Tredegar Corporation (NYSE:TG, also the “Company” or “Tredegar”)
today reported first quarter financial results for the period ended
March 31, 2022.
First quarter 2022 net income from continuing operations was
$16.5 million (0.49 per diluted share) compared to net income from
continuing operations of $9.6 million ($0.29 per diluted share) in
the first quarter of 2021. Net income from ongoing operations,
which excludes special items, was $16.9 million ($0.50 per diluted
share) in the first quarter of 2022 compared with $10.1 million
($0.30 per diluted share) in the first quarter of 2021. A
reconciliation of net income (loss) from continuing operations, a
financial measure calculated in accordance with U.S. generally
accepted accounting principles (“GAAP”), to net income from ongoing
operations, a non-GAAP financial measure, for the three months
ended March 31, 2022 and 2021, is provided in Note (a) to the
Financial Statements in this press release.
First Quarter Financial Results Highlights
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") from ongoing operations for Aluminum Extrusions of $23.9
million was $10.6 million higher than the first quarter of
2021
- EBITDA from ongoing operations for PE Films of $7.0 million was
$0.2 million lower than the first quarter of 2021
- EBITDA from ongoing operations for Flexible Packaging Films of
$5.0 million was $4.6 million lower than the first quarter of 2021
John Steitz, Tredegar’s president and chief executive officer,
said, “Bonnell Aluminum had a record quarter for profitability that
included a benefit of $7.1 million from the timing of the flow
through of inventory costs. Even without this benefit, we are
pleased with its performance in a challenging environment, which
included labor shortage, supply chain and inflationary issues.
Backlog continues to be robust.”
Mr. Steitz continued, “PE Films continues to make progress in
its efforts to reverse the sales and profit declines that occurred
in 2021 from previously disclosed product transitions. We should
have a better idea by year-end on whether these efforts will
translate into a meaningful rebound of growth. Terphane had a good
first quarter compared with exceptional results last year,
especially considering the heightened cost and competitive
pressures that exist in the current economic environment.”
Mr. Steitz further stated, “Debt, net of cash, increased by
$63.2 million mainly as a result of the previously disclosed $50
million contribution in February to our frozen pension plan, in
conjunction with the initiation of a process to terminate and
settle the plan, as well as higher working capital that we
typically experience in the first quarter of the year.”
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: building and construction (B&C),
automotive, and specialty (which consists of consumer durables,
machinery and equipment, electrical and renewable energy, and
distribution end-use products). A summary of results for Aluminum
Extrusions is provided below:
Three Months Ended
Favorable/
(Unfavorable)
% Change
(In thousands, except percentages)
March 31,
2022
2021
Sales volume (lbs)
43,010
44,365
(3.1)%
Net sales
$
158,110
$
118,125
33.8%
Ongoing operations:
EBITDA
$
23,919
$
13,302
79.8%
Depreciation & amortization
(4,261)
(4,130)
(3.2)%
EBIT*
$
19,658
$
9,172
114.3%
Capital expenditures
$
2,881
$
2,447
* See the net sales and EBITDA from
ongoing operations by segment statements in the Financial
Statements in this press release for a reconciliation of this
non-GAAP measure to the most directly comparable measure calculated
in accordance with GAAP.
First Quarter 2022 Results vs. First
Quarter 2021 Results
Net sales (sales less freight) in the first quarter of 2022
increased by 33.8% versus 2021 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 first quarter of 2022
decreased by 3.1% versus 2021. Sales volume in the specialty
market, which represented 34% of total volume in 2021, decreased
5.2% in the first quarter of 2022 versus 2021. Sales volume in the
automotive market, which represented 8% of total volume in 2021,
declined 20.0% versus the first quarter of 2021. Non-residential
B&C sales volume, which represented 51% of 2021 volume,
increased 1.3% in the first quarter of 2022 versus 2021. Strong
market demand in this sector has not been fully reflected in
Bonnell Aluminum's first quarter 2022 results, due to
pandemic-related labor shortages and resulting production
inefficiencies. While the average number of direct labor employees
at Bonnell Aluminum facilities increased approximately 5% and 3% in
the first quarter of 2022 compared to the first and fourth quarters
of 2021, respectively, the estimated average labor shortage levels
was 143, 133 and 147 workers in the first quarter of 2022 and first
and fourth quarters of 2021, respectively. Moreover, onboarding new
employees has resulted in higher hiring and training costs in 2022
versus last year. However, current bookings and backlog remain at
record high levels.
EBITDA from ongoing operations in the first quarter of 2022
increased by $10.6 million in comparison to the first quarter of
2021 primarily due to:
- Higher pricing ($14.7 million, net of the pass-through of
aluminum raw material costs), partially offset by: lower volume
($0.4 million); higher labor and employee-related costs ($1.3
million) and lower labor productivity ($1.1 million); higher
maintenance costs ($1.1 million); higher supply expense, including
significant price increases in paint, chemicals, packaging and
other supplies ($3.8 million); higher freight rates ($1.1 million);
and increased selling, general and administrative expenses ($1.5
million); and
- 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 $7.1 million in the
first quarter of 2022 versus a benefit of $1.0 million in the first
quarter of 2021. The benefit in the first quarter of 2022 was net
of an adverse impact from the lag in pricing ($1.8 million), in
which products promised to customers at a specified price were
shipped in a later period.
Aluminum Extrusions believes that it has adequate supply
agreements for aluminum raw materials in 2022 and is in the process
of securing supply sources to meet expected needs in 2023. Refer to
Item 3. Quantitative and Qualitative Disclosures About Market Risk
in the Company's Quarterly Report on Form 10-Q for the period ended
March 31, 2022 ("First Quarter Form 10-Q") for additional
information on aluminum price trends.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Bonnell Aluminum are projected to be
$31 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 $7 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 $2 million in 2022.
PE Films
PE Films produces surface protection films, polyethylene
overwrap and polypropylene films for other markets. A summary of
results for PE Films is provided below:
Three Months Ended
Favorable/
(Unfavorable)
% Change
(In thousands, except percentages)
March 31,
2022
2021
Sales volume (lbs)
10,553
10,244
3.0%
Net sales
$
31,131
$
27,953
11.4%
Ongoing operations:
EBITDA
$
7,047
$
7,213
(2.3)%
Depreciation & amortization
(1,595)
(1,420)
(12.3)%
EBIT*
$
5,452
$
5,793
(5.9)%
Capital expenditures
$
581
$
1,233
* See the net sales and EBITDA from
ongoing operations by segment statements in the Financial
Statements in this press release for a reconciliation of this
non-GAAP measure to the most directly comparable measure calculated
in accordance with GAAP.
First Quarter 2022 Results vs. First
Quarter 2021 Results
Net sales increased by $3.2 million in the first quarter of 2022
versus the first quarter of 2021 primarily due to higher volume in
Surface Protection and higher selling prices for overwrap films.
Sales volume in Surface Protection increased 5% versus the first
quarter of 2021.
EBITDA from ongoing operations in the first quarter of 2022
decreased by $0.2 million versus the first quarter of 2021,
primarily due to:
- A $0.9 million decrease from Surface Protection associated with
lower sales related to previously disclosed customer product
transitions ($1.5 million), competitive pricing pressures for
products unrelated to the customer product transitions ($1.4
million) and higher freight expense ($0.2 million), partially
offset by higher volume, favorable mix ($1.0 million) and the
pass-through lag associated with resin costs (benefit of $0.6
million in the first quarter of 2022 vs. charge of $0.5 million in
the first quarter of 2021); and
- A $0.7 million increase from overwrap films primarily related
to a benefit from the pass-through lag associated with resin costs
(benefit of $0.3 million in the first quarter of 2022 versus a
charge of $0.3 million in the first quarter of 2021) and favorable
selling, general and administrative expenses ($0.4 million),
partially offset by unfavorable mix ($0.2 million).
Refer to Item 3. Quantitative and Qualitative Disclosures About
Market Risk in the First Quarter Form 10-Q 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 pre-tax income from continuing operations as reported
under GAAP and EBITDA from ongoing operations for PE Films by $14.8
million during 2021 versus 2020. A total decline of $7 million in
pre-tax income from continuing operations as reported under GAAP
and 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 pre-tax income from
continuing operations as reported under GAAP and EBITDA from
ongoing operations by approximately $6 million for full year 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 pre-tax income from continuing operations as
reported under GAAP and 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.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for PE Films are projected to be $5 million
in 2022, including $2 million for productivity projects and $3
million for capital expenditures required to support continuity of
current operations. Depreciation expense is projected to be $7
million in 2022. There is no amortization expense for PE Films.
Flexible Packaging Films
Flexible Packaging Films, which is also referred to as Terphane,
produces polyester-based films for use in packaging applications
that have specialized properties, such as heat resistance,
strength, barrier protection and the ability to accept high-quality
print graphics. A summary of results for Flexible Packaging Films
is provided below:
Three Months Ended
Favorable/
(Unfavorable)
% Change
(In thousands, except percentages)
March 31,
2022
2021
Sales volume (lbs)
26,005
27,408
(5.1)%
Net sales
$
39,244
$
32,521
20.7%
Ongoing operations:
EBITDA
$
5,035
$
9,623
(47.7)%
Depreciation & amortization
(550)
(466)
(18.0)%
EBIT*
$
4,485
$
9,157
(51.0)%
Capital expenditures
$
1,545
$
1,271
* See the net sales and EBITDA from
ongoing operations by segment statements in the Financial
Statements in this press release for a reconciliation of this
non-GAAP measure to the most directly comparable measure calculated
in accordance with GAAP.
First Quarter 2022 Results vs. First
Quarter 2021 Results
Sales volume declined by 5.1% during the first quarter of 2022
versus the first quarter of 2021, which reflected the surge in
pandemic-related demand. Net sales in the first quarter of 2022
increased 20.7% compared to the first quarter of 2021, 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 the first quarter of 2022
decreased by $4.6 million versus the first quarter of 2021
primarily due to:
- Higher raw material costs ($6.0 million), higher variable costs
($1.6 million) and lower sales volume ($0.8 million), partially
offset by higher selling prices ($4.9 million) from the
pass-through of higher resin costs, favorable absorption of fixed
costs ($0.4 million) and favorable product mix ($0.3 million);
- Net unfavorable foreign currency translation of
Real-denominated operating costs ($0.3 million); and
- Foreign currency transaction losses ($0.9 million) in the first
quarter of 2022 compared to foreign currency transaction gains
($0.4 million) in the first quarter of 2021.
Refer to Item 3. Quantitative and Qualitative Disclosures About
Market Risk in the First Quarter Form 10-Q for additional
information on polyester fiber and component price trends.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Flexible Packaging Films are projected
to be $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, Interest, Taxes & Other
Corporate expenses, net in the first three months of 2022
remained consistent with the first three months of 2021 as lower
stock-based compensation ($0.8 million) was substantially offset by
higher professional fees associated with remediation activities
related to the Company's previously disclosed material weaknesses
in internal control over financial reporting ($0.3 million),
non-recurring 2021 transition service fee income, net of corporate
costs associated with the divested Personal Care Films business
($0.3 million) and higher professional fees associated with
business development activities ($0.1 million).
Interest expense of $0.8 million in the first three months of
2022 remained consistent with the first three months of 2021 as
lower average debt levels were offset by higher average interest
rates.
The effective tax rate used to compute income tax expense
(benefit) for continuing operations in the first three months of
2022 was 4.5%, compared to 24.4% in the first three months of 2021.
The decrease in the effective tax rate for continuing operations is
primarily due to a discrete benefit recorded in the first quarter
of 2022 resulting from the implementation of new U.S. tax
regulations associated with foreign tax credits published by the
U.S. Treasury and Internal Revenue Service on January 4, 2022.
These regulations overhaul various components of the foreign tax
credit regime including the determination of creditable foreign
taxes and limit the amount of foreign taxes that are creditable
against U.S. income taxes. This one-time discrete benefit is
expected to reduce the effective tax rate for the remainder of
2022, which will be offset by an expected increase to the effective
tax rate as the result of Brazilian income tax no longer being
creditable in the U.S. for the foreseeable future. The effective
tax rate from ongoing operations comparable to the earnings
reconciliation table provided in Note (a) to the Financial
Statements in this press release was 25.5% for the first three
months of 2022 versus 24.4% for the first three months of 2021 (see
also Note (e) to the Financial Statements). Refer to Note 9 to the
Company's Condensed Consolidated Financial Statements in the First
Quarter Form 10-Q for an explanation of differences between the
effective tax rate for income (loss) from continuing operations and
the U.S. federal statutory rate for 2022 and 2021.
Pension expense under GAAP of $3.5 million in the first three
months of 2022 remained consistent with the first three months of
2021. 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 cash
benefits on the Special Contribution of approximately $11 million
in 2022. Administrative costs for the pension plan through the
settlement process are estimated at $4 to $5 million.
Tredegar’s frozen defined benefit pension plan was underfunded
on a GAAP basis by $69 million at December 31, 2021, comprised of
investments at fair value of $245 million and a projected benefit
obligation (“PBO”) of $314 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 the Special Contribution and changes to the
values of pension plan assets and liabilities resulted in a
decrease in the underfunding on a GAAP basis from $69 million at
December 31, 2021 to approximately $13 million at March 31, 2022.
The ultimate settlement benefit obligation may differ from the PBO,
depending on market factors for buyers of pension obligations at
the time of settlement.
Prior to the Special Contribution, GAAP pension expense was a
reasonable proxy for the Company’s required minimum cash
contribution to the pension plan. The Company estimates that, with
the Special Contribution, there will be no required minimum cash
contributions until final settlement. Pension expense under GAAP is
projected to be approximately $14 million in 2022, which is mainly
comprised of non-cash amortization of deferred net actuarial losses
reflected in the Company’s shareholders’ equity as accumulated
other comprehensive losses. Beginning in 2022, and consistent with
no expected required minimum cash contributions, no pension expense
is included in 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 and a significant consideration for
computing non-GAAP net income (loss) from ongoing operations.
The impact on earnings from pension expense is reflected in
“Corporate expenses, net” in the accompanying net sales and EBITDA
from ongoing operations by segment tables. However, beginning in
2022 and consistent with excluding GAAP pension expense from Credit
EBITDA as described above, GAAP pension expense has been presented
separately and removed from net income (loss) from continuing
operations and diluted earnings (loss) per share as reported under
GAAP for purposes of determining Tredegar’s non-GAAP presentation
of net income (loss) and diluted earnings (loss) per share from
ongoing operations (see related reconciliation in Note (a) to the
Financial Statements in this press release for more
information).
Total debt was $131.3 million at March 31, 2022 compared to
total debt of $73.0 million at December 31, 2021. Net debt (debt in
excess of cash and cash equivalents), a non-GAAP financial measure,
was $105.7 million at March 31, 2022 compared to $42.5 million at
December 31, 2021. 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 Credit EBITDA for the trailing four quarters. The
Company had Credit EBITDA and a leverage ratio (calculated in the
"Liquidity and Capital Resources" section of the First Quarter Form
10-Q) of $109.9 million and 1.19x, respectively, at March 31, 2022.
See Note (h) to the Financial Statements in this press release 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, including rising inflation and the effects of the
Russian invasion of Ukraine;
- 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 for the year ended December 31, 2021. 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 (Loss)
(In Thousands, Except
Per-Share Data)
(Unaudited)
Three Months Ended
March 31,
2022
2021
Sales
$
236,566
$
184,822
Other income (expense), net (c)(d)
(267)
760
236,299
185,582
Cost of goods sold (c)
183,260
141,285
Freight
8,081
6,223
Selling, R&D and general expenses
(c)
22,807
20,105
Amortization of intangibles
663
723
Pension and postretirement benefits
3,476
3,540
Interest expense
786
822
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
(9)
169
219,064
172,867
Income (loss) from continuing operations
before income taxes
17,235
12,715
Income tax expense (benefit) (c)
778
3,097
Net income (loss) from continuing
operations
16,457
9,618
Income (loss) from discontinued
operations, net of tax
(35)
(587)
Net income (loss)
$
16,422
$
9,031
Earnings (loss) per share:
Basic:
Continuing operations
$
0.49
$
0.29
Discontinued operations
—
(0.02)
Basic earnings (loss) per share
$
0.49
$
0.27
Diluted:
Continuing operations
$
0.49
$
0.29
Discontinued operations
—
(0.02)
Diluted earnings (loss) per share
$
0.49
$
0.27
Shares used to compute earnings (loss) per
share:
Basic
33,654
33,406
Diluted
33,696
33,644
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2022
2021
Net Sales
Aluminum Extrusions
$
158,110
$
118,125
PE Films
31,131
27,953
Flexible Packaging Films
39,244
32,521
Total net sales
228,485
178,599
Add back freight
8,081
6,223
Sales as shown in the Condensed
Consolidated Statements of Income
$
236,566
$
184,822
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
23,919
$
13,302
Depreciation & amortization
(4,261)
(4,130)
EBIT (b)
19,658
9,172
Plant shutdowns, asset impairments,
restructurings and other (c)
(105)
183
PE Films:
Ongoing operations:
EBITDA (b)
7,047
7,213
Depreciation & amortization
(1,595)
(1,420)
EBIT (b)
5,452
5,793
Plant shutdowns, asset impairments,
restructurings and other (c)
(102)
(124)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
5,035
9,623
Depreciation & amortization
(550)
(466)
EBIT (b)
4,485
9,157
Plant shutdowns, asset impairments,
restructurings and other (c)
(43)
(38)
Total
29,345
24,143
Interest income
29
7
Interest expense
786
822
Gain on investment in kaléo (d)
—
718
Stock option-based compensation costs
631
468
Corporate expenses, net (c)
10,722
10,863
Income (loss) from continuing operations
before income taxes
17,235
12,715
Income tax expense (benefit)
778
3,097
Net income (loss) from continuing
operations
16,457
9,618
Net income (loss) from discontinued
operations, net of tax
(35)
(587)
Net income (loss)
$
16,422
$
9,031
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
March 31, 2022
December 31, 2021
Assets
Cash & cash equivalents
$
25,648
$
30,521
Accounts & other receivables, net
129,559
103,312
Income taxes recoverable
2,512
2,558
Inventories
104,560
88,569
Prepaid expenses & other
17,183
11,275
Current assets of discontinued
operations
151
178
Total current assets
279,613
236,413
Property, plant & equipment, net
172,567
170,381
Right-of-use leased assets
13,385
13,847
Identifiable intangible assets, net
13,632
14,152
Goodwill
70,608
70,608
Deferred income taxes
11,409
15,723
Other assets
3,457
2,460
Total assets
$
564,671
$
523,584
Liabilities and Shareholders’
Equity
Accounts payable
$
144,585
$
123,760
Accrued expenses
27,012
33,104
Lease liability, short-term
2,119
2,158
Income taxes payable
643
9,333
Current liabilities of discontinued
operations
178
193
Total current liabilities
174,537
168,548
Lease liability, long-term
12,361
12,831
Long-term debt
131,250
73,000
Pension and other postretirement benefit
obligations, net
28,333
78,265
Other non-current liabilities
6,322
6,218
Shareholders’ equity
211,868
184,722
Total liabilities and shareholders’
equity
$
564,671
$
523,584
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
2022
2021
Cash flows from operating activities:
Net income (loss)
$
16,422
$
9,031
Adjustments for noncash items:
Depreciation
5,829
5,463
Amortization of intangibles
663
723
Reduction of right-of-use lease asset
500
549
Deferred income taxes
552
1,017
Accrued pension income and post-retirement
benefits
3,506
3,540
Stock-based compensation expense
1,295
576
Gain on investment in kaléo
—
(400)
Changes in assets and liabilities:
Accounts and other receivables
(24,351)
(2,126)
Inventories
(12,622)
(5,442)
Income taxes recoverable/payable
(8,791)
1,102
Prepaid expenses and other
3,323
2,798
Accounts payable and accrued expenses
10,384
(2,517)
Lease liability
(547)
(535)
Pension and postretirement benefit plan
contributions
(50,158)
(3,886)
Other, net
(742)
(23)
Net cash (used in) provided by operating
activities
(54,737)
9,870
Cash flows from investing activities:
Capital expenditures
(5,086)
(5,259)
Net cash used in investing activities
(5,086)
(5,259)
Cash flows from financing activities:
Borrowings
109,500
32,000
Debt principal payments
(51,250)
(23,000)
Dividends paid
(4,059)
(4,025)
Other
(396)
915
Net cash provided by financing
activities
53,795
5,890
Effect of exchange rate changes on
cash
1,155
(488)
Increase (decrease) in cash and cash
equivalents
(4,873)
10,013
Cash and cash equivalents at beginning of
period
30,521
11,846
Cash and cash equivalents at end of
period
$
25,648
$
21,859
Notes to the Financial Tables
(Unaudited)
(a) Tredegar’s presentation of net income (loss) and diluted
earnings (loss) per share from ongoing operations are non-GAAP
financial measures that exclude the effects of gains or losses
associated with plant shutdowns, asset impairments and
restructurings, gains or losses from the sale of assets, goodwill
impairment charges, net periodic benefit cost for the frozen
defined benefit pension plan and other items (which includes gains
and losses for an investment accounted for under the fair value
method) which have been presented separately and removed from net
income (loss) from continuing operations and diluted earnings
(loss) per share as reported under GAAP. Net income (loss) and
diluted earnings (loss) per share from ongoing operations are key
financial and analytical measures used by management to gauge the
operating performance of Tredegar’s ongoing operations. They are
not intended to represent the stand-alone results for Tredegar’s
ongoing operations under GAAP and should not be considered as an
alternative to net income (loss) from continuing operations or
earnings (loss) per share as defined by GAAP. They exclude items
that management believes do not relate to Tredegar’s ongoing
operations. A reconciliation to net income (loss) and diluted
earnings (loss) per share from ongoing operations for the three
months ended March 31, 2022 and 2021 is shown below:
Three Months Ended March 31,
($ in millions, except per share data)
2022
2021
Net income (loss) from continuing
operations as reported under GAAP1
$
16.5
$
9.6
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
0.2
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
—
(0.6)
Tax benefit from adjustments to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits
(3.8)
—
Other
1.5
0.9
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
2.7
—
Net income (loss) from ongoing
operations1
$
16.9
$
10.1
Earnings (loss) per share from continuing
operations as reported under GAAP (diluted)
$
0.49
$
0.29
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
(Gains) losses from sale of assets and
other:
(Gain) loss associated with the investment
in kaléo
—
(0.02)
Tax benefit from adjustments to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits
(0.11)
—
Other
0.04
0.03
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
0.08
—
Earnings (loss) per share from ongoing
operations (diluted)
$
0.50
$
0.30
1. Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) are shown in Note
(e).
2. Prior to the Special Contribution (see “Corporate Expenses,
Interest, Taxes & Other” section of this report), GAAP pension
expense was a reasonable proxy for the Company’s required minimum
cash contribution to the pension plan. The Company estimates that,
with the Special Contribution, there will be no required minimum
cash contributions until final settlement. Pension expense under
GAAP is projected to be approximately $14 million in 2022, which is
mainly comprised of non-cash amortization of deferred net actuarial
losses reflected in the Company’s shareholders’ equity as
accumulated other comprehensive losses. Beginning in 2022, and
consistent with no expected required minimum cash contributions, no
pension expense is included in calculating earnings before
interest, taxes, depreciation and amortization as defined in the
Company’s revolving credit agreement, which is used to compute
certain borrowing ratios and a significant consideration for
computing non-GAAP net income (loss) from ongoing operations.
Accordingly, beginning in 2022, GAAP pension expense has been
presented separately and removed from net income (loss) from
continuing operations and diluted earnings (loss) per share as
reported under GAAP for purposes of determining Tredegar’s non-GAAP
presentation of net income (loss) and diluted earnings (loss) per
share from ongoing operations.
(b) EBITDA (earnings before interest, taxes, depreciation and
amortization) from ongoing operations is the key segment
profitability metric used by the Company’s chief operating decision
maker to assess segment financial performance. For more business
segment information, see Note 10 to the Company's Condensed
Consolidated Financial Statements in the First Quarter Form
10-Q.
EBIT (earnings before interest and taxes) from ongoing
operations is a non-GAAP financial measure included in the
accompanying tables and the reconciliation of segment financial
information to consolidated results for the Company in the net
sales and EBITDA from ongoing operations by segment statements. It
is not intended to represent the stand-alone results for Tredegar’s
ongoing operations under GAAP and should not be considered as an
alternative to net income (loss) 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
ended March 31, 2022 and 2021 detailed below are shown in the
statements of net sales and EBITDA from ongoing operations by
segment and are included in “Asset impairments and costs associated
with exit and disposal activities, net of adjustments” in the
condensed consolidated statements of income, unless otherwise
noted.
Three Months Ended March 31,
2022
($ in millions)
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
0.1
0.1
Total for Aluminum Extrusions
$
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
Total for PE Films
$
0.1
$
0.1
Corporate:
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities and other1
$
1.5
$
1.0
Professional fees associated with internal
control over financial reporting1
0.4
0.3
Tax benefit from adjustments to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits5
—
(3.8)
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination4
3.4
2.7
Total for Corporate
$
5.3
$
0.2
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 4 in the
Notes to the Company's Condensed Consolidated Financial Statements
in the First Quarter Form 10-Q.
5. Included in "Income tax expense
(benefit)" in the condensed consolidated statements of income.
Three Months Ended March 31,
2021
($ in millions)
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
$
(0.2)
$
(0.1)
Total for Aluminum Extrusions
$
(0.2)
$
(0.1)
PE Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
$
0.2
$
0.1
Total for PE Films
$
0.2
$
0.1
Corporate:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
(Gain), net of costs associated with the
sale of the Lake Zurich manufacturing facility assets
$
0.2
$
0.2
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities and other1
0.8
0.6
Professional fees associated with internal
control over financial reporting1
0.2
0.1
Transition service fees, net of corporate
costs associated with the divested Personal Care Films
business2
(0.3)
(0.2)
Write-down of investment in Harbinger
Capital Partners Special Situations Fund2
0.1
0.1
Stock compensation expense associated with
the fair value remeasurement of awards granted at the time of the
2020 Special Dividend1
0.4
0.3
Total for Corporate
$
1.4
$
1.1
1. Included in “Selling, R&D and
general expenses” in the condensed consolidated statements of
income.
2. Included in “Other income (expense),
net” in the condensed consolidated statements of income.
(d) A pre-tax gain of $0.7 million on the Company’s investment
in kaleo, Inc. ("kaléo") in the three months ended March 31, 2021,
which is reported in “Other income (expense), net” in the condensed
consolidated statements of income. The gain in the first three
months of 2021 includes a $0.3 million dividend received from
kaléo. On December 27, 2021, the Company completed the sale of
approximate 18% ownership interest in kaléo, which resulted in
Tredegar receiving total cash proceeds of $47.1 million.
(e) Tredegar’s presentation of net income (loss) from ongoing
operations is a non-GAAP financial measure that excludes the
effects of gains or losses associated with plant shutdowns, asset
impairments and restructurings, gains or losses from the sale of
assets, goodwill impairment charges, net periodic benefit cost for
the frozen defined benefit pension plan and other items (which
includes unrealized gains and losses for an investment accounted
for under the fair value method), which has been presented
separately and removed from net income (loss) from continuing
operations as reported under GAAP. Net income (loss) from ongoing
operations is a key financial and analytical measure used by
management to gauge the operating performance of Tredegar’s ongoing
operations. It is not intended to represent the stand-alone results
for Tredegar’s ongoing operations under GAAP and should not be
considered as an alternative to net income (loss) from continuing
operations as defined by GAAP. It excludes items that we believe do
not relate to Tredegar’s ongoing operations.
Reconciliations of the pre-tax and post-tax balances attributed
to net income (loss) from ongoing operations for the three months
ended March 31, 2022 and 2021 are presented below in order to show
the impact on the effective tax rate:
($ in millions)
Pre-tax
Tax Expense (Benefit)
After-Tax
Effective Tax Rate
Three Months Ended March 31,
2022
Net income (loss) from continuing
operations reported under GAAP
$
17.2
$
0.7
$
16.5
4.5 %
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
—
(Gains) losses from sale of assets and
other
2.1
4.4
(2.3)
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
3.4
0.7
2.7
Net income (loss) from ongoing
operations
$
22.7
$
5.8
$
16.9
25.5 %
Three Months Ended March 31,
2021
Net income (loss) from continuing
operations reported under GAAP
$
12.7
$
3.1
$
9.6
24.4 %
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.2
—
0.2
(Gains) losses from sale of assets and
other
0.5
0.2
0.3
Net income (loss) from ongoing
operations
$
13.4
$
3.3
$
10.1
24.4 %
(h) Net debt is calculated as follows:
March 31,
December 31,
(in millions)
2022
2021
Debt
$
131.3
$
73.0
Less: Cash and cash equivalents
25.6
30.5
Net debt
$
105.7
$
42.5
Net debt is not intended to represent total debt as defined by
GAAP. Net debt is utilized by management in evaluating the
Company’s financial leverage and equity valuation, and management
believes that investors also may find net debt to be helpful for
the same purposes.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220509005283/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
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