Tredegar Corporation (NYSE:TG, also the "Company" or "Tredegar")
today reported second quarter financial results for the period
ended June 30, 2024.
Second quarter 2024 net income (loss) was $8.8 million ($0.26
per diluted share) compared to $(18.9) million ($(0.56) per diluted
share) in the second quarter of 2023. Net income (loss) from
ongoing operations, which excludes special items, was $10.3 million
($0.30 per diluted share) in the second quarter of 2024 compared
with $(2.0) million ($(0.06) per diluted share) in the second
quarter of 2023. A reconciliation of net income (loss), a financial
measure calculated in accordance with U.S. generally accepted
accounting principles (“GAAP”), to net income (loss) from ongoing
operations, a non-GAAP financial measure, for the three and six
months ended June 30, 2024 and 2023, is provided in Note (a) to the
Financial Tables in this press release.
Second Quarter Financial Results Highlights
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") from ongoing operations for Aluminum Extrusions was
$12.9 million in the second quarter of 2024 versus $10.2 million in
the second quarter of last year and $12.5 million in the first
quarter of 2024.
- Sales volume was 34.9 million pounds in the second quarter of
2024 versus 35.5 million pounds in the second quarter of last year
and 33.8 million pounds in the first quarter of 2024.
- Open orders at the end of the second quarter of 2024 were
approximately 14 million pounds (versus 20 million pounds in the
second quarter of 2023 and 15 million pounds at the end of the
first quarter of 2024). Net new orders increased 17% in the second
quarter of 2024 versus the second quarter of 2023 and were
relatively flat versus the first quarter of 2024.
- EBITDA from ongoing operations for PE Films was $10.1 million
in the second quarter of 2024 versus $0.8 million in the second
quarter of 2023 and $6.9 million in the first quarter of 2024.
Sales volume was 10.5 million pounds in the second quarter of 2024
versus 6.2 million pounds in the second quarter of 2023 and 10.0
million pounds in the first quarter of 2024.
- EBITDA from ongoing operations for Flexible Packaging Films
(also referred to as "Terphane") was $3.2 million during the second
quarter of 2024 versus $0.2 million in the second quarter of 2023
and $2.0 million during the first quarter of 2024. Sales volume was
25.1 million pounds in the second quarter of 2024 versus 23.7
million pounds in the second quarter 2023 and 22.0 million pounds
in the first quarter of 2024. See the "Status of Agreement to Sell
Terphane" section below for information on the sale of
Terphane.
John Steitz, Tredegar’s president and chief executive officer,
said, “For the second quarter in a row we recognized a meaningful
profit from ongoing operations after suffering a period of losses
that began with the second quarter of last year. In addition,
results in the most recent quarter improved sequentially.”
Mr. Steitz further stated, “We continue to view the bottom of
the recent severe down cycle at Bonnell Aluminum as occurring in
the third quarter of 2023, which we believe was a residual impact
of the pandemic starting in the second half of 2022. Net new orders
and sales volume have increased since the apparent bottom. Through
the second quarter of 2024, we have yet to see a significant
improvement in our orders from the favorable preliminary
determinations of duties on imports that were made in March and May
by U.S. authorities. However, data available on U.S. import trends
of aluminum extrusions appear to indicate the onset of a purchasing
shift back to U.S. producers.”
Mr. Steitz continued, “At PE Films, EBITDA during the first half
of 2024 has been exceptional at $17.0 million compared with
moderate results of $8.6 million during the last six months of
2023. Terphane’s profitability showed improvement from depressed
levels for the fourth straight quarter while the review process of
our agreement to sell it to Oben Group continues to reside with
competition authorities in Brazil with a maximum deadline of
November 18, 2024. Meanwhile, the rebound at our business units is
having a favorable impact on overall operating results and net
financial leverage, which we believe peaked at 3.9x Credit EBITDA
at the end of the fourth quarter of 2023 and was 3.8x and 2.5x at
the end of the first and second quarters of this year,
respectively. The liquidity available under our new asset-based
lending facility has more than met our expectations. We continue to
focus on prudently managing costs, working capital and capital
spending.”
OPERATIONS REVIEW
Aluminum Extrusions
Aluminum Extrusions (also referred to as "Bonnell Aluminum")
produces high-quality, soft-alloy and medium-strength custom
fabricated and finished aluminum extrusions primarily for the
following markets: building and construction ("B&C"),
automotive and specialty (which consists of consumer durables,
machinery and equipment, electrical and renewable energy, and
distribution end-use products). A summary of results for Aluminum
Extrusions is provided below:
Three Months Ended
Favorable/ (Unfavorable) %
Change
Six Months Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
June 30,
June 30,
2024
2023
2024
2023
Sales volume (lbs)
34,906
35,492
(1.7)%
68,747
73,054
(5.9)%
Net sales
$
119,413
$
121,827
(2.0)%
$
233,636
$
255,197
(8.4)%
Ongoing operations:
EBITDA
$
12,907
$
10,217
26.3%
$
25,447
$
24,855
2.4%
Depreciation & amortization
(4,446
)
(4,158
)
(6.9)%
(8,988
)
(8,569
)
(4.9)%
EBIT*
$
8,461
$
6,059
39.6%
$
16,459
$
16,286
1.1%
Capital expenditures
$
1,463
$
5,631
$
3,012
$
13,373
* For a reconciliation of this non-GAAP
measure to the most directly comparable measure calculated in
accordance with GAAP, see the EBITDA from ongoing operations by
segment statements in the Financial Tables in this press
release.
The following table presents the sales volume by end use market
for the three and six months ended June 30, 2024 and 2023, and the
three months ended March 31, 2023.
Three Months Ended
Favorable/
Three Months Ended
Favorable/
Six Months Ended
Favorable/
(In millions of lbs)
June 30,
(Unfavorable)
March 31,
(Unfavorable)
June 30,
(Unfavorable)
2024
2023
% Change
2024
% Change
2024
2023
% Change
Sales volume by end-use market:
Non-residential B&C
20.3
19.7
3.0
%
20.1
1.0
%
40.4
42.0
(3.8
)%
Residential B&C
2.2
2.1
4.8
%
1.6
37.5
%
3.8
4.6
(17.4
)%
Automotive
2.9
3.3
(12.1
)%
3.2
(9.4
)%
6.1
6.7
(9.0
)%
Specialty products
9.5
10.4
(8.7
)%
8.9
6.7
%
18.4
19.8
(7.1
)%
Total
34.9
35.5
(1.7
)%
33.8
3.3
%
68.7
73.1
(5.9
)%
Second Quarter 2024 Results vs. Second
Quarter 2023 Results
Net sales (sales less freight) in the second quarter of 2024
decreased 2.0% versus the second quarter of 2023 primarily due to
lower sales volume, the pass-through of slightly lower metal costs
and pricing pressure. Sales volume in the second quarter of 2024
decreased 1.7% versus the second quarter of 2023 but increased 3.3%
versus the first quarter 2024.
Net new orders, which remain low compared to pre-pandemic
levels, increased 17% in the second quarter of 2024 versus the
second quarter of 2023 and were relatively flat compared to the
first quarter of 2024. Since January 2021, net new orders for the
Company's aluminum extruded products have generally tracked the
ISM® Manufacturing PMI®. The Company believes that net new orders
continue to be below pre-pandemic levels due to higher interest
rates, tighter lender requirements and the increase in remote
working, which particularly impacts the non-residential B&C
end-use market. In addition, data indicates that aluminum extrusion
imports have increased significantly in recent years, especially
during the pandemic, and some of Bonnell Aluminum’s customers have
increased their sourcing of aluminum extrusions from producers
outside of the U.S.
Open orders at the end of the second quarter of 2024 were 14
million pounds (versus 15 million pounds at the end of the first
quarter of 2024 and 20 million pounds at the end of the second
quarter of 2023). This level is below the quarterly range of 21 to
27 million pounds in 2019 before pandemic-related disruptions
(particularly starting in early 2021 with the re-opening of markets
following the rollout of vaccines) that resulted in long lead
times, driving a peak in open orders of approximately 100 million
pounds during the first quarter of 2022.
The Company is part of a coalition of members of the Aluminum
Extruders Council who have filed a trade case with the Department
of Commerce (“DOC”) and the U.S. International Trade Commission
(“ITC”) against 15 countries in response to alleged large and
increasing volumes of unfairly priced imports of aluminum
extrusions since 2019. In November 2023, the ITC found that there
is a reasonable indication that the American aluminum extrusions
industry is materially injured or threatened with injury due to
imports from 14 countries, including China. The ITC’s preliminary
determination found that subject import volumes were significant
and increasing, and that with regard to pricing, subject imports
predominantly undersold the domestic product by volume in each year
of the period of investigation. On May 2, 2024, the DOC announced
its preliminarily determination that aluminum extrusion producers
and exporters in 14 countries, including China, sold aluminum
extrusions at less-than-fair value in the U.S. Final
determinations, which are expected by the end of the third quarter
of 2024, should provide an additional opportunity for Bonnell
Aluminum to regain market share. The Company's analysis of recent
U.S. import data of aluminum extrusions indicates that the
preliminary determinations of duties are starting to have the
desired behavioral impact of shifting related customer purchases
back to U.S. producers.
EBITDA from ongoing operations in the second quarter of 2024
increased $2.7 million versus the second quarter of 2023 primarily
due to:
- Higher net pricing after the pass-through of metal cost changes
and mix ($1.3 million), manufacturing cost improvements, including
lower supply expense ($2.0 million) and lower freight rates ($0.5
million), partially offset by lower volume ($0.1 million), higher
labor and employee-related costs ($0.8 million), higher utility
expense ($0.4 million), and higher selling, general and
administrative ("SG&A") expenses, including other
employee-related compensation ($2.0 million); and
- The timing of the flow-through under the first-in first-out
("FIFO") method of aluminum raw material costs, which were
previously acquired at lower prices in a quickly changing commodity
pricing environment and passed through to customers, resulted in a
benefit of $1.2 million in the second quarter of 2024 versus a
charge of $1.3 million in the second quarter of 2023.
First Six Months of 2024 Results vs. First
Six Months of 2023 Results
Net sales in the first six months of 2024 decreased 8.4% versus
the first six months of 2023 primarily due to lower sales volume
and the pass-through of lower metal costs. Sales volume in the
first six months of 2024 decreased 5.9% versus the first six months
of 2023.
EBITDA from ongoing operations in the first six months of 2024
increased $0.6 million in comparison to the first six months of
2023 primarily due to:
- Higher net pricing after the pass-through of metal cost changes
and mix ($3.3 million), manufacturing cost improvements, including
lower supply expense ($2.6 million) and lower freight rates ($0.7
million), partially offset by lower volume ($3.4 million), higher
labor and employee-related costs ($0.2 million), and higher
SG&A, including other employee-related compensation ($1.7
million); and
- The timing of the flow-through under the FIFO method of
aluminum raw material costs, which were previously acquired at
lower prices in a quickly changing commodity pricing environment
and passed through to customers, resulted in a charge of $0.1
million in the first six months of 2024 versus a benefit of $0.4
million in the first six months of 2023.
Refer to Item 3. Quantitative and Qualitative Disclosures About
Market Risk in the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 2024 ("Second Quarter Form 10-Q") for
additional information on aluminum price trends.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Bonnell Aluminum are projected to be $9
million in 2024, including $4 million for productivity projects and
$5 million for capital expenditures required to support continuity
of operations. The projected spending reflects stringent spending
measures that the Company has implemented to control its financial
leverage (See "Total Debt, Financial Leverage and Debt Covenants"
section below for more information). The multi-year implementation
of new enterprise resource planning and manufacturing execution
systems ("ERP/MES") has been reorganized with an extended
implementation period. As a result, the earliest "go-live" date for
the net ERP/MES is 2025. The ERP/MES project commenced in 2022,
with spending to-date of approximately $21 million. Depreciation
expense is projected to be $16 million in 2024. Amortization
expense is projected to be $2 million in 2024.
PE Films
PE Films produces surface protection films, polyethylene
overwrap and polypropylene films for other markets. A summary of
results for PE Films is provided below:
Three Months Ended
Favorable/ (Unfavorable) %
Change
Six Months Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
June 30,
June 30,
2024
2023
2024
2023
Sales volume (lbs)
10,548
6,245
68.9%
20,583
13,613
51.2%
Net sales
$
29,197
$
15,918
83.4%
$
53,932
$
36,099
49.4%
Ongoing operations:
EBITDA
$
10,133
$
814
NM**
$
17,037
$
2,663
NM**
Depreciation & amortization
(1,317
)
(1,552
)
15.1%
(2,645
)
(3,195
)
17.2%
EBIT*
$
8,816
$
(738
)
NM**
$
14,392
$
(532
)
NM**
Capital expenditures
$
216
$
360
$
610
$
1,075
* For a reconciliation of this non-GAAP
measure to the most directly comparable measure calculated in
accordance with GAAP, see the EBITDA from ongoing operations by
segment statements in the Financial Tables in this press
release.
**Not meaningful ("NM")
Second Quarter 2024 Results vs. Second
Quarter 2023 Results
Net sales in the second quarter of 2024 were 83.4% higher
compared to the second quarter of 2023, with volume increases in
Surface Protection. Surface Protection sales volume in the second
quarter of 2024 increased 123% versus the second quarter of 2023
(which reflected weak market conditions in consumer electronics)
and 14% versus the first quarter of 2024.
EBITDA from ongoing operations during the second quarter of 2024
of $10.1 million was exceptional, primarily due to the restocking
of Surface Protection customer inventories, which were abnormally
low. While market indicators and recent volume improvements
indicate a positive outlook for the consumer electronics market,
EBITDA from ongoing operations performance is expected to moderate
in the third quarter of 2024 as customer inventories and the
Company's sales volume stabilize. There have been significant
cyclical swings in the sales volume and EBITDA from ongoing
operations for PE Films in the past 2.5 years, largely due to the
unprecedented downturn in the display industry during the second
half of 2022 and first half of 2023. EBITDA from ongoing operations
for the first half of 2024, the second and first halves of 2023 and
the second and first halves of 2022 were $17.0 million, $8.6
million, $2.7 million, $(2.2) million and $14.1 million,
respectively, which averages approximately $4 million per
quarter.
EBITDA from ongoing operations in the second quarter of 2024
increased $9.3 million versus the second quarter of 2023, primarily
due to:
- A $9.6 million increase in Surface Protection primarily due to
higher contribution margin associated with substantially higher
volume ($6.4 million), favorable pricing ($0.2 million), operating
efficiencies and manufacturing costs savings ($2.3 million), lower
fixed costs ($0.2 million) and lower SG&A ($0.6 million,
including $0.8 million associated with the closure of the Richmond
Technical Center in 2023);
- A foreign currency transaction gain of $0.1 million in the
second quarter of 2024 versus a gain of $0.5 million in the second
quarter of 2023; and
- A $0.1 million increase in overwrap films.
First Six Months of 2024 Results vs. First
Six Months of 2023 Results
Net sales in the first six months of 2024 increased 49.4%
compared to the first six months of 2023 primarily due to an
increase in sales volume in Surface Protection, as a result of
factors noted above. Sales volume increased 77% in Surface
Protection in the first six months of 2024 versus the first six
months of 2023.
EBITDA from ongoing operations in the first six months of 2024
increased by $14.4 million versus the first six months of 2023,
primarily due to:
- A $14.1 million increase in Surface Protection primarily due to
higher contribution margin associated with substantially higher
volume ($7.4 million), favorable pricing ($0.5 million), operating
efficiencies and manufacturing costs savings ($4.2 million), lower
fixed costs ($0.6 million) and lower SG&A ($1.4 million, which
was associated with the closure of the Richmond Technical Center in
2023);
- A foreign currency transaction gain of $0.1 million in the
first six months of 2024 versus a gain of $0.4 million in the first
six months of 2023;
- The pass-through lag associated with resin costs (a charge of
$0.4 million in the first six months of 2024 versus a charge of
$0.2 million in the first six months of 2023); and
- A $0.8 million increase from overwrap films primarily due to
cost improvements.
Refer to Item 3. Quantitative and Qualitative Disclosures About
Market Risk in the Second Quarter Form 10-Q for additional
information on resin price trends.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for PE Films are projected to be $2 million
in 2024, including $1 million for productivity projects and $1
million for capital expenditures required to support continuity of
current operations. Depreciation expense is projected to be $5
million in 2024. There is no amortization expense for PE Films.
Flexible Packaging Films
Flexible Packaging Films produces polyester-based films for use
in packaging applications that have specialized properties, such as
heat resistance, strength, barrier protection and the ability to
accept high-quality print graphics. A summary of results for
Flexible Packaging Films is provided below:
Three Months Ended
Favorable/ (Unfavorable) %
Change
Six Months Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
June 30,
June 30,
2024
2023
2024
2023
Sales volume (lbs)
25,074
23,724
5.7%
47,047
43,569
8.0%
Net sales
$
34,543
$
33,223
4.0%
$
64,655
$
64,750
(0.1)%
Ongoing operations:
EBITDA
$
3,204
$
249
NM**
$
5,167
$
1,599
NM**
Depreciation & amortization
(732
)
(711
)
(3.0)%
(1,483
)
(1,411
)
(5.1)%
EBIT*
$
2,472
$
(462
)
NM**
$
3,684
$
188
NM**
Capital expenditures
$
642
$
878
$
1,160
$
1,483
* For a reconciliation of this non-GAAP
measure to the most directly comparable measure calculated in
accordance with GAAP, see the EBITDA from ongoing operations by
segment statements in the Financial Tables in this press
release.
**Not meaningful ("NM")
Second Quarter 2024 Results vs. Second
Quarter 2023 Results
Net sales in the second quarter of 2024 increased 4.0% compared
to the second quarter of 2023 primarily due to higher sales volume
and favorable product mix, partially offset by lower selling prices
that the Company believes are driven by excess global capacity and
strong competition in Brazil, Latin America and the U.S.
EBITDA from ongoing operations in the second quarter of 2024
increased $3.0 million versus the second quarter of 2023, primarily
due to:
- Lower raw material costs ($2.5 million), lower fixed costs
($1.1 million), favorable product mix ($1.1 million), higher sales
volume ($0.5 million) and lower SG&A ($0.3 million), partially
offset by lower selling prices from global excess capacity and
margin pressures ($1.5 million);
- Foreign currency transaction losses ($0.2 million) in the
second quarter of 2024 remained consistent with the second quarter
of 2023; and
- Net unfavorable foreign currency translation of
Real-denominated operating costs ($1.1 million).
First Six Months of 2024 Results vs. First
Six Months of 2023 Results
Net sales in the first six months of 2024 remained consistent
with the first six months of 2023 primarily due to lower selling
prices that the Company believes are driven by excess global
capacity and strong competition in Brazil, Latin America and the
U.S, offset by higher sales volume.
EBITDA from ongoing operations in the first six months of 2024
increased $3.6 million versus the first six months of 2023
primarily due to:
- Lower raw material costs ($4.0 million), lower fixed costs
($2.8 million), higher sales volume ($1.5 million), favorable
product mix ($0.8 million), and lower SG&A ($0.5 million),
partially offset by lower selling prices from global excess
capacity and margin pressures ($3.5 million) and higher variable
costs ($0.8 million);
- Foreign currency transaction losses ($0.1 million) in the first
six months of 2024 compared to foreign currency transaction losses
($0.2 million) in the first six months of 2023; and
- Net unfavorable foreign currency translation of
Real-denominated operating costs ($1.9 million).
Refer to Item 3. Quantitative and Qualitative Disclosures About
Market Risk in the Second Quarter Form 10-Q for additional
information on polyester fiber and component price trends.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Flexible Packaging Films are projected
to be $4 million in 2024 for capital expenditures required to
support continuity of current operations. Depreciation expense is
projected to be $3 million in 2024. Amortization expense is
projected to be $0.1 million in 2024.
Corporate Expenses, Interest & Taxes
Corporate expenses, net in the first six months of 2024
decreased $8.7 million compared to the first six months of 2023
primarily due to lower pension expense as a result of the pension
plan termination completed in 2023 ($6.7 million), foreign currency
transaction gains related to the remeasurement of intercompany
receivables ($2.3 million) and lower business development
activities ($1.2 million), partially offset by higher incentive
compensation accruals ($1.0 million) and higher stock-based
compensation ($0.6 million). Further information on gains and
losses associated with special items impacting corporate expenses,
net is provided in the accompanying tables.
Interest expense of $6.8 million in the first six months of 2024
increased $2.1 million compared to the first six months of 2023 due
to higher average debt levels and interest rates.
The effective tax rate was 17.9% in the first six months of 2024
compared to 13.1% in the first six months of 2023. The change in
effective tax rate was primarily due to pre-tax income in the first
six months of 2024 versus a pre-tax loss in the first six months of
2023. The effective tax rate for the first six months of 2024
varies from the 21% statutory rate primarily due to foreign rate
differences and non-deductible expenses offset by Brazilian tax
incentives and federal tax credits. The effective tax rate from
ongoing operations comparable to the earnings reconciliation table
provided in Note (a) to the Financial Tables in this press release
was 18.9% for the first six months of 2024 versus 79.2% for the
first six months of 2023 (see also Note (e) to the Financial
Tables). Refer to Note 8 to the Company's Condensed Consolidated
Financial Statements in the Second Quarter Form 10-Q for an
explanation of differences between the effective tax rate for
income (loss) and the U.S. federal statutory rate for 2024 and
2023.
Status of Agreement to Sell Terphane
On September 1, 2023, the Company announced that it had entered
into a definitive agreement to sell Terphane to Oben Group (the
“Contingent Terphane Sale”). Completion of the sale is contingent
upon the satisfaction of customary closing conditions, including
the receipt of certain competition filing approvals by authorities
in Brazil and Colombia. On October 27, 2023, the Company filed the
requisite competition forms with the Administrative Council for
Economic Defense (“CADE”) in Brazil.
As part of the Brazilian merger review process regarding the
sale of Terphane to Oben Group, on May 13, 2024, the General
Superintendence of the Administrative Council for Economic Defense
("SG-CADE") issued a non-binding opinion ("SG Opinion")
recommending the rejection of the transaction. Following this first
stage of the two-stage Brazilian merger review process for complex
transactions, the case has been submitted to the CADE Tribunal, in
accordance with the customary Brazilian merger review process. The
parties are given a full opportunity to present evidence in favor
of clearing the transaction. The final decision regarding the
transaction will eventually be rendered by the Tribunal, which has
begun its independent analysis. CADE's maximum deadline for
completing its review is no later than November 18, 2024. The
Colombian authority cleared the merger review regarding the
transaction in early February 2024.
As of June 30, 2024, the Company has reported results for
Terphane as a continuing operation, given the status of the
approval process by authorities. If the sale transaction is
completed, the Company expects to realize after-tax net debt-free
cash proceeds of $85 million after deducting projected Brazil
withholding taxes, escrow funds, U.S. capital gains taxes and
transaction costs. Actual after-tax proceeds may differ from
estimates due to possible changes in deductions and the Company's
tax situation during the potentially lengthy interim period to the
closing date.
Total Debt, Financial Leverage and Debt Covenants
Total debt was $142.0 million at June 30, 2024 and $146.3
million at December 31, 2023. Cash, cash equivalents and restricted
cash was $8.7 million at June 30, 2024 and $13.5 million at
December 31, 2023. Net debt (total debt in excess of cash, cash
equivalents and restricted cash), a non-GAAP financial measure, was
$133.3 million at June 30, 2024 and $132.8 million at December 31,
2023. See Note (f) to the Financial Tables in this press release
for a reconciliation of net debt to the most directly comparable
GAAP financial measure.
The Company has been focused on stringent management of net
working capital, capital expenditures and costs since a slowdown in
business began in 2023. Total debt decreased $4.3 million and net
debt increased $0.5 million in the first six months 2024 versus the
end of 2023 due primarily to higher net working capital to support
the recovery the Company believes is underway in its businesses and
seasonal fluctuations, which were nearly fully offset by net cash
flow from operations after capital expenditures.
As of June 30, 2024, the Company was in compliance with all
covenants under its $180 million asset-based credit agreement,
which matures June 30, 2026 (the "ABL Facility"). Availability for
borrowings under the ABL Facility is governed by a borrowing base,
determined by the application of specified advance rates against
eligible assets, including trade accounts receivable, inventory,
owned real properties and owned machinery and equipment. As of June
30, 2024, funds available to borrow under the ABL Facility were
approximately $36 million. The median daily liquidity under the ABL
Facility during the second quarter of 2024 was favorable at $27
million compared with a median of $16 million during the first
quarter of 2024. As of June 30, 2024, the Company was in compliance
with all debt covenants. Refer to Note 10 Company's Condensed
Consolidated Financial Statements in the Second Quarter Form 10-Q
for additional details on the primary debt covenants.
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 the Company uses the words “believe,”
“estimate,” “anticipate,” “appear to,” “expect,” “project,” “plan,”
“likely,” “may” and similar expressions, it does so to identify
forward-looking statements. Such statements are based on the
Company's 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 the Company's actual results and financial
condition may differ, possibly materially, from the anticipated
results and financial condition indicated in or implied by these
forward-looking statements. Accordingly, you should not place undue
reliance on these forward-looking statements. Factors that could
cause actual results to differ materially from expectations
include, without limitation, the following:
- inability to successfully complete strategic dispositions,
including the Contingent Terphane Sale, failure to realize the
expected benefits of such dispositions and assumption of
unanticipated risks in such dispositions;
- inability to successfully transition into an asset-based
revolving lending facility;
- noncompliance with any of the financial and other restrictive
covenants in the Company's asset-based credit facility;
- the impact of macroeconomic factors, such as inflation,
interest rates, recession risks and other lagging effects of the
COVID-19 pandemic
- an increase in the operating costs incurred by the Company’s
business units, including, for example, the cost of raw materials
and energy;
- failure to continue to attract, develop and retain certain key
officers or employees;
- disruptions to the Company’s manufacturing facilities,
including those resulting from labor shortages;
- inability to develop, efficiently manufacture and deliver new
products at competitive prices;
- the impact of the imposition of tariffs and sanctions on
imported aluminum ingot used by Bonnell Aluminum;
- failure by governmental entities to prevent foreign companies
from evading anti-dumping and countervailing duties;
- unanticipated problems or delays with the implementation of the
enterprise resource planning and manufacturing executions systems,
or security breaches and other disruptions to the Company's
information technology infrastructure;
- loss or gain of sales to significant customers on which the
Company’s business is highly dependent;
- inability to achieve sales to new customers to replace lost
business;
- failure of the Company’s customers to achieve success or
maintain market share;
- failure to protect our intellectual property rights;
- risks of doing business in countries outside the U.S. that
affect our international operations;
- political, economic and regulatory factors concerning the
Company’s products;
- competition from other manufacturers, including manufacturers
in lower-cost countries and manufacturers benefiting from
government subsidies;
- impact of fluctuations in foreign exchange rates;
- the termination of anti-dumping duties on products imported to
Brazil that compete with products produced by Flexible
Packaging;
- an information technology system failure or breach;
- the impact of public health epidemics on employees, production
and the global economy, such as the COVID-19 pandemic;
- inability to successfully identify, complete or integrate
strategic acquisitions; failure to realize the expected benefits of
such acquisitions and assumption of unanticipated risks in such
acquisitions;
- impairment of the Surface Protection reporting unit's
goodwill;
and the other 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 additional detail in “Risk Factors” Part I, Item 1A of
the Company's Form 10-K for the year ended December 31, 2023.
Readers are urged to review and consider carefully the disclosures
Tredegar makes in its filings with the SEC.
Tredegar does not undertake, and expressly disclaims any duty,
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, except as required by applicable law.
To the extent that the financial information portion of this
press 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. Reconciliations of
non-GAAP financial measures are provided in the Notes to the
Financial Tables included with this press release and can also be
found within “Presentations” in the “Investors” section of our
website, www.tredegar.com.
Tredegar uses its website as a channel of distribution of
material Company information. Financial information and other
material information regarding Tredegar is posted on and assembled
in the “Investors” section of its website.
Tredegar Corporation is an industrial manufacturer with three
primary businesses: custom aluminum extrusions for the North
American building & construction, automotive and specialty
end-use markets; surface protection films for high-technology
applications in the global electronics industry; and specialized
polyester films primarily for the Latin American flexible packaging
market. Tredegar had 2023 sales of $705 million. With approximately
1,900 employees, the Company operates manufacturing facilities in
North America, South America, and Asia.
Tredegar Corporation
Condensed Consolidated
Statements of Income (Loss)
(In Thousands, Except
Per-Share Data)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2024
2023
2024
2023
Sales
$
190,235
$
178,167
$
365,971
$
369,289
Other income (expense), net (c)(d)
323
(20
)
331
260
190,558
178,147
366,302
369,549
Cost of goods sold (c)
148,666
153,267
290,708
312,792
Freight
7,082
7,199
13,748
13,243
Selling, R&D and general expenses
(c)
20,054
18,265
38,663
38,475
Amortization of intangibles
483
464
948
968
Pension and postretirement benefits
54
3,418
109
6,837
Interest expense
3,379
2,374
6,834
4,686
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
80
—
587
69
Goodwill impairment
—
15,413
—
15,413
Total
179,798
200,400
351,597
392,483
Income (loss) before income taxes
10,760
(22,253
)
14,705
(22,934
)
Income tax expense (benefit) (c)
1,968
(3,331
)
2,625
(3,000
)
Net income (loss)
$
8,792
$
(18,922
)
$
12,080
$
(19,934
)
Earnings (loss) per share:
Basic
$
0.26
$
(0.56
)
$
0.35
$
(0.59
)
Diluted
$
0.26
$
(0.56
)
$
0.35
$
(0.59
)
Shares used to compute earnings (loss) per
share:
Basic
34,378
34,079
34,350
33,988
Diluted
34,378
34,079
34,350
33,988
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2024
2023
2024
2023
Net Sales
Aluminum Extrusions
$
119,413
$
121,827
$
233,636
$
255,197
PE Films
29,197
15,918
53,932
36,099
Flexible Packaging Films
34,543
33,223
64,655
64,750
Total net sales
183,153
170,968
352,223
356,046
Add back freight
7,082
7,199
13,748
13,243
Sales as shown in the condensed
consolidated statements of income
$
190,235
$
178,167
$
365,971
$
369,289
EBITDA from Ongoing Operations
(i)
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
12,907
$
10,217
$
25,447
$
24,855
Depreciation & amortization
(4,446
)
(4,158
)
(8,988
)
(8,569
)
EBIT (b)
8,461
6,059
16,459
16,286
Plant shutdowns, asset impairments,
restructurings and other (c)
(1,649
)
155
(2,816
)
(339
)
PE Films:
Ongoing operations:
EBITDA (b)
10,133
814
17,037
2,663
Depreciation & amortization
(1,317
)
(1,552
)
(2,645
)
(3,195
)
EBIT (b)
8,816
(738
)
14,392
(532
)
Plant shutdowns, asset impairments,
restructurings and other (c)
(80
)
—
(584
)
2
Goodwill impairment
—
(15,413
)
—
(15,413
)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
3,204
249
5,167
1,599
Depreciation & amortization
(732
)
(711
)
(1,483
)
(1,411
)
EBIT (b)
2,472
(462
)
3,684
188
Plant shutdowns, asset impairments,
restructurings and other (c)
—
(1
)
—
(79
)
Total
18,020
(10,400
)
31,135
113
Interest income
7
30
28
74
Interest expense
3,379
2,374
6,834
4,686
Gain on investment in kaleo, Inc.
("kaléo") (d)
144
—
144
262
Stock option-based compensation costs
—
—
—
231
Corporate expenses, net (c)
4,032
9,509
9,768
18,466
Income (loss) before income taxes
10,760
(22,253
)
14,705
(22,934
)
Income tax expense (benefit)
1,968
(3,331
)
2,625
(3,000
)
Net income (loss)
$
8,792
$
(18,922
)
$
12,080
$
(19,934
)
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
June 30, 2024
December 31, 2023
Assets
Cash & cash equivalents
$
3,510
$
9,660
Restricted cash
5,159
3,795
Accounts & other receivables, net
83,895
67,938
Income taxes recoverable
789
1,182
Inventories
89,242
82,037
Prepaid expenses & other
8,170
12,065
Total current assets
190,765
176,677
Net property, plant and equipment
171,845
183,455
Right-of-use leased assets
16,209
11,848
Identifiable intangible assets, net
8,811
9,851
Goodwill
35,717
35,717
Deferred income taxes
23,600
25,034
Other assets
3,465
3,879
Total assets
$
450,412
$
446,461
Liabilities and Shareholders’
Equity
Accounts payable
$
93,006
$
95,023
Accrued expenses
27,015
24,442
Lease liability, short-term
2,877
2,107
ABL revolving facility (matures on June
30, 2026) (h)
122,000
126,322
Income taxes payable
257
1,210
Total current liabilities
245,155
249,104
Lease liability, long-term
14,610
10,942
Long-term debt
20,000
20,000
Pension and other postretirement benefit
obligations, net
6,524
6,643
Other non-current liabilities
4,159
4,119
Shareholders’ equity
159,964
155,653
Total liabilities and shareholders’
equity
$
450,412
$
446,461
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended June 30,
2024
2023
Cash flows from operating activities:
Net income (loss)
$
12,080
$
(19,934
)
Adjustments for noncash items:
Depreciation
12,357
12,387
Amortization of intangibles
948
968
Reduction of right-of-use lease asset
1,178
1,075
Goodwill impairment
—
15,413
Deferred income taxes
2,248
(3,731
)
Accrued pension income and post-retirement
benefits
109
6,837
Stock-based compensation expense
1,086
521
Gain on investment in kaléo
(144
)
(262
)
Changes in assets and liabilities:
Accounts and other receivables
(17,160
)
6,190
Inventories
(10,357
)
43,013
Income taxes recoverable/payable
(539
)
(1,060
)
Prepaid expenses and other
2,597
2,976
Accounts payable and accrued expenses
3,305
(39,629
)
Lease liability
(1,408
)
(1,095
)
Pension and postretirement benefit plan
contributions
(306
)
(279
)
Other, net
1,335
(692
)
Net cash provided by (used in) operating
activities
7,329
22,698
Cash flows from investing activities:
Capital expenditures
(4,782
)
(15,907
)
Proceeds on sale of investment in
kaléo
144
262
Proceeds from the sale of assets
83
—
Net cash provided by (used in) investing
activities
(4,555
)
(15,645
)
Cash flows from financing activities:
Borrowings
340,818
41,250
Debt principal payments
(345,140
)
(37,250
)
Dividends paid
—
(8,884
)
Debt financing fees
(587
)
—
Net cash provided by (used in) financing
activities
(4,909
)
(4,884
)
Effect of exchange rate changes on
cash
(2,651
)
(208
)
Increase (decrease) in cash, cash
equivalents and restricted cash
(4,786
)
1,961
Cash, cash equivalents and restricted cash
at beginning of period
13,455
19,232
Cash, cash equivalents and restricted cash
at end of period
$
8,669
$
21,193
Notes to the Financial
Tables
(Unaudited)
(a)
Tredegar’s presentation of net
income (loss) and diluted earnings (loss) per share from ongoing
operations are non-GAAP financial measures that exclude the effects
of gains or losses associated with plant shutdowns, asset
impairments and restructurings, gains or losses from the sale of
assets, goodwill impairment charges, net periodic benefit cost for
the frozen defined benefit pension plan and other items (which
includes gains and losses for an investment accounted for under the
fair value method), which have been presented separately and
removed from net income (loss) and diluted earnings (loss) per
share as reported under GAAP. Net income (loss) and diluted
earnings (loss) per share from ongoing operations are key financial
and analytical measures used by management to gauge the operating
performance of Tredegar’s ongoing operations. They are not intended
to represent the stand-alone results for Tredegar’s ongoing
operations under GAAP and should not be considered as an
alternative to net income (loss) or earnings (loss) per share as
defined by GAAP. They exclude items that management believes do not
relate to Tredegar’s ongoing operations. A reconciliation to net
income (loss) and diluted earnings (loss) per share from ongoing
operations for the three and six months ended June 30, 2024 and
2023 is shown below:
Three Months Ended June 30,
Six Months Ended June 30,
($ in millions, except per share data)
2024
2023
2024
2023
Net income (loss) as reported under
GAAP1
$
8.8
$
(18.9
)
$
12.1
$
(19.9
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.1
—
0.5
0.1
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
(0.1
)
—
(0.1
)
(0.2
)
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
—
0.8
—
0.8
Other
1.5
1.6
3.4
2.5
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
2.6
—
5.3
Goodwill impairment3
—
11.9
—
11.9
Net income (loss) from ongoing
operations1
$
10.3
$
(2.0
)
$
15.9
$
0.5
Earnings (loss) per share as reported
under GAAP (diluted)
$
0.26
$
(0.56
)
$
0.35
$
(0.59
)
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
0.01
—
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
—
—
(0.01
)
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
—
0.02
—
0.02
Other
0.04
0.05
0.10
0.08
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
0.08
—
0.16
Goodwill impairment3
—
0.35
—
0.35
Earnings (loss) per share from ongoing
operations (diluted)
$
0.30
$
(0.06
)
$
0.46
$
0.01
1. Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) are shown in Note
(e).
2. For more information, see Note (g).
3. For more information, see Note (j).
(b)
EBITDA (earnings before interest,
taxes, depreciation and amortization) from ongoing operations is
the key segment profitability metric used by the Company’s chief
operating decision maker to assess segment financial performance.
The Company uses sales less freight ("net sales") as its measure of
revenues from external customers. For more business segment
information, see Note 9 to the Company's Condensed Consolidated
Financial Statements in the Second Quarter Form 10-Q.
EBIT (earnings before interest
and taxes) from ongoing operations is a non-GAAP financial measure
included in the accompanying tables and the reconciliation of
segment financial information to consolidated results for the
Company in the net sales and EBITDA from ongoing operations by
segment statements. It is not intended to represent the stand-alone
results for Tredegar’s ongoing operations under GAAP and should not
be considered as an alternative to net income (loss) as defined by
GAAP. The Company believes that EBIT is a widely understood and
utilized metric that is meaningful to certain investors and that
including this financial metric in the reconciliation of
management’s performance metric, EBITDA from ongoing operations,
provides useful information to those investors that primarily
utilize EBIT to analyze the Company’s core operations.
(c)
Gains and losses associated with
plant shutdowns, asset impairments, restructurings and other items
for the three and six months ended June 30, 2024 and 2023 detailed
below are shown in the statements of net sales and EBITDA from
ongoing operations by segment and are included in “Asset
impairments and costs associated with exit and disposal activities,
net of adjustments” in the condensed consolidated statements of
income, unless otherwise noted.
Three Months Ended June 30,
2024
Six Months Ended June 30,
2024
($ in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
Consulting expenses for ERP/MES
project1
$
0.8
$
0.7
1.4
1.1
Storm damage to the Newnan, Georgia
plant1
0.2
0.1
0.3
0.2
Legal fees associated with the Aluminum
Extruders Trade Case1
0.3
0.2
0.5
0.4
Total for Aluminum Extrusions
$
1.3
$
1.0
$
2.2
$
1.7
PE Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
Richmond, Virginia Technical Center
closure expenses, including severance2
$
0.1
$
0.1
0.3
0.2
Richmond, Virginia Technical Center lease
abandonment2
—
—
0.3
0.3
Total for PE Films
$
0.1
$
0.1
$
0.6
$
0.5
Corporate:
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
$
0.4
$
0.4
$
0.9
$
0.8
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.4
0.3
1.3
1.0
Professional fees associated with the
transition to the ABL Facility1
—
—
0.2
0.1
Group annuity contract premium expense
adjustment3
(0.2
)
(0.2
)
(0.2
)
(0.2
)
Total for Corporate
$
0.6
$
0.5
$
2.2
$
1.7
1. Included in “Selling, R&D and
general expenses” in the condensed consolidated statements of
income.
2. For more information, refer to Note 1
to the Company's Condensed Consolidated Financial Statements in the
Second Quarter Form 10-Q.
3. Included in “Other income (expense),
net” in the condensed consolidated statements of income. For more
information, see Note (g).
Three Months Ended June 30,
2023
Six Months Ended June 30,
2023
($ in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
Storm damage to the Newnan, Georgia
plant1
$
(0.2
)
$
(0.2
)
$
0.4
$
0.2
Total for Aluminum Extrusions
$
(0.2
)
$
(0.2
)
$
0.4
$
0.2
PE Films:
Goodwill impairment4
$
15.4
$
11.9
$
15.4
$
11.9
Total for PE Films
$
15.4
$
11.9
$
15.4
$
11.9
Flexible Packaging Films:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
—
$
—
$
0.1
$
0.1
Total for Flexible Packaging Films
$
—
$
—
$
0.1
$
0.1
Corporate:
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
$
1.6
$
1.3
$
1.9
$
1.5
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.5
0.4
1.0
0.8
Write-down of investment in Harbinger
Capital Partners Special Situations Fund2
0.2
0.1
0.2
0.1
Stock-based compensation expense
associated with the fair value remeasurement of awards granted at
the time of the 2020 Special Dividend1
(0.1
)
—
(0.2
)
(0.1
)
Tax benefit from adjustments to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits5
—
0.8
—
0.8
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination3
3.4
2.6
6.8
5.3
Total for Corporate
$
5.6
$
5.2
$
9.7
$
8.4
1. Included in "Selling, R&D and
general expenses" in the condensed consolidated statements of
income.
2. Included in “Other income (expense),
net” in the condensed consolidated statements of income.
3. For more information, see Note (g).
4. For more information, see Note (j).
5. Included in “Income tax expense
(benefit)” in the condensed consolidated statements of income.
(d)
On December 27, 2021, the Company
completed the sale of its investment interests in kaléo and
received closing cash proceeds of $47.1 million. In April 2024 and
January 2023, additional cash consideration of $0.1 million and
$0.3 million, respectively, was received related to customary
post-closing adjustments, which is reported in “Other income
(expense), net” in the condensed consolidated statements of
income.
(e)
Tredegar’s presentation of net income
(loss) from ongoing operations is a non-GAAP financial measure that
excludes the effects of gains or losses associated with plant
shutdowns, asset impairments and restructurings, gains or losses
from the sale of assets, goodwill impairment charges, net periodic
benefit cost for the frozen defined benefit pension plan and other
items (which includes unrealized gains and losses for an investment
accounted for under the fair value method), which has been
presented separately and removed from net income (loss) as reported
under GAAP. Net income (loss) from ongoing operations is a key
financial and analytical measure used by management to gauge the
operating performance of Tredegar’s ongoing operations. It is not
intended to represent the stand-alone results for Tredegar’s
ongoing operations under GAAP and should not be considered as an
alternative to net income (loss) as defined by GAAP. It excludes
items that we believe do not relate to Tredegar’s ongoing
operations.
Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) from ongoing
operations for the three and six months ended June 30, 2024 and
2023 are presented below in order to show the impact on the
effective tax rate:
($ in millions)
Pre-tax
Tax Expense (Benefit)
After-Tax
Effective Tax Rate
Three Months Ended June 30,
2024
(a)
(b)
(b)/(a)
Net income (loss) reported under GAAP
$
10.8
$
2.0
$
8.8
18.3
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.1
—
0.1
(Gains) losses from sale of assets and
other
1.8
0.4
1.4
Net income (loss) from ongoing
operations
$
12.7
$
2.4
$
10.3
18.9
%
Three Months Ended June 30,
2023
Net income (loss) reported under GAAP
$
(22.3
)
$
(3.4
)
$
(18.9
)
15.0
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
—
(Gains) losses from sale of assets and
other
2.0
(0.4
)
2.4
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
3.4
0.8
2.6
Goodwill impairment
15.4
3.5
11.9
Net income (loss) from ongoing
operations
$
(1.5
)
$
0.5
$
(2.0
)
(33.3
)%
Six Months Ended June 30, 2024
Net income (loss) reported under GAAP
$
14.7
$
2.6
$
12.1
17.9
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.6
0.1
0.5
(Gains) losses from sale of assets and
other
4.3
1.0
3.3
Net income (loss) from ongoing
operations
$
19.6
$
3.7
$
15.9
18.9
%
Six Months Ended June 30, 2023
Net income (loss) reported under GAAP
$
(22.9
)
$
(3.0
)
$
(19.9
)
13.1
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.1
—
0.1
(Gains) losses from sale of assets and
other
3.0
(0.1
)
3.1
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
6.8
1.5
5.3
Goodwill impairment
15.4
3.5
11.9
Net income (loss) from ongoing
operations
$
2.4
$
1.9
$
0.5
79.2
%
(f)
Net debt is calculated as follows:
June 30,
December 31,
($ in millions)
2024
2023
ABL revolving facility (matures on June
30, 2026) (h)
$
122.0
$
126.3
Long-term debt
20.0
20.0
Total debt
142.0
146.3
Less: Cash and cash equivalents
3.5
9.7
Less: Restricted cash
5.2
3.8
Net debt
$
133.3
$
132.8
Net debt is not intended to
represent total debt as defined by GAAP. Net debt is utilized by
management in evaluating the Company’s financial leverage and
equity valuation, and management believes that investors also may
find net debt to be helpful for the same purposes.
(g)
Beginning in 2022, and consistent
with no expected required minimum cash contributions, no pension
expense has been included in calculating earnings before interest,
taxes, depreciation and amortization as defined in the Second
Amended and Restated Credit Agreement, which is used to compute
certain borrowing ratios and to compute non-GAAP net income (loss)
from ongoing operations. On November 3, 2023, the pension plan
termination and settlement process was completed, and the Company’s
relevant pension plan obligation was transferred to Massachusetts
Mutual Life Insurance Company. This completed the pension plan
termination process that began in February 2022. As a result of the
routine administrative process to transition the pension plan, the
Company recognized a $2.0 million charge to adjust the initial
purchase price of the nonparticipating single premium group annuity
contract.
(h)
The ABL Facility has customary
representations and warranties including, as a condition to each
borrowing, that all such representations and warranties are true
and correct in all material respects (including a representation
that no Material Adverse Effect (as defined in the ABL Facility)
has occurred since December 31, 2022). In the event that the
Company cannot certify that all conditions to the borrowing have
been met, the lenders can restrict the Company’s future borrowings
under the ABL Facility. Because a Cash Dominion Period (as defined
in the ABL Facility) is currently in effect and the Company is
required to represent that no Material Adverse Effect has occurred
as a condition to borrowing, the outstanding debt under the ABL
Facility (all contractual payments due on June 30, 2026) is
classified as a current liability in the consolidated balance
sheets.
In accordance with the ABL
Facility, the lenders have been provided with the Company’s
financial statements, covenant compliance certificates and
projections to facilitate their ongoing assessment of the Company.
Accordingly, the Company believes the likelihood that lenders would
exercise the subjective acceleration clause whereby prohibiting
future borrowings is remote. As of June 30, 2024, the Company was
in compliance with all debt covenants.
(i)
Tredegar’s presentation of
Consolidated EBITDA from ongoing operations is a non-GAAP financial
measure that excludes the effects of gains or losses associated
with plant shutdowns, asset impairments and restructurings, gains
or losses from the sale of assets, goodwill impairment charges, net
periodic benefit cost for the frozen defined benefit pension plan
and other items (which includes gains and losses for an investment
accounted for under the fair value method). Consolidated EBITDA
from ongoing operations also excludes depreciation &
amortization, stock option-based compensation costs, interest and
income taxes. Consolidated EBITDA is a key financial and analytical
measure used by management to gauge the operating performance of
Tredegar’s ongoing operations. It is not intended to represent the
stand-alone results for Tredegar’s ongoing operations under GAAP
and should not be considered as an alternative to net income (loss)
or earnings (loss) per share as defined by GAAP. It excludes items
that management believes do not relate to Tredegar’s ongoing
operations. A reconciliation of Consolidated EBITDA from ongoing
operations for the three and six months ended June 30, 2024 and
2023 is shown below:
Three Months Ended June 30,
Six Months Ended June 30,
($ in millions)
2024
2023
2024
2023
Net income (loss) as reported under
GAAP1
$
8.8
$
(18.9
)
$
12.1
$
(19.9
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.1
—
0.5
0.1
Gain associated with the investment in
kaléo
(0.1
)
—
(0.1
)
(0.2
)
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
—
0.8
—
0.8
(Gains) losses from sale of assets and
other
1.5
1.6
3.4
2.5
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
2.6
—
5.3
Goodwill impairment
—
11.9
—
11.9
Net income (loss) from ongoing
operations1
10.3
(2.0
)
15.9
0.5
Depreciation and amortization
6.5
6.5
13.3
13.4
Stock option-based compensation costs
—
—
—
0.2
Interest expense
3.4
2.4
6.8
4.7
Income taxes from ongoing operations1
2.4
0.5
3.7
1.9
Consolidated EBITDA from ongoing
operations
$
22.6
$
7.4
$
39.7
$
20.7
1. Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) are shown in Note
(e).
2. For more information, see Note (g).
(j)
During 2023, uncertainty about the timing
of a recovery in the consumer electronics market persisted, and
manufacturers in the supply chain for consumer electronics
continued to experience reduced capacity utilization and inventory
corrections. In light of the limited visibility on the timing of a
recovery and the expected adverse future impact to the Surface
Protection business, coupled with a cautious outlook on new product
development opportunities, the Company performed a Step 1 goodwill
impairment analysis, as of June 30, 2023 and September 30, 2023, of
the Surface Protection component of PE Films. The analyses
concluded that the fair value of Surface Protection was less than
its carrying value, thus a non-cash partial goodwill impairment of
$34.9 million ($27.0 million after deferred income tax benefits)
was recognized during 2023. As of December 1, 2023, the Company’s
reporting units with goodwill were Surface Protection in PE Films
and Futura in Aluminum Extrusions. Both of these reporting units
have separately identifiable operating net assets (operating assets
including goodwill and identifiable intangible assets net of
operating liabilities). The Company's Step 0 analysis of these
reporting units concluded that it is more likely than not that the
fair value of each reporting unit was greater than its carrying
value. Therefore, the Step 1 quantitative goodwill impairment tests
for these reporting units were not necessary. The Surface
Protection and Futura reporting units had goodwill in the amounts
of $22.4 million and $13.3 million, respectively, at December 31,
2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240807229585/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
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