed by the second group of former employees, which group had claimed damages in excess of €12.7 million (approximately $18 million). A total of 175 former employees have appealed these decisions. These appeals are scheduled to be heard in October 2008.

Other Legal Proceedings

On August 31, 2004, the Company completed the sale of its GDX Automotive 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 is investigating the underlying facts to determine what liability, if any, the Company may have for this claim.

In August 2007, along with numerous other companies, the Company received from the United States Department of Interior Fish and Wildlife Service (USFWS) a notice of a Natural Resource Damage 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. 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.

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 the Company’s results of operations or cash flows in any particular reporting period.

Item 4.   Submission of Matters to a Vote of Security Holders

None.

PART II

Item 5.   Market for Registrant’s Common Equity, Related Stockholders’ Matters and Issuer Purchases of Equity Securities

As of January 22, 2008, there were 8,514 holders of record of the common stock. On January 22, 2008, the last reported sale price of our common stock on the New York Stock Exchange was $10.06 per share.

Our Senior Credit Facility (described in Part II, Item 7. Management’s 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. Management’s 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.

27

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 sale prices for the common stock as reported by the New York Stock Exchange:

	Common Stock
	Price
Fiscal Year Ended November 30,	High		Low
2007
First Quarter	$	15.25	$	12.88
Second Quarter	$	14.46	$	13.06
Third Quarter	$	13.97	$	10.55
Fourth Quarter	$	12.73	$	10.76
2006
First Quarter	$	20.39	$	17.32
Second Quarter	$	20.75	$	17.80
Third Quarter	$	18.64	$	12.92
Fourth Quarter	$	14.63	$	12.02

28

Stock Performance Graph

The following graph compares the cumulative total shareholder returns on $100 invested in November 2002 assuming reinvestment of dividends of the Company’s Common Stock with the cumulative total return, assuming reinvestment of dividends, of (i) the Standard & Poor’s 500 Composite Stock Price Index (S&P 500 Index), and (ii) the Standard & Poor’s 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 and Defense Index,
November 2002 through November 2007

	Base
	Period		As of November 30,
Company/Index	Nov02		2003		2004		2005		2006		2007
GenCorp		100.00		125.42		211.73		230.00		173.95		152.41
S&P 500 Index		100.00		115.09		129.89		140.85		160.90		173.32
S&P 500 Aerospace & Defense		100.00		112.07		145.08		160.93		206.34		249.69

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. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Year Ended November 30,
	2007		2006			2005			2004			2003
	(In millions, except per share and dividend amounts)
Net sales(1)	$	745.4	$	621.1		$	622.4		$	495.4		$	347.9
Net income (loss):
Income (loss) from continuing operations, net of income taxes	$	41.1	$	(39.0	)	$	(206.4	)	$	(86.5	)	$	11.7
Income (loss) from discontinued operations, net of income taxes(1)		27.9		2.4			(23.6	)		(311.1	)		10.3
Cumulative effect of changes in accounting principles, net of income taxes(2)		—		(1.9	)		—			—			—
Net income (loss)	$	69.0	$	(38.5	)	$	(230.0	)	$	(397.6	)	$	22.0
Basic earnings (loss) per share of Common Stock
Income (loss) from continuing operations	$	0.73	$	(0.70	)	$	(3.78	)	$	(1.92	)	$	0.26
Income (loss) from discontinued operations, net of income taxes(1)		0.50		0.04			(0.43	)		(6.90	)		0.24
Cumulative effect of changes in accounting principles, net of income taxes(2)		—		(0.03	)		—			—			—
Total	$	1.23	$	(0.69	)	$	(4.21	)	$	(8.82	)	$	0.50
Diluted earnings (loss) per share of Common Stock
Income (loss) from continuing operations(3)	$	0.71	$	(0.70	)	$	(3.78	)	$	(1.92	)	$	0.26
Income (loss) from discontinued operations, net of income taxes(1)		0.43		0.04			(0.43	)		(6.90	)		0.24
Cumulative effect of changes in accounting principles, net of income taxes(2)		—		(0.03	)		—			—			—
Total(3)	$	1.14	$	(0.69	)	$	(4.21	)	$	(8.82	)	$	0.50
Cash dividends paid per share of Common Stock	$	—	$	—		$	—		$	0.06		$	0.12
Other financial data:
Total assets(2)	$	995.2	$	1,021.4		$	1,057.4		$	1,495.1		$	1,929.0
Long-term debt, including current maturities	$	446.3	$	462.4		$	443.9		$	577.1		$	538.0

(1)	On August 31, 2004, we completed the sale of our GDX business. On November 30, 2005, we completed the sale of our Fine Chemicals business. On November 17, 2006, we completed the sale of our Turbo product line. The GDX and Fine Chemicals businesses and the Turbo product line are classified as discontinued operations in the Consolidated Financial Statements and Notes to Consolidated Financial Statements.
(2)	During fiscal 2007, we adopted Statement of Financial Accounting Standards (SFAS) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. During fiscal 2006, we adopted SFAS No. 123(R), Share-Based Payment, and Financial Accounting Standards Board Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of SFAS Statement No. 143, Accounting for Asset Retirement Obligations.
(3)	During the fourth quarter of fiscal 2007, the Company identified an error in the computation of diluted income per share from continuing operations and diluted net income per share presented in its Form 10-Qs for the quarterly periods ended May 31, 2007 and August 31, 2007. The Company had incorrectly included in the computation its 21/4% Debentures on an “as if” converted basis. Only the conversion premium (amount in excess of principal received by holder upon conversion) for these debentures is settled in common shares, with the principal settled in cash. Because the market price of the Company’s common stock did not exceed the conversion price for the period, there was no conversion premium, and, as such, no dilutive effect on an “as converted” basis. The error had no effect on any financial statement amounts other than diluted income per share from continuing operations and diluted net income per share for the second and third quarter of fiscal 2007 and the nine months ended August 31, 2007. The diluted income per share from continuing operations and diluted net income per share for the six months ended May 31, 2007 were correctly stated. Management has concluded that the errors are not material to the financial statements for those periods and that the Form 10-Q filings for those periods can continue to be relied upon. A summary of the revisions are as follows:

	Second Quarter Ended				Third Quarter Ended				Nine Months Ended
	May 31, 2007				August 31, 2007				August 31, 2007
	Previously				Previously				Previously
	Reported		Revised		Reported		Revised		Reported		Revised
Diluted income per share from continuing operations	$	0.21	$	0.22	$	0.25	$	0.27	$	0.46	$	0.48
Diluted net income per share		0.20		0.21		0.24		0.26		0.87		0.94

30

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

Overview

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

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

Real Estate — includes activities related to the entitlement, sale, and leasing of our excess real estate assets. We own approximately 12,600 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 6,400 acres of the Sacramento Land. We also own approximately 580 acres in Chino Hills, California. We are currently seeking removal of environmental restrictions. Once completed, we will work to maximize the value of the land.

On August 31, 2004, we completed the sale of our GDX business. On November 30, 2005, we completed the sale of our Fine Chemicals business. On November 17, 2006, we completed the sale of our Turbo product line. The GDX and Fine Chemicals businesses and the Turbo product line are classified as discontinued operations in the Consolidated Financial Statements and Notes to Consolidated Financial Statements (see Note 11 in Notes to Consolidated Financial Statements).

Business Outlook

Real Estate — We continue to work with governmental authorities to effect entitlement changes and to lift environmental restrictions for approximately 6,400 acres of our excess Sacramento Land as soon as practicable. In conjunction with these efforts, we will continue to explore, depending on market conditions, real estate structures (or transactions) that may further enhance the value of our real estate assets, including outright sales, and/or joint ventures with real estate developers, residential builders or other third parties.

Retirement Benefits Related Items — We estimate that our net periodic benefit expense will be approximately $7 million in fiscal 2008 compared to $21.6 million in fiscal 2007. The significant decrease in net periodic benefit expense is primarily due to (i) our decision to increase the discount rate used to determine benefit obligations, due to higher market interest rates, and (ii) a diminishing actuarial loss base due to the recognition of prior year’s losses over five years.

31

Income Taxes — We estimate the adoption of Financial Accounting Standards (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, in the first quarter of fiscal 2008 will result in us recording a benefit of approximately $9 million which will directly reduce our shareholders’ deficit.

Results of Operations

	Year Ended November 30,
	2007			2006			2005
	(In millions, except per share amounts)
Net sales	$	745.4		$	621.1		$	622.4
Costs and expenses
Cost of products sold		657.8			565.0			737.3
Selling, general and administrative		14.4			28.8			29.5
Depreciation and amortization		28.4			27.2			28.4
Interest expense		28.6			27.2			23.6
Interest income		(4.9	)		(3.6	)		(0.6	)
Other (income) expense, net		(2.6	)		11.7			2.5
Unusual items
Legal settlements and estimated loss on legal matters		3.8			8.5			31.1
Customer reimbursement of tax matters		2.3			—			—
Loss on repayment of debt		0.6			—			18.1
Gain on settlements and recoveries		(6.0	)		—			(11.8	)
Total costs and expenses		722.4			664.8			858.1
Income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting principles		23.0			(43.7	)		(235.7	)
Income tax benefit		(18.1	)		(4.7	)		(29.3	)
Income (loss) from continuing operations before cumulative effect of changes in accounting principles		41.1			(39.0	)		(206.4	)
Income (loss) from discontinued operations, net of income taxes		27.9			2.4			(23.6	)
Income (loss) before cumulative effect of changes in accounting principles		69.0			(36.6	)		(230.0	)
Cumulative effect of changes in accounting principles, net of income taxes		—			(1.9	)		—
Net income (loss)	$	69.0		$	(38.5	)	$	(230.0	)

Net Sales

Consolidated net sales increased to $745.4 million in fiscal 2007 compared to $621.1 million in fiscal 2006. The increase is the result of higher sales on numerous space and defense programs, including the Standard Missile, Orion, and Titan programs. The increase in the Standard Missile program was primarily due to deliveries associated with awards received in fiscal 2006 and the award of a new contract in fiscal 2007 to develop and qualify the Throttling Divert Attitude Control Systems for the Standard Missile 3 program. Capturing the Orion award in fiscal 2006 is another factor driving the fiscal 2007 increase in net sales. The increase in Titan sales during fiscal 2007 is the result of the final close-out activities of the program which are essentially complete with expected conclusion in the first half of fiscal 2008.

Consolidated net sales decreased to $621.1 million in fiscal 2006 compared to $622.4 million in fiscal 2005. Revenue growth in missile defense, tactical motors, and space propulsion programs was offset by volume declines in the Atlas V and Titan programs.

32

Customers that represented more than 10% of net sales for the fiscal years presented are as follows:

	Year Ended November 30,
	2007			2006			2005
Lockheed Martin Corporation (Lockheed Martin)		28	%		39	%		39	%
Raytheon Company		28			19			16
The Boeing Company (Boeing)			*		10				*

* Less than 10% of net sales

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

Sales in fiscal 2007, fiscal 2006, and fiscal 2005 directly and indirectly to the U.S. government and its agencies, including sales to the Company’s significant customers discussed above, totaled $665.9 million, $523.5 million, and $500.8 million, respectively. The demand for certain of the Company’s services and products is directly related to the level of funding of government programs.

During fiscal 2007, approximately 46% of our net sales were from fixed-price contracts and 44% from cost reimbursable contracts.

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

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

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

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

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

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

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

These factors discussed above were partially offset by the following:

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

For fiscal 2006, we reported a loss from continuing operations before income taxes and cumulative effect of changes in accounting principles of $43.7 million compared to $235.7 million for fiscal 2005. The decrease in the loss reported was primarily due to the following:

•  Improvement in performance of our Aerospace and Defense segment, primarily driven by the $169.4 million write-down of inventory associated with the Atlas V contract in fiscal 2005.

•  Decrease of $28.9 million in unusual charges. See discussion of “Unusual Items” below.

•  Decrease related to employee retirement benefit expense of $4.3 million. See discussion of “Retirement Benefit Plans” below.

33

These factors discussed above were partially offset by the following:

•  Increased spending of $5.9 million related to corporate and other expenses. See discussion of “Corporate and Other Expenses” below.

•  Increased interest expense of $3.6 million. The increase was primarily due to interest allocated to discontinued operations in fiscal 2005 and higher debt levels.

Segment Results

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

	Year Ended November 30,
	2007			2006			2005
	(In millions)
Net Sales:
Aerospace and Defense	$	739.1		$	614.6		$	615.8
Real Estate		6.3			6.5			6.6
Total	$	745.4		$	621.1		$	622.4
Segment Performance — Income (Loss):
Aerospace and Defense	$	84.8		$	61.2		$	(109.2	)
Environmental remediation provision adjustments(1)		0.4			(7.4	)		(3.9	)
Retirement benefit plan expense(2)		(23.8	)		(34.8	)		(34.2	)
Unusual items(3)		(0.1	)		(8.5	)		9.8
Aerospace and Defense Total		61.3			10.5			(137.5	)
Real Estate		3.5			2.3			3.9
Total	$	64.8		$	12.8		$	(133.6	)
Reconciliation of segment performance to income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting principles:
Segment Performance	$	64.8		$	12.8		$	(133.6	)
Interest expense		(28.6	)		(27.2	)		(23.6	)
Interest income		4.9			3.6			0.6
Corporate retirement benefit plan income (expense)(2)		2.2			(8.7	)		(13.6	)
Corporate and other expenses		(19.7	)		(24.2	)		(18.3	)
Corporate unusual items(3)		(0.6	)		—			(47.2	)
Income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting principles	$	23.0		$	(43.7	)	$	(235.7	)

(1)	See discussion of environmental remediation provision adjustments under the caption “Environmental Matters” below.
(2)	See discussion of retirement benefit plan expense under the caption “Retirement Benefit Plans” below.
(3)	See discussion of unusual items under the caption “Unusual Items” below.

34

Aerospace and Defense

Fiscal 2007

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

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

Fiscal 2006

Net sales decreased to $614.6 million in fiscal 2006 compared to $615.8 million in fiscal 2005. Revenue growth in missile defense, tactical motors, and space propulsion programs was offset by volume declines in the Atlas V and Titan programs.

For fiscal 2006, segment performance was income of $10.5 million compared to a loss of $137.5 million in fiscal 2005. Significant factors impacting the change in segment performance compared to the prior year were: (i) a $169.4 million write-down of inventory associated with the Atlas V program in fiscal 2005 which was charged to cost of products sold; and (ii) a variety of other changes in fiscal 2006 sales that positively impacted mix and performance.

Real Estate

Fiscal 2007

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

Fiscal 2006

Real Estate sales and segment performance for fiscal 2006 were $6.5 million and $2.3 million, respectively, compared to $6.6 million and $3.9 million, respectively, for fiscal 2005. Results for fiscal 2006 and 2005 consist of rental property operations and there were no significant sales of real estate assets. The decrease in segment performance was driven primarily by additional expenditures, including costs associated with the exploration of potential real estate joint ventures with third parties.

Corporate and Other Expenses

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

Corporate and other expenses increased to $24.2 million in fiscal 2006 compared to $18.3 million in fiscal 2005. The increase in spending was primarily due to higher expenses related to the election of the Company’s directors and the Company’s estimated share of future environmental remediation costs, following a July 2006 ruling in a lawsuit with Olin Corporation.

Corporate and other expenses include costs associated with commercial legacy business matters, including legal and environmental costs.

35

Retirement Benefit Plans

Expense (income) from our retirement benefit plans are as follows:

	Year Ended
	November 30,
	2007			2006		2005
	(In millions)
Aerospace and Defense	$	23.8		$	34.8	$	34.2
Corporate		(2.2	)		8.7		13.6
Retirement benefit plan expense	$	21.6		$	43.5	$	47.8

The significant decrease in net periodic benefit expense in fiscal 2007 compared to fiscal 2006 is primarily due to (i) our decision to increase the discount rate used to determine benefit obligations, due to higher market interest rates; and (ii) a diminishing actuarial loss base due to the recognition of prior years’ losses over five years.

Unusual Items

Charges and gains associated with unusual items are summarized as follows:

	Year Ended
	November 30,
	2007			2006		2005
	(In millions)
Aerospace and Defense:
Legal settlements and estimated loss on legal matters	$	3.8		$	8.5	$	2.0
Customer reimbursements of tax recoveries		2.3			—		—
Gain on settlements and recoveries		(6.0	)		—		(11.8	)
Aerospace and Defense unusual items		0.1			8.5		(9.8	)
Corporate:
Replacement of the previous credit facility		0.6			—		—
Legal settlement		—			—		29.1
Loss on redemption of 91/2% Notes		—			—		6.7
Loss on repayment of 53/4% Notes		—			—		5.5
Loss on termination of the former credit facility		—			—		5.9
Corporate unusual items		0.6			—		47.2
Total Unusual items	$	0.7		$	8.5	$	37.4

In fiscal 2007, we recorded $3.8 million related to estimated costs associated with legal matters. We recorded an expense of $2.3 million for tax refunds that will be repaid to our defense customers. We 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. We incurred a charge of $0.6 million associated with the replacement of the previous credit facility.

In fiscal 2006, we recorded a charge of $8.5 million related to a legal settlement of a group of environmental toxic tort cases that had been pending in Sacramento Superior Court since 1997.

In fiscal 2005, we recorded a charge of $2.0 million related to a legal settlement of the San Gabriel Valley and Chino Hills toxic tort cases. In addition, we recorded an unusual gain of $11.8 million, $2.8 million of which related to a settlement with our insurance providers and $9.0 million of which related to an adjustment of reserves established in fiscal 2001 for customer reimbursements of tax recoveries that had been settled. We recorded a charge of $29.1 million related to the Olin legal matter. We also recorded a charge of $18.1 million as a result of the redemption of $52.5 million of principal of the 91/2% Notes, repayment of $59.9 million of principal of the 53/4% Notes, and the termination of the Company’s former credit facility.

36

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 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 (PRP) 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. In accordance with the American Institute of Certified Public Accountants’ Statement of Position 96-1 (SOP 96-1), Environmental Remediation Liabilities, and Staff Accounting Bulletin No. 92 (SAB 92), Accounting and Disclosure Relating to Loss Contingencies, 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 to $6.3 million in fiscal 2007, $7.1 million in fiscal 2006, and $11.2 million in fiscal 2005.

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 whose contractual terms are sufficiently specific to allow reasonable cost estimates to be developed for less or greater than a fifteen year period. As the period for which estimated environmental remediation costs increases, the reliability of such estimates decreases. These estimates consider the investigative work and analysis of engineers, outside environmental consultants, and the advice of our attorneys regarding the status and anticipated results of various administrative and legal proceedings. In most cases, only a range of reasonably probable 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 our estimates as new information becomes available. Management cannot predict whether new information gained as projects progress will affect the estimated liability accrued. The timing of payment for estimated future environmental costs depends on the timing of regulatory approvals for planned remedies and the construction and completion of the remedies.

37

A summary of the environmental reserve activity is shown below:

							Total
							Environmental
	Aerojet			Other			Reserves
	(In millions)
November 30, 2004	$	287.0		$	16.6		$	303.6
Fiscal 2005 additions		13.0			1.4			14.4
Fiscal 2005 expenditures		(44.4	)		(5.6	)		(50.0	)
November 30, 2005		255.6			12.4			268.0
Fiscal 2006 additions		48.4			1.8			50.2
Fiscal 2006 expenditures		(47.5	)		(4.7	)		(52.2	)
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

As of November 30, 2007, the Aerojet reserves include $164.2 million for the Sacramento site, $74.2 million for BPOU, and $21.1 million for other Aerojet reserves.

The effect of the final resolution of environmental matters and our obligation 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, if available, and from other PRPs, along with continued investigation of new and more cost effective remediation alternatives and technologies.

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 costs associated with the clean up 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.

Pursuant to the Global Settlement covering environmental costs associated with Aerojet’s 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 Aerojet’s products and services sold to the U.S. government. Allowable environmental costs are charged to these contracts as the costs are incurred. Aerojet’s 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 Aerojet’s sustained business volume under U.S. government contracts and programs and the relative size of Aerojet’s commercial business. Annually, we evaluate Aerojet’s forecasted business volume under U.S. government contracts and programs and the relative size of Aerojet’s commercial business as part of our long-term business review. In the third quarter of fiscal 2007, as a result of a forecasted increase in U.S government contracts and programs volume, estimated future recoverable amounts from the U.S. government increased; accordingly, we recorded a benefit of $8.6 million in the third quarter of fiscal 2007.

In conjunction with the sale its Electronic and Information Systems business, Aerojet entered into an agreement with Northrop Grumman Corporation (Northrop) whereby Aerojet is reimbursed by Northrop for a portion of environmental expenditures eligible for recovery under the Global Settlement. Amounts reimbursed are

38

subject to annual limitations, with excess amounts carried over to subsequent periods, the total of which will not exceed $190 million over the term of the agreement, which ends in 2028. As of November 30, 2007, $131.5 million in potential future reimbursements were available over the remaining life of the agreement.

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 million of costs (Pre-Close Environmental Costs) associated with environmental issues that arose prior to Aerojet’s acquisition of the ARC propulsion business, of which $5.5 million has been spent through November 30, 2007. Pursuant to a separate agreement with the U.S. government 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 Aerojet’s products and services sold to the U.S. government.

As a part of the ARC acquisition, Aerojet signed a Memorandum of Understanding with the U.S. government agreeing to key assumptions and conditions that preserved the original methodology used in recalculating the percentage split between Aerojet and Northrop. In the fourth quarter of fiscal 2007, Aerojet presented an updated proposal to the U.S. government based on the Memorandum of Understanding and expects to complete an agreement in the near term. As a result of the revised proposal, we incurred a charge of $1.5 million to cost of sales in the fourth quarter of fiscal 2007 related to the retroactive adjustment to the allocation split going back to fiscal 2005.

Environmental reserves and recoveries impact to Statement of Operations

In conjunction with the review of our environmental reserves discussed above, we revised our estimate of costs that will be recovered under the Global Settlement based on business expected to be conducted under contracts with the U.S. government and its agencies in the future. In fiscal 2007, the increase to the reserve of $60.4 million resulted in a net charge to operations of $2.1 million, the net charge includes a benefit of $8.6 million due to changes in the forecasted commercial business base (discussed above). In fiscal 2006, the increase to the reserve of $50.2 million resulted in a charge to operations of $9.2 million. In fiscal 2005, the increase to the reserve of $14.4 million resulted in a charge to operations of $5.1 million. 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.

Income Tax Benefit

Although we generated $23.0 million in pretax book income from continuing operations, we had a tax loss from continuing operations primarily from fiscal 2007 tax deductions for items previously expensed for book purposes, including environmental expenditures, research and development expenditures, and funding of post retirement obligations. The fiscal 2007 tax net operating loss from continuing operations resulted in an income tax benefit of $6.3 million for carryback to prior years and a refund of previously paid taxes and a $12.2 million benefit primarily from federal and state income tax settlements including research and development credit claim benefits, manufacturer’s investment credit claim benefits, and certain statute expirations, which is partially offset by $0.4 million of current state tax expense.

Our income tax benefit in fiscal 2006 reflects a $6.0 million benefit from continuing operations for the carryback of current and prior year losses resulting in refunds of previously paid taxes. Our income tax benefit in fiscal 2005 reflects a $29.3 million benefit from continuing operations for the carryback of current and prior year losses resulting in refunds of previously paid taxes.

At November 30, 2007, we had a federal net operating loss carryforward of approximately $223.2 million of which $61.3 million expires in fiscal 2024, $160.6 million expires in fiscal 2025, and $1.3 million expires in fiscal 2027, if not utilized. 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 federal and state capital loss carryforwards of approximately $158.4 million and $63.3 million, respectively, most of which expire in fiscal 2009. For state tax purposes, we have approximately $214.1 million in net operating loss carryforwards of which $35.6 million expires in fiscal 2014, $133.8 million expires in fiscal 2015, $28.7 million expires in fiscal 2016, and $16.0 million expires in fiscal 2017, if not utilized.

39

We also have a federal research credit carryforward of $6.2 million which begins expiring in fiscal 2021; and a California manufacturing investment credit carryforward of $1.0 million which begins expiring in fiscal 2010; 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.

Income (Loss) from Discontinued Operations

During fiscal 2006, we classified our Turbo product line as a discontinued operation as a result of our plan to sell the product line. The product line was not core to the Aerospace and Defense segment and required increased management oversight and costs because of increased competition and investments for on-going maintenance of the product line. On November 17, 2006, we completed the sale of the Turbo product line to Aerosource Inc. for $1.1 million, subject to adjustment. The loss on the sale of the Turbo product line during fiscal 2006 was $0.4 million. An additional loss of $0.1 million was recorded in fiscal 2007 to reflect the net assets of the Turbo product line and management’s estimate of the net proceeds from the sale. For operating segment reporting, the Turbo product line was previously reported as a part of the Aerospace and Defense segment.

On November 30, 2005, we sold our Fine Chemicals business to American Pacific Corporation (AMPAC) for $88.5 million of cash paid at closing, an unsecured subordinated seller note of $25.5 million delivered at closing, an earn-out provision of up to $6.0 million contingent upon the business’ achieving certain earnings targets, and the assumption by the buyer of certain liabilities. We recorded a full allowance on both the $25.5 million unsecured subordinated seller note in fiscal 2005 and $6.0 million earnings target receivable in fiscal 2006. During fiscal 2005, we recorded a loss of $28.7 million on the difference between the estimated cash proceeds to be received on disposition less the carrying value of the net assets being sold and related transaction selling costs. An additional loss of $0.1 million was recorded in fiscal 2006 to reflect the net assets of the Fine Chemicals business and management’s estimate of the proceeds from the sale. During the first quarter of fiscal 2007, we entered into an earn-out and seller note repayment agreement (Repayment Agreement) with 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. 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. For operating segment reporting, the Fine Chemicals business was previously reported as a separate operating segment.

In June 2006, we entered into a Final Settlement and Release Agreement with Cerberus Capital Management, L.P. (Cerberus) related to the sale of GDX which resulted in a $2.9 million income tax benefit and $2.0 million gain that was recorded during the second quarter of fiscal 2006. For operating segment reporting, GDX was previously reported as a separate operating segment.

We adjusted certain pre-acquisition obligations during the second quarter of fiscal 2006 associated with our purchase of the Draftex group in December 2000 which resulted in a $1.7 million charge. During the third quarter of fiscal 2006, we reached a settlement on these pre-acquisition obligations which resulted in a gain of $1.3 million.

In November 2003, we announced the closing of a GDX manufacturing facility in Chartres, France. The decision resulted primarily from declining sales volumes with French automobile manufacturers. In June 2004, we completed the legal process for closing the facility and establishing a social plan. In fiscal 2004, an expense of approximately $14.0 million related to employee social costs was recorded in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. An expense of $1.0 million was recorded during fiscal 2005 primarily related to employee social costs that became estimable in fiscal 2005. We have not yet recorded expenses associated with other social benefits due to the uncertainty of these costs which could total up to a pre-tax expense of $2.0 million and may be incurred within the next few years.

40

Summarized financial information for discontinued operations is set forth below:

	Year Ended November 30,
	2007			2006		2005
	(In millions)
Net sales	$	—		$	1.0	$	66.1
Income (loss) before income taxes		28.9			—		(23.6	)
Income tax benefit (provision)		(1.0	)		2.4		—
Income (loss) from discontinued operations		27.9			2.4		(23.6	)

Adoption of New Accounting Principles

As of December 1, 2005, we adopted SFAS No. 123(R), Share-Based Payment (SFAS 123(R)), which requires companies to recognize in the statement of operations the grant-date fair value of stock awards issued to employees and directors. We adopted SFAS 123(R) using the modified prospective transition method. In accordance with the modified prospective transition method, our Consolidated Financial Statements for prior periods have not been restated to reflect the impact of SFAS 123(R). As a result of applying SFAS 123(R), the loss from continuing operations before the cumulative effect of changes in accounting principles for fiscal 2006 was increased by $0.6 million. In addition, we recognized an increase to our net loss of $0.7 million related to the cumulative effect of changes accounting principles as of December 1, 2005 (see Note 8(c) in Notes to Consolidated Financial Statements).

As of November 30, 2006, we adopted FASB Interpretation No. 47 (FIN 47), Accounting for Conditional Asset Retirement Obligations, an interpretation of SFAS No. 143, Accounting for Asset Retirement Obligations. FIN 47 requires that the fair value of a liability for a conditional asset retirement obligation be recognized in the period in which it is incurred and the settlement date is estimable, and is capitalized as part of the carrying amount of the related tangible long-lived asset. The adoption of FIN 47 resulted in our recording conditional asset retirement obligations in the amount of $10.2 million. Of this amount, $1.4 million was recorded as an incremental cost of the underlying property, plant and equipment, less $0.8 million of accumulated depreciation. We also recorded an asset of $8.4 million which represents the amount of the conditional asset retirement obligation that is estimated to be recoverable under U.S. government contracts. As of November 30, 2006, the cumulative effect related to the accretion of the liability and depreciation of the asset net of the amount recoverable under U.S. government contracts was $1.2 million (see Note 7(e) in Notes to Consolidated Financial Statements).

As of November 30, 2007, we adopted SFAS No. 158 (SFAS 158), Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, which requires that the Consolidated Balance Sheet reflect the funded status of the pension and postretirement plans. The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation. We have recognized the aggregate of all overfunded plans in prepaid pension assets and the aggregate of all unfunded plans in either postretirement medical and life benefits or accrued pension benefits. At November 30, 2007, previously unrecognized actuarial (gains)/losses and the prior services (credits)/costs are included in accumulated other comprehensive loss in the Consolidated Balance Sheet as required by SFAS 158. In future periods, the additional actuarial (gains)/losses and prior service (credits)/costs will be recognized in accumulated other comprehensive loss in the period in which they occur (see Note 6 in Notes to Consolidated Financial Statements).

Liquidity and Capital Resources

Liquidity Requirements

Short-term liquidity requirements consist primarily of recurring operating expenses; costs associated with legacy business matters, including costs related to our retirement benefit plans; capital expenditures; and debt service requirements. We expect to meet these requirements through available cash, generation of cash from our Aerospace and Defense segment, and our Senior Credit Facility.

As of November 30, 2007, long-term liquidity requirements consist primarily of our long-term debt obligations. We expect to meet long-term liquidity requirements through cash provided from operations and, if

41

necessary, with long-term borrowings and other financing alternatives. The availability and terms of any such financing will depend upon market and other conditions at the time.

Net Cash Provided by (Used in) Operating, Investing, and Financing Activities

Cash and cash equivalents increased by $31.1 million during the year ended November 30, 2007. The change in cash and cash equivalents is summarized as follows:

	Year Ended November 30,
	2007			2006			2005
	(In millions)
Net Cash Provided by (Used in) Operating Activities
Continuing operations	$	26.2		$	0.6		$	(81.2	)
Discontinued operations		(2.4	)		(13.7	)		(2.6	)
Total		23.8			(13.1	)		(83.8	)
Net Cash Provided by (Used in) Investing Activities
Continuing operations		(2.0	)		(38.8	)		181.4
Proceeds from sale of discontinued operations		29.7			1.1			108.3
Discontinued operations		—			—			(38.5	)
Total		27.7			(37.7	)		251.2
Net Cash (Used in) Provided by Financing Activities		(20.4	)		20.3			(143.6	)
Increase (decrease) in cash and cash equivalents	$	31.1		$	(30.5	)	$	23.8

Net Cash Provided by (Used in) Operating Activities

Continuing Operations

Continuing operations generated cash of $26.2 million in fiscal 2007 compared to $0.6 million in fiscal 2006. The improvement is primarily due to (i) improved operating performance from the Aerospace and Defense segment; and (ii) lower costs associated with legacy business matters, partially offset by a decrease in the generation of cash from income tax related items.

Continuing operations generated cash of $0.6 million in fiscal 2006 compared to cash usage of $81.2 million in fiscal 2005. The year over year change consists of: (i) improved cash flows from the Aerospace and Defense segment; (ii) generation of cash from income tax related items; (iii) a payment in fiscal 2005 of approximately $30 million for the Olin judgment; and (iv) timing of payables and receivables and working capital increases, partially offset by payments associated with the settlement of the environmental toxic tort cases.

Discontinued Operations

Discontinued operations used $2.4 million of cash in fiscal 2007 primarily related to the retained portions of our former automotive business. Discontinued operations used cash of $13.7 million in fiscal 2006 primarily due to payments associated with the Fine Chemicals business divestiture, including purchase price adjustments and transaction costs, and the Final Settlement and Release Agreement we entered into with Cerberus in June 2006 related to the fiscal 2004 sale of GDX.

Net Cash Provided by (Used In) Investing Activities

Continuing Operations

During fiscal 2007, fiscal 2006, and fiscal 2005, we invested $21.8 million, $19.0 million, and $19.7 million, respectively, in capital expenditures. The capital expenditures in fiscal 2007 include the purchase of 180 acres of land which had been previously leased. The majority of our capital expenditures directly supports our contract and

42

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. As of November 30, 2004, we designated $201.1 million as restricted cash, consisting of a portion of the proceeds from the GDX Automotive sale and the proceeds from an equity offering completed in fiscal 2004. This restricted cash was used to repay debt in early fiscal 2005.

Proceeds from sale of Discontinued Operations

During fiscal 2007, we received $29.7 million from AMPAC in consideration for the cancellation and termination of an unsecured subordinated note receivable from AMPAC, including any interest due thereunder, and AMPAC’s obligation to make an earnings target payment associated with the sale of the Fine Chemicals business. During fiscal 2006, we received $1.1 million of proceeds from the sale of the Turbo product line. During fiscal 2005, we received $108.3 million of proceeds from the sale of the Fine Chemicals business.

Discontinued Operations

Discontinued operations used cash of $38.5 million in fiscal 2005 for capital expenditures in the Fine Chemicals business, of which approximately $17 million was reimbursed from the buyer pursuant to the amended Fine Chemicals purchase agreement.

Net Cash (Used in) Provided by Financing Activities

Fiscal 2007 — Cash of $20.4 million was used primarily for the net retirements of approximately $18.9 million of debt. See discussion of our debt activity under the caption “Borrowing Activity and Senior Credit Facility” below.

Fiscal 2006 — Cash of $20.3 million was generated primarily from the net issuances of approximately $18.5 million of debt.

Fiscal 2005 — Cash of $143.6 million was used primarily reflecting the completion of our recapitalization initiated in November 2004. We redeemed $264.6 million of outstanding debt including redemption costs, offset by $66.4 million from the issuance of our additional 21/4% Debentures and $55.7 million from the issuance of Term Loans under our previous credit facility. In addition, we incurred $6.0 million in debt issuance costs and received $4.9 million in other equity transactions.

Borrowing Activity and Senior Credit Facility:

Our borrowing activity in fiscal 2007 and our debt balances as of November 30, 2006 and 2007 were as follows:

	November 30,							November 30,
	2006		Additions		(Payments)			2007
	(In millions)
53/4% Convertible Subordinated Notes	$	19.8	$	—	$	(19.8	)	$	—
4% Contingent Convertible Subordinated Notes		125.0		—		—			125.0
21/4% Convertible Subordinated Debentures		146.4		—		—			146.4
91/2% Senior Subordinated Notes		97.5		—		—			97.5
Term loan		73.7		75.0		(74.1	)		74.6
Promissory note		—		2.8		—			2.8
Total Debt and Borrowing Activity	$	462.4	$	77.8	$	(93.9	)	$	446.3

In June 2007, we entered into an amended and restated $280.0 million credit facility (Senior Credit Facility) with Wachovia Bank, National Association as Administrative Agent, JP Morgan Chase Bank, N.A. as Syndication

43

Agent, and a syndicate of lenders. The Senior Credit Facility provides 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. The credit-linked facility consists of a $75.0 million term loan subfacility and a $125.0 million letter of credit subfacility. The interest rate on LIBOR rate borrowings under the Revolver is LIBOR plus 225 basis points, subject to downward adjustment after fiscal 2007 if the leverage ratio is reduced, and the interest rate on the term loan is LIBOR plus 225 basis points. We are 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. We are 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 is reduced. As of November 30, 2007, we had $72.4 million in outstanding letters of credit issued under the $125.0 million letter of credit subfacility and our $80.0 million Revolver was unused.

The Senior Credit Facility replaced our previous credit facility on June 21, 2007 for which we incurred a charge of $0.6 million in the third quarter of fiscal 2007.

In April 2007, we retired our outstanding principal of the 53/4% Notes with restricted cash. The outstanding principal on the 53/4% Notes had been cash collateralized during fiscal 2006.

In January 2007, we purchased, for $4.3 million, approximately 180 acres of Chino Hills, California 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 annual installments, matures in January 2011, and bears interest at a per annum rate of five percent.

The Senior Credit Facility is secured 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 and issuances of debt or equity, make certain investments and acquisitions, grant additional liens, and make restricted payments. We are also subject to the following financial covenants:

			Required Ratios -	Required Ratios -
	Actual Ratios - As of		November 30, 2007	December 1, 2009
Financial Covenant	November 30, 2007		through November 30, 2009	and thereafter
Interest coverage Ratio		4.54 to 1.00	Not less than: 2.25 to 1.00	Not less than: 2.25 to 1.00
Leverage ratio		3.27 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, 2007.

In June 2002, we filed a $300 million shelf registration statement with the SEC of which approximately $162 million remains available for issuance. We may use the shelf to issue debt securities, shares of common stock, or preferred stock.

Outlook

As disclosed in Notes 7(b) and 7(c) in 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, or cash flows.

We believe that our existing cash and cash equivalents and credit facilities provide sufficient funds to meet our operating plan for the next twelve months. The operating plan for this period provides for full operation of our businesses, and interest and projected principal payments on our debt.

We may also access capital markets to raise debt or equity financing for various business reasons, including required debt payments and acquisitions or partnerships that make both strategic and economic sense. The timing, terms, size, and pricing of any such financing will depend on investor interest and market conditions, and there can be no assurance that we will be able to obtain any such financing.

44

Major factors that could adversely impact our forecasted operating cash 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.

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, 2007 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:
4% Contingent Convertible Subordinated Notes	$	125.0	$	—	$	—	$	—	$	125.0
21/4% Convertible Subordinated Debentures		146.4		—		—		—		146.4
91/2% Senior Subordinated Notes		97.5		—		—		—		97.5
Term Loans		74.6		0.8		1.6		1.6		70.6
Promissory Note		2.8		0.7		1.4		0.7		—
Interest on long-term debt(1)		223.7		23.2		46.2		45.8		108.5
Operating leases		36.1		8.5		15.4		8.2		4.0
Conditional asset retirement obligations		13.4		—		—		3.1		10.3
Liabilities associated with legal settlements		29.9		4.7		10.4		10.0		4.8
Total	$	749.4	$	37.9	$	75.0	$	69.4	$	567.1

(1) Includes interest on variable debt calculated based on interest rates at November 30, 2007. Variable rate debt was approximately 17% of our total debt at November 30, 2007.

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 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, 2007, obligations required to be disclosed in accordance with FASB Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness of Others, consisted of:

— $72.4 million in outstanding commercial letters of credit expiring in 2008, the majority of which may be renewed, and securing obligations for environmental remediation closure and insurance coverage.

— Up to $120.0 million aggregate in guarantees by GenCorp of Aerojet’s obligations to U.S. government agencies for environmental remediation activities.

— Up to $2.3 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 Company’s material domestic subsidiaries of its obligations under the Senior Credit Facility and the 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:

45

(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 the Company. The terms of such obligations vary. Generally, a maximum obligation is not explicitly stated. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated.

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 in accordance with SFAS No. 5, Accounting for Contingencies. These costs are included in the program’s estimate at completion and are expensed in accordance with our revenue recognition methodology as allowed under American Institute of Certified Public Accountants (AICPA) Statement of Position No. 81-1 (SOP 81-1), Accounting for Performance Construction-Type and Certain Production-Type Contracts, for that particular contract.

Critical Accounting Policies

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America 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. The audit committee has reviewed all financial disclosures in our filings with the SEC. 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 income taxes. Except for income taxes, 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

46

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.

Our Aerospace and Defense segment is derived substantially from contracts that are accounted for in conformity with the AICPA audit and accounting guide, Audits of Federal Government Contracts and SOP 81-1. 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, as allowed by SOP 81-1, 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. Aerojet continually evaluates its performance and incorporates any anticipated 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 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.

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. We have not had any significant real estate asset sales during the past three fiscal years.

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 Federal Acquisition Regulations (FAR) and Cost Accounting Standards (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 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.

47

Goodwill

We test goodwill for possible impairment on an annual basis and at any other time if events occur or circumstances indicate that the carrying amount of goodwill may not be recoverable. Circumstances that could trigger an impairment test include but are not limited to: a significant adverse change in the business climate or legal factors; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; the likelihood that a reporting unit or significant portion of a reporting unit will be sold or otherwise disposed of; results of testing for recoverability of a significant asset group within a reporting unit; and recognition of a goodwill impairment loss in the financial statements of a subsidiary that is a component of a reporting unit.

The determination as to whether a write down of goodwill is necessary involves significant judgment based on the short-term and long-term projections of the future performance of the reporting unit to which the goodwill is attributed. The assumptions supporting the estimated future cash flows of the reporting unit, including the discount rate used and estimated terminal value, reflect our best estimates.

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 SFAS 158, SFAS No. 87, Employer’s Accounting for Pensions, and SFAS No. 106, Employer’s Accounting for Postretirement Benefits Other Than Pensions. Pension accounting is intended to reflect the recognition of future benefit costs over the employee’s approximate service period based on the terms of the plans and the investment and funding decisions made by us. 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. The discount rate is determined at the annual measurement date of August 31 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 2007 pension benefit obligations, the discount rate was increased by 40 basis points to 6.40%, and for medical and life benefit obligations the discount rate was increased by 40 basis points to 6.25%.

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. The expected long-term rate of return on plan assets is also determined at the annual measurement date of August 31 for our pension plans. The expected long-term rate of return used to determine benefit obligations was 8.75% for both fiscal 2007 and 2006. With input from our investment advisors and actuaries, we analyzed the expected rates of return on assets and determined that these rates are 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. Our pension assets are managed in two distinct portfolios with different investment objectives and strategies. Approximately $715 million of the assets are attributable to the variable annuity benefits with approximately 75% of those assets targeted to be invested in fixed income. Approximately $1 billion of the assets are attributable to the fixed benefits, with approximately 30% of those assets targeted to be invested in fixed income. The 8.75% expected rate of return applies to the fixed benefit plan assets since variable assets have no bearing on the total annual net periodic pension expense. As of November 30, 2007, the actual asset allocation of fixed benefit plan assets was consistent with the asset allocation assumptions used in determining the expected long-term rate of return. Management will continue to assess the expected long-term rate of return on assets for each plan based on relevant market conditions and will make adjustments to the assumptions as 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 assets or liabilities which will be amortized to pension costs in future

48

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 postretirement benefit plans (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, 2007 and on expense for fiscal 2008:

	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	$	22.6		$	106.8		$	10.0		$	(0.1	)	$	(2.3	)
1% increase		(22.6	)		(106.8	)		(10.0	)		0.1			2.3

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 the effectiveness of strategies related to these proceedings. See Note 7 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 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, 2007, we had environmental remediation reserves of $270.0 million. 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.

49

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. 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 Aerojet’s 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 Aerojet’s products and services sold to the U.S. government. Allowable environmental costs are charged to these contracts as the costs are incurred. Aerojet’s 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 Aerojet’s sustained business volume under U.S. government contracts and programs and the relative size of Aerojet’s commercial business.

Based on Aerojet’s 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, 2007, approximately $225.5 million of its estimated future environmental costs will be recoverable. Significant estimates and assumptions that could affect the future recovery of environmental remediation costs include: the proportion of Aerojet’s 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 Aerojet’s commercial business base; the timing of environmental expenditures; and uncertainties inherent in long-term cost projections of environmental remediation projects.

Income Taxes

We file a consolidated U.S. income tax return for ourselves and our wholly-owned consolidated subsidiaries. We account for income taxes in accordance with SFAS No. 109, Accounting for Income Taxes. 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 income in the period that includes the enactment date of the change.

The carrying value of our deferred tax assets is dependent upon our ability to generate sufficient future taxable income. 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. 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. We expect to continue to maintain a full valuation allowance until an appropriate level of profitability is sustained or a prudent and feasible tax strategy arises that would enable us to conclude that it is more likely than not that a portion of our deferred tax assets would be realizable.

Income taxes can be affected by estimates of whether, and within which jurisdictions, future earnings will occur combined with other aspects of an overall income tax strategy. Additionally, taxing jurisdictions could retroactively disagree with our tax treatment of certain items, and some historical transactions have income tax effects going forward. Accounting rules require these future effects be evaluated using current laws, rules, and regulations, each of which can change at any time and in an unpredictable manner. We establish tax reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged and it’s possible that we may not succeed. We adjust these reserves in light of changing facts and circumstances, such as the progress of a tax audit or the closing of the statute. We believe we have adequately provided for any reasonably foreseeable outcome related to these matters, and we do not anticipate any unfavorable material earnings impact from their ultimate resolutions.

50

Recently Issued Accounting Standards

In June 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes, to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarified the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective as of December 1, 2007. We expect to record a benefit of approximately $9 million upon adoption which will directly reduce our shareholders’ deficit.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), to provide enhanced guidance when using fair value to measure assets and liabilities. SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS 157 applies whenever other pronouncements require or permit assets or liabilities to be measured at fair value and, while not requiring new fair value measurements, may change current practices. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating the impact SFAS 157 will have on our financial position or results of operations.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115. SFAS 159 permits entities to choose to measure many financial instruments at fair value that are not currently required to be measured at fair value. It also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. We do not anticipate that the adoption of SFAS 159 will have a material impact on our financial position or results of operations.

In June 2007, the FASB issued Emerging Issue Task Force (EITF) No. 07-03 (EITF 07-03), Accounting for Non-Refundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities. EITF 07-03 provides guidance on whether non-refundable advance payments for goods that will be used or services that will be performed in future research and development activities should be accounted for as research and development costs or deferred and capitalized until the goods have been delivered or the related services have been rendered. EITF 07-03 is effective for fiscal years beginning after December 15, 2007. We do not expect that the adoption of EITF 07-03 will have a material impact on our financial position or results of operations.

Item 7A.   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 domestic 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, 2007, our debt totaled $446.3 million: $371.7 million, or 83% was at an average fixed rate of 4.76%; and $74.6 million or 17% was at a variable rate of 7.34%.

The estimated fair value of our total debt was $429.6 million as of November 30, 2007 compared to a carrying value of $446.3 million. The fair value of the term loan, convertible subordinated notes, senior subordinated notes, and convertible subordinated debentures was determined based on quoted market prices as of November 30, 2007. The fair value of the remaining debt was determined to approximate carrying value.

51

Item 8.   Consolidated Financial Statements and Supplementary Data

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, 2007 and 2006, and the results of their operations and their cash flows for each of the two years in the period ended November 30, 2007 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, 2007 and 2006 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, 2007, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s 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 Management’s 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 Company’s 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 changed its method of accounting for defined benefit pension and other postretirement plans as of November 30, 2007, conditional asset retirement obligations as of November 30, 2006, and stock-based compensation as of December 1, 2005.

A company’s 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 company’s 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 company’s 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

January 25, 2008

52

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of GenCorp Inc.

We have audited the consolidated statements of operations, shareholders’ (deficit) equity, and cash flows for the year ended November 30, 2005. Our audit also included the financial statement schedule for the year ended November 30, 2005 at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows for GenCorp Inc. for the year ended November 30, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule for the year ended November 30, 2005, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/  Ernst & Young LLP

Sacramento, California

February 7, 2006,

except for the first sentence of the first paragraph of Note 11, as to which the date is

August 24, 2006

53

GENCORP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended November 30,
	2007			2006			2005
	(In millions, except per share amounts)
Net sales	$	745.4		$	621.1		$	622.4
Costs and expenses
Cost of products sold		657.8			565.0			737.3
Selling, general and administrative		14.4			28.8			29.5
Depreciation and amortization		28.4			27.2			28.4
Interest expense		28.6			27.2			23.6
Interest income		(4.9	)		(3.6	)		(0.6	)
Other (income) expense, net		(2.6	)		11.7			2.5
Unusual items
Legal settlements and estimated loss on legal matters		3.8			8.5			31.1
Customer reimbursement of tax matters		2.3			—			—
Loss on repayment of debt		0.6			—			18.1
Gain on settlements and recoveries		(6.0	)		—			(11.8	)
Total costs and expenses		722.4			664.8			858.1
Income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting principles		23.0			(43.7	)		(235.7	)
Income tax benefit		(18.1	)		(4.7	)		(29.3	)
Income (loss) from continuing operations before cumulative effect of changes in accounting principles		41.1			(39.0	)		(206.4	)
Income (loss) from discontinued operations, net of income taxes		27.9			2.4			(23.6	)
Income (loss) before cumulative effect of changes in accounting principles		69.0			(36.6	)		(230.0	)
Cumulative effect of changes in accounting principles, net of income taxes		—			(1.9	)		—
Net income (loss)	$	69.0		$	(38.5	)	$	(230.0	)
Income (loss) per share of common stock
Basic:
Income (loss) per share from continuing operations before cumulative effect of changes in accounting principles	$	0.73		$	(0.70	)	$	(3.78	)
Income (loss) per share from discontinued operations, net of income taxes		0.50			0.04			(0.43	)
Loss per share from cumulative effect of changes in accounting principles, net of income taxes		—			(0.03	)		—
Net income (loss) per share	$	1.23		$	(0.69	)	$	(4.21	)
Diluted:
Income (loss) per share from continuing operations before cumulative effect of changes in accounting principles	$	0.71		$	(0.70	)	$	(3.78	)
Income (loss) per share from discontinued operations, net of income taxes		0.43			0.04			(0.43	)
Loss per share from cumulative effect of changes in accounting principles, net of income taxes		—			(0.03	)		—
Net income (loss) per share	$	1.14		$	(0.69	)	$	(4.21	)
Weighted average shares of common stock outstanding		56.2			55.4			54.6
Weighted average shares of common stock outstanding, assuming dilution		64.6			55.4			54.6

See Notes to Consolidated Financial Statements.

54

GENCORP INC.

CONSOLIDATED BALANCE SHEETS

	November 30,			November 30,
	2007			2006
	(In millions, except per share amounts)
ASSETS
Current Assets
Cash and cash equivalents	$	92.3		$	61.2
Restricted cash		—			19.8
Accounts receivable		99.2			71.1
Inventories		67.5			69.5
Recoverable from the U.S. government and other third parties for environmental remediation costs and other		46.5			37.6
Prepaid expenses and other		17.4			23.5
Assets of discontinued operations		0.1			0.5
Total Current Assets		323.0			283.2
Noncurrent Assets
Property, plant and equipment, net		139.8			136.8
Real estate held for entitlement and leasing		45.3			38.2
Recoverable from the U.S. government and other third parties for environmental remediation costs and other		179.0			177.0
Prepaid pension asset		101.0			187.3
Goodwill		94.9			101.3
Intangible assets		21.7			24.6
Other noncurrent assets, net		90.5			73.0
Total Noncurrent Assets		672.2			738.2
Total Assets	$	995.2		$	1,021.4
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities
Short-term borrowings and current portion of long-term debt	$	1.5		$	21.3
Accounts payable		28.9			32.6
Reserves for environmental remediation costs		66.1			55.6
Income taxes payable		6.2			12.2
Postretirement medical and life benefits		8.8			9.7
Advance payments on contracts		49.1			57.1
Other current liabilities		84.3			88.9
Liabilities of discontinued operations		1.0			1.8
Total Current Liabilities		245.9			279.2
Noncurrent Liabilities
Convertible subordinated notes		271.4			271.4
Senior subordinated notes		97.5			97.5
Other long-term debt		75.9			72.2
Deferred income taxes		0.3			—
Reserves for environmental remediation costs		203.9			210.4
Postretirement medical and life benefits		78.5			127.1
Other noncurrent liabilities		73.8			59.6
Total Noncurrent Liabilities		801.3			838.2
Total Liabilities		1,047.2			1,117.4
Commitments and Contingencies (Note 7)
Shareholders’ Deficit
Preference stock, par value of $1.00; 15 million shares authorized; none issued or outstanding		—			—
Common stock, par value of $0.10; 150 million shares authorized; 56.8 million shares issued, 56.6 million outstanding as of November 30, 2007; 56.1 million shares issued, 55.8 million shares outstanding as of November 30, 2006		5.7			5.6
Other capital		205.2			194.8
Accumulated deficit		(227.4	)		(296.4	)
Accumulated other comprehensive loss, net of income taxes		(35.5	)		—
Total Shareholders’ Deficit		(52.0	)		(96.0	)
Total Liabilities and Shareholders’ Deficit	$	995.2		$	1,021.4

See Notes to Consolidated Financial Statements.

55

GENCORP INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

													Accumulated			Total
	Comprehensive												Other			Shareholders’
	Income			Common Stock				Other		Accumulated			Comprehensive			(Deficit)
	(Loss)			Shares		Amount		Capital		Deficit			Loss			Equity
	(In millions, except share and per share amounts)
November 30, 2004					54,002,167	$	5.4	$	166.1	$	(27.9	)	$	(2.8	)	$	140.8
Net loss	$	(230.0	)		—		—		—		(230.0	)		—			(230.0	)
Change in minimum pension liability, net of taxes		1.2			—		—		—		—			1.2			1.2
Stock-based compensation		—			—		—		2.3		—			—			2.3
Shares issued under stock option and stock incentive plans		—			960,457		0.1		12.9		—			—			13.0
November 30, 2005	$	(228.8	)		54,962,624	$	5.5	$	181.3	$	(257.9	)	$	(1.6	)	$	(72.7	)
Net loss	$	(38.5	)		—		—		—		(38.5	)		—			(38.5	)
Change in minimum pension liability, net of taxes		1.6			—		—		—		—			1.6			1.6
Stock-based compensation		—			—		—		1.3		—			—			1.3
Tax benefit on equity based compensation		—			—		—		0.6		—			—			0.6
Shares issued under stock option and stock incentive plans		—			853,204		0.1		11.6		—			—			11.7
November 30, 2006	$	(36.9	)		55,815,828	$	5.6	$	194.8	$	(296.4	)	$	—		$	(96.0	)
Net income	$	69.0			—		—		—		69.0			—			69.0
SFAS 158 transition amount (see Note 6)		—			—		—		—		—			(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	)

See Notes to Consolidated Financial Statements.

56

GENCORP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended November 30,
	2007			2006			2005
	(In millions)
Operating Activities
Net income (loss)	$	69.0		$	(38.5	)	$	(230.0	)
(Income) loss from discontinued operations, net of income taxes		(27.9	)		(2.4	)		23.6
Cumulative effect of changes in accounting principles, net of income taxes		—			1.9			—
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss on repayment of debt		0.6			—			18.1
Depreciation and amortization		28.4			27.2			28.4
Stock-based compensation		1.5			1.8			2.3
Savings plan expense		9.1			8.4			7.9
Changes in operating assets and liabilities, net of effects of divestitures of businesses:
Accounts receivable		(28.1	)		11.0			10.5
Inventories		2.0			(12.4	)		101.3
Prepaid expenses and other		6.0			(13.9	)		(15.1	)
Real estate held for entitlement and leasing		(7.4	)		(6.8	)		(6.2	)
Other noncurrent assets		(11.6	)		46.8			60.0
Accounts payable		(3.6	)		(22.8	)		(0.6	)
Income taxes payable		(5.3	)		13.5			(25.3	)
Postretirement medical and life benefits		(8.7	)		(13.0	)		(13.9	)
Advance payments on contracts		(8.0	)		12.3			22.9
Other current liabilities		(3.5	)		3.0			(5.7	)
Deferred income taxes		0.3			—			—
Other noncurrent liabilities		13.4			(15.5	)		(59.4	)
Net cash provided by (used in) continuing operations		26.2			0.6			(81.2	)
Net cash used in discontinued operations		(2.4	)		(13.7	)		(2.6	)
Net Cash Provided by (Used in) Operating Activities		23.8			(13.1	)		(83.8	)
Investing Activities
Capital expenditures		(21.8	)		(19.0	)		(19.7	)
Restricted cash		19.8			(19.8	)		201.1
Proceeds from sale of discontinued operations		29.7			1.1			108.3
Investing activities of discontinued operations		—			—			(38.5	)
Net Cash Provided by (Used in) Investing Activities		27.7			(37.7	)		251.2
Financing Activities
Proceeds from issuance of convertible notes		—			—			66.4
Repayment of convertible note and senior subordinated note, including redemption costs		—			—			(121.5	)
Proceeds from the issuance of other debt		75.0			74.5			55.7
Repayments on other debt		(93.9	)		(56.0	)		(143.1	)
Debt issuance costs		(1.9	)		(2.1	)		(6.0	)
Tax benefit on equity based compensation		—			0.6			—
Proceeds from shares issued under stock option and equity incentive plans		0.4			3.3			4.9
Net Cash (Used in) Provided by Financing Activities		(20.4	)		20.3			(143.6	)
Increase (decrease) in cash and cash equivalents		31.1			(30.5	)		23.8
Cash and cash equivalents at beginning of year		61.2			91.7			67.9
Cash and Cash Equivalents at End of Year	$	92.3		$	61.2		$	91.7
Supplemental Disclosures of Cash Flow Information
Capital expenditure purchased with a promissory note	$	2.8		$	—		$	—
Cash paid for income taxes		0.8			0.4			1.2
Cash paid for interest		28.0			27.4			29.2

See Notes to Consolidated Financial Statements.

57

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 year’s presentation.

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 Company’s excess real estate assets. The Company’s continuing operations are organized into two segments:

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

Real Estate — includes activities related to the entitlement, sale, and leasing of the Company’s excess real estate assets. The Company owns approximately 12,600 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 6,400 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. Once completed, the Company will work to maximize the value of the land.

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. On November 17, 2006, the Company completed the sale of its Turbo product line. The GDX and Fine Chemicals businesses and the Turbo product line are classified as discontinued operations in these Consolidated Financial Statements and Notes to Consolidated Financial Statements (see Note 11).

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (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 to accounts payable.

c. Restricted Cash

In April 2007, the Company retired its outstanding 53/4% Convertible Subordinated Notes due April 2007 with restricted cash. The outstanding principal on the 53/4% Convertible Subordinated Notes had been cash collateralized during fiscal 2006 in order to prevent the early maturity of the credit facility in place at that time.

58

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

d. Fair Value of Financial Instruments

The carrying amounts of certain of the Company’s 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 of the Company’s total debt was $429.6 million as of November 30, 2007 compared to a carrying value of $446.3 million. The fair value of the term loan, convertible subordinated notes, senior subordinated notes, and convertible subordinated debentures was determined based on quoted market prices as of November 30, 2007. The fair value of the remaining debt was determined to approximate carrying value.

e. 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.

f. 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.

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

In accordance with SFAS No. 67, Accounting for Costs and Initial Rental Operations of Real Estate Projects, the Company capitalizes all costs associated with the real estate entitlement and leasing process.

i. Retirement Benefits

The Company has a defined benefit pension plan covering substantially all salaried and hourly employees. 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. The Company is required to fund annually, at a minimum, those retirement benefit costs which are calculated in accordance with Internal Revenue Service regulations and standards issued by the Cost Accounting Standards Board. The Company expects to pay $1.3 million in benefits to

59

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

participants in its unfunded pension plans in fiscal 2008, which is partially recoverable under government contracts. The Company will not contribute to its funded pension plan in fiscal 2008.

The Company adopted Statement of Financial Accounting Standards (SFAS) No. 158 (SFAS 158), Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, on November 30, 2007 which requires that the Consolidated Balance Sheet reflect the funded status of the pension and postretirement plans. The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation. The Company has recognized the aggregate of all overfunded plans in prepaid pension assets and the aggregate of all unfunded plans in either postretirement medical and life benefits or accrued pension benefits. At November 30, 2007, previously unrecognized actuarial (gains)/losses and the prior services (credits)/costs are included in accumulated other comprehensive loss in the Consolidated Balance Sheet as required by SFAS 158. In future periods, the additional actuarial (gains)/losses and prior service (credits)/costs will be recognized in accumulated other comprehensive loss in the period in which they occur (see Note 6).

j. 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 annual impairment tests for goodwill as of September 1, 2007 and 2006 and determined that goodwill was not impaired as of those dates.

Circumstances that could trigger an impairment test include but are not limited to: a significant adverse change in the business climate or legal factors; an adverse action or assessment by a regulator; unanticipated competition; loss of key personnel; and results of testing for recoverability of a significant asset group within a reporting unit.

If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recorded. Measurement of the fair value of a reporting unit is based on one or more of the following fair value measures including: amounts at which the unit as a whole could be bought or sold in a current transaction between willing parties; determining the present value of estimated future cash flows; or using valuation techniques based on multiples of earnings or revenue; or a similar performance measure.

k. 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.

l. 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.

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 are recognized on the date of sale.

60

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

m. Revenue Recognition

The Company accounts for sales derived from long-term development and production contracts in conformity with the American Institute of Certified Public Accountants (AICPA) Audit and Accounting guide, Audits of Federal Government Contracts, and the AICPA’s Statement of Position No. 81-1 (SOP 81-1), Accounting for Performance of Construction-Type and Certain Production Type Contracts. 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, as allowed by SOP 81-1, 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. Aerojet continually evaluates its performance and incorporates any anticipated 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 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.

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 the Company’s continuing financial commitment. The Company has not had any significant real estate asset sales for the past three fiscal years.

n. Concentrations

Dependence upon government programs and contracts

Sales in fiscal 2007, fiscal 2006, and fiscal 2005 directly and indirectly to the U.S. government and its agencies, including sales to the Company’s significant customers discussed below, totaled $665.9 million, $523.5 million, and $500.8 million, respectively. The demand for certain of the Company’s services and products is directly related to the level of funding of government programs.

61

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Major customers

Customers that represented more than 10% of net sales for the fiscal years presented are as follows:

	Year Ended November 30,
	2007			2006			2005
Lockheed Martin Corporation (Lockheed Martin)		28	%		39	%		39	%
Raytheon Company (Raytheon)		28			19			16
The Boeing Company (Boeing)		*			10			*

* Less than 10% of net sales

Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash equivalents and trade receivables. The Company invests available cash in money market funds, securities of various banks, and securities backed by the U.S. government. 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 Company’s 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,
	2007			2006
	(In millions)
Lockheed Martin		38	%		29	%
Raytheon		27			27

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 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 materials, are used industry-wide and are key to many of the Company’s motor and warhead programs. The Company continues its efforts at qualifying new suppliers and materials for these materials and expects that such new materials can be available in time to meet future production needs. In some situations, increased costs related to new suppliers may not be recoverable under the Company’s contracts. In addition, some of these materials may have to be procured from foreign 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. This single source, however, maintains two separate manufacturing lines a reasonable distance apart which helps mitigate the likelihood of a fire, explosion, or other problem impacting supply. The industry also currently relies on one primary supplier for graphite fiber, which is used in the production of composite materials. This supplier has multiple manufacturing lines for such material. Although other sources of graphite fiber exist, the addition of a new supplier would require the Company to qualify

62

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the new source for use. Recently, the Japanese government has imposed export restrictions on materials that are to be used in offensive weapons systems. To date, these restrictions have not materially impacted the Company’s production, but have increased the lead times associated with certain production as the export of certain materials has to be approved by the Japanese Defense Ministry.

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, whenever possible, the Company has negotiated with its customers economic and/or price adjustment clauses tied to commodity indices. The Company’s 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” (DFARS 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 Company’s 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 Company’s operating results, financial condition, and/or cash flows.

Workforce

As of November 30, 2007, 16% of the Company’s 3,252 employees were covered by collective bargaining agreements which are due to expire in the summer of 2008.

o. Environmental Remediation

The Company accounts for identified or potential environmental remediation liabilities in accordance with the AICPA’s Statement of Position 96-1 (SOP 96-1), Environmental Remediation Liabilities, and Security and Exchange Commission (SEC) Staff Accounting Bulletin No. 92, Accounting and Disclosures Relating to Loss Contingencies. Under this guidance, 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 Company’s 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 Company’s 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 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. Pursuant to U.S. government agreements or regulations, the Company can recover a substantial portion of its environmental costs for its Aerospace and Defense segment through the establishment of prices of the Company’s products and services sold to the U.S. government. The ability of the Company to continue recovering these costs from the U.S. government depends on Aerojet’s sustained business volume under U.S. government contracts and programs.

63

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

p. Conditional Asset Retirement Obligations

The Company adopted the Financial Accounting Standards Board (FASB) Interpretation No. 47 (FIN 47), Accounting for Conditional Asset Retirement Obligations, an interpretation of SFAS No. 143, Accounting for Asset Retirement Obligations, on November 30, 2006. FIN 47 requires that the fair value of a liability for a conditional asset retirement obligation be recognized in the period in which it is incurred and the settlement date is estimable, and is capitalized as part of the carrying amount of the related tangible long-lived asset. The liability is recorded at fair value and the capitalized cost is depreciated over the remaining useful life of the related asset (See Note 7(e)).

q. Income Taxes

The Company accounts for income taxes in accordance with the provisions of SFAS No. 109 (SFAS 109), Accounting for Income Taxes. The Company files a consolidated federal income tax return with its wholly-owned subsidiaries.

r. Warranties

The Company provides product warranties in conjunction with certain product sales. The majority of the Company’s 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 in accordance with SFAS No. 5 (SFAS 5), Accounting for Contingencies. These costs are included in the program’s estimate at completion and are expensed in accordance with the Company’s revenue recognition methodology as allowed under SOP 81-1 for that particular contract.

s. 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.

t. 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 for any particular period could be materially affected by changes in assumptions or the effectiveness of strategies related to these proceedings (See Note 7 (b) and (c)).

u. Foreign Currency Transactions

Foreign currency transaction gains and (losses) were ($0.1) million in fiscal 2007, $0.5 million in fiscal 2006, and $0.3 million in fiscal 2005 which are reported primarily as a component of discontinued operations. The Company’s foreign currency transactions were primarily associated with the Company’s GDX business, which was classified as a discontinued operation. Substantially all of the assets of GenCorp Inc. that were used in the GDX business were sold effective August 31, 2004 (see Note 11).

v. Research and Development Expenses

Company-sponsored research and development (R&D) expenses were $17.0 million in fiscal 2007, $14.0 million in fiscal 2006, and $12.9 million in fiscal 2005. 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.

64

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Customer-sponsored R&D expenditures, which are funded under government contracts, totaled $269.0 million in fiscal 2007, $219.9 million in fiscal 2006, and $176.9 million in fiscal 2005. Expenditures under customer-sponsored R&D funded government contracts are accounted for as sales and cost of products sold.

w. Stock-Based Compensation

As of December 1, 2005, the Company adopted SFAS No. 123(R), Share-Based Payment,(SFAS 123(R)), which requires companies to recognize in the statement of operations the grant-date fair value of stock awards issued to employees and directors. The Company adopted SFAS 123(R) using the modified prospective transition method. In accordance with the modified prospective transition method, the Company’s Consolidated Financial Statements for prior periods have not been restated to reflect the impact of SFAS 123(R) (see Note 8). 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.

Prior to the adoption of SFAS 123(R), the Company applied Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations to account for awards of stock-based compensation granted to employees.

x. Recent Accounting Pronouncements

In June 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, an interpretation of SFAS No. 109, Accounting for Income Taxes, to create a single model to address accounting for uncertainty in tax positions. FIN 48 clarified the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for the Company as of December 1, 2007 and the Company expects to record a benefit of approximately $9 million upon adoption.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157), to provide enhanced guidance when using fair value to measure assets and liabilities. SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS 157 applies whenever other pronouncements require or permit assets or liabilities to be measured at fair value and, while not requiring new fair value measurements, may change current practices. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is evaluating the impact SFAS 157 will have on its financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115. SFAS 159 permits entities to choose to measure many financial instruments at fair value that are not currently required to be measured at fair value. It also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company does not anticipate that the adoption of SFAS 159 will have a material impact on its financial position or results of operations.

In June 2007, the FASB issued Emerging Issue Task Force (EITF) No. 07-03 (EITF 07-03), Accounting for Non-Refundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities. EITF 07-03 provides guidance on whether non-refundable advance payments for goods that will be used or services that will be performed in future research and development activities should be accounted for as research and development costs or deferred and capitalized until the goods have been delivered or the related services have been rendered. EITF 07-03 is effective for fiscal years beginning after December 15, 2007. The Company does not expect that the adoption of EITF 07-03 will have a material impact on its financial position or results of operations.

65

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 November 30,
	2007		2006			2005
	(In millions, except per share amounts; shares in thousands)
Numerator for Basic and Diluted EPS
Income (loss) from continuing operations before cumulative effect of changes in accounting principles	$	41.1	$	(39.0	)	$	(206.4	)
Income (loss) from discontinued operations, net of income taxes		27.9		2.4			(23.6	)
Cumulative effect of changes in accounting principles, net of income taxes		—		(1.9	)		—
Net income (loss) for basic earnings per share		69.0		(38.5	)		(230.0	)
Interest on contingent convertible subordinated notes		5.0		—			—
Net income (loss) available to common shareholders, as adjusted for diluted earnings per share	$	74.0	$	(38.5	)	$	(230.0	)
Denominator
Basic weighted average shares		56,213		55,433			54,575
Effect of:
Contingent convertible subordinated notes		8,101		—			—
Employee stock options		190		—			—
Restricted stock awards		120		—			—
Diluted weighted average shares		64,624		55,433			54,575
Basic EPS:
Income (loss) per share from continuing operations before cumulative effect of changes in accounting principles	$	0.73	$	(0.70	)	$	(3.78	)
Income (loss) per share from discontinued operations, net of income taxes		0.50		0.04			(0.43	)
Loss per share from cumulative effect of changes in accounting principles, net of income taxes		—		(0.03	)		—
Net income (loss) per share	$	1.23	$	(0.69	)	$	(4.21	)
Diluted EPS:
Income (loss) per share from continuing operations before cumulative effect of changes in accounting principles	$	0.71	$	(0.70	)	$	(3.78	)
Income (loss) per share from discontinued operations, net of income taxes		0.43		0.04			(0.43	)
Loss per share from cumulative effect of changes in accounting principles, net of income taxes		—		(0.03	)		—
Net income(loss) per share	$	1.14	$	(0.69	)	$	(4.21	)

During fiscal 2007, the dilutive impact of the Company’s 21/4% Convertible Subordinated Debentures were not included in the computation of diluted income per share because the market price of the common stock did not

66

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

exceed the conversion price and only the conversion premium for these debentures is settled in common shares. Additionally, the 53/4% Convertible Subordinated Notes were not included in the computation of diluted income per share for fiscal 2007 because the effect would be antidilutive. The dilutive impact of the Company’s 53/4% Convertible Subordinated Notes, 4% Contingent Convertible Subordinated Notes, and 21/4% Convertible Subordinated Debentures were not included in the computation of diluted loss per share for fiscal 2006 and 2005 because the effect would be antidilutive. See a discussion of the terms of our convertible subordinated notes in Note 5(a). Other potentially dilutive securities that were not included in the diluted EPS calculation because they would be antidilutive are employee stock options of 1.7 million as of November 30, 2006 and 1.9 million as of November 30, 2005.

3.   Balance Sheet Accounts and Supplemental Disclosures

a.  Accounts Receivable

	As of November 30,
	2007		2006
	(In millions)
Billed	$	41.5	$	43.7
Unbilled		54.0		22.1
Total receivables under long-term contracts		95.5		65.8
Other receivables, net of $0.3 million and $0.1 million of allowance for doubtful accounts as of November 30, 2007 and 2006, respectively		3.7		5.3
Accounts receivable	$	99.2	$	71.1

The unbilled receivable amounts as of November 30, 2007 expected to be collected after one year is $4.0 million. Such amounts are billed either upon delivery of completed units or settlement of contracts.

b.  Inventories

	As of November 30,
	2007			2006
	(In millions)
Long-term contracts at average cost	$	181.7		$	155.8
Progress payments		(117.3	)		(90.5	)
Total long-term contract inventories		64.4			65.3
Raw materials		0.1			0.1
Work in progress		3.0			4.0
Finished goods		—			0.1
Total other inventories		3.1			4.2
Inventories	$	67.5		$	69.5

As of November 30, 2007 and 2006, long-term contract inventories include $9.7 million and $9.2 million, respectively, of deferred qualification costs. Realization of the deferred costs at November 30, 2007 is dependent upon receipt of future firm orders. The Company believes recovery of costs to be probable and specifically identifiable to future contracts. In addition, long-term contract inventories include an allocation of general and administrative costs incurred in fiscal 2007 and fiscal 2006 of $106.3 million and $115.7 million, respectively, and the cumulative amount of general and administrative costs in long-term contract inventories is estimated to be $18.2 million and $14.6 million at November 30, 2007 and 2006, respectively.

67

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

c.  Property, Plant and Equipment, net

	As of November 30,
	2007			2006
	(In millions)
Land	$	33.2		$	29.3
Buildings and improvements		144.7			140.3
Machinery and equipment		355.0			352.6
Construction-in-progress		9.3			9.1
		542.2			531.3
Less: accumulated depreciation		(402.4	)		(394.5	)
Property, plant and equipment, net	$	139.8		$	136.8

Depreciation expense for fiscal 2007, fiscal 2006, and fiscal 2005 was $23.9 million, $23.4 million, and $24.7 million, respectively.

d.  Goodwill

The goodwill balance at November 30, 2007 and 2006 relates to the Company’s Aerospace and Defense segment. The changes in the carrying amount of goodwill since November 30, 2005 were as follows (in millions):

Balance as of November 30, 2005		102.0
Purchase accounting adjustment during fiscal 2006		(0.7	)
Balance as of November 30, 2006		101.3
Purchase accounting adjustment during fiscal 2007		(6.4	)
Balance as of November 30, 2007	$	94.9

During fiscal 2007 and 2006, goodwill was reduced by $6.4 million and $0.7 million, respectively, as a result of an adjustment to the valuation of a liability associated with the Atlantic Research Corporation acquisition.

e.  Intangible Assets

	Gross
	Carrying		Accumulated		Net Carrying
As of November 30, 2007:	Amount		Amortization		Amount
	(In millions)
Customer related	$	10.7	$	2.6	$	8.1
Acquired technology		18.3		4.7		13.6
Intangible assets	$	29.0	$	7.3	$	21.7

	Gross
	Carrying		Accumulated		Net Carrying
As of November 30, 2006:	Amount		Amortization		Amount
	(In millions)
Customer related	$	10.7	$	2.1	$	8.6
Acquired technology		18.3		3.6		14.7
Pension (Note 6(b))		1.3		—		1.3
Intangible assets	$	30.3	$	5.7	$	24.6

68

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amortization expense related to intangible assets was $1.6 million in fiscal 2007 and $1.7 million in fiscal 2006 and fiscal 2005. Amortization expense for fiscal 2008 through fiscal 2010 related to intangible assets is estimated to be approximately $1.6 million annually. Amortization expense for fiscal 2011 and fiscal 2012 related to intangible assets is estimated to be approximately $1.5 million annually.

f.  Other Noncurrent Assets, net

	As of November 30,
	2007		2006
	(In millions)
Receivable from Northrop Grumman Corporation (see Note 7(d))	$	39.9	$	33.0
Note receivable (see Note 11)		—		25.5
Deferred financing costs		15.6		16.2
Other		35.0		23.8
		90.5		98.5
Less: allowance on note receivable (see Note 11)		—		(25.5	)
Other noncurrent assets, net	$	90.5	$	73.0

The Company amortizes deferred financing costs over the term of the related debt. Amortization of financing costs was $2.0 million, $2.1 million, and $2.0 million in fiscal 2007, fiscal 2006, and fiscal 2005, respectively.

g.  Other Current Liabilities

	As of November 30,
	2007		2006
	(In millions)
Accrued compensation and employee benefits	$	37.0	$	33.7
Legal settlements		4.7		15.2
Interest payable		5.0		5.0
Deferred revenue		2.1		3.1
Contract loss provisions		1.3		4.9
Pension liability		1.3		1.7
Other		32.9		25.3
Other current liabilities	$	84.3	$	88.9

h.  Other Noncurrent Liabilities

	As of November 30,
	2007		2006
	(In millions)
Legal settlements	$	25.2	$	13.6
Conditional asset retirement obligations		13.4		10.2
Deferred revenue		13.2		8.1
Deferred compensation		10.5		18.0
Pension liability		9.8		0.5
Other		1.7		9.2
Other noncurrent liabilities	$	73.8	$	59.6

69

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4.   Income Taxes

The Company accounts for income taxes in accordance with the provisions of SFAS 109. The Company files a consolidated federal income tax return with its wholly-owned subsidiaries.

Components of the Company’s income tax benefit from continuing operations are as follows:

	As of November 30,
	2007			2006			2005
	(In millions)
Current
United States federal	$	(13.3	)	$	(5.3	)	$	(29.3	)
State and local		(5.1	)		0.6			—
		(18.4	)		(4.7	)		(29.3	)
Deferred
United States federal		0.3			—			—
State and local		—			—			—
		0.3			—			—
Income tax benefit	$	(18.1	)	$	(4.7	)	$	(29.3	)

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate on book earnings from continuing operations is as follows:

	Year Ended November 30,
	2007			2006			2005
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax effect		10.0			(1.0	)		—
Tax settlements, refund claims, and reserve adjustments, including interest		(54.6	)		(3.9	)		(0.8	)
Valuation allowance		(67.1	)		(57.1	)		(18.9	)
Deferred tax liability reversal on goodwill		—			27.5			—
State net operating loss adjustment		—			6.6			—
Other, net		(2.0	)		3.2			(2.8	)
Effective income tax rate		(78.7	)%		10.3	%		12.5	%

Although the Company generated $23.0 million in pretax book income from continuing operations, the Company has a tax loss from continuing operations primarily from fiscal 2007 tax deductions for items previously expensed for book purposes, including environmental expenditures, research and development expenditures, and funding of post retirement obligations. The fiscal 2007 tax net operating loss from continuing operations resulted in an income tax benefit of $6.3 million for carryback to prior years and a refund of previously paid taxes and a $12.2 million benefit primarily from federal and state income tax settlements including research and development credit claim benefits, manufacturer’s investment credit claim benefits, and certain statute expirations, which is partially offset by $0.4 million of current state tax expense. Similar to prior years, a valuation allowance has been recorded to offset the net deferred tax assets for fiscal 2007 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.

70

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Forming a conclusion that a valuation allowance is not needed 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. Accordingly, as of May 31, 2004, the Company concluded that it was appropriate to establish a full valuation allowance for its net deferred tax assets. Subsequent to May 31, 2004, the Company has maintained a full valuation allowance on all of its net deferred tax assets. The Company expects to continue to maintain a full valuation allowance until circumstances change.

The fiscal 2006 tax net operating loss from continuing operations resulted in an income tax benefit of $6.0 million for carryback to prior years and refunding previously paid taxes.

The fiscal 2005 net operating loss resulted in an income tax benefit of $15.8 million for the portion eligible for carryback to prior years and refund of previously paid taxes. However, to reflect the uncertainty of realizing the benefit of the portion of the net operating losses to be carried forward to offset future taxable income, no benefit has been recorded. Instead, a valuation allowance has been recorded to offset the net deferred tax assets for fiscal 2005. Additionally, the Company increased its fiscal 2005 income tax benefit from continuing operations by $12.9 million for tax refund claims related to a 10 year carryback of prior year’s losses.

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.

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,
	2007			2006
	(In millions)
Deferred Tax Assets
Accrued estimated costs	$	43.8		$	73.5
Tax losses and credit carryforwards		176.4			175.2
Depreciation		6.4			12.1
Other postretirement and employee benefits		53.9			58.0
Valuation allowance		(188.4	)		(219.8	)
Total deferred tax assets		92.1			99.0
Deferred Tax Liabilities
Pensions		73.4			80.3
Federal effect of state deferreds		12.1			13.9
Other		6.9			4.8
Total deferred tax liabilities		92.4			99.0
Total net deferred tax liabilities		(0.3	)		—
Less: current deferred tax assets/(liabilities)		—			—
Noncurrent deferred tax liabilities	$	(0.3	)	$	—

At November 30, 2007, the Company had a federal net operating loss carryforward of approximately $223.2 million of which $61.3 million expires in fiscal 2024, $160.6 million expires in fiscal 2025, and $1.3 million expires in fiscal 2027, if not utilized. 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, the Company has federal and state capital loss carryforwards of approximately $158.4 million and $63.3 million, respectively, most of which expire in fiscal 2009. For state tax purposes, the Company has approximately $214.1 million in net

71

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

operating loss carryforwards of which $35.6 million expires in fiscal 2014, $133.8 million expires in fiscal 2015, $28.7 million expires in fiscal 2016, and $16.0 million expires in fiscal 2017, if not utilized.

The Company also has a federal research credit carryforward of $6.2 million which begins expiring in fiscal 2021; a California manufacturing investment credit carryforward of $1.0 million which begins expiring in fiscal 2010; 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.

5.   Long-Term Debt

	As of November 30,
	2007			2006
	(In millions)
Convertible subordinated notes	$	271.4		$	291.2
Senior subordinated notes		97.5			97.5
Other debt		77.4			73.7
Total debt		446.3			462.4
Less: Amounts due within one year		(1.5	)		(21.3	)
Total long-term debt	$	444.8		$	441.1

As of November 30, 2007, the Company’s annual fiscal year debt maturities are summarized as follows (in millions):

2008	$	1.5
2009		1.5
2010		1.5
2011		1.5
2012		0.8
Thereafter		439.5
Total debt	$	446.3

a.  Convertible Subordinated Notes:

	As of November 30,
	2007		2006
	(In millions)
Convertible subordinated debentures, bearing interest at 2.25% per annum, interest payments due in May and November, maturing in 2024 (21/4% Debentures)	$	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 (4% Notes)		125.0		125.0
Convertible subordinated notes, bearing interest at 5.75% per annum, matured April 2007 (53/4% Notes)		—		19.8
Total convertible subordinated notes	$	271.4	$	291.2

2 1/4% 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

72

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 21/4% per annum and is payable on May 15 and November 15, beginning May 15, 2005.

Each $1,000 principal of the 21/4% Debentures is convertible at each holder’s option, into cash and, if applicable, the Company’s 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 20 trading days in the 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 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 20 trading days in any 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.

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 21/4% Debentures are general unsecured obligations and rank equal in right of payment to all of the Company’s other existing and future subordinated indebtedness, including the 4% Notes. The 21/4% Debentures rank junior in right of payment to all of the Company’s existing and future senior indebtedness, including all of its obligations under its senior credit facilities and all of its existing and future senior subordinated indebtedness, including the Company’s outstanding 91/2% Senior Subordinated Notes. In addition, the 21/4% Debentures are

73

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

effectively subordinated to any of the Company’s secured debt and to any and all debt and liabilities, including trade debt of its subsidiaries.

The indenture governing the 21/4% Debentures limits the Company’s 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% 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 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 will not be payable during the six-month period beginning January 16, 2008.

Each $1,000 principal amount of the 4% Notes is convertible at each holder’s option into 64.81 shares of the Company’s 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 20 trading days in the 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.

The Company may redeem, at its option, some or all of its 4% Notes for cash on or after January 19, 2010. 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 20 trading days in the 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. 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 4% Notes are general unsecured obligations and rank equal in right of payment to all of the Company’s other existing and future subordinated indebtedness, including the 21/4% Debentures. The 4% Notes rank junior in right of payment to all of the Company’s existing and future senior indebtedness, including all of its obligations under its senior credit facilities, and all of its existing and future senior subordinated indebtedness, including the

74

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company’s outstanding 91/2% Senior Subordinated Notes. In addition, the 4% Notes are effectively subordinated to any of the Company’s secured debt and to any and all debt and liabilities, including trade debt of its subsidiaries.

The indenture governing the 4% Notes limits the Company’s 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 12 months of scheduled term loan principal amortization under the Company’s prior credit facility. The remaining net proceeds were available to be used for general corporate purposes.

5 3/4% Convertible Subordinated Notes

In April 2002, the Company issued $150.0 million aggregate principal amount of its 53/4% Notes that matured and were retired in April 2007. The 53/4% Notes were general unsecured obligations of the Company and ranked equal in right of payment to all of the Company’s other then existing and future subordinated indebtedness and junior in right of payment to all of the Company’s then existing and future senior indebtedness, including all of its obligations under its senior credit facilities, and all of its existing and future senior subordinated indebtedness. In addition, the 53/4% Notes were effectively subordinated to any of the Company’s secured debt and to any and all debt and liabilities, including trade debt of its subsidiaries.

Interest on the 53/4% Notes accrued at a rate of 5.75% per annum and was payable on April 15 and October 15, beginning in October 2002. The 53/4% Notes were initially convertible into 54.29 shares of the Company’s common stock per $1,000 principal amount of the 53/4% Notes, implying a conversion price of $18.42 per share, at any time preceding the maturity date. The 53/4% Notes were redeemable in whole or in part at the option of the holder upon a change of control of the Company at 100% of the principal amount of the 53/4% Notes to be repurchased, plus accrued and unpaid interest, if any, to the date of repurchase, and at the option of the Company at any time on or after April 22, 2005 if the closing price of the Company’s common stock exceeded 125% of the conversion price then in effect for at least 20 trading days within a period of 30 consecutive trading days at specified redemption prices, plus accrued and unpaid interest, if any.

Issuance of the 53/4% Notes in fiscal 2002 generated net proceeds of approximately $144.0 million, which were used to repay debt outstanding under the Company’s credit facility in place at that time. In November 2004, the Company used the net proceeds from the issuance of the 21/4% Debentures to repurchase $70.3 million aggregate principal amount of 53/4% Notes, resulting in an unusual charge of $8.8 million in fiscal 2004, including the write-off of deferred financing costs associated with the repurchase of the 53/4% Notes. In the first quarter of fiscal 2005, an additional $59.9 million in aggregate principal amount of 53/4% Notes was repurchased with net proceeds from the exercise by an initial purchaser of the 21/4% Debentures of its option to purchase additional debentures. The repurchase of the 53/4% Notes resulted in an unusual charge of $5.5 million in fiscal 2005, including the write-off of deferred financing costs associated with the repurchased 53/4% Notes.

Certain holders of the 53/4% Notes converted a de minimus amount of their notes into the Company’s common stock during fiscal 2006. There were no other conversions to common stock prior to maturity in April 2007 when the Company retired the outstanding principal of its 53/4% Notes with restricted cash. The outstanding principal on the 53/4% Notes had been cash collateralized during fiscal 2006 in order to prevent the early maturity of the credit facility in place at that time.

75

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

b.  Senior Subordinated Notes:

	As of
	November 30,
	2007		2006
	(In millions)
Senior subordinated notes, bearing interest at 9.50% per annum, interest payments due in February and August, maturing in 2013 (91/2% Notes)	$	97.5	$	97.5

9 1/2% 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% and reducing to 100% by August 15, 2011. If the Company undergoes a change of control or sells assets, it may be required to offer to purchase the 91/2% Notes from the holders of such notes.

The 91/2% Notes are unsecured and subordinated to all of the Company’s existing and future senior indebtedness, including borrowings under its senior credit facilities. The 91/2% Notes rank senior to the 4% Notes and the 21/4% Debentures. The 91/2% Notes are guaranteed by the Company’s material domestic subsidiaries. Each subsidiary guarantee is unsecured and subordinated to the respective subsidiary’s existing and future senior indebtedness, including guarantees of borrowings under the senior credit facilities. The 91/2% Notes and related guarantees are effectively subordinated to the Company’s and the subsidiary guarantors’ secured debt and to any and all debt and liabilities, including trade debt of the Company’s non-guarantor subsidiaries.

The indenture governing the 91/2% Notes limits the Company’s ability and the ability of the Company’s 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 Company’s 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 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.

76

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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. The Company paid the redemption price using a portion of the restricted cash from the proceeds of the equity offering completed in November 2004, and recorded an unusual charge of $6.7 million in the first quarter of fiscal 2005, including the write-off of deferred financing costs associated with the redeemed 91/2% Notes.

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.

c.  Other Debt:

	As of
	November 30,
	2007		2006
	(In millions)
Term loan, bearing interest at various rates (rate of 7.34% as of November 30, 2007), payable in quarterly installments of $187,500 plus interest, maturing in 2013	$	74.6	$	73.7
Promissory note, bearing interest at 5% per annum, payable in annual installments of $700,000 plus interest, maturing in 2011		2.8		—
Total other debt	$	77.4	$	73.7

Senior Credit Facility

In June 2007, the Company entered into an amended and restated $280.0 million credit facility (Senior Credit Facility) with Wachovia Bank, National Association as Administrative Agent, JP Morgan Chase Bank, N.A. as Syndication Agent, and a syndicate of lenders. The Senior Credit Facility provides 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. The credit-linked facility consists of a $75.0 million term loan subfacility and a $125.0 million letter of credit subfacility. The interest rate on LIBOR rate borrowings under the Revolver is LIBOR plus 225 basis points, subject to downward adjustment after fiscal 2007 if the leverage ratio is reduced, 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 is reduced.

The Senior Credit Facility replaced the Company’s previous credit facility on June 21, 2007 for which the Company incurred a charge of $0.6 million in the third quarter of fiscal 2007.

As of November 30, 2007, the borrowing limit under the Revolver was $80.0 million with all of it available. The Company had $74.6 million outstanding under the term loan subfacility and $72.4 million outstanding letters of credit issued under the $125.0 million letter of credit subfacility at November 30, 2007.

77

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Senior Credit Facility is secured by a substantial portion of the Company’s real property holdings and substantially all of the Company’s 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 dividends. The Company is also subject to financial covenants, which are as follows:

	Actual Ratios as of		Required Ratios November 30, 2007		Required Ratios
Financial Covenant	November 30, 2007		Through November 30, 2009		December 1, 2009 and thereafter
Interest coverage ratio		4.54 to 1.00		Not less than: 2.25 to 1.00		Not less than: 2.25 to 1.00
Leverage ratio		3.27 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, 2007.

Promissory Note

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 annual installments, matures in January 2011, and bears interest at a per annum rate of five percent.

6.   Retirement Benefits

a.  Plan Descriptions

Pension Benefits — The Company has a defined benefit pension plan covering substantially all salaried and hourly employees. 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 an unfunded non-qualified Benefits Restoration Plan (BRP), which restores benefits that can not be paid under the GenCorp qualified pension plan due to IRS limitations.

Medical and Life Benefits — The Company provides medical and life insurance benefits (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 defined contribution 401(k) plans and participation in these plans is available to all employees. Company contributions to these plans generally are based on a percentage of employee contributions. The cost of these plans for both continuing and discontinued operations was $9.1 million in fiscal 2007, $8.4 million in fiscal 2006, and $7.9 million in fiscal 2005. The Company’s contribution to the plans is invested entirely in the GenCorp Stock Fund, and may be funded with cash or shares of GenCorp common stock. There are no restrictions on participants re-allocating all or a part of their accounts in the GenCorp Stock Fund to other investment choices.

BRP Savings Plan — The Company sponsors an unfunded non-qualified 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 (IRC) limits. Under the BRP Savings 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. The Company makes a matching contribution in an amount equal to 100% of the participant’s contribution not to exceed 4.5% of the participant’s eligible compensation. Participants indicate how they wish their deferred compensation and the Company matching contributions to be notionally invested among the same investment options available through the GenCorp defined contribution 401(k) plan.

78

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS 158 Adoption — Effective November 30, 2007, the Company adopted SFAS 158 which requires that the Consolidated Balance Sheet reflect the funded status of the pension and postretirement plans. The funded status of the plans is measured as the difference between the plan assets at fair value and the projected benefit obligation. The Company has recognized the aggregate of all overfunded plans in prepaid pension assets; and the aggregate of all unfunded plans in either postretirement medical and life benefits, or other current and noncurrent liabilities.

At November 30, 2007, previously unrecognized actuarial (gains)/losses and the prior services (credits)/costs are included in accumulated other comprehensive loss in the Consolidated Balance Sheet as required by SFAS 158. In future periods, the additional actuarial (gains)/losses and prior service (credits)/costs will be recognized in accumulated other comprehensive loss in the period in which they occur.

Effective November 30, 2009, the Company will adopt the measurement provision of SFAS 158 which requires measurement of the assets and benefit obligations at the fiscal year end. The Company currently performs this measurement as of August 31 of each fiscal year.

The incremental effect of adopting SFAS 158 on individual line items in the Consolidated Balance Sheet at November 30, 2007 is shown below:

	Before Adoption of						After Adoption of
	SFAS 158			Adjustments			SFAS 158
	(In millions)
Prepaid pension asset	$	166.5		$	(65.5	)	$	101.0
Intangible assets		1.3			(1.3	)		—
Total Assets		1,062.0			(66.8	)		995.2
Pension liability, current (component of other current liabilities)		1.3			—			1.3
Postretirement medical and life benefits, current		8.8			—			8.8
Postretirement medical and life benefits, noncurrent		119.3			(40.8	)		78.5
Pension liability, noncurrent (component of other noncurrent liabilities)		0.3			9.5			9.8
Total Liabilities		1,078.5			(31.3	)		1,047.2
Accumulated other comprehensive loss, net of income taxes		—			(35.5	)		(35.5	)
Total Shareholders’ Deficit		(16.5	)		(35.5	)		(52.0	)

79

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

b.  Plan Results

Summarized below is the balance sheet impact of the Company’s 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 Company’s qualified plans. Plan assets, benefit obligations, and the funded status of the plans are determined at the annual measurement date of August 31 for each year presented below:

							Medical and
	Pension Benefits						Life Benefits
	Year Ended November 30,
	2007			2006			2007			2006
	(In millions)
Change in fair value of plan assets:
Fair value — beginning of year	$	1,705.7		$	1,693.9		$	—		$	—
Actual return on plan assets		145.5			145.7			—			—
Employer contributions		1.9			4.4			8.1			11.3
Divestiture(1)		—			(4.1	)		—			—
Benefits paid		(140.9	)		(134.2	)		(8.1	)		(11.3	)
Fair Value — end of year	$	1,712.2		$	1,705.7		$	—		$	—
Change in benefit obligation:
Benefit obligation — beginning of year	$	1,677.6		$	1,717.3		$	97.7		$	113.4
Service cost		17.2			18.2			0.3			0.4
Interest cost		96.2			112.9			5.5			5.7
Divestiture(1)		—			(5.3	)		—			—
Actuarial (gains) losses		(26.9	)		(31.3	)		(6.6	)		(10.5	)
Benefits paid		(140.9	)		(134.2	)		(8.1	)		(11.3	)
Benefit obligation — end of year(2)	$	1,623.2		$	1,677.6		$	88.8		$	97.7
Funded status of the plans	$	89.0		$	28.1		$	(88.8	)	$	(97.7	)
Unrecognized actuarial (gains) losses		—			141.0			—			(34.0	)
Unrecognized prior service (credits) costs		—			16.7			—			(6.8	)
Employer contributions/benefit payments from August 31 to November 30		0.9			0.6			1.5			1.7
Net Asset (Liability) Recognized in the Consolidated Balance Sheets(3)	$	89.9		$	186.4		$	(87.3	)	$	(136.8	)
Amounts Recognized in the Consolidated Balance Sheets:
Prepaid pension asset	$	101.0		$	187.3		$	—		$	—
Intangible assets		—			1.3			—			—
Pension liability, current (component of other current liabilities)		(1.3	)		(1.7	)		—			—
Postretirement medical and life benefits, current		—			—			(8.8	)		(9.7	)
Postretirement medical and life benefits, noncurrent		—			—			(78.5	)		(127.1	)
Pension liability, non-current (component of other noncurrent liabilities)		(9.8	)		(0.5	)		—			—
Net Asset (Liability) Recognized in the Consolidated Balance Sheets	$	89.9		$	186.4		$	(87.3	)	$	(136.8	)

(1)	As discussed in Note 11, the Company sold the Fine Chemicals business effective November 30, 2005 and transferred pension obligations and related assets to the buyer during fiscal 2006.
(2)	Pension amounts include $11.6 million in fiscal 2007 and $13.2 million in fiscal 2006 for unfunded plans.
(3)	Pension amounts include $11.1 million in fiscal 2007 and $10.4 million in fiscal 2006 for unfunded plans.

80

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Amounts recognized on a pre-tax basis in accumulated other comprehensive loss at November 30, 2007 are as follows:

	Pension			Medical and
	Benefits			Life Benefits
	(In millions)
Net actuarial gains (losses)	$	(61.7	)	$	34.1
Prior service credits (costs)		(14.6	)		6.7
	$	(76.3	)	$	40.8

The estimated amounts that will be amortized from accumulated other comprehensive loss into net periodic benefit (income) expense in fiscal 2008 are as follows:

	Pension		Medical and
	Benefits		Life Benefits
	(In millions)
Recognized net actuarial (gains) losses	$	14.6	$	(6.8	)
Amortization of prior service (credits) costs		2.0		(0.2	)
	$	16.6	$	(7.0	)

The accumulated benefit obligation for the defined benefit pension plans was $1,582 million and $1,633 million as of the August 31, 2007 and 2006 measurement dates, respectively.

Components of net periodic benefit (income) expense for continuing operations are as follows:

										Medical and
	Pension Benefits									Life Benefits
	Year Ended November 30,
	2007			2006			2005			2007			2006			2005
	(In millions)
Service cost	$	17.2		$	18.2		$	14.0		$	0.3		$	0.4		$	0.4
Interest cost on benefit obligation		96.2			112.9			113.9			5.5			5.7			7.2
Assumed return on plan assets(1)		(122.8	)		(139.0	)		(134.4	)		—			—			—
Amortization of prior service costs		2.0			2.2			1.7			(0.1	)		(3.6	)		(4.0	)
Amortization of net (gains) losses		29.8			52.8			55.5			(6.5	)		(6.1	)		(6.5	)
Net periodic benefit (income) expense	$	22.4		$	47.1		$	50.7		$	(0.8	)	$	(3.6	)	$	(2.9	)

(1) Actual returns for plan assets were $145.5 million in fiscal 2007, $145.7 million in fiscal 2006, and $185.9 million in fiscal 2005.

Components of net periodic benefit expense for discontinued operations, related to the sale of the Fine Chemicals business, as of November 30, 2005 were as follows (in millions):

Pension and medical and life benefit expense	$	0.6
Settlement/curtailment		1.7
Net periodic benefit expense	$	2.3

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 assets or liabilities 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

81

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

c.  Plan Assumptions

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
	2007			2006			2007			2006
Discount rate (benefit obligations)		6.40	%		6.00	%		6.25	%		5.85	%
Discount rate (net periodic benefit expense)		6.00	%		5.50	%		5.85	%		5.20	%
Expected long-term rate of return on plan assets		8.75	%		8.75	%		*			*
Rate of compensation increase		4.50	%		4.50	%		*			*
Initial healthcare trend rate		*			*			10.00	%		10.00	%
Ultimate healthcare trend rate		*			*			5.00	%		5.00	%
Year ultimate rate attained		*			*			2012			2011

* Not applicable.

The above assumptions apply to fixed benefit plans only, as variable benefit plans do not impact total annual net periodic pension expense.

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. For fiscal 2007 pension benefit obligations, the discount rate was increased by 40 basis points to 6.40%, and for medical and life benefit obligations the discount rate was increased by 40 basis points to 6.25%. The increase in the discount rate used was primarily due to increases in the yield of high quality fixed income instruments during the measurement period.

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. The expected long-term rate of return on plan assets is also determined at the annual measurement date of August 31. The expected long-term rate of return used to determine benefit obligations was 8.75% for both fiscal 2007 and fiscal 2006. With input from the Company’s investment advisors and actuaries, the Company has analyzed the expected rates of return on assets and determined that these rates are reasonable based on the current and expected asset allocations and on the plans’ historical investment performance and best estimates for future investment performance. The Company’s asset managers regularly review actual asset allocations and periodically rebalance investments to targeted allocations when considered appropriate. The Company’s pension assets are managed in two distinct portfolios with different investment objectives and strategies. Approximately $715 million of the assets are attributable to the variable annuity benefits with approximately 75% of those assets targeted to be invested in fixed income. Approximately $1.0 billion of the assets are attributable to the fixed benefits, with approximately 30% of those assets targeted to be invested in fixed income. As of November 30, 2007, the actual asset allocation of fixed benefit plan assets was consistent with the asset allocation assumptions used in determining the expected long-term rate of return.

82

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 2007 medical benefit obligations, the Company assumed a 10% annual rate of increase in the per capita cost of covered healthcare claims with the rate decreasing over 5 years until reaching 5%.

A one percentage point change in the key assumptions would have the following effects on the projected benefit obligations as of November 30, 2007 and on expense for fiscal 2008:

	Pension Benefits and									Assumed Healthcare
	Medical and Life Benefits Discount Rate						Expected Long-term			Cost Trend Rate
				Projected			Rate of Return			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	$	22.6		$	106.8		$	10.0		$	(0.1	)	$	(2.3	)
1% increase		(22.6	)		(106.8	)		(10.0	)		0.1			2.3

d.  Plan Assets and Investment Policy

The Company’s pension plans weighted average asset allocation and the investment policy asset allocation targets at August 31, 2007 and 2006, by asset category, are as follows:

	2007						2006
	Actual			Target(1)			Actual			Target(1)
Domestic equity securities		21	%		21	%		20	%		21	%
International equity securities		11			11			11			11
Fixed income		47			50			50			50
Real estate		2			2			2			2
Alternative investments		19			16			17			16
		100	%		100	%		100	%		100	%

(1) Assets rebalanced periodically to remain within a reasonable range of the target.

The Company’s 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.

The Company expects to pay $1.3 million in benefits to participants in its unfunded pension plan in fiscal 2008 which is partially recoverable under government contracts. The Company will not contribute to its funded pension plan in fiscal 2008.

83

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

e.  Benefit Payments

The following presents estimated future benefit payments, including the cost of expected future service, are summarized as follows:

	Pension		Medical and Life Benefits
	Benefits		Gross Benefit		Medicare D		Net Benefit
Year Ended November 30,	Payments		Payments		Subsidy		Payments
	(In millions)
2008	$	137.3	$	10.1	$	1.3	$	8.8
2009		134.5		9.4		0.4		9.0
2010		132.0		9.3		0.4		8.9
2011		129.5		9.1		0.4		8.7
2012		127.2		9.4		0.4		9.0
Years 2013 – 2017		602.1		41.9		1.6		40.3

The Company received an annual federal subsidy of $1.0 million in fiscal 2007 related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare D Subsidy).

7.   Commitments and Contingencies

a.  Lease Commitments and Revenues

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 ten years and require the Company to pay for utilities, insurance, taxes, and maintenance. Rent expense was $8.7 million in fiscal 2007and fiscal 2006, and $8.5 million in fiscal 2005.

The Company also leases certain surplus facilities to third parties. The Company recorded lease revenue of $6.3 million in fiscal 2007, $6.5 million in fiscal 2006, and $6.6 million in fiscal 2005 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, 2007 were as follows:

	Future Minimum		Lease
Year Ended November 30,	Rental Commitments		Revenues
	(In millions)
2008	$	8.5	$	5.1
2009		8.0		2.7
2010		7.4		0.1
2011		5.1		0.1
2012		3.1		0.1
Thereafter		4.0		—
	$	36.1	$	8.1

b.  Legal Proceedings

The Company and its subsidiaries are subject to legal proceedings, including litigation in federal and state courts, which arise out of, and are incidental to, the ordinary course of the Company’s 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. The Company accounts for litigation losses in accordance with SFAS 5. Under SFAS 5, loss contingency provisions are recorded

84

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

for probable losses at management’s 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 water entities in the SEMOU and those detected at Aerojet’s 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 Aerojet’s complaints. The motions as well as discovery have been stayed, pending efforts to resolve the litigation through mediation.

As previously reported in the Company’s periodic filings, in December 2006, Aerojet was sued by eleven individual plaintiffs residing in the vicinity of Aerojet’s facilities near Sacramento, California. Haynes et al. v. Aerojet-General Corporation, Case No. O6AS04555, Sacramento County (CA) Superior Court (the Sacramento litigation). Additional claims added to the case bring the total number of plaintiffs to fifteen. The plaintiffs alleged that Aerojet contaminated groundwater, which plaintiffs consumed causing illness, death, and economic injury. Aerojet and the plaintiffs reached a confidential settlement in principle of this case. The settlement agreement provided for the dismissal of all claims and full releases by the plaintiffs. As a result of this settlement, the Company reserved for the settlement and recorded a charge to operations for the amount related to the unrecoverable portion from the U.S. Government.

In June 2007, Aerojet was sued by seven individual plaintiffs residing in the vicinity of Aerojet’s former facility in Azusa, California. The case is entitled Gatter et al. v. Aerojet-General Corporation, Case No. K050503R, Los Angeles County (CA) Superior Court and was served June 21, 2007. The plaintiffs allege that Aerojet and unnamed defendants contaminated groundwater, which plaintiffs allegedly consumed, causing illness and economic injury. Discovery is ongoing. Trial is currently set for October 2008.

Aerojet has been recently named as a defendant in a lawsuit brought by six individuals who allegedly resided in the vicinity of Aerojet’s Sacramento facility. Plaintiffs allege that Aerojet contaminated groundwater to which plaintiffs were exposed and which caused plaintiffs illness and economic injury. Aerojet has not been served with the complaint.

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

85

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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.

Of the cases that have been filed, the majority have been dismissed or settled on terms favorable to the Company. There were three vinyl chloride cases pending against the Company as of November 30, 2007, all involving employees at VC or PVC facilities owned or operated by others. One of the pending cases is an action seeking class certification and a medical monitoring program for former employees at a PVC facility in New Jersey.

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 160 asbestos cases pending as of November 30, 2007.

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 April 11, 2006, the Labour Court rejected most of the claims of the first group of 44 former employees and held Snappon SA responsible for €12,000 (approximately $17,000) as damages. After two hearings, the Labour Court rejected the claims filed by the second group of former employees, which group had claimed damages in excess of €12.7 million (approximately $18 million). A total of 175 former employees have appealed these decisions. These appeals are scheduled to be heard in October 2008.

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 has 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 is investigating the underlying facts to determine what liability, if any, the Company may have for this claim.

86

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In August 2007, along with numerous other companies, the Company received from the United States Department of Interior Fish and Wildlife Service (USFWS) a notice of a Natural Resource Damage 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. 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.

The Company is 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 Company’s consolidated financial condition. It is possible that amounts could be significant to the statement of operations in any particular reporting period.

c.  Environmental Matters

The Company is involved in a number of environmental responses 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 (US EPA) or a state agency. 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 Company’s 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.

As of November 30, 2007, the aggregate range of these anticipated environmental costs was $270 million to $470 million and the accrued amount was $270.0 million. See Note 7(d) for a summary of the environmental reserve activity for fiscal 2007. Of these accrued liabilities, approximately 61% relates to the Sacramento, California site and approximately 28% 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 Company’s 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 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 Aerojet’s Sacramento

87

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

remediation activities are fully funded; and (c) removed approximately 2,600 acres of non-contaminated land from the US 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 US EPA issued a UAO requiring Aerojet to implement the US 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 will submit a Remedial Investigation/Feasibility Study for the Perimeter Groundwater Operable Unit in early 2008 and anticipates that the US EPA will issue a Record of Decision later in the same year. The remaining operable units are under various stages of investigation.

The southern portion of the property known as Rio Del Oro is under state orders issued in the 1990s by the California Department of Toxic Control (DTSC) and the Central Valley RWQCB to investigate and remediate environmental contamination. Aerojet leased this 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 McDonnell-Douglas Corporation (MDC), the successor to Douglas Aircraft. As a result, the state orders referenced above were issued to both MDC and Aerojet. Aerojet and MDC’s 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. By letter of October 27, 2006, Boeing submitted notice to Aerojet that it was initiating the reallocation arbitration process. The matter has been stayed pending further discussions between the parties. Aerojet is currently working to release a significant portion of the property from the DTSC order.

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 US 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 US 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 US EPA issued a UAO ordering the PRPs to implement a remedy consistent with the 1994 Record of Decision (ROD). 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. Aerojet and the other Cooperating Respondents have 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. A significant amount of public funding is available to offset project costs. To date, Congress has appropriated approximately $71 million (so called Title 16 and Dreier funds), which is potentially available for payment of project costs. Approximately $40 million of the funding has been allocated to costs associated with the Project Agreement and additional funds may follow in later years. All project costs are subject to reallocation among the Cooperating Respondents. Aerojet intends to continue to defend itself vigorously to ensure that it is appropriately treated with other PRPs and that costs of any remediation are properly allocated among all PRPs.

88

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As part of Aerojet’s sale of its Electronics and Information Systems (EIS) business to Northrop Grumman Corporation (Northrop) in October 2001, the US 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 Aerojet’s obligations under the Project Agreement.

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 US 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 US 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 US 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 US EPA and the water entities is approximately $90 million. The Company is working diligently with the US EPA and the other PRPs to resolve this matter and ensure compliance with the UAO. The Company’s share of responsibility has not yet been determined.

On November 17, 2005, Aerojet notified the Los Angeles RWQCB and the US EPA that Aerojet was involved in research and development at the East Flair Drive site that included the use of 1,4-dioxane. Aerojet’s investigation of that issue is continuing.

Other Sites

In August 2007, along with numerous other companies, the Company received from the USFWS a notice of a Natural Resource Damage 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. 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.

The Company is currently involved in approximately 34 other environmental remediation actions or claims. In many of these matters, the Company is involved with other PRPs. In many instances, the Company’s 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 Company’s involvement. While government agencies frequently claim PRPs are jointly and severally liable at such sites, in the Company’s experience, interim and final allocations of liability and costs are generally made based on relative contributions of waste or contamination.

89

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 whose contractual terms are sufficiently specific to allow reasonable cost estimates to be developed less or greater than a fifteen year period. 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 the Company’s attorneys regarding the status and anticipated results of various administrative and legal proceedings. In most cases, only a range of reasonably probable 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 the Company periodically evaluates and revises such estimates as new information becomes available. Management cannot predict whether new information gained as projects progress will affect the estimated liability accrued. The timing of payment for estimated future environmental costs depends on the timing of regulatory approvals for planned remedies and the construction and completion of the remedies.

A summary of the Company’s environmental reserve activity is shown below:

							Total
							Environmental
	Aerojet			Other			Reserve
	(In millions)
November 30, 2004	$	287.0		$	16.6		$	303.6
Fiscal 2005 additions		13.0			1.4			14.4
Fiscal 2005 expenditures		(44.4	)		(5.6	)		(50.0	)
November 30, 2005		255.6			12.4			268.0
Fiscal 2006 additions		48.4			1.8			50.2
Fiscal 2006 expenditures		(47.5	)		(4.7	)		(52.2	)
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

As of November 30, 2007, the Aerojet reserves include $164.2 million for the Sacramento site, $74.2 million for BPOU, and $21.1 million for other Aerojet reserves.

The effect of the final resolution of environmental matters and the Company’s 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 Company’s obligations for environmental remediation and compliance will not have a material adverse effect on the Company’s 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 through insurance coverage, if available, and from other PRPs, along with continued investigation of new and more cost effective remediation alternatives and technologies.

90

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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 costs associated with the clean up 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.

Pursuant to the Global Settlement covering environmental costs associated with Aerojet’s 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 Aerojet’s products and services sold to the U.S. government. Allowable environmental costs are charged to these contracts as the costs are incurred. Aerojet’s 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 Aerojet’s sustained business volume under U.S. government contracts and programs and the relative size of Aerojet’s commercial business. Annually, we evaluate Aerojet’s forecasted business volume under U.S. government contracts and programs and the relative size of Aerojet’s commercial business as part of our long-term business review. In the third quarter of 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, the Company recorded a benefit of $8.6 million in the third quarter of fiscal 2007.

In conjunction with the sale of EIS, Aerojet entered into an agreement with Northrop whereby Aerojet is reimbursed by Northrop for a portion of environmental expenditures eligible for recovery under the Global Settlement. Amounts reimbursed are subject to annual limitations, with excess amounts carried over to subsequent periods, the total of which will not exceed $190 million over the term of the agreement, which ends in 2028. As of November 30, 2007, $131.5 million in potential future reimbursements were available over the remaining life of the agreement. The amount billable to Northrop in excess of the annual limitation is $39.9 million and is included as a component of other noncurrent assets, net in the Consolidated Balance Sheet.

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 million of costs (Pre-Close Environmental Costs) associated with environmental issues that arose prior to Aerojet’s acquisition of the ARC propulsion business, of which $5.5 million has been spent through November 30, 2007. 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 Aerojet’s products and services sold to the U.S. government.

As a part of the ARC acquisition, Aerojet signed a Memorandum of Understanding with the U.S. government agreeing to key assumptions and conditions that preserved the original methodology used in recalculating the percentage split between Aerojet and Northrop. In the fourth quarter of fiscal 2007, Aerojet presented an updated proposal to the U.S. government based on the Memorandum of Understanding and expects to complete an agreement in the near term. As a result of the revised proposal, the Company incurred a charge of $1.5 million to cost of sales in the fourth quarter of fiscal 2007 related to the retroactive adjustment to the allocation split going back to fiscal 2005.

Environmental reserves and recoveries impact to Statement of Operations

In conjunction with the review of its environmental reserves discussed above, the Company revised its estimate of costs that will be recovered under the Global Settlement based on business expected to be conducted under contracts with the U.S. government and its agencies in the future. In fiscal 2007, the increase to the reserve of $60.4 million resulted in a net charge to operations of $2.1 million, the net charge includes a benefit of $8.6 million

91

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

due to changes in the forecasted commercial business base (discussed above). In fiscal 2006, the increase to the reserve of $50.2 million resulted in a charge to operations of $9.2 million. In fiscal 2005, the increase to the reserve of $14.4 million resulted in a charge to operations of $5.1 million. 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.

e.  Conditional Asset Retirement Obligations

Effective November 30, 2006, the Company adopted FIN 47 which requires that the fair value of a liability for a conditional asset retirement obligation be recognized in the period in which it is incurred and the settlement date is estimable, and is capitalized as part of the carrying amount of the related tangible long-lived asset.

The Company performed an analysis of such obligations associated with all real property owned or leased, including plants, warehouses, and offices. The Company’s estimate of conditional asset retirement obligations 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 conditional asset retirement obligations that are not expected to be retired in the next fifteen years, the Company estimated the retirement date of such asset retirement obligations to be thirty years from the date of adoption. For leased properties, such obligations relate to the estimated cost of contractually required property restoration.

The initial application of FIN 47 as of November 30, 2006 resulted in the Company recording conditional asset retirement obligations in the amount of $10.2 million, which is a component of other noncurrent liabilities on the Consolidated Balance Sheet. Of this amount, $1.4 million was recorded as an incremental cost of the underlying property, plant and equipment, less $0.8 million of accumulated depreciation. The Company also recorded an asset of $8.4 million which represents the amount of the conditional asset retirement obligation that is estimated to be recoverable under U.S. government contracts. As of November 30, 2006, the cumulative effect related to the accretion of the liability and depreciation of the asset net of the amount recoverable under U.S. government contracts was $1.2 million, all attributable to the Aerospace and Defense segment.

The changes in the carrying amount of conditional asset retirement obligations since November 30, 2006 were as follows (in millions):

Balance as of November 30, 2006	$	10.2
Additions and other, net		2.3
Accretion		0.9
Balance as of November 30, 2007	$	13.4

92

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth information for fiscal 2006 and fiscal 2005, adjusted for the recognition of depreciation expense related to the cost of conditional asset retirements and accretion expense had the Company accounted for conditional asset retirement obligations in accordance with FIN 47 in those periods:

	Year Ended November 30,
	2006			2005
	(In millions, except per share amounts)
Net loss, as reported	$	(38.5	)	$	(230.0	)
Add: FIN 47 cumulative effect, net of tax		1.2			—
Less: FIN 47 unrecoverable depreciation and accretion expense, net of tax		(0.1	)		(0.1	)
Net loss, pro forma	$	(37.4	)	$	(230.1	)
As reported
Basic and diluted net loss per share	$	(0.69	)	$	(4.21	)
Pro forma
Basic and diluted net loss per share	$	(0.68	)	$	(4.21	)
Pro forma asset retirement obligation, net	$	10.2		$	9.3

f.  Arrangements with Off-Balance Sheet Risk

As of November 30, 2007, obligations required to be disclosed in accordance with FASB Interpretation No. 45 (FIN 45), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness of Others, consisted of:

— $72.4 million in outstanding commercial letters of credit expiring in 2008, the majority of which may be renewed, and securing obligations for environmental remediation and insurance coverage.

— Up to $120.0 million aggregate in guarantees by GenCorp of Aerojet’s obligations to U.S. government agencies for environmental remediation activities.

— Up to $2.3 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 Company’s 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 from time to time enters into certain types of contracts that require the Company to indemnify parties against third-party and other claims. These contracts primarily relate to: (i) divestiture agreements, under which the Company may provide customary indemnification to purchasers of the Company’s 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 Company’s use of the applicable premises; and (iii) certain agreements with the Company’s 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. Because the obligated amounts of these types of agreements often are not explicitly stated, the overall maximum amount of the obligations cannot be reasonably estimated.

93

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8.   Shareholders’ Deficit

a.  Preference Stock and Preferred Share Purchase Rights

As of November 30, 2007 and 2006, 15 million shares of preferred stock were authorized and none were issued or outstanding.

In January 1997, the Board of Directors extended for ten additional years GenCorp’s Shareholder Rights Plan (Rights Plan), as amended. When the Rights Plan was originally adopted in 1987, the Directors declared a dividend of one Preferred Share Purchase Right (Right) on each outstanding share of common stock, payable to shareholders of record on February 27, 1987. On February 18, 2007, the Rights Plan expired without renewal. Rights outstanding as of November 30, 2006 totaled 55.8 million. The Rights Plan provided that under certain circumstances each Right would entitle shareholders to buy one one-hundredth of a share of a new Series A Cumulative Preference Stock at an exercise price of $100. The Rights were exercisable only if a person or group acquired 20% or more of GenCorp’s common stock or announced a tender or exchange offer that would result in such person or group acquiring 30% or more of the common stock. GenCorp was entitled to redeem the Rights at two cents per Right at any time until ten days after a 20% position had been acquired (unless the Board elected to extend such time period, which in no event could exceed 30 days). If the Company was involved in certain transactions after the Rights become exercisable, a holder of Rights (other than Rights beneficially owned by a shareholder who has acquired 20% or more of GenCorp’s common stock, which Rights become void) was entitled to buy a number of the acquiring company’s common shares, or GenCorp’s common stock, as the case may be, having a market value of twice the exercise price of each Right. A potential dilutive effect may have existed upon the exercise of the Rights. Until a Right was exercised, the holder had no rights as a stockholder of the Company including, without limitation, the right to vote as a stockholder or to receive dividends.

b.  Common Stock

As of November 30, 2007, the Company had 150.0 million authorized shares of common stock, par value $0.10 per share, of which 56.8 million shares were issued, 56.6 million shares were outstanding, and 20.8 million shares were reserved for future issuance for discretionary payments of the Company’s 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 Company’s Notes.

c.  Stock-based Compensation

On December 1, 2005, the Company adopted SFAS 123(R), which requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors, including employee stock options, restricted stock, and stock appreciation rights (SARS) based on estimated fair values. The Company adopted SFAS 123(R) using the modified prospective transition method, which requires application of the accounting standard as of December 1, 2005, the first day of fiscal 2006. In accordance with the modified prospective transition method, the Consolidated Financial Statements for prior periods have not been restated to reflect the impact of SFAS 123(R). Therefore, the results for fiscal 2007 and 2006 are not directly comparable to prior years.

Prior to the adoption of SFAS 123(R)

Prior to the adoption of SFAS 123(R), as permitted by SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123) and SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, the Company applied the accounting rules under APB 25, which provided that no compensation expense was charged for options granted at an exercise price equal to the market value of the underlying common stock on the date of grant. In addition, the Company did not record any significant stock-based compensation related to SARS under the intrinsic value method in accordance with SFAS 123.

94

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table illustrates the effect on net loss and net loss per share as if the Company had applied the fair value recognition provisions of SFAS 123(R) to awards granted under the Company’s stock-based compensation plans prior to the adoption of this standard:

	Year Ended
	November 30,
	2005
Net loss, as reported	$	(230.0	)
Add: Stock-based compensation expense reported, net of related tax effects		2.3
Deduct: Stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(3.5	)
Net loss, pro forma	$	(231.2	)
As reported Basic and diluted net loss per share	$	(4.21	)
Pro forma Basic and diluted net loss per share	$	(4.23	)

Adoption of SFAS 123(R)

The following table details the impact of adopting SFAS 123(R) during fiscal 2006 (in millions, except per share amounts):

	Year Ended
	November 30,
	2006
Effect on loss from continuing operations before cumulative effect of change in accounting principle	$	(0.6	)
Cumulative effect of change in accounting principle, net of income taxes		(0.7	)
Net loss	$	(1.3	)
Effect on basic and diluted net loss per share	$	(0.02	)

Total stock-based compensation expense by type of award for fiscal 2007 and 2006 was as follows:

	Year Ended November 30,
	2007			2006
	(In millions, except per share amounts)
Stock appreciation rights	$	0.5		$	1.2
Restricted stock, service based		0.3			0.3
Restricted stock, performance based		0.7			0.9
Stock options		—			0.1
Stock-based compensation expense before tax effect		1.5			2.5
Tax effect on stock-based compensation expense		—			—
Total stock-based compensation expense	$	1.5		$	2.5
Effect on basic net income (loss) per share	$	(0.03	)	$	(0.05	)
Effect on diluted net income (loss) per share	$	(0.02	)	$	(0.05	)

Stock Appreciation Rights:  As of November 30, 2007, a total of 830,076 SARS were outstanding under the 1999 Equity and Performance Incentive Plan (1999 Plan). SARS granted to employees are generally exercisable in

95

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

one-third increments at one year, two years, and three years from the date of grant and have a ten year contractual life. 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. These awards are similar to the Company’s employee stock options, but are settled in cash rather than in shares of common stock, and are classified as liability awards. Under APB 25, compensation cost for these awards was recognized based on the intrinsic value method. The Company did not incur any significant compensation charges related to the SARS during fiscal 2005. Under the provisions of SFAS 123(R), 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 subsequent to adoption of SFAS 123(R) is based on SARS ultimately expected to vest, and therefore it has been reduced for estimated forfeitures.

A summary of the status of the Company’s SARS as of November 30, 2007 and changes during fiscal 2007 is presented below:

						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	SARS			Exercise		Contractual		Value
	(000s)			Price		Life (years)		(In millions)
Outstanding at November 30, 2006		545		$	18.73
Granted		352			13.73
Canceled		(67	)		18.22
Outstanding at November 30, 2007		830		$	17.02		8.27	$	—
Exercisable at November 30, 2007		257		$	19.11		7.69	$	—

The weighted average grant date fair value for SARS granted in fiscal 2007, fiscal 2006, and fiscal 2005 was $7.57, $10.70, and $10.90, respectively. None of the SARS were exercised in fiscal 2007, fiscal 2006, or fiscal 2005. As of November 30, 2007, there was $1.3 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 11 months.

Restricted Stock, service based:  As of November 30, 2007, a total of 100,200 shares of service based restricted stock was outstanding which vest based on years of service under the 1999 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 Company’s 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.

A summary of the status of the Company’s service based restricted stock as of November 30, 2007 and changes during fiscal 2007, is presented below:

	Service
	Based			Weighted
	Restricted			Average
	Stock			Grant Date
	(000s)			Fair Value
Outstanding at November 30, 2006		85		$	18.99
Granted		40			13.66
Vested		(3	)		14.82
Canceled		(22	)		18.05
Outstanding at November 30, 2007		100		$	17.44

96

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of November 30, 2007, there was $0.7 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 21 months. The intrinsic value of the service based restricted stock outstanding at November 30, 2007 was $1.2 million. Additionally, the intrinsic value of the service based restricted stock vested during fiscal 2007, fiscal 2006, and fiscal 2005 was $0.1 million, $1.5 million, and $0.6 million, respectively. The weighted average grant date fair values for service based restricted stock granted in fiscal 2006 and fiscal 2005 was $19.27 and $18.75, respectively.

Restricted Stock, performance based:  As of November 30, 2007, a total of 132,496 shares of performance based restricted shares was outstanding under the 1999 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 restricted stock awards was based on the closing market price of the Company’s common stock on the date of award and is being amortized over the estimated service period to achieve the operations and earnings targets. 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.

A summary of the status of the Company’s performance based restricted stock as of November 30, 2007 and changes during fiscal 2007, is presented below:

	Performance
	Based			Weighted
	Restricted			Average
	Stock			Grant Date
	(000s)			Fair Value
Outstanding at November 30, 2006		114		$	18.87
Granted		86			13.73
Vested		(40	)		19.27
Canceled		(28	)		18.51
Outstanding at November 30, 2007		132		$	15.76

As of November 30, 2007, there was $0.8 million of total stock-based compensation related to nonvested performance based restricted stock. The underlying performance criteria set by the Organization & Compensation Committee of the Board relate to meeting certain annual earnings and cash flow targets and achieving certain real estate related milestones within specific time frames through 2009. Based on the Company’s current projections, approximately $0.2 million of the $0.8 million is not currently expected to vest. The estimated $0.6 million of nonvested performance based stock cost will be recognized over an estimated amortization period of when the performance targets are expected to be met. The intrinsic value of the performance based restricted stock outstanding at November 30, 2007 was $1.6 million. Additionally, the intrinsic value of the performance based restricted stock vested during fiscal 2007, fiscal 2006, and fiscal 2005 were $0.6 million, $1.5 million, and $1.3 million, respectively. The weighted average grant date fair value for performance based restricted stock granted in fiscal 2006 and fiscal 2005 was $19.43 and $18.51, respectively.

Stock Options:  As of November 30, 2007, a total of 1,581,724 stock options was outstanding under the 1999 Plan and the 1997 Stock Option Plan. The Company has not granted stock options to employees or directors since February 2004. Stock-based compensation expense recognized for fiscal 2006 included compensation expense for stock options granted prior to, but not yet vested as of December 1, 2005, based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS 123.

97

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the status of the Company’s stock options as of November 30, 2007 and changes during fiscal 2007 is presented below:

						Weighted
				Weighted		Average		Aggregate
	Stock			Average		Remaining		Intrinsic
	Options			Exercise		Contractual		Value
	(000s)			Price		Life		(In millions)
Outstanding at November 30, 2006		1,655		$	10.93
Exercised		(37	)		10.04
Canceled		(36	)		12.32
Outstanding and Exercisable at November 30, 2007		1,582		$	10.94		3.08	$	1.8

The total intrinsic value of options exercised during fiscal 2007, fiscal 2006, and fiscal 2005 was $0.2 million, $1.5 million, and $3.7 million, respectively.

The following table summarizes the range of exercise prices and weighted-average exercise prices for options outstanding and exercisable as of November 30, 2007 under the Company’s stock option plans:

				Outstanding and Exercisable
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)
1998		$12	.67 – $16.06		204	$	15.92		0.3
1999		$ 9	.40 – $13.59		207	$	10.43		1.4
2000		$ 8	.19 – $10.13		261	$	9.49		2.1
2001		$10	.44 – $12.30		322	$	10.85		3.2
2002		$ 9	.77 – $15.43		241	$	12.84		4.5
2003		$ 6	.53 – $ 9.29		319	$	7.92		5.3
2004		$10	.92		28	$	10.92		6.2
					1,582

Valuation Assumptions

The fair value of SARS were estimated using a Black-Scholes Model with the following weighted average assumptions:

	Year Ended November 30,
	2007			2006
Expected life (in years)		5.7			7.1
Volatility		34.96	%		39.31	%
Risk-free interest rate		3.56	%		4.46	%
Dividend yield		0.00	%		0.00	%

During fiscal 2005, the Company did not issue any stock options or SARS that required a fair value calculation.

Expected Term:  The Company’s expected term represents the period that the Company’s 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.

98

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Expected Volatility:  The fair value of stock-based payments were valued using the Black-Scholes Model with a volatility factor based on the Company’s historical stock prices. The range of expected volatility used in the Black-Scholes Model was 19% to 47%.

Expected Dividend:  The Black-Scholes Model requires a single expected dividend yield as an input. Beginning in December 2004, the Senior Credit Facility restricted 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 3.04% to 5.26%.

Estimated Pre-vesting Forfeitures:  When estimating forfeitures, the Company considers historical termination as well as anticipated retirements.

d.  Accumulated Other Comprehensive Loss, Net of Income Taxes

The components of accumulated other comprehensive loss and the related income tax effects are presented in the following table:

	As of November 30,
	2007			2006		2005
	(In millions)
SFAS 158 adoption (see Note 6)	$	(35.5	)	$	—	$	—
Minimum pension liability		—			—		(1.6	)
Accumulated other comprehensive loss	$	(35.5	)	$	—	$	(1.6	)

9.   Operating Segments and Related Disclosures

The Company’s 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 it operating segments based on several factors, of which the primary financial measure is segment performance, which is a non-GAAP financial measure. Segment performance 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, legacy income or expenses, provisions for unusual items not related to the segment, interest expense, interest income, and income taxes.

99

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Selected financial information for each reportable segment is as follows:

	Year Ended November 30,
	2007			2006			2005
	(In millions)
Net Sales:
Aerospace and Defense	$	739.1		$	614.6		$	615.8
Real Estate		6.3			6.5			6.6
Total	$	745.4		$	621.1		$	622.4
Segment Performance:
Aerospace and Defense	$	84.8		$	61.2		$	(109.2	)
Environmental remediation provision adjustments		0.4			(7.4	)		(3.9	)
Retirement benefit plan expense		(23.8	)		(34.8	)		(34.2	)
Unusual items (see Note 12)		(0.1	)		(8.5	)		9.8
Aerospace and Defense Total		61.3			10.5			(137.5	)
Real Estate		3.5			2.3			3.9
Total	$	64.8		$	12.8		$	(133.6	)
Reconciliation of segment performance to income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting principles:
Segment Performance	$	64.8		$	12.8		$	(133.6	)
Interest expense		(28.6	)		(27.2	)		(23.6	)
Interest income		4.9			3.6			0.6
Corporate retirement benefit plan income (expense)		2.2			(8.7	)		(13.6	)
Corporate and other expenses		(19.7	)		(24.2	)		(18.3	)
Corporate unusual items (see Note 12)		(0.6	)		—			(47.2	)
Income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting principles	$	23.0		$	(43.7	)	$	(235.7	)
Aerospace and Defense	$	20.3		$	19.0		$	19.7
Real Estate		1.5			—			—
Corporate		—			—			—
Capital Expenditures	$	21.8		$	19.0		$	19.7
Aerospace and Defense	$	25.4		$	24.4		$	25.6
Real Estate		0.9			0.7			0.8
Corporate		2.1			2.1			2.0
Depreciation and Amortization	$	28.4		$	27.2		$	28.4

100

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	As of November 30,
	2007		2006
	(In millions)
Aerospace and Defense	$	709.6	$	743.6
Real Estate		59.5		48.4
Identifiable assets		769.1		792.0
Corporate		226.0		228.9
Discontinued operations		0.1		0.5
Assets	$	995.2	$	1,021.4

The Company’s 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.

101

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10.   Quarterly Financial Data (Unaudited)

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(In millions, except per share amounts)
				(Revised)			(Revised)
2007
Net sales	$	150.8		$	192.3		$	198.5		$	203.8
Cost of products sold		135.0			163.3			175.4			184.1
Unusual items		—			2.6			4.7			(6.6	)
Income (loss) from continuing operations before income taxes		(1.7	)		9.6			3.6			11.5
Income (loss) from continuing operations		(2.1	)		13.2			16.0			14.0
Income (loss) from discontinued operations, net of income taxes		30.6			(0.7	)		(0.4	)		(1.6	)
Net income		28.5			12.5			15.6			12.4
Basic income (loss) per share from continuing operations		(0.04	)		0.23			0.29			0.25
Basic income (loss) per share from discontinued operations, net of income taxes		0.55			(0.01	)		(0.01	)		(0.03	)
Basic net income per share		0.51			0.22			0.28			0.22
Diluted income (loss) per share from continuing operations		(0.04	)		0.22*			0.27*			0.24
Diluted income (loss) per share from discontinued operations, net of income taxes		0.55			(0.01	)		(0.01	)		(0.03	)
Diluted net income per share	$	0.51		$	0.21*		$	0.26*		$	0.21

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(In millions, except per share amounts)
2006
Net sales	$	128.3		$	167.2		$	158.3		$	167.3
Cost of products sold		121.3			151.4			145.4			146.9
Unusual items		—			8.5			—			—
Loss from continuing operations before income taxes and cumulative effect of changes in accounting principles		(13.7	)		(14.4	)		(15.6	)		—
Income (loss) from continuing operations before cumulative effect of changes in accounting principles		(14.3	)		(10.4	)		(14.6	)		0.3
Income (loss) from discontinued operations, net of income taxes		(1.0	)		3.1			1.5			(1.2	)
Cumulative effect of changes in accounting principles, net of income taxes		(0.7	)		—			—			(1.2	)
Net loss		(16.0	)		(7.3	)		(13.1	)		(2.1	)
Basic and diluted income (loss) per share from continuing operations before cumulative effect of changes in accounting principles		(0.26	)		(0.19	)		(0.26	)		—
Basic and diluted income (loss) per share from discontinued operations, net of income taxes		(0.02	)		0.06			0.02			(0.02	)
Basic and diluted loss per share from cumulative effect of changes in accounting principles, net of income taxes		(0.01	)		—			—			(0.02	)
Basic and diluted net loss per share	$	(0.29	)	$	(0.13	)	$	(0.24	)	$	(0.04	)

* During the fourth quarter of fiscal 2007, the Company identified an error in the computation of diluted income per share from continuing operations and diluted net income per share presented in its Form 10-Qs for the quarterly periods ended May 31, 2007 and August 31, 2007. The Company had incorrectly included in the computation its 21/4% Debentures on an “as if” converted basis. Only the conversion premium (amount in excess of principal received by holder upon conversion) for these debentures is settled in common shares, with the principal settled in cash. Because the market price of the Company’s common stock did not exceed the conversion price for the period, there was no conversion premium, and, as such, no dilutive effect on an “as converted” basis. The error had no effect on any financial statement amounts other than diluted income per share from continuing operations and diluted net income per share for the second and third quarter of fiscal 2007 and the nine months ended August 31, 2007. The diluted income per share from continuing operations and diluted net income per share for the six months ended May 31, 2007 were correctly stated. Management has concluded that the errors are not material to the financial statements for those periods and that the Form 10-Q filings for those periods can continue to be relied upon. A summary of the revisions are as follows:

	Second Quarter Ended				Third Quarter Ended				Nine Months Ended
	May 31, 2007				August 31, 2007				August 31, 2007
	Previously				Previously				Previously
	Reported		Revised		Reported		Revised		Reported		Revised
Diluted income per share from continuing operations	$	0.21	$	0.22	$	0.25	$	0.27	$	0.46	$	0.48
Diluted net income per share		0.20		0.21		0.24		0.26		0.87		0.94

102

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11.   Discontinued Operations

During the third quarter of fiscal 2006, the Company classified its Turbo product line as a discontinued operation as a result of its plans to sell the product line. The product line was not core to the Aerospace and Defense segment and required increased management oversight and costs because of increased competition and investments for on-going maintenance of the product line. On November 17, 2006, the Company completed the sale of its Turbo product line to Aerosource Inc. for $1.1 million, subject to adjustment. The loss on the sale of the Turbo product line during fiscal 2006 was $0.4 million. An additional loss of $0.1 million was recorded in fiscal 2007 to reflect the net assets of the Turbo product line and management’s estimate of the net proceeds from the sale. For operating segment reporting, the Turbo product line was previously reported as a part of the Aerospace and Defense segment.

On November 30, 2005, the Company sold its Fine Chemicals business to American Pacific Corporation (AMPAC) for $88.5 million of cash paid at closing, an unsecured subordinated seller note of $25.5 million delivered at closing, an earn-out provision of up to $6.0 million contingent upon the business’ achieving certain earnings targets, and the assumption by the buyer of certain liabilities. The Company recorded a full allowance on both the $25.5 million unsecured subordinated seller note in fiscal 2005 and $6.0 million earnings targets receivable in fiscal 2006. During fiscal 2005, the Company recorded a loss of $28.7 million on the difference between the estimated cash proceeds to be received on disposition less the carrying value of the net assets being sold and related transaction selling costs. An additional loss of $0.1 million was recorded in fiscal 2006 to reflect the net assets of the Fine Chemicals business and management’s estimate of the proceeds from the sale. During the first quarter of fiscal 2007, the Company entered into an earn-out and seller note repayment agreement (Repayment Agreement) with 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 the Company from certain liabilities. 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.

In June 2006, the Company entered into a Final Settlement and Release Agreement with Cerberus related to the sale of GDX which resulted in a $2.9 million income tax benefit and $2.0 million gain that was recorded during the second quarter of fiscal 2006. For operating segment reporting, GDX was previously reported as a separate operating segment.

The Company adjusted certain pre-acquisition obligations during the second quarter of fiscal 2006 associated with the Company’s purchase of the Draftex group in December 2000 which resulted in a $1.7 million charge. During the third quarter of fiscal 2006, the Company reached a settlement on these pre-acquisition obligations which resulted in a gain of $1.3 million.

In November 2003, the Company announced the closing of a GDX manufacturing facility in Chartres, France. 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 in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. An expense of $1.0 million was recorded during fiscal 2005 primarily related to employee social costs that became estimable in fiscal 2005. The Company has not yet recorded expenses associated with other social benefits due to the uncertainty of these costs which could total up to a pre-tax expense of $2.0 million and may be incurred within the next few years.

In accordance with EITF 87-24, Allocation of Interest to Discontinued Operations, the Company allocated $2.5 million of interest expense in fiscal 2005 to discontinued operations based on interest on debt that would be required to be repaid using estimated proceeds to be received from the anticipated sale of the Fine Chemicals business.

103

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Summarized financial information for discontinued operations is set forth below:

	Year Ended November 30,
	2007			2006		2005
	(In millions)
Net sales	$	—		$	1.0	$	66.1
Income (loss) before income taxes		28.9			—		(23.6	)
Income tax benefit (provision)		(1.0	)		2.4		—
Income (loss) from discontinued operations		27.9			2.4		(23.6	)

As of November 30, 2007 and 2006, the components of assets and liabilities of discontinued operations in the Consolidated Balance Sheets are as follows:

	As of November 30,
	2007		2006
	(In millions)
Assets of discontinued operations, consisting of other assets	$	0.1	$	0.5
Accounts payable	$	0.5	$	0.6
Other liabilities		0.5		1.2
Liabilities of discontinued operations	$	1.0	$	1.8

12.   Unusual Items

Charges and gains associated with unusual items are summarized as follows:

	Year Ended November 30,
	2007			2006		2005
	(In millions)
Aerospace and Defense:
Legal settlements and estimated loss on legal matters	$	3.8		$	8.5	$	2.0
Customer reimbursements of tax recoveries		2.3			—		—
Gain on settlements and recoveries		(6.0	)		—		(11.8	)
Aerospace and Defense unusual items		0.1			8.5		(9.8	)
Corporate:
Replacement of the previous credit facility		0.6			—		—
Legal settlement		—			—		29.1
Loss on redemption of 91/2% Notes		—			—		6.7
Loss on repayment of 53/4% Notes		—			—		5.5
Loss on termination of the former credit facility		—			—		5.9
Corporate unusual items		0.6			—		47.2
Total Unusual items	$	0.7		$	8.5	$	37.4

In fiscal 2007, the Company recorded $3.8 million related to estimated costs associated with legal matters. The Company recorded an expense of $2.3 million for tax refunds that will be repaid to our 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.

104

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In fiscal 2006, Aerojet recorded a charge of $8.5 million related to a $25 million settlement of a group of environmental toxic tort cases that had been pending in Sacramento Superior Court since 1997.

In fiscal 2005, the Company recorded a charge of $2.0 million related to a legal settlement of the San Gabriel Valley and Chino Hills toxic tort cases. In addition, the Company recorded an unusual gain of $11.8 million, $2.8 million of which related to a settlement with its insurance providers and $9.0 million of which related to an adjustment of reserves established in fiscal 2001 for customer reimbursements of tax recoveries that has been settled. The Company recorded a charge of $29.1 million related to the Olin legal matter. The Company recorded a charge of $18.1 million as a result of the redemption of $52.5 million of principal of the 91/2% Notes, repayment of $59.9 million of principal of the 53/4% Notes, and the termination of the Company’s former credit facility.

13.   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. The wholly 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 secured indebtedness of the subsidiary guarantor with respect to the assets securing that indebtedness. Absent both default and notice as specified in the Company’s Senior Credit Facility agreement and agreements governing the Company’s outstanding convertible notes and the 91/2% Notes, there are no restrictions on the Company’s ability to obtain funds from its wholly 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 Company’s guarantor and non-guarantor subsidiaries.

105

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statements of Operations

				Guarantor			Non-guarantor
November 30, 2007(In millions):	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	745.4		$	—		$	—		$	745.4
Cost of products sold		—			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	)
Income (loss) from continuing operations before income taxes		(26.3	)		49.3			—			—			23.0
Income tax (benefit) provision		(25.2	)		7.1			—			—			(18.1	)
Income (loss) from continuing operations		(1.1	)		42.2			—			—			41.1
Income (loss) from discontinued operations		28.8			—			(0.9	)		—			27.9
Income before equity income (loss) of subsidiaries		27.7			42.2			(0.9	)		—			69.0
Equity earnings of subsidiaries		41.3			—			—			(41.3	)		—
Net income (loss)	$	69.0		$	42.2		$	(0.9	)	$	(41.3	)	$	69.0

				Guarantor			Non-guarantor
November 30, 2006 (In millions):	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net sales	$	—		$	621.1		$	—		$	—	$	621.1
Cost of products sold		—			565.0			—			—		565.0
Selling, general and administrative		15.7			13.0			0.1			—		28.8
Depreciation and amortization		2.1			25.1			—			—		27.2
Interest expense		42.2			(15.0	)		—			—		27.2
Other, net		(1.4	)		18.0			—			—		16.6
Income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting principles		(58.6	)		15.0			(0.1	)		—		(43.7	)
Income tax (benefit) provision		(22.8	)		18.1			—			—		(4.7	)
Loss from continuing operations before the cumulative effect of changes in accounting principles		(35.8	)		(3.1	)		(0.1	)		—		(39.0	)
Income from discontinued operations		—			2.4			—			—		2.4
Cumulative effect of changes in accounting principles, net of tax		(1.9	)		—			—			—		(1.9	)
Loss before equity losses of subsidiaries		(37.7	)		(0.7	)		(0.1	)		—		(38.5	)
Equity losses of subsidiaries		(0.8	)		—			—			0.8		—
Net loss	$	(38.5	)	$	(0.7	)	$	(0.1	)	$	0.8	$	(38.5	)

106

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				Guarantor			Non-guarantor
November 30, 2005 (In millions):	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net sales	$	—		$	622.4		$	—		$	—	$	622.4
Cost of products sold		—			737.3			—			—		737.3
Selling, general and administrative		19.3			10.2			—			—		29.5
Depreciation and amortization		2.1			26.3			—			—		28.4
Interest expense		18.3			5.3			—			—		23.6
Other, net		47.8			(8.5	)		—			—		39.3
Loss from continuing operations before income taxes		(87.5	)		(148.2	)		—			—		(235.7	)
Income tax benefit		(24.8	)		(4.5	)		—			—		(29.3	)
Loss from continuing operations		(62.7	)		(143.7	)		—			—		(206.4	)
Income (loss) from discontinued operations		(31.1	)		8.5			(1.0	)		—		(23.6	)
Loss before equity losses of subsidiaries		(93.8	)		(135.2	)		(1.0	)		—		(230.0	)
Equity losses of subsidiaries		(136.2	)		—			—			136.2		—
Net loss	$	(230.0	)	$	(135.2	)	$	(1.0	)	$	136.2	$	(230.0	)

107

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Balance Sheets

				Guarantor			Non-guarantor
November 30, 2007 (In millions):	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents	$	98.4		$	(6.7	)	$	0.6		$	—		$	92.3
Restricted cash		—			—			—			—			—
Accounts receivable		—			99.2			—			—			99.2
Inventories		—			67.5			—			—			67.5
Recoverable from the U.S. government and other third parties for environmental remediation costs and other		—			46.5			—			—			46.5
Prepaid expenses and other		9.8			7.5			0.1			—			17.4
Assets of discontinued operations		(0.1	)		—			0.2			—			0.1
Total current assets		108.1			214.0			0.9			—			323.0
Property, plant and equipment, net		0.5			139.3			—			—			139.8
Recoverable from the U.S. government and other third parties for environmental remediation costs and other		—			179.0			—			—			179.0
Prepaid pension asset		102.1			(1.1	)		—			—			101.0
Goodwill		—			94.9			—			—			94.9
Intercompany receivable (payable), net		24.1			(8.2	)		(15.9	)		—			—
Other noncurrent assets and intangibles, net		267.9			141.8			9.8			(262.0	)		157.5
Total assets	$	502.7		$	759.7		$	(5.2	)	$	(262.0	)	$	995.2
Short-term borrowings and current portion of long-term debt	$	1.5		$	—		$	—		$	—		$	1.5
Accounts payable		0.3			28.6			—			—			28.9
Reserves for environmental remediation costs		5.4			60.7			—			—			66.1
Income taxes (receivable) payable		(5.7	)		11.9			—			—			6.2
Other current liabilities, advance payments on contracts, and postretirement medical and life benefits		35.0			107.1			0.1			—			142.2
Liabilities of discontinued operations		—			—			1.0			—			1.0
Total current liabilities		36.5			208.3			1.1			—			245.9
Long-term debt		444.8			—			—			—			444.8
Reserves for environmental remediation costs		5.1			198.8			—			—			203.9
Other noncurrent liabilities		68.3			84.3			—			—			152.6
Total liabilities		554.7			491.4			1.1			—			1,047.2
Commitments and contingencies (Note 7)
Total shareholders’ (deficit) equity		(52.0	)		268.3			(6.3	)		(262.0	)		(52.0	)
Total liabilities and shareholders’ equity (deficit)	$	502.7		$	759.7		$	(5.2	)	$	(262.0	)	$	995.2

108

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				Guarantor			Non-guarantor
November 30, 2006 (In millions):	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents	$	70.5		$	(9.8	)	$	0.5		$	—		$	61.2
Restricted cash		19.8			—			—			—			19.8
Accounts receivable		—			71.1			—			—			71.1
Inventories		—			69.5			—			—			69.5
Recoverable from the U.S. government and other third parties for environmental remediation costs and other		—			37.6			—			—			37.6
Prepaid expenses and other		3.7			19.6			0.2			—			23.5
Assets of discontinued operations		—			—			0.5			—			0.5
Total current assets		94.0			188.0			1.2			—			283.2
Property, plant and equipment, net		0.5			136.3			—			—			136.8
Recoverable from the U.S. government and other third parties for environmental remediation costs and other		—			177.0			—			—			177.0
Prepaid pension asset		116.6			70.7			—			—			187.3
Goodwill		—			101.3			—			—			101.3
Intercompany (payable) receivable, net		(434.2	)		448.7			(14.5	)		—			—
Other noncurrent assets and intangibles, net		713.6			126.0			9.8			(713.6	)		135.8
Total assets	$	490.5		$	1,248.0		$	(3.5	)	$	(713.6	)	$	1,021.4
Short-term borrowings and current portion of long-term debt	$	21.3		$	—		$	—		$	—		$	21.3
Accounts payable		0.6			32.0			—			—			32.6
Reserves for environmental remediation costs		4.9			50.7			—			—			55.6
Income taxes payable (receivable)		(4.4	)		16.6			—			—			12.2
Other current liabilities, advance payments on contracts, and postretirement medical and life benefits		27.2			128.5			—			—			155.7
Liabilities of discontinued operations		—			—			1.8			—			1.8
Total current liabilities		49.6			227.8			1.8			—			279.2
Long-term debt		441.1			—			—			—			441.1
Reserves for environmental remediation costs		4.6			205.8			—			—			210.4
Other noncurrent liabilities		91.2			95.5			—			—			186.7
Total liabilities		586.5			529.1			1.8			—			1,117.4
Commitments and contingencies (Note 7)
Total shareholders’ (deficit) equity		(96.0	)		718.9			(5.3	)		(713.6	)		(96.0	)
Total liabilities and shareholders’ (deficit) equity	$	490.5		$	1,248.0		$	(3.5	)	$	(713.6	)	$	1,021.4

109

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Condensed Consolidating Statements of Cash Flows

				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
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:
Net transfers (to) from parent		3.6			(5.1	)		1.5			—		—
Repayments on notes payable and long-term debt, net		(20.8	)		—			—			—		(20.8	)
Other financing activities		0.4			—			—			—		0.4
Net cash (used in) provided by financing activities		(16.8	)		(5.1	)		1.5			—		(20.4	)
Net increase (decrease) 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

				Guarantor			Non-guarantor
November 30, 2006 (In millions):	Parent			Subsidiaries			Subsidiaries		Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(45.1	)	$	32.0		$	—	$	—	$	(13.1	)
Cash flows from investing activities:
Capital expenditures		—			(19.0	)		—		—		(19.0	)
Proceeds from business disposition		1.1			—			—		—		1.1
Other investing activities		(19.8	)		—			—		—		(19.8	)
Net cash used in investing activities		(18.7	)		(19.0	)		—		—		(37.7	)
Cash flows from financing activities:
Net transfers (to) from parent		14.5			(14.5	)		—		—		—
Borrowings (repayments) on notes payable and long-term debt, net		16.4			—			—		—		16.4
Other financing activities		3.7			0.2			—		—		3.9
Net cash provided by (used in) financing activities		34.6			(14.3	)		—		—		20.3
Net decrease in cash and cash equivalents		(29.2	)		(1.3	)		—		—		(30.5	)
Cash and cash equivalents at beginning of year		99.7			(8.5	)		0.5		—		91.7
Cash and cash equivalents at end of year	$	70.5		$	(9.8	)	$	0.5	$	—	$	61.2

110

GENCORP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

				Guarantor			Non-guarantor
November 30, 2005 (In millions):	Parent			Subsidiaries			Subsidiaries			Eliminations		Consolidated
Net cash (used in) provided by operating activities	$	(68.9	)	$	(10.1	)	$	(4.8	)	$	—	$	(83.8	)
Cash flows from investing activities:
Capital expenditures		—			(19.7	)		—			—		(19.7	)
Proceeds from business disposition		108.3			—			—			—		108.3
Other investing activities		201.1			(38.5	)		—			—		162.6
Net cash provided by (used in) investing activities		309.4			(58.2	)		—			—		251.2
Cash flows from financing activities:
Net transfers (to) from parent		(74.5	)		67.3			7.2			—		—
Borrowings (repayments) on notes payable and long-term debt, net		(148.5	)		—			—			—		(148.5	)
Other financing activities		12.9			(8.0	)		—			—		4.9
Net cash (used in) provided by financing activities		(210.1	)		59.3			7.2			—		(143.6	)
Net increase (decrease) in cash and cash equivalents		30.4			(9.0	)		2.4			—		23.8
Cash and cash equivalents at beginning of year		67.4			0.5			—			—		67.9
Cash and cash equivalents at end of year	$	97.8		$	(8.5	)	$	2.4		$	—	$	91.7

111

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, 2007, 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 SEC’s rules and forms. Disclosure controls and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to the Company’s 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, 2007 that our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s 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 Company’s 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, 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 Company’s 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, 2007.

The effectiveness of our internal control over financial reporting as of November 30, 2007 has been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm. Their report appears in Item 8.

112

Changes In Internal Control Over Financial Reporting

There was no change in the Company’s internal control over financial reporting during the fourth quarter of fiscal 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 2008 Annual Meeting of Shareholders is set forth under the heading “PROPOSAL 1 — ELECTION OF DIRECTORS” in our 2008 Proxy Statement for our 2008 Annual Meeting (2008 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 2008 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 2008 Proxy Statement and is incorporated herein by reference.

Executive Officers of the Registrant

The following information is given as of December 31, 2007, and except as otherwise indicated; each individual has held the same office during the preceding five-year period.

Name	Title	Other Business Experience	Age
Terry L. Hall	President and Chief Executive Officer (since July 2002)	Chairman of the Board (December 2003 — February 2007), President and Chief Executive Officer (July 2002 — present); Senior Vice President and Chief Operating Officer, November 2001 — July 2002; Senior Vice President and Chief Financial Officer of the Company, July 2001 — November 2001; Senior Vice President and Chief Financial Officer; Treasurer of the Company, October 1999 — July 2001; on special assignment as Chief Financial Officer of Aerojet, May 1999 — October 1999, Senior Vice President and Chief Financial Officer of US Airways Group, Inc., 1998, Chief Financial Officer of Apogee Enterprise Inc., 1995 — 1997.		53

113

Name	Title	Other Business Experience	Age
Yasmin R. Seyal	Senior Vice President and Chief Financial Officer (since May 2002)	Acting Chief Financial Officer and Senior Vice President, Finance, November 2001 — May 2002; Treasurer of the Company, July 2000 — September 2002; Assistant Treasurer and Director of Taxes of the Company, March 2000 — July 2000; Director of Treasury and Taxes of the Company, October 1999 — April 2000; Director of Taxes as well as other management positions within Aerojet, 1989 -- April 1999.		50
Mark A. Whitney	Senior Vice President; General Counsel and Secretary (since July 2006)	Vice President, Law; Deputy General Counsel and Assistant Secretary (2003 — 2006); Senior Corporate Counsel, Tyco International (US) Inc., June 1999 — March 2003 Associate Corporate Counsel, Tyco International (US) Inc., November 1996 — June 1999.		44
J. Scott Neish	Vice President of the Company and President of Aerojet (since November 2005)	Executive Vice President of Aerojet, 2005; Vice President of Aerojet Sacramento Operations, 2003 — 2005; Vice President and General Manager, Aerojet Redmond, and its predecessor, General-Dynamics-OTS, 2001 — 2004; Vice President, Operations for Primex Aerospace 1998 — 2001.		60
R. Leon Blackburn	Vice President and Controller (since February 2006)	Vice President, Tellabs Access, December 2004 — February 2005; Vice President — Corporate Controller, Advanced Fiber Communications, September 2000 — December 2004.		62
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.		49
Linda B. Cutler	Vice President, Corporate Communications (since May 2002)	Vice President, Communications of the Company, March 2002 — May 2002; Strategic Market Manager, Telecommunications and Video Services of Output Technology Solutions, September 2000 — March 2002; Vice President, Marketing and Corporate Communications of Output Technology Solutions, January 2000 — September 2000; Vice President, Investor Relations and Corporate Communications of USCS International, April 1996 — December 1999.		54
William M. Lau	Vice President, Treasurer (since April 2007)	Vice President, Finance and Treasurer of Catellus Development Corporation from 2001 to 2005; Managing Director for Banc of America Securities LLC from 1993 to 2000.		61

114

Name	Title	Other Business Experience	Age
Bryan P. Ramsey	Vice President, Human Resources (since July 2005)	Vice President, Aerojet Human Resources since 2001; Director, Aerojet Human Resources, 2000 — 2001; Director of Aerojet Human Resources, Azusa 1998 — 1999.		56

The Company’s executive officers generally hold terms of office of one year and/or until their successors are elected.

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 Company’s employees including the principal executive officer, principal financial officer, principal accounting officer and controller. 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 Company’s current Code of Business Conduct and the Company’s 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 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 Committee’s Financial Expert is set forth under the heading “Board Committees” in our 2008 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,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” of our 2008 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 2008 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, 2007: (i) GenCorp Inc. 1993 Stock Option Plan; (ii) GenCorp Inc. 1997 Stock Option Plan; and (iii) GenCorp Inc. 1999 Equity and Performance Incentive Plan. All three 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		1,581,724	$	10.94		237,513(1	)
Equity compensation plans not approved by shareholders(2)		—		N/A		—
Total		1,581,724	$	10.94		237,513

115

(1)

The number of shares issued as restricted shares, deferred shares or performance shares is limited under the GenCorp Inc. 1999 Equity and Performance Incentive Plan to 900,000 common shares and, during any period of three consecutive fiscal years, the maximum number of common shares covered by awards of restricted shares, deferred shares or performance shares granted to any one participant is limited to 900,000 common shares. The GenCorp Inc. 1999 Equity and Performance Incentive Plan further provides that no participant may receive an award in any one calendar year of performance shares or performance units having an aggregate maximum value as of the date of grant in excess of $2,000,000.

(2)

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 may be allocated to an account based on the Company’s 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, 2007, 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 43,424.

Item 13.   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 “Change in Control Severance Agreements” in our 2008 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 2008 Proxy Statement and is incorporated herein by reference.

Item 14.   Principal Accountant Fees and Services

The information in our 2008 Proxy Statement set forth under the captions “Proposal 2 — 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.

116

PART IV

Item 15.   Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

(1) FINANCIAL STATEMENTS

	Page
	Number
Report of Independent Registered Public Accounting Firm		52
Report of Independent Registered Public Accounting Firm		53
Consolidated Statements of Operations for each of the three years in the period ended November 30, 2007		54
Consolidated Balance Sheets as of November 30, 2007 and 2006		55
Consolidated Statements of Shareholders’ (Deficit) Equity for each of the three years in the period ended November 30, 2007		56
Consolidated Statements of Cash Flows for each of the three years in the period ended November 30, 2007		57
Notes to Consolidated Financial Statements		58

(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.

117

GENCORP INC.
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(In millions)

	Balance at		Charged to				Balance at
	Beginning of		Costs and				End of
	Period		Expenses		Deductions(1)		Period
Allowance for doubtful accounts (current and noncurrent):
Year ended November 30, 2007	$	31.6	$	0.2	$	31.5	$	0.3
Year ended November 30, 2006		26.8		6.1		1.3		31.6
Year ended November 30, 2005	$	0.6	$	26.3	$	0.1	$	26.8

(1)	During fiscal 2007, the Company entered into an earnout and seller note repayment agreement with American Pacific Corporation (see Note 11 in Notes to Consolidated Financial Statements).
(3)	See Item 15(b)

(b) EXHIBITS

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 GenCorp’s 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 GenCorp’s 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.

118

Table
Item No.			Exhibit Description
	3	.2*	The Amended Code of Regulations of GenCorp, as amended on March 28, 2007.
	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 GenCorp’s 9 1/2% Senior Subordinated Notes was filed as Exhibit 4.1 to GenCorp’s Form S-4 Registration Statement dated October 6, 2003 (File No. 333-109518) and is incorporated herein by reference.
	4	.2	Form of 9 1/2% Senior Subordinated Notes was filed as Exhibit 4.4 to GenCorp’s 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 GenCorp’s 9 1/2% 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 GenCorp’s 9 1/2% 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 GenCorp’s 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 2 1/4% 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 2 1/4% 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 2 1/4% 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.
	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 Company’s Current Report on Form 8-K dated November 5, 2001 (File No. 1-1520), and is incorporated herein by reference.
	10	.3†	Modified Employment Retention Agreement dated July 26, 2002, between GenCorp and Robert A. Wolfe was filed as Exhibit 10.39 to GenCorp Inc.’s Annual Report on Form 10-K for the fiscal year ended November 30, 2002 (File No. 1-1520), and is incorporated herein by reference.

119

Table
Item No.			Exhibit Description
	10	.4†	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	.5*†	Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain Subsidiary Companies as amended.
	10	.6†	Information relating to the Deferred Bonus Plan of GenCorp Inc. is contained in Post-Effective Amendment No. 1 to Form S-8 Registration Statement No. 2-83133 dated April 18, 1986 and is incorporated herein by reference.
	10	.7†	Amendment to the Deferred Bonus Plan of GenCorp Inc. effective as of April 5, 1987, was filed as Exhibit I to GenCorp Inc.’s Annual Report on Form 10-K for the fiscal year ended November 30, 1987 (File No. 1-1520), and is incorporated herein by reference.
	10	.8*†	GenCorp Inc. Deferred Compensation Plan for Nonemployee Directors, as amended.
	10	.9†	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	.10†	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	.11*†	GenCorp Inc. 1999 Equity and Performance Incentive Plan as amended.
	10	.12†	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	.13†	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	.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, 1998 (File No. 1-1520), and is incorporated herein by reference.
	10	.15†	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	.16†	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	.17†	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	.18†	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	.19	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.

120

Table
Item No.			Exhibit Description
	10	.20†	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	.21†	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	.22†	Form of Director and Officer Indemnification Agreement was filed as Exhibit L 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 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	.24†	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	.25†	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	.26	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	.27†	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	.28	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	.29†	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	.30†	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	.31†	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	.32†	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	.33†	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	.34†	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.

121

Table
Item No.			Exhibit Description
	10	.35	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.
	21	.1*	Subsidiaries of the Company.
	23	.1*	Consent of Independent Registered Public Accounting Firm.
	23	.2*	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.
(c)	See Item 15(a)2.

122

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.

January 25, 2008

GENCORP INC.

By: /s/  TERRY L. HALL

Terry L. Hall

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/  TERRY L. HALL Terry L. Hall	President and Chief Executive Officer/ Director (Principal Executive Officer)	January 25, 2008
By:	/s/  YASMIN R. SEYAL Yasmin R. Seyal	Senior Vice President, Chief Financial Officer (Principal Financial Officer)	January 25, 2008
By:	/s/  R. LEON BLACKBURN R. Leon Blackburn	Vice President and Controller (Principal Accounting Officer)	January 25, 2008
By:	/s/  * C. F. Bolden Jr	Director	January 25, 2008
By:	/s/  * James J. Didion	Director	January 25, 2008
By:	/s/  * David A. Lorber	Director	January 25, 2008

123

Signature		Title	Date
By:	/s/  * James M. Osterhoff	Director	January 25, 2008
By:	/s/  * Todd R. Snyder	Director	January 25, 2008
By:	/s/  * Timothy A. Wicks	Director	January 25, 2008
By:	/s/  * Sheila E. Widnall	Director	January 25, 2008
By:	/s/  * Robert C. Woods	Director	January 25, 2008
By:	/s/  * Yasmin R. Seyal	Attorney-in-Fact pursuant to Powers of Attorney filed herewith	January 25, 2008

124

Exhibits 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 GenCorp’s 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 GenCorp’s 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.
	3	.2*	The Amended Code of Regulations of GenCorp, as amended on March 28, 2007.
	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 GenCorp’s 9 1/2% Senior Subordinated Notes was filed as Exhibit 4.1 to GenCorp’s Form S-4 Registration Statement dated October 6, 2003 (File No. 333-109518) and is incorporated herein by reference.
	4	.2	Form of 9 1/2% Senior Subordinated Notes was filed as Exhibit 4.4 to GenCorp’s 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 GenCorp’s 9 1/2% 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 GenCorp’s 9 1/2% 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.

Table
Item No.			Exhibit Description
	4	.5	Indenture dated January 16, 2004 between GenCorp and The Bank of New York, as trustee, relating to GenCorp’s 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 2 1/4% 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 2 1/4% 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 2 1/4% 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.
	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 Company’s Current Report on Form 8-K dated November 5, 2001 (File No. 1-1520), and is incorporated herein by reference.
	10	.3†	Modified Employment Retention Agreement dated July 26, 2002, between GenCorp and Robert A. Wolfe was filed as Exhibit 10.39 to GenCorp Inc.’s Annual Report on Form 10-K for the fiscal year ended November 30, 2002 (File No. 1-1520), and is incorporated herein by reference.
	10	.4†	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	.5*†	Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain Subsidiary Companies as amended.
	10	.6†	Information relating to the Deferred Bonus Plan of GenCorp Inc. is contained in Post-Effective Amendment No. 1 to Form S-8 Registration Statement No. 2-83133 dated April 18, 1986 and is incorporated herein by reference.
	10	.7†	Amendment to the Deferred Bonus Plan of GenCorp Inc. effective as of April 5, 1987, was filed as Exhibit I to GenCorp Inc.’s Annual Report on Form 10-K for the fiscal year ended November 30, 1987 (File No. 1-1520), and is incorporated herein by reference.
	10	.8*†	GenCorp Inc. Deferred Compensation Plan for Nonemployee Directors, as amended.
	10	.9†	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	.10†	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	.11*†	GenCorp Inc. 1999 Equity and Performance Incentive Plan as amended.
	10	.12†	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.

Table
Item No.			Exhibit Description
	10	.13†	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	.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, 1998 (File No. 1-1520), and is incorporated herein by reference.
	10	.15†	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	.16†	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	.17†	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	.18†	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	.19	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	.20†	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	.21†	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	.22†	Form of Director and Officer Indemnification Agreement was filed as Exhibit L 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 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	.24†	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	.25†	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	.26	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	.27†	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.

Table
Item No.			Exhibit Description
	10	.28	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	.29†	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	.30†	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	.31†	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	.32†	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	.33†	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	.34†	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	.35	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.
	21	.1*	Subsidiaries of the Company.
	23	.1*	Consent of Independent Registered Public Accounting Firm.
	23	.2*	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.
(c)	See Item 15(a)2.

EX-3.1

Exhibit 3.1

AMENDED ARTICLES OF INCORPORATION

OF

GENCORP INC.

AMENDED ARTICLES OF INCORPORATION
of
GENCORP INC.

     Article First: The name of the Corporation shall be GenCorp Inc. The Corporation shall exist by virtue of, and be governed by, the laws of the State of Ohio.

     Article Second: The place in the State of Ohio where its principal office is to be located is the City of Cleveland.

     Article Third: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be formed under Section 1701.01 to 1701.98, inclusive, of the Ohio Revised Code.

     Article Fourth: The maximum number of shares which the Corporation is authorized to have outstanding is One Hundred Sixty-Five Million (165,000,000), of which Fifteen Million (15,000,000) shares of the par value of one dollar ($1.00) each shall be classified as Cumulative Preference Stock and One Hundred Fifty Million (150,000,000) shares of the par value of ten cents ($0.10) each shall be classified as Common Stock. The designation and express terms and provisions of the shares of Cumulative Preference Stock and Common Stock are as follows:

CUMULATIVE PREFERENCE STOCK

     A. The Cumulative Preference Stock may be issued from time to time in one (1) or more series with such distinctive serial designations as shall be fixed by the Board of Directors as hereinafter provided.

     The Board of Directors is expressly authorized to adopt from time to time amendments to the Articles of Incorporation of the Corporation, in respect of any unissued or treasury shares of Cumulative Preference Stock, to fix or change:

     (a) The division of such shares into series and the designation and authorized number of shares of each particular series, which number the Board of Directors may increase or decrease, except as otherwise provided in the creation of the particular series;

     (b) The dividend or distribution rate for each particular series, which may be at a specified rate, amount or proportion; and the dates on which dividends or distributions, if declared, shall be payable, and the date or dates from which dividends shall be cumulative;

     (c) The redemption rights and price or prices, if any, for shares of each particular series;

     (d) The amount payable for shares of each particular series upon any

1

voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation;

     (e) The right, if any, of the holders of shares of Cumulative Preference Stock of each particular series to convert such stock into other classes of stock, and, if convertible, the terms and conditions of such conversion;

     (f) The obligation, if any, of the Corporation to purchase and retire or redeem shares of each particular series pursuant to a sinking fund, and the terms and amount thereof;

     (g) The restrictions, if any, on the issuance of shares of any class of stock or any series thereof; and

     (h) Any or all other express terms in respect of any particular series as may be permitted or required by law.

     All shares of the Cumulative Preference Stock of any one (1) series shall be identical with each other in all respects except, if so determined by the Board of Directors, as to the dates from which dividends thereon shall be cumulative; and all shares of Cumulative Preference Stock shall be of equal rank with each other, regardless of series, and shall be identical with each other in all respects except in respect of terms which may be fixed by the Board of Directors as herein provided.

     B. The holders of record of the Cumulative Preference Stock at the time outstanding shall be entitled to receive, when and as declared by the Board of Directors of the Corporation out of any funds legally available for such purpose, cash dividends in the case of each series at the rate for such series theretofore fixed by the Board of Directors as herein provided. Such dividends shall be cumulative, in the case of shares of each particular series, from and after the date or dates fixed with respect to such series. No dividends may be paid upon or declared or set apart for any of the Cumulative Preference Stock for any dividend period unless at the same time a like proportionate dividend for the same dividend period, ratably in proportion to the respective dividend rates fixed therefor, shall be paid upon or declared or set apart for all Cumulative Preference Stock of all series then issued and outstanding and entitled to receive such dividend.

     C. Except as otherwise provided by the Board of Directors as to any particular series, the Cumulative Preference Stock of any series may be redeemed in whole or in part, at the option of the Corporation, by vote of its Board of Directors, or by operation of the sinking fund, if any, provided for the Cumulative Preference Stock of said series, at the time, or from time to time, at the redemption price or the respective redemption prices theretofore fixed by the Board of Directors as herein provided upon notice duly given as hereinafter provided. In case of the redemption of a part only of any series of the Cumulative Preference Stock at the time outstanding, the shares of the Cumulative Preference Stock of such series to be redeemed shall be selected pro rata or by lot or in such other manner as the Board of Directors may determine.

     Except as otherwise provided by the Board of Directors as to any particular series, at

2

least thirty (30) days’ previous notice of every such redemption of Cumulative Preference Stock shall be mailed to the holders of record of the Cumulative Preference Stock to be redeemed at their addresses as shown by the books of the Corporation, and shall be published at least once in a daily newspaper printed in the English language and published and of general circulation in the Borough of Manhattan, in the City of New York, the publication to be not less than thirty (30) days prior to the date fixed for redemption.

     If notice of redemption shall have been duly given and published, and if, on or before the redemption date designated in such notice, the funds necessary for the redemption shall have been set aside, so as to be and continue to be available therefor, then, notwithstanding that any certificate of the Cumulative Preference Stock so called for redemption shall not have been surrendered for cancellation, the dividends thereon shall cease to accrue from and after the date of redemption so designated, and all rights with respect to the Cumulative Preference Stock so called for redemption shall forthwith after such redemption date cease and terminate, except only the right of the holder to receive the redemption price therefor, but without interest.

     Except as otherwise provided by the Board of Directors as to any particular series, the Corporation may, however, at any time prior to the redemption date specified in the notice of redemption, deposit in trust, for the account of the holders of the Cumulative Preference Stock to be redeemed, with a bank or trust company in the City of New York, New York having a capital and undivided surplus aggregating at least Five Million Dollars ($5,000,000), named in the notice of redemption, all funds necessary for the redemption, and deliver written instructions authorizing and directing such bank or trust company, on behalf of and at the expense of the Corporation, to pay to the respective holders of shares of Cumulative Preference Stock the redemption price therefor and thereupon, notwithstanding that any certificate for the shares of Cumulative Preference Stock so called for redemption shall not have been surrendered for cancellation, all shares of Cumulative Preference Stock with respect to which the deposit shall have been made shall no longer be deemed to be outstanding and all rights with respect to such shares of Cumulative Preference Stock shall forthwith cease and terminate, except only the right of the holders thereof to receive from such bank or trust company at any time after the time of deposit, the redemption price of the shares so to be redeemed, but without interest, or the right to exercise, on or before the redemption date, any unexpired privileges of conversion. Any interest accrued on such funds shall be paid to the Corporation from time to time.

     Any funds so set aside or deposited, as the case may be, and unclaimed at the end of six (6) years from such redemption date shall be released or repaid to the Corporation upon its request expressed in a resolution of its Board of Directors, after which release or repayment the holders of the shares so called for redemption shall look only to the Corporation for the payment thereof, but without interest.

     D. So long as any shares of the Cumulative Preference Stock are outstanding, no dividend or other distribution (except in stock of the Corporation of a class ranking junior to the Cumulative Preference Stock) shall be declared or paid on the Common Stock of the Corporation or on stock of any other class ranking junior to the Cumulative Preference Stock as to dividends or in liquidation, and the Corporation shall not acquire or redeem shares of the Common Stock or any such junior stock, unless

3

     (a) all dividends on the Cumulative Preference Stock for all past quarterly dividend periods and for the then current quarterly dividend period shall have been paid, or declared and set apart; and

     (b) the Corporation shall have complied with all of its obligations theretofore required of it with respect to any sinking fund for all series of the Cumulative Preference Stock.

     E. So long as any shares of the Cumulative Preference Stock are outstanding, the affirmative vote of the holders of at least a majority of the Cumulative Preference Stock at the time outstanding, given in person or by proxy at a special meeting called for that purpose, shall be necessary for effecting or validating any one or more of the following:

     (a) The authorization or creation of any stock of any class, or any security convertible into stock of any class, ranking prior to the Cumulative Preference Stock;

     (b) The increase in the number of authorized shares of Cumulative Preference Stock or of any stock of any class ranking prior to or on a parity with the Cumulative Preference Stock or of any security convertible into stock of any class ranking prior to or on a parity with the Cumulative Preference Stock;

     (c) The sale, lease or conveyance of all or substantially all of the property or business of the Corporation, or a consolidation or merger with any other company, provided, however, that this restriction shall not apply to, nor shall it operate to prevent, a consolidation or merger with any domestic subsidiary organized under the laws of one of the states of the United States of America if none of the rights or preferences of the Cumulative Preference Stock or the holders thereof will be adversely affected thereby and if the company resulting from or surviving such consolidation or merger will have outstanding, after such consolidation or merger, no class of stock or other securities ranking prior to or on a parity with the Cumulative Preference Stock, except the same number of shares of stock and the same amount of other securities with the same rights and preferences as the stock and securities of the Corporation which were outstanding immediately preceding such consolidation or merger.

     F. So long as any shares of Cumulative Preference Stock are outstanding, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the Cumulative Preference Stock at the time outstanding, given in person or by proxy at a special meeting called for that purpose, shall be necessary for effecting or validating any amendment, alteration or repeal of any provisions of the Articles of Incorporation of the Corporation, as amended, which would adversely affect the rights or preferences of outstanding shares of the Cumulative Preference Stock or of the holders thereof (for the purposes hereof no action taken pursuant to paragraph E of this Article FOURTH shall be deemed to adversely affect such rights or preferences); provided, however, that if any such amendment, alteration or repeal would adversely affect the rights or preferences of the outstanding shares of any particular series without correspondingly affecting the rights or preferences of outstanding shares of all series, a

4

like affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the Cumulative Preference Stock of that particular series at the time outstanding shall also be necessary for effecting or validating such amendment, alteration or repeal.

     G. Except as otherwise provided in paragraphs E, F and J of this Article FOURTH or as specifically provided by statute, the Cumulative Preference Stock shall have no voting power unless and until six (6) quarter-yearly dividends payable on the Cumulative Preference Stock, whether or not consecutive, shall be in default in whole or in part. In such event the holders of the Cumulative Preference Stock, voting separately as a class and in addition to all other rights, if any, to vote for Directors, shall be entitled to elect, as herein provided, two (2) members of the Board of Directors of the Corporation; provided, however, that the holders of shares of Cumulative Preference Stock shall not have or exercise such special class voting rights except at meetings of the shareholders for the election of Directors at which the holders of not less than a majority of the outstanding shares of Cumulative Preference Stock of all series then outstanding are present in person or by proxy; and provided further that the special class voting rights provided for herein when the same shall have become vested shall remain so vested until all accrued and unpaid dividends on the Cumulative Preference Stock of all series then outstanding shall have been paid, whereupon the holders of Cumulative Preference Stock shall be divested of their special class voting rights in respect of subsequent elections of Directors, subject to the revesting of such special class voting rights in the event herein specified in this paragraph, and the Directors so elected shall thereupon resign.

     In the event of default entitling the holders of Cumulative Preference Stock to elect two (2) Directors as above specified, a special meeting of the shareholders for the purpose of electing such Directors shall be called by the Secretary of the Corporation upon written request of, or may be called by, the holders of record of at least ten percent (10%) of the shares of Cumulative Preference Stock of all series at the time outstanding, and notice thereof shall be given in the same manner as that required for the Annual Meeting of Shareholders, provided, however, that the Corporation shall not be required to call such special meeting if the Annual Meeting of Shareholders shall be held within ninety (90) days after the date of receipt of the foregoing written request from the holders of Cumulative Preference Stock. At any meeting at which the holders of Cumulative Preference Stock shall be entitled to elect Directors, the holders of a majority of the then outstanding shares of Cumulative Preference Stock of all series, present in person or by proxy, shall be sufficient to elect the members of the Board of Directors which the holders of Cumulative Preference Stock are entitled to elect as herein provided.

     The two (2) Directors who may be elected by the holders of Cumulative Preference Stock pursuant to the foregoing provisions shall be in addition to any other Directors then in office or proposed to be elected otherwise than pursuant to such provisions, and nothing in such provisions shall prevent any change otherwise permitted in the total number of Directors of the Corporation or require the resignation of any Directors elected otherwise than pursuant to such provisions.

     H. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, the holders of the Cumulative Preference Stock shall be entitled to be paid the amount fixed with respect to shares of each particular series by the Board of

5

Directors as herein provided which shall include, in the case of each share, an amount computed at the dividend rate for the series of which the particular share is part, from the date on which dividends on such shares became cumulative to and including the date fixed for such distribution or payment, less the aggregate of dividends paid thereon prior to such distribution or payment date, before any distribution or payment shall be made to the holders of stock of any class ranking junior to the Cumulative Preference Stock. If such payment shall have been made in full to the holders of the Cumulative Preference Stock, the remaining assets and funds of the Corporation shall be distributed among the holders of the Common Stock and the holders of stock of any other class ranking junior to the Cumulative Preference Stock according to their respective rates and preferences, and according to their respective shares. If upon any such liquidation, dissolution or winding up of the affairs of the Corporation the amounts payable on liquidation are not sufficient to pay in full the holders of all outstanding Cumulative Preference Stock, the holders of all series of Cumulative Preference Stock shall share ratably in any distribution of assets in accordance with the sums which would be payable on such shares if all sums payable were discharged in full.

     The merger or consolidation of the Corporation into or with any other corporation, or the merger of any other corporation into it, or the sale, lease or conveyance of all or substantially all the property or business of the Corporation, shall not be deemed to be a dissolution, liquidation or winding up for the purposes of this paragraph H.

     I. No holder of Cumulative Preference Stock shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock or of securities of the Corporation convertible into stock, of any class whatsoever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise.

     J. In addition to the voting rights expressly provided in paragraphs E, F and G of this Article FOURTH, the holders of Cumulative Preference Stock shall also be entitled to vote for the election of Directors and on all other matters submitted to a vote of the holders of the Common Stock of the Corporation, voting jointly as a single class with the holders of the Common Stock and not as a separate class, without regard to series, and subject to the provisions of paragraph AA of this Article FOURTH. Except as otherwise required by law, each holder of stock of the Corporation entitled to vote shall have one (1) vote for each share held thereof. No adjustment of the voting rights provided by this paragraph J shall be made in the event of any increase or decrease in the number of shares of Common Stock authorized, issued or outstanding or in the event of a stock split or combination of the Common Stock or in the event of a stock dividend on any class of stock payable in shares of Common Stock; and for the purposes paragraph F of this Article FOURTH, no amendment, alteration or repeal of any provisions of the Articles of Incorporation of the Corporation, as amended, adopted for the purpose of effecting any of the foregoing shall be deemed to affect adversely the voting rights of outstanding shares of the Cumulative Preference Stock or the holders thereof.

COMMON STOCK

     A. In addition to the express terms and provisions of the Common Stock set forth above in this Article FOURTH, the following terms and provisions shall be applicable to the Common Stock:

6

     (a) Each holder of Common Stock shall be entitled to one (1) vote for each share held thereof. Except as otherwise expressly provided in the Articles of Incorporation of the Corporation, as amended, and except as may be otherwise required by law or as a lesser vote may be permitted by law, the Corporation may lease, sell, exchange, transfer or otherwise dispose of all or substantially all of the property, assets or business of the Corporation or consolidate or merge with or into, or merge into the Corporation, any other corporation or corporations, or the Corporation may be dissolved voluntarily, or the Corporation may amend in any manner its Articles of Incorporation, or may take such other action as may require the authorization of shareholders, upon the affirmative vote of the holders of shares of the Cumulative Preference Stock and of the holders of shares of the Common Stock, voting jointly as a single class and not as separate classes, and without regard to series of the Cumulative Preference Stock, holding shares having a majority of the total voting power of all the shares of Cumulative Preference Stock and Common Stock at the time outstanding and entitled to vote. Except as may be otherwise expressly provided in the Articles of Incorporation of the Corporation, as amended, and except as may be otherwise required by law or as a lesser vote may be permitted by law, whenever by law a vote of the holders of the Common Stock as a separate class may be required to authorize the taking of any action by the Corporation, the affirmative vote of the holders of a majority of the shares of Common Stock at the time outstanding and entitled to vote shall be sufficient authorization by the holders of the Common Stock as a separate class for the taking of such action.

     (b) No holder of Common Stock shall be entitled, as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock or of securities of the Corporation convertible into stock, of any class whatsoever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise.

     Article Fifth: Series of Cumulative Preference Stock.

     The designation and express terms and provisions of a series of the Cumulative Preference Stock of the Corporation be and hereby are fixed as follows:

     A. Designation. The distinctive designation of said series shall be “Series A Cumulative Preference Stock” (hereinafter sometimes called the “Series A Preference Stock”) and the number of shares initially constituting said series shall be One Million Five Hundred Thousand (1,500,000). The number of authorized shares of the Series A Preference Stock may be increased or decreased by further resolution duly adopted by the Board of Directors of the Corporation stating that such increase or decrease has been so authorized.”

     B. Dividends and Distributions. The holders of record of shares of Series A Preference Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the last day of March, June, September and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment

7

Date after the first issuance of a share or fraction of a share of Series A Preference Stock (the “Original Issue Date”), in an amount per share (rounded to the nearest cent) equal to, but no more than, the greater of (a) Twelve Dollars and Fifty Cents ($12.50) or (b) subject to the provision for adjustment hereinafter set forth, one hundred (100) times the aggregate per share amount of all cash dividends, and one hundred (100) times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock of the Corporation since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the Original Issue Date. In the event the Corporation shall at any time on or after the Original Issue Date declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock) into a greater or lesser number of shares of Common Stock, therein each such case the amount to which holders of shares of Series A Preference Stock are entitled (without giving effect to such event) under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

     The Corporation shall declare a dividend or distribution on the Series A Preference Stock as provided in the paragraph above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of Twelve Dollars and Fifty Cents ($12.50) per share on the Series A Preference Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

     C. Redemption. The shares of the Series A Cumulative Preference Stock shall be redeemable at the option of the Corporation, as a whole or in part, at any time or from time to time, in accordance with the provisions of paragraph C of Article FOURTH of the Corporation’s Amended Articles of Incorporation, at a redemption price per share equal to the Market Price (as hereinafter defined) of the Common Stock on the Trading Day (as hereinafter defined) immediately prior to the date fixed for redemption, multiplied by one hundred (100) (the “Multiplier”), plus in each case a sum equal to dividends accrued but unpaid; provided, however, that if the Series A Preference Stock shall be called for redemption prior to February 18, 2007, the Multiplier shall be one hundred and twenty-five (125).

     In the event the Corporation shall at any time on or after the Original Issue Date declare or pay any dividend on the shares of Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding Common Stock (by reclassification or otherwise than by payment of a dividend in Common Stock), into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of Series A Preference Stock were entitled (without giving effect to such event), shall be

8

adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

     As used herein, the term “Market Price” per share of the Common Stock on any date of determination shall mean the average of the daily closing prices per share of the Common Stock (determined as described below) on each of the twenty (20) consecutive Trading Days through and including the Trading Day immediately preceding such date; provided, however, that if the Company shall at any time (i) declare a dividend on the Common Stock payable in Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the outstanding Common Stock into a smaller number of shares of Common Stock or (iv) issue any shares in a reclassification of the Common Stock, and such event or an event of a type analogous to any such event shall have caused the closing prices used to determine the Market Price on any Trading Days not to be fully comparable with the closing price on such date of determination, each such closing price so used shall be appropriately adjusted in order to make it fully comparable with the closing price on such date of determination. The closing price per share of the Common Stock on any date shall be the last sale price, regular way, or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, for each share of the Common Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Common Stock is listed or admitted to trading or, if the Common Stock is not listed or admitted to trading on any national securities exchange, the average of the high bid and low asked prices for each share of Common Stock in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System (“NASDAQ”) or such other system then in use, or, if on any such date the Common Stock is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the securities selected by the Board of Directors of the Corporation: provided, however, that if on any such date the Common Stock is not listed or admitted for trading on a national securities exchange or traded in the over-the-counter market, the closing price per share of the Common Stock on such date shall mean the fair value per share of Common Stock on such date as determined in good faith by the Board of Directors of the Corporation, after consultation with a nationally recognized investment banking firm with respect to the fair value per share of such securities, and set forth in a certificate delivered to the Corporation.

     As used herein, the term “Trading Day,” when used with respect to the Common Stock, shall mean a day on which the principal national securities exchange on which the Common Stock is listed or admitted to trading is open for the transaction of business or, if the Common Stock is not listed or admitted to trading on any national securities exchange, a Business Day (defined to mean any day other than a Saturday, Sunday or a day on which banking institutions in New York, New York are generally authorized or obligated by law or executive order to close).

9

     D. Conversion or Exchange. Except as otherwise provided herein, the holders of shares of this Series A Preference Stock shall not have any rights herein to convert such shares into or exchange such shares for shares of any other class or classes or of any other series of any class or classes of capital stock of the Corporation.

     In case the Corporation shall enter into any consolidation, merger, combination, reclassification or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Preference Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to one hundred (100) times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time on or after the Original Issue Date declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preference Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

     E. Liquidation Rights. Upon the voluntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of this Series shall be entitled to receive an amount equal to the redemption price therefor current at the time of the distribution or payment date, and any other amounts specified in paragraph H of Article FOURTH of the Corporation’s Amended Articles of Incorporation. Upon the involuntary liquidation, dissolution or winding up of the Corporation, the holders of the shares of this series shall be entitled to receive an amount equal to Thirty-Three Dollars and Thirty-Three Cents ($33.33) and any other amounts specified in paragraph H of Article FOURTH of the Corporation’s Amended Articles of Incorporation.

     F. Fractional Shares. Series A Preference Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders’ fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preference Stock.

     Article Sixth: The Corporation is authorized by these Articles to purchase shares of any class issued by it in all instances except as otherwise expressly prohibited by these Articles or as prohibited by law.

10

     Article Seventh:

     A. The right to cumulate votes in the election of Directors shall not exist with respect to shares of stock of the Corporation.

     B. Notwithstanding the provisions of paragraph AA(a) of Article FOURTH hereof or any other provisions of these Articles of Incorporation or the Code of Regulations (and notwithstanding that a lesser percentage may be allowed by law), the provisions of this Article SEVENTH may only be altered, amended, added to or repealed at a meeting held for such purpose by the affirmative vote of the holders of not less than eighty percent (80%) of the total voting power of the Corporation entitled to vote, voting jointly as a single class.

     Article Eighth: Section 1701.831 of the Ohio Revised Code shall not apply to “control share acquisitions” of shares of the Corporation.

     Article Ninth: Chapter 1704 of the Ohio Revised Code shall not apply to the Corporation.

     Article Tenth: These Amended Articles of Incorporation take the place of and supersede the existing Articles of Incorporation of the Corporation as heretofore amended.

11

EX-3.2

Exhibit 3.2

AMENDED CODE OF REGULATIONS

OF

GENCORP INC.

AMENDED CODE OF REGULATIONS
of
GENCORP INC.

ARTICLE 1.

SHAREHOLDERS’ MEETINGS.

Section 1. Annual Meeting.

     The Annual Meeting of the shareholders shall be held at the principal office of the Corporation in the State of Ohio, or at such other place in or outside of the State of Ohio as shall be designated in the notice of such meeting on such date and at such hour during the month of March as may be fixed by the Board of Directors, for the purpose of electing Directors and for considering reports to be laid before said Meeting. Upon due notice there may also be considered and acted upon at an Annual Meeting any matter which could properly be considered and acted upon at a Special Meeting, in which case and for which purpose the Annual Meeting shall also be considered as and shall be a Special Meeting. In the event the Annual Meeting is not held, or if the Directors are not elected thereat, a Special Meeting may be called and held for that purpose.

Section 2. Special Meetings.

     Special Meetings of the shareholders may be called by the Chairman of the Board, the President or a Vice President, or by a majority of the members of the Board of Directors acting with or without a meeting, or by the persons who hold of record an aggregate of at least twenty-five percent (25%) of the voting power of the shares outstanding and entitled to be voted on the proposals to be submitted at said meeting.

     Upon the request in writing delivered to the President or Secretary by any persons entitled to call a meeting of shareholders, it shall be the duty of the President or Secretary to give notice to shareholders, and if such request be refused, then the persons making such request may call a meeting by giving notice in the manner hereinafter provided.

     Special meetings of shareholders may be held at such place in or outside of the State of Ohio as shall be designated in the notice of such meeting.

Section 3. Notice of Meetings.

     Notice of all shareholders’ meetings, whether annual or special, shall be given in writing by the President or a Vice President or the Secretary or an Assistant Secretary (or in case of their refusal, by the person or persons entitled to call meetings under the provisions of Section 2 of this Article 1), which notice shall state the purpose or purposes for which the meeting is called and the time when and place where it is to be held. Not more than sixty (60) nor less than seven (7) days prior to any such meeting, a copy of such notice shall be served upon or mailed to each shareholder

2

of record entitled to vote at such meeting or entitled to notice thereof, directed, postage prepaid, to his last address as it appears upon the records of the Corporation.

Section 4. Waiver of Notice.

     Notice of shareholders’ meetings shall not be required to be given to those shareholders who attend the meeting either in person or by proxy or if waived, either before or after the meeting, by written assent, filed with or entered upon the records of such meeting, of shareholders not so attending who are entitled to notice.

Section 5. Record Date; Closing of Transfer Books.

     The Board of Directors may fix a date not exceeding sixty (60) days preceding any meeting of shareholders, as a record date for the determination of the shareholders entitled to notice of such meeting and entitled to vote thereat, and may close the books of the Corporation against transfer of shares during the whole or any part of such period.

     If the Board of Directors shall not fix a record date as aforesaid, the shareholders of record at the close of business on the fifteenth (15th) day prior to the date of the meeting shall be the shareholders entitled to notice of such meeting, and the shareholders of record at the close of business on the tenth (10th) day prior to the date of the meeting shall be the shareholders entitled to vote thereat.

     At any meeting of shareholders a list of shareholders entitled to vote, alphabetically arranged, showing the address, number, classes of shares held by each on the record date fixed as hereinbefore provided shall be produced on the request of any shareholder and such list shall be prima facie evidence of the ownership of shares and of the right of shareholders to vote, when certified by the Secretary of the Corporation or by the agent of the Corporation having charge of the transfer of shares.

Section 6. Voting.

     Except as otherwise provided in the Articles of Incorporation, every shareholder of record shall be entitled at each meeting of shareholders to one (1) vote for each share on which no installment is overdue and unpaid standing in his name on the books of the Corporation at the record date fixed as provided in Section 5 above.

     In all cases, except where otherwise provided by Statute or by the Articles of Incorporation or this Code of Regulations, a majority of the votes cast shall control.

Section 7. Proxies.

     At any meeting of the shareholders, any shareholder of record entitled to vote may be represented and may vote by proxy or proxies appointed by an instrument in a form permitted by

3

chapter 1701 of the Ohio Revised Code (or any successor provision) within eleven (11) months prior to the date of its use (unless the instrument provides for a longer period).

     In the event that such authorization shall designate three (3) or more persons to act as proxies, a majority of such persons present at the meeting, or if only one (1) shall be present then that one (1), shall have and may exercise all of the powers conferred by such authorization upon all of the persons so designated unless the authorization shall otherwise provide.

Section 8. Organization of Meetings.

     Any meeting of shareholders having been called to order, the presiding officer may appoint three (3) Inspectors, who shall determine whether or not a quorum is present, and in connection with the election of Inspectors by the shareholders hereinafter referred to, shall decide all questions concerning the qualifications of voters, the validity of proxies, the acceptance or rejection of votes and the result of the vote. After a quorum has been determined to be present any shareholder entitled to vote may request the election of three (3) Inspectors, who shall thereupon be elected by the vote of a majority of the shareholders present in person or by proxy and entitled to vote at such meeting. The Inspectors so elected shall thereafter at said meeting decide all questions concerning the qualification of voters, the validity of proxies, the acceptance or rejection of votes and shall receive and count the votes upon any election or question submitted to the meeting, shall determine the result of the vote and make a certificate thereof to be filed with the minutes of the meeting.

     In the event that no shareholder requests the election of Inspectors by the shareholders as aforesaid, the Inspectors appointed by the presiding officer pursuant to the provisions of the first paragraph of this section shall have all of the powers and duties set forth above in respect to Inspectors elected by the shareholders.

     No Inspector, whether appointed or elected, need be a shareholder.

Section 9. Quorum.

     At any meeting of shareholders, either annual or special, the presence in person or by proxy of the holders of record of shares entitling them to exercise a majority of the voting power of the outstanding shares of a class of stock shall be necessary to constitute a quorum of that class. If there be no quorum of a particular class of stock at the time when and place where any such meeting at which that class is entitled to vote is called to be held, the holders of shares of that class entitling them to exercise a majority of the voting power of that class present in person or represented by proxy may adjourn the meeting as to that class from time to time without notice other than by announcement at the meeting until a quorum of that class exists. No business shall be transacted at any such adjourned meeting except such as might have been lawfully transacted by that class at the original meeting.

     In the event that at any meeting at which the holders of more than one (1) class are entitled to vote a quorum of any class is lacking, the holders of the class or classes represented by a quorum may proceed with the transaction of the business to be transacted by the respective classes, and if

4

such business is the election of Directors, the Directors whose successors shall not have been elected shall continue in office until their successors shall have been elected and qualified.

     For purposes of the preceding paragraphs of this Section 9, whenever any series of any class of stock is entitled to vote separately as a series with respect to any matter, such series shall be deemed to be a “class” as that term is used in such preceding paragraphs insofar as that matter is concerned, and whenever two (2) or more classes of stock are entitled to vote only jointly as a single class and not as separate classes with respect to any matter, such classes shall together be deemed to be a single “class” as that term is used in such preceding paragraphs insofar as that matter is concerned.

Section 10. Action Without Meeting.

     Any action which may be authorized or taken at any meeting of shareholders may be authorized or taken without a meeting in a writing, or writings, signed by all the shareholders who would be entitled to notice of a meeting of shareholders held for such purpose, which writing, or writings, shall be filed or entered upon the records of the Corporation.

Section 11. Accounts and Reports to Shareholders.

     Adequate and correct accounts of the business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital and shares, shall be kept and maintained. Except for unreasonable or improper purposes, books of accounts, lists of shareholders, voting trust agreements, if any, and the minutes of meetings of the shareholders and Directors shall be open to the inspection of every shareholder at all reasonable times, provided, however, that any shareholder may be required by the officers of the Corporation to satisfy them or the Board of Directors that the information sought by such inspection is desired in good faith and will not be used to the detriment of the Corporation.

     At the Annual Meeting, or any other meeting at which Directors are to be elected, the officers of the Corporation shall lay before the shareholders a statement of profit and loss and a balance sheet containing a summary of the assets and liabilities, a summary of profits earned, dividends paid and other changes in the surplus accounts of the Corporation, made up to a date not more than four (4) months before said meeting from the date up to which the last preceding statement, account and balance sheet were made. A certificate signed by the President or Vice President or the Treasurer or an Assistant Treasurer or by a public accountant or firm of public accountants shall be appended to such statement of profit and loss and to the balance sheet, stating that they present fairly the financial position of the Corporation and the results of its operations in conformity with generally accepted accounting practices applied on a consistent basis with that of the preceding period.

     The officers of the Corporation, upon written request of any shareholder made within sixty (60) days after notice of any such meeting, shall, not later than the fifth (5th) day after receiving such request or the fifth (5th) day before the meeting, whichever is the later date, mail to such

5

requesting shareholder a copy of the financial statements to be laid before the shareholders at such meeting.

Section 12. Order of Business.

     At all shareholders’ meetings the order of business shall be as established from time to time by the Board of Directors.

ARTICLE 2.

BOARD OF DIRECTORS.

Section 1. Powers, Number and Term of Office.

     The property and business of the Corporation shall be controlled, and its powers and authorities vested in and exercised, by a Board of Directors of not less than seven (7) (to the extent consistent with applicable law) nor more than seventeen (17) Directors, as shall be determined and fixed from time to time by the Board of Directors. Subject to the provisions of Article EIGHTH of the Articles of Incorporation, Directors shall be elected annually at the Annual Meeting of Shareholders or if not so elected, at a Special Meeting of Shareholders called for that purpose. Each Director shall hold office until the next meeting of shareholders at which his successor is elected, or until his resignation, removal from office, or death, whichever is earlier.

Section 2. Changes in Number of Directors.

     Subject to the numerical limitations contained in Section 1 of this Article 2, and except as may be provided in the Articles of Incorporation (as it may be duly amended from time to time) relating to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation of the Corporation to elect, by separate class vote, additional Directors, the number of Directors on the Board may be increased or reduced by the affirmative vote of (i) a majority of the members of the Board of Directors then in office or (ii) the holders of not less than eighty percent (80%) of the total voting power of the Corporation entitled to elect Directors, voting jointly as a single class, but no reduction shall have the effect of removing any Director prior to the expiration of his term of office.

Section 3. Qualification of Directors.

     Within sixty (60) days after his election a Director shall qualify by accepting his election as a Director either in writing or by acting at a meeting of the Board of Directors.

6

Section 4. Vacancies.

     In the event of the failure of a Director to so qualify, or in the event of his being declared of unsound mind by order of court, or in the event of his being adjudicated a bankrupt, his office may be declared vacant by the Board of Directors. Any vacancy including vacancies resulting from death or resignation, if occurring in the office of a Director for whom the holders of a particular class of stock are entitled to vote, may be filled by the vote of a majority of the remaining Directors for whom such shareholders are entitled to vote, although such majority is less than a quorum. Subject to the provisions of the preceding sentence, any vacancy or vacancies in the office of Director may be filled by the affirmative vote of a majority of the members of the Board of Directors then in office. Within the meaning of this Section 4 a vacancy or vacancies shall also be deemed to exist in case the shareholders shall fail at any time to elect the full Board of authorized Directors or in case the Board of Directors shall increase the authorized number of Directors.

Section 5. Meetings.

     Meetings of the Board of Directors may be held at any time in or outside the State of Ohio.

     The Board of Directors may by resolution provide for regular meetings to be held at such times and places as it may determine, and such meetings may be held without further notice.

     Special meetings of the Board of Directors may be called by the Chairman of the Board or by the President of the Corporation, or by not less than one-third (1/3) of the Directors then in office. Notice of the time and place of such meeting shall be served upon or telephoned to each Director at least twenty-four (24) hours, or mailed or telephoned to each Director at his address as shown by the books of the Corporation at least forty-eight (48) hours prior to the time of the meeting. Notice of the time, place and purpose of any meeting of Directors may be waived by a Director either before or after the meeting by his written assent filed with or entered upon the record of the meeting, or by his attendance at such meeting.

Section 6. Action Without Meeting.

Any action which may be authorized or taken at a meeting of the Directors may be authorized or taken without a meeting in a writing, or writings, signed by all of the Directors which shall be filed with or entered upon the records of the Corporation.

Section 7. Quorum.

     A majority of the Directors then in office shall be necessary to constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the meeting until a quorum shall attend. The act of a majority of Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 8. Fixing of Record Dates.

7

     The Board of Directors may fix a time not exceeding sixty (60) days preceding any dividend payment date, or any date for the allotment of rights, as a record date for the determination of the shareholders entitled to receive dividends or rights, and may close the books of the Corporation against transfer of shares during the whole or any part of such period.

Section 9. Committees.

     The Board of Directors may from time to time appoint certain of its members to act in the intervals between meetings of the Board as a committee or committees, and may delegate to such committee or committees powers and duties to be exercised and performed under the control and direction of the Board.

     In particular, the Board of Directors may create from its membership and define the powers and duties of an Executive Committee of not less than three (3) members. During the intervals between meetings of the Board of Directors the Executive Committee, unless restricted by resolution of the Board, shall possess and may exercise, under the control and direction of the Board, all of the powers of the Board of Directors in the management and control of the business of the Corporation. All action taken by the Executive Committee shall be reported to the Board of Directors at its first meeting thereafter and shall be subject to revision or recision of the Board, provided, however, that rights of third parties shall not be affected by any such action of the Board.

     In every case the affirmative vote of a majority of the members present at a meeting at which a majority of the members are present, or the consent of all of the members of a Committee, shall be necessary for the approval of any action, and action may be taken by a Committee without a formal meeting or written consent. Each Committee shall meet at the call of any member thereof and shall keep a written record of all actions taken by it.

Section 10. Indemnification and Insurance.

     The Corporation shall indemnify, to the full extent then permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a member of the Board of Directors or an officer, employee, member, manager or agent of the Corporation, or is or was serving at the request of the Corporation as a director, trustee, officer, employee or agent of another corporation, limited liability company, or a partnership, joint venture, trust or other enterprise. The Corporation shall pay, to the full extent then required by law, expenses, including attorney’s fees, incurred by a member of the Board of Directors in defending any such action, suit or proceeding as they are incurred, in advance of the final disposition thereof, and may pay, in the same manner and to the full extent then permitted by law, such expenses incurred by any other person. The indemnification and payment of expenses provided hereby shall not be exclusive of, and shall be in addition to, any other rights granted to those seeking indemnification under any law, the Articles of Incorporation, any agreement, vote of shareholders or disinterested members of the Board of Directors, or otherwise, both as to action in official capacities and as to action in another capacity while he or she is a member of the Board of Directors, or an

8

officer, employee or agent of the Corporation, and shall continue as to a person who has ceased to be a member of the Board of Directors, trustee, officer, employee or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.

     The Corporation may, to the full extent then permitted by law and authorized by the Board of Directors, purchase and maintain insurance or furnish similar protection, including but not limited to trust funds, letters of credit or self-insurance, on behalf of or for any persons described in the preceding paragraph against any liability asserted against and incurred by any such person in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify such person against such liability. Insurance may be purchased from or maintained with a person in which the Corporation has a financial interest.

     The Corporation, upon approval by the Board of Directors, may enter into agreements with any persons whom the Corporation may indemnify under this Code of Regulations or under law and undertake thereby to indemnify such persons and to pay the expenses incurred by them in defending any action, suit or proceeding against them, whether or not the Corporation would have the power under law or this Code of Regulations to indemnify any such person.

Section 11. Removal.

     Except as may be provided in the Articles of Incorporation (as it may be duly amended from time to time) relating to the rights of holders of any class or series of stock which has a preference over the Common Stock as to dividends or upon liquidation of the Corporation to elect, by separate class vote, additional Directors, Directors may be removed from office by shareholders, with or without cause, only by the affirmative vote of the holders of not less than eighty percent (80%) of the total voting power of the Corporation entitled to elect Directors in place of those to be removed, voting jointly as a single class.

Section 12. Chairman of the Board.

     The Board of Directors shall elect a Chairman of the Board from among the members of the Board. The Board of Directors shall designate the Chairman as either a Non-Executive Chairman of the Board or, in accordance with the provisions of Section 1 of Article 3 of these Regulations, an Executive Chairman of the Board. (References in these Regulations to the “Chairman” shall mean the Non-Executive Chairman or Executive Chairman, as designated by the Board.) The Chairman shall preside at all meetings of the Board of Directors and shall perform such other duties as may be directed by the Board of Directors or as otherwise set forth in these Regulations.

9

ARTICLE 3.

OFFICERS.

Section 1. Officers.

     The Corporation shall have a President, a Secretary and a Treasurer, all of whom shall be chosen by the Board of Directors. The President shall be a member of the Board of Directors. The Board of Directors may designate the Chairman as an Executive Chairman, in which case such person shall be an officer of the Corporation and shall have, in addition to the duties set forth in these Regulations, such other powers and authority as determined by the Board. The Corporation may also have one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers as the Board may deem advisable, all of whom shall be chosen by the Board of Directors. The Board of Directors shall designate a chief executive officer. Any two (2) or more offices may be held by the same person. All officers shall hold office for one (1) year and until their successors are selected and qualified, unless otherwise specified by the Board of Directors, provided, however, that any officer shall be subject to removal at any time by the affirmative vote of a majority of the Directors then in office.

Section 2. The President.

     The President shall perform such duties and have such powers as are assigned to or vested in him by the Board of Directors.

Section 3. Vice President.

     The Vice President, or, if there be more than one (1), the Vice Presidents, in order of their seniority by designation (or if not designated, in order of their seniority of election), shall perform the duties of the President in his absence or during his disability to act. The Vice Presidents shall have such other duties and powers as may be assigned to or vested in them by the Board of Directors or the Executive Committee.

Section 4. Secretary.

     The Secretary shall issue notices of all meetings for which notice is required to be given, shall keep the minutes thereof, shall have charge of the corporate seal and corporate record books, shall cause to be prepared for each meeting of shareholders the list of shareholders referred to in Section 5, Article 1, hereof, and shall have such other powers and perform such other duties as assigned to or vested in him by the Board of Directors or the Executive Committee.

Section 5. Treasurer.

     The Treasurer shall have the custody of all moneys and securities of the Corporation and shall keep adequate and correct accounts of the Corporation’s business transactions, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital and shares,

10

shall prepare and lay before the shareholders’ meetings the data referred to in Section 11, Article 1, hereof, and shall mail a copy of such data as required in said section to any shareholder requesting it. The funds of the Corporation shall be deposited in the name of the Corporation by the Treasurer in such depositories as the Board of Directors may from time to time designate. The Treasurer shall have such other powers and perform such other duties as are assigned to or vested in him by the Board of Directors or the Executive Committee.

Section 6. Assistant Secretary.

     The Assistant Secretary shall perform all the duties of the Secretary in case of the absence or disability of the latter and shall perform such other and further duties as may be required of him by the Board of Directors or the Executive Committee.

Section 7. Assistant Treasurer.

     The Assistant Treasurer shall perform all the duties of the Treasurer in case of the absence or disability of the latter and shall perform such other and further duties as may be required of him by the Board of Directors or the Executive Committee.

Section 8. Other Officers.

     Other officers of the Corporation shall have such powers and duties as may be assigned to or vested in them by the Board of Directors or the Executive Committee.

Section 9. Authority to Sign.

     Share certificates shall be signed as hereinafter in Article 4 provided. Except as otherwise specifically provided by the Board of Directors or the Executive Committee, checks, notes, drafts, contracts or other instruments authorized by the Board of Directors or the Executive Committee may be executed and delivered on behalf of the Corporation by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer.

ARTICLE 4.

STOCK CERTIFICATES.

Section 1. Certificates.

     Each shareholder of the Corporation shall be entitled to a certificate signed by the Chairman of the Board, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, evidencing the number of full shares of the Corporation’s capital stock held of record by him and fully paid. To the extent permitted by law, said certificates shall be deemed to be so signed whether the signatures be manual or facsimile signatures. Said

11

certificates shall be in such form as shall be approved by the Board of Directors or the Executive Committee.

Section 2. Transfer and Registration.

     The Board of Directors and the Executive Committee shall have authority to make such rules and regulations as it deems expedient concerning the issuance, transfer and registration of share certificates and may appoint transfer agents and registrars thereof.

Section 3. Substituted Certificates.

     In case any certificate be lost, stolen, mutilated or destroyed the Board of Directors or the Executive Committee may authorize the issuance of a new certificate in lieu thereof upon such terms and conditions as it may deem advisable.

ARTICLE 5.

CORPORATE SEAL.

     The seal of the Company shall be circular in form with the words “GENCORP INC.” stamped around the margin and the words “Corporate Seal” stamped across the center.

ARTICLE 6.

EMERGENCY POWERS.

Section 1. Definition.

     “An emergency” shall exist when the governor, or any other person lawfully exercising the power and discharging the duties of the office of governor, proclaims that an attack on the United States or any nuclear, atomic, or other disaster has caused an emergency for corporations, and such an emergency shall continue until terminated by proclamation of the governor or any other person lawfully exercising the powers and discharging the duties of the office of governor.

Section 2. Directors.

     In the event of an emergency, meetings of the Board of Directors may be called by any Director or officer. Notice of the time and place of each such meeting of the Directors shall be given only to such of the Directors as it may be feasible to reach at the time and by such means, written or oral, as may be feasible at the time, including publication, radio, or other forms of mass communication. The Director or Directors present at any meeting of the Directors shall constitute a quorum for such meeting, and such Director or Directors may appoint one (1) or more of the officers of the Corporation Directors for such meeting. In the event that none of the Directors attends a meeting of the Directors, which has been duly called and notice of which has been duly given, the officers of the Corporation who are present, not exceeding three (3), in order of rank, shall be

12

Directors for such meeting; provided, however, such officers may appoint one (1) or more of the other officers of the Corporation Directors for such meeting.

Section 3. Officers.

     During such period of emergency if the chief executive officer dies, is missing, or for any reason is temporarily or permanently incapable of discharging the duties of his office, then, until such time as the Directors shall otherwise order, the next ranking officer who is available shall assume the duties and authority of the office of such deceased, missing or incapacitated chief executive officer. The offices of Secretary and Treasurer shall be deemed to be of equal rank, and within the same office or as between the offices of Secretary and Treasurer, rank shall be determined by seniority of the first election to the office, or if two (2) or more persons shall have been first elected to such office at the same time, by seniority in age.

Section 4. Conflicting Provisions of Code, Articles or Regulations.

     The emergency powers in this Article 6 shall be effective during an emergency notwithstanding any different provisions in § 1701.01 to § 1701.98, inclusive, of the Revised Code of Ohio, and notwithstanding any different provisions of the Articles of Incorporation or Code of Regulations which are not expressly stated to be operative during an emergency.

Section 5. Further Authorization to Directors.

     The Directors further are authorized to adopt either before or during an emergency, emergency by-laws subject to repeal or change by actions of the shareholders, which shall be operative during, but only during, an emergency notwithstanding any different provisions elsewhere in § 1701.01 to § 1701.98, inclusive, of the Revised Code of Ohio and notwithstanding any different provisions in the Articles of Incorporation or Code of Regulations which are not expressly stated to the operative during an emergency. The emergency by-laws which may be adopted by the Directors under this Section 5 may make any provision which is consistent with emergency regulations of the preceding sections of this Article 6 and which may be made by emergency regulations, as provided in § 1701.111, divisions (A) and (B) of the Revised Code of Ohio.

13

ARTICLE 7.

AMENDMENTS.

Section 1.

     Subject to the provisions stated below, this Code of Regulations may be amended either at any meeting of the shareholders by the affirmative vote of the holders of record of shares entitling them to exercise a majority of the voting power on such proposal, or without a meeting by the written consent of the holders of record of shares entitling them to exercise two-thirds (2/3) of the voting power on such proposal, provided, however, that in the event this Code of Regulations is amended otherwise than by vote as aforesaid, the Secretary shall mail a copy of the amendment to each shareholder who would have been entitled to vote thereon and did not participate in the adoption thereof. Anything in this Article 7 to the contrary notwithstanding, however, so long as any shares of a class of stock of the Corporation having the right on certain conditions to elect Directors representing such class shall be outstanding, no amendment of the provisions of Section 9 of Article 1 hereof relating to the quorum at meetings of shareholders, or of Section 4 of Article 2 hereof relating to the filling of vacancies in the Board of Directors, or of this Article 7, which would adversely affect the rights or preferences of such class of stock or of the holders thereof, shall be made without the affirmative vote of the holders of at least two-thirds (2/3) of the shares of such class at the time outstanding.

Section 2.

     Notwithstanding the provisions of Section 1 of this Article 7 or any other provisions of the Articles of Incorporation or this Code of Regulations (and notwithstanding that a lesser percentage may be allowed by law), no alteration, amendment, addition to or repeal of Sections 1, 2, 3, 4 and 11 of Article 2 or this Section 2 of Article 7 shall be made except by the affirmative vote of the holders of not less than eighty percent (80%) of the total voting power of the Corporation entitled to vote, voting jointly as a single class.

14

EX-10.5

Exhibit 10.5

BENEFITS RESTORATION PLAN FOR SALARIED EMPLOYEES
OF GENCORP INC. AND CERTAIN SUBSIDIARY COMPANIES

PURPOSE

     The purpose of this Plan is to restore the pension and profit sharing plan benefits which eligible employees and their beneficiaries would otherwise lose as a result of Internal Revenue Code limitations upon contributions to, and payment of benefits from, tax qualified pension and profit sharing plans. By restoring such benefits, this Plan permits the total benefits of such employees to be provided on the same basis as is applicable to all other employees under such plans. The terms and provisions of this Plan are as follows:

SECTION 1
DEFINITIONS

     Wherever used herein:

     (i) “Beneficiary” means a named beneficiary, joint annuitant or surviving spouse of a deceased Participant.

     (ii) “Code” means the Internal Revenue Code of 1986, as presently in effect or hereafter amended.

     (iii) “Company” means GenCorp Inc.

     (iv) “Effective Date” means December 1, 1982, except as otherwise specifically provided.

     (v) “Member Company” means the Company, Aerojet-General Corporation (“Aerojet”) and any of their subsidiaries which are designated as Member Companies by the Company’s Administrative Committee.

     (vi) “Participant” means an employee of a Member Company who is a participant under the Pension or Profit Sharing Plans (as defined below) or is a Beneficiary receiving a benefit under such plans, provided, however, that no employee shall become a Participant prior to the date such employee’s employer became a Member Company.

     (vii) “Pension or Profit Sharing Plans” means the pension, savings and profit sharing plans of a Member Company applicable to salaried employees.

     (viii) “Plan” means the plan set forth in this instrument known as the “Benefits Restoration Plan for Salaried Employees of GenCorp Inc. and Certain Subsidiary Companies,” as it may be amended from time to time.

     (ix) “Administrative Committee” means the GenCorp Administrative Committee as appointed by the GenCorp Board of Directors.

     (x) “Change in Control” means the occurrence of any of the following events, subject to the provisions of paragraph (E) hereof:

     (A) All or substantially all of the assets of the Company are sold or transferred to another corporation or entity, or the Company is merged, consolidated or reorganized into or with another corporation or entity, with the result that upon conclusion of the transaction less than 51% of the outstanding securities entitled to vote generally in the election of directors or other capital interests of the surviving, resulting or acquiring corporation or entity are beneficially owned (as that term is defined in Rule 13-d3 under the Securities Exchange Act of 1934 [“Exchange Act"], as amended) (such ownership, “Beneficial Ownership”) by the shareholders of the Company immediately prior to the completion of the transaction; or

     (B) Any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act (a “Person”)) has become the Beneficial Owner of securities representing 20% or more of the combined voting power of the then-outstanding voting securities of the Company; or

     (C) The individuals who, as of the later of (i) January 1, 2006, or (ii) the Participant’s date of hire by the Company, constituted the Board (the “Incumbent Directors”) cease for any reason, including without limitation as a result of a tender offer, proxy contest, merger or similar transaction, to constitute a majority thereof, provided that (1) any individual becoming a director of the Company subsequent to the later of (i) January 1, 2006, or (ii) the Participant’s date of hire by the Company shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at least two-thirds of the other Incumbent Directors and (2) any individual whose initial assumption of office is in connection with or as a result of an actual or threatened election contest relating to the election of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation shall not be considered an Incumbent Director; or

     (D) The Board determines that (1) any particular actual or proposed merger, consolidation, reorganization, sale or transfer of assets, accumulation of shares or tender offer for shares of the Company or other transaction or event or series of transactions or events will, or is likely to, if carried out, result in a Change in Control falling within paragraph (A), (B) or (C) hereof and (2) it is in the best interests of the Company and its shareholders, and will serve the intended purposes of the Change in Control provisions

2

of this Program and other compensation and benefit programs, plans and agreements of the Company, if a Change in Control shall be deemed to have occurred.

     (E) Notwithstanding the foregoing provisions of this Section 1(x):

     (1) If any such merger, consolidation, reorganization, sale or transfer of assets, or tender offer or other transaction or event or series of transactions or events mentioned in paragraph (D) hereof shall be abandoned, or any such accumulations of shares shall be dispersed or otherwise resolved, the Board may upon a majority vote, including a majority vote of all then-continuing Incumbent Directors (such vote, a “Majority Vote”), by notice to the Executive, nullify the effect thereof and a Change in Control shall be deemed not to have occurred, but without prejudice to any action that may have been taken prior to such nullification.

     (2) Unless otherwise determined in a specific case by the Board, a Change in Control shall not be deemed to have occurred for purposes of paragraph (B) hereof solely because (a) the Company, (b) a subsidiary of the Company, or (c) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company or any subsidiary of the Company either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing Beneficial Ownership by it of shares of the then-outstanding voting securities of the Company, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership.

     (3) For the avoidance of doubt, the fact that a particular event may not constitute a “Change in Control” under any subparagraph of this Section 1(x) will not affect whether a Change in Control shall be determined to have occurred under any other subparagraph.

SECTION 2
ELIGIBILITY

     2.1 Eligibility. A Participant who qualifies for a benefit under either the Pension or Profit Sharing Plans and who incurs a reduction in such benefit as a result of the Code’s limitations upon contributions to, and payment of benefits from, such plans (except a reduction mandated by the Actual Deferral Percentage test contained in Section 401(k) of the Code) shall be eligible to participate in this Plan.

3

SECTION 3
BENEFITS

     3.1 Amount of Benefit. The benefit provided by this Plan shall be an amount equal to the difference, if any, between (a) the aggregate amount of benefit to which the Participant would be entitled under each of the Pension or Profit Sharing Plans computed without regard to the Code’s limitations upon contributions to, and payment of benefit from, such plans (except a reduction mandated by the Actual Deferral Percentage test contained in Section 401(k) of the Code) and (b) the aggregate amount of benefit to which the Participant would be entitled under each of the Pension or Profit Sharing Plans after giving effect to all such limitations and all such exclusions. In addition, each allocation under this Plan attributable to the restoration of profit sharing plan benefits shall be credited, beginning September 1, 1985, with a rate of investment return which the Participant would have earned if he were credited with plan shares in the profit sharing plan in which the employee is a participant, except, however, that for purposes of this Plan, all profit sharing plan elections to participate in the GenCorp Stock Fund shall be treated as elections to participate in the Interest Accumulation Fund.

     In connection with the spin-off of the Company’s Performance Chemicals and Decorative and Building Products businesses into a separate and independent public company, OMNOVA Solutions Inc. (“OMNOVA”), the Company’s obligations as of September 30, 1999 to pay benefits under the Plan to any Participant who, as of September 30, 1999, (i) was an active employee of the Company whose employment was transferred to OMNOVA on that date and who consented in writing to the transfer described herein, or (ii) was a former employee of the Company who had terminated employment from (A) an active business location of OMNOVA or (B) the Company’s former business location in Newcomerstown, Ohio were transferred to, and assumed by, OMNOVA. To the extent so transferred, the Company shall have no obligation to pay any benefits under the Plan to a Participant, and the obligations assumed by OMNOVA will be paid to the Participant in accordance with the terms of the Benefits Restoration Plan of OMNOVA Solutions Inc.

     In connection with the sale of the Company’s Aerojet Electronics and Information Systems Group (“AES”) to Northrop Grumman Systems Corporation (“Northrop”), the Company’s obligations as of the closing of such sale (“Closing Date”) to pay benefits under the Plan to any Participant who, as of the Closing Date, was an active employee of AES whose employment was transferred to Northrop and who consented in writing to the transfer described herein, will be transferred to and assumed by Northrop. To the extent so transferred, the Company shall have no obligation to pay any benefits under the Plan to a Participant, the Participant shall cease to accrue benefits under the Plan, and the obligations assumed by Northrop will be paid to the Participant in accordance with the terms of the Northrop Grumman Deferred Compensation Plan.

     3.2 Allocations. Except as hereinafter specifically provided, the allocation to plan accounts under this Plan attributable to the restoration of profit sharing plan benefits shall be made in the same manner and shall be subject to the same conditions as would have been applicable if such allocations were made to the profit sharing plan, except, however, that (a) with respect to contributions pursuant to a Section 401(k) election, a Plan Participant must contribute

4

to this Plan for the remainder of any calendar year in which applicable Code limitations are reached at the rate specified in his deferral election under this Plan made prior to such calendar year, and (b) 401(k) after tax contributions shall be treated as deferred income, provided an appropriate deferral election is signed by the Plan Participant.

     3.3 Benefit Payments. The benefit payable under this Plan which is attributable to the restoration of profit sharing plan benefits shall be paid to the Participant (or to the Participant’s Beneficiary under such plan in case of the Participant’s death) in a single lump sum as soon as practicable following the Participant’s termination of employment. The benefit payable under this Plan which is attributable to the restoration of pension plan benefits shall be paid in the same manner and to the same persons prescribed by the provisions of the pension plan which would have been applicable if such benefit were paid under the pension plan. Benefits under this Plan shall be payable from the general assets of the Company, and participation hereunder shall not cause a Participant to have any title to, or beneficial ownership in, any of the assets of the Company. Nothing in this Plan shall operate or be construed to modify, amend or affect the terms and provisions of the Pension or Profit Sharing Plans in any way.

     3.4. Change in Control. Notwithstanding any other provision of this Plan, upon the occurrence of a Change in Control, benefits will be determined and paid in accordance with this Section 3.4:

     (a) Vesting. Upon the occurrence of a Change in Control, the (i) benefits of a Participant with whom the Company has entered into a Severance Agreement which have accrued but not vested under this Plan, and (ii) benefits of such a Participant which have accrued but not vested under the applicable Pension or Profit Sharing Plans, shall become vested and payable in accordance with the terms of this Plan.

     (b) Funding.

     (i) Upon the occurrence of a Change in Control, the performance of the Company’s obligations under this Plan shall be secured by amounts deposited or to be deposited in trust pursuant to a trust agreement to which the Company shall be a party, providing for payment of benefits in accordance with the terms of this Plan. Any failure by the Company to satisfy its obligations under this Section 3.4(b) shall not limit the rights of any Participant hereunder.

     (ii) Upon the earlier to occur of (A) a Change of a Control or (B) a declaration by the Board of Directors of the Company that a Change in Control is imminent, the Company shall promptly, to the extent it has not previously done so, and in any event within five business days, transfer to the trustee of such trust, to be added to the principal of the trust, a sum equal to

     (I) the aggregate account balances, on the date of the Change in Control (or on such fifth business day if the Board has declared a Change in Control to be imminent), of Participants who have benefits to be paid hereunder with respect to the applicable Profit Sharing Plans, plus

5

     (II) the present value on the date of the Change in Control (or on such fifth business day if the Board has declared a Change in Control to be imminent) of the benefits to be paid to the Participants hereunder with respect to any applicable Pension Plans, such present value to be computed (a) assuming that benefit payments to any Participant will commence on such Participant’s earliest retirement date under the applicable Pension Plan, and (b) applying a discount factor which is equal to the yield to maturity, as reported in the Midwest Edition of The Wall Street Journal, of the 26-week Treasury Bill most recently issued as of the date of the Change in Control.

Any payments of benefits hereunder by the trustee shall, to the extent thereof, discharge the Company’s obligation to pay benefits hereunder, it being the intent of the Company that assets in such trusts be held as security for the Company’s obligation to pay benefits under this Plan.

     (iii) Subject to the foregoing, a Participant shall have the status of a general unsecured creditor of the Company and shall have no right to, or security interest in, any assets of the Company.

     3.5 Lump Sum Payments. This section applies only to pension benefits accrued prior to January 1, 2005.

     (a) Election. Amounts due to a participant under this Plan may be paid in a lump sum in accordance with the following:

     (i) Former employees will be able to elect a lump sum payment of their deferred interest, subject to a 10% “haircut” and all applicable tax withholding.

     (ii) Active employees may receive lump-sum payments upon termination of employment based upon:

     (A) an election made at least one year in advance of termination; or

     (B) an election which is made both (1) at least six months in advance of termination, and (2) in the calendar year prior to termination; or

     (C) where an advance election is not possible (e.g., in the case of a short-notice involuntary termination), a request for a lump sum payment which is approved by the Administration Committee in its full discretion.

     (b) Amount. The amount of any lump sum payment hereunder will be computed using the then-current interest rate for 30-year Treasury securities.

6

SECTION 4
ADMINISTRATION

     4.1 Administrative Committee and Powers. The Administrative Committee shall administer this Plan and shall have, exercise and perform all of the powers, rights, authority and duties set forth in each of the Pension or Profit sharing Plans with the same effect as if similarly set forth herein with respect to this Plan. Any determination or decision of the Administrative Committee shall be conclusive and binding on all persons having or claiming to have any interest whatever under this Plan.

SECTION 5
MISCELLANEOUS

     5.1 Amendment and Termination. The Company reserves the right at any time and from time to time, by resolution of its Board of Directors or its delegate, to amend or terminate this Plan; provided, however, that no such amendment or termination shall operate retroactively so as to affect adversely any rights to which a Participant may be entitled under the provisions of this Plan as in effect prior to such action.

     5.2 No Alienation of Benefits. No Participant may assign, anticipate or otherwise encumber any payment due under this Plan. Except as may otherwise be required by law, any payment due under this Plan shall be exempt from the claims of the Participant’s creditors.

     5.3 No Enlargement of Employment Rights. The provisions of the Pension or Profit Sharing Plans relative to employment rights shall be applicable to this Plan with the same effect as though set forth in full herein.

     5.4 No Requirement to Fund. The Company shall not be required to reserve or otherwise set aside funds for the payment of its obligations hereunder.

     5.5 Laws Governing. This Plan shall be construed in accordance with and governed by the laws of the State of Ohio.

7

EX-10.8

Exhibit 10.8

GENCORP INC.
DEFERRED COMPENSATION PLAN
FOR NONEMPLOYEE DIRECTORS

Article 1
Establishment of Plan

     GenCorp Inc. (“Company”), hereby adopts the deferred compensation plan set forth herein, effective as of January 1, 1992, provided that the provisions for the GenCorp Stock Fund shall be effective only upon approval by the Company’s shareholders. The purpose of the Plan is to provide the Company’s Nonemployee Directors with the opportunity to defer the receipt of Director Pay on a pre-tax basis and to earn investment income on the amount of their deferred pay.

Article 2
Definitions and Construction

     2.1 Definitions. The following capitalized words and phrases when used in the text of the Plan shall have the meanings set forth below:

(a)	“Board” means the Board of Directors of the Company.
(b)	“Calendar Year” means each consecutive twelve-month period commencing January 1 and ending December 31.
(c)	Change in Control: The occurrence of any of the following events, subject to the provisions of paragraph (5) hereof:

(1)

All or substantially all of the assets of the Company are sold or transferred to another corporation or entity, or the Company is merged, consolidated or reorganized into or with another corporation or entity, with the result that upon conclusion of the transaction less than 51% of the outstanding securities entitled to vote generally in the election of directors or other capital interests of the surviving, resulting or acquiring corporation or entity are beneficially owned (as that term is defined in Rule 13-d3 under the Securities Exchange Act of 1934 [“Exchange Act”], as amended (such ownership, “Beneficial Ownership”) by the shareholders of the Company immediately prior to the completion of the transaction; or

(2)

Any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act (a “Person”)) has become the

-1-

	Beneficial Owner of securities representing 20% or more of the combined voting power of the then-outstanding voting securities of the Company; or
(3)	The individuals who, as of January 1, 2006 constituted the Board (the “Incumbent Directors”) cease for any reason, including without limitation as a result of a tender offer, proxy contest, merger or similar transaction, to constitute a majority thereof, provided that (A) any individual becoming a director of the Company subsequent to January 1, 2006 shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at least two-thirds of the other Incumbent Directors , and (B) any individual whose initial assumption of office is in connection with or as a result of an actual or threatened election contest relating to the election of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation shall not be considered an Incumbent Director; or
(4)	The Board determines that (A) any particular actual or proposed merger, consolidation, reorganization, sale or transfer of assets, accumulation of shares or tender offer for shares of the Company or other transaction or event or series of transactions or events will, or is likely to, if carried out, result in a Change in Control falling within paragraph (1), (2) or (3) hereof and (B) it is in the best interests of the Company and its shareholders, and will serve the intended purposes of the Change in Control provisions of this Plan and other compensation and benefit programs, plans and agreements of the Company, if a Change in Control shall be deemed to have occurred.
(5)	Notwithstanding the foregoing provisions of this Section 2.1(c):

(A) If any such merger, consolidation, reorganization, sale or transfer of assets, or tender offer or other transaction or event or series of transactions or events mentioned in paragraph (iv) hereof shall be abandoned, or any such accumulations of shares shall be dispersed or otherwise resolved, the Board may , upon a majority vote of all then-continuing Incumbent Directors (such a vote, a “Majority Vote”), nullify the effect thereof, but without prejudice to any action that may have been taken prior to such nullification.

-2-

(B)

Unless otherwise determined in a specific case by the Board, a Change in Control shall not be deemed to have occurred for purposes of paragraph (2) hereof solely because (i) the Company, (ii) a subsidiary of the Company, or (iii) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company or any subsidiary of the Company either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing Beneficial Ownership by it of shares of the then-outstanding voting securities of the Company, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership.

(C)

For the avoidance of doubt, the fact that a particular event may not constitute a “Change in Control” under any subsection of this Section 2.1(c) will not affect whether a Change in Control shall be determined to have occurred under any other subsection.

(d)	“Company” means GenCorp Inc.
(e)	“Deferral Dates” means the dates on which Director payments are made, are paid, namely January 15, April 15, July 15 and October 15.
(f)	“Director” means a member of the Board.
(g)	“Director Pay” means the aggregate compensation payable by the Company to a Director, including committee chair and membership pay.
(h)	“Effective Date” means January 1, 1992 (except the provisions for the GenCorp Stock Fund which will become effective upon approval of the Plan by the Company’s shareholders).
(i)	“Market Value” means

(1) in the case of shares of GenCorp Common Stock (except as otherwise provided in Section 6.4 hereof), the closing price (or if no trading occurs on any trading day, the mean between the closing bid and asked prices) as quoted in the New York Stock Exchange Composite Transactions as published in the Wall

-3-

Street Journal (or, if not so listed, as quoted on such other exchange on which such securities shall then be listed, or if unlisted, the mean average between the over-the-counter high bid and low asked quotation) on the day for which the determination is to be made, or if such day is not a trading day, the trading day immediately preceding such day, and as used in Section 6.5 hereof, in the event of a Recapitalization, the weighted average of the trading prices on the day (or the weighted average of such trading prices on such trading days) following the occurrence thereof as determined by the Organization and Compensation Committee of the Board in its discretion, or in the event of an issuer tender offer in connection with a Recapitalization, the weighted average of the trading prices on the trading day immediately following the termination date of such issuer tender offer, or any extensions thereof (or the weighted average of such trading prices on the five trading days immediately following such termination date) as determined by the Organization and Compensation Committee in its discretion; and

(2)

in the case of shares of the Designated Equity Fund (i) for a bank commingled fund, the closing price of a share as determined by the trustee of such fund, (ii) for a closed-end fund, the closing price of a share on the New York Stock Exchange, or (iii) for an open-end mutual fund, the net asset value per share of a share as determined by such fund, on the date for which the determination is to be made, or if such date is not a trading day, the trading day immediately preceding such determination date.

(j)	“Nonemployee Director” means a Director who is not an employee of the Company.
(k)	“Participant” means a Nonemployee Director who elects to defer all or a portion of his Director Pay in accordance with Article 4.
(l)	“Plan” means the GenCorp Inc. Deferred Compensation Plan for Nonemployee Directors described in this document, as approved by the Board on November 13, 1991 and as amended from time to time.
(m)	“Recapitalization” means a significant change in the capital structure of the Company (which may include an issuer tender offer made to all of the Company’s shareholders to purchase outstanding shares of the Company’s Common Stock), as determined in the discretion of the Board as constituted immediately prior to the occurrence thereof.

-4-

     2.2 Construction. Whenever any word is used herein in the singular form, it shall be construed as though it were also used in the plural form in all cases where it would so apply. Headings of articles and sections are inserted for convenience and reference, and they constitute no part of the Plan. Except where otherwise indicated by the context, any masculine terminology herein shall include the feminine and neuter.

Article 3
Eligibility and Participation

     Any Nonemployee Director shall be eligible to participate in the Plan. A Nonemployee Director may become a Participant in the Plan by electing to defer all or a portion of his Director Pay in accordance with Article 4.

Article 4
Deferral of Director Pay

     4.1 Deferral Election. By written notice to the Secretary of the Company which is either received by the Secretary or postmarked not later than December 31 preceding the beginning of a Calendar Year, any Nonemployee Director may elect to defer all or a portion of the Director Pay which may be payable to him for services rendered during such Calendar Year and to have such deferred Director Pay held for his benefit under the terms of this Plan. Any election made by a Participant pursuant to this Section 4.1 must specify his amount of deferral, investment choice[s] and time and manner of distribution, as described in subsections (a), (b) and (c) below:

(a) Amount of Deferral. Subject to a minimum annual deferral of $5,000, a Participant must specify the amount of his deferral as

(1)	his total Director Pay for the Calendar Year,
(2)	a percentage of his total Director Pay for the Calendar Year, or
(3)	a flat annual dollar amount not in excess of his total Director Pay for the Calendar Year.

If a Participant elects to defer less than 100 percent of his Director Pay, deferrals pursuant to paragraphs (2) or (3) will be deducted by the Company on a pro rata basis from the regular quarterly payments of Director Pay.

-5-

(b) Investment Choices. A Participant must specify the amount or percentage of his deferred Director Pay to be applied to one or more of the following investment programs as further described in Article 5:

(1)	GenCorp Stock Fund;
(2)	Designated Equity Fund;
(3)	Cash Deposit Fund.

(c) Distribution. A Participant must elect to receive the cash value of his deferred Director Pay, plus earnings thereon,

(1)	in either (i) a single payment, or (ii) in two or more approximately equal annual installments, not to exceed ten; and
(2)	commencing, at his election, (i) 30 days following the date he ceases to be a Director, (ii) on a fixed future date specified in the written election notice, or (iii) upon the Participant’s attainment of an age specified by him in the written election notice.

In addition, a Participant may elect to have the cash value of his deferred Director Pay, plus earnings thereon, distributed as a single payment within 60 days in the event of his death or termination of service on the Board due to physical or mental disability, notwithstanding any election made by the Participant pursuant to paragraphs (1) and (2) above.

     4.2 Irrevocability. Deferral elections made under this Plan with respect to any Calendar Year will be final and, after commencement of such Calendar Year, cannot be amended or revoked in respect of Director Pay for services rendered during such Calendar Year.

-6-

Article 5
Investment Programs

     5.1 Individual Accounts. When a Participant has made a deferral election pursuant to Section 4.1, the Company shall establish an account on its books in his name and shall, in the case of the investment programs described in Sections 5.3(a) and (b), cause to be credited to such account as of each Deferral Date the number of full and fractional phantom shares which could be purchased with the amount deferred on such Deferral Date and, in the case of the investment program described in Section 5.3(c), cause to be credited to such account as of each Deferral Date the dollar amount deferred on such Deferral Date.

     5.2 No Trust Fund. The Company shall not be required to reserve or otherwise set aside funds for the payment of any amounts credited to any account created hereunder. In addition, the Company shall not, and shall not be required to, actually purchase any stock, security or mutual fund units described in Sections 5.3 (a) and (b).

     5.3 Description of Investment Programs.

(a) GenCorp Stock Fund. Under this program, the Participant’s account shall be credited with the number of full and fractional phantom shares of GenCorp Common Stock which would be purchasable at the Market Value on the Deferral Date with the deferred amount designated for this investment program.

(1)

In the event that the shares of GenCorp Common Stock shall be increased or decreased or changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, merger, consolidation, recapitalization, stock split-up, combination of shares, stock offerings, spin-off or otherwise, such number of phantom shares of GenCorp Common Stock as shall be credited to the account of any Participant as of the record date for such action shall be proportionately or appropriately adjusted as of the payment or effective date to reflect such action. If any such adjustment shall result in a fractional share, such fractional phantom share shall also be credited to the account of the Participant.

(2)

The Participant’s account shall further be credited with the number of phantom shares, including fractions, which would be purchasable at the Market Value on the date a dividend is paid on GenCorp Common Stock, with an aggregate amount equal to

-7-

any dividend or the value of any other distribution (other than a distribution for which an adjustment in the number of phantom shares in the account is made pursuant to paragraph (1)) paid on that number of shares of GenCorp Common Stock which is equivalent to the number of phantom shares credited to the Participant’s account on the record date of such dividend or other distribution.

(b) Designated Equity Fund.

(1)	The Designated Equity Fund initially shall be the Bankers Trust Company BT Pyramid Commingled S&P 500 Equity Index Fund, a bank commingled fund, which is designed to match the performance of and changes in Standard and Poor’s 500 Index. The Designated Equity Fund may be changed from time to time by action of the Board, except that such change shall be only for future application and shall not affect the phantom shares previously credited to the account of any Participant.
(2)	Under this program, the Participant’s account is credited with the number of full and fractional phantom shares of the Designated Equity Fund, which could be purchased at the Market Value on the Deferral Date with the deferred amount designated for this investment program.
(3)	If and when any dividend is declared and paid, the Participant’s account shall further be credited with the number of phantom shares, including fractions, which could be purchased at the Market Value on the dividend payment date with an aggregate amount equal to any ordinary or capital cash dividend paid on that number of shares of the Designated Equity Fund which is equivalent to the number of phantom shares credited to the Participant’s account on the dividend record date.

(c) Cash Deposit Fund. Under this program, the Participant’s account is credited on the Deferral Date with that deferred dollar amount designated for this investment program. After the end of each Calendar Year quarter, there shall further be credited to each Participant’s account an amount equal to three months’ interest on the average balance credited to such account during such quarter computed at the prime interest rate payable by the Company at the beginning of each such quarter as determined by the Treasurer of the Company.

-8-

     5.4 Responsibility For Investment Choices. Each Nonemployee Director is solely responsible for his decision to participate in the Plan and accepts all investment risks entailed by his participation and/or selection of an investment program, including the risk of loss of and a decrease in the value of his deferred Director Pay.

Article 6
Distribution of Deferred Amounts

     6.1 Distribution. Subject to the terms of Sections 6.2, 6.3, 6.4 and 6.5, a Participant’s interests in the Plan shall be distributed to him in accordance with his elections made pursuant to Section 4.1(c). All amounts shall be distributed in cash.

     In the case of phantom shares credited to a Participant’s account in the GenCorp Stock Fund or Designated Equity Fund of the Plan, the value of a Participant’s interest on any distribution date elected by a Participant, whether such distribution is to be made in a single payment or in annual installments, will be the product of the pro rata portion of the Participant’s phantom shares which is to be distributed on such date multiplied by the Market Value of GenCorp Common Stock or shares of the Designated Equity Fund, as the case may be, on such distribution date. In the case of annual installments, the value of a Participant’s interest on each annual distribution date after the initial distribution will be calculated in a like manner based upon the applicable Market Value on each subsequent distribution date.

     In the case of the Cash Deposit Fund, if a single payment has been elected, the entire cash value of a Participant’s account on the distribution date will be paid in a single payment. Where annual installments have been elected, the cash value of the pro rata portion of the Participant’s account balance to be distributed on such date (plus accrued interest thereon), shall be paid to the Participant on each annual installment distribution date.

     6.2 Survivor Benefits. If a Participant dies before all or any portion of his interests under the Plan have been distributed to him, the interests remaining to be paid shall be distributed, on the date or dates and in the manner specified in such Participant’s written deferral elections, to such beneficiary or beneficiaries as the Participant may have designated in writing to the Company or, in the absence of any such designation to his estate or to, or as directed by, his legal representatives.

     6.3 Conflict of Interest. Notwithstanding any election made by a Participant, in the event that a Participant terminates his service on the Board due to a conflict of interest resulting from such Participant becoming a proprietor, director, officer, partner, employee, or otherwise becoming affiliated with any business that is in competition with the Company or any of its subsidiaries, directly or indirectly, or

-9-

becoming employed by any governmental agency having jurisdiction over the activities of the Company or any of its subsidiaries, the entire balance of his deferred Director Pay, including earnings thereon, shall be paid immediately to him in a single payment.

6.4	Change in Control.
(a)	Notwithstanding any other provisions of the Plan, in the event a Director’s service on the Board terminates for any reason on the date of a Change in Control or during the two year period following a Change in Control, such Director shall be immediately paid, in a single payment, the sum of (1) the Cash Value of his GenCorp Stock Fund account, (2) the Market Value of his Designated Equity Fund account and (3) the cash value of his Cash Deposit Fund account.
(b)	For purposes of this Section 6.4, the Cash Value of a Participant’s GenCorp Stock Fund account shall be determined using as a conversion price the greater of (1) the tender offer or exchange offer price (if any), or (2) the highest market value of GenCorp Common Stock (or other security for which GenCorp Common Stock may have been exchanged pursuant to Section 5.3(a)(1)) during the ninety-day period preceding the Change in Control.
6.5	Conversion and Adjustment in Event of Recapitalization.

     Notwithstanding any other provisions of the Plan, upon the occurrence of a Recapitalization, all shares credited to the Participant’s account in the GenCorp Stock Fund (“Shares”) shall first be adjusted to a Cash Value either (x) in the event of a Recapitalization not occurring in connection with an issuer tender offer, by multiplying the aggregate number of Shares by an amount, on a per share basis, equal to the prorated value as determined by the Organization and Compensation Committee of the Board of the (A) Cash and Market Value of any security or property distributed to shareholders in connection with the Recapitalization, (B) Cash and Market Value of any security or property paid to shareholders in exchange for GenCorp Common Stock in connection with the Recapitalization, and (C) Market Value of GenCorp Common Stock (or its successor), or (y) in the event of a Recapitalization occurring in connection with an issuer tender offer, by determining the sum of A + B obtained pursuant to the following calculations:

-10-

		Tender Offer
Aggregate	X	Proration	X	Tender	= A
Shares		Rate		Offer Price

                                                                  and

			Tender Offer
Aggregate	X	one -	Proration	X	Market	= B
Shares			Rate		Value

     For purposes of the foregoing calculations, the term Tender Offer Proration Rate shall mean the ratio (excluding consideration of any odd lot shares tendered or repurchased) of the number of shares repurchased by the Company in an issuer tender offer to the number of shares tendered to the Company in connection with such offer.

     The Cash Value of Shares determined in (x) or (y) above, together with the aggregate Market Value of the Participant’s interests, if any, in the Designated Equity Fund, and the cash value, if any, of the Participant’s interests in the Cash Deposit Fund shall be payable to the Participant in a single payment within thirty days thereafter.

     6.6. Transfer of Obligations to OMNOVA Solutions Inc. In connection with the spin-off of the Company’s Performance Chemicals and Decorative and Building Products businesses into a separate and independent public company, OMNOVA Solutions Inc. (“OMNOVA”), the Company’s obligations as of September 30, 1999 to pay deferred compensation under the Plan to any Participant who (i) resigned as a Director of the Company to become a Director of OMNOVA on October 1, 1999, and (ii) consented in writing to the transfer described herein, were transferred to, and assumed by, OMNOVA. To the extent so transferred, the Company shall have no obligation to pay any amount under the Plan to a Participant, and the obligations assumed by OMNOVA will be credited to investment programs and distributed in accordance with the terms of the OMNOVA Solutions Inc. Deferred Compensation Plan for Nonemployee Directors.

-11-

Article 7
Miscellaneous

     7.1 Finality of Determinations. Authority to determine contested issues or claims arising under the Plan shall be vested in the GenCorp Administrative Committee, and any determination by the Administrative Committee pursuant to such authority shall be final and binding for all purposes and upon all interested persons and their heirs, successors, and personal representatives.

     7.2 Plan Administration. Authority and responsibility for administration of the Plan, including maintenance of Participants’ accounts hereunder and preparation and delivery of individual annual account statements to Participants, shall be vested in the GenCorp Administrative Committee. Responsibility for oversight of investment programs, and reporting on the performance thereof to the Board, shall be vested in the GenCorp Benefits Management Committee.

     7.3 Amendment, Suspension or Termination of the Plan. The Board may amend, suspend or terminate the Plan in whole or in part at any time, provided that such amendment, suspension or termination shall not adversely affect rights or obligations with respect to funds or interests previously credited to the account of any Participant.

     7.4 Limitations on Transfer. Participants shall have no rights to any funds or interests credited to their accounts except as set forth in this Plan. Such rights may not be anticipated, assigned, alienated or transferred, except in writing to a designated beneficiary or beneficiaries or by will or by the laws of descent and distribution. Any attempt to alienate, sell, exchange, transfer, assign, pledge, hypothecate or otherwise encumber or dispose of any such funds or interests by a Participant shall be void and of no effect. The foregoing limitations shall apply with equal force and effect to any beneficiary or beneficiaries designated by a Participant hereunder.

     7.5 Governing Law. The Plan shall be governed by the laws of the State of Ohio. The Plan is not governed by the Employee Retirement Income Security Act of 1974.

     7.6 Expenses of Administration. All costs and expenses incurred in the operation and administration of this Plan shall be borne by the Company.

-12-

EX-10.11

Exhibit 10.11

GENCORP INC.

1999 Equity and Performance Incentive Plan

     1. Purpose. The purpose of the 1999 Equity and Performance Incentive Plan is to attract and retain directors, officers and other key employees for GenCorp Inc., an Ohio corporation and its Subsidiaries and to provide to such persons incentives and rewards for superior performance.

     2. Definitions. As used in this Plan,

          “Appreciation Right” means a right granted pursuant to Section 5 of this Plan, and shall include both Tandem Appreciation Rights and Free-Standing Appreciation Rights.

          “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem Appreciation Right.

          “Board” means the Board of Directors of the Company and, to the extent of any delegation by the Board to a committee (or subcommittee thereof) pursuant to Section 16 of this Plan, such committee (or subcommittee).

          “Change in Control” shall have the meaning provided in Section 12 of this Plan.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time.

          “Common Shares” means the Common Shares, par value $0.10 per share, of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 11 of this Plan.

          “Company” means GenCorp Inc., an Ohio corporation.

          “Covered Employee” means a Participant who is, or is determined by the Board to be likely to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any successor provision).

          “Date of Grant” means the date specified by the Board on which a grant of Option Rights, Appreciation Rights, Performance Shares or Performance Units or a grant or sale of Restricted Shares or Deferred Shares shall become effective which date shall not be earlier than the date on which the Board takes action with respect thereto.

          “Deferral Period” means the period of time during which Deferred Shares are subject to deferral limitations under Section 7 of this Plan.

          “Deferred Shares” means an award made pursuant to Section 7 of this Plan of the right to receive Common Shares at the end of a specified Deferral Period.

          “Director” means a member of the Board of Directors of the Company.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.

          “Free-Standing Appreciation Right” means an Appreciation Right granted pursuant to Section 5 of this Plan that is not granted in tandem with an Option Right.

          “Immediate Family” has the meaning ascribed thereto in Rule 16a-1(e) under the Exchange Act (or any successor rule to the same effect) as in effect from time to time.

          “Incentive Stock Options” means Option Rights that are intended to qualify as “incentive stock options” under Section 422 of the Code or any successor provision.

          “Management Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Board, Option Rights, Appreciation Rights, Restricted Shares and dividend credits pursuant to this Plan. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of the Subsidiary, division, department, region or function within the Company or Subsidiary in which the Participant is employed. The Management Objectives may be made relative to the performance of other corporations. The Management Objectives applicable to any award to a Covered Employee shall be based on specified levels of or growth in one or more of the following criteria:

1.	cash flow;
2.	earnings per share;
3.	earnings before interest and taxes;
4.	earnings per share growth;
5.	net income;
6.	return on assets;
7.	return on assets employed;
8.	return on equity;
9.	return on invested capital;
10.	return on total capital;
11.	revenue growth;
12.	stock price;
13.	total return to stockholders;
14.	economic value added; and
15.	operating profit growth; or

any combination of the foregoing.

          If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may in its discretion modify such Management Objectives or the related minimum acceptable level of

2

achievement, in whole or in part, as the Committee deems appropriate and equitable, except in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code. In such case, the Committee shall not make any modification of the Management Objectives or minimum acceptable level of achievement.

          “Market Value” means (i) the closing price for Common Shares as reported in the New York Stock Exchange Composite Transactions in the Wall Street Journal or similar publication selected by the Board for the relevant date if Common Shares were traded on such day or, if none were then traded, the last prior day on which Common Shares were so traded, or (ii), if clause (i) does not apply, the fair market value of the Common Stock as determined by the Board.

          “Nonemployee Director” means a Director who is not an employee of the Company or any Subsidiary.

          “Optionee” means the optionee named in an agreement evidencing an outstanding Option Right.

          “Option Price” means the purchase price payable on exercise of an Option Right.

          “Option Right” means the right to purchase Common Shares upon exercise of an option granted pursuant to Section 4 or Section 9 of this Plan.

          “Participant” means a person who is selected by the Board to receive benefits under this Plan and who is at the time an officer or other key employee of the Company or any one or more of its Subsidiaries, or who has agreed to commence serving in any of such capacities within 30 days of the Date of Grant, and shall also include each Nonemployee Director who receives an award of Option Rights or Restricted Shares.

          “Performance Period” means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Performance Share or Performance Unit are to be achieved.

          “Performance Share” means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 8 of this Plan.

          “Performance Unit” means a bookkeeping entry that records a unit equivalent to $1.00 awarded pursuant to Section 8 of this Plan.

          “Plan” means this GenCorp Inc. 1999 Equity and Performance Incentive Plan.

          “Restricted Shares” means Common Shares granted or sold pursuant to Section 6 or Section 9 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in such Section 6 has expired.

          “Rule 16b-3” means Rule 16b-3 under the Exchange Act (or any successor rule to the same effect) as in effect from time to time.

3

          “Spread” means the excess of the Market Value per Share on the date when an Appreciation Right is exercised, or on the date when Option Rights are surrendered in payment of the Option Price of other Option Rights, over the Option Price or Base Price provided for in the related Option Right or Free-Standing Appreciation Right, respectively.

          “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company except that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which, at the time, the Company owns or controls, directly or indirectly, more than 50 percent of the total combined voting power represented by all classes of stock issued by such corporation.

          “Tandem Appreciation Right” means an Appreciation Right granted pursuant to Section 5 of this Plan that is granted in tandem with an Option Right.

          “Voting Power” means at any time, the total votes relating to the then-outstanding securities entitled to vote generally in the election of Directors.

     3. Shares Available Under the Plan. (a) Subject to adjustment as provided in Section 3(b) and Section 11 of this Plan, the number of Common Shares that may be issued or transferred (i) upon the exercise of Option Rights or Appreciation Rights, (ii) as Restricted Shares and released from substantial risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in payment of Performance Shares or Performance Units that have been earned, (v) as awards to Nonemployee Directors or (vi) in payment of dividend equivalents paid with respect to awards made under the Plan shall not exceed in the aggregate 2,700,000 (Two Million Seven Hundred Thousand) Common Shares, plus any shares described in Section 3(b). Such shares may be shares of original issuance or treasury shares or a combination of the foregoing.

          (b) The number of shares available in Section 3(a) above shall be adjusted to account for shares relating to awards that expire, are forfeited or are transferred, surrendered or relinquished upon the payment of any Option Price by the transfer to the Company of Common Shares or upon satisfaction of any withholding amount. Upon payment in cash of the benefit provided by any award granted under this Plan, any shares that were covered by that award shall again be available for issue or transfer hereunder.

          (c) Notwithstanding anything in this Section 3, or elsewhere in this Plan, to the contrary and subject to adjustment as provided in Section 11 of this Plan, (i) the aggregate number of Common Shares actually issued or transferred by the Company upon the exercise of Incentive Stock Options shall not exceed 1,000,000 Common Shares; (ii) no Participant shall be granted Option Rights and Appreciation Rights, in the aggregate, for more than 1,000,000 Common Shares during any period of 3 consecutive years; (iii) the number of shares issued as Restricted Shares, Deferred Shares or Performance Shares shall not in the aggregate exceed 900,000 Common Shares; (iv) during any period of three consecutive fiscal years, the maximum number of Common Shares covered by awards of Restricted Shares, Deferred Shares or

4

Performance Shares granted to any one Participant shall not exceed 900,000 Common Shares; and (v) no Nonemployee Director shall be granted Option Rights, Appreciation Rights and Restricted Shares, in the aggregate, for more than 100,000 Common Shares during any fiscal year of the Company.

          (d) Notwithstanding any other provision of this Plan to the contrary, in no event shall any Participant in any one calendar year receive an award of Performance Shares of Performance Units having an aggregate maximum value as of their respective Dates of Grant in excess of $2,000,000.

     4. Option Rights. The Board may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of options to purchase Common Shares. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements contained in the following provisions:

          (a) Each grant shall specify the number of Common Shares to which it pertains subject to the limitations set forth in Section 3 of this Plan.

          (b) Each grant shall specify an Option Price per share, which may not be less than the Market Value per Share on the Date of Grant.

          (c) Each grant shall specify whether the Option Price shall be payable (i) in cash or by check acceptable to the Company, (ii) by the actual or constructive transfer to the Company of Common Shares owned by the Optionee for at least 6 months (or other consideration authorized pursuant to Section 4(d)) having a value at the time of exercise equal to the total Option Price, or (iii) by a combination of such methods of payment.

          (d) The Board may determine, at or after the Date of Grant, that payment of the Option Price of any Option Right (other than an Incentive Stock Option) may also be made in whole or in part in the form of Restricted Shares or other Common Shares that are forfeitable or subject to restrictions on transfer, Deferred Shares, Performance Shares (based, in each case, on the Market Value per Share on the date of exercise), other Option Rights (based on the Spread on the date of exercise) or Performance Units. Unless otherwise determined by the Board at or after the Date of Grant, whenever any Option Price is paid in whole or in part by means of any of the forms of consideration specified in this Section 4(d), the Common Shares received upon the exercise of the Option Rights shall be subject to such risks of forfeiture or restrictions on transfer as may correspond to any that apply to the consideration surrendered, but only to the extent, determined with respect to the consideration surrendered, of (i) the number of shares or Performance Shares, (ii) the Spread of any unexercisable portion of Option Rights, or (iii) the stated value of Performance Units.

          (e) Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the shares to which such exercise relates.

          (f) Any grant may provide for payment of the Option Price, at the election of the Optionee, in installments, with or without interest, upon terms determined by the Board.

5

          (g) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised.

          (h) Each grant shall specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary that is necessary before the Option Rights or installments thereof will become exercisable and may provide for the earlier exercise of such Option Rights in the event of a Change in Control.

          (i) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights.

          (j) Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Stock Options, that are intended to qualify under particular provisions of the Code, (ii) options that are not intended so to qualify, or (iii) combinations of the foregoing.

          (k) The Board may, at or after the Date of Grant of any Option Rights (other than Incentive Stock Options), provide for the payment of dividend equivalents to the Optionee on either a current or deferred or contingent basis or may provide that such equivalents shall be credited against the Option Price.

          (l) The exercise of an Option Right shall result in the cancellation on a share- for-share basis of any Tandem Appreciation Right authorized under Section 5 of this Plan.

          (m) No Option Right shall be exercisable more than 10 years from the Date of Grant.

          (n) Each grant of Option Rights shall be evidenced by an agreement executed on behalf of the Company by an officer and delivered to the Optionee and containing such terms and provisions, consistent with this Plan, as the Board may approve.

     5. Appreciation Rights. (a) The Board may authorize the granting (i) to any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A Tandem Appreciation Right shall be a right of the Optionee, exercisable by surrender of the related Option Right, to receive from the Company an amount determined by the Board, which shall be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights may be granted at any time prior to the exercise or termination of the related Option Rights; provided, however, that a Tandem Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently with such Incentive Stock Option. A Free-Standing Appreciation Right shall be a right of the Participant to receive from the Company an amount determined by the Board, which shall be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.

          (b) Each grant of Appreciation Rights may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions:

6

               (i) Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by the Company in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives.

               (ii) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Board at the Date of Grant.

               (iii) Any grant may specify waiting periods before exercise and permissible exercise dates or periods.

               (iv) Any grant may specify that such Appreciation Right may be exercised only in the event of, or earlier in the event of, a Change in Control.

               (v) Any grant may provide for the payment to the Participant of dividend equivalents thereon in cash or Common Shares on a current, deferred or contingent basis.

               (vi) Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Rights.

               (vii) Each grant of Appreciation Rights shall be evidenced by an agreement executed on behalf of the Company by an officer and delivered to and accepted by the Participant, which agreement shall describe such Appreciation Rights, identify the related Option Rights (if applicable), state that such Appreciation Rights are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Board may approve.

          (c) Any grant of Tandem Appreciation Rights shall provide that such Rights may be exercised only at a time when the related Option Right is also exercisable and at a time when the Spread is positive, and by surrender of the related Option Right for cancellation.

          (d) Regarding Free-standing Appreciation Rights only:

               (i) Each grant shall specify in respect of each Free-standing Appreciation Right a Base Price, which shall be equal to or greater or less than the Market Value per Share on the Date of Grant;

               (ii) Successive grants may be made to the same Participant regardless of whether any Free-standing Appreciation Rights previously granted to the Participant remain unexercised; and

               (iii) No Free-standing Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant.

     6. Restricted Shares. The Board may also authorize the grant or sale of Restricted Shares to Participants. Each grant or sale of Restricted Stock may utilize any or all of the

7

authorizations, and shall be subject to all of the requirements, contained in the following provisions:

          (a) Each such grant or sale shall constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to.

          (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than Market Value per Share at the Date of Grant.

          (c) Each such grant or sale shall provide that the Restricted Shares covered by such grant or sale shall be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period of not less than 3 years to be determined by the Board at the Date of Grant and may provide for the earlier lapse of such substantial risk of forfeiture in the event of a Change in Control. If the Board conditions the noforfeitability of shares of Restricted Stock upon service alone, such vesting may not occur before three years from the Date of Grant of such shares of Restricted Stock, and if the Board conditions the nonforfeitability of shares of Restricted Stock on Management Objectives, such nonforfeitability may not occur before one year from the Date of Grant of such shares of Restricted Stock.

          (d) Each such grant or sale shall provide that during the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Board at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee).

          (e) Any grant of Restricted Shares may specify Management Objectives that, if achieved, will result in termination or early termination of the restrictions applicable to such shares. Each grant may specify in respect of such Management Objectives a minimum acceptable level of achievement and may set forth a formula for determining the number of Restricted Shares on which restrictions will terminate if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives.

          (f) Any such grant or sale of Restricted Shares may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional Restricted Shares, which may be Subject to the same restrictions as the underlying award.

          (g) Each grant or sale of Restricted Shares shall be evidenced by an agreement executed on behalf of the Company by any officer and delivered to and accepted by the Participant and shall contain such terms and provisions, consistent with this Plan, as the Board may approve. Unless otherwise directed by the Board, all certificates representing Restricted Shares shall be held in custody by the Company until all restrictions thereon shall have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such Shares.

8

     7. Deferred Shares. The Board may also authorize the granting or sale of Deferred Shares to Participants. Each grant or sale of Deferred Shares may utilize any or all of the authorizations, and shall be subject to all of the requirements contained in the following provisions:

          (a) Each such grant or sale shall constitute the agreement by the Company to deliver Common Shares to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the Deferral Period as the Board may specify.

          (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant.

          (c) Each such grant or sale shall be subject to a Deferral Period of not less than one year, as determined by the Board at the Date of Grant, and may provide for the earlier lapse or other modification of such Deferral Period in the event of a Change in Control. If the Board conditions the nonforfeitability of shares of Deferred Stock upon service alone, such vesting may not occur before three years from the Date of Grant of such shares of Deferred Stock, and if the Board conditions the nonforfeitability of shares of Deferred Stock on Management Objectives, such nonforfeitability may not occur before one year from the Date of Grant of such shares of Deferred Stock.

          (d) During the Deferral Period, the Participant shall have no right to transfer any rights under his or her award and shall have no rights of ownership in the Deferred Shares and shall have no right to vote them, but the Board may, at or after the Date of Grant, authorize the payment of dividend equivalents on such Shares on either a current or deferred or contingent basis, either in cash or in additional Common Shares.

          (e) Each grant or sale of Deferred Shares shall be evidenced by an agreement executed on behalf of the Company by any officer and delivered to and accepted by the Participant and shall contain such terms and provisions, consistent with this Plan, as the Board may approve.

     8. Performance Shares and Performance Units. The Board may also authorize the granting of Performance Shares and Performance Units that will become payable to a Participant upon achievement of specified Management Objectives. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions:

          (a) Each grant shall specify the number of Performance Shares or Performance Units to which it pertains, which number may be subject to adjustment to reflect changes in compensation or other factors; provided, however, that no such adjustment shall be made in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the award under Section 162(m) of the Code.

          (b) The Performance Period with respect to each Performance Share or Performance Unit shall be such period of time not less than 1 year, commencing with the Date of

9

Grant as shall be determined by the Board at the time of grant which may be subject to earlier lapse or other modification in the event of a Change in Control as set forth in the agreement specified in Section 8(g).

          (c) Any grant of Performance Shares or Performance Units shall specify Management Objectives which, if achieved, will result in payment or early payment of the award, and each grant may specify in respect of such specified Management Objectives a minimum acceptable level of achievement and shall set forth a formula for determining the number of Performance Shares or Performance Units that will be earned if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. The grant of Performance Shares or Performance Units shall specify that, before the Performance Shares or Performance Units shall be earned and paid, the Board must certify that the Management Objectives have been satisfied.

          (d) Each grant shall specify the time and manner of payment of Performance Shares or Performance Units that have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Company in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives.

          (e) Any grant of Performance Shares may specify that the amount payable with respect thereto may not exceed a maximum specified by the Board at the Date of Grant. Any grant of Performance Units may specify that the amount payable or the number of Common Shares issued with respect thereto may not exceed maximums specified by the Board at the Date of Grant.

          (f) The Board may, at or after the Date of Grant of Performance Shares, provide for the payment of dividend equivalents to the holder thereof on either a current or deferred or contingent basis, either in cash or in additional Common Shares.

          (g) Each grant of Performance Shares or Performance Units shall be evidenced by an agreement executed on behalf of the Company by any officer and delivered to and accepted by the Participant, which agreement shall state that such Performance Shares or Performance Units are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Board may approve.

     9. Awards to Nonemployee Directors. The Board may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Nonemployee Directors of Option Rights and may also authorize the grant or sale of Restricted Shares to Nonemployee Directors.

          (a) Each grant of Option Rights awarded pursuant to this Section 9 shall be upon terms and conditions consistent with Section 4 of this Plan and shall be evidenced by an agreement in such form as shall be approved by the Board. Each grant shall specify an Option Price per share, which shall not be less than the Market Value per Share on the Date of Grant. Each such Option Right granted under the Plan shall expire not more than 10 years from the Date of Grant and shall be subject to earlier termination as hereinafter provided. Unless otherwise

10

determined by the Board, such Option Rights shall be subject to the following additional terms and conditions:

               (i) Each grant shall specify the number of Common Shares to which it pertains subject to the limitations set forth in Section 3 of this Plan.

               (ii) Each such Option Right shall become exercisable six (6) months after the Date of Grant. Such Option Rights shall become exercisable in full immediately in the event of a Change in Control or other similar transaction or event.

               (iii) In the event of the termination of service on the Board by the holder of any such Option Rights, other than by reason of disability, death or retirement, the then outstanding Option Rights of such holder may be exercised to the extent that they would be exercisable on the date of such termination until the date that is one year after the date of such termination, but in no event after the expiration date of such Option Rights.

               (iv) In the event of the death, disability or retirement of the holder of any such Option Rights, each of the then outstanding Option Rights of such holder may be exercised at any time within one (1) year after such death, disability or retirement, but in no event after the expiration date of the term of such Option Rights.

               (v) If a Nonemployee Director subsequently becomes an employee of the Company or a Subsidiary while remaining a member of the Board, any Option Rights held under the Plan by such individual at the time of such commencement of employment shall not be affected thereby.

               (vi) Option Rights may be exercised by a Nonemployee Director only upon payment to the Company in full of the Option Price of the Common Shares to be delivered. Such payment shall be made in cash or in Common Shares then owned by the optionee for at least six months, or in a combination of cash and such Common Shares.

          (b) Each grant or sale of Restricted Shares pursuant to this Section 9 shall be upon terms and conditions consistent with Section 6 of this Plan.

     10. Transferability. (a) Except as otherwise determined by the Board, no Option Right, Appreciation Right or other derivative security granted under the Plan shall be transferable by a Participant other than by will or the laws of descent and distribution. Except as otherwise determined by the Board, Option Rights and Appreciation Rights shall be exercisable during the Optionee’s lifetime only by him or her or by his or her guardian or legal representative.

          (b) The Board may specify at the Date of Grant that part or all of the Common Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Deferral Period applicable to Deferred Shares or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, shall be subject to further restrictions on transfer.

11

          (c) Notwithstanding the provisions of Section 10(a), Option Rights (other than Incentive Stock Options) shall be transferable by a Participant, without payment of consideration therefor by the transferee, to any one or more members of the Participant’s Immediate Family (or to one or more trusts established solely for the benefit of one or more members of the Participant’s Immediate Family or to one or more partnerships in which the only partners are members of the Participant’s Immediate Family); provided, however, that (i) no such transfer shall be effective unless reasonable prior notice thereof is delivered to the Company and such transfer is thereafter effected in accordance with any terms and conditions that shall have been made applicable thereto by the Company or the Board and (ii) any such transferee shall be subject to the same terms and conditions hereunder as the Participant.

     11. Adjustments. The Board may make or provide for such adjustments in the numbers of Common Shares covered by outstanding Option Rights, Appreciation Rights, Deferred Shares, and Performance Shares granted hereunder, in the Option Price and Base Price provided in outstanding Appreciation Rights, and in the kind of shares covered thereby, as the Board, in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Board, in its discretion, may provide in substitution for any or all outstanding awards under this Plan such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. The Board may also make or provide for such adjustments in the numbers of shares specified in Section 3 of this Plan as the Board in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described in this Section 11; provided, however, that any such adjustment to the number specified in Section 3(c)(i) shall be made only if and to the extent that such adjustment would not cause any Option intended to qualify as an Incentive Stock Option to fail so to qualify.

     12. Change in Control. For purposes of this Plan, except as may be otherwise prescribed by the Board in an agreement evidencing a grant or award made under the Plan, a Change in Control means the occurrence during the Term of any of the following events, subject to the provisions of Section 12(f) hereof:

          (a) All or substantially all of the assets of the Company are sold or transferred to another corporation or entity, or the Company is merged, consolidated or reorganized into or with another corporation or entity, with the result that upon conclusion of the transaction less than 51% of the outstanding securities entitled to vote generally in the election of directors or other capital interests of the surviving, resulting or acquiring corporation or entity are beneficially owned (as that term is defined in Rule 13-d3 under the Exchange Act) (such ownership, “Beneficial Ownership”), by the shareholders of the Company immediately prior to the completion of the transaction; or

          (b) Any person (as the term “person” is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act (a “Person”)) has become the Beneficial Owner of

12

securities representing 20% or more of the combined voting power of the then-outstanding voting securities of the Company; or

          (c) The individuals who, as of January 1, 2006, constituted the Board (the “Incumbent Directors”) cease for any reason, including without limitation as a result of a tender offer, proxy contest, merger or similar transaction, to constitute a majority thereof, provided that (1) any individual becoming a director of the Company subsequent to January 1, 2006 shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at least two-thirds of the other Incumbent Directors and (2) any individual whose initial assumption of office is in connection with or as a result of an actual or threatened election contest relating to the election of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as that term is used in Sections 13(d) and 14(d) of the Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation shall not be considered an Incumbent Director; or

          (d) There shall be an announcement of the intent of any Person (other than the Company, any wholly-owned Subsidiary of the Company, or any employee stock ownership or other employee benefit plan of the Company or any wholly-owned Subsidiary of the Company) to commence a tender offer or exchange offer to acquire (when added to any shares as to which such Person is the Beneficial Owner immediately prior to such tender or exchange offer) beneficial ownership of 30% or more of the combined voting power of the then-outstanding voting securities of the Company; or

          (e) The Board determines that (1) any particular actual or proposed merger, consolidation, reorganization, sale or transfer of assets, accumulation of shares or tender offer for shares of the Company or other transaction or event or series of transactions or events will, or is likely to, if carried out, result in a Change in Control falling within Subsections (a), (b), (c) or (d) and (2) it is in the best interests of the Company and its shareholders, and will serve the intended purposes of this Section 12, if the provisions of awards which provide for earlier exercise or earlier lapse of restrictions or conditions upon a Change in Control shall thereupon become immediately operative.

          (f) Notwithstanding the foregoing provisions of this Section 12:

               (i) If any such merger, consolidation, reorganization, sale or transfer of assets, or tender offer or other transaction or event or series of transactions or events mentioned in Section 12(e) shall be abandoned, or any such accumulations of shares shall be dispersed or otherwise resolved, the Board may, upon a majority vote, including a majority vote of all then-continuing Incumbent Directors (such vote, a “Majority Vote”), by notice to the Executive, nullify the effect thereof and reinstate the award as previously in effect, but without prejudice to any action that may have been taken prior to such nullification.

               (ii) Unless otherwise determined in a specific case by the Board, a “Change in Control” shall not be deemed to have occurred for purposes of Section 12(b) or Section 12(d) solely because (X) the Company, (Y) a Subsidiary,

13

or (Z) any Company-sponsored employee stock ownership plan or any other employee benefit plan of the Company or any Subsidiary either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act disclosing Beneficial Ownership by it of shares of the then-outstanding voting securities of the Company, whether in excess of 20% or otherwise, or because the Company reports that a change in control of the Company has occurred or will occur in the future by reason of such beneficial ownership.

     For the avoidance of doubt, the fact that a particular event may not constitute a “Change in Control” under any subsection of this Section 12 will not affect whether a Change in Control shall be determined to have occurred under any other subparagraph.

     13. Fractional Shares. The Company shall not be required to issue any fractional Common Shares pursuant to this Plan. The Board may provide for the elimination of fractions or for the settlement of fractions in cash.

     14. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Board) may include relinquishment of a portion of such benefit. Common Shares or benefits shall not be withheld in excess of the minimum number required for such tax withholding. The Company and a Participant or such other person may also make arrangements with respect to the payment in cash of any taxes with respect to which withholding is not required.

     15. Foreign Employees. In order to facilitate the making of any grant or combination of grants under this Plan, the Board may provide for such special terms for awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America as the Board may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Board may approve such supplements to or amendments, restatements or alternative versions of this Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, shall include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Company.

     16. Administration of the Plan. (a) This Plan shall be administered by the Board, which may from time to time delegate all or any part of its authority under this Plan to a committee of the Board (or subcommittee thereof) consisting entirely of three Nonemployee Directors appointed by the Board. A majority of the committee (or subcommittee) shall

14

constitute a quorum, and the action of the members of the committee (or subcommittee) present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the committee (or subcommittee). To the extent of any such delegation, references in this Plan to the Board shall be deemed to be references to any such committee or subcommittee.

          (b) The interpretation and construction by the Board of any provision of this Plan or of any agreement, notification or document evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares or Performance Units and any determination by the Board pursuant to any provision of this Plan or of any such agreement, notification or document shall be final and conclusive. No member of the Board shall be liable for any such action or determination made in good faith.

     17. Amendments, Etc. (a) The Board may at any time and from time to time amend the Plan in whole or in part; provided, however, that any amendment which must be approved by the shareholders of the Company in order to comply with applicable law or the rules of the New York Stock Exchange] or, if the Common Shares are not traded on the New York Stock Exchange, the principal national securities exchange upon which the Common Shares are traded or quoted, shall not be effective unless and until such approval has been obtained. Presentation of this Plan or any amendment hereof for shareholder approval shall not be construed to limit the Company’s authority to offer similar or dissimilar benefits under other plans without shareholder approval.

          (b) The Board shall not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Option Right to reduce the Option Price. Furthermore, no Option Right shall be cancelled and replaced with awards having a lower Option Price without further approval of the shareholders of the Company. This Section 17(b) is intended to prohibit the repricing of “underwater” Option Rights and shall not be construed to prohibit the adjustments provided for in Section 11 of this Plan.

          (c) The Board also may permit Participants to elect to defer the issuance of Common Shares or the settlement of awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan. The Board also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts.

          (d) The Board may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant.

          (e) In case of termination of employment by reason of death, disability or normal or early retirement, or in the case of hardship or other special circumstances, of a Participant who holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Deferred Shares as to which the Deferral Period has not been completed, or any Performance Shares or Performance Units which have not been fully earned, or who holds Common Shares subject to any transfer restriction imposed pursuant to Section 10(b) of this Plan, the Board may, in its sole discretion, accelerate the time at which such

15

Option Right or Appreciation Right may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Deferral Period will end or the time at which such Performance Shares or Performance Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award.

          (f) This Plan shall not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor shall it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time.

          (g) To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision shall be null and void with respect to such Option Right. Such provision, however, shall remain in effect for other Option Rights and there shall be no further effect on any provision of this Plan.

     18. Termination. No grant shall be made under this Plan more than 10 years after the date on which this Plan is first approved by the shareholders of the Company, but all grants made on or prior to such date shall continue in effect thereafter subject to the terms thereof and of this Plan.

     19. Exclusion from Certain Restrictions. Notwithstanding anything in this Plan to the contrary, not more than eighty-one thousand (81,000) Common Shares in the aggregate available under this Plan may be subject to awards as follows:

(a) in the case of grants of Restricted Stock, which do not meet the requirements of the last sentence of Section 6(c);

(b) in the case of grants of Restricted Stock as to which the Board may accelerate or waive any restrictions imposed under Section 6(d)

(c) in the case of grants of Deferred Stock, which do not meet the requirements of the last sentence of Section 7(c); or

(d) in the case of Performance Shares and Performance Units, which do not meet the requirements of Section 8(b).

16

EX-21.1

Exhibit 21.1

GenCorp Inc.
Wholly Owned Subsidiaries

Aerojet-General Corporation	Ohio
Aerojet International, Inc.	California
Aerojet Investments Ltd.	California
Aerojet Ordnance Tennessee, Inc.	Tennessee
BPOU LLC	Delaware
AGC Office 1 LLC	California
Chemical Construction Corporation	Delaware
Cordova Chemical Company	California
Cordova Chemical Company of Michigan	Michigan
GT & MC, Inc.	Delaware
General Applied Science Laboratories, Inc.	New York
PJD, Inc.	Delaware
TKD, Inc.	California
GDX Automotive SAS	France
Snappon SA	France
GDX LLC	Delaware
Genco Insurance Limited	Bermuda
GenCorp Overseas Inc.	Ohio
GenCorp Realty Investments LLC	California
RKO General, Inc.	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-91783 and 333-35621, Form S-4 (No. 333-109518) and Form S-3 (Nos. 333-90850, 333-89796, 333-113497, and 333-121948) of GenCorp Inc. of our report dated January 25, 2008 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
Sacramento, California
January 25, 2008

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-91783 and 333-35621; Form S-4 No. 333-109518; and Form S-3 Nos. 333-90850, 333-89796, 333-113497 and 333-121948) and in the related Prospectuses of GenCorp Inc. of our report dated February 7, 2006, except for the first sentence of the first paragraph of Note 11, as to which the date is August 24, 2006, with respect to the consolidated financial statements and schedule of GenCorp Inc. for the year ended November 30, 2005, included in this Annual Report (Form 10-K) for the year ended November 30, 2007.

/s/ Ernst & Young LLP  

Sacramento, California
January 25, 2008

EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS:

That each person whose signature appears below, as a Director of GenCorp Inc., an Ohio corporation (the “Company”), with its principal offices at Highway 50 & Aerojet Road, Rancho Cordova, California, does hereby make, constitute and appoint Yasmin R. Seyal and Mark A. Whitney, or one of them acting alone, his or her true and lawful attorneys, with full power of substitution and resubstitution, in his or her name, place and stead, in any and all capacities, to execute and sign the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2007, and any and all amendments thereto, and documents in connection therewith, to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, giving and granting unto said attorneys full power and authority to do and perform such actions as fully as they might have done or could do if personally present and executing any of said documents.

Dated and effective as of the 23rd of January 2008.

/s/ TIMOTHY A. WICKS Timothy A. Wicks, Chairman of the Board	/s/ JAMES M. OSTERHOFF James M. Osterhoff, Director
/s/ CHARLES F. BOLDEN JR. Charles F. Bolden Jr., Director	/s/ TODD R. SNYDER Todd R. Snyder, Director
/s/ JAMES J. DIDION James J. Didion, Director	/s/ SHEILA E. WIDNALL Sheila E. Widnall, Director
/s/ DAVID A. LORBER David A. Lorber, Director	/s/ ROBERT C. WOODS Robert C. Woods, Director

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Terry L. Hall, certify that:

1. I have reviewed this annual report on Form 10-K of GenCorp Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 25, 2008

/s/  TERRY L. HALL

Terry L. Hall

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Yasmin R. Seyal, certify that:

1. I have reviewed this annual report on Form 10-K of GenCorp Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: January 25, 2008

/s/  YASMIN R. SEYAL

Yasmin R. Seyal

Senior Vice President, Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF ANNUAL REPORT ON FORM 10-K

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the Annual Report on Form 10-K of GenCorp Inc. (the Company) for the fiscal year ended November 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies that, to his knowledge:

•  the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

•  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/ TERRY L. HALL

Name:     Terry L. Hall

Title:  President and Chief Executive Officer

(Principal Executive Officer)

Date: January 25, 2008

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in connection with the filing of the Annual Report on Form 10-K of GenCorp Inc. (the Company) for the fiscal year ended November 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the Report), the undersigned officer of the Company certifies that, to her knowledge:

•  the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

•  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

/s/  YASMIN R. SEYAL

Name:     Yasmin R. Seyal

Title: Senior Vice President, Chief Financial Officer

(Principal Financial Officer)

Date: January 25, 2008