Tredegar Corporation (NYSE:TG, also the “Company” or “Tredegar”)
today reported fourth quarter and full year financial results for
the period ended December 31, 2022.
Fourth quarter 2022 net income (loss) from continuing operations
was $(3.9) million ($(0.11) per diluted share) compared to $21.4
million ($0.63 per diluted share) in the fourth quarter of 2021.
Net income (loss) from ongoing operations, which excludes special
items, was $0.5 million ($0.02 per diluted share) in the fourth
quarter of 2022 compared to $6.2 million ($0.18 per diluted share)
in the fourth quarter of 2021.
Full year 2022 net income (loss) from continuing operations was
$28.4 million ($0.84 per diluted share) compared to $57.9 million
($1.72 per diluted share) in 2021. Net income (loss) from ongoing
operations was $39.4 million ($1.17 per diluted share) in 2022
compared to $39.6 million ($1.18 per diluted share) in 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 and
year ended December 31, 2022 and 2021, is provided in Note (a) 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 $8.9
million was $2.0 million lower than the fourth quarter of 2021
- EBITDA from ongoing operations for PE Films of negative $2.6
million was $9.3 million lower than the fourth quarter of 2021
- EBITDA from ongoing operations for Flexible Packaging Films of
$7.0 million was $0.6 million higher than the fourth quarter of
2021
John Steitz, Tredegar’s president and chief executive officer,
said, “Tredegar had a pre-tax loss from ongoing operations during
the fourth quarter of 2022 driven by lower sales volume in our
Aluminum Extrusions and PE Films business segments, which we
believe was mainly due to cyclical declines exacerbated by customer
inventory corrections. We expect an overall return to profitability
during the first quarter of 2023 with gradual improvement
thereafter.”
Mr. Steitz continued, “While Bonnell had record profitability
during 2022, performance in the first half of the year
significantly outperformed the second half as customers focused on
bringing down high inventory levels. The outlook for 2023 remains
uncertain.”
Mr. Steitz added, “PE Films had negative EBITDA from ongoing
operations during the second half of 2022 due to weak demand for
products with flat panel displays and customer inventory
corrections. We’re hopeful that a recovery will begin in the second
quarter of 2023. Terphane, our flexible packaging films business
headquartered in Brazil, had solid performance throughout 2022, but
has experienced a downturn in demand during the first quarter of
2023.”
Mr. Steitz further stated, “Debt, net of cash, increased by $75
million during 2022. The primary factors for this increase included
a $50 million contribution in February of 2022 for the first step
in the termination and settlement process of our frozen pension
plan, which is expected to be completed by the end of 2023, and
higher working capital resulting from an abrupt slowdown in
business in the second half of 2022. We continue to be very focused
on reducing net working capital to normal operating levels.”
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: 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/
Year Ended
Favorable/
(In thousands, except percentages)
December 31,
(Unfavorable)
December 31,
(Unfavorable)
2022
2021
% Change
2022
2021
% Change
Sales volume (lbs)
37,243
44,576
(16.5)%
174,670
183,367
(4.7)%
Net sales
$
127,805
$
144,832
(11.8)%
$
637,872
$
539,325
18.3%
Ongoing operations:
EBITDA
$
8,915
$
10,886
(18.1)%
$
66,800
$
55,948
19.4%
Depreciation & amortization
(4,568
)
(4,210
)
(8.5)%
(17,414
)
(16,272
)
(7.0)%
EBIT*
$
4,347
$
6,676
(34.9)%
$
49,386
$
39,676
24.5%
Capital expenditures
$
8,576
$
6,957
$
23,664
$
18,914
* For a reconciliation of this non-GAAP
measure to the most directly comparable measure calculated in
accordance with GAAP, see the EBITDA from ongoing operations by
segment statements in the Financial Tables in this press
release.
Fourth Quarter 2022 Results vs. Fourth
Quarter 2021 Results
Net sales (sales less freight) in the fourth quarter of 2022
decreased 11.8% versus 2021 primarily due to lower sales volume and
the pass-through of lower metal costs, partially offset by an
increase in average selling prices to cover higher operating costs.
Sales volume in the fourth quarter of 2022 decreased 16.5% versus
2021. Non-residential B&C sales volume, which represented 52%
of 2022 volume, declined 10.0% in the fourth quarter of 2022 versus
the fourth quarter 2021. Sales volume in the specialty market,
which represented 31% of total volume in 2022, decreased 32.1% in
the fourth quarter of 2022 versus the fourth quarter of 2021. Sales
volume in the automotive market, which represented 8% of total
volume in 2022, increased 13.3% in the fourth quarter of 2022
versus the fourth quarter of 2021.
Overall open orders at the end of the fourth quarter of 2022
were 41 million pounds versus 59 million pounds at the end of the
third quarter of 2022, but remain higher than the pre-COVID-19
range of 21 to 27 million pounds quarterly in 2019. The Company has
continued to observe order cancellations as customers report high
inventory levels and expects the confluence of orders,
cancellations and shipments to drive open orders to pre-COVID-19,
normalized levels during the first half of 2023. Given the slowdown
in orders versus the first half of 2022, average labor shortage
levels have been significantly diminished. Nonetheless, onboarding
new employees resulted in higher hiring and training costs and
production inefficiencies in 2022 versus 2021. The outlook for
demand and shipments in 2023 remains uncertain given recessionary
concerns.
EBITDA from ongoing operations in the fourth quarter of 2022
decreased $2.0 million in comparison to the fourth quarter of 2021,
primarily due to:
- Lower volume ($4.9 million), higher labor and employee-related
costs ($1.2 million) and lower labor productivity ($1.0 million);
higher supply expense, including significant price increases in
paint, chemicals, packaging and other supplies ($5.2 million);
higher utility costs ($0.4 million) and higher freight rates ($1.1
million), partially offset by higher pricing ($15.9 million) and
lower selling, general and administrative (“SG&A”) expenses
($0.2 million); and
- Inventories accounted for under the last in, first out (“LIFO”)
method resulted in a charge of $2.9 million in the fourth quarter
of 2022 versus a benefit of $0.6 million in the fourth quarter of
2021. In addition, inventories accounted for under the first in,
first out (“FIFO”) method resulted in a charge of $1.7 million in
the fourth quarter of 2022 versus a benefit of $0.9 million in the
fourth quarter of 2021, which related to the timing of the flow
through of aluminum raw material costs passed through to customers
previously acquired at higher prices in a quickly changing
commodity pricing environment. Also, the Company recorded a
favorable out-of-period adjustment of $1.8 million related to
inventory and accounts payable in the fourth quarter of 2022.
Full Year 2022 Results vs. Full Year 2021
Results
Net sales in 2022 increased 18.3% versus 2021. The annual
increase in net sales was primarily due to an increase in average
selling prices to cover higher average aluminum raw material costs
and higher operating costs, partially offset by lower sales volume.
Sales volume in 2022 decreased 4.7% versus 2021, primarily due to
lower shipments in the specialty and automotive segments which
declined 14.3% and 4.2%, respectively. Shipments for
non-residential B&C in 2022 increased by 1.6% versus 2021.
EBITDA from ongoing operations increased $10.9 million in 2022
versus 2021, primarily due to:
- Higher pricing ($69.6 million, net of the pass-through of
aluminum raw materials costs), partially offset by: lower volume
($5.6 million); higher labor and employee-related costs ($7.2
million) and lower labor productivity ($5.6 million); higher supply
expenses ($15.3 million), including significant price increases in
paint, chemicals, packaging and other supplies; higher freight
expenses ($6.3 million); higher utility rates ($3.1 million);
higher maintenance expenses ($1.4 million); and higher SG&A
($3.0 million); and
- Inventories accounted for under the LIFO method resulted in a
charge of $2.9 million in 2022 versus a benefit of $0.6 million in
2021. In addition, inventories accounted for under the FIFO method
resulted in no charge or benefit in 2022 versus a benefit of $6.7
million in 2021, which related to the timing of the flow through of
aluminum raw material costs passed through to customers previously
acquired at higher prices in a quickly changing commodity pricing
environment. Also, the Company recorded unfavorable net
out-of-period adjustments totaling $0.6 million for charges related
to inventory, accrued labor costs and accounts payable in
2022.
Aluminum Extrusions has secured supply sources to meet expected
needs for aluminum raw materials in 2023. See discussion of
Quantitative and Qualitative Disclosures about Market Risk in Item
7a of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2022 (“Form 10-K”) for additional information on
aluminum price trends.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Bonnell Aluminum are projected to be
$26 million in 2023, but could possibly be managed to lower levels
under recessionary conditions. Budgeted amounts include $11 million
for a 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 $2 million for other strategic projects. The
ERP/MES project commenced in 2022 and is expected to cost a total
of approximately $30 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 $15 million in 2023. Amortization expense is
projected to be $2 million in 2023.
PE Films
PE Films produces surface protection films, polyethylene
overwrap films and films for other markets. A summary of results
for PE Films is provided below:
Three Months Ended
Favorable/
Year Ended
Favorable/
(In thousands, except percentages)
December 31,
(Unfavorable)
December 31,
(Unfavorable)
2022
2021
% Change
2022
2021
% Change
Sales volume (lbs)
5,600
9,363
(40.2)%
32,873
39,429
(16.6)%
Net sales
$
14,959
$
31,035
(51.8)%
$
97,571
$
118,920
(18.0)%
Ongoing operations:
EBITDA
$
(2,594
)
$
6,659
(139.0)%
$
11,949
$
27,694
(56.9)%
Depreciation & amortization
(1,548
)
(1,582
)
2.1%
(6,280
)
(6,263
)
(0.3)%
EBIT*
$
(4,142
)
$
5,077
(181.6)%
$
5,669
$
21,431
(73.5)%
Capital expenditures
$
752
$
240
$
3,289
$
2,997
* For a reconciliation of this non-GAAP
measure to the most directly comparable measure calculated in
accordance with GAAP, see the EBITDA from ongoing operations by
segment statements in the Financial Tables in this press
release.
Fourth Quarter 2022 Results vs. Fourth
Quarter 2021 Results
Net sales in the fourth quarter of 2022 decreased 51.8% versus
the fourth quarter of 2021. Sales volume decreased in both Surface
Protection and overwrap films in the fourth quarter of 2022 versus
the fourth quarter of 2021. Surface Protection sales volume
declined 42% in the fourth quarter of 2022 versus the fourth
quarter of 2021. Surface Protection sales have been adversely
impacted by weak market demand and competitive pricing. Customer
demand for electronics has continued to deteriorate since the third
quarter of 2022, causing manufacturers in the supply chain to
experience reduced capacity utilization and inventory corrections.
In addition, these depressed market conditions, which are expected
to continue for most of the first half of 2023, are adversely
impacting mix through reduced sales to our highest value-added
customers and products.
EBITDA from ongoing operations in the fourth quarter of 2022
decreased $9.3 million versus the fourth quarter of 2021, primarily
due to:
- A $7.4 million decrease from Surface Protection as a result of:
- Lower contribution margin for: non-transitioning products
associated with a market slowdown and customer inventory
corrections ($5.6 million) and competitive pricing ($1.1 million);
and previously disclosed customer product transitions ($1.9
million), partially offset by lower SG&A expenses ($0.6
million);
- The pass-through lag associated with resin costs (a benefit of
$0.2 million in the fourth quarter of 2022 versus a charge of $0.9
million in the fourth quarter of 2021); and
- A provision for obsolete inventories which resulted in a charge
of $0.2 million in the fourth quarter of 2022 versus a benefit of
$0.5 million in the fourth quarter of 2021, partially offset by
inventories accounted for under the LIFO method, which resulted in
a charge of $0.1 million in the fourth quarter of 2022 versus a
charge of $0.6 million in the fourth quarter of 2021.
- A $1.9 million decrease from overwrap films primarily due to
lower sales volume ($0.8 million). In addition, inventories
accounted for under the LIFO method resulted in a charge of $0.4
million in the fourth quarter of 2022 versus a benefit of $0.5
million in the fourth quarter of 2021.
See discussion of Quantitative and Qualitative Disclosures about
Market Risk in Item 7a of the Form 10-K for additional information
on resin price trends.
Full Year 2022 Results vs. Full Year 2021
Results
Net sales in 2022 decreased 18% versus 2021, primarily due to
lower volume in Surface Protection and overwrap films. Sales volume
and net sales declined 15% and 23%, respectively, in Surface
Protection. Sales volume and net sales declined 19% and 4%,
respectively, in overwrap films, with volume declines partially
offset by the pricing impact associated with the pass-through of
resin costs.
EBITDA from ongoing operations in 2022 decreased $15.7 million
versus 2021 primarily due to:
- A $14.6 million decrease from Surface Protection as a result
of:
- Lower contribution for: non-transitioning products associated
with a market slowdown and customer inventory corrections ($7.3
million), competitive pricing ($5.5 million), lower productivity
($0.6 million) and previously disclosed customer product
transitions ($6.6 million), partially offset by lower SG&A and
research and development expenses ($1.4 million);
- The pass-through lag associated with resin costs (a benefit of
$0.5 million in 2022 versus a charge of $2.2 million in 2021);
- A foreign currency transaction gain of $0.8 million in 2022
versus a loss of $0.2 million in 2021; and
- Inventories accounted for under the LIFO method resulted in a
charge of $0.1 million in 2022 versus a charge of $0.6 million in
2021.
- A $1.1 million decrease from overwrap films primarily due to
lower volume ($1.9 million). The pass-through lag associated with
resin costs resulted in a benefit of $0.4 million in 2022 versus a
charge of $1.3 million in 2021. In addition, inventories accounted
for under the LIFO method resulted in a charge of $0.4 million in
2022 versus a benefit of $0.5 million in 2021.
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, which principally relate
to one customer, to less costly alternative processes or materials.
The Company estimates that these transitions, which were complete
as of the second quarter of 2022, resulted in a total decline of $7
million in pre-tax income from continuing operations as reported
under GAAP and EBITDA from ongoing operations during 2022 versus
2021.
The Surface Protection business is continuing to experience
competitive pricing pressures, unrelated to the customer product
transitions, that adversely impacted pre-tax income from continuing
operations as reported under GAAP and EBITDA from ongoing
operations by approximately $5.5 million in 2022 versus 2021. To
offset the adverse impact of the customer transitions and pricing
pressures, the Company is aggressively pursuing sales of new
surface protection products, applications and customers and driving
production efficiencies and cost savings.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for PE Films are projected to be $4 million
in 2023, including $2 million for productivity projects and $2
million for capital expenditures required to support continuity of
current operations. Depreciation expense is projected to be $7
million in 2023. 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 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,
2022
2021
2022
2021
Sales volume (lbs)
24,475
25,902
(5.5)%
106,685
104,569
2.0%
Net sales
$
40,022
$
37,418
7.0%
$
168,139
$
139,978
20.1%
Ongoing operations:
EBITDA
$
6,957
$
6,388
8.9%
$
27,452
$
31,684
(13.4)%
Depreciation & amortization
(721
)
(523
)
(37.9)%
(2,444
)
(1,988
)
(22.9)%
EBIT*
$
6,236
$
5,865
6.3%
$
25,008
$
29,696
(15.8)%
Capital expenditures
$
841
$
1,320
$
8,151
$
5,603
* For a reconciliation of this non-GAAP
measure to the most directly comparable measure calculated in
accordance with GAAP, see the EBITDA from ongoing operations by
segment statements in the Financial Tables in this press
release.
Fourth Quarter 2022 Results vs. Fourth
Quarter 2021 Results
Net sales in the fourth quarter of 2022 increased 7.0% compared
to the fourth quarter of 2021, primarily due to higher selling
prices from the pass-through of higher resin costs and lower
freight costs, partially offset by lower sales volume.
EBITDA from ongoing operations in the fourth quarter of 2022
increased by $0.6 million versus the fourth quarter of 2021,
primarily due to:
- Higher selling prices from the pass-through of higher resin
costs ($2.9 million), lower variable costs ($1.7 million) and
favorable product mix ($0.4 million), partially offset by higher
raw material costs ($2.0 million), lower sales volume ($0.6
million), higher fixed costs ($0.6 million) and higher SG&A
expenses ($0.3 million);
- Net unfavorable foreign currency translation of
Real-denominated operating costs ($0.8 million) in the fourth
quarter of 2022 versus in the fourth quarter of 2021; and
- Foreign currency transaction gains ($0.1 million) in the fourth
quarter of 2022 compared to foreign currency transaction gains
($0.2 million) in the fourth quarter of 2021.
Full Year 2022 Results vs. Full Year 2021
Results
Net sales in 2022 increased 20.1% compared to 2021, primarily
due to higher selling prices from the pass-through of higher resin
costs, favorable product mix and higher sales volume.
EBITDA from ongoing operations in 2022 decreased by $4.2 million
versus 2021, primarily due to:
- Higher raw material costs ($17.9 million), higher fixed costs
($1.5 million), and higher SG&A expenses ($1.4 million), offset
by higher selling prices from the pass-through of higher resin
costs ($18.3 million), higher sales volume ($1.1 million),
favorable product mix ($1.6 million), and lower variable costs
($0.1 million);
- Net unfavorable foreign currency translation of
Real-denominated operating costs ($3.7 million) in 2022 versus
2021; and
- Foreign currency transaction losses ($0.2 million) in 2022
compared to foreign currency transaction gains ($0.7 million) in
2021.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Terphane are projected to be $8 million
in 2023, including $2 million for new capacity for value-added
products and productivity projects and $6 million for capital
expenditures required to support continuity of current operations.
Depreciation expense is projected to be $3 million in 2023.
Amortization expense is projected to be $0.1 million in 2023.
Corporate Expenses, Interest, Taxes and Other
Corporate expenses, net in 2022 decreased by $0.6 million
compared 2021, primarily due to lower professional fees associated
with business development activities ($1.1 million),
employee-related compensation ($0.9 million) and stock-based
compensation ($0.6 million), partially offset by increased
professional fees associated with the internal and external audits
of the Company ($2.2 million).
Interest expense was $5.0 million in 2022 in comparison to $3.4
million in 2021, primarily due to higher interest rates.
The effective tax rate used to compute income taxes (benefit)
for continuing operations in 2022 was 13.4% compared to 13.8% in
2021. The decrease in the effective tax rate for continuing
operations is primarily due to a discrete tax 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 (“IRS”) 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 discrete benefit was
partially offset by an increase to the effective tax rate as the
result of the Brazilian income tax no longer being creditable in
the U.S. for the foreseeable future. Lastly, the effective tax rate
changed due to foreign rate differences pertaining to the Company’s
foreign operations and the benefit from tax incentives in Brazil.
The effective tax rate from ongoing operations comparable to the
earnings reconciliation table provided in Note (a) to Financial
Tables in this press release was 23.8% in 2022 and 21.9% in 2021
(see also Note (e) 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 2022
and 2021, 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 under GAAP was $14.4 million in 2022, an
unfavorable change of $0.5 million from 2021. In February 2022,
Tredegar announced the initiation of a process to terminate and
settle its frozen defined benefit pension plan. 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 settlement process has been delayed because
of longer-than-expected review times with the IRS. The Company does
not expect issues with receiving approval from the IRS and is
hopeful that the entire process will be completed by the end of
2023. The Company realized income tax benefits on the Special
Contribution of $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 (also estimated settlement basis) by $28 million at
December 31, 2022, comprised of investments at fair value of $218
million and a projected benefit obligation (“PBO”) of $246 million.
The ultimate underfunded amount at settlement may differ from
amounts existing at the end of 2022, depending on changes in market
factors, including 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 expects there will be
no required minimum cash contributions until final settlement.
Pension expense under GAAP is projected to be approximately $14
million in 2023, 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 Tables in this press release for more information).
Total debt was $137.0 million at December 31, 2022, compared to
$73.0 million at December 31, 2021. Net debt (debt in excess of
cash and cash equivalents), a non-GAAP financial measure but a key
measure used to compute the net leverage ratio under the Company’s
revolving credit agreement (“Credit Agreement”), was $117.8 million
at December 31, 2022, compared to $42.5 million at December 31,
2021. The increase in net debt during 2022 of $75.3 million was
primarily due to the Special Contribution of $50 million and higher
net working capital, resulting from a slowdown in business greater
than anticipated in the second half of 2022, which the Company
believes was mainly due to customer inventory corrections driven by
recessionary concerns. The Company is very focused on reducing net
working capital to normal operating levels.
The Credit Agreement is a five-year, revolving, secured credit
facility that permits aggregate borrowings of $375 million and
matures on June 29, 2027. The Company believes that its most
restrictive covenant under the Credit Agreement (computed
quarterly) is the Total Net 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 in Item 7 of the
Form 10-K) of $84.4 million and 1.39x, respectively, at December
31, 2022. See Note (f) 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. Accordingly, you should not place undue
reliance on these forward-looking statements. Factors that could
cause actual results to differ materially 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 continued high 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 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;
- unanticipated problems or delays with the implementation of an
enterprise resource planning and manufacturing execution systems,
or security breaches and other disruptions to the Company’s
information technology infrastructure;
- 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;
- failure to continue to attract, develop and retain certain key
officers or employees;
- 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;
- an impairment of the Surface Protection reporting unit’s
goodwill could have a material non-cash adverse impact on our
results of operations;
- 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 2022 sales from continuing operations of $939
million. With approximately 2,300 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,
2022
2021
2022
2021
Sales
$
189,149
$
220,986
$
938,564
$
826,455
Other income (expense), net (c)(d)(g)
(178
)
11,104
935
20,376
188,971
232,090
939,499
846,831
Cost of goods sold (c)
162,113
178,957
764,042
649,690
Freight
6,363
7,701
34,982
28,232
Selling, R&D and general expenses
(c)
20,986
21,117
85,004
81,311
Amortization of identifiable intangibles
(h)
538
(466
)
2,520
1,704
Pension and postretirement benefits
4,083
3,540
14,569
14,160
Interest expense
1,832
831
4,990
3,386
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
—
495
622
1,127
195,915
212,175
906,729
779,610
Income (loss) from continuing operations
before income taxes
(6,944
)
19,915
32,770
67,221
Income tax expense (benefit)(c)
(3,071
)
(1,443
)
4,389
9,284
Net income (loss) from continuing
operations
(3,873
)
21,358
28,381
57,937
Income (loss) from discontinued
operations, net of tax
6
(6
)
74
(111
)
Net income (loss)
$
(3,867
)
$
21,352
$
28,455
$
57,826
Earnings (loss) per share:
Basic:
Continuing operations
$
(0.11
)
$
0.64
$
0.84
$
1.72
Discontinued operations
—
—
—
—
Basic earnings (loss) per share
$
(0.11
)
$
0.64
$
0.84
$
1.72
Diluted:
Continuing operations
$
(0.11
)
$
0.63
$
0.84
$
1.72
Discontinued operations
—
—
—
—
Diluted earnings (loss) per share
$
(0.11
)
$
0.63
$
0.84
$
1.72
Shares used to compute earnings (loss) per
share:
Basic
33,882
33,628
33,806
33,563
Diluted
33,882
33,648
33,826
33,670
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2022
2021
2022
2021
Net Sales (b)
Aluminum Extrusions
$
127,805
$
144,832
$
637,872
$
539,325
PE Films
14,959
31,035
97,571
118,920
Flexible Packaging Films
40,022
37,418
168,139
139,978
Total net sales
182,786
213,285
903,582
798,223
Add back freight
6,363
7,701
34,982
28,232
Sales as shown in the Condensed
Consolidated Statements of Income
$
189,149
$
220,986
$
938,564
$
826,455
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
8,915
$
10,886
$
66,800
$
55,948
Depreciation & amortization
(4,568
)
(4,210
)
(17,414
)
(16,272
)
EBIT (b)
4,347
6,676
49,386
39,676
Plant shutdowns, asset impairments,
restructurings and other (c)
(190
)
3,461
(310
)
3,237
PE Films:
Ongoing operations:
EBITDA (b)
(2,594
)
6,659
11,949
27,694
Depreciation & amortization
(1,548
)
(1,582
)
(6,280
)
(6,263
)
EBIT (b)
(4,142
)
5,077
5,669
21,431
Plant shutdowns, asset impairments,
restructurings and other (c)
4
86
(646
)
(371
)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
6,957
6,388
27,452
31,684
Depreciation & amortization
(721
)
(523
)
(2,444
)
(1,988
)
EBIT (b)
6,236
5,865
25,008
29,696
Plant shutdowns, asset impairments,
restructurings and other (c)
(5
)
32
(91
)
8,439
Total
6,250
21,197
79,016
102,108
Interest income
16
33
57
73
Interest expense
1,832
831
4,990
3,386
Gain (loss) on investment in kaléo (d)
—
11,583
1,406
12,780
Stock option-based compensation costs
271
675
1,424
2,495
Corporate expenses, net (c)
11,107
11,392
41,295
41,859
Income (loss) from continuing operations
before income taxes
(6,944
)
19,915
32,770
67,221
Income tax expense (benefit)
(3,071
)
(1,443
)
4,389
9,284
Net income (loss) from continuing
operations
(3,873
)
21,358
28,381
57,937
Income (loss) from discontinued
operations, net of tax
6
(6
)
74
(111
)
Net income (loss)
$
(3,867
)
$
21,352
$
28,455
$
57,826
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
December 31, 2022
December 31, 2021
Assets
Cash & cash equivalents
$
19,232
$
30,521
Accounts & other receivables, net
84,544
103,312
Income taxes recoverable
733
2,558
Inventories
127,771
88,569
Prepaid expenses & other
10,304
11,275
Current assets of discontinued
operations
—
178
Total current assets
242,584
236,413
Property, plant & equipment, net
186,411
170,381
Right-of-use leased assets
14,021
13,847
Identifiable intangible assets, net
(h)
11,690
14,152
Goodwill (h)
70,608
70,608
Deferred income taxes
13,900
15,723
Other assets
2,879
2,460
Total assets
$
542,093
$
523,584
Liabilities and Shareholders’
Equity
Accounts payable
$
114,938
$
123,760
Accrued expenses
31,603
33,104
Lease liability, short-term
2,035
2,158
Income taxes payable
1,137
9,333
Current liabilities of discontinued
operations
—
193
Total current liabilities
149,713
168,548
Lease liability, long-term
12,738
12,831
Long-term debt
137,000
73,000
Pension and other postretirement benefit
obligations, net
35,046
78,265
Other non-current liabilities
5,834
6,218
Shareholders’ equity
201,762
184,722
Total liabilities and shareholders’
equity
$
542,093
$
523,584
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Year Ended December 31,
2022
2021
Cash flows from operating activities:
Net income (loss)
$
28,455
$
57,826
Adjustments for noncash items:
Depreciation
23,882
22,080
Amortization of intangibles
2,520
1,704
Reduction of right-of-use assets
2,098
2,086
Deferred income taxes
544
(4,944
)
Accrued pension and postretirement
benefits
14,602
14,160
Stock-based compensation expense
3,619
5,167
Gain on investment in kaléo
(1,406
)
(12,462
)
Changes in assets and liabilities:
Accounts and other receivables
18,569
(16,993
)
Inventories
(37,771
)
(23,132
)
Income taxes recoverable/payable
(6,423
)
8,956
Prepaid expenses and other
(2,526
)
3,612
Accounts payable and accrued expenses
(14,916
)
19,835
Lease liability
(2,301
)
(1,935
)
Pension and postretirement benefit plan
contributions
(50,660
)
(5,687
)
Other, net
870
310
Net cash (used in) provided by operating
activities
(20,844
)
70,583
Cash flows from investing activities:
Capital expenditures
(36,875
)
(27,361
)
Proceeds on sale of investment in
kaléo
1,406
47,062
Proceeds from the sale of assets
10
4,749
Net cash (used in) provided by investing
activities
(35,459
)
24,450
Cash flows from financing activities:
Borrowings
313,500
75,500
Debt principal payments
(249,500
)
(136,500
)
Dividends paid
(16,974
)
(16,167
)
Debt financing costs
(1,245
)
—
Other
(396
)
325
Net cash provided by (used in) financing
activities
45,385
(76,842
)
Effect of exchange rate changes on
cash
(371
)
484
(Decrease) increase in cash and cash
equivalents
(11,289
)
18,675
Cash and cash equivalents at beginning of
period
30,521
11,846
Cash and cash equivalents at end of
period
$
19,232
$
30,521
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 and the years ended December 31, 2022 and 2021 is
shown below:
Three Months Ended December
31,
Year Ended December 31,
(In millions, except per share data)
2022
2021
2022
2021
Net income (loss) from continuing
operations as reported under GAAP1
$
(3.9
)
$
21.4
$
28.4
$
57.9
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
0.3
0.5
0.5
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
(0.1
)
(9.1
)
(1.1
)
(10.0
)
Tax benefit from adjustments to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits
—
—
(3.8
)
—
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 tax3
—
—
—
(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
1.3
(0.9
)
4.1
3.2
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
3.2
—
11.3
—
Net income (loss) from ongoing
operations1
$
0.5
$
6.2
$
39.4
$
39.6
Earnings (loss) from continuing operations
per share as reported under GAAP (diluted)
$
(0.11
)
$
0.63
$
0.84
$
1.72
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
0.01
0.01
0.02
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
(0.27
)
(0.03
)
(0.30
)
Tax benefit from adjustments to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits
—
—
(0.11
)
—
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 tax3
—
—
—
(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
0.04
(0.03
)
0.13
0.10
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
0.09
—
0.33
—
Earnings (loss) per share from ongoing
operations (diluted)
$
0.02
$
0.18
$
1.17
$
1.18
1. Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) are shown in Note
(e).
2. For more information, see "Corporate
Expenses, Interest, Taxes & Other" section of this press
release.
3. For more information, see Note (i) in
this press release.
(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. The Company
uses sales less freight (“net sales”) from continuing operations as
its measure of revenues from external customers at the segment
level. 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, 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 December 31,
2022
Year Ended December 31, 2022
(in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses, net of relief
2
$
—
$
—
$
0.1
$
0.1
Environmental charges at Newnan, Georgia
plant4
0.1
0.1
0.1
0.1
Storm damage to the Newnan, Georgia
plant1
0.1
0.1
0.1
0.1
Total for Aluminum Extrusions
$
0.2
$
0.2
$
0.3
$
0.3
PE Films:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
—
$
—
$
0.5
$
0.4
(Gain) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
—
—
0.2
0.1
Total for PE Films
$
—
$
—
$
0.7
$
0.5
Flexible Packaging Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
0.1
0.1
0.1
0.1
Total for Flexible Packaging Films
$
0.1
$
0.1
$
0.1
$
0.1
Corporate:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
—
$
—
$
0.1
$
0.1
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
0.8
0.6
2.4
1.8
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.6
0.4
2.6
2.0
Stock compensation expense associated with
the fair value remeasurement of awards granted at the time of the
2020 Special Dividend1
—
—
(0.3
)
(0.2
)
Tax benefit from adjustment to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits3
—
—
—
(3.8
)
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination5
4.0
3.2
14.4
11.3
Total for Corporate
$
5.4
$
4.2
$
19.2
$
11.2
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 “Income
tax expense (benefit)” in the condensed consolidated statements of
income. 4. Included in "Costs of goods sold" in the condensed
consolidated statements of income. 5. For more information, see
“Corporate Expenses, Interest, Taxes & Other” section of this
press release.
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 expenses2
(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:
Surface Protection 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 activities1
1.6
1.3
3.9
3.1
Professional fees associated with
remediation activities related to 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.
(d)
In the year ended December 2021, a pre-tax
gain of $12.8 million was recognized on the Company’s investment in
kaleo, Inc. ("kaléo"), which included a $0.3 million dividend
received from kaléo. On December 27, 2021, the Company completed
the sale of its investment interests in kaléo and received closing
cash proceeds of $47.1 million. Subsequently, in May 2022,
additional cash consideration of $1.4 million was received related
to customary post-closing adjustments, which is reported in “Other
income (expense), net” in the condensed consolidated statements of
income.
(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
and years ended December 31, 2022 and 2021 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,
2022
(a)
(b)
(b)/(a)
Net income (loss) from continuing
operations reported under GAAP
$
(6.9
)
$
(3.0
)
$
(3.9
)
43.5
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
—
(Gains) losses from sale of assets and
other
1.7
0.5
1.2
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
4.0
0.8
3.2
Net income (loss) from ongoing
operations
$
(1.2
)
$
(1.7
)
$
0.5
141.7
%
Three Months Ended December 31,
2021
Net income (loss) from continuing
operations reported under GAAP
$
19.9
$
(1.5
)
$
21.4
(7.5
) %
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.4
0.1
0.3
(Gains) losses from sale of assets and
other
(12.7
)
2.8
(15.5
)
Net income (loss) from ongoing
operations
$
7.6
$
1.4
$
6.2
18.4
%
Year Ended December 31, 2022
Net income (loss) from continuing
operations reported under GAAP
$
32.8
$
4.4
$
28.4
13.4
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.6
0.1
0.5
(Gains) losses from sale of assets and
other
3.9
4.7
(0.8
)
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
14.4
3.1
11.3
Net income (loss) from ongoing
operations
$
51.7
$
12.3
$
39.4
23.8
%
Year Ended December 31, 2021
Net income (loss) from continuing
operations reported under GAAP
$
67.2
$
9.3
$
57.9
13.8
%
(Gains) 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
%
(f)
Net debt is calculated as follows:
(in millions)
December 31,
December 31,
2022
2021
Debt
$
137.0
$
73.0
Less: Cash and cash equivalents
19.2
30.5
Net debt
$
117.8
$
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.
(g)
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 pre-tax gain was recorded in “Other
income (expense), net” in the condensed consolidated statements of
income.
(h)
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/20230316005072/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
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