Tredegar Reports Fourth-Quarter Results
RICHMOND, Va., Feb 14, 2013 (BUSINESS WIRE) --
Copyright Business Wire 2013
--Bonnell Aluminum's operating profit of $1.7 million increased $0.8 million from the fourth quarter of 2011 due to the fourth quarter 2012 acquisition of AACOA, Inc. ("AACOA").
--Tredegar sold its mitigation banking business, Falling Springs, LLC ("Falling Springs"), on November 20, 2012.
Tredegar Corporation (NYSE:TG) reported fourth-quarter net income from
continuing operations of $13.9 million (43 cents per share) compared to
$3.5 million (11 cents per share) in the fourth quarter of 2011. Results
from continuing operations in the fourth quarter of 2012 include a net
after-tax gain of $4.2 million (13 cents per share) for special items
primarily related to an unrealized gain for an investment accounted for
under the fair value method. Income from ongoing operations in the
fourth quarter, which excludes special items, was $9.7 million (30 cents
per share) versus $6.5 million (20 cents per share) in the fourth
quarter of last year.
Net income from continuing operations for 2012 was $43.2 million ($1.34
per share) compared to $28.5 million (89 cents per share) in 2011.
Results from continuing operations in 2012 include a net after-tax gain
of $4.7 million (14 cents per share) for special items primarily related
to an unrealized gain for an investment accounted for under the fair
value method, partially offset by charges associated with the shutdown
of our Kentland, Indiana aluminum extrusions manufacturing facility.
Income from ongoing operations in 2012 was $38.5 million ($1.20 per
share) versus $27.9 million (87 cents per share) in 2011. Further
details regarding the special items that reconcile income from ongoing
operations to net income from continuing operations are provided in the
financial tables to this press release.
A summary of results for ongoing operations for the three and twelve
months ended December 31, 2012 and 2011 is shown below:
* Ongoing operations include operating profit (loss) of Film Products,
Aluminum Extrusions and the Other segment as well as Corporate Expenses,
Interest and Taxes. See Notes to the Financial Tables included with this
press release for further detail regarding the items included in the
reconciliation of income from ongoing operations and diluted earnings
per share from ongoing operations, each being a non-GAAP financial
measure, to net income and diluted earnings per share as reported under
GAAP. In addition, Note (h) within the Notes to the Financial Tables
provides the definition of income from ongoing operations and the
reasons why the measure is presented.
Nancy M. Taylor, Tredegar's president and chief executive officer, said:
"Film Products' performance for the quarter showed improvement versus
the fourth quarter of last year, due to stronger results from Terphane
and higher volumes in surface protection films. Overall, 2012 proved to
be a challenging year for our Films business, with softness in demand
and pricing pressures in several of our markets. Film Products ended the
year on a positive note but we remain cautious due to the competitive
dynamics in our core markets."
Ms. Taylor continued, "We are pleased with a strong year of performance
for Bonnell Aluminum. Relative to the fourth quarter, Bonnell benefitted
from the addition of AACOA. We're excited about the future opportunities
that this acquisition provides, allowing us to broaden our capabilities
and more actively participate in markets outside of building and
construction."
Ms. Taylor added, "We also divested our mitigation banking business,
Falling Springs, in the fourth quarter. The sale of Fallings Springs is
consistent with our strategic intent to focus our efforts on
manufacturing."
OPERATIONS REVIEW
Film Products
A summary of fourth quarter and full year operating results for Film
Products is provided below:
The improvement in operating results for Film Products in 2012 was
primarily driven by the addition of flexible packaging films with the
acquisition of Terphane on October 24, 2011. Net sales (sales less
freight) for Terphane were $36.4 million and $138.0 million in the
fourth quarter of 2012 and full year 2012, respectively, compared to
$28.3 million in 2011. Operating profit from ongoing operations for
Terphane was $6.4 million in the fourth quarter of 2012, which includes
amortization expense of $1.3 million, and $19.1 million for the full
year 2012, which includes amortization expense of $5.1 million. In 2011,
Terphane had operating profit of $3.0 million, which included $0.9
million in one-time reimbursements for custom duties and $0.9 million of
amortization expense. The operating results for Terphane reflect
continued progress on addressing production efficiency issues associated
with the upgrade of an existing production line highlighted in previous
quarters.
For the fourth quarter of 2012 compared to the fourth quarter of 2011,
Film Products' net sales increased primarily due to the acquisition of
Terphane and higher sales volumes for the other product lines of
approximately $8.4 million, partially offset by a decrease in average
selling prices of approximately $4.5 million. Higher net sales volumes
are primarily related to improved performance in surface protection
materials and personal care films, partially offset by lower volumes in
polyethylene overwrap films. Average selling prices decreased primarily
from the pass-through of lower resin prices to customers and pricing
pressures. The change in the U.S. dollar value of currencies for
operations outside the U.S. had an unfavorable impact on net sales of
approximately $0.7 million in the fourth quarter of 2012 compared to the
fourth quarter of 2011.
Film Products' fourth-quarter operating profit from ongoing operations
was also favorably impacted by the full quarter results from the
Terphane acquisition and improved volume and product mix, partially
offset by the estimated unfavorable impact of the projected quarterly
lag in the pass-through of average resin costs and lower margins for
personal care materials. Excluding the impact of the Terphane
acquisition, higher sales volumes and improved product mix in Film
Products had a favorable impact of approximately $4.2 million in the
fourth quarter of 2012 compared to the fourth quarter of 2011, primarily
as a result of higher surface protection volumes. As previously noted in
the prior quarter, higher volumes for surface protection products may
indicate improving conditions in the display market, although operating
results are expected to fluctuate from quarter-to-quarter. We continue
to experience margin compression in our premium personal care materials,
which adversely impacted operating profit. The estimated impact on
operating profit from ongoing operations of the quarterly lag in the
pass-through of average resin costs was approximately a negative $1.0
million in the fourth quarter of 2012 compared to a positive $1.0
million in the fourth quarter of 2011.
As noted above, net sales for 2012 increased in comparison to 2011
primarily due to the acquisition of Terphane. Higher net sales from the
acquisition of Terphane were primarily offset by lower volumes in the
other product lines of approximately $18.7 million, the unfavorable
change in the U.S. dollar value of currencies for operations outside the
U.S. of approximately $10.1 million and a decrease in average selling
prices of approximately $4.6 million. Lower net sales volumes are
primarily related to lower volumes for personal care and polyethylene
overwrap films, partially offset by improved performance in surface
protection materials in the fourth quarter of 2012. The decrease in the
average selling prices in 2012 compared to 2011 can be primarily
attributed to pricing pressures.
The increase in operating profit from ongoing operations in 2012
compared to 2011 is primarily due to the acquisition of Terphane,
partially offset by lower volumes and compressed margins for personal
care materials and the unfavorable impact of the change in the U.S.
dollar value of currencies outside the U.S. Excluding the impact of the
acquisition of Terphane, lower volumes in Film Products had an
unfavorable impact of approximately $4.8 million in 2012 compared to
2011. Lower volumes in personal care films were partially mitigated by
higher sales volumes for surface protection materials. The change in the
U.S. dollar value of currencies for operations outside the U.S. had an
unfavorable impact of approximately $1.4 million in 2012 compared to
2011. The estimated impact on operating profit from ongoing operations
of the quarterly lag in the pass-through of average resin costs was
approximately a negative $0.5 million in 2012 compared to a negative
$0.8 million in 2011.
Effective January 1, 2012, the operations of Bright View Technologies
Corporation ("Bright View") were incorporated into Film Products to
leverage research and development efforts and accelerate new product
development. Prior year balances for Bright View have been reclassified
to Film Products to conform with the current year presentation.
Operating losses for Bright View in 2012 were $3.8 million, which were
consistent with 2011.
Capital expenditures in Film Products were $30.5 million in 2012
compared to $12.9 million in 2011, which included approximately $19.6
million in capital expenditures for a project that will expand our
capacity at the manufacturing facility in Cabo de Santo Agostinho,
Brazil. Film Products currently estimates that capital expenditures will
be approximately $80 million in 2013, which includes approximately $49
million for the capacity expansion project in Brazil. This multi-year
project will significantly increase capacity in Brazil and primarily
serve flexible packaging films customers in Latin America. Depreciation
expense was $33.9 million in 2012 and $34.6 million in 2011, and is
projected to be approximately $32 million in 2013.
Aluminum Extrusions
A summary of fourth quarter and full year operating results for Aluminum
Extrusions, which is also referred to as Bonnell Aluminum, is provided
below:
Net sales in the fourth quarter of 2012 increased in comparison to the
same period of the prior year primarily due to the addition of AACOA,
partially offset by a decrease in average selling prices driven by lower
aluminum prices. AACOA, which was acquired on October 1, 2012, had net
sales of $19.5 million in the fourth quarter of 2012. Excluding the
addition of AACOA, sales volumes in the fourth quarter of 2012 compared
to the fourth quarter of 2011 were relatively flat despite the closing
of the Kentland, Indiana manufacturing facility in the third quarter of
2012. As previously reported, approximately half of the Kentland volume
was transferred to our other facilities. Net sales in 2012 increased
versus 2011 primarily due to the addition of AACOA, partially offset by
a decrease in average selling prices driven by lower aluminum prices and
lower volumes resulting from the shutdown of the Kentland facility.
Excluding the addition of AACOA and the impact of the Kentland plant
shutdown, sales volume in 2012 increased 0.6% in comparison to 2011.
Operating profit from ongoing operations increased in the fourth quarter
of 2012 compared to the fourth quarter of 2011 primarily as a result of
the addition of AACOA. AACOA had operating profit of $0.8 million for
the fourth quarter of 2012, which included amortization expense of $0.5
million. Operating profit from ongoing operations increased in 2012
versus 2011 due to improved profitability from the shutdown of our
Kentland manufacturing facility, better pricing, lower energy costs and
the addition of AACOA. The net impact from the shutdown of our Kentland
manufacturing facility had a favorable impact of approximately $2.5
million in 2012.
Capital expenditures for Bonnell Aluminum were $2.3 million in 2012
compared with $2.7 million in 2011. Capital expenditures are projected
to be approximately $19 million in 2013, which includes approximately
$15 million for an 18-month project that will expand our capacity at the
manufacturing facility in Newnan, Georgia. This additional capacity will
primarily serve the automotive industry. Depreciation expense was $9.5
million in 2012 compared with $8.3 million in 2011, and is projected to
be approximately $7 million in 2013. Higher depreciation expense in 2012
is primarily related to approximately $2.4 million in accelerated
depreciation on property, plant and equipment at the Kentland
manufacturing facility.
Other
The Other segment previously included the mitigation banking business,
which is also referred to as Falling Springs. On November 20, 2012, we
sold our membership interests in Falling Springs to Arc Ventures, LC, a
Virginia limited liability company affiliated with John D. Gottwald, a
member of Tredegar's Board of Directors, for cash and stock proceeds of
$16.6 million. The corresponding loss on sale of $3.1 million, which
included transaction-related expenses of $0.5 million, and the results
of operations related to Falling Springs have been classified as
discontinued operations for all periods presented.
Corporate Expenses, Interest and Taxes
Pension expense was $8.1 million in 2012, an unfavorable change of $5.8
million from 2011. Most of the pension impact on earnings is reflected
in "Corporate expenses, net" in the net sales and operating profit by
segment table. Corporate expenses, net increased in 2012 versus 2011
primarily due to the higher pension expenses noted above, an unrealized
loss on our investment in the Harbinger Capital Partners Special
Situations Fund, L.P. (see Note (f) within the Notes to the Financial
Tables for additional detail), certain acquisition-related expenses and
higher performance-based incentives.
Interest expense, which includes the amortization of debt issue costs,
was $3.6 million in 2012 in comparison to $1.9 million in 2011 as a
result of an increase in the average borrowings under our revolving
credit facility, which were used to finance a portion of the purchase
price for the acquisitions of Terphane in the fourth quarter of 2011 and
AACOA in the fourth quarter of 2012.
The effective tax rate used to compute income taxes from continuing
operations was 29.8% in 2012 compared with 26.4% in 2011. Income taxes
from continuing operations in 2012 primarily reflect the benefit of
current year foreign tax incentives. Income taxes for continuing
operations in 2011 reflect the recognition of estimated tax benefits
from the divestiture of the film products business in Italy, partially
offset by the nondeductible acquisition-related expenses associated with
the acquisition of Terphane by Film Products. Significant differences
between the effective tax rate for continuing operations and the U.S.
federal statutory rate for 2012 and 2011 will be provided in our Annual
Report on Form 10-K for the year ended December 31, 2012 that will be
filed with the Securities and Exchange Commission (the "SEC"). The
change in the effective tax rate for the fourth quarter primarily
reflects the impact to income taxes during the fourth quarter to adjust
the effective tax rate to the calculated effective tax rate for the full
year.
CAPITAL STRUCTURE
Net debt (debt in excess of cash and cash equivalents) was $79.2 million
at December 31, 2012, compared with $56.1 million at December 31, 2011.
In October 2012, we borrowed an additional $51 million under our
revolving credit agreement to fund the acquisition of AACOA. Net debt is
a financial measure that is not calculated or presented in accordance
with GAAP. See the Notes to the Financial Tables for reconciliation of
this non-GAAP financial measure 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
we use the words "believe," "estimate," "anticipate," "expect,"
"project," "likely," "may" and similar expressions, we do so to identify
forward-looking statements. Such statements are based on our 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
our 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 from expectations include, without limitation: acquired
businesses, including Terphane and AACOA, may not achieve the levels of
revenue, profit, productivity, or otherwise perform as we expect;
acquisitions, including our acquisition of Terphane and AACOA, involve
special risks, including without limitation, diversion of management's
time and attention from our existing businesses, the potential
assumption of unanticipated liabilities and contingencies and potential
difficulties in integrating acquired businesses and achieving
anticipated operational improvements; Film Products is highly dependent
on sales to one customer -- The Procter & Gamble Company; growth of Film
Products depends on its ability to develop and deliver new products at
competitive prices; sales volume and profitability of Aluminum
Extrusions are cyclical and highly dependent on economic conditions of
end-use markets in the U.S., particularly in the construction sector,
and are also subject to seasonal slowdowns; our substantial
international operations subject us to risks of doing business in
foreign countries, which could adversely affect our business, financial
condition and results of operations; our future performance is
influenced by costs incurred by our operating companies, including, for
example, the cost of energy and raw materials; and the other factors
discussed in the reports Tredegar files with or furnishes to the SEC
from time-to-time, including the risks and important factors set forth
in additional detail in "Risk Factors" in Part I, Item 1A of Tredegar's
2011 Annual Report on Form 10-K (the "2011 Form 10-K") filed with the
SEC. Readers are urged to review and consider carefully the disclosures
Tredegar makes in its filings with the SEC, which include the 2011 Form
10-K.
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.
To the extent that the financial information portion of this 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. Accompanying the reconciliation is management's statement
concerning the reasons why management believes that presentation of
non-GAAP measures provides useful information to investors concerning
Tredegar's financial condition and results of operations.
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 Investor Relations 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
Investor Relations section of our website.
Tredegar Corporation is primarily a manufacturer of plastic films and
aluminum extrusions. A global company headquartered in Richmond,
Virginia, Tredegar had 2012 sales of $882 million. With approximately
2,700 employees, the company operates manufacturing facilities in North
America, South America, Europe, and Asia.
Notes to the Financial Tables
(a) Plant shutdowns, asset impairments, restructurings and other in the
fourth quarter of 2012 include:
--
A net pretax gain of $1.3 million in Film Products (included in "Other
income (expenses), net" in the condensed consolidated statements of
income) associated with an insurance recovery on idle equipment that
was destroyed in a fire at an outside warehouse;
--
Pretax gain of $1.1 million (included in "Other income (expenses),
net" in the condensed consolidated statements of net income) on the
sale of a previously shutdown film products manufacturing facility in
LaGrange, Georgia;
--
Net pretax charge of $0.9 million associated with the shutdown of the
aluminum extrusions manufacturing facility in Kentland, Indiana, which
includes shutdown-related charges of $1.4 million, partially offset by
gains on the sale of equipment of $0.5 million (included in "Other
income (expense), net" in the condensed consolidated statement of
income);
--
Pretax charges of $0.9 million for acquisition-related expenses
(included in "Selling, R&D and general expenses" in the condensed
consolidated statements of income) associated with the acquisition of
AACOA by Aluminum Extrusions;
--
Pretax charges of $0.2 million for asset impairments in Film Products;
--
Pretax charges of $0.2 million for severance and other
employee-related costs in connection with restructurings in Film
Products;
--
Pretax charges of $0.2 million for integration-related expenses and
other non-recurring transactions (included in "Selling, R&D and
general expenses" in the condensed consolidated statements of income)
associated with the acquisition of AACOA by Aluminum Extrusions;
--
Pretax charges of $0.1 million associated with purchase accounting
adjustments made to the value of inventory sold by Aluminum Extrusions
after its acquisition of AACOA (included in "Cost of goods sold" in
the condensed consolidated statements of income, see note (i) below
for further detail);
--
Pretax charges of $0.1 million for integration-related expenses and
other non-recurring transactions (included in "Selling, R&D and
general expenses" in the condensed consolidated statements of income)
associated with the acquisition of Terphane by Film Products; and
--
A pretax charge of $0.1 million related to expected future
environmental costs at our aluminum extrusions manufacturing facility
in Newnan, Georgia (included in "Cost of goods sold" in the condensed
consolidated statement of income).
Plant shutdowns, asset impairments, restructurings and other in 2012
include:
--
Net pretax charge of $3.6 million associated with the shutdown of the
aluminum extrusions manufacturing facility in Kentland, Indiana, which
includes accelerated depreciation for property and equipment of $2.4
million (included in "Cost of goods sold" in the condensed
consolidated statements of income), severance and other
employee-related costs of $1.2 million and other shutdown-related
charges of $2.3 million, partially offset by adjustments to
inventories accounted for under the last-in, first-out method of $1.5
million (included in "Cost of goods sold" in the condensed
consolidated statements of income) and gains on the sale of equipment
of $0.8 million (included in "Other income (expense), net" in the
condensed consolidated statement of income);
--
A net pretax gain of $1.3 million in Film Products (included in "Other
income (expenses), net" in the condensed consolidated statements of
income) associated with an insurance recovery on idle equipment that
was destroyed in a fire at an outside warehouse;
--
Pretax charges of $1.3 million for acquisition-related expenses
(included in "Selling, R&D and general expenses" in the condensed
consolidated statements of income) associated with the acquisition of
AACOA by Aluminum Extrusions;
--
Pretax charges of $1.1 million for integration-related expenses and
other non-recurring transactions (included in "Selling, R&D and
general expenses" in the condensed consolidated statements of income)
associated with the acquisition of Terphane by Film Products;
--
Pretax gain of $1.1 million (included in "Other income (expenses),
net" in the condensed consolidated statements of income) on the sale
of a previously shutdown film products manufacturing facility in
LaGrange, Georgia;
--
Pretax loss of $0.8 million for asset impairments associated with a
previously shutdown film products manufacturing facility in LaGrange,
Georgia;
--
Pretax charges of $0.5 million for severance and other
employee-related costs in connection with restructurings in Film
Products ($0.3 million) and Aluminum Extrusions ($0.2 million);
--
Pretax charges of $0.2 million for asset impairments in Film Products;
--
Pretax charges of $0.2 million for integration-related expenses and
other non-recurring transactions (included in "Selling, R&D and
general expenses" in the condensed consolidated statements of income)
associated with the acquisition of AACOA by Aluminum Extrusions;
--
Pretax charges of $0.1 million associated with purchase accounting
adjustments made to the value of inventory sold by Aluminum Extrusions
after its acquisition of AACOA (included in "Cost of goods sold" in
the condensed consolidated statements of income, see note (i) below
for further detail); and
--
A pretax charge of $0.1 million related to expected future
environmental costs at our aluminum extrusions manufacturing facility
in Newnan, Georgia (included in "Cost of goods sold" in the condensed
consolidated statement of income).
Plant shutdowns, asset impairments, restructurings and other in the
fourth quarter of 2011 include:
--
Pretax charges of $2.5 million for acquisition-related expenses
(included in "Selling, R&D and general expenses" in the condensed
consolidated statements of income) associated with the acquisition of
Terphane by Film Products;
--
Pretax charges of $0.7 million associated with purchase accounting
adjustments made to the value of inventory sold by Film Products after
its acquisition of Terphane (included in "Cost of goods sold" in the
condensed consolidated statements of income, see note (i) below for
further detail);
--
Pretax charges of $0.6 million for asset impairments in Film Products;
--
Pretax charges of $0.4 million for integration-related expenses
(included in "Selling, R&D and general expenses" in the condensed
consolidated statements of income) associated with the acquisition of
Terphane by Film Products;
--
Pretax charges of $0.1 million for severance and other
employee-related costs in connection with restructurings in Film
Products; and
--
Pretax gains of $39,000 associated with Aluminum Extrusions for timing
differences between the recognition of realized losses on aluminum
futures contracts and related revenues from the delayed fulfillment by
customers of fixed-price forward purchase commitments (included in
"Cost of goods sold" in the condensed consolidated statements of
income).
Plant shutdowns, asset impairments, restructurings and other in 2011
include:
--
Pretax charges of $4.8 million for acquisition-related expenses
(included in "Selling, R&D and general expenses" in the condensed
consolidated statements of income) associated with the acquisition of
Terphane by Film Products;
--
Pretax charges of $1.4 million for asset impairments in Film Products;
--
Pretax gain of $1.0 million on the disposition of our film products
business in Roccamontepiano, Italy (included in "Other income
(expenses), net" in the condensed consolidated statements of income),
which includes the recognition of previously unrecognized foreign
currency translation gains of $4.3 million that were associated with
the business;
--
Pretax charges of $0.7 million associated with purchase accounting
adjustments made to the value of inventory sold by Film Products after
its acquisition of Terphane (included in "Cost of goods sold" in the
condensed consolidated statements of income, see note (i) below for
further detail);
--
Pretax charges of $0.5 million for severance and other
employee-related costs in connection with restructurings in Film
Products;
--
Pretax charges of $0.4 million for integration-related expenses
(included in "Selling, R&D and general expenses" in the condensed
consolidated statements of income) associated with the acquisition of
Terphane by Film Products; and
--
Pretax gains of $0.1 million associated with Aluminum Extrusions for
timing differences between the recognition of realized losses on
aluminum futures contracts and related revenues from the delayed
fulfillment by customers of fixed-price forward purchase commitments
(included in "Cost of goods sold" in the condensed consolidated
statements of income).
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SOURCE: Tredegar Corporation
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