-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Zvvka3xnDD6Sp5Od1xBds5P9lxDNGbC5CYm0TeP/gn4yr635zDUeJ2BvFRE27V78 dprG1x53y1zx0ydLZe7Jww== 0000916641-95-000130.txt : 19950418 0000916641-95-000130.hdr.sgml : 19950418 ACCESSION NUMBER: 0000916641-95-000130 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950417 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TREDEGAR INDUSTRIES INC CENTRAL INDEX KEY: 0000850429 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 541497771 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10258 FILM NUMBER: 95529219 BUSINESS ADDRESS: STREET 1: 1100 BOULDERS PKWY CITY: RICHMOND STATE: VA ZIP: 23225 BUSINESS PHONE: 8043301075 10-Q 1 TREDEGAR INDUSTRIES, INC FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________ FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) [ X ] OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) [ ] OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-10258 Tredegar Industries, Inc. (Exact name of registrant as specified in its charter) Virginia 54-1497771 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 1100 Boulders Parkway Richmond, Virginia 23225 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (804) 330-1000 Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of Common Stock, no par value, outstanding as of April 13, 1995: 9,035,697 PART I - FINANCIAL INFORMATION Item 1. Financial Statements TREDEGAR INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) March 31 December 31 ASSETS 1995 1994 Cash and cash equivalents $ 5,001 $ 9,036 Accounts and notes receivable 91,458 73,248 Inventories 33,285 35,369 Income taxes recoverable 1,130 2,534 Deferred income taxes 14,778 14,014 Prepaid expenses and other 2,809 696 Total current assets 148,461 134,897 Property, plant and equipment 321,085 318,124 Less accumulated depreciation and amortization 198,225 194,505 Net property, plant and equipment 122,860 123,619 Other assets and deferred charges 32,508 29,073 Goodwill and other intangibles 30,573 30,756 Total assets $ 334,402 $ 318,345 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 42,070 $ 31,486 Accrued expenses 42,131 41,288 Total current liabilities 84,201 72,774 Long-term debt 35,500 38,000 Deferred income taxes 21,682 20,336 Other noncurrent liabilities 16,419 15,357 Total liabilities 157,802 146,467 Shareholders' equity: Common stock, no par value 136,691 136,150 Foreign currency translation adjustment 605 327 Retained earnings 39,304 35,401 Total shareholders' equity 176,600 171,878 Total liabilities and shareholders' equity $ 334,402 $ 318,345 See accompanying notes to financial statements. 2 TREDEGAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per-share amounts) (Unaudited) Three Months Ended March 31 1995 1994 Net sales $151,083 $120,994 Other (expense) income, net (101) (231) 150,982 120,763 Cost of goods sold 128,005 102,250 Selling, general & administrative expenses 12,421 11,295 Research & development expenses 1,970 1,839 Interest expense 723 1,177 Unusual items 650 9,521 143,769 126,082 Income (loss) from continuing operations before income taxes 7,213 (5,319) Income taxes 2,768 (226) Income (loss) from continuing operations 4,445 (5,093) Income from discontinued operations - 8,693 Net income $ 4,445 $ 3,600 Earnings (loss) per share: Continuing operations $ .49 $ (.47) Discontinued operations - .80 Net income $ .49 $ .33 Shares used to compute earnings (loss) per share 9,008 10,896 See accompanying notes to financial statements. 3 TREDEGAR INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Three Months Ended March 31 1995 1994 Cash flows from operating activities: Continuing operations: Income (loss) from continuing operations $ 4,445 $(5,093) Adjustments for noncash items: Depreciation 5,755 5,840 Amortization of intangibles 148 719 Write-off of intangibles - 9,521 Deferred income taxes 1,104 (2,682) Accrued pension income and postretirement benefits, net (453) 298 Changes in assets and liabilities: Accounts and notes receivable (14,873) (6,339) Inventories 3,873 3,107 Income taxes recoverable 1,404 - Prepaid expenses and other (2,113) (539) Accounts payable 8,002 2,210 Accrued expenses and income taxes payable 269 5,115 Other, net (997) (1,055) Net cash provided by continuing operating activities 6,564 11,102 Net cash provided by discontinued operating activities - 6,198 Net cash provided by operating activities 6,564 17,300 Cash flows from investing activities: Continuing operations: Capital expenditures (3,970) (3,824) Acquisitions (net of $358 cash acquired) (3,637) - Investments (800) - Property disposals 175 280 Other, net 155 (124) Net cash used in investing activities of continuing operations (8,077) (3,668) Discontinued operations: Capital expenditures - (10) Property disposals 7,927 Net cash provided by investing activities of discontinued operations - 7,917 Net cash (used in) provided by investing activities (8,077) 4,249 Cash flows from financing activities: Dividends paid (542) (654) Net decrease in borrowings (2,500) (19,000) Other, net 520 (14) Net cash used in financing activities (2,522) (19,668) (Decrease) increase in cash and cash equivalents (4,035) 1,881 Cash and cash equivalents at beginning of period 9,036 - Cash and cash equivalents at end of period $ 5,001 $ 1,881 Supplemental cash flow information: Interest payments (net of amount capitalized) $ 84 $ 676 Income tax payments, net $ 1,810 $ 1,662 See accompanying notes to financial statements. 4 TREDEGAR INDUSTRIES, INC. NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying consolidated financial statements of Tredegar Industries, Inc. and Subsidiaries ("Tredegar") contain all adjustments necessary to present fairly, in all material respects, Tredegar's consolidated financial position as of March 31, 1995, and the consolidated results of their operations and their cash flows for the three months ended March 31, 1995 and 1994. All such adjustments are deemed to be of a normal recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Tredegar's Annual Report on Form 10-K for the year ended December 31, 1994. The results of operations for the three months ended March 31, 1995 are not necessarily indicative of the results to be expected for the full year. 2. On April 11, 1995, Tredegar's Board of Directors authorized a "Dutch Auction" tender offer for up to one million shares of Tredegar's common stock at a price range of $20 to $23 per share. The offer will be funded with available cash and cash equivalents and borrowings under Tredegar's revolving credit facilities. Additional information (including pro forma data) concerning the offer is contained in Tredegar's tender offer statement on Schedule 13E-4 filed with the Securities and Exchange Commission on April 17, 1995. During the first quarter of 1995, Tredegar granted stock options to purchase 146,000 shares of Tredegar common stock at prices not less than the fair market value on the date of grant ($17.375 to $18.75) and for a term not to exceed 10 years. 3. The components of inventories are as follows: (In thousands) March 31 December 31 1995 1994 Finished goods $ 4,761 $ 4,970 Work-in-process 3,885 5,243 Raw materials 16,600 18,004 Stores, supplies and other 8,039 7,152 Total $33,285 $35,369 4. Unusual items in 1995 include a charge of $2.4 million ($1.6 million after income tax benefits or 17 cents per share) related to the restructuring of APPX Software ("APPX") aimed at eliminating operating losses and a recovery of $1.75 million ($1.1 million after income taxes or 12 cents per share) related to a final judgment in connection with a Film Products product liability lawsuit. The APPX charge includes 5 estimated losses on the disposal of assets ($1,100,000), severance costs ($600,000) and costs for the termination of leases and certain contracts ($700,000). Product development efforts have been curtailed while APPX continues to support its existing products. APPX incurred operating losses (excluding unusual items) in 1994 of $4.7 million ($3.1 million after income tax benefits) on revenues of $2.5 million. APPX operating losses (excluding unusual items) and revenues in the first quarter of 1995 were $478,000 and $378,000, respectively, compared to $1,636,000 and $379,000, respectively, in the first quarter of 1994. Unusual items in 1994 include the write-off of goodwill and other intangibles in APPX totalling $9.5 million ($7.6 million after income tax benefits or 70 cents per share). Net income and earnings per share from continuing operations, adjusted for unusual items affecting the comparability of operating results, are presented below: (In thousands, except per-share amounts) Three Months Ended March 31 1995 1994 Net income (loss) from continuing operations $ 4,445 $(5,093) After-tax effects of unusual items: Restructuring charges associated with APPX 1,560 - Recovery in connection with a Film Products' product liability lawsuit (1,068) - Write-off of APPX intangibles - 7,642 Income from continuing operations as adjusted for unusual items $ 4,937 $ 2,549 Earnings (loss) per share from continuing operations: As reported $ .49 $ (.47) As adjusted for unusual items .54 .23 5. Tredegar is reporting its former Energy segment, which was divested in 1994, as discontinued operations. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations First Quarter 1995 Compared with First Quarter 1994 Net income from continuing operations for the first quarter of 1995 was $4.4 million, or 49 cents per share, compared with a loss of $5.1 million, or 47 cents per share, in the first quarter of 1994. Unusual items recognized in the first quarter of 1995 affecting the comparability of operating results include a charge of $2.4 million ($1.6 million after income tax benefits or 17 cents per share) for the restructuring of APPX Software ("APPX") and a recovery of $1.75 million ($1.1 million after income taxes or 12 cents per share) related to a final judgment in connection with a Film Products product liability lawsuit. Unusual items in the first quarter of 1994 affecting the comparability of operating results includes a charge of $9.5 million ($7.6 million after income tax benefits or 70 cents per share) for the write-off of goodwill and other intangibles in APPX. First quarter 1995 net income from continuing operations excluding unusual items was $4.9 million, or 54 cents per share, compared with $2.5 million, or 23 cents per share, in the first quarter of 1994. Overall, this significant increase was driven primarily by higher profits from volume growth in Aluminum Extrusions. Other factors include a decrease in losses at APPX due to restructuring, favorable performance in Molded Products due to higher sales volume, lower interest expense from lower average debt outstanding and accretion in earnings per share from share repurchases in 1994. Film Products operating profits declined primarily from lower domestic backsheet film volume and margins. First quarter net sales increased 25% in 1995 due primarily to higher selling prices reflecting higher aluminum and plastic resin costs. Sales volume growth at Aluminum Extrusions, Molded Products and Brudi also contributed to the increase (see Segment Results on page 9 for further discussion). The gross profit margin decreased to 15.3% in 1995 from 15.5% in 1994 due to lower margins in Film Products, partially offset by relatively lower conversion costs on higher sales volume in Aluminum Extrusions and Molded Products. Selling, general and administrative expenses increased 10% over 1994 primarily in support of higher levels of sales. However, such expenses as a percentage of sales declined from 9.3% in the first quarter of 1994 to 8.2% in the first quarter of 1995. Research and development expenses increased 7% due to higher spending at Molecumetics and higher product development spending at Film Products, partially offset by the curtailment of product development spending at APPX. 7 Interest expense for continuing operations decreased 39% as a result of significantly lower average debt levels. The average interest rate on debt outstanding during the first quarter of 1995 was 7.2% (all fixed-rate debt) compared with 5.5% in 1994 (a mix of fixed and floating-rate debt). Interest expense of $136,000 was allocated to discontinued operations in the first quarter of 1994, based on relative capital employed. The effective tax rate for continuing operations, excluding special items, decreased to 37.2% in 1995 from 39.3% in 1994. The higher rate in 1994 reflects the combined effects of higher nondeductible goodwill amortization and significantly lower income. A significant portion of the nondeductible goodwill amortization was eliminated at the end of the first quarter of 1994 with the write-off of APPX intangibles. 8 Segment Results The following tables present Tredegar's net sales and operating profit by segment for the three months ended March 31, 1995 and 1994. Net Sales by Segment (In thousands) (Unaudited) Three Months Ended March 31 1995 1994 Plastics $ 82,634 $ 68,838 Metal Products 68,071 51,777 Technology 378 379 Total $151,083 $120,994 Operating Profit by Segment (In thousands) (Unaudited) Three Months Ended March 31 1995 1994 Plastics: Ongoing operations $ 9,295 $ 8,995 Unusual items (a) 1,750 - 11,045 8,995 Metal Products 3,325 1,664 Technology: Ongoing operations (1,655) (2,377) Unusual items (b) (2,400) (9,521) (4,055) (11,898) Total $ 10,315 $ 1,239 Notes: (a) Plastics segment unusual items consist of a recovery related to a final judgment in connection with a Film Products product liability lawsuit. (b) Technology segment unusual items consist of a charge for restructuring APPX in 1995 and a write-off of goodwill and other intangibles in APPX in 1994. Tredegar Film Products sales increased in 1995 due primarily to higher average selling prices resulting from rising raw material costs. A decline in domestic (which includes U.S. export business) backsheet film volume from record levels in the first quarter of 1994 was partially offset by higher volume in domestic permeable films, specialty films and at 9 foreign operations. Ongoing operating profit declined on lower volume and margins in domestic backsheet film and lower margins in domestic permeable films, partially offset by higher profits in specialty films and at foreign operations. Lower margins in domestic backsheet and permeable films were primarily driven by the combined effects of substantially higher selling prices (reflecting higher plastic resin costs) and lower profit per unit sold. Tredegar Molded Products sales increased in 1995 due to higher prices and volumes in all lines of business. Operating profit improved primarily as a result of higher volume on relatively flat conversion costs. Sales at Fiberlux improved over last year reflecting primarily higher raw material costs. Operating results declined slightly. Metal Products sales increased 31% over 1994 due primarily to higher prices in Aluminum Extrusions reflecting higher aluminum costs and improved sales at Brudi. Volume and profit improvements in Aluminum Extrusions (volume increased 4.8%) were driven by growth in construction and automotive markets and ongoing cost and quality improvements. Despite higher sales at Brudi, operating profit declined due to accruals for bad debt and warranty costs. Sustaining the upward trend in Aluminum Extrusions' volume and profit growth, which began in the first quarter of 1993, depends, in large measure, on construction and automotive activity. A softening of these markets, as evidenced recently by lower housing starts and continued uncertainty regarding interest rates, could have an unfavorable impact on growth and earnings. Technology segment results for the first quarter of 1995 include a charge of $2.4 million related to the restructuring of APPX aimed at eliminating operating losses. Product development efforts have been curtailed while APPX continues to support its existing products. APPX incurred operating losses (excluding unusual items) in 1994 of $4.7 million ($3.1 million after income tax benefits) on revenues of $2.5 million. APPX operating losses (excluding unusual items) and revenues in the first quarter of 1995 were $478,000 and $378,000, respectively, compared to $1,636,000 and $379,000, respectively, in the first quarter of 1994. Excluding unusual items, Technology segment operating losses were $1.7 million and $2.4 million in the first quarters of 1995 and 1994, respectively. Losses decreased as a result of cost reductions at APPX due to the restructuring and the elimination of APPX intangibles amortization with the write-off of such intangibles at the end of the first quarter of 1994, partially offset by higher research and development spending in Molecumetics. Liquidity and Capital Resources Tredegar's total assets at March 31, 1995 were $334.4 million, an increase of $16.1 million over December 31, 1994. The increase is due to higher accounts receivable resulting from higher sales in Plastics and Metal Products and the acquisition of a films business in Argentina, partially offset by depreciation in excess of capital 10 expenditures of $1.8 million. Higher accounts payable reflect higher raw material costs not fully reflected in inventories as a result of the LIFO pricing method, and the recent acquisition in Argentina. The ratio of current assets to current liabilities was 1.8 to 1 at March 31, 1995, compared with 1.9 to 1 at December 31, 1994. Debt was $35.5 million and $38 million at March 31, 1995, and December 31, 1994, respectively (including debt of $35 million at a fixed rate of 7.2% with an average remaining maturity of 5.25 years). Net debt (debt less cash and cash equivalents) as a percentage of net capitalization was 14.7% at March 31, 1995, compared with 14.4% at December 31, 1994. On April 11, 1995, Tredegar's Board of Directors authorized a "Dutch Auction" tender offer for up to one million shares of Tredegar's common stock at a price range of $20 to $23 per share. The offer will be funded with available cash and cash equivalents and borrowings under Tredegar's revolving credit facilities. Additional information (including pro forma data) concerning the offer is contained in Tredegar's tender offer statement on Schedule 13E-4 filed with the Securities and Exchange Commission on April 17, 1995. Net cash provided by continuing operating activities declined to $6.6 million in 1995 from $11.1 million in 1994 due to additional working capital needed to support a higher level of sales activity. Despite this working capital funding, cash from continuing operating activities exceeded capital expenditures and dividends by $2 million. This excess cash combined with the $9 million cash and cash equivalents balance at December 31, 1994, was used primarily for the films acquisition in Argentina ($3.6 million) and repayment of debt ($2.5 million), leaving approximately $5 million of cash and cash equivalents on hand at March 31, 1995. 11 PART II - OTHER INFORMATION Item 5. Other Information. On April 11, 1995, Tredegar's Board of Directors authorized a "Dutch Auction" tender offer for up to one million shares of Tredegar's common stock at a price range of $20 to $23 per share. The offer will be funded with available cash and cash equivalents and borrowings under Tredegar's revolving credit facilities. Additional information (including pro forma data) concerning the offer is contained in Tredegar's tender offer statement on Schedule 13E-4 filed with the Securities and Exchange Commission on April 17, 1995. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit No. 11 Statement re computation of earnings per share 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K have been filed for the quarter ended March 31, 1995. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Tredegar Industries, Inc. (Registrant) Date: April 17, 1995 /s/ N. A. Scher Norman A. Scher Executive Vice President, Treasurer and Chief Financial Officer (Principal Financial Officer) Date: April 17, 1995 /s/ D. Andrew Edwards D. Andrew Edwards Corporate Controller (Principal Accounting Officer) 13 EXHIBIT INDEX Exhibit No. Description 11 Statement re computation of earnings per share 27 Financial Data Schedule 14
EX-11 2 EXHIBIT 11 EXHIBIT 11 - COMPUTATIONS OF EARNINGS PER SHARE Tredegar Industries, Inc. and Subsidiaries (In thousands, except per-share amounts) (Unaudited) Three Months Ended March 31 1995 1994 Income (loss) from continuing operations $ 4,445 $(5,093) Income from discontinued operations - 8,693 Net income $ 4,445 $ 3,600 Earnings (loss) per share as reported: Income (loss) from continuing operations $ .49 $ (.47) Income from discontinued operations - .80 Net income $ .49 $ .33 PRIMARY EARNINGS PER SHARE: Shares issuable upon the assumed exercise of outstanding stock options (1) 153 37 Weighted average common shares outstanding during period 9,008 10,896 Weighted average common shares and common stock equivalents 9,161 10,933 Primary earnings per share (2) $ .49 $ .33 FULLY DILUTED EARNINGS PER SHARE: Shares issuable upon the assumed exercise of outstanding stock options (3) 208 37 Weighted average common shares outstanding during period 9,008 10,896 Weighted average common shares and common stock equivalents 9,216 10,933 Fully diluted earnings per share (2) $ .48 $ .33 (1) Computed using the average market price during the related period. (2) Common stock equivalents had an immaterial dilutive effect. (3) Computed using the higher of the average market price during the related period and the market price at the end of the related period. EX-27 3 EXHIBIT 27
5 The schedule contains summary financial information extracted from the Balance Sheet for the period ended March 31, 1995 and the Statement of Income for the 3 months ended March 31, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1995 MAR-31-1995 5,001 0 96,557 5,099 33,285 148,461 321,085 198,225 334,402 84,201 35,500 136,691 0 0 39,909 334,402 151,083 150,982 128,005 128,005 14,410 631 723 7,213 2,768 4,445 0 0 0 4,445 .49 0
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