SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
(Mark One)
___ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
/ X / OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
/ / OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------------------- -------------------
Commission file number 1-10258
Tredegar Industries, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Virginia 54-1497771
- -------------------------------- -----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1100 Boulders Parkway
Richmond, Virginia 23225
- --------------------------------- -----------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (804) 330-1000
Indicate by check whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of shares of Common Stock, no par value, outstanding as of
October 25, 1996: 12,222,303.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Tredegar Industries, Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
Sept. 30, Dec. 31,
1996 1995
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 99,026 $ 2,145
Accounts and notes receivable 65,154 71,673
Inventories 17,034 33,148
Income taxes recoverable -- 2,179
Deferred income taxes 16,300 14,882
Prepaid expenses and other 3,434 2,375
-------- --------
Total current assets 200,948 126,402
-------- --------
Property, plant and equipment, at cost 255,591 326,526
Less accumulated depreciation and amortization 165,693 204,074
-------- --------
Net property, plant and equipment 89,898 122,452
-------- --------
Other assets and deferred charges 34,697 35,186
Goodwill and other intangibles 20,146 30,012
-------- --------
Total assets $345,689 $314,052
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 33,748 $ 31,105
Accrued expenses 32,968 38,648
Income taxes payable 6,747 --
-------- --------
Total current liabilities 73,463 69,753
Long-term debt 35,000 35,000
Deferred income taxes 18,401 22,218
Other noncurrent liabilities 15,962 16,560
-------- --------
Total liabilities 142,826 143,531
-------- --------
Shareholders' equity:
Common stock, no par value 111,836 112,908
Foreign currency translation adjustment 299 445
Retained earnings 90,728 57,168
-------- --------
Total shareholders' equity 202,863 170,521
-------- --------
Total liabilities and shareholders' equity $345,689 $314,052
======== ========
See accompanying notes to financial statements
Tredegar Industries, Inc.
Consolidated Statements of Income
(In Thousands)
(Unaudited)
Third Quarter Nine Months
Ended Sept. 30 Ended Sept. 30
----------------------- -----------------------
1996 1995 1996 1995
----------- ----------- ----------- ----------
Revenues:
Net sales $ 129,425 $ 145,955 $ 397,143 $ 446,720
Other income (expense), net 2,909 (286) 3,324 (635)
--------- --------- --------- ---------
Total 132,334 145,669 400,467 446,085
--------- --------- --------- ---------
Costs and expenses:
Cost of goods sold 103,334 121,806 317,556 374,141
Selling, general and administrative 9,713 10,444 30,828 35,702
Research and development 2,500 2,668 7,520 6,435
Interest expense 459 951 1,608 2,528
Unusual items (680) (728) (11,427) (78)
--------- --------- --------- ---------
Total 115,326 135,141 346,085 418,728
--------- --------- --------- ---------
Income before income taxes 17,008 10,528 54,382 27,357
Income taxes 6,273 3,902 18,627 10,212
--------- --------- --------- ---------
Net income $ 10,735 $ 6,626 $ 35,755 $ 17,145
========= ========= ========= =========
Earnings per common and dilutive common
equivalent share $ .82 $ .50 $ 2.74 $ 1.27
========= ========= ========= =========
Shares used to compute earnings per
common and dilutive common equivalent
share 13,112 13,202 13,047 13,485
========= ========= ========= =========
See accompanying notes to financial statements.
Tredegar Industries, Inc.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months
Ended Sept. 30
--------------------
1996 1995
--------- ---------
Cash flows from operating activities:
Net income $ 35,755 $ 17,145
Adjustments for noncash items:
Depreciation 15,231 17,607
Amortization of intangibles 242 433
Deferred income taxes (3,530) (249)
Accrued pension income and postretirement
benefits (1,752) (1,523)
Pretax gain on the sale of Molded Products (19,893) --
Pretax loss on the sale of Brudi 9,146 --
Gain on the sale of investments (2,139) (728)
Gain on the sale of property in Fremont, CA (1,968) --
Writeoff of certain industrial packaging
film machinery and equipment 1,288 --
Changes in assets and liabilities, net of
effects from divestitures and acquisition:
Accounts and notes receivable (8,972) 436
Inventories 1,881 8,733
Income taxes recoverable 2,179 2,534
Prepaid expenses and other (1,433) (2,016)
Accounts payable 8,477 (1,209)
Accrued expenses and income taxes payable 3,233 (2,533)
Other, net (31) (336)
-------- --------
Net cash provided by operating activities 37,714 38,294
-------- --------
Cash flows from investing activities:
Capital expenditures (18,726) (15,890)
Acquisition (net of $358 cash acquired) -- (3,637)
Investments (1,432) (1,327)
Proceeds from the sale of investments 2,600 1,478
Property disposals 8,801 841
Proceeds from the sale of Molded Products
and Brudi 71,598 --
Other, net (378) 414
-------- --------
Net cash provided by (used in) investing
activities 62,463 (18,121)
-------- --------
Cash flows from financing activities:
Dividends paid (2,195) (1,556)
Net decrease in borrowings -- (3,000)
Repurchases of Tredegar common stock (2,034) (14,974)
Other, net 933 1,735
-------- --------
Net cash used in financing activities (3,296) (17,795)
-------- --------
Increase in cash and cash equivalents 96,881 2,378
Cash and cash equivalents at beginning of period 2,145 9,036
-------- --------
Cash and cash equivalents at end of period $ 99,026 $ 11,414
======== ========
See accompanying notes to financial statements.
TREDEGAR INDUSTRIES, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying consolidated financial
statements of Tredegar Industries, Inc. and Subsidiaries ("Tredegar")
contain all adjustments necessary to present fairly, in all material
respects, Tredegar's consolidated financial position as of September 30,
1996, and the consolidated results of their operations and their cash flows
for the nine months ended September 30, 1996 and 1995. All such adjustments
are deemed to be of a normal recurring nature. These financial statements
should be read in conjunction with the consolidated financial statements
and notes thereto included in Tredegar's Annual Report on Form 10-K for the
year ended December 31, 1995. The results of operations for the nine months
ended September 30, 1996, are not necessarily indicative of the results to
be expected for the full year.
2. On March 29, 1996, Tredegar sold all of the outstanding capital stock of
its injection molding subsidiary, Tredegar Molded Products Company,
including Polestar Plastics Manufacturing Company (together "Molded
Products"), to Precise Technology, Inc. ("Precise") for cash consideration
of $57.5 million ($54 million after transaction costs). In addition,
Tredegar received unregistered cumulative redeemable preferred stock of
Precise with a face amount of $2.5 million, which is not currently
marketable. Dividends on the preferred stock are payable quarterly at an
annual rate of 7% beginning June 30, 1996. The preferred stock is
redeemable in full on March 29, 2007, or earlier upon the occurrence of
certain events. Both dividends and redemption are subordinated to other
outstanding debt of Precise.
No value has been assigned by Tredegar to the preferred stock received from
Precise due to the uncertainty of redemption. Consistent therewith,
dividend income on such stock is not recognized by Tredegar until received.
During the second quarter of 1996, Tredegar completed the sale of Brudi,
Inc. and its subsidiaries (together "Brudi") for cash consideration of
approximately $18.1 million ($17.6 million after transaction costs).
Proceeds from the sale of Molded Products and Brudi will be invested in
cash equivalents until other opportunities, in existing businesses or
elsewhere, are identified.
Tredegar recognized a gain of $19.9 million ($13.7 million or $1.06 per
share after income taxes) on the sale of Molded Products in the first
quarter of 1996. The gain was partially offset by a first-quarter charge of
$9.1 million ($5.7 million or 44 cents per share after income tax benefits)
related to the loss on the divestiture of Brudi. The Brudi charge included
a $1 million loss accrued for payments that remained under a noncompetition
and secrecy agreement entered into when Tredegar acquired Brudi on April 1,
1991.
Additional information on the sales and operating results for Molded
Products and Brudi is provided in Note 3 on page 6 and the segment tables
on page 11.
3. Historical and pro forma net income and earnings per common and dilutive
common equivalent share, adjusted for unusual items affecting the
comparability of operating results and the pro forma effects of the
divestitures of Molded Products and Brudi (see Note 2 on page 5), are
presented below:
(In Thousands Except Per-Share
Amounts)
Last
Twelve
Third Quarter Nine Months Year Ended Months
Ended Sept. 30 Ended Sept. 30 Dec. 31, Ended
--------------------- ---------------------
1996 * 1995 1996 * 1995 1995 9/30/96 *
--------- --------- --------- --------- --------- ---------
Historical net income as reported $ 10,735 $ 6,626 $ 35,755 $ 17,145 $ 24,053 $ 42,663
After-tax effects of unusual items:
Gain on sale of property in Fremont, CA (1,215) -- (1,215) -- -- (1,215)
Writeoff of specialized machinery and
equipment due to excess capacity in certain
industrial packaging films 795 -- 795 -- -- 795
Combined net gain on the divestitures of
Molded Products and Brudi -- -- (8,059) -- -- (8,059)
Gain on sale of Regal Cinema shares -- (451) -- (451) (451) --
APPX Software restructuring charge -- -- -- 1,560 1,560 --
Recovery in connection with a Film Products
product liability lawsuit -- -- -- (1,068) (1,068) --
-------- -------- -------- -------- -------- --------
Historical net income as adjusted for unusual items 10,315 6,175 27,276 17,186 24,094 34,184
Pro forma adjustments:
Combined after-tax operating profit of
Molded Products and Brudi -- (351) (715) (1,411) (1,696) (1,000)
Reduction of Tredegar's after-tax cost for certain
benefit plans due to the curtailment of
participation by Molded Products employees -- 133 161 399 531 293
After-tax interest income on assumed investment
in cash equivalents of after-tax divestiture
proceeds at an annual rate ranging from 5.40%
to 5.95% -- 610 724 1,859 2,478 1,343
-------- -------- -------- -------- -------- --------
Pro forma net income as adjusted for unusual items
and the pro forma effects of the divestitures of
Molded Products and Brudi $ 10,315 $ 6,567 $ 27,446 $ 18,033 $ 25,407 $ 34,820
======== ======== ======== ======== ======== ========
Earnings per common and dilutive common
equivalent share (adjusted for 3-for-2 stock split
effective January 1, 1996):
As reported $ .82 $ .50 $ 2.74 $ 1.27 $ 1.80 $ 3.28
As adjusted for unusual items .79 .47 2.09 1.27 1.80 2.62
Pro forma as adjusted for unusual items and the
pro forma effects of the divestitures of
Molded Products and Brudi .79 .50 2.10 1.34 1.90 2.67
* Includes a $1,369 after-tax gain (10 cents per share) on the sale of an
equity investment in Indigo Medical, Inc. in the third quarter of 1996.
The pro forma operating results presented above assume that Tredegar sold
Molded Products and Brudi at the beginning of the periods shown (except no
pro forma adjustments are applicable to Molded Products and Brudi in the
third quarter of 1996 since they were sold prior to that time) and invested
related after-tax proceeds of approximately $48 million and $21 million,
respectively, in cash equivalents. The pro forma financial information is
unaudited and does not purport to be indicative of the future results or
financial position of Tredegar or the net income and financial position
that would actually have been attained had the divestitures occurred on the
dates or for the periods indicated.
During the third quarter of 1996, Tredegar realized a gain of $2.1 million
($1.4 million or 10 cents per share after income taxes) on the sale of its
equity investment in Indigo Medical, Inc. ("Indigo") to Johnson & Johnson.
This gain is included in "other income (expense), net" in the consolidated
statements of income. Indigo is engaged in the development of
catheter-based laser thermotherapy systems to treat enlargement of the
prostate. Tredegar did not classify the Indigo gain as an unusual item
because of its ongoing technology investment activities.
At September 30, 1996, Tredegar had technology-related investments with a
cost basis of $4.3 million, which represented ownership (either in the form
of limited partnership shares, the stock of privately-held companies or the
restricted or unrestricted stock of companies that recently registered
shares in initial public offerings) of less than 20% in six separate
entities. These investments are included in "other assets and deferred
charges" in the consolidated balance sheets and each security is generally
accounted for at the lower of cost or estimated fair value. Management
estimates the fair value of these investments to be in excess of $10
million. However, because of the inherent uncertainty of the valuations of
restricted securities or securities for which there is no public market,
these estimates may differ significantly from the values that would have
been used had a ready market for the securities existed. Furthermore, the
publicly-traded stock of emerging, technology-based companies usually has
higher volatility and risk than the U.S. stock market as a whole.
4. The components of inventories are as follows:
(In Thousands)
Sept. 30 Dec. 31
1996 1995
-------------- --------------
Finished goods $ 2,020 $ 4,619
Work-in-process 1,276 4,217
Raw materials 7,693 17,946
Stores, supplies and other 6,045 6,366
-------------- --------------
Total $17,034 $33,148
============== ==============
The decline in inventory during the period is due primarily to the sale of
Molded Products and Brudi (see Note 2 on page 5).
5. Interest payments (net of amount capitalized) for the nine months ended
September 30, 1996 and 1995 were $1 million and $1.9 million, respectively.
Income tax payments (net) for the nine months ended September 30, 1996 and
1995 were $13 million and $10.3 million, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Third Quarter 1996 Compared with Third Quarter 1995
Net income for the third quarter of 1996 was $10.7 million or 82 cents
per share, up from $6.6 million or 50 cents per share in the third quarter of
1995. Unusual items recognized in the third quarter of 1996 affecting the
comparability of operating results include a gain of $2 million ($1.2 million or
9 cents per share after income taxes) on the sale of a former plastic films
manufacturing site in Fremont, California, partially offset by a charge of $1.3
million ($795,000 or 6 cents per share after income tax benefits) related to the
write-off of specialized machinery and equipment due to excess capacity in
certain industrial packaging films. Unusual items recognized in the third
quarter of 1995 affecting the comparability of operating results include a gain
of $728,000 ($451,000 or 3 cents per share after income taxes) on the sale of
shares in Regal Cinema, Inc. See Note 3 on page 6 for further discussion of
unusual items.
Net income excluding unusual items for the third quarter of 1996 was
$10.3 million or 79 cents per share, up from $6.2 million or 47 cents per share
in the third quarter of 1995. The improved results were driven primarily by
higher volume in Film Products and Aluminum Extrusions and a gain of $2.1
million ($1.4 million or 10 cents per share after income taxes) on the sale of
an equity investment in Indigo Medical, Inc. ("Indigo") (see Note 3 on page 6),
partially offset by higher research and development spending at Molecumetics.
Third-quarter net sales decreased by 11.3% in 1996 due mainly to the
divestitures of Molded Products and Brudi. On a pro forma basis, excluding
Molded Products and Brudi, third-quarter net sales increased by 9.6% in 1996 due
to higher volume in Film Products and Aluminum Extrusions, partially offset by
lower selling prices (reflecting lower plastic resin and aluminum costs).
The gross profit margin during the third quarter of 1996 increased to
20.2% from 16.5% in 1995 due primarily to higher volume in ongoing manufacturing
businesses and lower raw material costs per unit, partially offset by startup
costs associated with nonwoven film laminate (cloth-like) backsheet production
and the unfavorable impact of press shutdowns associated with a modernization
project currently underway at the Newnan, Georgia aluminum extrusions plant.
Selling, general and administrative expenses decreased by $731,000 or
7% due primarily to the divestitures of Molded Products and Brudi. Research and
development expenses decreased by $168,000 or 6.3% due to the timing of product
development expenditures at Film Products partially offset by higher spending at
Molecumetics.
Interest income, which is included in "other income (expense), net" in
the consolidated statements of income, increased to $1 million in 1996 from
$75,000 in 1995 due to the investment in cash equivalents of divestiture
proceeds and cash generated from operations. Interest expense declined due to
higher capitalized interest from an increase in capital expenditures, lower
revolving credit facility fees and lower average debt outstanding.
The effective tax rate excluding unusual items declined slightly
to 36.8% in the third quarter of 1996 from 37% in the third quarter of 1995.
Nine Months 1996 Compared with Nine Months 1995
Net income for the first nine months of 1996 was $35.8 million or $2.74
per share, up from $17.1 million or $1.27 per share in the first nine months of
1995. Unusual items recognized in the first nine months of 1996 affecting the
comparability of operating results include: (i) a gain of $19.9 million ($13.7
million or $1.06 per share after income taxes) on the sale of Molded Products,
(ii) a gain of $2 million ($1.2 million or 9 cents per share after income taxes)
on the sale of a former plastic films manufacturing site in Fremont, California,
(iii) a charge of $9.1 million ($5.7 million or 44 cents per share after income
tax benefits) related to the loss on the divestiture of Brudi, and (iv) a charge
of $1.3 million ($795,000 or 6 cents per share after income tax benefits)
related to the write-off of specialized machinery and equipment due to excess
capacity in certain industrial packaging films. Unusual items recognized in the
first nine months of 1995 affecting the comparability of operating results
include: (i) a charge of $2.4 million ($1.6 million or 11 cents per share after
income tax benefits) for the restructuring of APPX Software, (ii) a recovery of
$1.75 million ($1.1 million or 8 cents per share after income taxes) related to
a final judgment in connection with a Film Products product liability lawsuit,
and (iii) a gain of $728,000 ($451,000 or 3 cents per share after income taxes)
on the sale of shares in Regal Cinema, Inc. See Note 2 on page 5 and Note 3 on
page 6 for further discussion of unusual items.
Net income excluding unusual items for the first nine months of 1996
was $27.3 million or $2.09 per share, up from $17.2 million or $1.27 per share
in the first nine months of 1995. The improved results were driven primarily by
higher volume in Film Products; higher volume, cost reductions and quality
improvements in Aluminum Extrusions; and a gain of $2.1 million ($1.4 million or
10 cents per share after income taxes) on the sale of an equity investment in
Indigo (see Note 3 on page 6), partially offset by higher research and
development spending at Molecumetics.
Net sales for the first nine months of 1996 decreased by 11.1% due to
the divestitures of Molded Products and Brudi and lower selling prices
(reflecting lower average plastic resin and aluminum costs), partially offset by
higher volume in Film Products and Aluminum Extrusions. On a pro forma basis,
excluding Molded Products and Brudi, net sales for the first nine months of 1996
increased by 1.5%.
The gross profit margin during the first nine months of 1996 increased
to 20% from 16.2% in 1995 due primarily to higher volume in ongoing
manufacturing businesses and lower raw material costs per unit, partially offset
by startup costs associated with nonwoven film laminate (cloth-like) backsheet
production. Cost reductions and quality improvements in Aluminum Extrusions also
contributed to the increase but were partially offset by the unfavorable impact
of press shutdowns associated with a modernization project currently underway at
the Newnan, Georgia plant.
Selling, general and administrative expenses decreased by $4.9 million
or 13.7% due mainly to the divestitures of Molded Products and Brudi, cost
reductions at APPX Software and lower expenses for stock appreciation rights
(down $700,000) due to their appreciation limitation, partially offset by
selling, general and administrative expenses from the films business acquired in
Argentina in March 1995. Research and development expenses increased by $1.1
million or 16.9% due to higher spending at Molecumetics.
Interest income, which is included in "other income (expense), net" in
the consolidated statements of income, increased to $1.9 million in 1996 from
$234,000 in 1995 due to the investment in cash equivalents of divestiture
proceeds and cash generated from operations. Interest expense declined due to
higher capitalized interest from an increase in capital expenditures, lower
revolving credit facility fees and lower average debt outstanding.
The effective tax rate excluding unusual items declined to 36.5% during
the first nine months of 1996 from 37% in 1995 due primarily to a lower
effective state income tax rate from proportionally higher domestic income in
states with lower tax rates, proportionally higher foreign income that is exempt
from state income taxes and higher tax-exempt interest income.
Segment Results
The following tables present Tredegar's net sales and operating profit
by segment for the third quarter and nine months ended September 30, 1996 and
1995.
Net Sales by Segment
(In Thousands)
(Unaudited)
Third Quarter Nine Months
Ended Sept. 30 Ended Sept. 30
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Plastics:
Film Products and Fiberlux $ 70,311 $ 63,202 $193,492 $185,670
Molded Products (a) -- 19,912 21,131 64,978
Metal Products:
Aluminum Extrusions 58,772 54,385 167,986 170,207
Brudi (a) -- 7,944 13,380 24,482
Technology 342 512 1,154 1,383
-------- -------- -------- --------
Total net sales $129,425 $145,955 $397,143 $446,720
======== ======== ======== ========
Operating Profit by Segment
(In Thousands)
(Unaudited)
Third Quarter Nine Months
Ended Sept. 30 Ended Sept. 30
---------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
Plastics:
Film Products and Fiberlux $ 10,136 $ 9,297 $ 31,693 $ 26,260
Molded Products (a) -- 404 1,011 2,124
Unusual items (b) 680 -- 20,573 1,750
-------- -------- -------- --------
10,816 9,701 53,277 30,134
-------- -------- -------- --------
Metal Products:
Aluminum Extrusions 7,216 3,858 18,462 12,597
Brudi (a) -- 200 231 287
Unusual items (c) -- -- (9,146) --
-------- -------- -------- --------
7,216 4,058 9,547 12,884
-------- -------- -------- --------
Technology:
Molecumetics (1,690) (1,115) (4,470) (3,234)
Investments and other (d) 1,965 56 1,960 (863)
Unusual items (e) -- 728 -- (1,672)
-------- -------- -------- --------
275 (331) (2,510) (5,769)
-------- -------- -------- --------
Total operating profit 18,307 13,428 60,314 37,249
Interest income 1,019 75 1,851 234
Interest expense 459 951 1,608 2,528
Corporate expenses, net 1,859 2,024 6,175 7,598
-------- -------- -------- --------
Income before income taxes 17,008 10,528 54,382 27,357
Income taxes 6,273 3,902 18,627 10,212
-------- -------- -------- --------
Net income (f) $ 10,735 $ 6,626 $ 35,755 $ 17,145
======== ======== ======== ========
Notes to Segment Tables:
(a) Molded Products and Brudi were divested by Tredegar during the first
and second quarters of 1996, respectively (see Note 2 on page 5 and
Note 3 on page 6).
(b) Includes, on a pretax basis, the recognition of: (i) a gain of $2
million in the third quarter of 1996 from the sale of a former plastic
films manufacturing site in Fremont California, (ii) a charge of $1.3
million in the third quarter of 1996 related to the write-off of
specialized machinery and equipment due to excess capacity in certain
industrial packaging films, (iii) a gain of $19.9 million in the first
quarter of 1996 on the sale of Molded Products, and (iv) a recovery of
$1.75 million in the first quarter of 1995 related to a final judgment
in connection with a Film Products product liability lawsuit (see Note
2 on page 5 and Note 3 on page 6).
(c) Represents a pretax charge recognized in the first quarter of 1996 for
the loss on the divestiture of Brudi (see Note 2 on page 5 and Note 3
on page 6).
(d) Includes a pretax gain of $2.1 million recognized in the third quarter
of 1996 from the sale of an equity investment in Indigo (see Note 3 on
page 6).
(e) Includes a pretax gain of $728,000 recognized in the third quarter of
1995 from the sale of shares in Regal Cinema, Inc. and a pretax charge
of $2.4 million recognized in the first quarter of 1995 for the
restructuring of APPX Software (see Note 3 on page 6).
(f) See Note 3 on page 6 for historical and pro forma net income and
earnings per common and dilutive common equivalent share adjusted for
unusual items affecting the comparability of operating results and the
pro forma effects of the divestitures of Molded Products and Brudi.
Sales in Film Products for the third quarter and first nine months of
1996 increased over the prior year due mainly to (i) higher volume in North
America, including higher volume of diaper backsheet supplied to the Proctor &
Gamble Company ("P&G"), higher volume of specialty films used for the protection
of high-gloss surfaces and electronic circuit boards and higher volume of
Vispore(R) film used in seed bed and ground cover applications, (ii) higher
diaper backsheet and packaging film volume in Argentina, and (iii) higher volume
of permeable film supplied to P&G in Europe for feminine pads. The positive
impact on sales of higher volume was partially offset by lower selling prices,
which reflected lower plastic resin costs. Operating profit increased in Film
Products for the third quarter and nine months due primarily to higher volume in
the areas noted above, partially offset by startup costs associated with
nonwoven film laminate (cloth-like) backsheet production. Operating profits in
Fiberlux also improved.
Sales in Aluminum Extrusions increased during the third quarter of 1996
due to higher volume (up 15.9%), partially offset by lower selling prices
reflecting lower aluminum costs. Sales in Aluminum Extrusions for the first nine
months of 1996 decreased due to lower selling prices, which reflected lower
aluminum costs. Volume in Aluminum Extrusions for the first nine months of 1996
increased 5.1%. Volume increases during the quarter and for the year were driven
primarily by continued strength in residential and commercial windows, wood clad
windows and automotive markets. Operating profit in Aluminum Extrusions during
the third quarter and first nine months of 1996 increased significantly from
higher volume, cost reductions and quality improvements, partially offset by the
unfavorable impact of press shutdowns at the Newnan, Georgia plant due to a
modernization project currently underway.
Excluding the $2.1 million gain on the sale of Indigo in the third
quarter of 1996 and a $329,000 writedown of a technology investment in the
second quarter of 1995, ongoing technology segment losses increased by $805,000
during the third quarter and $881,000 during the first nine months of 1996.
These increases were due mainly to higher research and development spending at
Molecumetics, with lower costs in 1996 at APPX Software due to its restructuring
in the first quarter of 1995.
Liquidity and Capital Resources
Tredegar's total assets increased to $345.7 million at September 30,
1996, from $314.1 million at December 31, 1995, due primarily to (i) cash
generated from operating activities in excess of capital expenditures and
dividends ($16.8 million), (ii) capital expenditures in excess of depreciation
($3.5 million), (iii) higher current assets in Aluminum Extrusions to support
the significant increase in volume during the third quarter ($4.2 million), (iv)
proceeds from the sale of Indigo in excess of its carrying value ($2.1 million),
(v) an increase in prepaid pension expense (included in other assets) for the
curtailment of participation by Molded Products employees in one of Tredegar's
defined benefit plans ($1.8 million), and (vi) other items ($4.3 million),
partially offset by (vii) the divestitures of Molded Products and Brudi for
combined cash consideration of $71.6 million (net of transaction costs), which
was $1.1 million less than the book value of their assets at December 31, 1995.
Accounts payable increased by $2.6 million due to an improvement in trade terms
with certain vendors, partially offset by the effects of divestitures. Accrued
expenses, deferred income taxes and other noncurrent liabilities declined from
December 31, 1995 to September 30, 1996 due mainly to divestitures. Income taxes
payable of $6.7 million resulted from timing differences between income tax
accruals and payments during the year.
Debt at September 30, 1996 and December 31, 1995 consisted of a $35
million, 7.2% note maturing in June 2003. The first annual principal payment of
$5 million is due June 1997, and has been classified as long-term debt in
accordance with Tredegar's ability to refinance such obligation on a long-term
basis. At September 30, 1996, Tredegar had cash and cash equivalents in excess
of debt of $64 million, compared to net debt (debt in excess of cash and cash
equivalents) of $32.9 million at December 31, 1995.
Net cash provided by operating activities in excess of capital
expenditures and dividends decreased to $16.8 million in the first nine months
of 1996 from $20.8 million in 1995 due primarily to higher capital expenditures.
For the nine months ended September 30, 1996, capital expenditures of $18.7
million exceeded depreciation and prior-period capital expenditures by $3.5
million and $2.8 million, respectively, due to capital additions for new
nonwoven film laminate capacity, expansion of permeable film capacity in Europe
and Brazil, the expansion of lab facilities at Molecumetics and a modernization
program to upgrade certain areas of the aluminum extrusions facility in Newnan,
Georgia, partially offset by a reduction of capital expenditures from the
divestitures of Molded Products and Brudi. During the first nine months of 1996
and 1995, Tredegar's consolidated results included combined capital expenditures
for Molded Products and Brudi of $1.3 million and $6.6 million, respectively,
and combined depreciation for these divested businesses of $1.6 million and $4.5
million, respectively. Approximately $4.2 million is expected to be spent on the
Newnan program in 1996 and 1997, most of which will occur in 1996.
The $16.8 million of excess cash generated during the first nine months
of 1996 combined with the $2.1 million cash and cash equivalents balance at
December 31, 1995, the proceeds from the divestitures of Molded Products and
Brudi ($71.6 million after transaction costs), proceeds from property disposals
($8.8 million; primarily the former plastic films site in Fremont, California
and a former aluminum extrusions and fabrication site in Mechanicsburg,
Pennsylvania), cash generated from technology investment activities ($1.2
million), other sources ($500,000) and a use of cash for the repurchases of
Tredegar common stock ($2 million), resulted in a cash and cash equivalents
balance of $99 million at September 30, 1996.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No.
4.1 Extension Letter, dated September 16, 1996, extending
the maturity date of the Revolving Credit Facility
Agreement dated as of September 7, 1995 among
Tredegar Industries, Inc., the banks named therein,
Chemical Bank as Administrative Agent and NationsBank
N.A. and LTCB Trust Company as Co-Agents
11 Statement re computation of earnings per share
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed for the quarter ended
September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tredegar Industries, Inc.
(Registrant)
Date: October 30, 1996 /s/ N. A. Scher
---------------------------- -----------------------------
Norman A. Scher
Executive Vice President,
Treasurer and Chief Financial
Officer (Principal Financial
Officer)
Date: October 30, 1996 /s/ D. Andrew Edwards
----------------------------- ------------------------------
D. Andrew Edwards
Corporate Controller
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
4.1 Extension Letter, dated September 16, 1996, extending the
maturity date of the Revolving Credit Facility Agreement dated
as of September 7, 1995 among Tredegar Industries, Inc., the
banks named therein, Chemical Bank as Administrative Agent and
NationsBank N.A. and LTCB Trust Company as Co-Agents
11 Statement re computation of earnings per share
27 Financial Data Schedule
Exhibit 4.1
September 16, 1996
Michael W. Giancaspro
Tredegar Industries, Inc.
1100 Boulders Parkway
Richmond, VA 23225
Re: Extension of the Revolving Credit Agreement dated September 7,
1995
Pursuant to section 2.10(d)(i) of the Credit Agreement dated September 7, 1995,
you have requested that the Chase Manhattan Bank seek approval from the lenders
in order to extend the maturity date of the Credit Agreement from September 7,
2000 to September 7, 2001. We have requested such approval from each of the
lenders and have received approval from each lender to extend its commitments.
Therefore, according to the provisions of section 2.10(d)(i), the Chase
Manhattan Bank hereby notifies you that the maturity date for your Credit
Agreement shall be extended to September 7, 2001.
Enclosed are copies of the approvals from each of the banks. Please let me know
if I can be of further assistance.
Sincerely,
/s/ Bruce Borden
Bruce Borden
Vice President
c: Nancy Taylor, Tredegar Internal Counsel
Enclosures
EXHIBIT 11 - Computations of Earnings Per Share
Tredegar Industries, Inc. and Subsidiaries
(In thousands, except per-share amounts)
Third Quarter Nine Months
Ended Sept. 30 Ended Sept. 30
----------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
Net income $10,735 $ 6,626 $ 35,755 $ 17,145
=========== =========== =========== ===========
Earnings per common and dilutive common
equivalent share as reported (1) $ .82 $ .50 $ 2.74 $ 1.27
=========== =========== =========== ===========
PRIMARY EARNINGS PER SHARE:
Shares issuable upon the assumed exercise
of outstanding stock options (2) 909 530 846 400
Weighted average common shares outstanding
during period 12,203 12,672 12,201 13,085
----------- ----------- ----------- -----------
Weighted average common and dilutive common
equivalent shares 13,112 13,202 13,047 13,485
=========== =========== =========== ===========
Primary earnings per share (1) $ .82 $ .50 $ 2.74 $ 1.27
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE:
Shares issuable upon the assumed exercise
of outstanding stock options (3) 938 576 937 600
Weighted average common shares outstanding
during period 12,203 12,672 12,201 13,085
----------- ----------- ----------- -----------
Weighted average common and dilutive common
equivalent shares 13,141 13,248 13,138 13,685
=========== =========== =========== ===========
Fully diluted earnings per share (3) $ .82 $ .50 $ 2.72 $ 1.25
=========== =========== =========== ===========
Notes to Exhibit 11:
(1) Shares used to compute earnings per common and dilutive common
equivalent share in the consolidated statements of income include
common stock equivalents.
(2) Computed using the average market price during the related period.
(3) Computed using the higher of the average market price during the
related period and the market price at the end of the related period.
Fully diluted earnings per common and dilutive common equivalent share
is not materially different (dilutive by 3% or more) from earnings per
common and dilutive common equivalent share reported in the
consolidated statements of income.
5
1,000
9-MOS
DEC-31-1996
SEP-30-1996
99,026
0
68,743
3,589
17,034
200,948
255,591
165,693
345,689
73,463
35,000
0
0
111,836
91,027
345,689
397,143
400,467
317,556
317,556
26,702
219
1,608
54,382
18,627
35,755
0
0
0
35,755
2.74
0.00
