Printer Friendly Version View printer-friendly version
<< Back
Tredegar Reports First-Quarter Results
RICHMOND, Va., May 5, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Tredegar Corporation (NYSE: TG) reported first-quarter net income from continuing operations of $3.8 million (11 cents per share) compared to $11.1 million (28 cents per share) in the first quarter of 2007. Earnings from continuing manufacturing operations in the first quarter were $6.0 million (17 cents per share) versus $11.7 million (29 cents per share) last year. First-quarter sales from continuing operations decreased to $228.5 million from $244.9 million in 2007. On February 12, 2008, Tredegar sold its aluminum extrusions business in Canada. All historical results for this business have been reflected as discontinued operations in the accompanying financial tables.

A summary of results for continuing operations for the three months ended March 31, 2008 and 2007 is shown below:


     (In Millions, Except Per-Share Data)                Three Months Ended
                                                              March 31
                                                       2008              2007
     Sales                                           $228.5            $244.9

     Income from continuing operations as
      reported under generally accepted
      accounting principles (GAAP)                     $3.8             $11.1
     After-tax effects of:
      Loss associated with plant shutdowns,
       asset impairments and restructurings             2.7                .5
      (Gains) losses from sale of assets
       and other items                                  (.5)                -
     Income from continuing manufacturing
      operations*                                      $6.0             $11.6


     Diluted earnings per share from
      continuing operations as reported
      under GAAP                                       $.11              $.28
     After-tax effects per diluted share
      of:
       Loss associated with plant shutdowns,
        asset impairments and
        restructurings                                  .08               .01
       (Gains) losses from sale of assets
        and other items                                (.02)                -
     Diluted earnings per share from
      continuing manufacturing
      operations*                                      $.17              $.29


    * The after-tax effects of unusual items, plant shutdowns, asset
      impairments and restructurings, and gains or losses from sale of assets
      and other items have been presented separately and removed from net
      income and earnings per share from continuing operations as reported
      under GAAP to determine Tredegar's presentation of income and earnings
      per share from continuing manufacturing operations.  Income and earnings
      per share from continuing manufacturing operations are key financial and
      analytical measures used by Tredegar to gauge the operating performance
      of its continuing manufacturing businesses.  They are not intended to
      represent the stand-alone results for Tredegar's continuing
      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: "Earnings from continuing manufacturing operations, which excludes restructuring charges, declined by 12 cents per share or 41% in the first quarter of 2008 compared with the first quarter of 2007 due to lower operating profits in both films and continuing operations in aluminum extrusions. Operating profits before restructuring charges in films declined by $6.0 million or 36% in the first quarter of 2008 compared with an exceptionally strong first quarter of 2007 due primarily to competitive pressures, particularly for personal care materials, packaging materials and lower value surface protection films. Future operating profit levels in films will depend on our ability to deliver product innovations and cost reductions. We believe we have good opportunities for growth, especially in higher value surface protection films and with expected new product introductions for the personal care market. We've already taken significant action on cost reductions. During the first quarter of 2008, we recognized restructuring charges of $3.7 million, including charges relating to a 6% reduction of the Film Products' workforce that is expected to save $2.6 million in the remainder of 2008 and $4.2 million on an annualized basis."

Mr. Gottwald continued: "The aluminum extrusions industry in the U.S. continues to suffer from a cyclical downturn. Volume in our continuing operations declined by 12.5% in the first quarter of 2008 compared with the first quarter of last year, with demand down in most market segments. Operating profits declined by $3.1 million or 67%, primarily due to the decrease in volume. We're very focused on controlling our variable costs and reducing fixed costs to minimize the adverse impact of the volume drop on profits."

Mr. Gottwald further stated: "Despite challenging business conditions, our balance sheet remains strong with net debt of $15.6 million at March 31, 2008, down from $33.8 million at December 31, 2007."

                           MANUFACTURING OPERATIONS
                                Film Products

First-quarter net sales in Film Products were $132.3 million, down 2.8% from $136.1 million in the first quarter of 2007, while operating profit from ongoing operations decreased to $10.8 million in the first quarter of 2008 from $16.8 million in 2007. Volume was 57.9 million pounds in the first quarter of 2008 compared with 65.3 million pounds in the first quarter of 2007.

Volume was down in the first quarter of 2008 compared with the first quarter of 2007 primarily due to a decrease in sales of lower value surface protection films, personal care materials and packaging materials. Net sales decreased due to the decline in volume, partially offset by appreciation of the U.S. dollar value of currencies for operations outside of the U.S. and higher selling prices from the pass-through of higher resin costs.

Operating profit from ongoing operations decreased in the first quarter of 2008 compared with an exceptionally strong first quarter of 2007 due primarily to competitive pressures, particularly for personal care materials, packaging materials and lower value surface protection films. In addition, operating profit in the first quarter of 2008 benefited from appreciation of the U.S. dollar value of currencies for operations outside of the U.S. (the favorable impact from currency rate changes was approximately $1.2 million) but was offset by the lag in the pass-through of increases in 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 in Film Products were $3.2 million in the first quarter of 2008 compared with $5 million in the first quarter of last year, and are projected to be approximately $33 million in 2008. Depreciation expense was $8.8 million in the first quarter of 2008 compared with $8.2 million in the first quarter of last year, and is projected to be approximately $34 million in 2008.

Aluminum Extrusions

First-quarter net sales from continuing operations in Aluminum Extrusions were $91.1 million, down 12.2% from $103.8 million in the first quarter of 2007. Operating profit from ongoing U.S. operations decreased to $1.5 million in the first quarter of 2008, down 67% from $4.6 million in the first quarter of 2007. Volume from continuing operations decreased to 37.1 million pounds in the first quarter of 2008, down 12.5% from 42.4 million pounds in the first quarter of 2007.

The decreases in net sales and ongoing operating profit from continuing operations in the first quarter of 2008 compared with the first quarter of last year were mainly due to lower volume. Shipments declined in most markets.

Capital expenditures for continuing operations in Aluminum Extrusions were $810,000 in the first quarter of 2008 compared with $1.9 million in the first quarter of last year, and are projected to be approximately $18 million in 2008. In January, Tredegar announced plans to spend approximately $24 million over the next 18 months to expand the capacity at its plant in Carthage, Tennessee. Approximately 65% of the sales of aluminum extrusions from operations in the U.S. are related to non-residential construction, and this additional capacity will increase Tredegar's capabilities in this sector. Depreciation expense was $2.0 million in the first quarter of 2008 compared with $2.1 million in the first quarter of last year, and is projected to be approximately $8.1 million in 2008.

On February 12, 2008, Tredegar sold its aluminum extrusions business in Canada for a purchase price of $25.5 million to an affiliate of H.I.G. Capital. The purchase price is subject to adjustment based upon the actual working capital of the business at the time of sale. The final purchase price is estimated at $24.7 million, with the decline from the amount estimated at February 12, 2008 due to the excess of estimated working capital over actual working capital. Tredegar expects to realize cash income tax benefits in 2008 from the sale of approximately $12 million. All historical results for this business have been reflected as discontinued operations in the accompanying financial tables.

OTHER ITEMS

Net pension income from continuing operations was $1.6 million in the first quarter of 2008, a favorable change of $826,000 (2 cents per share after taxes) from amounts recognized in the first quarter of 2007. Most of the favorable changes relate to a pension plan that is reflected in "Corporate expenses, net" in the operating profit by segment table. The company contributed approximately $167,000 to its pension plans for continuing operations in 2007 and expects to contribute a similar amount in 2008.

Interest expense was $881,000 in the first quarter of 2008, a slight increase from $824,000 in the first quarter of last year due to higher average debt levels partially offset by lower average interest rates.

The effective tax rate used to compute income taxes from continuing manufacturing operations was 38.8% in the first quarter of 2008 compared with 35.0% in the first quarter of 2007. The increase in the effective tax rate for continuing manufacturing operations for 2008 versus 2007, which had an unfavorable impact of approximately 1 cent per share, was mainly due to higher effective tax rates for operations outside of the U.S., expiration at December 31, 2007 of the research & development tax credit and lower income tax benefits expected for the Domestic Production Activities Deduction, partially offset by a lower state income tax effective rate.

Overall results for continuing operations for the quarter include special items. After-tax charges for continuing operations for plant shutdowns, asset impairments and restructurings were 8 cents and 1 cent per share in the first quarters of 2008 and 2007, respectively. Further details regarding these items are provided in the financial tables included with this press release.

Tredegar's investment in Harbinger Capital Partners Special Situations Fund, L.P. had a reported capital account value of $24.1 million at March 31, 2008, compared with $23.0 million at December 31, 2007. This investment has a carrying value in Tredegar's balance sheet of $10 million, which represents the amount invested on April 2, 2007.

CAPITAL STRUCTURE AND ADJUSTED EBITDA

Net debt (debt in excess of cash) was $15.6 million at March 31, 2008, compared with net debt of $33.8 million at December 31, 2007. Adjusted EBITDA from continuing manufacturing operations, a key valuation and borrowing capacity measure, was $100.3 million in the twelve months ended March 31, 2008, down from $107.9 million in 2007. See notes to financial statements and tables for reconciliations to comparable GAAP measures.

On January 7, 2008, Tredegar announced that its board of directors approved a share repurchase program whereby management is authorized at its discretion to purchase, in the open market or in privately negotiated transactions, up to 5 million shares of Tredegar's outstanding common stock. This share repurchase program replaces Tredegar's previous share repurchase authorization. The authorization has no time limit. During the first quarter of 2008, Tredegar repurchased 469,300 shares for $7.3 million. As of March 31, 2008, Tredegar had approximately 34.3 million common shares outstanding.

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," "estimate," "anticipate," "expect," "project," "likely," "may" 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 continuing operations in Aluminum Extrusions is cyclical and highly dependent on economic conditions of end-use markets in the U.S., particularly in the construction, distribution and transportation industries and are also subject to seasonal slowdowns; 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 Tredegar's 2007 Annual Report on Form 10-K 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
                                                     2008              2007

    Sales                                          $228,480          $244,887
    Other income (expense), net                         557               293
                                                    229,037           245,180

    Cost of goods sold                              194,239           202,652
    Freight                                           5,101             5,055
    Selling, R&D and general expenses                18,969            18,659
    Amortization of intangibles                          32                37
    Interest expense                                    881               824
    Asset impairments and costs associated
     with exit and disposal activities (a)            3,940               733
                                                    223,162           227,960

    Income from continuing operations
     before income taxes                              5,875            17,220
    Income taxes                                      2,090             6,085
    Income from continuing operations                 3,785            11,135
    Income (loss) from discontinued
     operations (b)                                    (723)             (802)

    Net income (a) (c)                               $3,062           $10,333


    Earnings (loss) per share:
      Basic:
        Continuing operations                          $.11              $.28
        Discontinued operations                        (.02)             (.02)
        Net income                                     $.09              $.26
      Diluted:
        Continuing operations                          $.11              $.28
        Discontinued operations                        (.02)             (.02)
        Net income                                     $.09              $.26

    Shares used to compute earnings (loss)
     per share:
      Basic                                          34,467            39,272
      Diluted                                        34,682            39,487



                               Tredegar Corporation
                    Net Sales and Operating Profit by Segment
                                  (In Thousands)
                                   (Unaudited)

                                                       Three Months Ended
                                                            March 31
                                                     2008              2007
    Net Sales
    Film Products                                  $132,314          $136,061
    Aluminum Extrusions                              91,065           103,771
    Total net sales                                 223,379           239,832
    Add back freight                                  5,101             5,055
    Sales as shown in the Consolidated
      Statements of Income                         $228,480          $244,887

    Operating Profit
    Film Products:
      Ongoing operations                            $10,786           $16,820
      Plant shutdowns, asset impairments
       and restructurings (a)                        (3,705)             (367)

    Aluminum Extrusions (b):
      Ongoing operations                              1,542             4,649
      Plant shutdowns, asset impairments
       and restructurings (a)                          (235)                -

    AFBS:
      Plant shutdowns, asset impairments
       and restructurings (a)                             -              (366)
    Total                                             8,388            20,736
    Interest income                                     258               388
    Interest expense                                    881               824
    Stock option-based compensation costs                60               269
    Corporate expenses, net                           1,830             2,811
    Income before income taxes                        5,875            17,220
    Income taxes                                      2,090             6,085
    Income from continuing operations                 3,785            11,135
    Income (loss) from discontinued
     operations (b)                                    (723)             (802)
    Net income (a) (c)                               $3,062           $10,333



                              Tredegar Corporation
                      Condensed Consolidated Balance Sheets
                                 (In Thousands)
                                   (Unaudited)

                                                   March 31,      December 31,
                                                     2008             2007
    Assets

    Cash & cash equivalents                         $41,443          $48,217
    Accounts & notes receivable, net                116,185           97,064
    Income taxes recoverable                         14,298              323
    Inventories                                      41,652           48,666
    Deferred income taxes                             9,173            9,172
    Prepaid expenses & other                          8,361            4,077
    Current assets of discontinued
     operation (b)                                        -           37,750
    Total current assets                            231,112          245,269

    Property, plant & equipment, net                266,986          269,083
    Other assets                                    117,672          116,759
    Goodwill & other intangibles                    136,179          135,907
    Noncurrent assets of discontinued
     operation (b)                                        -           17,460
    Total assets                                   $751,949         $784,478

    Liabilities and Shareholders' Equity

    Accounts payable                                $74,327          $67,161
    Accrued expenses                                 37,589           33,676
    Current portion of long-term debt                   583              540
    Current liabilities of discontinued
     operation (b)                                        -           17,152
    Total current liabilities                       112,499          118,529

    Long-term debt                                   56,450           81,516
    Deferred income taxes                            83,022           68,625
    Other noncurrent liabilities                     15,844           15,662
    Noncurrent liabilities of discontinued
     operation (b)                                        -            8,818
    Shareholders' equity                            484,134          491,328

    Total liabilities and shareholders'
     equity                                        $751,949         $784,478



                              Tredegar Corporation
                 Condensed Consolidated Statement of Cash Flows
                                 (In Thousands)
                                   (Unaudited)

                                                       Three Months Ended
                                                            March 31
                                                      2008              2007
    Cash flows from operating activities:
      Net income                                    $3,062           $10,333
      Adjustments for noncash items:
        Depreciation                                11,336            11,259
        Amortization of intangibles                     32                37
        Deferred income taxes                        8,289            (1,633)
        Accrued pension income and
         postretirement benefits                    (1,413)             (439)
        Loss on asset impairments and
         divestitures                                2,327               338
      Changes in assets and liabilities,
       net of effects of acquisitions
       and divestitures:
        Accounts and notes receivables             (22,066)          (21,147)
        Inventories                                 10,013            (4,345)
        Income taxes recoverable                   (13,841)            8,125
        Prepaid expenses and other                     421             1,039
        Accounts payable and accrued
         expenses                                    5,357            15,008
      Other, net                                     2,661             1,095
        Net cash provided by operating
         activities                                  6,178            19,670
    Cash flows from investing activities:
      Capital expenditures                          (4,052)           (7,164)
      Proceeds from the sale of the
       aluminum extrusions business in
       Canada (net of cash included in
       sale and transaction costs)                  23,616                 -
      Proceeds from the sale of assets and
       property disposals & reimbursements
       from customers for purchases
       of equipment                                    248             2,762
        Net cash provided by (used in)
         investing activities                       19,812            (4,402)
    Cash flows from financing activities:
      Dividends paid                                (1,378)           (1,579)
      Debt principal payments                      (38,158)          (20,323)
      Borrowings                                    13,000                 -
      Repurchases of Tredegar common stock          (7,283)                -
      Proceeds from exercise of stock
       options                                           -             4,089
        Net cash used in financing
         activities                                (33,819)          (17,813)
    Effect of exchange rate changes on
     cash                                            1,055               127
    Decrease in cash and cash equivalents           (6,774)           (2,418)
    Cash and cash equivalents at beginning
     of period                                      48,217            40,898
    Cash and cash equivalents at end of
     period                                        $41,443           $38,480



                           Selected Financial Measures
                                  (In Millions)
                                   (Unaudited)

                                  For the Twelve Months Ended March 31, 2008

                                             Film    Aluminum
                                           Products Extrusions  Total
    Operating profit from continuing
     ongoing operations                      $53.4    $13.4     $66.8
    Allocation of corporate overhead          (7.7)    (1.9)     (9.6)
    Add back depreciation and amortization
     from continuing operations               34.7      8.4      43.1
    Adjusted EBITDA from continuing
     operations (d)                          $80.4    $19.9    $100.3

    Selected balance sheet and other data
     as of March 31, 2008:
      Net debt (e)                           $15.6
      Shares outstanding                      34.3

    Notes to the Financial Tables

    (a)  Plant shutdowns, asset impairments and restructurings in the first
         quarter of 2008 include:
          -- Pretax charges of $2.3 million for severance and other employee-
             related costs in connection with restructurings in Film Products
             ($2.1 million) and Aluminum Extrusions ($235,000); and
          -- Pretax charges of $1.6 million for asset impairments in Film
             Products.

         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.

    (b)  On February 12, 2008, Tredegar sold its aluminum extrusions business
         in Canada for a purchase price of $25.5 million to an affiliate of
         H.I.G. Capital. The purchase price is subject to adjustment based
         upon the actual working capital of the business at the time of sale.
         The final purchase price is estimated at $24.7 million, with the
         decline from the amount estimated at February 12, 2008, due to the
         excess of estimated working capital over actual working capital.
         Tredegar expects to realize cash income tax benefits in 2008 from the
         sale of approximately $12 million. All historical results for this
         business have been reflected as discontinued operations in the
         accompanying financial tables. The components of income (loss) from
         discontinued operations are presented below:


                                                          Three Months Ended
                                                                March 31
      (In thousands)                                          2008      2007

      Income (loss) from operations before
       income taxes                                          $(391)  $(1,183)
      Income tax cost (benefit) on
       operations                                              (98)     (381)
                                                              (293)     (802)
      Loss associated with asset
       impairments and disposal
       activities                                           (1,130)        -
      Income tax cost (benefit) on asset
       impairments and costs associated
       disposal activities                                    (700)        -
                                                              (430)        -
      Income (loss) from discontinued
       operations                                            $(723)    $(802)


    (c)   Comprehensive income (loss), defined as net income and other
          comprehensive income (loss), was a gain of $1.1 million for the
          first quarter of 2008 and a gain of $12.9 million for the first
          quarter of 2007. 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)   Adjusted EBITDA for the twelve months ended March 31, 2008,
          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.


    (e)   Net debt is calculated as follows (in millions):
            Debt                                         $57.0
            Less:  Cash and cash equivalents             (41.4)
            Net debt                                     $15.6

          Net debt is not intended to represent total debt or debt defined by
          GAAP. 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

http://www.tredegar.com

Back to top