Tredegar Corporation (NYSE:TG, also the “Company” or “Tredegar”)
today reported second quarter financial results for the period
ended June 30, 2021.
Second quarter 2021 net income from continuing operations was
$20.7 million ($0.61 per diluted share) compared to net income from
continuing operations of $14.3 million ($0.43 per diluted share) in
the second quarter of 2020. Net income from ongoing operations,
which excludes special items and discontinued operations, was $16.1
million ($0.48 per diluted share) in the second quarter of 2021
compared with $16.0 million ($0.48 per diluted share) in the second
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 and six months ended June 30, 2021 and 2020, is provided
in Note (a) of the Notes to the Financial Tables in this press
release.
Second Quarter Financial Results Highlight
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") from ongoing operations for Aluminum Extrusions of $19.7
million was $6.4 million higher than the second quarter of
2020
- EBITDA from ongoing operations for PE Films of $9.0 million was
$6.5 million lower than the second quarter of 2020
- EBITDA from ongoing operations for Flexible Packaging Films of
$8.3 million was $1.8 million higher than the second quarter of
2020
John Steitz, Tredegar’s president and chief executive officer,
said, “Bonnell’s performance in the second quarter improved
considerably over last year with current bookings and backlog at
record levels. Labor shortages at manufacturing facilities continue
to be an issue. As anticipated and previously disclosed, operating
results in PE Films suffered from a significant customer product
transition. Terphane’s profitability increased due to improvement
in costs and product mix despite volume declines from temporary
resin supply issues and customer inventory corrections.”
Mr. Steitz further stated, “Debt net of cash, which fell below
$100 million as of June 30, declined by $22 million during the
second quarter as a result of strong cash generation.”
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 evolve with COVID-19
informed work practices and as 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, relating to the benefits of the COVID-19
vaccines and other safeguards that may be taken to try to prevent a
COVID-19 outbreak in the workplace. The Company believes that these
efforts are encouraging some employees to get vaccinated. In the
meantime, the Company continues to take other precautions, such as
providing hand sanitizer throughout facilities, extra cleaning for
high touch areas, mandating that employees experiencing symptoms
(including fully vaccinated employees) remain at home and
coordinate their return with Human Resources, and ensuring
ventilation systems are properly working.
Bonnell Aluminum continues to experience 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 of the Company's business units are managing through
supply chain disruptions, including raw material cost increases,
shortages in aluminum and plastic resin and transportation delays.
To offset growing cost pressures, Bonnell Aluminum implemented its
second selling price increase in 2021, which became effective on
April 26, 2021. In response to unprecedented cost increases and
supply issues for polyethylene and polypropylene resin, Tredegar
Surface Protection implemented a quarterly resin cost pass-through
mechanism, effective July 1, 2021, for all products and customers
not previously covered by such arrangements.
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%).
Non-residential B&C volume started to decline in the fourth
quarter of 2020 after the fulfillment of contracts that existed at
the start of the COVID-19 pandemic. Bonnell Aluminum continued to
experience weakness in non-residential B&C during the second
quarter of 2021 with related volume declining 10.2% versus the
second quarter of last year. In addition, a portion of the
non-residential B&C volume decline was due to pandemic-related
production inefficiencies and labor constraints. However,
B&C-related sales volume declines were more than offset by
increases in other markets, resulting in an overall increase in
volume for the second quarter and first six months of 2021 of 11.9%
and 2.5%, respectively. Moreover, 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 been strong during the COVID-19 pandemic for the
Company’s flexible food packaging films produced by Terphane;
however, temporary resin supply issues and customer inventory
corrections adversely impacted second quarter sales volume versus
the same period in the prior year. The Surface Protection component
of PE Films had record EBITDA from ongoing operations in 2020, but
is experiencing a decline in volume in 2021 related to a previously
disclosed customer product transition and the timing of customer
orders. In addition, significant resin cost increases since the
second quarter of 2020 have adversely impacted PE Films' results,
due to margin compression for products with customers that were not
covered by resin pass-through arrangements. The quarterly lag
between the timing of changes in resin costs and selling prices on
existing pass-through arrangements also affected PE Films' results.
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
Six Months Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
June 30,
June 30,
2021
2020
2021
2020
Sales volume (lbs)
49,021
43,807
11.9
%
93,387
91,124
2.5
%
Net sales
$
139,281
$
106,058
31.3
%
$
257,405
$
223,945
14.9
%
Ongoing operations:
EBITDA
$
19,723
$
13,279
48.5
%
$
33,024
$
24,956
32.3
%
Depreciation & amortization
$
(4,032
)
$
(4,267
)
5.5
%
$
(8,162
)
$
(8,380
)
2.6
%
EBIT*
$
15,691
$
9,012
74.1
%
$
24,862
$
16,576
50.0
%
Capital expenditures
$
4,326
$
1,355
$
6,773
$
2,929
* 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 the most directly comparable measure calculated
in accordance with GAAP.
Second Quarter 2021 Results vs. Second
Quarter 2020 Results
Net sales (sales less freight) in the second quarter of 2021
increased versus the second quarter of 2020, primarily due to
higher volume, the pass-through of higher metal costs and an
increase in average selling prices to cover higher operating costs.
Sales volume in the second quarter of 2021 increased by 11.9%
versus the second quarter of 2020. Sales volume associated with the
non-residential B&C market, which represented 55% of volume in
2020, declined 10.2% in the second quarter of 2021 versus the
second quarter of 2020. Sales volume associated with specialty
markets, which represented 31% of total volume in 2020, increased
44.2% in the second quarter of 2021 versus the second quarter of
2020, and sales volume associated with the automotive market, which
represented 9% of total volume in 2020, increased 65.3% in the
second quarter of 2021 versus the second quarter of 2020. See “The
Impact of COVID-19 and Related Financial Considerations” section
for more information on business conditions.
EBITDA from ongoing operations in the second quarter of 2021
increased by $6.4 million in comparison to the second quarter of
2020, including a $5.2 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 costs in a quickly rising pricing environment driving a
benefit of $3.1 million in the second quarter of 2021 versus a
charge of $2.1 million in the second quarter of 2020. In addition,
higher volume ($3.9 million) and higher pricing ($3.3 million) were
partially offset by higher labor and other operating costs ($3.3
million), higher general, selling and administrative expenses ($1.8
million) and higher freight costs ($0.8 million). Refer to Item 3.
Quantitative and Qualitative Disclosures About Market Risk of the
Company's Form 10-Q for the period ended June 30, 2021 for
additional information on aluminum prices.
First Six Months of 2021 Results vs. First
Six Months 2020 Results
Net sales in the first six months of 2021 increased versus the
first six months of 2020, primarily due to higher sales volume in
the specialty and automotive markets, the pass-through of higher
metal costs and an increase in average selling prices to cover
higher operating costs. Sales volume in the first six months of
2021 increased by 2.5% versus the first six months of 2020.
EBITDA from ongoing operations in the first six months of 2021
increased by $8.1 million in comparison to the first six months of
2020 due to higher volumes ($2.5 million) and higher pricing ($4.7
million), partially offset by higher labor and employee-related
costs ($1.8 million) and other operational costs ($3.0 million),
higher general, administrative and selling expenses ($1.0 million)
and higher freight costs ($1.0 million). In addition, and
consistent with second quarter results, inventories accounted for
under the FIFO method resulted in a benefit of $4.1 million in the
first six months of 2021 versus a charge of $3.5 million in the
first six months of 2020.
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,
$1 million for a roof replacement at the Elkhart, Indiana site and
$4 million for strategic projects. In addition, approximately $13
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 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
("Pottsville Packaging"), 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
Six Months Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
June 30,
June 30,
2021
2020
2021
2020
Sales volume (lbs)
10,538
11,613
(9.3
)%
20,782
23,792
(12.7
)%
Net sales
$
31,430
$
40,203
(21.8
)%
$
59,384
$
77,004
(22.9
)%
Ongoing operations:
EBITDA
$
9,001
$
15,471
(41.8
)%
$
16,213
$
27,884
(41.9
)%
Depreciation & amortization
$
(1,671
)
$
(1,589
)
(5.2
)%
$
(3,090
)
$
(3,083
)
(0.2
)%
EBIT*
$
7,330
$
13,882
(47.2
)%
$
13,123
$
24,801
(47.1
)%
Capital expenditures
$
500
$
1,423
$
1,733
$
3,044
* 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 the most directly comparable measure calculated
in accordance with GAAP.
Second Quarter 2021 Results vs. Second
Quarter 2020 Results
Net sales declined by $8.8 million in the second quarter of 2021
versus the second 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 second quarter of 2021
decreased by $6.5 million versus the second quarter of 2020,
primarily due to:
- A $5.7 million decrease from Surface Protection related to
lower sales associated with the customer product transitions ($7.2
million) and higher resin costs, net of existing index based
pricing ($1.0 million), partially offset by higher sales of
products unrelated to the customer product transitions ($0.9
million), higher productivity ($0.7 million), lower research and
development expenses ($0.4 million) and lower other operating costs
($0.5 million); and
- A $0.6 million decrease from Pottsville Packaging primarily
related to higher resin costs.
Refer to Item 3. Quantitative and Qualitative Disclosures About
Market Risk of the Company's Form 10-Q for the period ended June
30, 2021 for additional information on resin prices.
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 have been
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 $13 million occurred during the first six months 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 have increased by approximately
$12 million during the past two years.
First Six Months of 2021 Results vs. First
Six Months 2020 Results
Net sales in the first six months of 2021 decreased versus the
first six months 2020, primarily due to lower volume and
unfavorable mix associated with the previously disclosed customer
product transitions in Surface Protection.
EBITDA from ongoing operation in the first six months of 2021
decreased by $11.7 million versus the first six months of 2020
primarily due to:
- A $11.1 million decrease from Surface Protection primarily
related to lower sales and unfavorable mix associated with the
customer product transitions ($13.0 million) and higher resin
costs, net of existing index based pricing ($1.7 million),
partially offset by higher sales of products unrelated to the
customer product transitions ($1.8 million) and higher productivity
($2.0 million); and
- A $1.0 million decrease from Pottsville Packaging primarily
related to higher resin costs.
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
Six Months Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
June 30,
June 30,
2021
2020
2021
2020
Sales volume (lbs)
24,230
29,195
(17.0
)%
51,638
54,974
(6.1
)%
Net sales
$
33,374
$
34,104
(2.1
)%
$
65,895
$
64,678
1.9
%
Ongoing operations:
EBITDA
$
8,277
$
6,495
27.4
%
$
17,901
$
13,048
37.2
%
Depreciation & amortization
$
(506
)
$
(436
)
(16.1
)%
$
(972
)
$
(864
)
(12.5
)%
EBIT*
$
7,771
$
6,059
28.3
%
$
16,929
$
12,184
38.9
%
Capital expenditures
$
1,117
$
417
$
2,388
$
1,265
* 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 the most directly comparable measure calculated
in accordance with GAAP.
Second Quarter 2021 Results vs. Second
Quarter 2020 Results
Sales volume declined by 17.0% during the second quarter of 2021
versus the second quarter of 2020, primarily due to temporary resin
supply issues impacting production and lower demand, which the
Company believes was related to customer inventory corrections in
Brazil. Net sales in the second quarter of 2021 decreased 2.1%
compared to the second quarter of 2020, primarily due to lower
sales volume, partially offset by favorable product mix and higher
selling prices from the pass-through of higher resin costs.
EBITDA from ongoing operations in the second quarter of 2021
increased by $1.8 million versus the second quarter of 2020
primarily due to:
- Lower sales volume ($2.8 million), partially offset by
favorable product mix ($0.7 million), lower fixed ($0.5 million)
and variable ($0.2 million) costs, higher selling prices from the
pass-through of higher resin costs ($0.5 million) and lower selling
and general administration expenses ($0.6 million);
- Net favorable foreign currency translation of Real-denominated
operating costs ($2.2 million); and
- Higher foreign currency transaction losses of $0.1 million in
the second quarter of 2021 versus the second quarter of 2020.
First Six Months of 2021 Results vs. First
Six Months 2020 Results
Sales volume declined by 6.1% during the first six months of
2021 versus the first six months of 2020, primarily due to the
factors adversely impacting the second quarter of 2021 mentioned
above. Net sales in the first six months of 2021 increased 1.9%
compared to the first six months of 2020, primarily due to
favorable product mix and higher selling prices from the
pass-through of higher resin costs, partially offset by lower sales
volume.
EBITDA from ongoing operations in the first six months of 2021
increased by $4.8 million versus the first six months of 2020
primarily due to:
- Higher selling prices from the pass-through of higher resin
costs ($1.6 million), favorable product mix ($1.4 million), lower
variable costs ($0.4 million) and lower selling and general
administration expenses ($0.5 million), partially offset by lower
sales volume ($1.7 million) and higher fixed costs ($0.6
million);
- Net favorable currency translation of Real-denominated
operating costs ($3.5 million);
- Foreign currency transaction loss of $0.1 million in the first
six months of 2021 versus losses of $0.2 million in the first six
months of 2020; and
- Lower value-added tax credits received in the first six months
of 2021 ($0.5 million) compared with the first six months of 2020
($1.2 million).
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Flexible Packaging Films are projected
to be $8 million in 2021, including $5 million for new capacity for
value-added products and productivity projects and $3 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 six months of
2021 versus the first six months of 2020, primarily due to higher
employee-related compensation ($1.8 million), stock-based
compensation ($1.3 million), costs associated with held for sale
assets ($0.4 million) and write-downs related to the investment
held in Harbinger Capital Partners Special Situations Fund ($0.3
million), partially offset by lower professional fees related to
remediation activities of previously disclosed material weaknesses
in the Company’s internal control over financial reporting and
business development activities ($1.0 million) and favorable
transition service fees, net of corporate costs associated with the
divested Personal Care Films business ($0.6 million).
Interest expense was $1.7 million in the first six months of
2021 in comparison to $1.1 million in the first six 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 six months of 2021
was 22.5%, compared to 27.1% in the first six 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 22.3% for the first six
months of 2021 versus 21.4% for the first six months of 2020 (see
also Note (f) of the Notes to Financial Tables). Refer to Note 12
of the Company's Form 10-Q for the period ended June 30, 2021 for
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.
Pension expense was $7.0 million in the first six months of
2021, a favorable change of $0.1 million compared to the first six
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 $75 million at June 30, 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 using a
fair value method. The Company’s estimate of the fair value of its
interest in kaléo at June 30, 2021 was $35.2 million ($30.1 million
after taxes), essentially unchanged from the balance at March 31,
2021 of $35.0 million ($30.0 million after taxes) and 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 $117 million at June 30, 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
$98.7 million at June 30, 2021 compared to $122.2 million at
December 31, 2020. The Company's revolving credit agreement allows
for 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 June 30, 2021) of $102.9 million and 1.14x,
respectively, at June 30, 2021. See Note (g) 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 the COVID-19 pandemic. As a consequence,
the Company's results could differ significantly from its
projections, depending on, among other things, 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
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Sales
$
211,129
$
186,259
$
395,951
$
378,396
Other income (expense), net (c)(d)(h)
8,122
168
8,882
(25,964
)
219,251
186,427
404,833
352,432
Cost of goods sold (c)
158,692
134,035
299,977
279,204
Freight
7,044
5,894
13,267
12,769
Selling, R&D and general expenses
(c)
21,711
23,427
41,816
45,641
Amortization of intangibles
723
753
1,446
1,511
Pension and postretirement benefits
3,540
3,567
7,080
7,134
Interest expense
891
549
1,713
1,104
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
199
10
368
71
Goodwill impairment (e)
—
—
—
13,696
192,800
168,235
365,667
361,130
Income (loss) from continuing operations
before income taxes
26,451
18,192
39,166
(8,698
)
Income tax expense (benefit) (c)
5,723
3,860
8,820
(2,366
)
Net income (loss) from continuing
operations
20,728
14,332
30,346
(6,332
)
Income (loss) from discontinued
operations, net of tax
508
(3,136
)
(79
)
(4,794
)
Net income (loss)
$
21,236
$
11,196
$
30,267
$
(11,126
)
Earnings (loss) per share:
Basic:
Continuing operations
$
0.62
$
0.43
$
0.91
$
(0.19
)
Discontinued operations
0.02
(0.10
)
—
(0.14
)
Basic earnings (loss) per share
$
0.64
$
0.33
$
0.91
$
(0.33
)
Diluted:
Continuing operations
$
0.61
$
0.43
$
0.90
$
(0.19
)
Discontinued operations
0.02
(0.10
)
—
(0.14
)
Diluted earnings (loss) per share
$
0.63
$
0.33
$
0.90
$
(0.33
)
Shares used to compute earnings (loss) per
share:
Basic
33,594
33,435
33,500
33,374
Diluted
33,740
33,436
33,692
33,374
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2021
2020
2021
2020
Net Sales
Aluminum Extrusions
$
139,281
$
106,058
$
257,405
$
223,945
PE Films
31,430
40,203
59,384
77,004
Flexible Packaging Films
33,374
34,104
65,895
64,678
Total net sales
204,085
180,365
382,684
365,627
Add back freight
7,044
5,894
13,267
12,769
Sales as shown in the Condensed
Consolidated Statements of Income
$
211,129
$
186,259
$
395,951
$
378,396
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
19,723
$
13,279
$
33,024
$
24,956
Depreciation & amortization
(4,032
)
(4,267
)
(8,162
)
(8,380
)
EBIT (b)
15,691
9,012
24,862
16,576
Plant shutdowns, asset impairments,
restructurings and other (c)
(246
)
(1,230
)
(63
)
(1,918
)
Goodwill impairment (e)
—
—
—
(13,696
)
PE Films:
Ongoing operations:
EBITDA (b)
9,001
15,471
16,213
27,884
Depreciation & amortization
(1,671
)
(1,589
)
(3,090
)
(3,083
)
EBIT (b)
7,330
13,882
13,123
24,801
Plant shutdowns, asset impairments,
restructurings and other (c)
(151
)
(139
)
(275
)
(167
)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
8,277
6,495
17,901
13,048
Depreciation & amortization
(506
)
(436
)
(972
)
(864
)
EBIT (b)
7,771
6,059
16,929
12,184
Plant shutdowns, asset impairments,
restructurings and other (c)
8,452
(10
)
8,414
(10
)
Total
38,847
27,574
62,990
37,770
Interest income
25
5
32
32
Interest expense
891
549
1,713
1,104
Gain (loss) on investment in kaléo
accounted for under fair value method (d)
200
1,300
918
(24,800
)
Stock option-based compensation costs
675
683
1,144
1,258
Corporate expenses, net (c)
11,055
9,455
21,917
19,338
Income (loss) from continuing operations
before income taxes
26,451
18,192
39,166
(8,698
)
Income tax expense (benefit)
5,723
3,860
8,820
(2,366
)
Net income (loss) from continuing
operations
20,728
14,332
30,346
(6,332
)
Net income (loss) from discontinued
operations, net of tax
508
(3,136
)
(79
)
(4,794
)
Net income (loss)
$
21,236
$
11,196
$
30,267
$
(11,126
)
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
June 30, 2021
December 31, 2020
Assets
Cash & cash equivalents
$
18,298
$
11,846
Accounts & other receivables, net
99,652
86,327
Income taxes recoverable
141
2,807
Inventories
81,161
66,437
Prepaid expenses & other
15,219
19,679
Current assets of discontinued
operations
151
1,339
Total current assets
214,622
188,435
Property, plant & equipment, net
168,557
166,545
Right-of-use leased assets
14,973
16,037
Investment in kaléo (cost basis of
$7,500)
35,200
34,600
Identifiable intangible assets, net
17,408
18,820
Goodwill
67,708
67,708
Deferred income taxes
14,205
19,068
Other assets
2,691
3,506
Non-current assets of discontinued
operations
151
151
Total assets
$
535,515
$
514,870
Liabilities and Shareholders’
Equity
Accounts payable
$
113,202
$
89,702
Accrued expenses
33,272
40,741
Lease liability, short-term
2,078
2,082
Income taxes payable
767
706
Current liabilities of discontinued
operations
1,033
7,521
Total current liabilities
150,352
140,752
Lease liability, long-term
13,904
14,949
Long-term debt
117,000
134,000
Pension and other postretirement benefit
obligations, net
105,161
110,585
Other non-current liabilities
5,758
5,529
Shareholders’ equity
143,340
109,055
Total liabilities and shareholders’
equity
$
535,515
$
514,870
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Six Months Ended
2021
2020
Cash flows from operating activities:
Net income (loss)
$
30,267
$
(11,126
)
Adjustments for noncash items:
Depreciation
10,875
15,357
Amortization of intangibles
1,446
1,511
Reduction of right-of-use lease asset
1,066
1,402
Goodwill impairment
—
13,696
Deferred income taxes
2,477
(8,461
)
Accrued pension income and post-retirement
benefits
7,080
7,134
Stock-based compensation expense
2,444
2,520
(Gain) loss on investment accounted for
under the fair value method
(600
)
24,800
Changes in assets and liabilities:
Accounts and other receivables
(12,840
)
2,303
Inventories
(14,020
)
(8,515
)
Income taxes recoverable/payable
2,680
8,799
Prepaid expenses and other
7,267
(1,912
)
Accounts payable and accrued expenses
8,040
(6,936
)
Lease liability
(1,051
)
(1,496
)
Pension and postretirement benefit plan
contributions
(4,020
)
(2,130
)
Other, net
396
(884
)
Net cash provided by operating
activities
41,507
36,062
Cash flows from investing activities:
Capital expenditures
(11,324
)
(8,806
)
Net cash used in investing activities
(11,324
)
(8,806
)
Cash flows from financing activities:
Borrowings
34,000
25,000
Debt principal payments
(51,000
)
(33,000
)
Dividends paid
(8,070
)
(8,025
)
Other
915
(586
)
Net cash used in financing activities
(24,155
)
(16,611
)
Effect of exchange rate changes on
cash
424
(2,137
)
Increase in cash and cash equivalents
6,452
8,508
Cash and cash equivalents at beginning of
period
11,846
31,422
Cash and cash equivalents at end of
period
$
18,298
$
39,930
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 and six months ended June 30, 2021 and
2020 is shown below:
Three Months Ended June 30,
Six Months Ended June 30,
($ in millions, except per share data)
2021
2020
2021
2020
Net income (loss) from continuing
operations as reported under GAAP2
$
20.7
$
14.3
$
30.3
$
(6.3
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.1
—
0.3
—
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
(0.1
)
(0.9
)
(0.7
)
19.5
One-time tax credit in Brazil for
unemployment/social security insurance non-income taxes resulting
from a favorable decision by Brazil’s Supreme Court regarding the
calculation of such tax1
(6.6
)
—
(6.6
)
—
Other
2.0
2.6
2.9
4.2
Goodwill impairment
—
—
—
10.5
Net income (loss) from ongoing
operations2
$
16.1
$
16.0
$
26.2
$
27.9
Earnings (loss) per share from continuing
operations as reported under GAAP (diluted)
$
0.61
$
0.43
$
0.90
$
(0.19
)
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
0.01
—
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
—
(0.03
)
(0.02
)
0.59
One-time tax credit in Brazil for
unemployment/social security insurance non-income taxes resulting
from a favorable decision by Brazil’s Supreme Court regarding the
calculation of such tax1
(0.20
)
—
(0.20
)
—
Other
0.07
0.08
0.09
0.13
Goodwill impairment
—
—
—
0.32
Earnings (loss) per share from ongoing
operations (diluted)
$
0.48
$
0.48
$
0.78
$
0.85
1. For more information, see Note 13 in
the Notes to Financial Statements in the Form 10-Q for the quarter
ended June 30, 2021.
2. 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 June 30,
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)
Gains and losses associated with
plant shutdowns, asset impairments, restructurings and other items
for the three and six months ended June 30, 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 June 30,
2021
Six Months Ended June 30,
2021
($ in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses, net of relief
2
$
0.3
$
0.2
$
0.1
$
0.1
Total for Aluminum Extrusions
$
0.3
$
0.2
$
0.1
$
0.1
PE Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
$
0.1
$
0.1
$
0.3
$
0.2
Total for PE Films
$
0.1
$
0.1
$
0.3
$
0.2
Flexible Packaging Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
One-time tax credit in Brazil for
unemployment/social security insurance non-income taxes resulting
from a favorable decision by Brazil’s Supreme Court regarding the
calculation of such taxes2,3
$
(8.5
)
$
(6.6
)
$
(8.5
)
$
(6.6
)
COVID-19-related expenses2
—
—
0.1
0.1
Total for Flexible Packaging Films
$
(8.5
)
$
(6.6
)
$
(8.4
)
$
(6.5
)
Corporate:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Maintenance costs associated with
held-for-sale assets
0.2
0.1
$
0.4
$
0.3
(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
1.7
1.6
2.6
2.2
Write-down of investment in Harbinger
Capital Partners Special Situations Fund2
0.4
0.3
0.5
0.4
Stock compensation expense associated with
the fair value remeasurement of awards granted at the time of the
2020 special dividend1
0.1
—
0.5
0.3
Transition service fees, net of corporate
costs associated with the divested Personal Care Films
business2
(0.3
)
(0.2
)
(0.6
)
(0.4
)
Total for Corporate
$
2.1
$
1.8
$
3.4
$
2.8
1. Included in “Selling, R&D and
general expenses” in the condensed consolidated statements of
income.
2. Included in “Other income (expense),
net” in the condensed consolidated statements of income.
3. For more information, see Note 13 in
the Notes to Financial Statements in the Form 10-Q for the quarter
ended June 30, 2021.
Three Months Ended June 30,
2020
Six Months Ended June 30,
2020
($ in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
Consulting expenses for enterprise
resource planning feasibility study2
$
0.2
$
0.2
0.9
0.7
COVID-19-related expenses, net of relief
3
0.9
0.8
0.9
0.8
Total for Aluminum Extrusions
$
1.1
$
1.0
$
1.8
$
1.5
PE Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses3
$
0.1
$
0.1
$
0.1
$
0.1
Total for PE Films
$
0.1
$
0.1
$
0.1
$
0.1
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
1.4
3.6
3.0
Write-down of investment in Harbinger
Capital Partners Special Situations Fund3
—
—
0.2
0.1
Accelerated recognition of stock-based
compensation expense2
0.1
0.1
0.1
0.1
U.S. tax benefit on foreign branch
income1
—
—
—
(0.6
)
Total for Corporate
$
1.9
$
1.5
$
3.9
$
2.6
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 $0.2 million and $0.9 million was recognized in the three
and six months ended June 30, 2021, respectively, compared to a
gain of $1.3 million and a loss of $24.8 million in the three and
six months ended June 30, 2020, respectively, which is reported in
“Other income (expense), net” in the condensed consolidated
statements of income. The gain in the first six months 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 B&C and automotive markets. As a result,
a goodwill impairment charge of $13.7 million was recognized in
Aluminum Extrusions, which represented the entire amount of
goodwill associated with the acquisition of AACOA.
(f)
Tredegar’s presentation of net income
(loss) from ongoing operations is a non-GAAP financial measure that
excludes the effects of gains or losses associated with plant
shutdowns, asset impairments and restructurings, gains or losses
from the sale of assets, goodwill impairment charges, discontinued
operations, and other items (which includes unrealized gains and
losses for an investment accounted for under the fair value
method), which has been presented separately and removed from net
income (loss) from continuing operations as reported under GAAP.
Net income (loss) from ongoing operations is a key financial and
analytical measure used by management to gauge the operating
performance of Tredegar’s ongoing operations. It is not intended to
represent the stand-alone results for Tredegar’s ongoing operations
under GAAP and should not be considered as an alternative to net
income (loss) from continuing operations as defined by GAAP. It
excludes items that we believe do not relate to Tredegar’s ongoing
operations.
Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) from ongoing
operations for the three and six months ended June 30, 2021 and
2020 are presented below in order to show the impact on the
effective tax rate:
($ in millions)
Pre-tax
Tax Expense (Benefit)
After-Tax
Effective Tax Rate
Three Months Ended June 30,
2021
(a)
(b)
(b)/(a)
Net income (loss) from continuing
operations reported under GAAP
$
26.5
$
5.8
$
20.7
21.9
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.2
0.1
0.1
(Gains) losses from sale of assets and
other
(6.4
)
(1.7
)
(4.7
)
Net income (loss) from ongoing
operations
$
20.3
$
4.2
$
16.1
20.7
%
Three Months Ended June 30,
2020
Net income (loss) from continuing
operations reported under GAAP
$
18.2
$
3.9
$
14.3
21.2
%
(Gains) losses from sale of assets and
other
1.8
0.1
1.7
Net income (loss) from ongoing
operations
$
20.0
$
4.0
$
16.0
20.0
%
Six Months Ended June 30, 2021
Net income (loss) from continuing
operations reported under GAAP
$
39.2
$
8.9
$
30.3
22.5
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.4
0.1
0.3
(Gains) losses from sale of assets and
other
(5.9
)
(1.5
)
(4.4
)
Net income (loss) from ongoing
operations
$
33.7
$
7.5
$
26.2
22.3
%
Six Months Ended June 30, 2020
Net income (loss) from continuing
operations reported under GAAP
$
(8.7
)
$
(2.4
)
$
(6.3
)
27.1
%
(Gain) loss associated with the investment
in kaléo
24.8
5.3
19.5
(Gains) losses from sale of assets and
other
5.8
1.6
4.2
Goodwill impairment
13.7
3.2
10.5
Net income (loss) from ongoing
operations
$
35.6
$
7.7
$
27.9
21.4
%
(g)
Net debt is calculated as follows:
June 30,
December 31,
(in millions)
2021
2020
Debt
$
117.0
$
134.0
Less: Cash and cash equivalents
18.3
11.8
Net debt
$
98.7
$
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.
(h)
Represents a one-time tax credit
in Brazil for unemployment/social security insurance non-income
taxes ("PIS/COFINS") resulting from a favorable decision by
Brazil’s Supreme Court regarding the calculation of such tax.
In May 2021, the Brazil Supreme Court ruled in a leading case
related to the amount of Brazilian value-added tax to exclude from
the calculation of PIS/COFINS. As a result, in the second
quarter of 2021, the Company recorded a pre-tax gain of $8.5
million for certain excess PIS/COFINS paid from 2003 to 2021, plus
applicable interest, which the Company expects to apply to future
required Brazilian federal tax payments. The pretax gain was
recorded in “Other income (expense), net” in the condensed
consolidated statements of income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210806005106/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
Tredegar (NYSE:TG)
Historical Stock Chart
From May 2024 to Jun 2024
Tredegar (NYSE:TG)
Historical Stock Chart
From Jun 2023 to Jun 2024