Tredegar Corporation (NYSE:TG, also the "Company" or "Tredegar")
today reported first quarter financial results for the period ended
March 31, 2024.
First quarter 2024 net income (loss) was $3.3 million ($0.10 per
diluted share) compared to net income (loss) of $(1.0) million
($(0.03) per diluted share) in the first quarter of 2023. Net
income (loss) from ongoing operations, which excludes special
items, was $5.6 million ($0.16 per diluted share) in the first
quarter of 2024 compared with $2.5 million ($0.07 per diluted
share) in the first quarter of 2023. A reconciliation of net income
(loss), a financial measure calculated in accordance with U.S.
generally accepted accounting principles (“GAAP”), to net income
(loss) from ongoing operations, a non-GAAP financial measure, for
the three months ended March 31, 2024 and 2023, is provided in Note
(a) to the Financial Tables in this press release.
First Quarter Financial Results Highlights
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") from ongoing operations for Aluminum Extrusions was
$12.5 million in the first quarter of 2024 versus $14.6 million in
the first quarter of last year and $8.0 million in the fourth
quarter of 2023.
- Sales volume was 33.8 million pounds in the first quarter of
2024 versus 37.6 million pounds in the first quarter of last year
and 32.9 million pounds in the fourth quarter of 2023.
- Open orders at the end of the first quarter of 2024 were
approximately 15 million pounds (versus 27 million pounds in the
first quarter of 2023 and 14 million pounds at the end of the
fourth quarter of 2023). Net new orders increased 61% and 12% in
the first quarter of 2024 versus the first quarter of 2023 and
fourth quarter of 2023, respectively.
- EBITDA from ongoing operations for PE Films was $6.9 million in
the first quarter of 2024 versus $1.8 million in the first quarter
of 2023 and $4.5 million in the fourth quarter of 2023. Sales
volume was 10.0 million pounds in the first quarter of 2024 versus
7.4 million pounds in the first quarter of 2023 and 8.5 million
pounds in the fourth quarter of 2023.
- EBITDA from ongoing operations for Flexible Packaging Films
(also referred to as "Terphane") was $2.0 million during the first
quarter of 2024 versus $1.4 million in the first quarter of 2023
and $2.3 million during the fourth quarter of 2023. Sales volume
was 22.0 million pounds in the first quarter of 2024 versus 19.8
million pounds in the first quarter 2023 and 22.8 million pounds in
the fourth quarter of 2023. See the Status of Agreement to Sell
Terphane section of this report for information on the sale of
Terphane.
John Steitz, Tredegar’s president and chief executive officer,
said, “During the first quarter of 2024, we recognized a meaningful
profit from ongoing operations for the first time since the first
quarter of last year. The bottom of the recent severe down cycle
for Bonnell, which we believe was a residual impact of the pandemic
and started in the second half of 2022, appears to have occurred in
the third quarter of 2023. Net new orders and sales volume have
increased sequentially in each quarter since that time. In
addition, favorable preliminary determinations have been made by
U.S. authorities regarding a trade case backed by a coalition of
members of the Aluminum Extruders Council. PE Films EBITDA during
the first quarter of 2024 was exceptional at $6.9 million compared
with $8.6 million during the last six months of 2023.”
Mr. Steitz further stated, “The process to complete the closing
of our agreement to sell Terphane continues to advance as planned,
including the review required by competition authorities in Brazil.
Meanwhile, the recovery that we believe is underway in our business
units is having a favorable impact on overall operating results and
improving our outlook of net financial leverage, which we believe
peaked at 3.9x Credit EBITDA at the end of the fourth quarter of
2023 and was 3.8x at the end of the first quarter of this year. The
liquidity available under our new asset-based lending facility has
met our expectations in supporting us through the downturn. We
continue to focus on prudently managing costs, working capital and
capital spending.”
OPERATIONS REVIEW
Aluminum Extrusions
Aluminum Extrusions (or 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,
2024
2023
Sales volume (lbs)
33,841
37,562
(9.9)%
Net sales
$
114,222
$
133,370
(14.4)%
Ongoing operations:
EBITDA
$
12,540
$
14,638
(14.3)%
Depreciation & amortization
(4,542
)
(4,411
)
(3.0)%
EBIT*
$
7,998
$
10,227
(21.8)%
Capital expenditures
$
1,550
$
7,742
* 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.
The following table presents the sales volume by end use market
for the three months ended March 31, 2024 and 2023, and the three
months ended December 31, 2023.
Three Months Ended
Favorable/
Three Months Ended
Favorable/
(In millions of lbs)
March 31,
(Unfavorable)
December 31,
(Unfavorable)
2024
2023
% Change
2023
% Change
Sales volume by end-use market:
Non-residential B&C
20.1
22.3
(9.9
)%
18.4
9.2
%
Residential B&C
1.6
2.5
(36.0
)%
2.0
(20.0
)%
Automotive
3.2
3.4
(5.9
)%
3.3
(3.0
)%
Specialty products
8.9
9.4
(5.3
)%
9.2
(3.3
)%
Total
33.8
37.6
(9.9
)%
32.9
2.7
%
First Quarter 2024 Results vs. First
Quarter 2023 Results
Net sales (sales less freight) in the first quarter of 2024
decreased 14.4% versus the first quarter of 2023 primarily due to
lower sales volume and the pass-through of lower metal costs. Sales
volume in the first quarter of 2024 decreased 9.9% versus the first
quarter of 2023 but increased 2.7% versus the fourth quarter
2023.
Net new orders, which remain low compared to pre-pandemic levels
but are growing, increased 61% in the first quarter of 2024 versus
the first quarter of 2023, marking the sixth consecutive quarterly
increase in incoming orders. Since January 2021, net new orders for
the Company's aluminum extruded products have generally tracked the
ISM® Manufacturing PMI®. The Company believes that net new orders
continue to be below pre-pandemic levels due to higher interest
rates, tighter lender requirements and the increase in remote
working, which particularly impacts the non-residential B&C
end-use market. In addition, data indicates that aluminum extrusion
imports increased significantly in recent years, especially during
the pandemic, and some of Bonnell Aluminum’s customers may have
sourced, and continue to source, aluminum extrusions from producers
outside the United States.
Open orders at the end of the first quarter of 2024 were 15
million pounds (versus 14 million pounds at the end of the fourth
quarter of 2023 and 27 million pounds at the end of the first
quarter of 2023). This level is below the quarterly range of 21 to
27 million pounds in 2019 before pandemic-related disruptions
(particularly starting in early 2021 with the re-opening of markets
following the rollout of vaccines) that resulted in long lead
times, driving a peak in open orders of approximately 100 million
pounds during the first quarter of 2022.
The Company is participating as part of a coalition of members
of the Aluminum Extruders Council who have filed a trade case with
the Department of Commerce (“DOC”) and the U.S. International Trade
Commission (“ITC”) against 15 countries in response to alleged
large and increasing volumes of unfairly priced imports of aluminum
extrusions since 2019. In November 2023, the ITC found that there
is a reasonable indication that the American aluminum extrusions
industry is materially injured or threatened with injury due to
imports from 14 countries, including China. The ITC’s preliminary
determination found that subject import volumes were significant
and increasing, and that with regard to pricing, subject imports
predominantly undersold the domestic product by volume in each year
of the period of investigation. On May 2, 2024, the DOC announced
its preliminarily determination that aluminum extrusion producers
and exporters in 14 countries, including China, sold aluminum
extrusions at less-than-fair value in the United States. Final
determinations, which are expected by the end of the third quarter
of 2024, should provide an additional opportunity for Bonnell to
regain market share.
EBITDA from ongoing operations in the first quarter of 2024
decreased $2.1 million versus the first quarter of 2023 primarily
due to:
- Lower volume ($3.3 million) offset by higher net pricing after
the pass-through of metal cost changes ($2.0 million), lower labor
and employee-related costs ($0.6 million), lower supply expense
($0.6 million), lower utility expense ($0.4 million), lower
selling, general and administrative ("SG&A") expenses ($0.3
million) and lower freight rates ($0.2 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 higher prices in a quickly changing
commodity pricing environment, resulted in a charge of $1.2 million
in the first quarter of 2024 versus a benefit of $1.7 million in
the first quarter of 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, 2024 ("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 $9
million in 2024, including $4 million for productivity projects and
$5 million for capital expenditures required to support continuity
of operations. The projected spending reflects stringent spending
measures that the Company has implemented to control its financial
leverage (See "Total Debt, Financial Leverage and Debt Covenants"
section for more information). The multi-year implementation of new
enterprise resource planning and manufacturing execution systems
("ERP/MES") has been reorganized with an extended implementation
period. As a result, the earliest "go-live" date for the net
ERP/MES is 2025. The ERP/MES project commenced in 2022, with
spending to-date of approximately $21 million. Depreciation expense
is projected to be $16 million in 2024. Amortization expense is
projected to be $2 million in 2024.
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,
2024
2023
Sales volume (lbs)
10,036
7,368
36.2%
Net sales
$
24,735
$
20,182
22.6%
Ongoing operations:
EBITDA
$
6,904
$
1,849
273.4%
Depreciation & amortization
(1,329
)
(1,643
)
19.1%
EBIT*
$
5,575
$
206
NM**
Capital expenditures
$
394
$
716
* 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.
**Not meaningful ("NM")
First Quarter 2024 Results vs. First
Quarter 2023 Results
Net sales in the first quarter of 2024 were 22.6% higher
compared to the first quarter of 2023, with volume increases in
both Surface Protection and overwrap films. Surface Protection
sales volume in the first quarter of 2024 increased 43% versus the
first quarter of 2023 and 30% versus the fourth quarter of 2023.
Given recent volume improvements for Surface Protection and other
market indicators, the Company believes that the consumer
electronics market is now in recovery mode.
EBITDA from ongoing operations during the first quarter of 2024
was $6.9 million, which was exceptional and well above comparable
amounts realized during the second and first halves of 2023 of $8.6
million and $2.7 million, respectively.
EBITDA from ongoing operations in the first quarter of 2024
increased $5.1 million versus the first quarter of 2023, primarily
due to:
- A $4.4 million increase from Surface Protection primarily due
to higher contribution margin associated with higher volume ($1.0
million), favorable pricing ($0.3 million), operating efficiencies
and manufacturing costs savings ($1.9 million), lower fixed costs
($0.4 million), and lower SG&A ($0.7 million, including $0.6
million associated with the closure of the Richmond Technical
Center in 2023).
- A $0.7 million increase from overwrap films primarily due to
cost improvements.
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.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for PE Films are projected to be $2 million
in 2024, including $1 million for productivity projects and $1
million for capital expenditures required to support continuity of
current operations. Depreciation expense is projected to be $5
million in 2024. 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
(In thousands, except percentages)
March 31,
2024
2023
Sales volume (lbs)
21,973
19,845
10.7%
Net sales
$
30,113
$
31,527
(4.5)%
Ongoing operations:
EBITDA
$
1,963
$
1,350
45.4%
Depreciation & amortization
(751
)
(700
)
(7.3)%
EBIT*
$
1,212
$
650
86.5%
Capital expenditures
$
518
$
605
* 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.
First Quarter 2024 Results vs. First
Quarter 2023 Results
Net sales in the first quarter of 2024 decreased 4.5% compared
to the first quarter of 2023 primarily due to lower selling prices
that the Company believes are driven by excess global capacity and
strong competition in Brazil, Latin America and the U.S., and
unfavorable product mix, partially offset by higher sales
volume.
EBITDA from ongoing operations in the first quarter of 2024
increased $0.6 million versus the first quarter of 2023, primarily
due to:
- Lower raw material costs ($1.9 million), lower fixed costs
($1.7 million), higher sales volume ($ 1.0 million) and lower
SG&A ($0.2 million), partially offset by lower selling prices
from global excess capacity and margin pressures ($2.1 million) and
higher variable costs ($1.3 million);
- Foreign currency transaction gains ($0.1 million) in the first
quarter of 2024 compared to foreign currency transaction losses
($0.1 million) in the first quarter of 2023; and
- Net unfavorable foreign currency translation of
Real-denominated operating costs ($0.9 million).
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 $4 million in 2024 for capital expenditures required to
support continuity of current operations. Depreciation expense is
projected to be $3 million in 2024. Amortization expense is
projected to be $0.1 million in 2024.
Corporate Expenses, Interest & Taxes
Corporate expenses, net in the first three months of 2024
decreased $3.2 million compared to the first three months of 2023
primarily due to lower pension expense as a result of the pension
plan termination completed in 2023 ($3.4 million) and lower
internal audit fees ($0.3 million), partially offset by higher
stock-based compensation ($0.6 million). Further information on
gains and losses associated with special items impacting corporate
expenses, net is provided in the accompanying tables.
Interest expense of $3.5 million in the first three months of
2024 increased $1.1 million compared to the first three months of
2023 due to higher average debt levels and interest rates.
The effective tax rate was 16.7% in the first three months of
2024 compared to (48.8)% in the first three months of 2023. The
change in effective tax rate was primarily due to pre-tax income in
the first quarter of 2024 versus a pre-tax loss in the first three
months of 2023. The effective tax rate for the first three months
of 2024 varies from the 21% statutory rate primarily due to foreign
rate differences and non-deductible expenses offset by Brazilian
tax incentives and federal tax credits. The effective tax rate from
ongoing operations comparable to the earnings reconciliation table
provided in Note (a) to the Financial Tables in this press release
was 19.0% for the first three months of 2024 versus 34.2% for the
first three months of 2023 (see also Note (e) to the Financial
Tables). Refer to Note 8 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) and the U.S. federal statutory rate for 2024 and
2023.
Status of Agreement to Sell Terphane
On September 1, 2023, the Company announced that it had entered
into a definitive agreement to sell Terphane to Oben Group (the
“Contingent Terphane Sale”). Completion of the sale is contingent
upon the satisfaction of customary closing conditions, including
the receipt of certain competition filing approvals by authorities
in Brazil and Colombia. On October 27, 2023, the Company filed the
requisite competition forms with the Administrative Council for
Economic Defense (“CADE”) in Brazil. The regulatory review process
is ongoing and in line with the Company’s expectations. CADE’s
maximum deadline for completing its review is no later than
November 18, 2024. The merger review regarding the transaction was
cleared by the Colombian authority in early February 2024.
As of March 31, 2024, the Company has reported results for
Terphane as a continuing operation, given the status of the
approval process by authorities. If the sale transaction is
completed, the Company expects to realize after-tax net debt-free
cash proceeds of $85 million after deducting projected Brazil
withholding taxes, escrow funds, U.S. capital gains taxes and
transaction costs. Actual after-tax proceeds may differ from
estimates due to possible changes in deductions and the Company's
tax situation during the potentially lengthy interim period to the
closing date.
Total Debt, Financial Leverage and Debt Covenants
Total debt was $148.3 million at March 31, 2024 and $146.3
million at December 31, 2023. Cash, cash equivalents and restricted
cash was $4.8 million at March 31, 2024 and $13.5 million at
December 31, 2023. Net debt (total debt in excess of cash, cash
equivalents and restricted cash), a non-GAAP financial measure, was
$143.5 million at March 31, 2024 and $132.8 million at December 31,
2023. See Note (f) to the Financial Tables in this press release
for a reconciliation of net debt to the most directly comparable
GAAP financial measure.
The Company has been focused on stringent management of net
working capital, capital expenditures and costs during the current
slowdown in business. Total debt increased $2.0 million and net
debt increased $10.7 million in the first quarter of 2024 versus
the end of 2023 due primarily to higher net working capital to
support the recovery the Company believes is underway in its
businesses.
As of March 31, 2024, the Company was in compliance with all
covenants under its $180 million asset-based credit agreement
maturing June 30, 2026 (the "ABL Facility"). Availability for
borrowings under the ABL Facility is governed by a borrowing base,
determined by the application of specified advance rates against
eligible assets, including trade accounts receivable, inventory,
owned real properties and owned machinery and equipment. As of
March 31, 2024, excess available borrowings under the ABL Facility
were approximately $22.2 million, based upon the outstanding
borrowing base availability net of the financial covenant for
Minimum Liquidity (as defined in the ABL Facility). Daily liquidity
under the ABL Facility from January 1, 2024 to March 31, 2024, was
$10 million to $27 million with an average of $16 million and
median of $16 million, which was consistent with the Company's
expectations. Refer to Note 10 Company's Condensed Consolidated
Financial Statements in the First Quarter Form 10-Q for an
explanation of the financial highlights and primary debt
covenants.
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:
- inability to successfully complete strategic dispositions,
including the Contingent Terphane Sale, failure to realize the
expected benefits of such dispositions and assumption of
unanticipated risks in such dispositions;
- inability to successfully transition into an asset-based
revolving lending facility;
- noncompliance with any of the financial and other restrictive
covenants in the Company's asset-based credit facility;
- the impact of macroeconomic factors, such as inflation,
interest rates, recession risks and other lagging effects of the
COVID-19 pandemic
- an increase in the operating costs incurred by the Company’s
business units, including, for example, the cost of raw materials
and energy;
- failure to continue to attract, develop and retain certain key
officers or employees;
- disruptions to the Company’s manufacturing facilities,
including those resulting from labor shortages;
- inability to develop, efficiently manufacture and deliver new
products at competitive prices;
- the impact of the imposition of tariffs and sanctions on
imported aluminum ingot used by Bonnell Aluminum;
- failure to prevent foreign companies from evading anti-dumping
and countervailing duties;
- unanticipated problems or delays with the implementation of the
enterprise resource planning and manufacturing executions systems,
or security breaches and other disruptions to the Company's
information technology infrastructure;
- 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;
- 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;
- competition from other manufacturers, including manufacturers
in lower-cost countries and manufacturers benefiting from
government subsidies;
- impact of fluctuations in foreign exchange rates;
- the termination of anti-dumping duties on products imported to
Brazil that compete with products produced by Flexible
Packaging;
- an information technology system failure or breach;
- the impact of public health epidemics on employees, production
and the global economy, such as the COVID-19 pandemic;
- 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;
- impairment of the Surface Protection reporting unit's
goodwill;
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 Company's Form 10-K for the year ended December 31, 2023.
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 2023 sales of $705 million. With approximately
1,900 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,
2024
2023
Sales
$
175,736
$
191,122
Other income (expense), net (c)(d)
8
280
175,744
191,402
Cost of goods sold (c)
142,043
159,525
Freight
6,666
6,043
Selling, R&D and general expenses
(c)
18,610
20,211
Amortization of intangibles
464
503
Pension and postretirement benefits
54
3,418
Interest expense
3,455
2,311
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
507
69
Total
171,799
192,080
Income (loss) before income taxes
3,945
(678
)
Income tax expense (benefit) (c)
657
331
Net income (loss)
$
3,288
$
(1,009
)
Earnings (loss) per share:
Basic
$
0.10
$
(0.03
)
Diluted
$
0.10
$
(0.03
)
Shares used to compute earnings (loss) per
share:
Basic
34,323
33,895
Diluted
34,323
33,895
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
2024
2023
Net Sales
Aluminum Extrusions
$
114,222
$
133,370
PE Films
24,735
20,182
Flexible Packaging Films
30,113
31,527
Total net sales
169,070
185,079
Add back freight
6,666
6,043
Sales as shown in the condensed
consolidated statements of income
$
175,736
$
191,122
EBITDA from Ongoing Operations
(i)
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
12,540
$
14,638
Depreciation & amortization
(4,542
)
(4,411
)
EBIT (b)
7,998
10,227
Plant shutdowns, asset impairments,
restructurings and other (c)
(1,167
)
(493
)
PE Films:
Ongoing operations:
EBITDA (b)
6,904
1,849
Depreciation & amortization
(1,329
)
(1,643
)
EBIT (b)
5,575
206
Plant shutdowns, asset impairments,
restructurings and other (c)
(504
)
2
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
1,963
1,350
Depreciation & amortization
(751
)
(700
)
EBIT (b)
1,212
650
Plant shutdowns, asset impairments,
restructurings and other (c)
—
(78
)
Total
13,114
10,514
Interest income
22
44
Interest expense
3,455
2,311
Gain on investment in kaleo, Inc.
("kaléo") (d)
—
262
Stock option-based compensation costs
—
231
Corporate expenses, net (c)
5,736
8,956
Income (loss) before income taxes
3,945
(678
)
Income tax expense (benefit)
657
331
Net income (loss)
$
3,288
$
(1,009
)
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
March 31, 2024
December 31, 2023
Assets
Cash & cash equivalents
$
3,493
$
9,660
Restricted cash
1,299
3,795
Accounts & other receivables, net
73,032
67,938
Income taxes recoverable
793
1,182
Inventories
86,822
82,037
Prepaid expenses & other
9,438
12,065
Total current assets
174,877
176,677
Net property, plant and equipment
177,972
183,455
Right-of-use leased assets
16,761
11,848
Identifiable intangible assets, net
9,364
9,851
Goodwill
35,717
35,717
Deferred income taxes
24,320
25,034
Other assets
3,520
3,879
Total assets
$
442,531
$
446,461
Liabilities and Shareholders’
Equity
Accounts payable
$
84,925
$
95,023
Accrued expenses
23,083
24,442
Lease liability, short-term
2,871
2,107
ABL revolving facility (matures on June
30, 2026) (h)
128,330
126,322
Income taxes payable
225
1,210
Total current liabilities
239,434
249,104
Lease liability, long-term
15,318
10,942
Long-term debt
20,000
20,000
Pension and other postretirement benefit
obligations, net
6,582
6,643
Other non-current liabilities
4,382
4,119
Shareholders’ equity
156,815
155,653
Total liabilities and shareholders’
equity
$
442,531
$
446,461
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended March 31,
2024
2023
Cash flows from operating activities:
Net income (loss)
$
3,288
$
(1,009
)
Adjustments for noncash items:
Depreciation
6,252
6,340
Amortization of intangibles
464
503
Reduction of right-of-use lease asset
610
551
Deferred income taxes
623
411
Accrued pension income and post-retirement
benefits
54
3,418
Stock-based compensation expense
686
186
Gain on investment in kaléo
—
(262
)
Changes in assets and liabilities:
Accounts and other receivables
(5,337
)
(4,320
)
Inventories
(5,481
)
14,840
Income taxes recoverable/payable
(580
)
(1,156
)
Prepaid expenses and other
1,890
1,816
Accounts payable and accrued expenses
(10,306
)
(28,977
)
Lease liability
(689
)
(558
)
Pension and postretirement benefit plan
contributions
(158
)
(154
)
Other, net
965
(737
)
Net cash provided by (used in) operating
activities
(7,719
)
(9,108
)
Cash flows from investing activities:
Capital expenditures
(2,461
)
(9,025
)
Proceeds on sale of investment in
kaléo
—
262
Proceeds from the sale of assets
83
—
Net cash provided by (used in) investing
activities
(2,378
)
(8,763
)
Cash flows from financing activities:
Borrowings
179,248
37,250
Debt principal payments
(177,240
)
(19,250
)
Dividends paid
—
(4,419
)
Net cash provided by (used in) financing
activities
2,008
13,581
Effect of exchange rate changes on
cash
(574
)
83
Increase (decrease) in cash, cash
equivalents and restricted cash
(8,663
)
(4,207
)
Cash, cash equivalents and restricted cash
at beginning of period
13,455
19,232
Cash, cash equivalents and restricted cash
at end of period
$
4,792
$
15,025
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) 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) 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, 2024 and 2023 is
shown below:
Three Months Ended March 31,
($ in millions, except per share data)
2024
2023
Net income (loss) as reported under
GAAP1
$
3.3
$
(1.0
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.4
0.1
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
(0.2
)
Other
1.9
1.0
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
2.6
Net income (loss) from ongoing
operations1
$
5.6
$
2.5
Earnings (loss) per share as reported
under GAAP (diluted)
$
0.10
$
(0.03
)
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.01
—
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
(0.01
)
Other
0.05
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)
$
0.16
$
0.07
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 Note (g).
(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") as its measure of revenues
from external customers. For more business segment information, see
Note 9 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) 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, 2024 and 2023 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,
2024
($ in millions)
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
Consulting expenses for ERP/MES
project1
$
0.6
$
0.4
Storm damage to the Newnan, Georgia
plant1
0.1
0.1
Legal fees associated with the Aluminum
Extruders Trade Case1
0.2
0.2
Total for Aluminum Extrusions
$
0.9
$
0.7
PE Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
Richmond, Virginia Technical Center
closure expenses, including severance2
$
0.2
$
0.1
Richmond, Virginia Technical Center lease
abandonment2
0.3
0.3
Total for PE Films
$
0.5
$
0.4
Corporate:
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
$
0.5
$
0.4
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.9
0.7
Professional fees associated with the
transition to the ABL Facility1
0.2
0.1
Total for Corporate
$
1.6
$
1.2
1. Included in “Selling, R&D and
general expenses” in the condensed consolidated statements of
income.
2. For more information, refer to Note 1
to the Company's Condensed Consolidated Financial Statements in the
First Quarter Form 10-Q.
Three Months Ended March 31,
2023
($ in millions)
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
Storm damage to the Newnan, Georgia
plant1
$
0.6
$
0.4
Total for Aluminum Extrusions
$
0.6
$
0.4
Flexible Packaging Films:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
0.1
$
0.1
Total for Flexible Packaging Films
$
0.1
$
0.1
Corporate:
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
$
0.3
$
0.3
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.5
0.4
Stock-based compensation expense
associated with the fair value remeasurement of awards granted at
the time of the 2020 Special Dividend1
(0.1
)
(0.1
)
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
3.4
2.6
Total for Corporate
$
4.1
$
3.2
- Included in "Selling, R&D and general expenses" in the
condensed consolidated statements of income.
- For more information, see Note (g).
(d)
On December 27, 2021, the Company
completed the sale of its investment interests in kaléo and
received closing cash proceeds of $47.1 million. In January 2023,
additional cash consideration of $0.3 million was received related
to customary post-closing adjustments, which is reported in “Other
income (expense), net” in the condensed consolidated statements of
income.
(e) Tredegar’s presentation of net income (loss) from
ongoing operations is a non-GAAP financial measure that excludes
the effects of gains or losses associated with plant shutdowns,
asset impairments and restructurings, gains or losses from the sale
of assets, goodwill impairment charges, net periodic benefit cost
for the frozen defined benefit pension plan and other items (which
includes unrealized gains and losses for an investment accounted
for under the fair value method), which has been presented
separately and removed from net income (loss) as reported under
GAAP. Net income (loss) from ongoing operations is a key financial
and analytical measure used by management to gauge the operating
performance of Tredegar’s ongoing operations. It is not intended to
represent the stand-alone results for Tredegar’s ongoing operations
under GAAP and should not be considered as an alternative to net
income (loss) as defined by GAAP. It excludes items that we believe
do not relate to Tredegar’s ongoing operations.
Reconciliations of the pre-tax and post-tax balances attributed to
net income (loss) from ongoing operations for the three months
ended March 31, 2024 and 2023 are presented below in order to show
the impact on the effective tax rate:
($ in millions)
Pre-tax
Tax Expense (Benefit)
After-Tax
Effective Tax Rate
Three Months Ended March 31,
2024
(a)
(b)
(b)/(a)
Net income (loss) reported under GAAP
$
3.9
$
0.6
$
3.3
16.7
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.5
0.1
0.4
(Gains) losses from sale of assets and
other
2.5
0.6
1.9
Net income (loss) from ongoing
operations
$
6.9
$
1.3
$
5.6
19.0
%
Three Months Ended March 31,
2023
Net income (loss) reported under GAAP
$
(0.7
)
$
0.3
$
(1.0
)
(48.8
)%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.1
—
0.1
(Gains) losses from sale of assets and
other
1.0
0.2
0.8
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
3.4
0.8
2.6
Net income (loss) from ongoing
operations
$
3.8
$
1.3
$
2.5
34.2
%
(f) Net debt is calculated as follows:
March 31,
December 31,
($ in millions)
2024
2023
ABL revolving facility (matures on June
30, 2026) (h)
$
128.3
$
126.3
Long-term debt
20.0
20.0
Total debt
148.3
146.3
Less: Cash and cash equivalents
3.5
9.7
Less: Restricted cash
1.3
3.8
Net debt
$
143.5
$
132.8
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) Beginning in 2022, and consistent with no expected
required minimum cash contributions, no pension expense has been
included in calculating earnings before interest, taxes,
depreciation and amortization as defined in the Second Amended and
Restated Credit Agreement, which is used to compute certain
borrowing ratios and to compute non-GAAP net income (loss) from
ongoing operations. (h) The ABL Facility has customary
representations and warranties including, as a condition to each
borrowing, that all such representations and warranties are true
and correct in all material respects (including a representation
that no Material Adverse Effect (as defined in the ABL Facility)
has occurred since December 31, 2022). In the event that the
Company cannot certify that all conditions to the borrowing have
been met, the lenders can restrict the Company’s future borrowings
under the ABL Facility. Because a Cash Dominion Period (as defined
in the ABL Facility) is currently in effect and the Company is
required to represent that no Material Adverse Effect has occurred
as a condition to borrowing, the outstanding debt under the ABL
Facility (all contractual payments due on June 30, 2026) is
classified as a current liability in the consolidated balance
sheets. In accordance with the ABL Facility, the lenders
have been provided with the Company’s financial statements,
covenant compliance certificates and projections to facilitate
their ongoing assessment of the Company. Accordingly, the Company
believes the likelihood that lenders would exercise the subjective
acceleration clause whereby prohibiting future borrowings is
remote. As of March 31, 2024, the Company was in compliance with
all debt covenants. (i) Tredegar’s presentation of
Consolidated EBITDA 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 gains and losses for an investment
accounted for under the fair value method). Consolidated EBITDA
from ongoing operations also excludes depreciation &
amortization, stock option-based compensation costs, interest and
income taxes. Consolidated EBITDA 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)
or earnings (loss) per share as defined by GAAP. It excludes items
that management believes do not relate to Tredegar’s ongoing
operations. A reconciliation of Consolidated EBITDA from ongoing
operations for the three months ended March 31, 2024 and 2023 is
shown below:
Three Months Ended March 31,
($ in millions)
2024
2023
Net income (loss) as reported under
GAAP1
$
3.3
$
(1.0
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.4
0.1
Gain associated with the investment in
kaléo
—
(0.2
)
(Gains) losses from sale of assets and
other
1.9
1.0
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
2.6
Net income (loss) from ongoing
operations1
5.6
2.5
Depreciation and amortization
6.7
6.8
Stock option-based compensation costs
—
0.2
Interest expense
3.5
2.3
Income taxes from ongoing operations1
1.3
1.3
Consolidated EBITDA from ongoing
operations
$
17.1
$
13.1
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 Note (g).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240509797818/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
Tredegar (NYSE:TG)
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