SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 11, 1998
Tredegar Industries, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Virginia 1-10258 54-1497771
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(State or Other Jurisdiction of (Commission File (I.R.S. Employer
Incorporation or Organization) Number) Identification No.)
1100 Boulders Parkway
Richmond, Virginia 23225
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (804) 330-1000
Item 7 of the Current Report on Form 8-K dated June 23, 1998, filed by
Tredegar Industries, Inc. ("Tredegar") on June 26, 1998, is hereby amended as
set forth below.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Financial statements of businesses acquired are not required to be
filed by Item 7.
(b) Pro Forma Financial Information.
Set forth below are certain selected historical and pro forma
consolidated financial information with respect to recent acquisitions by
Tredegar. Historical financial information was excerpted or derived from the
audited financial statements contained in Tredegar's Annual Report on Form 10-K
for the year ended December 31, 1997, and the unaudited financial statements
contained in the Tredegar's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998. The historical information below is qualified in its entirety by
reference to such reports and the information contained therein.
On June 11, 1998, Tredegar acquired Canada-based Exal Aluminum Inc.
("Exal"). Exal operates two aluminum extrusion plants in Pickering, Ontario and
Aurora, Ontario. Both facilities manufacture extrusions for distribution,
transportation, electrical, machinery and equipment, and building and
construction markets. The Pickering facility also produces aluminum logs and
billet for internal use and for sale to customers.
On February 6, 1998, Tredegar acquired two Canada-based aluminum
extrusion and fabrication plants ("ReyCan") from Reynolds Metals Company
("Reynolds"). The plants are located in Ste-Therese, Quebec, and Richmond Hill,
Ontario. Both facilities manufacture products used primarily in building and
construction, transportation, electrical, machinery and equipment, and consumer
durables markets.
On May 30, 1997, Tredegar acquired an aluminum extrusion and
fabrication plant in El Campo, Texas, from Reynolds. The El Campo facility
extrudes and fabricates products used primarily in transportation, electrical
and consumer durables markets.
These acquisitions were accounted for using the purchase method. The
operating results and financial position of the five plants have been included
in Tredegar's consolidated financial statements since the dates acquired.
The pro forma information for the six months ended June 30, 1998, and
the year ended December 31, 1997, assumes that, at the beginning of 1997,
Tredegar made these acquisitions by using available cash and cash equivalents of
$75.5 million and by issuing Class I Shares of Tredegar's Bon L Canada
subsidiary valued at $11.2 million (see Note (1) on page 4).
Excluded from the pro forma results are cost savings and efficiencies
expected from the consolidation of aluminum extrusion operations. Accordingly,
the pro forma financial information does not purport to be indicative of the
future results or the financial position of Tredegar or the net income and
financial position that would actually have been attained had the pro forma
transactions occurred on the dates or for the periods indicated. The pro forma
financial information is unaudited.
2
Tredegar Industries, Inc.
Selected Historical and Pro Forma Financial Information
(In Thousands)
(Unaudited)
Six Months Ended June 30, 1998
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Pro Forma Adjustments (1)
--------------------------------------
Historical for Purchase
Preacquisition Periods Account-
----------------------- ing and
ReyCan Exal Other Tredegar
Tredegar 1/1/98 to 1/1/98 to Adjust- Pro
Historical 2/6/98 6/11/98 ments Forma
Results of Operations
Revenues:
Net sales $ 326,606 $ 5,022 $ 43,179 $ (2,402)(2) $ 372,405
Other income (expense), net 3,301 - - (872)(3) 2,429
---------- --------- --------- --------- ----------
Total 329,907 5,022 43,179 (3,274) 374,834
---------- --------- --------- --------- ----------
Costs and expenses:
Cost of goods sold 257,571 5,122 39,385 685 (1) 300,361
(2,402)(2)
Selling, general and administrative 18,976 199 1,341 (61)(4) 20,455
Research and development 6,947 - - - 6,947
Interest 686 - 742 (742)(3) 686
Unusual items (765) - - - (765)
---------- --------- --------- --------- ----------
Total 283,415 5,321 41,468 (2,520) 327,684
---------- --------- --------- --------- ----------
Income (loss) before income taxes 46,492 (299) 1,711 (754) 47,150
Income taxes 14,035 (108) 616 (140)(5) 14,403
---------- --------- --------- --------- ----------
Net income (loss) $ 32,457 $ (191) $ 1,095 $ (614) $ 32,747
========== ========= ========= ========= ==========
Earnings per share:
Basic $ .90 $ .90
Diluted .84 .84
Shares used to compute earnings per share:
Basic 36,150 340 (1) 36,490
Diluted 38,788 340 (1) 39,128
Other Financial Data Excluding
Unusual Items and Technology-
Related Investment Activities (6)
EBIT $ 42,947 $ (299) $ 2,453 $ (624) $ 44,477
EBITDA 53,366 (223) 2,923 61 56,127
Depreciation 10,385 76 470 541 (1) 11,472
Amortization of intangibles 34 - - 144 (1) 178
Capital expenditures 13,604 36 317 - 13,957
Net income (loss) 28,588 (191) 1,095 (614) 28,878
Diluted earnings per share .74 .74
See accompanying notes to pro forma financial information.
Year Ended December 31, 1997
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Pro Forma Adjustments (1)
------------------------------------------------------
Historical for Purchase
Preacquisition Periods Account-
------------------------ ing and
El Campo ReyCan Exal Other Tredegar
Tredegar 1/1/97 to 1/1/97 to 1/1/97 to Adjust- Pro
Historical 5/30/97 12/31/97 12/31/97 ments Forma
Results of Operations
Revenues:
Net Sales $ 581,004 $ 18,121 $ 54,715 $ 93,934 $ (4,548)(2) $ 743,226
Other income (expense), net 17,015 - - - (2,835)(3) 14,180
---------- -------- -------- --------- --------- ----------
Total 598,019 18,121 54,715 93,934 (7,383) 757,406
---------- -------- -------- --------- --------- ----------
Costs and expenses:
Cost of goods sold 457,946 17,915 50,254 85,647 2,203 (1) 609,417
(4,548)(2)
Selling, general and administrative 37,035 595 2,419 3,041 (144)(4) 42,946
Research and development 13,170 - - - - 13,170
Interest 1,952 - - 1,740 (1,740)(3) 1,952
Unusual items (2,250) - - - - (2,250)
---------- -------- -------- --------- --------- ----------
Total 507,853 18,510 52,673 90,428 (4,229) 665,235
---------- -------- -------- --------- --------- ----------
Income (loss) before income taxes 90,166 (389) 2,042 3,506 (3,154) 92,171
Income taxes 31,720 (140) 735 1,262 (341)(5) 33,236
---------- -------- -------- --------- --------- ----------
Net income (loss) $ 58,446 $ (249) $ 1,307 $ 2,244 $ (2,813) $ 58,935
========== ======== ======== ========= ========= ==========
Earnings per share:
Basic $ 1.59 $ 1.58
Diluted 1.48 1.48
Shares used to compute earnings
per share
Basic 36,864 380 (1) 37,244
Diluted 39,534 380 (1) 39,914
Other Financial Data Excluding
Unusual Items and Technology-
Related Investment Activities (6)
EBIT $ 71,029 $ (389) $ 2,042 $ 5,246 $ (2,059) $ 75,869
EBITDA 89,443 (30) 2,979 6,345 144 98,881
Depreciation 18,364 359 937 1,099 1,876 (1) 22,635
Amortization of intangibles 50 - - - 327 (1) 377
Capital expenditures 22,655 72 477 355 - 23,559
Net income (loss) 48,124 (249) 1,307 2,244 (2,813) 48,613
Diluted earnings per share 1.22 1.22
See accompanying notes to pro forma financial information.
3
Notes to Pro Forma Financial Information
(1) Set forth below are the net assets of the operations acquired and the
capital used by Tredegar to fund the acquisitions:
Tredegar Industries, Inc.
Net Assets of Operations Acquired and Capital Used by Tredegar to Fund Acquisitions
(In Thousands Except Share Information)
(Unaudited)
Historical Basis at Combined
Dates Acquired Purchase Combined
----------------------------- Accounting Value at
El Campo ReyCan Exal Adjust- Dates
5/30/97 2/6/98 6/11/98 ments Acquired
Net Assets of Operations Acquired
Cash and cash equivalents $ - $ - $ 1,097 $ - $ 1,097
Accounts and notes receivable 6,659 7,178 14,622 - 28,459
Inventories 3,344 5,731 5,038 127 14,240
Prepaid expenses and other assets 1 160 482 (456) 187
Net property, plant and equipment 3,842 7,304 15,329 27,134 53,609
Prepaid pension assets - 3,115 - 178 3,293
Goodwill and other intangibles - - - 13,071 13,071
Accounts payable, accrued
expenses and other liabilities (3,476) (4,799) (11,294) (879) (20,448)
Deferred income taxes, net - - (1,702) (5,138) (6,840)
--------- --------- --------- --------- ----------
Net assets of operations acquired $ 10,370 $ 18,689 $ 23,572 $ 34,037 $ 86,668
========= ========= ========= ========= ==========
Capital Used by Tredegar to Fund
Acquisitions
Cash used to:
Pay sellers $ 12,702 $ 28,343 $ 12,297 $ 53,342
Repay debt assumed - - 18,811 18,811
Pay transaction costs 767 750 1,779 3,296
Issuance of 380,172 Class I Shares to
sellers (economically equivalent to
shares of Tredegar common stock) - - 11,219 11,219
--------- --------- --------- ----------
Total capital used to fund acquisi-
tions $ 13,469 $ 29,093 $ 44,106 $ 86,668
========= ========= ========= ==========
In connection with the acquisition of Exal, 380,172 shares of Class I
non-voting preferred shares of Tredegar's Bon L Canada subsidiary were issued to
Exal's former shareholders (the "Class I Shares"). The Class I Shares are
exchangeable into shares of Tredegar common stock on a one-for-one basis. Each
Class I Share is economically equivalent to one share of Tredegar common stock
and accordingly accounted for in the same manner.
4
The combined purchase accounting adjustments reflect the revaluation of
the historical basis of identifiable net assets acquired to estimated fair value
and the recognition of deferred income taxes for differences between the
financial reporting and tax basis of related net assets. The revaluation of
property, plant and equipment is being depreciated over the estimated remaining
useful lives of related assets. No goodwill arose from the acquisitions of the
former Reynolds plants since the estimated fair value of the identifiable net
assets acquired equaled the purchase price. Goodwill (the excess of the purchase
price over the estimated fair value of identifiable net assets acquired) of $13
million was recorded on the acquisition of Exal and is being amortized on a
straight-line basis over 40 years.
(2) The pro forma adjustments to net sales and cost of goods sold reflect the
sale of aluminum logs and billet by Exal to ReyCan during the preacquisition
periods. Related intercompany profit in inventory is immaterial.
(3) The pro forma adjustments to "Other income (expense), net" relate to
interest income removed from the results of operations due to the assumed use of
cash and cash equivalents at the beginning of the period to fund the
acquisitions.
Information used to compute the pro forma interest income adjustments are as
follows:
(Dollars In Thousands)
Pro Forma Preacquisition Periods
-----------------------------------------------------------------------
ReyCan Exal El Campo ReyCan Exal
1/1/98 to 1/1/98 to 1/1/97 to 1/1/97 to 1/1/97 to
2/6/98 6/11/98 5/30/97 12/31/97 12/31/97
Pro forma average cash outflows
related to acquisitions $ 29,093 $ 32,900 $ 13,469 $ 29,093 $ 32,909
Average annualized interest rates
used for computing pro forma
interest income adjustments:
Actual yield 5.10% 5.00% 4.20% 4.20% 4.20%
Tax-equivalent yield 5.70% 5.70% 5.70% 5.70% 5.70%
Average actual interest yield earned
for pro forma preacquisition period .50% 2.21% 1.71% 4.20% 4.20%
Pro forma interest income removed $ 146 $ 726 $ 231 $ 1,222 $ 1,382
Pro forma average cash outflows include average dividends applicable to
the Bon L Canada Class I Shares issued in connection with the Exal acquisition.
Exal's interest expense has been eliminated on a pro forma basis since its debt
was paid-off by Tredegar with available cash on the acquisition date.
(4) The pro forma adjustment to selling, general and administrative expenses
represents management fees paid pursuant to agreements with two companies
related to former shareholders of Exal that were terminated at the acquisition
date.
5
(5) The pro forma income tax benefit related to purchase accounting and other
adjustments was computed as follows:
(In Thousands)
For the Six For the
Months Year
Ended Ended
6/30/98 12/31/97
Pro forma impact on income before income taxes
of purchase accounting and other adjustments $ (754) $ (3,154)
Related pro forma permanent differences:
Goodwill amortization 144 327
Tax-exempt interest income removed 221 1,880
--------- --------
Pro forma impact on book taxable income of
purchase accounting and other adjustments $ (389) $ (947)
--------- --------
Related pro forma income tax benefit at 36% $ (140) $ (341)
--------- --------
(6) Other financial data, excluding unusual items and technology-related
investment activities affecting the comparability of historical and pro forma
operating results, has been presented and computed in a manner consistent with
selected financial information included in Tredegar's Annual Report on Form 10-K
for the year ended December 31, 1997, and the unaudited financial statements
contained in the Tredegar's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.
(c) Exhibits.
None.
6
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 hereunto duly authorized.
TREDEGAR INDUSTRIES, INC.
Date: August 19, 1998 By: /s/ N. A. Scher
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Norman A. Scher
Executive Vice President
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