News Release
RICHMOND, Va., May 3 /PRNewswire-FirstCall/ -- Tredegar Corporation (NYSE: TG) reported first-quarter net income of $10.3 million (26 cents per share) compared to $8.2 million (21 cents per share) in 2006. Earnings from manufacturing operations in the first quarter were $10.8 million (27 cents per share) versus $9.5 million (24 cents per share) last year. First-quarter sales increased to $281.6 million from $268.0 million in 2006. A summary of results for the first quarter is shown below:
(In Millions, Except Per-Share Data) First Quarter Ended
March 31
2007 2006
Sales $281.6 $268.0
Net income as reported under
generally accepted
accounting principles (GAAP) $10.3 $8.2
After-tax effects of losses
associated with plant shutdowns,
asset impairments and restructurings 0.5 1.3
Income from manufacturing operations* $10.8 $9.5
Diluted earnings per share as
reported under GAAP $.26 $.21
After-tax effects per diluted share
of losses associated with
plant shutdowns, asset impairments
and restructurings .01 .03
Diluted earnings per share from
manufacturing operations* $.27 $.24
* The after-tax effects of unusual items, plant shutdowns, asset impairments and
restructurings, and gains from sale of assets and other items have been presented
separately and removed from net income and earnings per share as reported under
GAAP to determine Tredegar's presentation of income and earnings per share from
manufacturing operations. Income and earnings per share from manufacturing operations
are key financial and analytical measures used by Tredegar to gauge the operating
performance of its manufacturing businesses. They are not intended to represent
the stand-alone results for Tredegar's manufacturing businesses under GAAP and
should not be considered as an alternative to net income or earnings per share
as defined by GAAP. They exclude items that we believe do not relate to Tredegar's
ongoing manufacturing operations.
John D. Gottwald, Tredegar's president and chief executive officer, said: "Driven by strong performance in our films business, lower pension and interest costs and a lower effective income tax rate, earnings per share from manufacturing operations increased by 13% in the first quarter of 2007 compared with the first quarter of last year. In the last twelve months, excluding the effects of resin lag, quarterly operating profit in films has had significant ups and downs. Future performance in this business is likely to exhibit similar fluctuations, with growth primarily dependent on further increases in sales of high-value surface protection, elastic and apertured materials and new products developed using related core technologies."
Mr. Gottwald continued: "In aluminum, operating profit decreased in the first quarter of 2007 compared with 2006 mainly due to lower volume, especially extrusions used in hurricane protection products and residential construction. Overall backlog is down significantly. We're very focused on reducing our operating costs in light of the downturn in these markets, while trying to maintain sufficient flexibility to participate in cyclical upswings. The bright spot continues to be healthy demand for extrusions used in commercial construction applications."
MANUFACTURING OPERATIONSFilm Products
First-quarter net sales in Film Products were $136.1 million, up 7.8% from $126.3 million in the first quarter of 2006, while operating profit from ongoing operations increased to $16.8 million in the first quarter of 2007 from $15.6 million in 2006. Volume was 65.3 million pounds in the first quarter of 2007 compared with 64.5 million pounds in the first quarter of last year.
Net sales and volume were up in the first quarter of 2007 compared with the first quarter of 2006 primarily due to increased sales of high-value surface protection films and elastic materials, partially offset by lower sales of certain commodity barrier films that were dropped in conjunction with the shutdown in the second quarter of 2006 of the plant in LaGrange, Georgia. Volume was up 2.6 million pounds or 4.1% from the depressed level existing in the fourth quarter of 2006, which the company believes was adversely affected by customer inventory adjustments.
Profits increased in the first quarter of 2007 compared with the first quarter of 2006 due primarily to higher volume noted above and appreciation of the U.S. Dollar equivalent value of functional currencies for operations outside of the U.S. The company also estimates that the lag in the pass- through of lower average resin costs had a positive impact on operating profit of $500,000 in the first quarter of 2007. During the first quarter of last year, the company estimates that profits were positively affected by $2.0 million from the lag in the pass-through of lower average resin costs. Film Products has index-based pass-through raw material cost agreements for the majority of its business. However, under certain agreements, changes in resin prices are not passed through for an average period of 90 days.
Capital expenditures were $5.0 million in the first quarter of 2007 and are projected to be approximately $30 million for the year. Depreciation expense was $8.2 million in the first quarter of 2007 and is projected to be $33 million for the year.
Aluminum ExtrusionsFirst-quarter net sales in Aluminum Extrusions were $139.4 million, up 3.1% from $135.2 million in the first quarter of 2006 primarily due to higher selling prices substantially offset by lower volume. Operating profit from ongoing operations decreased to $3.5 million in the first quarter of 2007, down 28.6% from $4.9 million in the first quarter of 2006. The decrease in operating profit was mainly due to lower volume partially offset by higher selling prices. Volume decreased to 57.7 million pounds in the first quarter of 2007, down 9.4% from 63.7 million pounds in the first quarter of 2006. Lower shipments were primarily due to declines in demand for extrusions used in hurricane protection products and residential construction, partially offset by continued growth for extrusions used in commercial construction. Overall backlog at the end of the quarter was 14.3 million pounds, down from 19.7 million pounds at March 31, 2006, and the lowest quarterly level since the December 2003 level of 13.1 million pounds.
Capital expenditures in the first quarter of 2007 were $2.2 million and are projected to be approximately $11 million for the year. Depreciation expense was $3 million in the first quarter of 2007 and is expected to be $12.7 million for the year.
OTHER ITEMSNet pension income was $596,000 in the first quarter of 2007, a favorable change of $1.3 million (2 cents per share after taxes) from the net pension expense of $675,000 recognized in the first quarter of 2006. Most of this favorable change relates to a pension plan that is reflected in "Corporate expenses, net" in the operating profit by segment table. The company contributed $1.1 million to its pension plans in 2006 and expects to contribute the same amount in 2007.
Interest expense was $824,000 in the first quarter of 2007, a decline of $608,000 (1 cent per share after taxes) versus the first quarter of last year due to lower average debt outstanding.
The effective tax rate used to compute income from manufacturing operations was 35.2% in the first quarter of 2007 compared with 37.9% in the first quarter of 2006. The decrease in the effective tax rate for manufacturing operations, which had a favorable impact of approximately 1 cent per share, was mainly due to differences in income taxes accrued on operations outside of the U.S.
During the first quarter of 2007, the company adopted new accounting standards for maintenance costs and uncertain income tax positions, neither of which had a material impact on Tredegar's results of operations or financial condition.
Results for the first quarters of 2007 and 2006 include net after-tax charges of $539,000 (1 cent per share) and $1.3 million (3 cents per share), respectively, for plant shutdowns, asset impairments and restructurings. Details regarding these items are provided in the financial tables included with this press release.
CAPITAL STRUCTURENet debt (debt net of cash) was $3.7 million at March 31, 2007, compared with $21.6 million at December 31, 2006, which is significantly less than the last twelve months adjusted EBITDA from manufacturing operations of $111.5 million. See notes to financial statements and tables for reconciliations to comparable GAAP measures.
FORWARD-LOOKING AND CAUTIONARY STATEMENTSSome of the information contained in this press release may constitute "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. When we use the words "believe," "hope," "expect," "are likely," "project" and similar expressions, we do so to identify forward-looking statements. Such statements are based on our then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause actual results to differ from expectations include, without limitation: Film Products is highly dependent on sales to one customer -- The Procter & Gamble Company; growth of Film Products depends on its ability to develop and deliver new products at competitive prices; sales volume and profitability of Aluminum Extrusions is cyclical and highly dependent on economic conditions of end-use markets in the United States and Canada, particularly in the construction, distribution and transportation industries and are also subject to seasonal slowdowns during the winter months; our substantial international operations subject us to risks of doing business in foreign countries, which could adversely affect our business, financial condition and results of operations; our future performance is influenced by costs incurred by our operating companies including, for example, the cost of energy and raw materials; and the factors discussed in the reports Tredegar files with or furnishes to the Securities and Exchange Commission (the "SEC") from time-to-time, including the risks and important factors set forth in "Risk Factors" in Part I, Item 1A of our 2006 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for this period that will be filed with the SEC.
Tredegar does not undertake 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.
Based in Richmond, Va., Tredegar Corporation is a global manufacturer of plastic films and aluminum extrusions.
Tredegar Corporation
Condensed Consolidated Statements of Income
(In Thousands, Except Per-Share Data)
(Unaudited)
Three Months Ended
March 31
2007 2006
Sales $281,594 $267,964
Other income (expense), net (a)(b) 294 12
281,888 267,976
Cost of goods sold 238,388 226,638
Freight 6,147 6,474
Selling, R&D and general expenses 19,722 18,101
Amortization of intangibles 37 37
Interest expense 824 1,432
Asset impairments and costs associated
with exit and disposal activities (a) 733 1,692
265,851 254,374
Income before income taxes 16,037 13,602
Income taxes 5,704 5,387
Net income (a)(b)(c) $10,333 $8,215
Earnings per share:
Basic $.26 $.21
Diluted .26 .21
Shares used to compute earnings per
share:
Basic 39,272 38,602
Diluted 39,487 38,664
Tredegar Corporation
Net Sales and Operating Profit by Segment
(In Thousands)
(Unaudited)
Three Months Ended
March 31
2007 2006
Net Sales
Film Products $136,061 $126,331
Aluminum Extrusions 139,386 135,159
Total net sales 275,447 261,490
Add back freight 6,147 6,474
Sales as shown in the Consolidated
Statements of Income $281,594 $267,964
Operating Profit
Film Products:
Ongoing operations $16,820 $15,577
Plant shutdowns, asset impairments
and restructurings (a) (367) (1,583)
Aluminum Extrusions:
Ongoing operations 3,466 4,866
Plant shutdowns, asset impairments
and restructurings (a) - (109)
AFBS (d):
Loss on investment in Therics, LLC - (25)
Plant shutdowns, asset impairments
and restructurings (a) (366) -
Total 19,553 18,726
Interest income 388 222
Interest expense 824 1,432
Gain on the sale of corporate assets (b) - 56
Stock option-based compensation costs (e) 269 211
Corporate expenses, net 2,811 3,759
Income before income taxes 16,037 13,602
Income taxes 5,704 5,387
Net income (a)(b)(c) $10,333 $8,215
Tredegar Corporation
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)
March 31, December 31,
2007 2006
Assets
Cash & cash equivalents $38,480 $40,898
Accounts & notes receivable, net 143,817 121,834
Income taxes recoverable 2,850 10,975
Inventories 73,863 68,930
Deferred income taxes 7,567 6,055
Prepaid expenses & other 3,920 4,558
Total current assets 270,497 253,250
Property, plant & equipment, net 320,408 325,763
Other assets (f) 64,360 64,078
Goodwill & other intangibles 138,893 138,696
Total assets $794,158 $781,787
Liabilities and Shareholders' Equity
Accounts payable $88,181 $69,426
Accrued expenses 36,706 41,906
Current portion of long-term debt 481 678
Total current liabilities 125,368 112,010
Long-term debt 41,716 61,842
Deferred income taxes 77,065 75,772
Other noncurrent liabilities (f) 17,635 15,568
Shareholders' equity (f) 532,374 516,595
Total liabilities and shareholders'
equity $794,158 $781,787
Tredegar Corporation
Condensed Consolidated Statement of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31
2007 2006
Cash flows from operating activities:
Net income $10,333 $8,215
Adjustments for noncash items:
Depreciation 11,259 10,713
Amortization of intangibles 37 37
Deferred income taxes (1,633) 4,478
Accrued pension income and
postretirement benefits (439) 828
Gain on sale of assets - (56)
Loss on asset impairments and
divestitures 338 1,150
Changes in assets and liabilities,
net of effects of acquisitions
and divestitures:
Accounts and notes receivables (21,147) (32,633)
Inventories (4,345) 2,226
Income taxes recoverable 8,125 (284)
Prepaid expenses and other 1,039 482
Accounts payable 18,309 21,265
Accrued expenses (3,301) 1,714
Other, net 1,095 (681)
Net cash provided by operating
activities 19,670 17,454
Cash flows from investing activities:
Capital expenditures (7,164) (13,074)
Proceeds from the sale of assets and
property disposals &
reimbursements from customers for
purchases of equipment 2,762 56
Other, net - (158)
Net cash used in investing
activities (4,402) (13,176)
Cash flows from financing activities:
Dividends paid (1,579) (1,552)
Debt principal payments (20,323) (648)
Borrowings - 4,000
Proceeds from exercise of stock
options 4,089 461
Net cash (used in) provided by
financing activities (17,813) 2,261
Effect of exchange rate changes on
cash 127 165
Increase in cash and cash equivalents (2,418) 6,704
Cash and cash equivalents at beginning
of period 40,898 23,434
Cash and cash equivalents at end of
period $38,480 $30,138
Selected Financial Measures
(In Millions)
(Unaudited)
For the Twelve Months Ended March 31,2007
Film Aluminum
Products Extrusions Total
Operating profit from ongoing
operations $58.9 $20.6 $79.5
Allocation of corporate overhead (9.3) (3.4) (12.7)
Add back depreciation and
amortization 32.3 12.4 44.7
Adjusted EBITDA (g) $81.9 $29.6 $111.5
Selected balance sheet and other
data as of March 31, 2007:
Net debt (h) $3.7
Shares outstanding 39.5
Notes to the Financial Tables
(a) Plant shutdowns, asset impairments and restructurings in the first
quarter of 2007 include:
-- A pretax charge of $366,000 related to the estimated loss on the
sub-lease of a portion of the AFBS (formerly Therics) facility in
Princeton, New Jersey.
-- Pretax charges of $338,000 for asset impairments in Film Products;
and
-- A pretax charge of $29,000 for costs related to the shutdown of the
films manufacturing facility in LaGrange, Georgia.
Plant shutdowns, asset impairments and restructurings in the first
quarter of 2006 include:
-- A pretax charge of $404,000 related to the planned shutdown of the
films manufacturing facility in LaGrange, Georgia, including asset
impairment charges of $130,000 and severance and other costs of
$274,000;
-- Pretax charges of $1 million for asset impairments in Film
Products; and
-- Pretax charges of $268,000 for severance and other employee-
related costs in connection with restructurings in Film Products
($159,000) and Aluminum Extrusions ($109,000).
(b) Gain on the sale of corporate assets in 2006 includes a gain
related to the sale of public equity securities.
(c) Comprehensive income (loss), defined as net income and other
comprehensive income (loss), was a gain of $12.9 million for the first
quarter of 2007 and a gain of $9.0 million for the first quarter of
2006. Other comprehensive income (loss) includes changes in unrealized
gains and losses on available-for-sale securities, foreign currency
translation adjustments, unrealized gains and losses on derivative
financial instruments and amortization of prior service cost and net
gains or losses from pension and other postretirement benefit plans
recorded net of deferred taxes directly in shareholders' equity.
(d) On June 30, 2005, substantially all of the assets of AFBS, Inc.
(formerly Therics, Inc.), a wholly-owned subsidiary of Tredegar, were
sold or assigned to a newly-created limited liability company,
Therics, LLC, which is controlled and managed by an individual not
affiliated with Tredegar. AFBS retained substantially all of its
liabilities in the transaction, which included customary
indemnification provisions for pre-transaction liabilities. AFBS
received a 17.5% equity interest in the new company valued at $170,000
and a 3.5% interest in Theken Spine, LLC valued at $800,000, along
with potential future payments on the sale of certain products by
Therics, LLC.
(e) Effective January 1, 2006, Tredegar adopted Statement of Financial
Accounting Standards (SFAS) No. 123(R), "Share-Based Payment" (SFAS
123(R)) using the modified prospective method. SFAS 123(R) requires
the company to record compensation expense for all share-based awards.
Tredegar previously applied Accounting Principles Board (APB) Opinion
No. 25, "Accounting for Stock Issued to Employees," and related
interpretations and provided the required pro forma disclosures of
SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
Prior periods were not restated.
(f) Effective December 31, 2006, Tredegar adopted SFAS No. 158,
"Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans" (SFAS 158). This statement requires the
recognition in the balance sheet of the funded status of each of our
defined benefit pension and other postretirement plans. Each
overfunded plan is recognized as an asset and each underfunded plan is
recognized as a liability. The initial impact of SFAS 158, net of
deferred taxes, was recognized directly in shareholders' equity.
Adjustments from the new standard will not impact our debt covenant
computations since our credit agreement allows us to elect to use
generally accepted accounting principles in effect when the agreement
was signed.
(g) Adjusted EBITDA for the twelve months ended March 31, 2007, represents
income from continuing operations before interest, taxes,
depreciation, amortization, unusual items and losses associated with
plant shutdowns, asset impairments and restructurings, gains from the
sale of assets, investment write-down, charges related to stock option
awards accounted for under the fair value-based method and other
items. Adjusted EBITDA is not intended to represent cash flow from
operations as defined by GAAP and should not be considered as either
an alternative to net income (as an indicator of operating
performance) or to cash flow (as a measure of liquidity). Tredegar
uses Adjusted EBITDA as a measure of unlevered (debt-free) operating
cash flow. We also use it when comparing relative enterprise values
of manufacturing companies and when measuring debt capacity. When
comparing the valuations of a peer group of manufacturing companies,
we express enterprise value as a multiple of Adjusted EBITDA. We
believe Adjusted EBITDA is preferable to operating profit and other
GAAP measures when applying a comparable multiple approach to
enterprise valuation because it excludes the items noted above,
measures of which may vary among peer companies.
(h) Net debt is calculated as follows (in millions):
Debt $42.2
Less: Cash and cash equivalents (38.5)
Net debt $3.7
Net debt is utilized by management in evaluating the company's
financial leverage and equity valuation and the company believes that
investors also may find net debt to be helpful for the same purposes.
SOURCE Tredegar Corporation
CONTACT: D. Andrew Edwards of Tredegar Corporation, +1-804-330-1041, or
fax, +1-804-330-1777, daedward@tredegar.com
Web site: http://www.tredegar.com
