Tredegar Corporation (NYSE:TG, also the “Company” or “Tredegar”)
today reported fourth quarter and full year financial results for
the period ended December 31, 2020.
Fourth quarter 2020 net income from continuing operations was
$6.5 million ($0.19 per diluted share) compared to net income from
continuing operations of $1.0 million ($0.03 per diluted share) in
the fourth quarter of 2019. Net income from ongoing operations,
which excludes special items and discontinued operations, was $9.7
million ($0.29 per diluted share) in the fourth quarter of 2020 and
$9.9 million ($0.30 per diluted share) in the fourth quarter of
2019.
Full year 2020 net loss from continuing operations was $16.8
million ($0.51 per diluted share) compared to net income from
continuing operations of $58.5 million ($1.76 per diluted share) in
2019. Net income from ongoing operations was $50.8 million ($1.51
per diluted share) in 2020 and $47.6 million ($1.42 per diluted
share) in 2019. 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 and twelve months ended December 31, 2020 and 2019, is
provided in Note (a) of the Notes to the Financial Tables in this
press release.
Fourth Quarter Financial Results Highlights
- Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) from ongoing operations for Aluminum Extrusions of $13.6
million was $0.8 million lower than the fourth quarter of 2019
- EBITDA from ongoing operations for PE Films of $11.2 million
was $0.5 million higher than the fourth quarter of 2019
- EBITDA from ongoing operations for Flexible Packaging Films of
$8.1 million was $3.8 million higher than the fourth quarter of
2019
John Steitz, Tredegar’s president and chief executive officer,
said, “Although 2020 was an extremely challenging year with
COVID-19, we believe that it was one of our best. Bonnell
Aluminum’s volume and EBITDA from ongoing operations suffered under
COVID-19 conditions, yet data indicates that we outperformed the
aluminum extrusions industry. Current bookings and backlog are at
high levels. Surface Protection’s EBITDA from ongoing operations
achieved a record high while facing the headwinds of a significant
customer product transition. Surface Protection continues to make
progress in generating contribution from sales of new products,
applications and customers and implementing cost savings measures.
Terphane had record EBITDA since being acquired in October of 2011,
and its stellar performance has demonstrated the excellence of the
Terphane leadership team.”
Mr. Steitz continued, “At the end of October, we sold the
Personal Care business, which was at about the break-even level of
EBITDA from ongoing operations, for cash proceeds of approximately
$46 million. In December, we supplemented the cash from this sale
and the cash that had built up on our balance sheet with borrowings
under our revolving credit facility to pay a $200 million, or $5.97
per share, special dividend. In light of our history of strong cash
generation, we believe that the related borrowings prudently use
financial leverage in a low interest rate environment while also
preserving available capital to meet the needs of our business
units.”
Mr. Steitz concluded, “We are proud of our performance in 2020
despite COVID-19. But most of all, we are proud of our employees,
who have demonstrated their dedication and strong work ethic during
these unprecedented times to deliver exceptional performance.”
THE IMPACT OF COVID-19
Essential Business and Employee Considerations
The Company’s priorities during the 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. Within the limitations imposed by the health and
safety procedures described below, 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
will encourage employees to receive a vaccine when they are
eligible.
The Company has educated employees about COVID-19, including how
the virus is spread, COVID-19 symptoms and mitigation efforts to
keep employees safe. Even in those facilities not bound by the
Families First Coronavirus Response Act, the Company has adopted
COVID-19 related pay and sick leave policies and remote work
policies that require employees to stay home if they feel ill or
have been exposed to others with the illness, until they are
cleared to return to work by our Human Resources team, who applies
CDC and other state health department guidance to each case. The
Company’s policies include: mandating employees self-monitor for
symptoms; taking an employee’s temperature before entering
production facilities; answering self-screening questions related
to potential exposure and COVID-19 symptoms; mandating frequent
handwashing; requiring social distancing; requiring face coverings
on production floors at all times and in common areas and office
settings where social distancing is difficult; streamlining onsite
personnel to only those required for production and distribution;
strongly encouraging and, where mandated, requiring remote work for
all those who can work from home; limiting travel to essential
business purposes; and regularly cleaning and disinfecting
facilities. In the U.S., the Company has educated employees on
COVID-19-related government benefits and has provided such benefits
even in those facilities where the government benefits are not
mandated.
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.
Financial Considerations
The 2020 annual plan for Bonnell Aluminum (pre-COVID-19)
included sales volume of 201 million pounds and EBITDA from ongoing
operations of $65 million, versus 2019 sales volume of 208 million
pounds and EBITDA from ongoing operations of $65.7 million. Actual
2020 sales volume was 186 million pounds and EBITDA from ongoing
operations was $55.1 million. 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%). Much of the 2020 sales volume
associated with the B&C market was related to contracts that
existed at the start of the COVID-19 pandemic. With the completion
of many of these contracts, Bonnell began experiencing weakness in
the B&C market during the fourth quarter of 2020. Overall, the
Company believes that volume results for Bonnell Aluminum in 2020
have outperformed the industry, and performance to date during the
COVID-19 environment has exceeded the Company's expectations, with
current bookings and backlog at high levels. No significant issues
have arisen to date on the collection of accounts receivable at
Bonnell Aluminum.
Demand has remained strong under COVID-19 conditions for the
Company’s flexible food packaging films produced by Terphane. The
Surface Protection component of PE Films had record performance for
EBITDA from ongoing operations in the second quarter and first half
of 2020, but it experienced a slowdown in the third quarter, with a
portion of the decline in volume related to a previously disclosed
customer product transition and customer inventory corrections. The
Company believes that while Surface Protection’s customer inventory
corrections were largely resolved during the third quarter of 2020,
it will experience a significant decline in volume and
profitability in the first quarter of 2021 as a result of the
customer product transition. See the PE Films section below for
further discussion. No significant issues have arisen to date on
the collection of accounts receivable at Terphane or Surface
Protection.
Tredegar owns approximately 20% 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 basis. The Company’s estimate of the fair value of its
interest in kaléo at December 31, 2020 was $34.6 million ($29.7
million after taxes), which represents an increase of $0.1 million
($0.1 million after taxes) and a decrease of $60.9 million ($47.6
million after taxes) since September 30, 2020 and December 31,
2019, respectively. The decline in estimated fair value in 2020 was
primarily due to: (i) current projections that assume ongoing
pricing pressures, (ii) expected changes in market access as well
as continued lower market demand for epinephrine delivery devices
resulting from COVID-19-driven delays in in-person back-to-school
schedules and social distancing guidelines, and (iii) a higher
private company liquidity discount. kaléo’s stock is not publicly
traded. The ultimate value of Tredegar’s ownership interest in
kaléo could be materially different from the $34.6 million
estimated fair value reflected in the Company’s financial
statements at December 31, 2020.
Total debt was $134 million at December 31, 2020, compared to
$42 million at December 31, 2019. Net debt (debt in excess of cash
and cash equivalents), a non-GAAP financial measure, was $122.2
million at December 31, 2020, compared to $10.6 million at December
31, 2019. In December 2020, the Company paid a special dividend of
$5.97 per share or $200 million, as a result of strong cash
generation and overall net cash proceeds of approximately $46
million relating to the sale of Personal Care Films. The overall
net cash proceeds resulted from net proceeds of $53 million
received in the fourth quarter of 2020 less $7 million of expected
expenditures during 2021, primarily related to information
technology transition services and severance. 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 Annual Report on the period ended December 31,
2020 ("Form 10-K")) of $93.4 million and 1.43x, respectively, at
December 31, 2020. The Company’s current stress testing under a
COVID-19-driven recession indicates a low probability that a future
leverage ratio will exceed 4.0x. See the Notes to the Financial
Tables for a reconciliation of net debt to the most directly
comparable GAAP financial measure.
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 fourth quarter and full year results for Aluminum Extrusions is
provided below:
Three Months Ended
Favorable/
Year Ended
Favorable/
(In thousands, except percentages)
December 31,
(Unfavorable)
December 31,
(Unfavorable)
2020
2019
% Change
2020
2019
% Change
Sales volume (lbs)
46,408
50,102
(7.4
)%
186,391
208,249
(10.5
)%
Net sales
$
116,145
$
124,292
(6.6
)%
$
455,711
$
529,602
(14.0
)%
Ongoing operations:
EBITDA
$
13,641
$
14,452
(5.6
)%
$
55,137
$
65,683
(16.1
)%
Depreciation & amortization*
(4,771
)
(4,238
)
(12.6
)%
(17,403
)
(16,719
)
(4.1
)%
EBIT**
$
8,870
$
10,214
(13.2
)%
$
37,734
$
48,964
(22.9
)%
Capital expenditures
$
5,547
$
6,010
$
10,260
$
17,855
* Excludes pre-tax accelerated
amortization of trade names of $7.5 million and $10.0 million in
the three months and year ended December 31, 2019, respectively.
See Note (g) of the attached Notes to the Financial Tables. ** See
the attached net sales and EBITDA from ongoing operations by
segment statements for a reconciliation of this non-GAAP measure to
GAAP.
Fourth Quarter 2020 Results vs. Fourth
Quarter 2019 Results
Net sales (sales less freight) in the fourth quarter of 2020
decreased by 6.6% versus 2019 primarily due to lower sales volume,
partially offset by an increase in average selling prices to cover
higher operating costs. Metal costs were relatively flat versus the
fourth quarter of 2019. Sales volume in the fourth quarter of 2020
decreased by 7.4% versus 2019. Sales volume in the specialty
market, which represented 31% of total volume in 2020, increased
9.5% in the fourth quarter of 2020 versus 2019, and sales volume in
the automotive market, which represented 9% of total volume in
2020, was relatively flat versus the fourth quarter of 2019.
Non-residential sales volume, which represented 55% of 2020 volume,
declined 17.5% in the fourth quarter of 2020 versus 2019 primarily
as a result of COVID-19-related lower demand. See “The Impact of
COVID-19” section for more information on business conditions.
EBITDA from ongoing operations in the fourth quarter of 2020
decreased by $0.8 million in comparison to the fourth quarter of
2019. Lower volume ($2.9 million) and higher labor and
employee-related costs ($2.3 million) were partially offset by
higher pricing ($2.4 million) and other lower operating costs ($1.3
million). In addition, the timing of the flow through under the
first-in first-out method of aluminum raw material costs,
previously acquired at lower prices in a quickly rising commodity
pricing environment, resulted in a benefit of $0.6 million in the
fourth quarter of 2020 versus a charge of $0.1 million in the
fourth quarter of 2019.
Full Year 2020 Results vs. Full Year 2019
Results
Net sales in 2020 decreased by 14.0% versus 2019 primarily due
to lower sales volume and the pass-through of lower metal costs,
partially offset by an increase in average selling prices to cover
higher operating costs. Sales volume in 2020 decreased by 10.5%
versus 2019 with declines in all key markets, which the Company
believes was mainly a result of COVID-19-related lower demand.
EBITDA from ongoing operations in 2020 decreased by $10.5
million in comparison to 2019 due to lower volume ($16.1 million)
and higher labor and employee-related costs ($4.3 million),
partially offset by higher pricing ($8.1 million), lower freight
($0.8 million) and lower travel and entertainment expenses as a
result of COVID-19 ($0.9 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 $14 million in
2021. Amortization expense is projected to be $3 million in
2021.
PE Films
PE Films is composed of surface protection films, polyethylene
overwrap films and 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 (“Pottsville
Packaging”), which was previously reported within the Personal Care
component of PE Films. A summary of fourth quarter and full year
results for PE Films is provided below:
Three Months Ended
Favorable/
Year Ended
Favorable/
(In thousands, except percentages)
December 31,
(Unfavorable)
December 31,
(Unfavorable)
2020
2019
% Change
2020
2019
% Change
Sales volume (lbs)
11,827
12,047
(1.8
)%
45,175
43,983
2.7
%
Net sales
$
35,843
$
34,494
3.9
%
$
139,288
$
133,807
4.1
%
Ongoing operations:
EBITDA
$
11,179
$
10,681
4.7
%
$
45,107
$
41,133
9.7
%
Depreciation & amortization
(1,894
)
(1,480
)
(28.0
)%
(6,762
)
(5,860
)
(15.4
)%
EBIT*
$
9,285
$
9,201
0.9
%
$
38,345
$
35,273
8.7
%
Capital expenditures
$
1,147
$
2,993
$
6,024
$
8,567
* See the attached net sales and EBITDA
from ongoing operations by segment statements for a reconciliation
of this non-GAAP measure to GAAP.
Fourth Quarter 2020 Results vs. Fourth
Quarter 2019 Results
Net sales in the fourth quarter of 2020 increased by 3.9% versus
2019 primarily due to favorable sales mix in Surface
Protection.
EBITDA from ongoing operations in the fourth quarter of 2020
increased by $0.5 million versus the fourth quarter of 2019
primarily due to higher EBITDA from ongoing operations in Surface
Protection, partially offset by higher fixed costs in Pottsville
Packaging.
Full Year 2020 Results vs. Full Year 2019
Results
Net sales increased by 4.1% in 2020 versus 2019 primarily due to
higher sales of products in Surface Protection unrelated to
customer product transitions ($12.0 million), partially offset by
lower sales associated with the customer product transitions this
year ($6.8 million).
EBITDA from ongoing operations in 2020 increased by $4.0 million
versus 2019 primarily due to:
- A $3.2 million increase from Surface Protection, primarily due
to sales of products unrelated to the customer product transitions
($8.3 million), partially offset by lower sales associated with the
customer product transitions ($4.5 million); and
- A $0.8 million increase from Pottsville Packaging primarily
related to higher sales volume and favorable raw materials
pricing.
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 could 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 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 has increased since 2018 by approximately $12
million.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for PE Films are projected to be $5 million
in 2021, including $2 million for productivity projects and $3
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 fourth quarter and full year results
for Flexible Packaging Films is provided below:
Three Months Ended
Favorable/ (Unfavorable) %
Change
Year Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
December 31,
December 31,
2020
2019
2020
2019
Sales volume (lbs)
28,026
25,435
10.2
%
113,115
105,276
7.4
%
Net sales
$
34,072
$
31,985
6.5
%
$
134,605
$
133,935
0.5
%
Ongoing operations:
EBITDA
$
8,051
$
4,260
89.0
%
$
30,645
$
14,737
107.9
%
Depreciation & amortization
(455
)
(416
)
(9.4
)%
(1,761
)
(1,517
)
(16.1
)%
EBIT*
$
7,596
$
3,844
97.6
%
$
28,884
$
13,220
118.5
%
Capital expenditures
$
2,511
$
3,174
$
4,959
$
8,866
* See the attached net sales and EBITDA
from ongoing operations by segment statements for a reconciliation
of this non-GAAP measure to GAAP.
Fourth Quarter 2020 Results vs. Fourth
Quarter 2019 Results
Net sales in the fourth quarter of 2020 increased 6.5% versus
the fourth quarter of 2019 primarily due to higher sales volume and
favorable product mix, partially offset by lower selling prices
from the pass-through of lower resin costs.
Terphane’s EBITDA from ongoing operations in the fourth quarter
of 2020 increased by $3.8 million versus the fourth quarter of 2019
primarily due to:
- Lower raw material costs, net of lower selling prices ($1.8
million), higher sales volume ($1.2 million), favorable product mix
($0.7 million) and lower variable costs ($1.1 million), partially
offset by higher fixed costs ($0.4 million) and higher selling and
general administration expenses ($0.4 million);
- Net favorable foreign currency translation of Real-denominated
costs ($0.2 million); and
- Higher foreign currency transaction losses of $0.5 million in
the fourth quarter of 2020 compared to the prior year.
Full Year 2020 Results vs. Full Year 2019
Results
Net sales in 2020 increased 0.5% versus 2019 while volume
increased 7.4% versus 2019 primarily due to lower selling prices
from lower raw material costs and changes in product mix.
Terphane’s EBITDA from ongoing operations in 2020 increased by
$15.9 million versus 2019 due to:
- Lower raw material costs, net of lower selling prices ($8.9
million), higher sales volume ($3.3 million), favorable product mix
($2.2 million) and lower fixed costs ($1.0 million), partially
offset by higher variable costs ($1.1 million) and higher selling
and general administration expenses ($0.4 million);
- Net favorable foreign currency translation of Real-denominated
costs ($1.5 million);
- Foreign currency transaction losses of $0.5 million in 2020
versus gains of $0.2 million in 2019; and
- A benefit of $1.2 million in 2020 resulting from the favorable
settlement of a dispute related to value-added taxes.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Terphane 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, Investments, Interest and Taxes
Pension expense was $14.6 million in 2020, an unfavorable change
of $5.1 million from 2019. The impact on earnings from pension
expense is reflected in “Corporate expenses, net” in the net sales
and EBITDA from ongoing operations by segment statements. Pension
expense is projected to be $14.0 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. In addition to the higher pension expense
in 2020 compared to 2019, corporate expenses, net, increased
primarily due to higher professional fees ($3.4 million) related to
business development activities and higher stock compensation
expense ($1.0 million), partially offset by lower environmental
expenses ($0.6 million) and lower other employee-related
compensation ($1.3 million).
Interest expense was $2.6 million in 2020 in comparison to $4.1
million in 2019, primarily due to lower average debt levels.
The effective tax rate used to compute income taxes for
continuing operations in 2020 was 32.8% compared to 18.8% in 2019.
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 21.4% in 2020 and 21.5%
in 2019 (see also Note (f) of the Notes to Financial Tables). An
explanation of differences between the effective tax rate for
income from continuing operations and the U.S. federal statutory
rate for 2020 and 2019 will be provided in the Form 10-K.
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 coronavirus (COVID-19)
currently impacting the global economy;
- 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. 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
(In Thousands, Except
Per-Share Data)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
Sales
$
192,524
$
198,313
$
755,290
$
826,324
Other income (expense), net (c)(d)
(3,396
)
(137
)
(67,294
)
28,371
189,128
198,176
687,996
854,695
Cost of goods sold (c)
143,755
152,820
558,967
641,140
Freight
6,464
7,542
25,686
28,980
Selling, R&D and general expenses
(c)
24,927
22,141
92,644
84,491
Amortization of intangibles (g)
753
8,419
3,017
13,601
Pension and postretirement benefits
4,019
2,396
14,720
9,642
Interest expense
989
697
2,587
4,051
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
1,651
176
1,725
784
Goodwill impairment (e)
—
—
13,696
—
182,558
194,191
713,042
782,689
Income (loss) from continuing operations
before income taxes
6,570
3,985
(25,046
)
72,006
Income tax expense (benefit)
95
2,995
(8,213
)
13,545
Net income (loss) from continuing
operations
6,475
990
(16,833
)
58,461
Income (loss) from discontinued
operations, net of tax
(5,580
)
(4,126
)
(58,611
)
(10,202
)
Net income (loss)
$
895
$
(3,136
)
$
(75,444
)
$
48,259
Earnings (loss) per share:
Basic:
Continuing operations
$
0.19
$
0.03
$
(0.51
)
$
1.76
Discontinued operations
(0.17
)
(0.12
)
(1.75
)
(0.31
)
Basic earnings (loss) per share
$
0.02
$
(0.09
)
$
(2.26
)
$
1.45
Diluted:
Continuing operations
$
0.19
$
0.03
$
(0.51
)
$
1.76
Discontinued operations
(0.17
)
(0.12
)
(1.75
)
(0.31
)
Diluted earnings (loss) per share
$
0.02
$
(0.09
)
$
(2.26
)
$
1.45
Shares used to compute earnings (loss) per
share:
Basic
33,421
33,278
33,402
33,236
Diluted
33,485
33,341
33,402
33,258
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2020
2019
2020
2019
Net Sales
Aluminum Extrusions
$
116,145
$
124,292
$
455,711
$
529,602
PE Films
35,843
34,494
139,288
133,807
Flexible Packaging Films
34,072
31,985
134,605
133,935
Total net sales
186,060
190,771
729,604
797,344
Add back freight
6,464
7,542
25,686
28,980
Sales as shown in the Condensed
Consolidated Statements of Income
$
192,524
$
198,313
$
755,290
$
826,324
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
13,641
$
14,452
$
55,137
$
65,683
Depreciation & amortization (g)
(4,771
)
(4,238
)
(17,403
)
(16,719
)
EBIT (b)
8,870
10,214
37,734
48,964
Plant shutdowns, asset impairments,
restructurings and other (c)
(869
)
106
(3,506
)
(561
)
Goodwill impairment (e)
—
—
(13,696
)
—
Trade name accelerated amortization
(g)
—
(7,530
)
—
(10,040
)
PE Films:
Ongoing operations:
EBITDA (b)
11,179
10,681
45,107
41,133
Depreciation & amortization
(1,894
)
(1,480
)
(6,762
)
(5,860
)
EBIT (b)
9,285
9,201
38,345
35,273
Plant shutdowns, asset impairments,
restructurings and other (c)
(1,751
)
(178
)
(1,974
)
(733
)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
8,051
4,260
30,645
14,737
Depreciation & amortization
(455
)
(416
)
(1,761
)
(1,517
)
EBIT (b)
7,596
3,844
28,884
13,220
Plant shutdowns, asset impairments,
restructurings and other (c)
(4
)
—
(18
)
—
Total
23,127
15,657
85,769
86,123
Interest income
1
41
44
66
Interest expense
989
697
2,587
4,051
Gain (loss) on investment in kaléo
accounted for under fair value method (d)
100
—
(60,900
)
28,482
Loss on sale of Bright View Technologies
(i)
(2,299
)
—
(2,299
)
—
Stock option-based compensation costs
394
791
2,161
4,132
Corporate expenses, net (c)
12,976
10,225
42,912
34,482
Income (loss) from continuing operations
before income taxes
6,570
3,985
(25,046
)
72,006
Income tax expense (benefit)
95
2,995
(8,213
)
13,545
Net income (loss) from continuing
operations
6,475
990
(16,833
)
58,461
Income (loss) from discontinued
operations, net of tax
(5,580
)
(4,126
)
(58,611
)
(10,202
)
Net income (loss)
$
895
$
(3,136
)
$
(75,444
)
$
48,259
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
December 31, 2020
December 31, 2019
Assets
Cash & cash equivalents
$
11,846
$
31,422
Accounts & other receivables, net
86,327
89,117
Income taxes recoverable
2,807
2,661
Inventories
66,437
64,205
Prepaid expenses & other
19,679
8,333
Current assets of discontinued
operations
1,339
37,418
Total current assets
188,435
233,156
Property, plant & equipment, net
166,545
173,556
Right-of-use leased assets
16,037
18,492
Investment in kaléo (cost basis of
$7,500)
34,600
95,500
Identifiable intangible assets, net
18,820
22,636
Goodwill
67,708
81,404
Deferred income taxes
19,068
12,435
Other assets
3,506
4,628
Non-current assets of discontinued
operations
151
70,861
Total assets
$
514,870
$
712,668
Liabilities and Shareholders’
Equity
Accounts payable
$
89,702
$
87,296
Accrued expenses
40,741
39,465
Lease liability, short-term
2,082
2,427
Income taxes payable
706
—
Current liabilities of discontinued
operations
7,521
23,280
Total current liabilities
140,752
152,468
Lease liability, long-term
14,949
17,338
Long-term debt
134,000
42,000
Pension and other postretirement benefit
obligations, net
110,585
107,446
Deferred income taxes
—
11,019
Other non-current liabilities
5,529
5,297
Non-current liabilities of discontinued
operations
—
351
Shareholders’ equity
109,055
376,749
Total liabilities and shareholders’
equity
$
514,870
$
712,668
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Year Ended
December 31,
2020
2019
Cash flows from operating activities:
Net income (loss)
$
(75,444)
$
48,259
Adjustments for noncash items:
Depreciation
28,940
30,683
Amortization of intangibles
3,017
13,601
Reduction of right-of-use assets
2,753
2,588
Goodwill impairment
13,696
—
Deferred income taxes
(16,892)
5,856
Accrued pension and postretirement
benefits
14,720
9,642
Loss (gain) on investment in kaléo
accounted for under the fair value method
60,900
(10,900)
Loss on sale of divested businesses
52,326
—
Gain on sale of assets
—
(6,334)
Changes in assets and liabilities:
Accounts and other receivables
(335)
16,471
Inventories
(4,366)
11,315
Income taxes recoverable/payable
1,617
2,644
Prepaid expenses and other
(2,203)
795
Accounts payable and accrued expenses
4,045
(2,937)
Lease liability
(3,049)
(2,723)
Pension and postretirement benefit plan
contributions
(12,681)
(8,614)
Other, net
7,329
5,517
Net cash provided by operating
activities
74,373
115,863
Cash flows from investing activities:
Capital expenditures
(23,355)
(50,864)
Proceeds from the sale of businesses
56,236
—
Proceeds from the sale of assets and
other
—
10,936
Net cash provided by (used in) investing
activities
32,881
(39,928)
Cash flows from financing activities:
Borrowings
162,250
65,500
Debt principal payments
(70,250)
(125,000)
Dividends paid
(216,049)
(15,325)
Debt financing costs
(693)
(1,817)
Repurchase of employee common stock for
tax withholdings
(850)
(854)
Proceeds from exercise of stock options
and other
—
184
Net cash used in financing activities
(125,592)
(77,312)
Effect of exchange rate changes on
cash
(1,238)
(1,598)
Increase (decrease) in cash and cash
equivalents
(19,576)
(2,975)
Cash and cash equivalents at beginning of
period
31,422
34,397
Cash and cash equivalents at end of
period
$
11,846
$
31,422
Notes to the Financial
Tables
(Unaudited)
(a)
Tredegar’s presentation of net income
(loss) and diluted earnings 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 per share as reported under GAAP.
Net income 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 and the years ended December 31,
2020 and 2019 is shown below:
Three Months Ended December
31,
Year Ended December 31,
(In millions, except per share data)
2020
2019
2020
2019
Net income (loss) from continuing
operations as reported under GAAP
$
6.5
$
1.0
$
(16.8
)
$
58.5
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
1.2
0.1
1.2
0.6
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
(0.1
)
—
47.6
(23.3
)
Loss on sale of Bright View
Technologies
1.8
—
1.8
—
Accelerated trade name amortization
—
5.8
—
7.8
Other
0.3
3.0
6.5
4.0
Goodwill impairment
—
—
10.5
—
Net income from ongoing operations
$
9.7
$
9.9
$
50.8
$
47.6
Earnings (loss) from continuing operations
per share as reported under GAAP (diluted)
$
0.19
$
0.03
$
(0.51
)
$
1.76
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.04
—
0.04
0.02
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
—
—
1.42
(0.72
)
Loss on sale of Bright View
Technologies
0.05
—
0.05
—
Accelerated trade name amortization
—
0.17
—
0.23
Other
0.01
0.10
0.19
0.13
Goodwill impairment
—
—
0.32
—
Earnings per share from ongoing operations
(diluted)
$
0.29
$
0.30
$
1.51
$
1.42
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 5 in the Notes to Financial
Statements in the Form 10-K.
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. 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 and the years ended December 31, 2020 and 2019 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
December 31, 2020
Year Ended
December 31, 2020
(in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
Losses from sale of assets, investment
writedowns and other items:
Consulting expenses for ERP feasibility
study2
$
0.1
$
0.1
$
1.3
$
1.0
Environmental charges at Newnan, Georgia
plant1
0.3
0.3
0.3
0.3
COVID-19-related expenses2
0.5
0.3
1.9
1.4
Total for Aluminum Extrusions
$
0.9
$
0.7
$
3.5
$
2.7
PE Films:
(Gains)/losses associated with plant
shutdowns, asset impairments and restructurings:
Surface Protection restructuring costs -
severance
$
1.6
$
1.2
$
1.6
$
1.2
Losses from sale of assets, investment
writedowns and other items:
COVID-19-related expenses3
0.2
0.1
0.3
0.3
Total for PE Films
$
1.8
$
1.3
$
1.9
$
1.5
Corporate:
Professional fees associated with:
internal control over financial reporting; business development
activities; and implementation of new accounting guidance2
$
1.3
$
0.8
$
5.5
$
4.2
Accelerated recognition of stock
option-based compensation2
—
—
0.1
0.1
Corporate costs associated with the
divested Personal Care business2
(0.3
)
(0.2
)
0.9
0.7
Allocation of changes in effective state
tax rates resulting primarily from the sale of Personal Care
Films4
—
(1.5
)
—
(1.5
)
Loss on sale of Bright View
Technologies3
2.3
1.8
2.3
1.8
Write-down of investment in Harbinger
Capital Partners Special Situations Fund3
0.1
0.1
0.4
0.3
U.S. tax on foreign branch income4
—
—
—
(0.6
)
Stock compensation expense associated with
the fair value remeasurement of awards granted at the time of the
Special Dividend2
0.4
0.3
0.4
0.3
Total for Corporate
$
3.8
$
1.3
$
9.6
$
5.3
1. Included in “Cost of goods sold” in the
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.
4. Included in "Income tax expense (benefit)" in the condensed
consolidated statements of income.
Three Months Ended December 31,
2019
Year Ended December 31, 2019
($ in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
Losses from sale of assets, investment
writedowns and other items:
Wind damage to roof of Elkhart, Indiana
plant2
$
(0.4
)
$
(0.3
)
$
(0.1
)
$
(0.1
)
Environmental charges at Carthage,
Tennessee facility1
0.2
0.2
0.6
0.5
Total for Aluminum Extrusions
$
(0.2
)
$
(0.1
)
$
0.5
$
0.4
PE Films:
Losses associated with plant shutdowns,
asset impairments and restructurings:
Write-off of films production line -
Guangzhou, China facility
$
—
$
—
$
0.4
$
0.3
Surface Protection restructuring costs -
severance
0.2
0.1
0.3
0.2
Total for PE Films
$
0.2
$
0.1
$
0.7
$
0.5
Corporate:
Professional fees associated with:
internal control over financial reporting; business development
activities; and implementation of new accounting guidance2
$
0.2
$
0.2
$
3.5
$
2.7
Accelerated recognition of stock
option-based compensation2
1.3
1.2
1.3
1.2
Environmental costs not associated with a
business unit2
0.6
0.5
0.6
0.5
Tax adjustment - FIN 48 reserve
reversal3
—
—
—
(2.0
)
Total for Corporate
$
2.1
$
1.9
$
5.4
$
2.4
1. Included in “Cost of goods sold” in the
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 pre-tax loss of $60.9 million on the
Company’s investment in kaléo was recognized in the full year ended
December 31, 2020 compared to a pre-tax gain of $28.5 million in
the full year ended December 31, 2019 which is reported in “Other
income (expense), net” in the condensed consolidated statements of
income. The full year of 2019 included a receipt of $17.6 million
dividend.
(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)
were 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) 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 the Company believes 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 twelve ended December 31, 2020 and are
shown below in order to show the impact on the effective tax
rate:
(In millions)
Pre-Tax
Taxes Expense (Benefit)
After-Tax
Effective
Tax Rate
Three Months Ended December 31,
2020
(a)
(b)
(b)/(a)
Net income (loss) from continuing
operations reported under GAAP
$
6.6
$
0.1
$
6.5
1.5
%
Losses associated with plant shutdowns,
asset impairments and restructurings
1.6
0.4
1.2
(Gains) losses from sale of assets and
other
4.8
2.8
2.0
Net income (loss) from ongoing
operations
$
13.0
$
3.3
$
9.7
25.4
%
Three Months Ended December 31,
2019
Net income (loss) from continuing
operations reported under GAAP
$
4.0
$
3.0
$
1.0
75.0
%
Losses associated with plant shutdowns,
asset impairments and restructurings
0.2
0.1
0.1
(Gains) losses from sale of assets and
other
9.7
0.9
8.8
Net income (loss) from ongoing
operations
$
13.9
$
4.0
$
9.9
28.8
%
Twelve Months Ended December 31,
2020
Net income (loss) from continuing
operations reported under GAAP
$
(25.0
)
$
(8.2
)
$
(16.8
)
32.8
%
Losses associated with plant shutdowns,
asset impairments and restructurings
1.6
0.4
1.2
(Gains) losses from sale of assets and
other
74.3
18.4
55.9
Goodwill impairment
13.7
3.2
10.5
Net income (loss) from ongoing
operations
$
64.6
$
13.8
$
50.8
21.4
%
Twelve Months Ended December 31,
2019
Net income (loss) from continuing
operations reported under GAAP
$
72.0
$
13.5
$
58.5
18.8
%
Losses associated with plant shutdowns,
asset impairments and restructurings
0.8
0.2
0.6
(Gains) losses from sale of assets and
other
(12.2
)
(0.7
)
(11.5
)
Net income (loss) from ongoing
operations
$
60.6
$
13.0
$
47.6
21.5
%
(g)
On October 30, 2019, Bonnell Aluminum
announced a rebranding initiative under which Bonnell and its
subsidiaries, at that date, AACOA and Futura, would all operate
under the Bonnell Aluminum brand. The usage of the AACOA and Futura
trade names was discontinued at the end of 2019. In September 2019,
management committed to implement the rebranding initiative. Prior
to this commitment, the AACOA trade name had an indefinite useful
life and a remaining net book value of $4.8 million, and the Futura
trade name had an estimated remaining useful life of approximately
10.5 years and a remaining net book value of $5.4 million. As a
result of the rebranding initiative, there was a change in estimate
in the useful lives for both trade names to 4 months. The non-cash
amounts amortized related to these trade names were as follows:
(in millions)
Three Months Ended December 31,
2019
Year Ended December 31, 2019
AACOA - accelerated
$
3.6
$
4.8
Futura - accelerated
3.9
5.2
Futura - ongoing1
0.1
0.2
Total amortization
$
7.6
$
10.2
1. Amortization based on original useful life.
(h)
Net debt is calculated as follows:
December 31,
December 31,
(in millions)
2020
2019
Debt
$
134.0
$
42.0
Less: Cash and cash equivalents
11.8
31.4
Net debt
$
122.2
$
10.6
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.
(i)
In December 2020, the Company entered into
a definitive agreement and completed the sale of Bright View
Technologies (“Bright View”). The sale does not represent a
strategic shift nor does it have a major effect on the Company’s
historical and ongoing operations, thus all financial information
for Bright View has been presented as continuing operations. Bright
View historically has been reported in the PE Films segment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210316006013/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
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