Tredegar Corporation (NYSE:TG, also the “Company” or “Tredegar”)
today reported fourth quarter and full year financial results for
the period ended December 31, 2021.
Fourth quarter 2021 net income from continuing operations was
$21.4 million ($0.63 per diluted share) compared to $6.5 million
($0.19 per diluted share) in the fourth quarter of 2020. Net income
from ongoing operations, which excludes special items, was $6.2
million ($0.18 per diluted share) in the fourth quarter of 2021
compared to $9.7 million ($0.29 per diluted share) in the fourth
quarter of 2020.
Full year 2021 net income from continuing operations was $57.9
million ($1.72 per diluted share) compared to net loss from
continuing operations of $16.8 million ($0.51 per diluted share) in
2020. Net income from ongoing operations was $39.6 million ($1.18
per diluted share) in 2021 compared to $50.8 million ($1.51 per
diluted share) in 2020. A reconciliation of net income (loss) from
continuing operations, a financial measure calculated in accordance
with U.S. generally accepted accounting principles (“GAAP”), to net
income from ongoing operations, a non-GAAP financial measure, for
the three months and year ended December 31, 2021 and 2020, 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 $10.9
million was $2.8 million lower than the fourth quarter of 2020
- EBITDA from ongoing operations for PE Films of $6.7 million was
$4.5 million lower than the fourth quarter of 2020
- EBITDA from ongoing operations for Flexible Packaging Films of
$6.4 million was $1.7 million lower than the fourth quarter of
2020
John Steitz, Tredegar’s president and chief executive officer,
said, “We continue to manage through supply chain and inflation
issues at each of our businesses. At Bonnell Aluminum, production
challenges and inefficiencies persist from labor shortages. On the
bright side, orders and backlog remain robust. In addition, we
recently approved the implementation of new enterprise resource
planning and manufacturing execution systems that will replace
existing systems that are over 30 years old. This highly strategic
two-year project includes estimated capital expenditures of $28
million and expenses of $3 million, which we estimate will generate
operational and commercial benefits, including higher yield,
productivity and other improvements, of approximately $9 million
annually once the systems are fully implemented and
functioning.”
Mr. Steitz continued, “PE Films continues to focus on generating
new business to offset profit declines from previously announced
product transitions and margin pressures. Terphane had another
stellar performance in 2021 despite a very competitive
marketplace.”
Mr. Steitz further stated, “Debt, net of cash, declined by
approximately $80 million during 2021. In addition to generating
strong cash flow from operations after paying dividends, we
received cash of $47.1 million at the end of December from the sale
of our investment in kaléo. On February 10, 2022, we announced the
use of $50 million of revolver borrowings for a contribution to our
frozen pension plan in conjunction with the initiation of a process
to terminate and settle the plan. This action should remove risk
from our balance sheet while preserving retirement benefits that
are due to participants.”
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 as the Centers for
Disease Control, the Office of the Surgeon General and other state
and local health departments learn more about the virus and its
variants. Consistent with recommendations and mandates from
government agencies and health authorities, the Company has
implemented multiple layers of COVID-19 protections and
interventions.
The Company has engaged in an education campaign that provides
employees with the most accurate and up-to-date information related
to COVID-19 vaccines and has offered different monetary and/or
time-away-from-work incentives to encourage employees to get
vaccinated with the primary dose(s) and to get a booster shot once
eligible. The Company will continue to monitor available
information to assess safeguards that may be taken to try to
prevent a COVID-19 outbreak in the workplace.
Aluminum Extrusions, also known as Bonnell Aluminum, continues
to experience higher than normal absenteeism and hiring
difficulties, which it attributes to COVID-19-related factors,
including high COVID-19 transmission rates in the geographic areas
where its plants are located. While the average number of direct
labor employees at Bonnell Aluminum facilities increased
approximately 9% in the fourth quarter of 2021, compared with the
abnormally low levels related to the pandemic in the second and
third quarters of 2020, there continues to be a shortage of labor
to meet existing demand and desired shipment levels. Moreover,
onboarding new employees has resulted in higher hiring and training
costs and labor inefficiencies in 2021 versus last year.
All three of the Company's business segments are managing
through supply chain disruptions and escalating costs, including
raw material cost increases, shortages, transportation cost
increases and delays. To offset growing cost pressures, Bonnell
Aluminum implemented a selling price increase effective January 3,
2022, which followed two price increases in 2021. In response to
unprecedented cost increases and supply issues for polyethylene and
polypropylene resin, PE Films implemented a quarterly resin cost
pass-through mechanism, effective July 1, 2021, for all products
and customers not previously covered by such arrangements. Flexible
Packaging Films, which is also known as Terphane, which is
headquartered in Brazil, continues to monitor cost escalations to
adjust selling prices as market dynamics permit.
Financial Considerations
Approximately 58% of Bonnell Aluminum’s sales volume in 2021 was
related to building and construction (“B&C”) markets
(non-residential B&C of 51% 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. Market demand in this sector
has recently been strong but not fully realized in Bonnell
Aluminum's fourth quarter and full year 2021 results due to
pandemic-related labor shortages and resulting production
inefficiencies. Non-residential B&C volume declined 4% versus
the fourth quarter of 2020 and 11% versus full year 2020. However,
current bookings and backlog remain at record high levels which the
Company believes will bode well for future results when production
constraints are alleviated.
The Surface Protection component of PE Films had record EBITDA
from ongoing operations in 2020 but experienced a decline in volume
in 2021, primarily related to a previously disclosed customer
product transition unrelated to the pandemic. In addition, the lag
in the pass-through of significant pandemic-related increases in
resin costs, and some of such cost increases incurred prior to
mid-year that will not be recovered even on a lagging basis, have
adversely impacted PE Films’ profitability in 2021.
At Terphane, the Company believes that the pandemic-related
surge in demand for flexible packaging films that began in early
2020 returned to lower pre-pandemic levels during the second
quarter of 2021.
OPERATIONS REVIEW
Aluminum Extrusions
Aluminum Extrusions 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)
2021
2020
% Change
2021
2020
% Change
Sales volume (lbs)
44,576
46,408
(3.9
)%
183,367
186,391
(1.6
)%
Net sales
$
144,832
$
116,145
24.7
%
$
539,325
$
455,711
18.3
%
Ongoing operations:
EBITDA
$
10,886
$
13,641
(20.2
)%
$
55,948
$
55,137
1.5
%
Depreciation & amortization
(4,210
)
(4,771
)
11.8
%
(16,272
)
(17,403
)
6.5
%
EBIT*
$
6,676
$
8,870
(24.7
)%
$
39,676
$
37,734
5.1
%
Capital expenditures
$
6,957
$
5,547
$
18,914
$
10,260
* 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 2021 Results vs. Fourth
Quarter 2020 Results
Net sales (sales less freight) in the fourth quarter of 2021
increased by 24.7% versus 2020 primarily due to an increase in
average selling prices to cover significantly higher aluminum raw
material costs and higher operating costs, partially offset by
lower sales volume. Sales volume in the fourth quarter of 2021
decreased by 3.9% versus 2020. Sales volume in the specialty
market, which represented 34% of total volume in 2021, increased
6.6% in the fourth quarter of 2021 versus 2020. Sales volume in the
automotive market, which represented 8% of total volume in 2021,
declined 36.1% versus the fourth quarter of 2020. A portion of the
decline in automotive volume was attributed to supply chain issues
in the automotive industry. Non-residential B&C sales volume,
which represented 51% of 2021 volume, declined 4% in the fourth
quarter of 2021 versus 2020, primarily due to COVID-19-related
labor shortages. See “The Impact of COVID-19 and Related Financial
Considerations” section above for more information on business
conditions.
EBITDA from ongoing operations in the fourth quarter of 2021
decreased by $2.8 million in comparison to the fourth quarter of
2020. The decline is primarily due to higher labor and
employee-related costs ($2.4 million) and other operating costs
($1.1 million), lower labor productivity ($1.0 million), higher
freight rates ($0.9 million) and higher selling, general and
administrative expenses ($1.6 million), partially offset by higher
pricing ($3.4 million net of the pass-through of aluminum raw
material costs). In addition, the timing of the flow through under
the first-in first-out method of aluminum raw material costs passed
through to customers, previously acquired at lower prices in a
quickly rising commodity pricing environment, resulted in a benefit
of $1.1 million in the fourth quarter of 2021 versus a benefit of
$0.6 million in the fourth quarter of 2020. See discussion of
Quantitative and Qualitative Disclosures About Market Risk in Item
7 of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2021 (“Form 10-K”) for additional information on
aluminum price trends.
Full Year 2021 Results vs. Full Year 2020
Results
Net sales in 2021 increased by 18.3% versus 2020. The annual
increase in net sales was primarily due to an increase in average
selling prices to cover significantly higher aluminum raw material
costs and higher operating costs, partially offset by lower sales
volume. Sales volume in 2021 decreased by 1.6% versus 2020.
Increased shipments in the specialty sector were offset by declines
in B&C and automotive markets. All end markets served within
the specialty sector experienced growth. The Company believes that
declines in the non-residential B&C market resulted mainly from
COVID-19-related labor shortages, with a portion of the decline in
automotive sales volume associated with supply chain issues in the
automotive industry.
EBITDA from ongoing operations in 2021 increased by $0.8 million
versus 2020 due to higher pricing ($13.6 million net of the
pass-through of aluminum raw materials costs), partially offset by
higher labor and employee-related costs ($7.2 million) and other
inflationary operating costs such as higher supply expenses ($6.4
million), lower labor productivity ($1.6 million), higher freight
expenses ($3.2 million) and higher selling, general and
administrative costs ($3.2 million). In addition, the timing of the
flow through under the first-in first-out method of aluminum raw
material costs passed through to customers, previously acquired at
lower prices in a quickly rising commodity pricing environment,
resulted in a benefit of $6.9 million in 2021 versus a charge of
$1.3 million in 2020.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Bonnell Aluminum are projected to be
$30 million in 2022, including $15 million for new enterprise
resource planning and manufacturing execution systems (“ERP/MES”),
$6 million for infrastructure upgrades at the facilities located in
Niles, Michigan, Carthage, Tennessee and Newnan, Georgia, and $3
million for other strategic projects. The ERP/MES project is
expected to cost $28 million over a two-year time span. In addition
to strategic projects, approximately $6 million will be required to
support continuity of current operations. Depreciation expense is
projected to be $14 million in 2022. Amortization expense is
projected to be $3 million in 2022.
PE Films
PE Films produces 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)
2021
2020
% Change
2021
2020
% Change
Sales volume (lbs)
9,363
11,827
(20.8
)%
39,429
45,175
(12.7
)%
Net sales
$
31,035
$
35,843
(13.4
)%
$
118,920
$
139,288
(14.6
)%
Ongoing operations:
EBITDA
$
6,659
$
11,179
(40.4
)%
$
27,694
$
45,107
(38.6
)%
Depreciation & amortization
(1,582
)
(1,894
)
16.5
%
(6,263
)
(6,762
)
7.4
%
EBIT*
$
5,077
$
9,285
(45.3
)%
$
21,431
$
38,345
(44.1
)%
Capital expenditures
$
240
$
1,147
$
2,997
$
6,024
* 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 2021 Results vs. Fourth
Quarter 2020 Results
Net sales decreased by $4.8 million in the fourth quarter of
2021 versus the fourth quarter of 2020, primarily due to lower
volume in Surface Protection for products unrelated to previously
disclosed customer product transitions. Sales volume in Surface
Protection declined 35% versus a particularly strong fourth quarter
of 2020. The Company believes that this lower volume was primarily
due to customer inventory corrections, customer production
slowdowns associated with COVID-19-related factors, and a slowdown
in the television market.
EBITDA from ongoing operations in the fourth quarter of 2021
decreased by $4.5 million versus the fourth quarter of 2020,
primarily due to:
- A $6.8 million decrease from Surface Protection associated with
lower sales and unfavorable mix for products unrelated to
previously disclosed customer product transitions ($4.7 million),
lower sales associated with the customer product transitions ($0.2
million), higher freight and packaging expense ($0.9 million), the
pass-through lag associated with higher resin costs ($0.4 million),
and lower productivity ($0.4 million);
- A $1.6 million increase from Pottsville Packaging primarily
related to favorable sales mix ($0.4 million), a benefit from the
pass-through lag associated with higher resin costs (benefit of
$0.1 million in the fourth quarter of 2021 versus a charge of $0.2
million in the fourth quarter of 2020), and a benefit from
inventories accounted for under the first-in first-out method
(benefit of $0.5 million versus a charge of $0.5 million in the
fourth quarter of 2020); and
- A $1.1 million favorable variance associated with the
divestiture of Bright View Technologies at the end of 2020.
See discussion of Quantitative and Qualitative Disclosures About
Market Risk in Item 7 of the Form 10-K for additional information
on resin price trends.
Customer Product Transitions and Other
Factors 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 would be made
obsolete by customer product transitions to less costly alternative
processes or materials. The Company estimates that these
transitions, which principally relate to one customer, adversely
impacted EBITDA from ongoing operations for PE Films by $14.8
million during 2021 versus 2020. A further decline of $7 million in
EBITDA from ongoing operations due to the transitions is expected
in 2022 versus 2021, at which time the transitions are expected to
be complete.
The Surface Protection business is also experiencing competitive
pricing pressures, unrelated to the customer product transitions,
that are expected to adversely impact EBITDA from ongoing
operations by approximately $6 million in 2022 versus 2021. To
offset the expected adverse impact of the customer transitions and
pricing pressures, the Company is aggressively pursuing and making
progress in generating contribution from sales of new surface
protection products, applications and customers and driving
production efficiencies and cost savings. Annual contribution to
EBITDA from ongoing operations for PE Films from sales of products
unrelated to previously disclosed customer product transitions
increased $7 million for the two-year period ended December 31,
2021, which excludes the impact of resin pass-through lag but
includes the adverse impact of customer inventory corrections,
customer production slowdowns associated with COVID-19-related
factors, and a slowdown in the television market in the fourth
quarter of 2021.
Full Year 2021 Results vs. Full Year 2020
Results
Net sales in 2021 decreased by $20.4 million versus 2020,
primarily due to lower volume and unfavorable mix associated with
the previously disclosed customer product transitions in Surface
Protection, partially offset by higher pricing associated with the
pass-through of increased resin costs.
EBITDA from ongoing operations in 2021 decreased by $17.4
million versus 2020 primarily due to:
- A $19.4 million decrease from Surface Protection primarily
related to lower sales and unfavorable mix associated with the
customer product transitions ($14.8 million), lower sales and
unfavorable mix for products unrelated to customer product
transitions ($3.4 million), margin erosion associated with higher
resin costs that occurred before the resin index pricing plan was
fully implemented ($1.4 million), the pass-through lag associated
with higher resin costs ($1.4 million), and higher freight expense
($1.0 million), partially offset by production efficiencies and
cost savings ($1.9 million) and lower research and development
spend ($0.4 million);
- A $0.1 million increase from Pottsville Packaging; and
- A $2.7 million favorable variance associated with the
divestiture of Bright View Technologies at the end of 2020.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for PE Films are projected to be $5 million
in 2022, including $3 million for productivity projects and $2
million for capital expenditures required to support continuity of
current operations. Depreciation expense is projected to be $7
million in 2022. There is no amortization expense for PE Films.
Flexible Packaging Films
Flexible Packaging Films produces polyester-based films for use
in packaging applications that have specialized properties, such as
heat resistance, strength, barrier protection and the ability to
accept high-quality print graphics. A summary of 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,
2021
2020
2021
2020
Sales volume (lbs)
25,902
28,026
(7.6
)%
104,569
113,115
(7.6
)%
Net sales
$
37,418
$
34,072
9.8
%
$
139,978
$
134,605
4.0
%
Ongoing operations:
EBITDA
$
6,388
$
8,051
(20.7
)%
$
31,684
$
30,645
3.4
%
Depreciation & amortization
(523
)
(455
)
(14.9
)%
(1,988
)
(1,761
)
(12.9
)%
EBIT*
$
5,865
$
7,596
(22.8
)%
$
29,696
$
28,884
2.8
%
Capital expenditures
$
1,320
$
2,511
$
5,603
$
4,959
* 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 2021 Results vs. Fourth
Quarter 2020 Results
Sales volume declined by 7.6% during the fourth quarter of 2021
versus the fourth quarter of 2020, primarily due to lower demand.
Net sales in the fourth quarter of 2021 increased 9.8% compared to
the fourth quarter of 2020, primarily due to higher selling prices
from the pass-through of higher resin costs and favorable product
mix, partially offset by lower sales volume. The Company believes
that the pandemic-related surge in demand for flexible packaging
that began in early 2020 returned to lower pre-pandemic levels
during the second quarter of 2021.
EBITDA from ongoing operations in the fourth quarter of 2021
decreased by $1.7 million versus the fourth quarter of 2020
primarily due to:
- Higher raw material costs ($5.3 million), higher variable costs
($1.4 million) and lower sales volume ($1.3 million), partially
offset by higher selling prices ($3.3 million) from the
pass-through of higher resin costs, favorable absorption of fixed
costs ($0.9 million) and lower selling, general and administration
expenses ($0.3 million);
- Net favorable foreign currency translation of Real-denominated
operating costs ($1.1 million); and
- Higher foreign currency transaction gains ($0.9 million) in the
fourth quarter of 2021 versus the fourth quarter of 2020.
Full Year 2021 Results vs. Full Year 2020
Results
Sales volume declined by 7.6% in 2021 versus 2020, primarily due
to lower demand, resin supply issues, and an equipment failure
impacting production. Net sales in 2021 increased 4.0% compared to
2020, primarily due to higher selling prices from the pass-through
of higher resin costs and favorable product mix, partially offset
by lower sales volume.
EBITDA from ongoing operations in 2021 increased by $1.0 million
versus 2020 primarily due to:
- Higher selling prices from the pass-through of higher resin
costs ($11.2 million), favorable product mix ($2.0 million) and
lower selling, general, and administration expenses ($0.7 million),
partially offset by higher raw material costs ($12.8 million),
lower sales volume ($4.9 million) and higher variable costs ($1.7
million);
- Net favorable currency translation of Real-denominated
operating costs ($5.9 million);
- Higher foreign currency transaction gains ($1.2 million) in
2021 versus 2020; and
- Lower value-added tax credits received in 2021 ($0.5 million)
versus 2020.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Terphane are projected to be $8 million
in 2022, including $4 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 2022.
Amortization expense is projected to be $0.4 million in 2022.
Corporate Expenses, Investments, Interest and Taxes
Corporate expenses, net, decreased $1.1 million in 2021 versus
2020, primarily due to higher transition service fees, net of
corporate costs associated with the 2020 divestiture of the
Personal Care Films business ($1.1 million).
Interest expense was $3.4 million in 2021 in comparison to $2.6
million in 2020, primarily due to higher average debt levels.
The effective tax rate used to compute income taxes for
continuing operations in 2021 was 13.8% compared to 32.8% in 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 21.9% in 2021 and 21.4%
in 2020 (see also Note (f) of the Notes to Financial Tables). For
an explanation of differences between the effective tax rate for
income from continuing operations and the U.S. federal statutory
rate for 2021 and 2020, see Note 12 “Income Taxes” to the
Consolidated Financial Statements included in Item 15 “Exhibits and
Financial Statements Schedules” (“Item 15”) of the Form 10-K.
Pension expense was $14.1 million in 2021, a favorable change of
$0.5 million from 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 statements. On February
10, 2022, Tredegar announced the initiation of a process to
terminate and settle its frozen defined benefit pension plan, which
could take up to 24 months to complete. In connection therewith,
the Company borrowed funds under its revolving credit agreement and
made a $50 million contribution to the pension plan (the “Special
Contribution”) to reduce its underfunding and as part of a program
within the pension plan to hedge or fix the expected future
contributions that will be needed by the Company through the
settlement process. The Company expects to realize income tax
benefits on the Special Contribution of approximately $11 million.
Administrative costs for the pension plan through the settlement
process are estimated at $4 to $5 million.
As of December 31, 2021 (and before the Special Contribution),
the estimated pension plan underfunding under GAAP was $69 million,
comprised of investments at fair value of $245 million and a
projected benefit obligation (“PBO”) of $314 million. The ultimate
settlement benefit obligation may differ from the PBO, depending on
market factors for buyers of pension obligations at the time of
settlement. Pension expense is projected to be approximately $14
million under GAAP in 2022 and zero for calculating earnings before
interest, taxes, depreciation and amortization as defined in the
Company’s revolving credit agreement (“Credit EBITDA”), which is
used to compute certain borrowing ratios. The Company estimates
that, with the Special Contribution, there will be no required
minimum contributions to the pension plan until final
settlement.
Total debt was $73.0 million at December 31, 2021, compared to
$134.0 million at December 31, 2020. Net debt (debt in excess of
cash and cash equivalents), a non-GAAP financial measure, was $42.5
million at December 31, 2021, compared to $122.2 million at
December 31, 2020. The year-over-year decline in net debt of $79.7
million includes proceeds of $47.1 million from the sale of the
Company’s investment in kaleo, Inc. (“kaléo”) on December 27, 2021.
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 Credit EBITDA.
The Company had Credit EBITDA and a leverage ratio (calculated in
the “Liquidity and Capital Resources” section of the Form 10-K of
$90.0 million and 0.81x, respectively, at December 31, 2021. See
Note (g) of the Notes to the Financial Tables for a reconciliation
of net debt to the most directly comparable GAAP financial
measure.
FORWARD-LOOKING AND CAUTIONARY
STATEMENTS
Some of the information contained in this press release may
constitute “forward-looking statements” within the meaning of the
“safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. When the Company uses the words “believe,”
“estimate,” “anticipate,” “appear to,” “expect,” “project,” “plan,”
“likely,” “may” and similar expressions, it does so to identify
forward-looking statements. Such statements are based on the
Company's then current expectations and are subject to a number of
risks and uncertainties that could cause actual results to differ
materially from those addressed in the forward-looking statements.
It is possible that the Company's actual results and financial
condition may differ, possibly materially, from the anticipated
results and financial condition indicated in or implied by these
forward-looking statements. In addition, the Company's current
projections for its businesses could be materially affected by the
highly uncertain impact of 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;
- movement of pension plan assets and liabilities up through
initiating hedging activities to fix underfunding amounts and
assumptions thereafter relating to differences between the ultimate
settlement benefit obligation and the projected benefit obligation,
census data, administrative costs, the effectiveness of hedging
activities and discounts required to liquidate non-public
securities held by the plan;
- 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;
- disruptions to the Company’s manufacturing facilities,
including those resulting from labor shortages;
- 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;
- 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 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 2021 sales from continuing operations of $826
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,
2021
2020
2021
2020
Sales
$
220,986
$
192,524
$
826,455
$
755,290
Other income (expense), net (c)(d)(h)
11,104
(3,396
)
20,376
(67,294
)
232,090
189,128
846,831
687,996
Cost of goods sold (c)
178,957
143,755
649,690
558,967
Freight
7,701
6,464
28,232
25,686
Selling, R&D and general expenses
(c)
21,117
24,927
81,311
92,644
Amortization of identifiable intangibles
(j)
(466
)
753
1,704
3,017
Pension and postretirement benefits
3,540
4,019
14,160
14,720
Interest expense
831
989
3,386
2,587
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
495
1,651
1,127
1,725
Goodwill impairment (e)
—
—
—
13,696
212,175
182,558
779,610
713,042
Income (loss) from continuing operations
before income taxes
19,915
6,570
67,221
(25,046
)
Income tax expense (benefit)(c)
(1,443
)
95
9,284
(8,213
)
Net income (loss) from continuing
operations
21,358
6,475
57,937
(16,833
)
Income (loss) from discontinued
operations, net of tax
(6
)
(5,580
)
(111
)
(58,611
)
Net income (loss)
$
21,352
$
895
$
57,826
$
(75,444
)
Earnings (loss) per share:
Basic:
Continuing operations
$
0.64
$
0.19
$
1.72
$
(0.51
)
Discontinued operations
—
(0.17
)
—
(1.75
)
Basic earnings (loss) per share
$
0.64
$
0.02
$
1.72
$
(2.26
)
Diluted:
Continuing operations
$
0.63
$
0.19
$
1.72
$
(0.51
)
Discontinued operations
—
(0.17
)
—
(1.75
)
Diluted earnings (loss) per share
$
0.63
$
0.02
$
1.72
$
(2.26
)
Shares used to compute earnings (loss) per
share:
Basic
33,628
33,421
33,563
33,402
Diluted
33,648
33,485
33,670
33,402
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2021
2020
2021
2020
Net Sales
Aluminum Extrusions
$
144,832
$
116,145
$
539,325
$
455,711
PE Films
31,035
35,843
118,920
139,288
Flexible Packaging Films
37,418
34,072
139,978
134,605
Total net sales
213,285
186,060
798,223
729,604
Add back freight
7,701
6,464
28,232
25,686
Sales as shown in the Condensed
Consolidated Statements of Income
$
220,986
$
192,524
$
826,455
$
755,290
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
10,886
$
13,641
$
55,948
$
55,137
Depreciation & amortization
(4,210
)
(4,771
)
(16,272
)
(17,403
)
EBIT (b)
6,676
8,870
39,676
37,734
Plant shutdowns, asset impairments,
restructurings and other (c)
3,461
(869
)
3,237
(3,506
)
Goodwill impairment (e)
—
—
—
(13,696
)
PE Films:
Ongoing operations:
EBITDA (b)
6,659
11,179
27,694
45,107
Depreciation & amortization
(1,582
)
(1,894
)
(6,263
)
(6,762
)
EBIT (b)
5,077
9,285
21,431
38,345
Plant shutdowns, asset impairments,
restructurings and other (c)
86
(1,751
)
(371
)
(1,974
)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
6,388
8,051
31,684
30,645
Depreciation & amortization
(523
)
(455
)
(1,988
)
(1,761
)
EBIT (b)
5,865
7,596
29,696
28,884
Plant shutdowns, asset impairments,
restructurings and other (c)
32
(4
)
8,439
(18
)
Total
21,197
23,127
102,108
85,769
Interest income
33
1
73
44
Interest expense
831
989
3,386
2,587
Gain (loss) on investment in kaléo (d)
11,583
100
12,780
(60,900
)
Loss on sale of Bright View Technologies
(i)
—
(2,299
)
—
(2,299
)
Stock option-based compensation costs
675
394
2,495
2,161
Corporate expenses, net (c)
11,392
12,976
41,859
42,912
Income (loss) from continuing operations
before income taxes
19,915
6,570
67,221
(25,046
)
Income tax expense (benefit)
(1,443
)
95
9,284
(8,213
)
Net income (loss) from continuing
operations
21,358
6,475
57,937
(16,833
)
Income (loss) from discontinued
operations, net of tax
(6
)
(5,580
)
(111
)
(58,611
)
Net income (loss)
$
21,352
$
895
$
57,826
$
(75,444
)
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
December 31, 2021
December 31, 2020
Assets
Cash & cash equivalents
$
30,521
$
11,846
Accounts & other receivables, net
103,312
86,327
Income taxes recoverable
2,558
2,807
Inventories
88,569
66,437
Prepaid expenses & other
11,275
19,679
Current assets of discontinued
operations
178
1,339
Total current assets
236,413
188,435
Property, plant & equipment, net
170,381
166,545
Right-of-use leased assets
13,847
16,037
Investment in kaléo (cost basis of
$7,500)
—
34,600
Identifiable intangible assets, net
(j)
14,152
18,820
Goodwill (j)
70,608
67,708
Deferred income taxes
15,723
19,068
Other assets
2,460
3,506
Non-current assets of discontinued
operations
—
151
Total assets
$
523,584
$
514,870
Liabilities and Shareholders’
Equity
Accounts payable
$
123,760
$
89,702
Accrued expenses
33,104
40,741
Lease liability, short-term
2,158
2,082
Income taxes payable
9,333
706
Current liabilities of discontinued
operations
193
7,521
Total current liabilities
168,548
140,752
Lease liability, long-term
12,831
14,949
Long-term debt
73,000
134,000
Pension and other postretirement benefit
obligations, net
78,265
110,585
Other non-current liabilities
6,218
5,529
Shareholders’ equity
184,722
109,055
Total liabilities and shareholders’
equity
$
523,584
$
514,870
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Year Ended December 31,
2021
2020
Cash flows from operating activities:
Net income (loss)
$
57,826
$
(75,444
)
Adjustments for noncash items:
Depreciation
22,080
28,940
Amortization of intangibles
1,704
3,017
Reduction of right-of-use assets
2,086
2,753
Goodwill impairment
—
13,696
Deferred income taxes
(4,944
)
(16,892
)
Accrued pension and postretirement
benefits
14,160
14,720
Stock-based compensation expense
5,167
5,402
(Gain) loss on investment in kaléo
(12,462
)
60,900
Loss on sale of divested businesses
—
52,326
Changes in assets and liabilities:
Accounts and other receivables
(16,993
)
(335
)
Inventories
(23,132
)
(4,366
)
Income taxes recoverable/payable
8,956
1,617
Prepaid expenses and other
3,612
(2,203
)
Accounts payable and accrued expenses
19,835
4,045
Lease liability
(1,935
)
(3,049
)
Pension and postretirement benefit plan
contributions
(5,687
)
(12,681
)
Other, net
310
1,927
Net cash provided by operating
activities
70,583
74,373
Cash flows from investing activities:
Capital expenditures
(27,361
)
(23,355
)
Proceeds on sale of investment in
kaléo
47,062
—
Proceeds from the sale of assets
4,749
—
Proceeds from the sale of businesses
—
56,236
Net cash provided by investing
activities
24,450
32,881
Cash flows from financing activities:
Borrowings
75,500
162,250
Debt principal payments
(136,500
)
(70,250
)
Dividends paid
(16,167
)
(216,049
)
Debt financing costs
(693
)
Other
325
(850
)
Net cash used in financing activities
(76,842
)
(125,592
)
Effect of exchange rate changes on
cash
484
(1,238
)
Increase (decrease) in cash and cash
equivalents
18,675
(19,576
)
Cash and cash equivalents at beginning of
period
11,846
31,422
Cash and cash equivalents at end of
period
$
30,521
$
11,846
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, and other items (which includes gains and
losses for an investment accounted for under the fair value method)
which have been presented separately and removed from net income
(loss) from continuing operations and diluted earnings (loss) per
share as reported under GAAP. Net income (loss) and diluted
earnings (loss) per share from ongoing operations are key financial
and analytical measures used by management to gauge the operating
performance of Tredegar’s ongoing operations. They are not intended
to represent the stand-alone results for Tredegar’s ongoing
operations under GAAP and should not be considered as an
alternative to net income (loss) from continuing operations or
earnings (loss) per share as defined by GAAP. They exclude items
that management believes do not relate to Tredegar’s ongoing
operations. A reconciliation to net income (loss) and diluted
earnings (loss) per share from ongoing operations for the three
months and the years ended December 31, 2021 and 2020 is shown
below:
Three Months Ended December
31,
Year Ended December 31,
(In millions, except per share data)
2021
2020
2021
2020
Net income (loss) from continuing
operations as reported under GAAP1
$
21.4
$
6.5
$
57.9
$
(16.8
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.3
1.2
0.5
1.2
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
(9.1
)
(0.1
)
(10.0
)
47.6
Loss on sale of Bright View
Technologies
—
1.8
—
1.8
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 tax2
—
—
(6.6
)
—
Tax benefit associated with the release of
a deferred tax valuation allowance on excess capital losses
primarily due to sale of kaléo
(5.5
)
—
(5.4
)
—
Other
(0.9
)
0.3
3.2
6.5
Goodwill impairment
—
—
—
10.5
Net income (loss) from ongoing
operations1
$
6.2
$
9.7
$
39.6
$
50.8
Earnings (loss) from continuing operations
per share as reported under GAAP (diluted)
$
0.63
$
0.19
$
1.72
$
(0.51
)
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.01
0.04
0.02
0.04
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
(0.27
)
—
(0.30
)
1.42
Loss on sale of Bright View
Technologies
—
0.05
—
0.05
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 tax2
—
—
(0.20
)
—
Tax benefit associated with the release of
a deferred tax valuation allowance on excess capital losses
primarily due to sale of kaléo
(0.16
)
—
(0.16
)
—
Other
(0.03
)
0.01
0.10
0.19
Goodwill impairment
—
—
—
0.32
Earnings (loss) per share from ongoing
operations (diluted)
$
0.18
$
0.29
$
1.18
$
1.51
- Reconciliations of the pre-tax and post-tax balances attributed
to net income (loss) are shown in Note (f).
- For more information see Note 9 “Other income (expense), net”
to the Consolidated Financial Statements in Item 15 of the Form
10-K.
(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 13 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) from continuing operations as
defined by GAAP. The Company believes that EBIT is a widely
understood and utilized metric that is meaningful to certain
investors and that including this financial metric in the
reconciliation of management’s performance metric, EBITDA from
ongoing operations, provides useful information to those investors
that primarily utilize EBIT to analyze the Company’s core
operations.
(c) Gains and losses associated with plant shutdowns, asset
impairments, restructurings and other items for the three months
and the years ended December 31, 2021 and 2020 detailed below are
shown in the statements of net sales and EBITDA from ongoing
operations by segment and are included in “Asset impairments and
costs associated with exit and disposal activities, net of
adjustments” in the condensed consolidated statements of income,
unless otherwise noted.
Three Months Ended December 31,
2021
Year Ended December 31, 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:
Consulting expenses for ERP feasibility
study1
$
0.3
$
0.2
$
0.3
$
0.2
Futura intangible amortization
out-of-period adjustment6
(0.9
)
(0.7
)
(0.9
)
(0.7
)
Vacation accrual policy change5
(2.9
)
(2.2
)
(2.9
)
(2.2
)
Environmental charges at Newnan, Georgia
plant3
0.1
0.1
0.2
0.2
COVID-19-related expenses, net of relief
2
(0.1
)
(0.1
)
0.1
0.1
Total for Aluminum Extrusions
$
(3.5
)
$
(2.7
)
$
(3.2
)
$
(2.4
)
PE Films:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
0.3
$
0.3
$
0.4
$
0.3
(Gain) losses from sale of assets,
investment writedowns and other items:
Vacation accrual policy change5
(0.5
)
(0.4
)
(0.5
)
(0.4
)
COVID-19-related expenses2
0.1
0.1
0.5
0.3
Total for PE Films
$
(0.1
)
$
—
$
0.4
$
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 taxes 2,4
$
—
$
—
$
(8.5
)
$
(6.6
)
COVID-19-related expenses2
0.1
0.1
0.1
0.1
Total for Flexible Packaging Films
$
0.1
$
0.1
$
(8.4
)
$
(6.5
)
Corporate:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Costs, net of gain associated with the
sale of the Lake Zurich manufacturing facility assets
$
(0.1
)
$
(0.1
)
$
0.1
$
0.1
Other restructuring costs - severance
0.2
0.1
0.2
0.1
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities and other1
1.6
1.3
3.9
3.1
Professional fees associated with internal
control over financial reporting1
1.2
0.9
3.1
2.3
Write-down of investment in Harbinger
Capital Partners Special Situations Fund2
—
—
0.5
0.4
Stock compensation expense associated with
the fair value remeasurement of awards granted at the time of the
2020 Special Dividend1
—
—
0.4
0.3
Transition service fees, net of corporate
costs associated with the divested Personal Care Films
business2
0.2
0.1
(0.3
)
(0.2
)
Vacation accrual policy change5
(0.4
)
(0.3
)
(0.4
)
(0.3
)
Tax benefit associated with the release of
a deferred tax valuation allowance on excess capital losses
primarily due to sale of kaléo7
—
(5.5
)
—
(5.4
)
Total for Corporate
$
2.7
$
(3.5
)
$
7.5
$
0.4
1. Included in “Selling, R&D and general expenses” in the
condensed consolidated statements of income. 2. Included in “Other
income (expense), net” in the condensed consolidated statements of
income. 3. Included in "Costs of goods sold" in the condensed
consolidated statements of income. 4. For more information, see
Note 9 “Other income (expense), net” to the Consolidated Financial
Statements in the Form 10-K. 5. For more information, see Note 6
“Accrued expenses” to the Consolidated Financial Statements in the
Form 10-K. 6. Included in “Amortization of identifiable
intangibles” in the condensed consolidated statements of income. 7.
Included in “Income tax expense (benefit)” in the condensed
consolidated statements of income.
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:
(Gains) 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 expenses3
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
(Gain) 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:
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities and other2
$
0.3
$
0.1
$
3.5
$
2.8
Professional fees associated with internal
control over financial reporting and implementation of new
accounting guidance2
1.0
0.7
2.0
1.4
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.
(d) A pre-tax gain of $12.8 million on the Company’s investment
in kaléo was recognized in the year ended December 31, 2021
compared to a pre-tax loss of $60.9 million in the year ended
December 31, 2020 which is reported in “Other income (expense),
net” in the condensed consolidated statements of income. The year
of 2021 also included a receipt of a $0.3 million dividend. On
December 27, 2021, the Company completed the sale of its
approximate 18% ownership interest in kaléo, which resulted in
Tredegar receiving total cash proceeds of $47.1 million.
(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, and other items (which
includes 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
twelve ended December 31, 2021 and 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,
2021
(a)
(b)
(b)/(a)
Net income (loss) from continuing
operations reported under GAAP
$
19.9
$
(1.5
)
$
21.4
(7.5
) %
Losses associated with plant shutdowns,
asset impairments and restructurings
0.4
0.1
0.3
(Gains) losses from sale of assets and
other
(12.7
)
2.8
(15.5
)
Net income (loss) from ongoing
operations
$
7.6
$
1.4
$
6.2
18.4
%
Three Months Ended December 31,
2020
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
%
Year Ended December 31, 2021
Net income (loss) from continuing
operations reported under GAAP
$
67.2
$
9.3
$
57.9
13.8
%
Losses associated with plant shutdowns,
asset impairments and restructurings
0.7
0.2
0.5
(Gains) losses from sale of assets and
other
(17.2
)
1.6
(18.8
)
Net income (loss) from ongoing
operations
$
50.7
$
11.1
$
39.6
21.9
%
Year 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
%
(g) Net debt is calculated as follows:
(in millions)
December 31,
December 31,
2021
2020
Debt
$
73.0
$
134.0
Less: Cash and cash equivalents
30.5
11.8
Net debt
$
42.5
$
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, that included applicable
interest, which the Company applied to required Brazilian federal
tax payments during 2021. The pretax gain was recorded in “Other
income (expense), net” in the condensed consolidated statements of
income.
(i) In December 2020, the Company entered into a definitive
agreement and completed the sale of Bright View Technologies. The
sale did not represent a strategic shift nor did it have a major
effect on the Company’s historical and ongoing operations, thus all
financial information for Bright View Technologies has been
presented as continuing operations within the PE Films segment.
(j) During the fourth quarter of 2021, the Company recorded an
out-of-period adjustment in connection with the original valuation
of intangible assets and goodwill related to the acquisition of
Futura in February 2017. This adjustment resulted in a
reclassification of $2.9 million from acquired customer
relationship intangible assets to goodwill and a $0.9 million
decrease to accumulated amortization and amortization expense as of
and for the year ended December 31, 2021.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220311005038/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
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