Printer Friendly Version   View printer-friendly version
<<  Back

Tredegar Reports First-Quarter Results

May 3, 2007 at 5:02 PM EDT

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 OPERATIONS
Film 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 Extrusions

First-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 ITEMS

Net 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 STRUCTURE

Net 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 STATEMENTS

Some 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

Back to top