Tredegar Corporation (NYSE:TG, also the "Company" or "Tredegar")
today reported third quarter financial results for the period ended
September 30, 2024.
Third quarter 2024 net income (loss) was $(3.9) million ($(0.11)
per diluted share) compared to $(50.4) million ($(1.47) per diluted
share) in the third quarter of 2023. Net income (loss) from ongoing
operations, which excludes special items, was $0.2 million ($0.01
per diluted share) in the third quarter of 2024 compared with
$(5.1) million ($(0.15) per diluted share) in the third 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 and nine months ended
September 30, 2024 and 2023, is provided in Note (a) to the
Financial Tables in this press release.
Third Quarter Financial Results and Other Highlights
- Earnings before interest, taxes, depreciation and amortization
("EBITDA") from ongoing operations for Aluminum Extrusions was $6.2
million in the third quarter of 2024 versus $5.1 million in the
third quarter of last year and $12.9 million in the second quarter
of 2024.
- Sales volume was 34.6 million pounds in the third quarter of
2024 versus 32.5 million pounds in the third quarter of last year
and 34.9 million pounds in the second quarter of 2024.
- Open orders at the end of the third quarter of 2024 were
approximately 15.5 million pounds (versus 17 million pounds in the
third quarter of 2023 and 14 million pounds at the end of the
second quarter of 2024). Net new orders increased 27% in the third
quarter of 2024 versus the third quarter of 2023 and increased 7%
versus the second quarter of 2024.
- EBITDA from ongoing operations for PE Films was $5.9 million in
the third quarter of 2024 versus $4.0 million in the third quarter
of 2023 and $10.1 million in the second quarter of 2024. Sales
volume was 9.6 million pounds in the third quarter of 2024 versus
7.2 million pounds in the third quarter of 2023 and 10.5 million
pounds in the second quarter of 2024.
- On November 1, 2024, Tredegar completed the sale of Terphane,
its flexible packaging films business headquartered in Brazil, to
Oben Group. At closing, Tredegar received $60 million in cash,
which is net of Terphane debt assumed by Oben Group of $20 million
and Terphane cash retained by Oben Group of $2 million.
Accordingly, on a cash-free and debt-free basis, the enterprise
value of the Terphane transaction at closing for Tredegar was $78
million. Tredegar anticipates receiving an additional $7 million in
cash following the release of certain escrow funds within 120 days
of closing. The cash proceeds received by Tredegar at closing are
after deducting projected Brazil withholding taxes, net working
capital adjustments, escrow funds, U.S. capital gains taxes and
transaction expenses. See "Flexible Packaging Films"
below.
John Steitz, Tredegar’s president and chief executive officer,
said, "Our ongoing operations for the third quarter were
disappointingly at the break-even level due to low profitability at
Bonnell Aluminum from unfavorable cost events, including
manufacturing inefficiencies. On the favorable side, net new orders
were up 7% over the second quarter but with margin pressures from
imports and excess industry capacity."
Mr. Steitz continued, "Regarding the trade case brought by a
coalition of aluminum extruders and the United Steelworkers against
14 countries, we were very disappointed by the split negative vote
by the U.S. International Trade Commission and the surprising
recusal of one of its members. The USITC decision on October 30
indicated that it believes the industry was not materially injured
by reason of the subject imports, despite preliminary
determinations by the U.S. Department of Commerce of pricing below
fair value and receiving unfair subsidies. The coalition is
evaluating next steps for challenging the decision."
Mr. Steitz added, "PE Films performance during the third quarter
moderated as expected from an exceptional first half but was better
than anticipated."
Mr. Steitz further stated, "We closed on the sale of Terphane on
November 1. This completes a strategic goal that we've been working
on for well over a year. Net debt-free after-tax proceeds were $78
million, driving our net leverage ratio down from 2.3x at the end
of the third quarter to 1.2x on a pro forma basis. Another $7
million of cash proceeds is expected from the release of certain
escrow funds upon completion of the up to 120-day post-closing
adjustment period."
OPERATIONS REVIEW
Aluminum Extrusions
Aluminum Extrusions (also referred to as "Bonnell Aluminum")
produces high-quality, soft-alloy and medium-strength custom
fabricated and finished aluminum extrusions primarily for the
following markets: building and construction ("B&C"),
automotive and specialty (which consists of consumer durables,
machinery and equipment, electrical and renewable energy, and
distribution end-use products). A summary of results for Aluminum
Extrusions is provided below:
Three Months Ended
Favorable/
(Unfavorable)
% Change
Nine Months Ended
Favorable/
(Unfavorable)
% Change
(In thousands, except percentages)
September 30,
September 30,
2024
2023
2024
2023
Sales volume (lbs)
34,556
32,457
6.5%
103,303
105,511
(2.1)%
Net sales
$
115,717
$
109,410
5.8%
$
349,353
$
364,607
(4.2)%
Ongoing operations:
EBITDA
$
6,177
$
5,113
20.8%
$
31,624
$
29,968
5.5%
Depreciation & amortization
(4,404
)
(4,683
)
6.0%
(13,392
)
(13,252
)
(1.1)%
EBIT*
$
1,773
$
430
NM**
$
18,232
$
16,716
9.1%
Capital expenditures
$
1,449
$
4,489
$
4,461
$
17,862
* 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")
The following table presents the sales volume by end use market
for the three and nine months ended September 30, 2024 and 2023,
and the three months ended June 30, 2024.
Three Months Ended
Favorable/
Three Months Ended
Favorable/
Nine Months Ended
Favorable/
(In millions of lbs)
September 30,
(Unfavorable)
June 30,
(Unfavorable)
September 30,
(Unfavorable)
2024
2023
% Change
2024
% Change
2024
2023
% Change
Sales volume by end-use market:
Non-residential B&C
18.7
17.9
4.5
%
20.3
(7.9
)%
59.1
59.8
(1.2
)%
Residential B&C
2.4
1.6
50.0
%
2.2
9.1
%
6.2
6.2
—
%
Automotive
3.2
3.9
(17.9
)%
2.9
10.3
%
9.3
10.6
(12.3
)%
Specialty products
10.3
9.1
13.2
%
9.5
8.4
%
28.7
28.9
(0.7
)%
Total
34.6
32.5
6.5
%
34.9
(0.9
)%
103.3
105.5
(2.1
)%
Third Quarter 2024 Results vs. Third
Quarter 2023 Results
Net sales (sales less freight) in the third quarter of 2024
increased 5.8% versus the third quarter of 2023 primarily due to
higher sales volume and the pass-through of higher metal costs,
partially offset by lower pricing associated with a shift in mix.
Sales volume in the third quarter of 2024 increased 6.5% versus the
third quarter of 2023 but decreased 0.9% versus the second quarter
2024.
Net new orders, which remain low compared to pre-pandemic
levels, increased 27.3% in the third quarter of 2024 versus the
third quarter of 2023 and increased 7% versus the second quarter of
2024. Since January 2021, net new orders for the Company's aluminum
extruded products have generally tracked the ISM® Manufacturing
PMI®. In addition, the Architecture Billings Index (ABI), a key
leading indicator for non-residential B&C, has demonstrated a
decline in billings (i.e., an index below 50) for the last 20
months ended September 2024. 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 have increased significantly in recent years,
especially during the pandemic, and some of Bonnell Aluminum’s
customers have increased their sourcing of aluminum extrusions from
producers outside of the U.S.
Open orders at the end of the third quarter of 2024 were 15.5
million pounds (versus 14 million pounds at the end of the second
quarter of 2024 and 17 million pounds at the end of the third
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 part of a coalition of members of the Aluminum
Extruders Council that filed a trade case with the U.S. Department
of Commerce (“USDOC”) and the U.S. International Trade Commission
(“USITC”) against 15 countries in response to alleged large and
increasing volumes of unfairly priced imports of aluminum
extrusions since 2019. In November 2023, the USITC 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. On September 27, 2024,
the USDOC announced its final determinations that aluminum
extrusion producers and exporters in 14 countries, including China,
sold aluminum extrusions at less-than-fair value in the U.S. The
final USITC vote on October 30, 2024, indicated that it believes
that the industry was not materially injured by reason of the
subject imports, despite the USDOC determinations of pricing below
fair value and receiving unfair subsidies. The coalition is
evaluating next steps for challenging the decision.
EBITDA from ongoing operations in the third quarter of 2024
increased $1.1 million versus the third quarter of 2023 primarily
due to:
- Higher volume ($1.8 million), favorable variable manufacturing
costs ($1.7 million), lower labor-related costs ($0.1 million) and
lower freight rates ($0.2 million), partially offset by unfavorable
net pricing after the pass-through of metal cost and changes
associated with a shift in mix ($1.1 million), manufacturing
inefficiencies ($0.8 million), higher maintenance expense ($0.4
million) and higher selling, general and administrative
("SG&A") expenses, including other employee-related
compensation ($0.8 million); and
- The timing of the flow-through under the first-in first-out
("FIFO") method of aluminum raw material costs, which were
previously acquired at higher prices in a quickly changing
commodity pricing environment and passed through to customers,
resulted in a charge of $1.0 million in the third quarter of 2024
versus a charge of $1.2 million in the third quarter of 2023.
First Nine Months of 2024 Results vs.
First Nine Months of 2023 Results
Net sales in the first nine months of 2024 decreased 4.2% versus
the first nine months of 2023 primarily due to lower sales volume
and the pass-through of lower metal costs. Sales volume in the
first nine months of 2024 decreased 2.1% versus the first nine
months of 2023.
EBITDA from ongoing operations in the first nine months of 2024
increased $1.7 million in comparison to the first nine months of
2023 primarily due to:
- Higher net pricing after the pass-through of metal cost changes
and mix ($2.0 million), favorable variable manufacturing costs
($3.7 million), lower utilities ($0.2 million) and lower freight
rates ($0.9 million), partially offset by lower volume ($1.6
million), manufacturing inefficiencies ($0.8 million), higher labor
and employee-related costs ($0.1 million), and higher SG&A,
including other employee-related compensation ($2.4 million);
and
- The timing of the flow-through under the FIFO method of
aluminum raw material costs, which were previously acquired at
higher prices in a quickly changing commodity pricing environment
and passed through to customers, resulted in a charge of $1.0
million in the first nine months of 2024 versus a charge of $0.8
million in the first nine months 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 September 30, 2024 ("Third 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 $8
million in 2024, including $4 million for productivity projects and
$4 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 below for more information). The multi-year implementation
of new enterprise resource planning and manufacturing execution
systems ("ERP/MES") has been reorganized with the timing for the
go-live date being uncertain. 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
Nine Months Ended
Favorable/
(Unfavorable)
% Change
(In thousands, except percentages)
September 30,
September 30,
2024
2023
2024
2023
Sales volume (lbs)
9,640
7,224
33.4%
30,223
20,837
45.0%
Net sales
$
24,879
$
19,938
24.8%
$
78,811
$
56,036
40.6%
Ongoing operations:
EBITDA
$
5,876
$
4,037
45.6%
$
22,913
$
6,700
NM**
Depreciation & amortization
(1,299
)
(2,111
)
38.5%
(3,944
)
(5,305
)
25.7%
EBIT*
$
4,577
$
1,926
NM**
$
18,969
$
1,395
NM**
Capital expenditures
$
517
$
431
$
1,127
$
1,506
* 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")
Third Quarter 2024 Results vs. Third
Quarter 2023 Results
Net sales in the third quarter of 2024 were 24.8% higher
compared to the third quarter of 2023, with volume increases in
Surface Protection and overwrap films. Surface Protection sales
volume in the third quarter of 2024 increased 37.5% versus the
third quarter of 2023 and declined 16.5% versus the second quarter
of 2024. Surface Protection sales volume began to moderate during
the third quarter of 2024, following extremely high sales volume in
the second quarter associated with the restocking of Surface
Protection customer inventories.
EBITDA from ongoing operations in the third quarter of 2024
increased $1.8 million versus the third quarter of 2023, primarily
due to:
- A $2.4 million increase in Surface Protection primarily due to
higher contribution margin associated with higher volume ($2.0
million) and manufacturing costs savings ($1.1 million), partially
offset by unfavorable pricing ($0.2 million) and higher SG&A
($0.1 million);
- A foreign currency transaction loss of $0.2 million in the
third quarter of 2024 versus no gain or loss in the third quarter
of 2023;
- The pass-through lag associated with resin costs (a charge of
$0.2 million in the third quarter of 2024 versus a benefit of $0.1
million in the third quarter of 2023); and
- A $0.6 million decrease in overwrap films, primarily due to
pricing and mix.
There have been significant cyclical swings in the sales volume
and EBITDA from ongoing operations for PE Films in the past 2.5
years, largely due to the unprecedented downturn in the display
industry during the second half of 2022 and first half of 2023.
EBITDA from ongoing operations for the first half of 2024, the
second and first halves of 2023 and the second and first halves of
2022 were $17.0 million, $8.6 million, $2.7 million, $(2.2) million
and $14.1 million, respectively, which averages approximately $4
million per quarter.
First Nine Months of 2024 Results vs.
First Nine Months of 2023 Results
Net sales in the first nine months of 2024 increased 40.6%
compared to the first nine months of 2023 primarily due to an
increase in sales volume in Surface Protection, as a result of
factors noted above. Sales volume increased 62.3% in Surface
Protection in the first nine months of 2024 versus the first nine
months of 2023.
EBITDA from ongoing operations in the first nine months of 2024
increased $16.2 million versus the first nine months of 2023,
primarily due to:
- A $16.0 million increase in Surface Protection primarily due to
higher contribution margin associated with substantially higher
volume ($9.4 million), operating efficiencies and manufacturing
costs savings ($5.9 million), favorable pricing ($0.3 million),
lower fixed costs ($0.2 million) and lower SG&A, including
lower costs associated with the closure of the Richmond Technical
Center in 2023 ($1.2 million);
- A foreign currency transaction loss of $0.1 million in the
first nine months of 2024 versus a gain of $0.3 million in the
first nine months of 2023;
- The pass-through lag associated with resin costs (a charge of
$0.7 million in the first nine months of 2024 versus a charge of
$0.1 million in the first nine months of 2023); and
- A $0.2 million increase from overwrap films, primarily due to
cost improvements ($1.0 million), partially offset by a shift in
mix ($0.8 million).
Refer to Item 3. Quantitative and Qualitative Disclosures About
Market Risk in the Third 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
On November 1, 2024, Tredegar completed the sale of Terphane,
its flexible packaging films business headquartered in Brazil, to
Oben Group. At closing, Tredegar received $60 million in cash,
which is net of Terphane debt assumed by Oben Group of $20 million
and Terphane cash retained by Oben Group of $2 million.
Accordingly, on a cash-free and debt-free basis, the enterprise
value of the Terphane transaction at closing for Tredegar was $78
million. Tredegar anticipates receiving an additional $7 million in
cash following the release of certain escrow funds within 120 days
of closing. The cash proceeds received by Tredegar at closing are
after deducting projected Brazil withholding taxes, net working
capital adjustments, escrow funds, U.S. capital gains taxes and
transaction expenses. As of September 30, 2024, the Company
reported results for Terphane as a continuing operation, due to the
uncertainty related to the Brazilian merger review process. For
additional information refer to Note 11 in the Company's Condensed
Consolidated Financial Statements in the Third Quarter Form 10-Q.
Certain pro forma financial information is provided in Note (j) to
the Financial Tables in this press release. Refer to the Form 8-K
filed by the Company on November 6, 2024 regarding the full pro
forma impact of the sale of Terphane through the second quarter of
2024.
Corporate Expenses, Interest & Taxes
Corporate expenses, net in the first nine months of 2024
decreased $13.7 million compared to the first nine months of 2023
primarily due to lower pension expense as a result of the pension
plan termination completed in 2023 ($10.1 million) and lower
business development activities ($3.4 million). Further information
on gains and losses associated with special items impacting
corporate expenses, net is provided in the accompanying tables.
Interest expense of $10.3 million in the first nine months of
2024 increased $2.5 million compared to the first nine months of
2023 due to higher average debt and higher interest rates.
The effective tax rate was 30.5% in the first nine months of
2024 compared to 18.8% in the first nine months of 2023. The change
in effective tax rate was primarily due to pre-tax income in the
first nine months of 2024 versus a pre-tax loss in the first nine
months of 2023. The change in effective tax rate was primarily due
to pre-tax income in the first nine months of 2024 versus a pre-tax
loss in the first nine months of 2023. During the first nine months
of 2024, Tredegar increased the valuation allowance on existing
deferred tax assets as a result of the sale of Terphane by $1.0
million. 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 18.5% for the first nine
months of 2024 versus (12.0)% for the first nine 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 Third
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.
Total Debt, Financial Leverage and Debt Covenants
Total debt was $143.4 million at September 30, 2024 and $146.3
million at December 31, 2023. Cash, cash equivalents and restricted
cash was $6.6 million at September 30, 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
$136.8 million at September 30, 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 sale of Terphane resulted in a reduction of consolidated
total debt and net debt of $78 million, with an additional
reduction of $7 million expected from the release of escrow funds
by March 1, 2025.
The Company has been focused on stringent management of net
working capital, capital expenditures and costs since a slowdown in
business began in 2023. Total debt decreased $2.9 million and net
debt increased $4.0 million in the first nine months of 2024 versus
the end of 2023 primarily due to higher net working capital from
low levels at the end of last year and to support the recovery the
Company believes is underway in its businesses and seasonal
fluctuations, which were nearly fully offset by net cash flow from
operations after capital expenditures.
As of September 30, 2024, the Company was in compliance with all
covenants under its $180 million asset-based credit agreement,
which matures 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
September 30, 2024, funds available to borrow under the ABL
Facility were approximately $30 million and $38 million on a pro
forma basis after giving effect to the completion of the sale of
Terphane and the use of the related proceeds. The median daily
liquidity under the ABL Facility during the third quarter of 2024
was favorable at $30 million compared with a median of $27 million
during the second quarter of 2024. Refer to Note 10 in the
Company's Condensed Consolidated Financial Statements in the Third
Quarter Form 10-Q for additional details on the primary debt
covenants. Refer to Note (j) to the Financial Tables in this press
release below for debt covenant modifications associated with the
divestiture of Terphane.
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,
failure to realize the expected benefits of such dispositions and
assumption of unanticipated risks in such dispositions;
- failure by governmental entities to prevent foreign companies
from evading anti-dumping and countervailing duties;
- 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;
- 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 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;
- 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 two
primary businesses: custom aluminum extrusions for the North
American building & construction, automotive and specialty
end-use markets and surface protection films for high-technology
applications in the global electronics industry. With approximately
1,500 employees, the Company operates manufacturing facilities in
North America and Asia.
Tredegar Corporation
Condensed Consolidated
Statements of Income (Loss)
(In Thousands, Except
Per-Share Data)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Sales
$
182,051
$
166,192
$
548,022
$
535,481
Other income (expense), net (c)(d)
(22
)
(51
)
310
210
182,029
166,141
548,332
535,691
Cost of goods sold (c)
151,676
144,539
442,384
457,332
Freight
7,085
6,733
20,833
19,977
Selling, R&D and general expenses
(c)
22,270
22,144
60,934
60,619
Amortization of intangibles
462
465
1,410
1,433
Pension and postretirement benefits
54
3,118
163
9,955
Interest expense
3,480
3,106
10,314
7,791
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
—
4,633
587
4,702
Pension settlement loss
—
25,612
—
25,612
Goodwill impairment
—
19,478
—
34,891
Total
185,027
229,828
536,625
622,312
Income (loss) before income taxes
(2,998
)
(63,687
)
11,707
(86,621
)
Income tax expense (benefit) (c)
948
(13,307
)
3,573
(16,307
)
Net income (loss)
$
(3,946
)
$
(50,380
)
$
8,134
$
(70,314
)
Earnings (loss) per share:
Basic
$
(0.11
)
$
(1.47
)
$
0.24
$
(2.06
)
Diluted
$
(0.11
)
$
(1.47
)
$
0.24
$
(2.06
)
Shares used to compute earnings (loss) per
share:
Basic
34,391
34,264
34,364
34,081
Diluted
34,391
34,264
34,364
34,081
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net Sales
Aluminum Extrusions
$
115,717
$
109,410
$
349,353
$
364,607
PE Films
24,879
19,938
78,811
56,036
Flexible Packaging Films
34,370
30,111
99,025
94,861
Total net sales
174,966
159,459
527,189
515,504
Add back freight
7,085
6,733
20,833
19,977
Sales as shown in the condensed
consolidated statements of income
$
182,051
$
166,192
$
548,022
$
535,481
EBITDA from Ongoing Operations
(i)
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
6,177
$
5,113
$
31,624
$
29,968
Depreciation & amortization
(4,404
)
(4,683
)
(13,392
)
(13,252
)
EBIT (b)
1,773
430
18,232
16,716
Plant shutdowns, asset impairments,
restructurings and other (c)
(2,170
)
(1,483
)
(4,986
)
(1,821
)
PE Films:
Ongoing operations:
EBITDA (b)
5,876
4,037
22,913
6,700
Depreciation & amortization
(1,299
)
(2,111
)
(3,944
)
(5,305
)
EBIT (b)
4,577
1,926
18,969
1,395
Plant shutdowns, asset impairments,
restructurings and other (c)
—
(4,566
)
(584
)
(4,565
)
Goodwill impairment
—
(19,478
)
—
(34,891
)
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
3,749
477
8,915
2,076
Depreciation & amortization
(708
)
(704
)
(2,191
)
(2,115
)
EBIT (b)
3,041
(227
)
6,724
(39
)
Plant shutdowns, asset impairments,
restructurings and other (c)
(103
)
—
(103
)
(79
)
Total
7,118
(23,398
)
38,252
(23,284
)
Interest income
8
62
36
135
Interest expense
3,480
3,106
10,314
7,791
Gain on investment in kaleo, Inc.
("kaléo") (d)
—
—
144
262
Stock option-based compensation costs
—
—
—
231
Pension settlement loss
—
25,612
—
25,612
Corporate expenses, net (c)
6,644
11,633
16,411
30,100
Income (loss) before income taxes
(2,998
)
(63,687
)
11,707
(86,621
)
Income tax expense (benefit)
948
(13,307
)
3,573
(16,307
)
Net income (loss)
$
(3,946
)
$
(50,380
)
$
8,134
$
(70,314
)
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
September 30, 2024
December 31, 2023
Assets
Cash & cash equivalents
$
2,724
$
9,660
Restricted cash
3,864
3,795
Accounts & other receivables, net
81,636
67,938
Income taxes recoverable
954
1,182
Inventories
88,058
82,037
Prepaid expenses & other
11,026
12,065
Total current assets
188,262
176,677
Net property, plant and equipment
168,688
183,455
Right-of-use leased assets
15,663
11,848
Identifiable intangible assets, net
8,361
9,851
Goodwill
35,717
35,717
Deferred income taxes
22,765
25,034
Other assets
3,085
3,879
Total assets
$
442,541
$
446,461
Liabilities and Shareholders’
Equity
Accounts payable
$
89,070
$
95,023
Accrued expenses
24,000
24,442
Lease liability, short-term
2,824
2,107
Short-term debt
1,356
—
ABL revolving facility (matures on June
30, 2026) (h)
122,000
126,322
Income taxes payable
8
1,210
Total current liabilities
239,258
249,104
Lease liability, long-term
13,963
10,942
Long-term debt
20,000
20,000
Pension and other postretirement benefit
obligations, net
6,464
6,643
Other non-current liabilities
4,408
4,119
Shareholders’ equity
158,448
155,653
Total liabilities and shareholders’
equity
$
442,541
$
446,461
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Nine Months Ended September
30,
2024
2023
Cash flows from operating activities:
Net income (loss)
$
8,134
$
(70,314
)
Adjustments for noncash items:
Depreciation
18,372
19,516
Amortization of intangibles
1,410
1,433
Reduction of right-of-use lease asset
1,735
1,633
Goodwill impairment
—
34,891
Deferred income taxes
2,975
(16,820
)
Accrued pension income and post-retirement
benefits
163
9,955
Pension settlement loss
25,612
Stock-based compensation expense
1,950
1,196
Gain on investment in kaléo
(144
)
(262
)
Write-down of Richmond, Virginia Technical
Center assets
—
3,387
Changes in assets and liabilities:
Accounts and other receivables
(14,683
)
14,630
Inventories
(8,711
)
49,589
Income taxes recoverable/payable
(952
)
(1,688
)
Prepaid expenses and other
(286
)
(142
)
Accounts payable and accrued expenses
(3,454
)
(27,970
)
Lease liability
(2,118
)
(1,669
)
Pension and postretirement benefit plan
contributions
(455
)
(455
)
Other, net
2,117
1,716
Net cash provided by (used in) operating
activities
6,053
44,238
Cash flows from investing activities:
Capital expenditures
(7,696
)
(22,270
)
Proceeds on sale of investment in
kaléo
144
262
Proceeds from the sale of assets
83
—
Net cash provided by (used in) investing
activities
(7,469
)
(22,008
)
Cash flows from financing activities:
Borrowings
519,274
87,000
Debt principal payments
(522,240
)
(69,000
)
Dividends paid
—
(8,884
)
Debt financing fees
(587
)
(1,404
)
Net cash provided by (used in) financing
activities
(3,553
)
7,712
Effect of exchange rate changes on
cash
(1,898
)
(570
)
Increase (decrease) in cash, cash
equivalents and restricted cash
(6,867
)
29,372
Cash, cash equivalents and restricted cash
at beginning of period
13,455
19,232
Cash, cash equivalents and restricted cash
at end of period
$
6,588
$
48,604
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 and nine months ended September 30, 2024
and 2023 is shown below:
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions, except per share data)
2024
2023
2024
2023
Net income (loss) as reported under
GAAP1
$
(3.9
)
$
(50.4
)
$
8.1
$
(70.3
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
3.7
0.5
3.8
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
—
(0.1
)
(0.2
)
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
—
0.7
—
1.5
Valuation allowance on existing deferred
tax assets as a result of the sale of Terphane
1.8
—
1.8
—
Other
2.3
3.4
5.7
6.0
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
2.4
—
7.6
Pension settlement loss2
—
20.0
—
20.0
Goodwill impairment3
—
15.1
—
27.0
Net income (loss) from ongoing
operations1
$
0.2
$
(5.1
)
$
16.0
$
(4.6
)
Earnings (loss) per share as reported
under GAAP (diluted)
$
(0.11
)
$
(1.47
)
$
0.24
$
(2.06
)
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
0.11
0.01
0.11
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
—
—
(0.01
)
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
—
0.02
—
0.04
Valuation allowance on existing deferred
tax assets as a result of the sale of Terphane
0.05
—
0.05
—
Other
0.07
0.10
0.17
0.18
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
0.07
—
0.23
Pension settlement loss2
—
0.58
—
0.59
Goodwill impairment3
—
0.44
—
0.79
Earnings (loss) per share from ongoing
operations (diluted)
$
0.01
$
(0.15
)
$
0.47
$
(0.13
)
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).
3. For more information, see Note (k).
(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 Third 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 and nine months ended September 30, 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 September 30,
2024
Nine Months Ended September 30,
2024
($ 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/MES
project1
$
0.7
$
0.5
2.1
1.6
Storm damage to the Newnan, Georgia
plant1
—
—
0.3
0.2
Legal fees associated with the Aluminum
Extruders Trade Case1
0.4
0.3
0.9
0.7
Resolution of customer quality
complaint4
0.8
0.6
0.8
0.6
Total for Aluminum Extrusions
$
1.9
$
1.4
$
4.1
$
3.1
PE Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
Richmond, Virginia Technical Center
closure expenses, including severance2
$
—
$
—
0.3
0.2
Richmond, Virginia Technical Center lease
abandonment2
—
—
0.3
0.3
Total for PE Films
$
—
$
—
$
0.6
$
0.5
Flexible Packaging Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
$
0.1
$
0.1
$
0.1
$
0.1
Total for Flexible Packaging Films
$
0.1
$
0.1
$
0.1
$
0.1
Corporate:
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
$
0.7
$
0.5
$
1.6
$
1.3
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.3
0.2
1.6
1.2
Professional fees associated with the
transition to the ABL Facility1
0.1
0.1
0.3
0.2
Group annuity contract premium expense
adjustment3
—
—
(0.2
)
(0.2
)
Valuation allowance on existing deferred
tax assets as a result of the sale of Terphane5
—
1.8
—
1.8
Total for Corporate
$
1.1
$
2.6
$
3.3
$
4.3
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
Third Quarter Form 10-Q.
3. Included in “Other income (expense),
net” in the condensed consolidated statements of income. For more
information, see Note (g).
4. Included in “Sales” in the condensed
consolidated statements of income.
5. Included in “Income tax expense
(benefit)” in the condensed consolidated statements of income.
Three Months Ended September 30,
2023
Nine Months Ended September 30,
2023
($ in millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
0.1
$
0.1
$
0.1
$
0.1
(Gains) losses from sale of assets,
investment writedowns and other items:
Consulting expenses for ERP/MES
project1
1.2
0.9
1.2
0.9
Storm damage to the Newnan, Georgia
plant1
0.1
0.1
0.5
0.3
Total for Aluminum Extrusions
$
1.4
$
1.1
$
1.8
$
1.3
PE Films:
(Gain) losses from sale of assets,
investment writedowns and other items:
Write-down of Richmond, Virginia Technical
Center assets6
$
3.4
$
2.6
$
3.4
$
2.6
Richmond, Virginia Technical Center
expenses, including severance6
1.1
1.0
1.1
1.0
Goodwill impairment4
19.5
15.1
34.9
27.0
Total for PE Films
$
24.0
$
18.7
$
39.4
$
30.6
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
$
2.9
$
2.2
$
4.8
$
3.8
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.2
0.2
1.2
1.0
Write-down of investment in Harbinger
Capital Partners Special Situations Fund2
—
—
0.2
0.1
Stock-based compensation expense
associated with the fair value remeasurement of awards granted at
the time of the 2020 Special Dividend1
—
—
(0.2
)
(0.1
)
Tax benefit from adjustments to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits5
—
0.7
—
1.5
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination3
3.1
2.4
9.9
7.6
Pension settlement loss3
25.6
20.0
25.6
20.0
Total for Corporate
$
31.8
$
25.5
$
41.5
$
33.9
- Included in "Selling, R&D and general expenses" in the
condensed consolidated statements of income.
- Included in “Other income (expense), net” in the condensed
consolidated statements of income.
- For more information, see Note (g).
- For more information, see Note (k).
- Included in “Income tax expense (benefit)” in the condensed
consolidated statements of income.
- For more information, refer to Note 1 to the Company's
Condensed Consolidated Financial Statements in the Third Quarter
From 10-Q.
(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 April 2024 and
January 2023, additional cash consideration of $0.1 million and
$0.3 million, respectively, was received related to customary
post-closing adjustments, which is reported in “Other income
(expense), net” in the condensed consolidated statements of
income.
(e)
Tredegar’s presentation of net income
(loss) from ongoing operations is a non-GAAP financial measure that
excludes the effects of gains or losses associated with plant
shutdowns, asset impairments and restructurings, gains or losses
from the sale of assets, goodwill impairment charges, net periodic
benefit cost for the frozen defined benefit pension plan and other
items (which includes unrealized gains and losses for an investment
accounted for under the fair value method), which has been
presented separately and removed from net income (loss) as reported
under GAAP. Net income (loss) from ongoing operations is a key
financial and analytical measure used by management to gauge the
operating performance of Tredegar’s ongoing operations. It is not
intended to represent the stand-alone results for Tredegar’s
ongoing operations under GAAP and should not be considered as an
alternative to net income (loss) as defined by GAAP. It excludes
items that we believe do not relate to Tredegar’s ongoing
operations.
Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) from ongoing
operations for the three and nine months ended September 30, 2024
and 2023 are presented below in order to show the impact on the
effective tax rate:
($ in millions)
Pre-tax
Tax Expense (Benefit)
After-Tax
Effective Tax Rate
Three Months Ended September 30,
2024
(a)
(b)
(b)/(a)
Net income (loss) reported under GAAP
$
(3.0
)
$
0.9
$
(3.9
)
(31.6
)%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
—
(Gains) losses from sale of assets and
other
3.1
(1.0
)
4.1
Net income (loss) from ongoing
operations
$
0.1
$
(0.1
)
$
0.2
NM*
Three Months Ended September 30,
2023
Net income (loss) reported under GAAP
$
(63.7
)
$
(13.3
)
$
(50.4
)
20.9
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
4.6
0.9
3.7
(Gains) losses from sale of assets and
other
4.4
0.3
4.1
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
3.1
0.7
2.4
Pension settlement loss
25.6
5.6
20.0
Goodwill impairment
19.5
4.4
15.1
Net income (loss) from ongoing
operations
$
(6.5
)
$
(1.4
)
$
(5.1
)
21.7
%
Nine Months Ended September 30,
2024
Net income (loss) reported under GAAP
$
11.7
$
3.6
$
8.1
30.5
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.6
0.1
0.5
(Gains) losses from sale of assets and
other
7.4
—
7.4
Net income (loss) from ongoing
operations
$
19.7
$
3.7
$
16.0
18.5
%
Nine Months Ended September 30,
2023
Net income (loss) reported under GAAP
$
(86.6
)
$
(16.3
)
$
(70.3
)
18.8
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
4.7
0.9
3.8
(Gains) losses from sale of assets and
other
7.4
0.1
7.3
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
9.9
2.3
7.6
Pension settlement loss
25.6
5.6
20.0
Goodwill impairment
34.9
7.9
27.0
Net income (loss) from ongoing
operations
$
(4.1
)
$
0.5
$
(4.6
)
(12.0
)%
* Not meaningful ("NM")
(f) Net debt is calculated as follows:
September 30,
December 31,
($ in millions)
2024
2023
Short-term debt
$
1.4
$
—
ABL revolving facility (matures on June
30, 2026) (h)
122.0
126.3
Long-term debt
20.0
20.0
Total debt
143.4
146.3
Less: Cash and cash equivalents
2.7
9.7
Less: Restricted cash
3.9
3.8
Net debt
$
136.8
$
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 Company's 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. During the third quarter of 2023, the
Company remeasured the pension plan, which resulted in a pre-tax
pension settlement loss in the condensed consolidated results of
operation of $25.6 million. The remeasurement of the pension
benefit obligation and plan assets was triggered by $64.5 million
of lump sum distributions from the pension plan assets which
exceeded the pension plan's service and interest cost. On November
3, 2023, the pension plan termination and settlement process was
completed, and the Company’s relevant pension plan obligation was
transferred to Massachusetts Mutual Life Insurance Company. This
completed the pension plan termination process that began in
February 2022. As a result of the routine administrative process to
transition the pension plan, the Company recognized a $2.0 million
charge to adjust the initial purchase price of the nonparticipating
single premium group annuity contract.
(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) was in effect as of September 30, 2024 and
December 31, 2023 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) was classified as a current
liability in the consolidated balance sheets as of the dates
presented.
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 September 30, 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 and nine months ended September 30, 2024 and 2023 is
shown below:
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2024
2023
2024
2023
Net income (loss) as reported under
GAAP1
$
(3.9
)
$
(50.4
)
$
8.1
$
(70.3
)
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
3.7
0.5
3.8
Gain associated with the investment in
kaléo
—
—
(0.1
)
(0.2
)
(Gains) losses from sale of assets and
other
2.3
3.4
5.7
6.0
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
—
0.7
—
1.5
Valuation allowance on existing deferred
tax assets as a result of the sale of Terphane
1.8
—
1.8
—
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
—
2.4
—
7.6
Pension settlement loss2
—
20.0
—
20.0
Goodwill impairment
—
15.1
—
27.0
Net income (loss) from ongoing
operations1
0.2
(5.1
)
16.0
(4.6
)
Depreciation and amortization
6.5
7.6
19.8
20.9
Stock option-based compensation costs
—
—
—
0.2
Interest expense
3.5
3.1
10.3
7.8
Interest income
—
(0.1
)
—
(0.1
)
Income taxes from ongoing operations1
(0.1
)
(1.4
)
3.7
0.5
Consolidated EBITDA from ongoing
operations
$
10.1
$
4.1
$
49.8
$
24.7
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).
(j)
The following tables represent unaudited
supplemental pro forma consolidated net sales and Consolidated
EBITDA from ongoing operations for the three and nine months ended
September 30, 2024, as if the sale of Terphane had occurred at the
beginning of each period presented. In addition, unaudited
supplemental pro forma earnings before interest, taxes,
depreciation and amortization as defined in the ABL Facility
("Credit EBITDA") for the twelve months ended September 30, 2024
and a pro forma net leverage ratio as of September 30, 2024 has
been provided below. The pro forma financial information is for
comparative purposes only and is based on certain factually
supported estimates and assumptions, which the Company believes to
be reasonable, but not necessarily indicative of future operating
results or financial position or the results that would have been
reported if the sale had been completed at the beginning of each
period presented. These results were not used as part of
management's analysis of the financial results and performance of
the Company as of and for the period ended September 30, 2024 since
the Company reported the results for Terphane as a continuing
operation as of September 30, 2024, due to the uncertainty related
to the Brazilian merger review process.
Three Months Ended September
30,
Nine Months Ended September
30,
($ in thousands)
2024
2024
Pro forma net sales
Aluminum Extrusions
$
115,717
$
349,353
PE Films
24,879
78,811
Total pro forma net sales
140,596
428,164
Add back freight
7,085
20,833
Add back pro forma discontinued operation
net sales1
34,370
99,205
Sales as shown in the condensed
consolidated statements of income
$
182,051
$
548,202
1. Reflects the Company's current best
estimate of pre-tax revenue and expenses of the Terphane business
prepared in accordance with discontinued operations guidance set
forth in Accounting Standards Codification ("ASC") 205 Presentation
of Financial Statements.
Three Months Ended September
30,
Nine Months Ended September
30,
($ in millions)
2024
2024
Pro forma consolidated EBITDA from
ongoing operations
Net income (loss) as reported under
GAAP1
$
(3.9
)
$
8.1
Income tax expense (benefit)1
0.9
3.6
Income (loss) before income taxes as shown
in the condensed consolidated statements of income
(3.0
)
11.7
Discontinued operations before taxes2
EBIT from ongoing operations
(3.0
)
(6.7
)
Interest expense
1.8
5.5
Plant shutdowns, asset impairments,
restructurings and other
0.1
0.1
Corporate expenses, net
1.1
(0.4
)
Pro forma income (loss) from continuing
operations before income tax
(3.0
)
10.2
Pre-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
0.6
Gain associated with the investment in
kaléo
—
(0.1
)
(Gains) losses from sale of assets and
other
2.4
6.1
Pro forma net income (loss) from ongoing
operations before income tax
(0.6
)
16.8
Depreciation and amortization
5.8
17.6
Interest expense
1.6
4.8
Pro forma consolidated EBITDA from ongoing
operations
$
6.8
$
39.2
1. Reconciliations of the pre-tax and
post-tax balances attributed to net income (loss) are shown in Note
(e).
2. Reflects the Company's current best
estimate of pre-tax revenue and expenses of the Terphane business
prepared in accordance with discontinued operations guidance set
forth in ASC 205 Presentation of Financial Statements.
As of or for Twelve Months Ended
September 30, 2024(5)
($ in millions)
Net leverage ratio
Net debt(1)
$
136.8
Credit EBITDA(2)
$
59.1
Net leverage ratio
2.3
Pro forma net debt
Net debt(1)
$
136.8
Debt reduction associated with the sale of
Terphane(3)
(78.0
)
Pro forma net debt
$
58.8
Pro forma Credit EBITDA
Credit EBITDA(2)
$
59.1
Discontinued operations EBITDA from
ongoing operations(4)
(11.2
)
Discontinued operations corporate
expenses, net(4)
(0.8
)
Pro forma Credit EBITDA
$
47.1
Pro forma net leverage ratio
Pro forma net debt
$
58.8
Pro forma Credit EBITDA
$
47.1
Pro forma net leverage ratio
1.2
1. For more information, see Note (f).
2. For more information, refer to the
"Liquidity and Capital Resources" section in the Third Quarter From
10-Q.
3. On November 1, 2024, Tredegar received
$60 million in cash, which is net of Terphane's debt assumed by
Oben Group of $20 million and Terphane's cash retained by Oben
Group of $2 million. Accordingly, on a cash-free and debt-free
basis, the enterprise value of the Terphane transaction at closing
for Tredegar was $78 million.
4. Reflects the Company's current best
estimate of pre-tax revenue and expenses of the Terphane business
prepared in accordance with discontinued operations guidance set
forth in ASC 205 Presentation of Financial Statements.
5. Actual and pro forma Credit EBITDA
amounts are for the twelve months ended September 30, 2024, and
actual or pro forma net debt amounts are as of September 30,
2024.
Upon the earlier of September 30, 2025 or
the date the Company receives the proceeds from the sale of
Terphane (the “ABL Adjustment Date”), the $180 million ABL Facility
will be reduced to $125 million. On November 1, 2024, with the
closing of the sale of Terphane, the ABL Adjustment Date has
occurred. Following the ABL Adjustment Date, the minimum Credit
EBITDA (as defined in the ABL Facility) and minimum liquidity
financial covenants were replaced with a minimum fixed charge
coverage ratio of 1.00:1.00 that will be triggered in the event
that availability is less than 10% of $125 million commitment
amount and continuing thereafter until availability is greater than
10% of the $125 million commitment amount for 30 consecutive days.
On a pro forma basis after giving effect to the completion of the
sale of Terphane and the use of the related proceeds, the Company
determined it was in compliance with the post-ABL Adjustment Date
financial covenant. For more information, refer to Note 10 to the
Company's Condensed Consolidated Financial Statements in the Third
Quarter Form 10-Q.
(k)
During 2023, uncertainty about the timing
of a recovery in the consumer electronics market persisted, and
manufacturers in the supply chain for consumer electronics
continued to experience reduced capacity utilization and inventory
corrections. In light of the limited visibility on the timing of a
recovery and the expected adverse future impact to the Surface
Protection business, coupled with a cautious outlook on new product
development opportunities, the Company performed a Step 1 goodwill
impairment analysis, as of June 30, 2023 and September 30, 2023, of
the Surface Protection component of PE Films. The analyses
concluded that the fair value of Surface Protection was less than
its carrying value, thus a non-cash partial goodwill impairment of
$34.9 million ($27.0 million after deferred income tax benefits)
was recognized during 2023. As of December 1, 2023, the Company’s
reporting units with goodwill were Surface Protection in PE Films
and Futura in Aluminum Extrusions. Both of these reporting units
have separately identifiable operating net assets (operating assets
including goodwill and identifiable intangible assets net of
operating liabilities). The Company's Step 0 analysis of these
reporting units concluded that it is more likely than not that the
fair value of each reporting unit was greater than its carrying
value. Therefore, the Step 1 quantitative goodwill impairment tests
for these reporting units were not necessary. The Surface
Protection and Futura reporting units had goodwill in the amounts
of $22.4 million and $13.3 million, respectively, at December 31,
2023.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241108045204/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
Tredegar (NYSE:TG)
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