Tredegar Corporation (NYSE:TG, also the “Company” or “Tredegar”)
today reported first quarter financial results for the period ended
March 31, 2021.
First quarter 2021 net income from continuing operations was
$9.6 million ($0.29 per diluted share) compared to net loss from
continuing operations of $20.7 million ($0.62 per diluted share) in
the first quarter of 2020. Net income from ongoing operations,
which excludes special items and discontinued operations, was $10.1
million ($0.30 per diluted share) in the first quarter of 2021
compared with $11.8 million ($0.36 per diluted share) in the first
quarter of 2020. A reconciliation of net income (loss) from
continuing operations, a financial measure calculated in accordance
with U.S. generally accepted accounting principles (“GAAP”), to net
income from ongoing operations, a non-GAAP financial measure, for
the three months ended March 31, 2021 and 2020, is provided in Note
(a) of the Notes to the Financial Tables in this press release.
First Quarter Financial Results Highlights
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") from ongoing operations for Aluminum Extrusions of $13.3
million was $1.6 million higher than the first quarter of 2020
- EBITDA from ongoing operations for PE Films of $7.2 million was
$5.2 million lower than the first quarter of 2020
- EBITDA from ongoing operations for Flexible Packaging Films of
$9.6 million was $3.1 million higher than the first quarter of
2020
John Steitz, Tredegar’s president and chief executive officer
said, “Bonnell’s current bookings and backlog are at record high
levels. Our main challenge is overcoming a shortage in
manufacturing personnel to meet production needs and customer
demand. Our PE Films segment, which is mainly comprised of our
Surface Protection business, performed as expected with its decline
in financial performance due to a previously disclosed customer
product transition. Terphane continues to deliver exceptional
performance.”
THE IMPACT OF COVID-19 AND RELATED FINANCIAL
CONSIDERATIONS
Essential Business and Employee Considerations
The Company’s priorities during the coronavirus ("COVID-19")
pandemic continue to be to protect the health and safety of
employees while keeping its manufacturing sites open due to the
essential nature of many of its products. The Company has continued
to manufacture the full range of products at its facilities.
The Company’s protocols to protect the health and well-being of
its employees from COVID-19 continue to develop as COVID-19
informed work practices evolve and the Company responds to
recommended and mandated actions of government and health
authorities. In addition, to facilitate a return to fully
functional operations, the Company has undertaken an education
campaign to provide employees with the most accurate and up-to-date
information available, particularly from the Centers for Disease
Control (“CDC”), the Office of the Surgeon General and state and
local health departments. The Company believes that these efforts
are encouraging employees to receive a vaccine when they are
eligible.
Bonnell Aluminum is experiencing higher than normal absenteeism
and hiring difficulties, which it attributes to COVID-19-related
factors. Bonnell Aluminum attempts to match its direct labor with
demand and is facing difficulty maintaining sufficient labor to
meet desired shipment levels.
All three business units are successfully managing through
supply chain disruptions, including raw material shortages in
aluminum and plastic resin and transportation delays.
Financial Considerations
Approximately 62% of Bonnell Aluminum’s sales volume in 2020 was
related to building and construction (“B&C”) markets
(non-residential B&C of 55% and residential B&C of 7%).
Bonnell Aluminum continued to experience weakness in
non-residential B&C during the first quarter of 2021 with
related volume declining 15.1% versus the first quarter of last
year. The decline in non-residential B&C volume started in the
fourth quarter of 2020 after the fulfillment of contracts that
existed at the start of the COVID-19 pandemic. In addition, a
portion of the non-residential B&C volume decline was due to
pandemic-related production inefficiencies, labor constraints and
severe weather in the Southeastern United States. However, Bonnell
Aluminum's performance to date during the COVID-19 environment has
exceeded the Company's expectations, with current bookings and
backlog at record high levels.
Demand has also remained strong during the COVID-19 pandemic for
the Company’s flexible food packaging films produced by Terphane.
The Surface Protection component of PE Films had record EBITDA from
ongoing operations in 2020 but is now experiencing a decline in
volume related to a previously disclosed customer product
transition and the timing of customer orders. See the PE Films
section below for further discussion.
OPERATIONS REVIEW
Aluminum Extrusions
Aluminum Extrusions, which is 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: 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
(In thousands, except percentages)
March 31,
2021
2020
Sales volume (lbs)
44,365
47,317
(6.2
)%
Net sales
$
118,125
$
117,887
0.2
%
Ongoing operations:
EBITDA
$
13,302
$
11,677
13.9
%
Depreciation & amortization
$
(4,130
)
$
(4,113
)
(0.4
)%
EBIT*
$
9,172
$
7,564
21.3
%
Capital expenditures
$
2,447
$
1,574
* See the net sales and EBITDA from
ongoing operations by segment statements in the Financial
Statements of this press release for a reconciliation of this
non-GAAP measure to GAAP.
First Quarter 2021 Results vs. First
Quarter 2020 Results
Net sales (sales less freight) in the first quarter of 2021 were
relatively flat versus the first quarter of 2020 despite lower
volume, primarily due to the pass-through of higher metal costs and
an increase in average selling prices to cover higher operating
costs. Sales volume in the first quarter of 2021 decreased by 6.2%
versus the first quarter of 2020. Sales volume associated with
non-residential B&C markets, which represented 55% of volume in
2020, declined 15.1% in the first quarter of 2021 versus the first
quarter of 2020. Sales volume associated with specialty markets,
which represented 31% of total volume in 2020, decreased 2.3% in
the first quarter of 2021, and sales volume associated with the
automotive market, which represented 9% of total volume in 2020,
increased 8.0%. See “The Impact of COVID-19 and Related Financial
Considerations” section for more information on business
conditions.
EBITDA from ongoing operations in the first quarter of 2021
increased by $1.6 million in comparison to the first quarter of
2020, including a $2.3 million favorable variance from the timing
of the flow through of aluminum raw materials costs under the
first-in first-out (“FIFO”) inventory method. This favorable FIFO
variance was due to aluminum raw materials previously acquired at
lower prices in a quickly rising pricing environment driving a
benefit of $1.0 million in the first quarter of 2021 versus a
charge of $1.3 million in the first quarter of 2020. In addition,
higher pricing ($0.8 million) and lower general, sales and
administrative expenses ($0.8 million) were more than offset by
lower volume ($1.4 million) and higher labor and other operating
costs ($1.0 million).
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Bonnell Aluminum are projected to be
$21 million in 2021, including $3 million for infrastructure
upgrades at the Carthage, Tennessee and Newnan, Georgia facilities,
$3 million for a roof replacement at the Elkhart, Indiana site and
$4 million for strategic projects. In addition, approximately $11
million will be required to support continuity of current
operations. Depreciation expense is projected to be $15 million in
2021. Amortization expense is projected to be $2 million in
2021.
PE Films
PE Films is composed of surface protection films, polyethylene
overwrap and packaging films and polypropylene films for other
markets. All historical results for the Personal Care component,
which was sold in the fourth quarter of 2020, have been presented
as discontinued operations. The Surface Protection component of the
PE Films segment now includes the packaging lines and operations
located at the Pottsville, Pennsylvania manufacturing site, which
was previously reported within the Personal Care component of PE
Films. A summary of results for PE Films is provided below:
Three Months Ended
Favorable/
(Unfavorable)
% Change
(In thousands, except percentages)
March 31,
2021
2020
Sales volume (lbs)
10,244
12,178
(15.9
)%
Net sales
$
27,953
$
36,800
(24.0
)%
Ongoing operations:
EBITDA
$
7,213
$
12,413
(41.9
)%
Depreciation & amortization
$
(1,420
)
$
(1,494
)
5.0
%
EBIT*
$
5,793
$
10,919
(46.9
)%
Capital expenditures
$
1,233
$
1,621
* See the net sales and EBITDA from
ongoing operations by segment statements in the Financial
Statements of this press release for a reconciliation of this
non-GAAP measure to GAAP.
First Quarter 2021 Results vs. First
Quarter 2020 Results
Net sales declined by $8.8 million in the first quarter of 2021
versus the first quarter of 2020 primarily due to lower volume and
unfavorable mix associated with the previously disclosed customer
product transitions in Surface Protection.
EBITDA from ongoing operations in the first quarter of 2021
decreased by $5.2 million versus the first quarter of 2020,
primarily due to lower sales associated with the customer product
transitions in Surface Protection ($5.8 million) and higher other
operating costs ($0.3 million), partially offset by higher sales of
products unrelated to the customer product transitions ($0.9
million).
Customer Product Transitions in Surface Protection
The Surface Protection component of PE Films supports
manufacturers of optical and other specialty substrates used in
flat panel display products. These films are primarily used by
customers to protect components of displays in the manufacturing
and transportation processes and then discarded.
The Company previously reported the risk that a portion of its
film products used in surface protection applications will be made
obsolete by possible future customer product transitions to less
costly alternative processes or materials. These transitions
principally relate to one customer. The Company believes that
previously reported delays in this customer's transitions were
recently resolved by the customer and much of the remaining
transitions are expected to occur by the end of 2021. Under this
scenario, the Company estimates that the contribution to EBITDA
from ongoing operations for PE Films could decline due to the
remaining customer product transitions by $18 million in 2021
versus 2020 (of which approximately $5.8 million occurred during
the first quarter of 2021) and $4 million in 2022 versus 2021. To
offset the expected adverse impact, the Company is aggressively
pursuing and making progress in generating contribution from sales
from new surface protection products, applications and customers
and implementing cost savings measures. Annual contribution to
EBITDA from ongoing operations for PE Films on surface protection
products unrelated to the customer product transitions increased by
approximately $12 million during the past two years.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for PE Films are projected to be $4 million
in 2021, including $2 million for productivity projects and $2
million for capital expenditures required to support continuity of
current operations. Depreciation expense is projected to be $6
million in 2021. There is no amortization expense for PE Films.
Flexible Packaging Films
Flexible Packaging Films, which is also referred to as Terphane,
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
(In thousands, except percentages)
March 31,
2021
2020
Sales volume (lbs)
27,408
25,779
6.3
%
Net sales
$
32,521
$
30,574
6.4
%
Ongoing operations:
EBITDA
$
9,623
$
6,553
46.8
%
Depreciation & amortization
$
(466
)
$
(428
)
(8.9
)%
EBIT*
$
9,157
$
6,125
49.5
%
Capital expenditures
$
1,271
$
848
* See the net sales and EBITDA from
ongoing operations by segment statements in the Financial
Statements of this press release for a reconciliation of this
non-GAAP measure to GAAP.
First Quarter 2021 Results vs. First
Quarter 2020 Results
Net sales in the first quarter of 2021 increased 6.4% compared
to the first quarter of 2020 primarily due to higher sales volume
and favorable product mix, partially offset by lower selling prices
from the pass-through of lower resin costs.
EBITDA from ongoing operations in the first quarter of 2021
increased by $3.1 million versus the first quarter of 2020
primarily due to:
- Lower raw material costs, net of lower selling prices ($0.9
million), higher sales volume ($0.8 million), and favorable product
mix ($1.1 million), partially offset by unfavorable absorption of
fixed costs ($1.1 million);
- Net favorable foreign currency translation of Real-denominated
operating costs ($1.0 million); and
- Foreign currency transaction gains of $0.4 million in 2021
versus gains of $0.1 million in 2020.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Flexible Packaging Films are projected
to be $9 million in 2021, including $5 million for new capacity for
value-added products and productivity projects, and $4 million for
capital expenditures required to support continuity of current
operations. Depreciation expense is projected to be $2 million in
2021. Amortization expense is projected to be $0.4 million in
2021.
Corporate Expenses, Interest, Taxes & Other
Corporate expenses, net, increased in the first three months of
2021 versus the first three months of 2020 primarily due to higher
employee-related compensation ($0.9 million) and higher stock
compensation expense ($1.1 million), partially offset by lower
professional fees ($1.0 million) related to remediation activities
of previously disclosed material weaknesses in the Company’s
internal control over financial reporting and business development
activities.
Interest expense was $0.8 million in the first three months of
2021 in comparison to $0.6 million in the first three months of
2020, primarily due to higher average debt levels.
The effective tax rate used to compute income tax expense
(benefit) for continuing operations in the first three months of
2021 was 24.4%, compared to 23.2% in the first three months of
2020. The effective tax rate from ongoing operations comparable to
the earnings reconciliation table provided in Note (a) of the Notes
to Financial Tables in this press release was 24.4% for the first
three months of 2021 versus 24.2% for the first three months of
2020 (see also Note (f) of the Notes to Financial Tables). An
explanation of differences between the effective tax rate for
income (loss) from continuing operations and the U.S. federal
statutory rate for 2021 and 2020 will be provided in the Form
10-Q.
Pension expense was $3.5 million in both the first three months
of 2021 and the first three months of 2020. The impact on earnings
from pension expense is reflected in “Corporate expenses, net” in
the net sales and EBITDA from ongoing operations by segment table.
Pension expense is projected to be $14 million in 2021, which is
determined at the beginning of the year based on the funded status
of the Company’s defined benefit pension plan and actuarial
assumptions at that time. Tredegar’s frozen defined benefit pension
plan was underfunded on a GAAP basis by $103 million at December
31, 2020, comprised of investments at fair value of $233 million
and a projected benefit obligation (“PBO”) of $336 million. GAAP
accounting requires adjustment for changes in values of assets and
the PBO only at the end of each year, even though these values
change daily. The Company estimates that changes to the values of
pension plan assets and liabilities resulted in a decrease in the
underfunding from $103 million at December 31, 2020 to
approximately $70 million at March 31, 2021.
Tredegar owns approximately 19% of kaleo, Inc. (“kaléo”), which
makes and sells an epinephrine delivery device under the name
AUVI-Q®. The Company accounts for its investment in kaléo on a fair
value method. The Company’s estimate of the fair value of its
interest in kaléo at March 31, 2021 was $35.0 million ($30.0
million after taxes), essentially unchanged from the balance at
December 31, 2020 of $34.6 million ($29.7 million after taxes).
kaléo’s stock is not publicly traded. The ultimate value of the
Company’s ownership interest in kaléo could be materially different
from the estimated fair value and will ultimately be determined and
realized only if and when a liquidity event occurs.
Total debt was $143 million at March 31, 2021 compared to total
debt of $134 million at December 31, 2020. Net debt (debt in excess
of cash and cash equivalents), a non-GAAP financial measure, was
$121.1 million at March 31, 2021 compared to $122.2 million at
December 31, 2020. The Company's revolving credit agreement allows
borrowings of up to $375 million and matures in June 2024. The
Company believes that its most restrictive covenant (computed
quarterly) is the leverage ratio, which permits maximum borrowings
of up to 4x EBITDA, as defined under the revolving credit agreement
for the trailing four quarters ("Credit EBITDA"). The Company had
Credit EBITDA and a leverage ratio (calculated in the "Liquidity
and Capital Resources" section of the Company's Form 10-Q for the
period ended March 31, 2021) of $93.1 million and 1.54x,
respectively, at March 31, 2021. See the Notes to the Financial
Tables for a reconciliation of net debt to the most directly
comparable GAAP financial measure.
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. In addition, the Company's current
projections for its businesses could be materially affected by the
highly uncertain impact of COVID-19. As a consequence, the
Company's results could differ significantly from its projections,
depending on, among other things, the duration of "shelter in
place" orders and the ultimate impact of the pandemic on employees,
supply chains, customers and the U.S. and world economies.
Accordingly, you should not place undue reliance on these
forward-looking statements. Factors that could cause actual results
to differ from expectations include, without limitation, the
following:
- 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;
- inability to develop, efficiently manufacture and deliver new
products at competitive prices;
- 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;
- uncertain economic conditions in countries in which the Company
does business;
- competition from other manufacturers, including manufacturers
in lower-cost countries and manufacturers benefiting from
government subsidies;
- impact of fluctuations in foreign exchange rates;
- a change in the amount of the Company's underfunded defined
benefit pension plan liability;
- an increase in the operating costs incurred by the Company's
business units, including, for example, the cost of raw materials
and energy;
- 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;
- disruption to the Company's manufacturing facilities;
- the impact of public health epidemics on employees, production
and the global economy, such as the COVID-19 pandemic;
- an information technology system failure or breach;
- volatility and uncertainty of the valuation of the Company's
investment in kaléo;
- the impact of the imposition of tariffs and sanctions on
imported aluminum ingot used by Bonnell Aluminum;
- the impact of new tariffs, duties or other trade restrictions
imposed as a result of rising trade tensions between the U.S. and
other countries;
- the termination of anti-dumping duties on products imported to
Brazil that compete with products produced by Flexible
Packaging;
- failure to establish and maintain effective internal control
over financial reporting;
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 Form 10-K for the year ended December 31, 2020. 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 2020 sales from continuing operations of $755
million. With approximately 2,400 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
March 31,
2021
2020
Sales
$
184,822
$
192,136
Other income (expense), net (c)(d)
760
(26,130
)
185,582
166,006
Cost of goods sold (c)
141,285
145,169
Freight
6,223
6,875
Selling, R&D and general expenses
(c)
20,105
22,214
Amortization of intangibles
723
758
Pension and postretirement benefits
3,540
3,567
Interest expense
822
555
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
169
61
Goodwill impairment (e)
—
13,696
172,867
192,895
Income (loss) from continuing operations
before income taxes
12,715
(26,889
)
Income tax expense (benefit) (c)
3,097
(6,226
)
Net income (loss) from continuing
operations
9,618
(20,663
)
Income (loss) from discontinued
operations, net of tax
(587
)
(1,658
)
Net income (loss)
$
9,031
$
(22,321
)
Earnings (loss) per share:
Basic:
Continuing operations
$
0.29
$
(0.62
)
Discontinued operations
(0.02
)
(0.05
)
Basic earnings (loss) per share
$
0.27
$
(0.67
)
Diluted:
Continuing operations
$
0.29
$
(0.62
)
Discontinued operations
(0.02
)
(0.05
)
Diluted earnings (loss) per share
$
0.27
$
(0.67
)
Shares used to compute earnings (loss) per
share:
Basic
33,406
33,313
Diluted
33,644
33,313
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2021
2020
Net Sales
Aluminum Extrusions
$
118,125
$
117,887
PE Films
27,953
36,800
Flexible Packaging Films
32,521
30,574
Total net sales
178,599
185,261
Add back freight
6,223
6,875
Sales as shown in the Condensed
Consolidated Statements of Income
$
184,822
$
192,136
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
13,302
$
11,677
Depreciation & amortization
(4,130
)
(4,113
)
EBIT (b)
9,172
7,564
Plant shutdowns, asset impairments,
restructurings and other (c)
183
(688
)
Goodwill impairment (e)
—
(13,696
)
PE Films:
Ongoing operations:
EBITDA (b)
7,213
12,413
Depreciation & amortization
(1,420
)
(1,494
)
EBIT (b)
5,793
10,919
Plant shutdowns, asset impairments,
restructurings and other (c)
(124
)
(28
)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
9,623
6,553
Depreciation & amortization
(466
)
(428
)
EBIT (b)
9,157
6,125
Plant shutdowns, asset impairments,
restructurings and other (c)
(38
)
—
Total
24,143
10,196
Interest income
7
27
Interest expense
822
555
Gain (loss) on investment in kaléo
accounted for under fair value method (d)
718
(26,100
)
Stock option-based compensation costs
468
566
Corporate expenses, net (c)
10,863
9,891
Income (loss) from continuing operations
before income taxes
12,715
(26,889
)
Income tax expense (benefit)
3,097
(6,226
)
Net income (loss) from continuing
operations
9,618
(20,663
)
Net income (loss) from discontinued
operations, net of tax
(587
)
(1,658
)
Net income (loss)
$
9,031
$
(22,321
)
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
March 31, 2021
December 31, 2020
Assets
Cash & cash equivalents
$
21,859
$
11,846
Accounts & other receivables, net
87,648
86,327
Income taxes recoverable
2,266
2,807
Inventories
70,623
66,437
Prepaid expenses & other
14,426
19,679
Current assets of discontinued
operations
3,285
1,339
Total current assets
200,107
188,435
Property, plant & equipment, net
165,618
166,545
Right-of-use leased assets
15,482
16,037
Investment in kaléo (cost basis of
$7,500)
35,000
34,600
Identifiable intangible assets, net
18,012
18,820
Goodwill
67,708
67,708
Deferred income taxes
17,295
19,068
Other assets
3,131
3,506
Non-current assets of discontinued
operations
151
151
Total assets
$
522,504
$
514,870
Liabilities and Shareholders’
Equity
Accounts payable
$
94,477
$
89,702
Accrued expenses
33,411
40,741
Lease liability, short-term
2,066
2,082
Income taxes payable
1,206
706
Current liabilities of discontinued
operations
6,438
7,521
Total current liabilities
137,598
140,752
Lease liability, long-term
14,424
14,949
Long-term debt
143,000
134,000
Pension and other postretirement benefit
obligations, net
105,998
110,585
Other non-current liabilities
5,497
5,529
Shareholders’ equity
115,987
109,055
Total liabilities and shareholders’
equity
$
522,504
$
514,870
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
2021
2020
Cash flows from operating activities:
Net income (loss)
$
9,031
$
(22,321
)
Adjustments for noncash items:
Depreciation
5,463
7,557
Amortization of intangibles
723
758
Reduction of right-of-use lease asset
549
696
Goodwill impairment
—
13,696
Deferred income taxes
1,017
(9,804
)
Accrued pension income and post-retirement
benefits
3,540
3,567
(Gain) loss on investment accounted for
under the fair value method
(400
)
26,100
Changes in assets and liabilities:
Accounts and other receivables
(2,126
)
(2,849
)
Inventories
(5,442
)
(6,982
)
Income taxes recoverable/payable
1,102
3,478
Prepaid expenses and other
2,798
(294
)
Accounts payable and accrued expenses
(2,517
)
3,588
Lease liability
(535
)
(741
)
Pension and postretirement benefit plan
contributions
(3,886
)
(1,967
)
Other, net
553
595
Net cash provided by operating
activities
9,870
15,077
Cash flows from investing activities:
Capital expenditures
(5,259
)
(4,854
)
Net cash used in investing activities
(5,259
)
(4,854
)
Cash flows from financing activities:
Borrowings
32,000
16,500
Debt principal payments
(23,000
)
(15,500
)
Dividends paid
(4,025
)
(4,005
)
Other
915
(586
)
Net cash provided by (used in) financing
activities
5,890
(3,591
)
Effect of exchange rate changes on
cash
(488
)
(2,995
)
Increase in cash and cash equivalents
10,013
3,637
Cash and cash equivalents at beginning of
period
11,846
31,422
Cash and cash equivalents at end of
period
$
21,859
$
35,059
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, discontinued operations and
other items (which includes unrealized gains and losses for an
investment accounted for under the fair value method) which have
been presented separately and removed from net income (loss) from
continuing operations 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) from continuing operations 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 months ended March 31, 2021 and 2020 is
shown below:
Three Months Ended March 31,
($ in millions, except per share data)
2021
2020
Net income (loss) from continuing
operations as reported under GAAP
$
9.6
$
(20.7
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.2
—
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
(0.6
)
20.4
Other
0.9
1.6
Goodwill impairment
—
10.5
Net income (loss) from ongoing
operations
$
10.1
$
11.8
Earnings (loss) per share from continuing
operations as reported under GAAP (diluted)
$
0.29
$
(0.62
)
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
(0.02
)
0.61
Other
0.03
0.05
Goodwill impairment
—
0.32
Earnings (loss) per share from ongoing
operations (diluted)
$
0.30
$
0.36
Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) are shown in Note
(f).
(b)
EBITDA (earnings before interest, taxes,
depreciation and amortization) from ongoing operations is the key
profitability metric used by the Company’s chief operating decision
maker to assess segment financial performance. For more business
segment information, see Note 11 in the Notes to Financial
Statements in the Form 10-Q for the quarter ended March 31,
2021.
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) from continuing operations as
defined by GAAP. EBIT is a widely understood and utilized metric
that is meaningful to certain investors. The Company believes 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)
Losses associated with plant shutdowns,
asset impairments, restructurings and other items for the three
months ended March 31, 2021 and 2020 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
March 31, 2021
($ in millions)
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gain) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses, net of
relief2
$
(0.2
)
$
(0.1
)
Total for Aluminum Extrusions
$
(0.2
)
$
(0.1
)
PE Films:
(Gain) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
$
0.2
$
0.1
Total for PE Films
$
0.2
$
0.1
Corporate:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Maintenance costs associated with
held-for-sale assets
$
0.2
$
0.2
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with:
remediation activities and other costs relating to the Company’s
material weaknesses in internal control over financial reporting;
and business development activities1
1.0
0.7
Write-down of investment in Harbinger
Capital Partners Special Situations Fund2
0.1
0.1
Stock compensation expense associated with
the fair value remeasurement of awards granted at the time of the
2020 special dividend1
0.4
0.3
Transition service fees, net of corporate
costs associated with the divested Personal Care business2
(0.3
)
(0.2
)
Total for Corporate
$
1.4
$
1.1
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.
Three Months Ended
March 31, 2020
($ in millions)
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
Consulting expenses for ERP feasibility
study2
0.7
0.5
Total for Aluminum Extrusions
$
0.7
$
0.5
Corporate:
Professional fees associated with:
remediation activities and other costs relating to the Company’s
material weaknesses in internal control over financial reporting;
and business development activities2
1.8
1.6
Write-down of investment in Harbinger
Capital Partners Special Situations Fund3
0.2
0.1
U.S. tax benefit on foreign branch
income1
—
(0.6
)
Total for Corporate
$
2.0
$
1.1
1. Included in "Income tax expense
(benefit)" in condensed consolidated statements of income.
2. Included in “Selling, R&D and
general expenses” in the condensed consolidated statements of
income.
3. Included in “Other income (expense),
net” in the condensed consolidated statements of income.
(d)
A gain on the Company’s investment in
kaléo of $0.7 million was recognized in the three months ended
March 31, 2021, compared to a loss of $26.1 million in the three
months ended March 31, 2020 which is reported in “Other income
(expense), net” in the condensed consolidated statements of income.
The gain in the first quarter of 2021 includes a $0.3 million
dividend received from kaléo.
(e)
In the first quarter of 2020, the
operations of Aluminum Extrusions’ Niles, Michigan and Elkhart,
Indiana facilities (which were acquired as “AACOA” in October 2012)
was expected to be severely impacted by the COVID-19 pandemic, with
over 80% of the aluminum extrusions manufactured at these
facilities sold to customers that make consumer durable products,
such as recreational boating and power sports vehicles, and to
customers serving the building and construction and automotive
markets. As a result, a goodwill impairment charge of $13.7 million
was recognized in Aluminum Extrusions, which represented the entire
amount of goodwill associated with the acquisition of AACOA.
(f)
Tredegar’s presentation of net income
(loss) from ongoing operations is a non-GAAP financial measure that
excludes the effects of gains or losses associated with plant
shutdowns, asset impairments and restructurings, gains or losses
from the sale of assets, goodwill impairment charges, discontinued
operations, and other items (which includes unrealized gains and
losses for an investment accounted for under the fair value
method), which has been presented separately and removed from net
income (loss) from continuing operations as reported under GAAP.
Net income (loss) from ongoing operations is a key financial and
analytical measure used by management to gauge the operating
performance of Tredegar’s ongoing operations. It is not intended to
represent the stand-alone results for Tredegar’s ongoing operations
under GAAP and should not be considered as an alternative to net
income (loss) from continuing operations as defined by GAAP. It
excludes items that we believe do not relate to Tredegar’s ongoing
operations.
Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) from ongoing
operations for the three months ended March 31, 2021 and 2020 are
presented below in order to show the impact on the effective tax
rate:
($ in millions)
Pre-tax
Tax Expense
(Benefit)
After-Tax
Effective
Tax Rate
Three Months Ended March 31,
2021
Net income (loss) from continuing
operations reported under GAAP
$
12.7
$
3.1
$
9.6
24.4
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.2
—
0.2
(Gains) losses from sale of assets and
other
0.5
0.2
0.3
Net income (loss) from ongoing
operations
$
13.4
$
3.3
$
10.1
24.4
%
Three Months Ended March 31,
2020
Net income (loss) from continuing
operations reported under GAAP
$
(26.9
)
$
(6.2
)
$
(20.7
)
23.2
%
(Gains) losses from sale of assets and
other
28.8
6.8
22.0
Goodwill impairment
13.7
3.2
10.5
Net income (loss) from ongoing
operations
$
15.6
$
3.8
$
11.8
24.2
%
(g)
Net debt is calculated as follows:
(in millions)
March 31,
December 31,
2021
2020
Debt
$
143.0
$
134.0
Less: Cash and cash equivalents
21.9
11.8
Net debt
$
121.1
$
122.2
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210507005288/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
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