UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 6, 2003
Tredegar Corporation
(Exact Name of Registrant as Specified in its Charter)
| Virginia | 1-10258 | 54-1497771 |
| (State or Other Jurisdiction | (Commission File | (I.R.S. Employer |
| of Incorporation) | Number) | 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
Item 2. Acquisition or Disposition of Assets.
On March 6, 2003, Tredegar Investments, Inc., Tredegar Corporation’s ("Tredegar") venture capital investment subsidiary (“Tredegar Investments”), reached a definitive agreement to sell substantially all of its portfolio of private equity partnership interests to GS Vintage Funds II, which are investment partnerships managed by Goldman Sachs Asset Management’s Private Equity Group. On the same date, Tredegar Investments also agreed to sell in a separate transaction to W Capital Partners, an independent private equity manager, the subsidiary funds that hold substantially all of Tredegar Investments’ direct venture capital investments.
Assuming completion of all closings under both transactions, Tredegar expects to receive a total of approximately $75 million in cash after taxes. This amount includes a tax refund of approximately $50 million expected in mid-2004 from the carry-back of 2003 capital losses generated by these sales against gains realized in 2000 by Tredegar Investments.
The sale to W Capital Partners of the funds that hold the direct investments occurred on March 7, 2003, representing approximately $40 million in sales proceeds and recoverable income taxes.
Tredegar expects that the sale of the private equity fund interests will occur in a series of closings and will produce approximately $35 million in sale proceeds and recoverable income taxes. The sale of these fund interests also involves the assumption by the buyer of Tredegar Investments’ obligations to make additional capital contributions to those funds in the future. If the initial closing in this transaction does not occur by April 10, 2003, the sale agreement can be terminated.
The agreements governing these transactions contain customary contingent indemnification provisions that Tredegar does not believe will have a material adverse effect on its financial position or results of operations.
The transactions are expected to result in a first-quarter charge of $49 million after taxes ($1.28 per share).
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired.
Not applicable.
(b) Pro forma financial information.
The unaudited pro forma financial information with respect to the disposition required by Item 7 of Form 8-K is included on pages 3 through 7.
(c) Exhibits.
Not applicable.
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Tredegar Corporation
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| Tredegar Historical |
Pro Forma Adjustments |
Tredegar Pro Forma |
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|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | |||||||||||
| Gross sales | $ | 753,724 | $ | — | $ | 753,724 | |||||
| Freight | (16,319 | ) | — | (16,319 | ) | ||||||
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| Net sales | 737,405 | — | 737,405 | ||||||||
| Other income (expense), net | (60,154 | ) | 60,690 | (1) | 536 | ||||||
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| Total | 677,251 | 60,690 | 737,941 | ||||||||
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| Costs and expenses: | |||||||||||
| Cost of goods sold | 582,658 | — | 582,658 | ||||||||
| Selling, general and administrative | 57,846 | (5,604 | )(1) | 52,242 | |||||||
| Research and development | 20,346 | — | 20,346 | ||||||||
| Amortization of intangibles | 100 | — | 100 | ||||||||
| Interest | 9,352 | — | 9,352 | ||||||||
| Unusual items | (2,263 | ) | — | (2,263 | ) | ||||||
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| Total | 668,039 | (5,604 | ) | 662,435 | |||||||
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| Income from continuing operations | |||||||||||
| before income taxes | 9,212 | 66,294 | 75,506 | ||||||||
| Income taxes | 3,015 | 23,866 | (1) | 26,881 | |||||||
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| Income from continuing operations | $ | 6,197 | $ | 42,428 | $ | 48,625 | |||||
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| Earnings per share: | |||||||||||
| Basic | $ | .16 | $ | 1.27 | |||||||
| Diluted | $ | .16 | $ | 1.25 | |||||||
| Shares used to compute earnings per share: | |||||||||||
| Basic | 38,268 | 38,268 | |||||||||
| Diluted | 38,869 | 38,869 | |||||||||
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See accompanying notes to pro forma financial statements. 3 |
Tredegar Corporation
|
| Tredegar Historical |
Pro Forma Adjustments |
Tredegar Pro Forma |
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|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | |||||||||||
| Gross sales | $ | 779,157 | $ | — | $ | 779,157 | |||||
| Freight | (15,580 | ) | — | (15,580 | ) | ||||||
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| Net sales | 763,577 | — | 763,577 | ||||||||
| Other income (expense), net | (18,400 | ) | 19,641 | (1) | 1,241 | ||||||
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| Total | 745,177 | 19,641 | 764,818 | ||||||||
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| Costs and expenses: | |||||||||||
| Cost of goods sold | 618,323 | — | 618,323 | ||||||||
| Selling, general and administrative | 54,278 | (6,338 | )(1) | 47,940 | |||||||
| Research and development | 20,305 | — | 20,305 | ||||||||
| Amortization of intangibles | 4,914 | — | 4,914 | ||||||||
| Interest | 12,671 | — | 12,671 | ||||||||
| Unusual items | 15,964 | — | 15,964 | ||||||||
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| Total | 726,455 | (6,338 | ) | 720,117 | |||||||
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| Income from continuing operations | |||||||||||
| before income taxes | 18,722 | 25,979 | 44,701 | ||||||||
| Income taxes | 4,598 | 9,352 | (1) | 13,950 | |||||||
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| Income from continuing operations | $ | 14,124 | $ | 16,627 | $ | 30,751 | |||||
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| Earnings per share: | |||||||||||
| Basic | $ | .37 | $ | .81 | |||||||
| Diluted | $ | .36 | $ | .79 | |||||||
| Shares used to compute earnings per share: | |||||||||||
| Basic | 38,061 | 38,061 | |||||||||
| Diluted | 38,824 | 38,824 | |||||||||
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See accompanying notes to pro forma financial statements. 4 |
Tredegar Corporation
|
| Tredegar Historical |
Pro Forma Adjustments |
Tredegar Pro Forma |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues: | ||||||||||||
| Gross sales | $ | 879,475 | $ | -- | $ | 879,475 | ||||||
| Freight | (17,125 | ) | — | (17,125 | ) | |||||||
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| Net sales | 862,350 | — | 862,350 | |||||||||
| Other income (expense), net | 138,204 | (135,975 | )(1) | 2,229 | ||||||||
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| Total | 1,000,554 | (135,975 | ) | 864,579 | ||||||||
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| Costs and expenses: | ||||||||||||
| Cost of goods sold | 706,817 | — | 706,817 | |||||||||
| Selling, general and administrative | 52,732 | (5,096 | )(1) | 47,636 | ||||||||
| Research and development | 15,305 | — | 15,305 | |||||||||
| Amortization of intangibles | 5,025 | — | 5,025 | |||||||||
| Interest | 17,319 | — | 17,319 | |||||||||
| Unusual items | 23,220 | (191 | )(1) | 23,029 | ||||||||
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| Total | 820,418 | (5,287 | ) | 815,131 | ||||||||
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| Income from continuing operations | ||||||||||||
| before income taxes | 180,136 | (130,688 | ) | 49,448 | ||||||||
| Income taxes | 65,183 | (47,047 | )(1) | 18,136 | ||||||||
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| Income (loss) from continuing operations | $ | 114,953 | $ | (83,641 | ) | $ | 31,312 | |||||
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| Earnings per share: | ||||||||||||
| Basic | $ | 3.03 | $ | .83 | ||||||||
| Diluted | $ | 2.95 | $ | .80 | ||||||||
| Shares used to compute earnings per share: | ||||||||||||
| Basic | 37,885 | 37,885 | ||||||||||
| Diluted | 38,908 | 38,908 | ||||||||||
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See accompanying notes to pro forma financial statements. 5 |
Tredegar Corporation
|
| Tredegar Historical |
Pro Forma Adjustments |
Tredegar Pro Forma |
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|---|---|---|---|---|---|---|---|---|---|---|---|
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 109,928 | $ | 19,888 | (2) | $ | 129,816 | ||||
| Accounts and notes receivable | 92,892 | — | 92,892 | ||||||||
| Income taxes recoverable | 12,863 | — | 12,863 | ||||||||
| Inventories | 43,969 | — | 43,969 | ||||||||
| Deferred income taxes | 20,976 | — | 20,976 | ||||||||
| Prepaid expenses and other | 3,962 | — | 3,962 | ||||||||
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| Total current assets | 284,590 | 19,888 | 304,478 | ||||||||
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| Property, plant and equipment, at cost: | |||||||||||
| Land and land improvements | 12,935 | — | 12,935 | ||||||||
| Buildings | 75,631 | — | 75,631 | ||||||||
| Machinery and equipment | 416,527 | — | 416,527 | ||||||||
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| Total property, plant and equipment | 505,093 | — | 505,093 | ||||||||
| Less accumulated depreciation | 254,490 | — | 254,490 | ||||||||
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| Net property, plant and equipment | 250,603 | — | 250,603 | ||||||||
| Non-current assets of Therics held for sale | 10,406 | — | 10,406 | ||||||||
| Venture capital investments | 93,765 | (93,765 | )(4) | — | |||||||
| Income taxes recoverable | — | 54,441 | (3) | 54,441 | |||||||
| Other assets and deferred charges | 66,316 | 3,847 | (4) | 70,163 | |||||||
| Goodwill and other intangibles | 132,282 | — | 132,282 | ||||||||
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| Total assets | $ | 837,962 | $ | (15,589 | ) | $ | 822,373 | ||||
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| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 35,861 | $ | — | $ | 35,861 | |||||
| Accrued expenses | 42,409 | — | 42,409 | ||||||||
| Current portion of long-term debt | 55,000 | — | 55,000 | ||||||||
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| Total current liabilities | 133,270 | — | 133,270 | ||||||||
| Long-term debt | 204,280 | — | 204,280 | ||||||||
| Deferred income taxes | 27,443 | 33,399 | (3) | 60,842 | |||||||
| Other noncurrent liabilities | 10,037 | — | 10,037 | ||||||||
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| Total liabilities | 375,030 | 33,399 | 408,429 | ||||||||
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| Shareholders' equity: | |||||||||||
| Common stock (no par value): | |||||||||||
| Authorized 150,000,000 shares; | |||||||||||
| Issued and outstanding - 38,323,025 shares | |||||||||||
| in 2002 | 108,389 | — | 108,389 | ||||||||
| Common stock held in trust for savings restoration | |||||||||||
| plan (53,871 shares in 2002) | (1,212 | ) | — | (1,212 | ) | ||||||
| Accumulated other comprehensive income (loss): | |||||||||||
| Unrealized gain on available-for-sale securities | 586 | — | 586 | ||||||||
| Foreign currency translation adjustment | (4,422 | ) | — | (4,422) | |||||||
| Loss on derivative financial instruments | (842 | ) | — | (842) | |||||||
| Minimum pension liability | (3,310 | ) | — | (3,310) | |||||||
| Retained earnings | 363,743 | (48,988 | )(2) | 314,755 | |||||||
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| Total shareholders' equity | 462,932 | (48,988 | ) | 413,944 | |||||||
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| Total liabilities and shareholders' equity | $ | 837,962 | $ | (15,589 | ) | $ | 822,373 | ||||
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See accompanying notes to pro forma financial statements. 6 |
TREDEGAR CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The unaudited pro forma financial statements of Tredegar Corporation (“Tredegar” or the “company”) included on pages 3 through 6 give effect to the disposition by Tredegar Investments, Inc. of substantially all of its private equity partnership interests and funds that hold substantially all of its direct investments (the “venture capital portfolio”). The disposition is to be accounted for as a discontinued operation. The unaudited pro forma balance sheet assumes the disposition of the venture capital portfolio on December 31, 2002. Such pro forma information is based upon the historical balance sheet data of Tredegar and the venture capital portfolio as of that date. The unaudited pro forma statement of income gives effect to the disposition of the venture capital portfolio for each of the three years ended December 31, 2002, as if the disposition occurred on January 1, 2000. The disposition requires a series of closings and the pro forma adjustments assume that all closings are completed. These unaudited pro forma financial statements should be read in conjunction with the consolidated historical financial statements and related notes included in Tredegar’s Annual Report on Form 10-K for the year ended December 31, 2002.
(1) The results of venture capital investment activities have been removed from the pro forma income statement. The pro forma adjustment to other income (expense) represents the adjustment to eliminate net realized gains, losses and write-downs for the venture capital portfolio reflected in our consolidated statements of income. The pro forma adjustment to selling, general and administrative expenses represents operating expenses for venture capital investment activities reflected in our consolidated statements of income. These expenses consist primarily of management fees. The pro forma adjustment to income taxes was made at an effective tax rate of 36%.
An after-tax loss of approximately $49 million on the sale of the venture capital portfolio has not been included in the pro forma statement of income but will be reflected in the statement of income when the transactions are consummated.
(2) The pro forma balance sheet gives effect to the disposition of the venture capital portfolio for cash proceeds of approximately $20 million, net of transaction costs and cash investments made since December 31, 2002. The estimated loss on the sale of approximately $49 million, net of taxes, has been reflected in the pro forma balance sheet.
(3) The pro forma adjustment to income taxes recoverable and deferred income taxes represents a tax refund of $54.4 million expected in mid-2004 from the carry-back of 2003 capital losses against gains generated by the venture capital portfolio in 2000. Of the $54.4 million, $33.4 million had previously been recorded as assets in deferred taxes.
(4) The pro forma adjustment to venture capital investments represents the elimination of the assets sold. Approximately $3.8 million of investments not included in the transactions have been reclassified to "Other assets and deferred charges."
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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 CORPORATION |
| Dated: March 20, 2003 | By: /s/ D. Andrew Edwards |
| D. Andrew Edwards | |
| Vice President, Finance and Treasurer |
8