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TheStreet Open House

Tredegar Reports Second-Quarter Results

Stocks in this article: TG

Tredegar does not undertake, and expressly disclaims any duty, to update any forward-looking statement made in this press release to reflect any change in management’s expectations or any change in conditions, assumptions or circumstances on which such statements are based.

To the extent that the financial information portion of this release contains non-GAAP financial measures, it also presents both the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the difference between any such non-GAAP measures and such comparable GAAP financial measures. Accompanying the reconciliation is management’s statement concerning the reasons why management believes that presentation of non-GAAP measures provides useful information to investors concerning Tredegar’s financial condition and results of operations. Reconciliations of non-GAAP financial measures are provided in the Notes to the Financial Tables included with this press release and can also be found within Presentations in the Investor Relations section of our website, www.tredegar.com. Tredegar uses its website as a channel of distribution of material company information. Financial information and other material information regarding Tredegar is posted on and assembled in the Investor Relations section of our website.

Tredegar Corporation is primarily a manufacturer of plastic films and aluminum extrusions. A global company headquartered in Richmond, Virginia, Tredegar had 2012 sales of $882 million. With approximately 2,700 employees, the company operates manufacturing facilities in North America, South America, Europe, and Asia.

 
Tredegar Corporation
Condensed Consolidated Statements of Income
(In Thousands, Except Per-Share Data)
(Unaudited)
   
Second Quarter Ended

 

Six Months Ended

June 30

June 30

  2013       2012     2013       2012  
 
Sales $ 243,530 $ 215,859 $ 485,056 $ 432,502
Other income (expense), net (a) (d) (e) (f)   846     2,625     1,670     5,190  
  244,376     218,484     486,726  

 

  437,692  
 
Cost of goods sold (a) 198,581 176,486 396,069 352,343
Freight 7,409 5,938 14,611 11,274
Selling, R&D and general expenses (a) 20,455 22,294 42,115 45,128
Amortization of intangibles 1,758 1,330 3,533 2,742
Interest expense 715 1,017 1,405 2,024

Asset impairments and costs associated with exit and disposal activities (a)

  384     1,321     638     2,214  
  229,302     208,386     458,371     415,725  
 

Income from continuing operations before income taxes

15,074 10,098 28,355 21,967
Income taxes from continuing operations (g)   5,484     2,710     9,248     6,842  
Income from continuing operations 9,590 7,388 19,107 15,125
Loss from discontinued operations (b)   (8,300 )   (35 )   (13,540 )   (4,774 )
 
Net income (a) (c) $ 1,290   $ 7,353   $ 5,567   $ 10,351  
 
 
 
Earnings (loss) per share:
Basic:

Continuing operations

$ .30 $ .23 $ .59 $ .47
Discontinued operations (b)   (.26 )   -     (.42 )   (.15 )
Net income $ .04   $ .23   $ .17   $ .32  
Diluted:
Continuing operations $ .29 $ .23 $ .59 $ .47
Discontinued operations (b)   (.25 )   -   $ (.42 )   (.15 )
Net income $ .04   $ .23   $ .17   $ .32  
 
Shares used to compute earnings (loss) per share:
Basic 32,187 32,051 32,132 32,031
Diluted 32,635 32,101 32,558 32,247
 

 
Tredegar Corporation
Net Sales and Operating Profit by Segment
(In Thousands)
(Unaudited)
   
Second Quarter Ended Six Months Ended
June 30 June 30
  2013       2012     2013       2012  
Net Sales
Film Products $ 158,266 $ 150,226 $ 312,651 $ 303,925
Aluminum Extrusions   77,855     59,695     157,794     117,303  
Total net sales 236,121 209,921 470,445 421,228
Add back freight   7,409     5,938     14,611     11,274  

Sales as shown in the Consolidated Statements of Income

$ 243,530   $ 215,859   $ 485,056   $ 432,502  
 
Operating Profit
Film Products:
Ongoing operations $ 18,727 $ 13,441 $ 35,734 $ 28,907

Plant shutdowns, asset impairments, restructurings and other (a)

(107 ) (1,508 ) (209 ) (1,792 )
 
Aluminum Extrusions:
Ongoing operations 4,311 3,800 8,925 5,503

Plant shutdowns, asset impairments, restructurings and other (a)

  (545 )   (1,086 )   (798 )   (2,147 )
Total 22,386 14,647 43,652 30,471
Interest income 91 83 169 253
Interest expense 715 1,017 1,405 2,024
Gain on investment accounted for under fair value method (d) 2,100 2,700 3,200 6,300
Unrealized loss on investment property (e) (1,018 ) - (1,018 ) -
Stock option-based compensation costs 283 315 599 761
Corporate expenses, net (f)   7,487     6,000     15,644     12,272  
Income from continuing operations before income taxes 15,074 10,098 28,355 21,967
Income taxes from continuing operations (g)   5,484     2,710     9,248     6,842  
Income from continuing operations 9,590 7,388 19,107 15,125
Loss from discontinued operations (b)   (8,300 )   (35 )   (13,540 )   (4,774 )
Net income (a) (c) $ 1,290   $ 7,353   $ 5,567   $ 10,351  
 

 
Tredegar Corporation
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
   
June 30, December 31,
2013 2012
Assets
 
Cash & cash equivalents $ 44,427 $ 48,822
Accounts & other receivables, net 120,600 100,798
Income taxes recoverable 692 2,886
Inventories 78,294 74,670
Deferred income taxes 7,100 5,614
Prepaid expenses & other   4,791   6,780
Total current assets 255,904 239,570
 
Property, plant & equipment, net 260,130 253,417
Goodwill & other intangibles, net 232,462 240,619
Other assets   50,824   49,559
Total assets $ 799,320 $ 783,165
 
Liabilities and Shareholders' Equity
 
Accounts payable $ 91,888 $ 82,067
Accrued expenses   44,779   42,514
Total current liabilities 136,667 124,581
 
Long-term debt 139,000 128,000
Deferred income taxes 59,974 60,773
Other noncurrent liabilities 95,560 97,559
Shareholders' equity   368,119   372,252
Total liabilities and shareholders' equity $ 799,320 $ 783,165
 

 
Tredegar Corporation
Condensed Consolidated Statement of Cash Flows
(In Thousands)
(Unaudited)
 
Six Months Ended
June 30
2013   2012
Cash flows from operating activities:
Net income $ 5,567 $ 10,351
Adjustments for noncash items:
Depreciation 19,592 24,334
Amortization of intangibles 3,533 2,742
Deferred income taxes (1,998 ) (245 )
Accrued pension income and postretirement benefits 6,806 4,044
Gain on investment accounted for under the fair value method (3,200 ) (6,300 )
Loss on asset impairments and divestitures 1,018 1,942

Changes in assets and liabilities, net of effects of acquisitions and divestitures:

Accounts and other receivables (22,036 ) (4,750 )
Inventories (5,578 ) (11,052 )
Income taxes recoverable 1,947 575
Prepaid expenses and other 1,074 1,814
Accounts payable and accrued expenses 13,583 7,775
Other, net   323     (3,716 )
Net cash provided by operating activities   20,631     27,514  
Cash flows from investing activities:
Capital expenditures (34,642 ) (8,933 )
Acquisition - (3,311 )
Sale of business 306

-

Proceeds from the sale of assets and other   701     75  
Net cash used in investing activities   (33,635 )   (12,169 )
Cash flows from financing activities:
Borrowings 32,000 -
Debt principal payments and financing costs (21,000 ) (28,354 )
Dividends paid (4,521 ) (2,890 )
Proceeds from exercise of stock options and other   2,692     125  
Net cash provided by (used in) financing activities   9,171     (31,119 )
Effect of exchange rate changes on cash   (562 )   (606 )
Increase (decrease) in cash and cash equivalents (4,395 ) (16,380 )
Cash and cash equivalents at beginning of period   48,822     68,939  
Cash and cash equivalents at end of period $ 44,427   $ 52,559  
 

 
Selected Financial Measures
(In Millions)
(Unaudited)
 
Selected balance sheet and other data as of June 30, 2013:

Net debt (h)

  $ 94.6
Shares outstanding 32.3
 
 

Notes to the Financial Tables

 
(a) Plant shutdowns, asset impairments, restructurings and other in the second quarter of 2013 include:

-

 

Net pretax charge of $0.3 million associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana;

-

Pretax charges of $0.1 million for integration-related expenses and other non-recurring transactions (included in "Selling, R&D and general expenses" in the condensed consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions;

-

Pretax loss of $0.1 million related to the sale of previously impaired machinery and equipment at our film products manufacturing facility in Shanghai, China (included in “Other income (expense), net” in the consolidated statements of income); and

-

Pretax charge of $0.1 million related to expected future environmental costs at our aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statements of income).

 
Plant shutdowns, asset impairments, restructurings and other in the first six months of 2013 include:

-

Net pretax charge of $0.5 million associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana;

-

Pretax charges of $0.2 million for integration-related expenses and other non-recurring transactions (included in "Selling, R&D and general expenses" in the condensed consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions;

-

Pretax loss of $0.1 million related to the sale of previously impaired machinery and equipment at our film products manufacturing facility in Shanghai, China (included in “Other income (expense), net” in the consolidated statements of income);

-

Pretax charge of $0.1 million related to expected future environmental costs at our aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the consolidated statements of income); and

-

Pretax charges of $0.1 million for severance and other employee-related costs in connection with restructurings in Film Products.

 
Plant shutdowns, asset impairments, restructurings and other in the second quarter of 2012 include:

-

Net pretax charge of $1.0 million associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana, which includes accelerated depreciation for property and equipment of $1.2 million (included in "Cost of goods sold" in the condensed consolidated statements of income), severance and other employee-related costs of $0.4 million and other shutdown-related charges of $0.1 million, partially offset by adjustments to inventories accounted for under the last-in, first-out method of $0.5 million (included in "Cost of goods sold" in the condensed consolidated statements of income);

-

Pretax loss of $0.8 million for asset impairments associated with a previously shutdown film products manufacturing facility in LaGrange, Georgia;

-

Pretax charges of $0.6 million for integration-related expenses and other non-recurring transactions (included in "Selling, R&D and general expenses" in the condensed consolidated statements of income) associated with the acquisition of Terphane by Film Products; and

-

Pretax charges of $0.1 million for severance and other employee-related costs in connection with restructurings in Film Products.

 
Plant shutdowns, asset impairments, restructurings and other in the first six months of 2012 include:

-

Net pretax charge of $1.9 million associated with the shutdown of the aluminum extrusions manufacturing facility in Kentland, Indiana, which includes accelerated depreciation for property and equipment of $1.9 million (included in "Cost of goods sold" in the condensed consolidated statements of income), severance and other employee-related costs of $1.0 million and other shutdown-related charges of $0.1 million, partially offset by adjustments to inventories accounted for under the last-in, first-out method of $1.0 million (included in "Cost of goods sold" in the condensed consolidated statements of income);

-

Pretax charges of $0.9 million for integration-related expenses and other non-recurring transactions (included in "Selling, R&D and general expenses" in the condensed consolidated statements of income) associated with the acquisition of Terphane by Film Products;

-

Pretax loss of $0.8 million for asset impairments associated with a previously shutdown film products manufacturing facility in LaGrange, Georgia; and

-

Pretax charges of $0.3 million for severance and other employee-related costs in connection with restructurings in Film Products ($0.1 million) and Aluminum Extrusions ($0.2 million).

 

(b)  

On November 20, 2012, Tredegar sold its mitigation banking business, Falling Springs, LLC to Arc Ventures LC, a company affiliated with John D. Gottwald, a member of our Board of Directors, for cash and stock consideration of $16.6 million. All historical results for this business have been reflected as discontinued operations in the accompanying condensed consolidated financial statements.

 

On February 12, 2008, Tredegar sold its aluminum extrusions business in Canada for a purchase price of approximately $25 million. All historical results for this business were previously reported in discontinued operations. Accruals were made for indemnifications under the purchase agreement related to environmental matters of $8.3 million ($8.3 million after tax) in the second quarter of 2013. Accruals were made for indemnifications under the purchase agreement related to environmental matters of $13.5 million ($13.5 million after tax) in the first six months of 2013 and $4.8 million ($4.8 million after tax) in the first six months of 2012.

 
(c)

Comprehensive income (loss), defined as net income (loss) and other comprehensive income (loss), was a loss of $10.2 million in the second quarter of 2013 and a loss of $8.0 million for the second quarter 2012. Comprehensive income (loss) was a loss of $3.2 million in the first six months of 2013 and income of $2.1 million for the first six months of 2012. Other comprehensive income (loss) includes changes in foreign currency translation adjustments, unrealized gains and losses on derivative financial instruments and prior service costs and net gains or losses from pension and other postretirement benefit plans arising during the period and the related amortization of these prior service costs and net gains or losses recorded net of deferred taxes directly in shareholders' equity.

 
(d)

The unrealized gain on our investment in Intelliject, Inc. (included in "Other income (expense), net" in the condensed consolidated statements of income) were gains of $2.1 million and $2.7 million in second quarter of 2013 and 2012, respectively, and $3.2 million and $6.3 million in the first six months of 2013 and 2012, respectively. The unrealized gains in 2013 are primarily related to adjustments in the fair value for the passage of time as anticipated cash flows associated with achieving product development and commercialization milestones are discounted at 55% for their high degree of risk. The unrealized gain in the second quarter of 2012 is primarily attributed to the appreciation of our ownership interest to reflect insights from a new marketing study for its first product, which resulted in the favorable adjustment to the timing and amount of anticipated cash flows from an upcoming product introduction and achieving related milestones. The unrealized gain in the first quarter of 2012 is primarily attributed to the appreciation of our ownership interest after the weighted average cost of capital used to discount cash flows in our valuation of the specialty pharmaceutical company was reduced to reflect the completion of certain process testing and a reassessment of the risk associated with the timing for obtaining final marketing approval for its first product from the U.S. Food & Drug Administration.

 
(e)

An unrealized loss on our investment property in Alleghany and Bath County, Virginia (included in “Other income (expense), net” in the consolidated statements of income) of $1.0 million ($0.6 million after taxes) was recorded in the second quarter of 2013 as a result of a reduction in the estimated fair value of our investment that is not expected to be temporary.

 
(f)

A pretax charge of $1.1 million related to unrealized losses for our investment in the Harbinger Capital Partners Special Situations Fund, L.P. was recorded in the first quarter of 2012 as a result of a reduction in the fair value of our investment that is not expected to be temporary. The impairment charge is included in "Other income (expense), net" in the condensed consolidated statements of income and in "Corporate expenses, net" in the statement of net sales and operating profit by segment.

 
(g)

Income taxes for 2012 include the recognition of an additional valuation allowance of $1.3 million ($0.4 million in the second quarter of 2012) related to the expected limitations on the utilization of assumed capital losses on certain investments recognized in previous years.

 
(h)   Net debt is calculated as follows (in millions):
          June 30,   December 31,
2013 2012
Debt $ 139.0 $ 128.0
Less: Cash and cash equivalents   (44.4 )   (48.8 )
Net debt $ 94.6   $ 79.2  
 
 

Net debt is not intended to represent total debt as defined by GAAP.  Net debt is utilized by management in evaluating the company's financial leverage and equity valuation, and management believes that investors also may find net debt to be helpful for the same purposes.

 
(i)

Tredegar's presentation of income and diluted earnings per share from ongoing operations are non-GAAP financial measures that exclude the after-tax effects of gains or losses associated with plant shutdowns, asset impairments and restructurings, gains or losses from sale of assets and other items, goodwill impairment charges and operating results and gains or losses on sale for businesses divested that are included in discontinued operations, which have been presented separately and removed from net income (loss) and diluted earnings (loss) per share as reported under GAAP. Income and diluted earnings per share from ongoing operations are used by management to gauge the operating performance of Tredegar's ongoing operations. They are not intended to represent the stand-alone results for Tredegar’s ongoing operations under GAAP and should not be considered as an alternative to net income (loss) or earnings (loss) per share from continuing operations as defined by GAAP. They exclude items that we believe do not relate to Tredegar's ongoing operations.





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