Tredegar Corporation (NYSE:TG, also the “Company” or “Tredegar”)
today reported fourth quarter and full year financial results for
the period ended December 31, 2023.
Fourth quarter 2023 net income (loss) was $(35.6) million
($(1.04) per diluted share) compared to $(3.9) million ($(0.11) per
diluted share) in the fourth quarter of 2022. Net income (loss)
from ongoing operations, which excludes special items, was $(0.1)
million ($(0.01) per diluted share) in the fourth quarter of 2023
compared to $0.5 million ($0.02 per diluted share) in the fourth
quarter of 2022.
Full year 2023 net income (loss) was $(105.9) million ($(3.10)
per diluted share) compared to $28.5 million ($0.84 per diluted
share) in 2022. Net income (loss) from ongoing operations was
$(4.7) million ($(0.15) per diluted share) in 2023 compared to
$39.5 million ($1.17 per diluted share) in 2022. 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 and year ended December 31, 2023 and
2022, is provided in Note (a) to the Financial Tables in this press
release.
Fourth Quarter Financial Results Highlights
- Earnings before interest, taxes, depreciation and amortization
(“EBITDA”) from ongoing operations for Aluminum Extrusions was $8.0
million in the fourth quarter of 2023 versus $8.9 million in the
fourth quarter of last year and versus $5.1 million in the third
quarter of 2023.
- Sales volume was 32.9 million pounds in the fourth quarter of
2023 versus 37.2 million pounds in the fourth quarter of last year
and versus 32.5 million pounds in the third quarter of 2023.
- Open orders at the end of the fourth quarter of 2023 were
approximately 14 million pounds (versus 17 million pounds at the
end of the third quarter of 2023), which is below the quarterly
range of 21 to 27 million pounds in 2019 before pandemic-related
disruptions that resulted in excessive open orders, which peaked in
the first quarter of 2022 at approximately 100 million pounds.
- EBITDA from ongoing operations for PE Films was $4.5 million in
the fourth quarter of 2023 versus negative $2.6 million in the
fourth quarter of 2022 and $4.0 million in the third quarter of
2023. Sales volume was 8.5 million pounds in the fourth quarter of
2023 versus 5.6 million pounds in the fourth quarter of last year
and 7.2 million pounds in the third quarter of 2023.
- EBITDA from ongoing operations for Flexible Packaging Films
(also referred to as “Terphane”) was $2.3 million during the fourth
quarter of 2023 versus $7.0 million in the fourth quarter of 2022
and $0.5 million in the third quarter of 2023. Sales volume was
22.8 million pounds in the fourth quarter of 2023 versus 24.5
million pounds in the fourth quarter of 2022 and 22.2 million
pounds in the third quarter of 2023. The Company believes that
unfavorable variances throughout the fourth quarter of 2023 versus
the fourth quarter of 2022 were primarily due to lower sales volume
and lower margin, driven by global excess capacity and intense
competition in Brazil from imports from multiple origins. See
Status of Current Corporate Strategic Initiatives section of
this report for information on the sale of Terphane.
John Steitz, Tredegar’s president and chief executive officer,
said, “Results for the fourth quarter were better than expected and
improved compared with the third quarter of 2023. There are signs
that the downturn at Bonnell, which we believe is a residual impact
of the pandemic and started in the second half of 2022, has hit
bottom and that a recovery is underway. In addition, U.S.
authorities have made favorable preliminary determinations
regarding a trade case backed by a coalition of members of the
Aluminum Extruders Council. At PE Films, EBITDA was $8.6 million
during the second half of 2023 compared with $2.7 million during
the first half. We expect that this positive recent performance
will continue in 2024.”
Mr. Steitz further stated, “We continue to make progress on our
corporate strategic initiatives. The process to complete the sale
of Terphane is advancing as planned, including the review required
by competition authorities in Brazil. In early November, we settled
our pension plan. In late December, we executed an amendment of our
credit agreement and conversion to an asset-based lending facility
to support us during what has been an unprecedented cyclical
downturn. Furthermore, favorable operating results have improved
our outlook for our financial leverage.”
Mr. Steitz continued, “I’d like to express my sincere
appreciation to all of the employees at Tredegar and its operating
divisions for coming together as a team to meet head-on our
significant business challenges in 2023.”
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/
Year Ended
Favorable/
(In thousands, except percentages)
December 31,
(Unfavorable)
December 31,
(Unfavorable)
2023
2022
% Change
2023
2022
% Change
Sales volume (lbs)
32,940
37,243
(11.6)%
138,451
174,670
(20.7)%
Net sales
$
110,196
$
127,805
(13.8)%
$
474,803
$
637,872
(25.6)%
Ongoing operations:
EBITDA
$
8,008
$
8,915
(10.2)%
$
37,976
$
66,800
(43.1)%
Depreciation & amortization
(4,675
)
(4,568
)
(2.3)%
(17,927
)
(17,414
)
(2.9)%
EBIT*
$
3,333
$
4,347
(23.3)%
$
20,049
$
49,386
(59.4)%
Capital expenditures
$
2,477
$
8,576
$
20,339
$
23,664
* 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 December 31,
2023 and 2022, the three months ended September 30, 2023, and the
years ended December 31, 2023 and 2022.
Three Months Ended
Favorable/
Three Months Ended
Favorable/
Year Ended
Favorable/
(In millions of lbs)
December 31,
(Unfavorable)
September 30,
(Unfavorable)
December 31,
(Unfavorable)
2023
2022
% Change
2023
% Change
2023
2022
% Change
Sales volume by end-use market:
Non-residential B&C
18.4
20.7
(11.1
)%
18.0
2.2
%
78.6
93.5
(15.9
)%
Residential B&C
2.0
2.7
(25.9
)%
1.6
25.0
%
8.1
13.7
(40.9
)%
Automotive
3.3
3.3
—
%
3.9
(15.4
)%
13.8
14.0
(1.4
)%
Specialty products
9.2
10.5
(12.4
)%
9.1
1.1
%
38.0
53.5
(29.0
)%
Total
32.9
37.2
(11.6
)%
32.6
0.9
%
138.5
174.7
(20.7
)%
Fourth Quarter 2023 Results vs. Fourth
Quarter 2022 Results
Net sales (sales less freight) in the fourth quarter of 2023
decreased 13.8% versus the fourth quarter of 2022 primarily due to
lower sales volume and the pass-through of lower metal costs. Sales
volume in the fourth quarter of 2023 decreased 11.6% versus the
fourth quarter of 2022 but increased 1.5% versus third quarter of
2023. Beginning in the third quarter of 2022, the Company observed
order cancellations and slowing order input as customers continued
to report high inventory levels, which carried into 2023. The
Company believes that its percentage changes in sales volume by
end-use markets for 2023 versus 2022, particularly for residential
B&C and the distribution sector within specialty products, were
unfavorable versus the industry as a whole mainly due to surging
imports.
Net new orders, which remain sluggish compared to historical
levels, increased 55% in the fourth quarter of 2023 versus the
fourth quarter of 2022, marking the sixth consecutive quarterly
increase in incoming orders. Open orders at the end of the fourth
quarter of 2023 were 14 million pounds (versus 17 million pounds at
the end of the third quarter of 2023 and 41 million pounds at the
end of the fourth quarter of 2022). This level is below the
quarterly range of 21 to 27 million pounds in 2019 before
pandemic-related disruptions that resulted in long lead times,
driving a peak in open orders of approximately 100 million pounds
during the first quarter of 2022. We believe that current open
orders are 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.
The Company is participating as part of a coalition of members
of 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 March 5, 2024, the DOC announced
its preliminary finding that the governments of China, Indonesia,
Mexico and Turkey unfairly subsidize their aluminum extrusion
industries. The DOC calculated a range of affirmative preliminary
countervailing duties from each country. A preliminary anti-dumping
determination for these four countries and the 10 other countries
included in the initial petition is expected in May 2024. The
Company expects the final ITC vote to occur in late 2024.
EBITDA from ongoing operations in the fourth quarter of 2023
decreased $0.9 million versus the fourth quarter of 2022, primarily
due to:
- Lower volume ($3.6 million), higher labor and employee-related
costs ($0.9 million), lower pricing ($0.6 million), and higher
selling, general and administrative ("SG&A") expenses ($1.8
million), partially offset by lower supply expense ($1.9 million)
and utility costs ($0.7 million);
- The timing of the flow-through under the first-in first-out
(“FIFO”) 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
$0.3 million in the fourth quarter of 2023 versus a charge of $1.7
million in the fourth quarter of 2022; and
- Inventories accounted for under the last in, first out (“LIFO”)
method resulted in a benefit of $1.2 million in the fourth quarter
of 2023 versus a charge of $2.9 million in the fourth quarter of
2022. In addition, the Company recorded a favorable out-of-period
adjustment of $1.9 million related to inventory in the fourth
quarter of 2022.
Full Year 2023 Results vs. Full Year 2022
Results
Net sales in 2023 decreased 25.6% versus 2022 primarily due to
lower sales volume and the pass-through of lower metal costs.
EBITDA from ongoing operations decreased $28.8 million in 2023
versus 2022, primarily due to:
- Lower volume ($29.6 million), higher labor and employee-related
costs ($4.5 million), lower labor productivity in the first half of
2023 ($0.9 million), higher supply expense, including higher paint
expense associated with a shift to more painted product throughout
2023 and inflationary costs for other supplies ($1.2 million),
higher freight rates ($0.8 million) and higher SG&A expenses
($1.5 million); partially offset by higher pricing, primarily in
the first quarter of 2023 ($4.0 million), and lower utility costs
($2.3 million);
- The timing of the flow-through under the FIFO 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 $1.1 million in 2023 versus a
benefit of $0.1 million in 2022; and
- Inventories accounted for under the LIFO method resulted in a
benefit of $1.2 million in 2023 versus a charge of $2.9 million in
2022. In addition, the Company recorded an unfavorable
out-of-period adjustment of $0.6 million related to inventory and
accrued labor costs in the third quarter and fourth quarters of
2022.
Aluminum Extrusions believes that it has adequate supply
agreements for aluminum raw materials in 2024. See discussion of
Quantitative and Qualitative Disclosures about Market Risk in Item
7a of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2023 (“Form 10-K”) for additional information on
aluminum price trends.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Bonnell Aluminum are projected to be $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 “Debt, Financial Leverage, Debt Covenants and Debt
Refinancing” 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 new 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 films and films for other markets. A summary of results
for PE Films is provided below:
Three Months Ended
Favorable/
Year Ended
Favorable/
(In thousands, except percentages)
December 31,
(Unfavorable)
December 31,
(Unfavorable)
2023
2022
% Change
2023
2022
% Change
Sales volume (lbs)
8,518
5,600
52.1%
29,355
32,873
(10.7)%
Net sales
$
20,728
$
14,959
38.6%
$
76,763
$
97,571
(21.3)%
Ongoing operations:
EBITDA
$
4,516
$
(2,594
)
NM**
$
11,217
$
11,949
(6.1)%
Depreciation & amortization
(1,216
)
(1,548
)
21.4%
(6,522
)
(6,280
)
(3.9)%
EBIT*
$
3,300
$
(4,142
)
NM**
$
4,695
$
5,669
(17.2)%
Capital expenditures
$
266
$
752
$
1,772
$
3,289
* 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”)
Fourth Quarter 2023 Results vs. Fourth
Quarter 2022 Results
Net sales in the fourth quarter of 2023 increased 38.6% versus
the fourth quarter of 2022, with volume increases in both surface
protection and overwrap films. Surface Protection sales volume
increased 42% in the fourth quarter of 2023 versus the fourth
quarter of 2022. Although fourth quarter volume in Surface
Protection is typically low due to seasonality, sales volume in the
fourth quarter of 2023 increased 8% versus the third 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. Overwrap sales volume
in the fourth quarter of 2023 increased 62% versus a weak fourth
quarter of 2022.
EBITDA from ongoing operations in the fourth quarter of 2023
increased $7.1 million versus the fourth quarter of 2022, primarily
due to:
- A $5.2 million increase from Surface Protection:
- Higher contribution margin associated with higher volume and
favorable mix ($2.1 million), operating efficiencies ($1.0
million), cost improvements ($0.6 million) and lower SG&A and
research and development ($0.7 million), primarily from the closure
of the technical center in the third quarter of 2023;
- Inventories accounted for under the LIFO method resulted in a
benefit of $1.0 million in the fourth quarter of 2023 versus a
charge of $0.1 million in the fourth quarter of 2022; and
- The pass-through lag associated with resin costs ($0.2 million
charge in the fourth quarter of 2023 versus a benefit of $0.2
million in the fourth quarter of 2022).
- A $1.9 million increase from overwrap films primarily due to:
- Higher contribution margin associated with higher volume and
favorable mix ($0.6 million) and cost improvements ($0.7
million);
- Inventories accounted for under the LIFO method resulted in a
benefit of $0.3 million in the fourth quarter of 2023 versus a
charge of $0.4 million in the fourth quarter of 2022; and
- The pass-through lag associated with resin costs (a charge of
$0.1 million in the fourth quarter of 2023 versus a benefit of $0.2
million in the fourth quarter of 2022).
See discussion of Quantitative and Qualitative Disclosures about
Market Risk in Item 7a of the Form 10-K for additional information
on resin price trends.
Full Year 2023 Results vs. Full Year 2022
Results
Net sales in 2023 decreased 21.3% versus 2022, primarily due to
lower volume in Surface Protection, resulting from weak demand in
the consumer electronics market and customer inventory corrections
during 2023. Sales volume in 2023 for surface protection films
declined 22% and increased 2% for overwrap films versus 2022.
EBITDA from ongoing operations in 2023 decreased $0.7 million
versus 2022 primarily due to:
- A $5.7 million decrease from Surface Protection:
- Lower contribution margin for non-transitioning products
associated with a market slowdown and customer inventory
corrections ($11.1 million) and for previously disclosed customer
product transitions ($0.7 million), partially offset by favorable
pricing ($0.5 million), operating efficiencies ($2.6 million) and
cost improvements ($3.2 million);
- The pass-through lag associated with resin costs ($0.3 million
charge in 2023 versus a benefit of $0.5 million in 2022);
- A foreign currency transaction gain of $0.2 million in 2023
versus a gain of $0.8 million in 2022; and
- Inventories accounted for under the LIFO method resulted in a
benefit of $1.0 million in 2023 versus a charge of $0.1 million in
2022.
- A $5.0 million increase from overwrap films primarily due:
- Higher contribution margin associated with higher volume and
favorable mix ($1.3 million), cost improvements ($3.1 million) and
lower SG&A ($0.4 million);
- The pass-through lag associated with resin costs (a charge of
$0.2 million in 2023 versus a benefit of $0.4 million in 2022);
and
- Inventories accounted for under the LIFO method resulted in a
benefit of $0.3 million in 2023 versus a charge of $0.4 million in
2022.
Closure of PE Films Technical
Center
In August 2023, the Company adopted a plan to close the PE Films
technical center in Richmond, VA and reduce its efforts to develop
and sell films supporting the semiconductor market. Future research
and development activities for PE Films will be performed at the
facility in Pottsville, PA. PE Films continues to have new business
opportunities primarily relating to surface protection films that
protect components of flat panel and flexible displays. The Company
anticipates all activities to cease at the PE Films technical
center in Richmond, VA, by the end of the first quarter of 2024.
The Company recognized total expense incurred through December 31,
2023 associated with exit activities of $1.3 million for: (i)
severance and related costs ($0.9 million) and (ii) building
closure costs ($0.4 million). In addition, the Company recognized a
non-cash asset impairment ($3.5 million), accelerated depreciation
($0.3 million) and a gain on the lease modification ($0.1 million).
Net annual cash savings of $3.4 million are anticipated, which
began in the fourth quarter of 2023.
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 $6
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
Year Ended
Favorable/ (Unfavorable) %
Change
(In thousands, except percentages)
December 31,
December 31,
2023
2022
2023
2022
Sales volume (lbs)
22,805
24,475
(6.8)%
88,536
106,685
(17.0)%
Net sales
$
31,464
$
40,022
(21.4)%
$
126,326
$
168,139
(24.9)%
Ongoing operations:
EBITDA
$
2,307
$
6,957
(66.8)%
$
4,383
$
27,452
(84.0)%
Depreciation & amortization
(750
)
(721
)
(4.0)%
(2,865
)
(2,444
)
(17.2)%
EBIT*
$
1,557
$
6,236
(75.0)%
$
1,518
$
25,008
(93.9)%
Capital expenditures
$
1,433
$
841
$
4,323
$
8,151
* For a reconciliation of this non-GAAP
measure to the most directly comparable measure calculated in
accordance with GAAP, see the EBITDA from ongoing operations by
segment statements in the Financial Tables in this press
release.
Fourth Quarter 2023 Results vs. Fourth
Quarter 2022 Results
Net sales in the fourth quarter of 2023 decreased 21.4% compared
to the fourth quarter of 2022. The Company believes that
unfavorable variances throughout 2023 versus 2022 were primarily
due to lower sales volume and lower margin driven by global excess
capacity and competition in Brazil from imports.
EBITDA from ongoing operations in the fourth quarter of 2023
decreased by $4.7 million versus the fourth quarter of 2022,
primarily due to:
- Lower selling prices from the pass-through of lower resin costs
and margin pressures ($4.3 million), lower sales volume ($1.0
million) and higher variable costs ($3.2 million), partially offset
by lower raw material costs ($2.7 million) and lower SG&A
expenses ($1.4 million); and
- Foreign currency transaction losses ($0.2 million) in the
fourth quarter of 2023 compared to foreign currency transaction
gains ($0.1 million) in the fourth quarter of 2022.
Full Year 2023 Results vs. Full Year 2022
Results
Net sales in 2023 decreased 24.9% compared to 2022, primarily
due to lower sales volume and lower margin that the Company
believes were driven by excess global capacity and competition in
Brazil from imports, partially offset by favorable product mix.
EBITDA from ongoing operations in 2023 decreased by $23.1
million versus 2022, primarily due to:
- Lower selling prices from the pass-through of lower resin costs
and margin pressures ($17.6 million), lower sales volume ($9.7
million), higher fixed costs ($1.0 million, primarily due to under
absorption from lower production volumes) and higher variable costs
($1.3 million, including higher costs resulting from quality
issues), partially offset by lower raw material costs ($5.9
million) and lower SG&A expenses ($2.3 million);
- Foreign currency transaction losses ($0.3 million) in 2023
compared to foreign currency transaction losses ($0.2 million) in
2022; and
- Net unfavorable foreign currency translation of
Real-denominated operating costs ($1.4 million) in 2023 versus
2022.
Projected Capital Expenditures and
Depreciation & Amortization
Capital expenditures for Terphane 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 2023 decreased by $1.8 million
compared to 2022, primarily due to lower pension expense as a
result of the pension plan termination completed in 2023 ($3.7
million), lower accruals for employee-related compensation ($2.1
million) and lower stock-based compensation ($1.4 million),
partially offset by higher professional fees associated with
business development activities ($3.2 million) and a charge to
adjust the initial purchase price of the nonparticipating single
premium group annuity contract as a result of the routine
administrative process to transition the pension plan ($2.0
million).
Interest expense was $11.6 million in 2023 in comparison to $5.0
million in 2022, primarily due to higher weighted average total
debt outstanding, higher interest rates and the write-off of $1.1
million of deferred financing fees.
The effective tax rate used to compute income taxes (benefit) in
2023 was 33.8% compared to 13.4% in 2022. The increase in the
effective tax rate is primarily due to tax benefits previously
recorded in other comprehensive income (loss) that were released as
a result of the pension plan termination, partially offset by a
reduction in Brazilian tax incentives as a percentage of income.
The stranded taxes released with the termination of the pension
plan represent the effect of the change in federal and state tax
rates on pension-related deferred tax items initially recorded in
other comprehensive income. The related stranded taxes were
released in full in 2023. As of December 31, 2023, the Company had
potential U.S. federal income tax benefits of $22 million that
could be realized from the utilization against future taxable
income of existing U.S. foreign tax credit, net operating loss,
research & development and interest limitation carryforwards.
See Note (e) to Financial Tables for information related to the
effective tax rate from ongoing operations. For an explanation of
differences between the effective tax rate and the U.S. federal
statutory rate for 2023 and 2022, see Note 12 “Income Taxes” to the
Consolidated Financial Statements included in Item 15 “Exhibits and
Financial Statements Schedules” (“Item 15”) of the Form 10-K.
Status of Current Corporate Strategic Initiatives
The status of current corporate strategic initiatives is as
follows:
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 December 31, 2023, the Company has reported results for
Terphane as a continuing operation, given the early stage of the
approval process by authorities. If the Contingent Terphane Sale
transaction is completed, the Company expects to realize after-tax
cash proceeds of $85 million after deducting projected Brazil
withholding taxes, escrow funds, U.S. capital gains taxes and
transaction costs. Actual after-tax net proceeds may differ from
this estimate due to possible changes in deductions and the
Company's tax situation during the potentially lengthy interim
period to the closing date.
Debt, Financial Leverage, Debt Covenants
and Debt Refinancing
Total debt was $146.3 million at December 31, 2023, $155.0
million at September 30, 2023 and $137.0 million at December 31,
2022. Cash, cash equivalents and restricted cash were $13.5 million
at December 31, 2023, $48.6 million at September 30, 2023 and $19.2
million at December 31, 2022. Net debt (total debt in excess of
cash, cash equivalents and restricted cash), a non-GAAP financial
measure, was $132.8 million at December 31, 2023, $106.4 million at
September 30, 2023 and $117.8 million at December 31, 2022. See
Note (f) to the Financial Tables for a reconciliation of net debt
to the most directly comparable GAAP financial measure.
The Company has been focused on managing net working capital,
capital expenditures and costs during the current slowdown in
business. Total debt increased $9.3 million and net debt increased
$15.0 million at the end of 2023 versus the end of 2022 due to the
$27.7 million contribution to the pension plan in the fourth
quarter of 2023, partially offset by lower net working capital.
In November 2023, the Company disclosed its intent to reduce the
risk of a debt covenant violation during a severe cyclical downturn
impacting all of its businesses at the same time by transitioning
from a “cash flow” based revolving credit facility (which uses
Credit EBITDA) to an asset based revolving credit facility.
On October 26, 2023, Terphane Limitada (“Terphane”), the
Company’s wholly owned subsidiary in Brazil, borrowed $20 million
secured by certain of its assets (“Terphane Brazil Loan”). This
U.S. Dollar borrowing matures on October 30, 2028, with interest
payable quarterly at an annual floating interest rate of the
Secured Overnight Financing Rate (“SOFR”) plus 5.99%. The SOFR rate
was 5.36% as of December 31, 2023. Quarterly principal payments of
$1.7 million begin starting in year 3 of the loan. There are no
prepayment penalties. The Company expects that the Terphane Brazil
Loan will be repaid (and collateral released) upon the closing of
the Contingent Terphane Sale. On October 26, 2023, the Company
borrowed $20 million from Terphane Brazil (the “Intercompany Loan”)
at the same interest rate as the Terphane Brazil Loan, thereby
transferring the funds to the U.S. The Company will repay the
Intercompany Loan in conjunction with the closing of the Contingent
Terphane Sale.
On December 27, 2023, the Company entered into Amendment No. 3
(the “ABL Facility”) to the Second Amended and Restated Credit
Agreement dated June 29, 2022, which provides the Company with a
$180 million senior secured asset-based revolving credit facility
that will expire on June 30, 2026. The ABL Facility amended the
Company’s existing $200 million revolving, secured credit facility
that was scheduled to mature on June 29, 2027 (the “Prior Credit
Agreement”). As of December 31, 2023, the Company was in compliance
with all covenants under 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
December 31, 2023, excess available borrowings under the ABL
Facility were approximately $22.9 million, based upon the
outstanding borrowing base availability net of the financial
covenant for Minimum Liquidity (as defined in the ABL Facility).
Upon the earlier of March 31, 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. If
the Contingent Terphane Sale is not completed by the ABL Adjustment
Date, the Company may have to undertake alternative financing
plans, subject to the limitations imposed by the ABL Facility, such
as refinancing or restructuring our indebtedness, selling assets,
reducing or delaying capital investments or raising additional
capital. Refer to Note 7 “Debt and Credit Agreements” to the
Consolidated Financial Statements in Item 15 of the Form 10-K for
an explanation of the financial highlights and primary debt
covenants.
Pension Plan Termination
On September 27, 2023, the Company borrowed $30 million under
the Prior Credit Agreement in anticipation of the final funding
expected for terminating its defined benefit pension plan
obligation. On October 31, 2023, the Company used this cash to
contribute $27.7 million to fully fund the pension plan with the
amount necessary to purchase from Massachusetts Mutual Life
Insurance Company a nonparticipating single premium group annuity
contract for $157.5 million. 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. During 2023, the Company recognized a pre-tax pension
settlement loss of $92.3 million.
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 an
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;
- failure to establish and maintain effective internal control
over financial reporting;
and the other factors discussed in the reports Tredegar files
with or furnishes to the Securities and Exchange Commission (the
“SEC”) from time to time, including the risks and important factors
set forth in additional detail in “Risk Factors” Part I, Item 1A of
the Form 10-K. Readers are urged to review and consider carefully
the disclosures Tredegar makes in its filings with the SEC.
Tredegar does not undertake, and expressly disclaims any duty,
to update any forward-looking statement made in this press release
to reflect any change in management’s expectations or any change in
conditions, assumptions or circumstances on which such statements
are based, except as required by applicable law.
To the extent that the financial information portion of this
press release contains non-GAAP financial measures, it also
presents both the most directly comparable financial measures
calculated and presented in accordance with GAAP and a quantitative
reconciliation of the difference between any such non-GAAP measures
and such comparable GAAP financial measures. Reconciliations of
non-GAAP financial measures are provided in the Notes to the
Financial Tables included with this press release and can also be
found within “Presentations” in the “Investors” section of our
website, www.tredegar.com.
Tredegar uses its website as a channel of distribution of
material company information. Financial information and other
material information regarding Tredegar is posted on and assembled
in the “Investors” section of its website.
Tredegar Corporation is an industrial manufacturer with three
primary businesses: custom aluminum extrusions for the North
American building & construction, automotive and specialty
end-use markets; surface protection films for high-technology
applications in the global electronics industry; and specialized
polyester films primarily for the Latin American flexible packaging
market. Tredegar had 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
(In Thousands, Except
Per-Share Data)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Sales
$
169,344
$
189,149
$
704,825
$
938,564
Other income (expense), net (c)(d)
(2,357
)
(172
)
(2,147
)
1,009
166,987
188,977
702,678
939,573
Cost of goods sold (c)
141,778
162,113
599,110
764,042
Freight
6,956
6,363
26,933
34,982
Selling, R&D and general expenses
(c)
19,349
20,986
79,968
85,004
Amortization of identifiable
intangibles
464
538
1,897
2,520
Pension and postretirement benefits
890
4,083
10,844
14,569
Interest expense
3,815
1,832
11,607
4,990
Asset impairments and costs associated
with exit and disposal activities, net of adjustments (c)
465
—
5,167
622
Pension settlement loss
66,679
—
92,291
—
Goodwill impairment (g)
—
—
34,891
—
240,396
195,915
862,708
906,729
Income (loss) before income taxes
(73,409
)
(6,938
)
(160,030
)
32,844
Income tax expense (benefit)(c)
(37,818
)
(3,071
)
(54,125
)
4,389
Net income (loss)
$
(35,591
)
$
(3,867
)
$
(105,905
)
$
28,455
Earnings (loss) per share:
Basic
$
(1.04
)
$
(0.11
)
$
(3.10
)
$
0.84
Diluted
$
(1.04
)
$
(0.11
)
$
(3.10
)
$
0.84
Shares used to compute earnings (loss) per
share:
Basic
34,289
33,882
34,133
33,806
Diluted
34,289
33,882
34,133
33,826
Tredegar Corporation
Net Sales and EBITDA from
Ongoing Operations by Segment
(In Thousands)
(Unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net Sales
Aluminum Extrusions
$
110,196
$
127,805
$
474,803
$
637,872
PE Films
20,728
14,959
76,763
97,571
Flexible Packaging Films
31,464
40,022
126,326
168,139
Total net sales
162,388
182,786
677,892
903,582
Add back freight
6,956
6,363
26,933
34,982
Sales as shown in the condensed
consolidated statements of income
$
169,344
$
189,149
$
704,825
$
938,564
EBITDA from Ongoing Operations
Aluminum Extrusions:
Ongoing operations:
EBITDA (b)
$
8,008
$
8,915
$
37,976
$
66,800
Depreciation & amortization
(4,675
)
(4,568
)
(17,927
)
(17,414
)
EBIT (b)
3,333
4,347
20,049
49,386
Plant shutdowns, asset impairments,
restructurings and other (c)
(1,736
)
(190
)
(3,557
)
(310
)
PE Films:
Ongoing operations:
EBITDA (b)
4,516
(2,594
)
11,217
11,949
Depreciation & amortization
(1,216
)
(1,548
)
(6,522
)
(6,280
)
EBIT (b)
3,300
(4,142
)
4,695
5,669
Plant shutdowns, asset impairments,
restructurings and other (c)
(408
)
4
(4,972
)
(646
)
Goodwill impairment (g)
—
—
(34,891
)
—
Flexible Packaging Films:
Ongoing operations:
EBITDA (b)
2,307
6,957
4,383
27,452
Depreciation & amortization
(750
)
(721
)
(2,865
)
(2,444
)
EBIT (b)
1,557
6,236
1,518
25,008
Plant shutdowns, asset impairments,
restructurings and other (c)
(34
)
(5
)
(113
)
(91
)
Total
6,012
6,250
(17,271
)
79,016
Interest income
387
16
522
57
Interest expense
3,815
1,832
11,607
4,990
Gain on investment in kaleo, Inc. (d)
—
—
262
1,406
Stock option-based compensation costs
—
271
231
1,424
Pension settlement loss
66,679
—
92,291
—
Corporate expenses, net (c)
9,314
11,101
39,414
41,221
Income (loss) before income taxes
(73,409
)
(6,938
)
(160,030
)
32,844
Income tax expense (benefit)
(37,818
)
(3,071
)
(54,125
)
4,389
Net income (loss)
$
(35,591
)
$
(3,867
)
$
(105,905
)
$
28,455
Tredegar Corporation
Condensed Consolidated Balance
Sheets
(In Thousands)
(Unaudited)
December 31, 2023
December 31, 2022
Assets
Cash & cash equivalents
$
9,660
$
19,232
Restricted cash
3,795
—
Accounts & other receivables, net
67,938
84,544
Income taxes recoverable
1,182
733
Inventories
82,037
127,771
Prepaid expenses & other
12,065
10,304
Total current assets
176,677
242,584
Property, plant & equipment, net
183,455
186,411
Right-of-use leased assets
11,848
14,021
Identifiable intangible assets, net
9,851
11,690
Goodwill (g)
35,717
70,608
Deferred income taxes
25,034
13,900
Other assets
3,879
2,879
Total assets
$
446,461
$
542,093
Liabilities and Shareholders’
Equity
Accounts payable
$
95,023
$
114,938
Accrued expenses
24,442
31,603
Lease liability, short-term
2,107
2,035
ABL revolving facility (matures on June
30, 2026) (i)
126,322
—
Income taxes payable
1,210
1,137
Total current liabilities
249,104
149,713
Lease liability, long-term
10,942
12,738
Long-term debt
20,000
137,000
Pension and other postretirement benefit
obligations, net
6,643
35,046
Other non-current liabilities
4,119
5,834
Shareholders’ equity
155,653
201,762
Total liabilities and shareholders’
equity
$
446,461
$
542,093
Tredegar Corporation
Condensed Consolidated
Statements of Cash Flows
(In Thousands)
(Unaudited)
Year Ended December 31,
2023
2022
Cash flows from operating activities:
Net income (loss)
$
(105,905
)
$
28,455
Adjustments for noncash items:
Depreciation
25,786
23,882
Amortization of intangibles
1,897
2,520
Reduction of right-of-use assets
2,220
2,098
Goodwill impairment
34,891
—
Deferred income taxes
(56,098
)
544
Accrued pension and postretirement
benefits
10,844
14,602
Pension settlement loss
92,291
—
Stock-based compensation expense
1,978
3,619
Gain on investment in kaléo
(262
)
(1,406
)
Impairment of Richmond, Virginia Technical
Center assets
3,454
—
Changes in assets and liabilities:
Accounts and other receivables
17,400
18,569
Inventories
47,607
(37,771
)
Income taxes recoverable/payable
(406
)
(6,423
)
Prepaid expenses and other
1,204
(2,526
)
Accounts payable and accrued expenses
(25,165
)
(14,916
)
Lease liability
(2,299
)
(2,301
)
Pension and postretirement benefit plan
contributions
(28,269
)
(50,660
)
Other, net
2,827
870
Net cash provided by (used in) operating
activities
23,995
(20,844
)
Cash flows from investing activities:
Capital expenditures
(26,446
)
(36,875
)
Proceeds on sale of investment in
kaléo
262
1,406
Proceeds from the sale of assets
—
10
Net cash provided by (used in) investing
activities
(26,184
)
(35,459
)
Cash flows from financing activities:
Borrowings
116,134
313,500
Debt principal payments
(107,713
)
(249,500
)
Dividends paid
(8,884
)
(16,974
)
Debt financing fees
(4,021
)
(1,245
)
Other
—
(396
)
Net cash provided by (used in) financing
activities
(4,484
)
45,385
Effect of exchange rate changes on
cash
896
(371
)
Increase (decrease) in cash, cash
equivalents and restricted cash
(5,777
)
(11,289
)
Cash, cash equivalents and restricted cash
at beginning of period
19,232
30,521
Cash, cash equivalents and restricted cash
at end of period
$
13,455
$
19,232
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 and the years ended December 31, 2023 and 2022 is
shown below:
Three Months Ended December
31,
Year Ended December 31,
(In millions, except per share data)
2023
2022
2023
2022
Net income (loss) as reported under
GAAP1
$
(35.6
)
$
(3.9
)
$
(105.9
)
$
28.5
After-tax effects of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.3
—
4.0
0.5
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
(0.1
)
(0.2
)
(1.1
)
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
(0.2
)
—
1.3
(3.8
)
Group annuity contract premium
expense4
1.6
—
1.6
—
Other
2.1
1.3
8.1
4.1
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
0.7
3.2
8.4
11.3
Pension settlement loss4
31.0
—
51.0
—
Goodwill impairment3
—
—
27.0
—
Net income (loss) from ongoing
operations1
$
(0.1
)
$
0.5
$
(4.7
)
$
39.5
Earnings (loss) per share as reported
under GAAP (diluted)
$
(1.04
)
$
(0.11
)
$
(3.10
)
$
0.84
After-tax effects per diluted share
of:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.01
—
0.12
0.01
(Gains) losses from sale of assets and
other:
Gain associated with the investment in
kaléo
—
—
(0.01
)
(0.03
)
Tax expense (benefit) from adjustments to
deferred income tax liabilities under new U.S. tax regulations
related to foreign tax credits
(0.01
)
—
0.04
(0.11
)
Group annuity contract premium
expense4
0.05
—
0.05
—
Other
0.06
0.04
0.23
0.13
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination2
0.02
0.09
0.25
0.33
Pension settlement loss4
0.90
—
1.48
—
Goodwill impairment3
—
—
0.79
—
Earnings (loss) per share from ongoing
operations (diluted)
$
(0.01
)
$
0.02
$
(0.15
)
$
1.17
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 (h).
3. For more information, see Note (g).
4. For more information, see “Status of
Current Corporate Strategic Initiatives” section of this press
release.
(b)
EBITDA (earnings before interest, taxes,
depreciation and amortization) from ongoing operations is the key
segment profitability metric used by the Company’s chief operating
decision maker to assess segment financial performance. The Company
uses sales less freight (“net sales”) as its measure of revenues
from external customers at the segment level. For more business
segment information, see Note 13 “Business Segments” to the
Consolidated Financial Statements included in Item 15 of the Form
10-K.
EBIT (earnings before interest and taxes)
from ongoing operations is a non-GAAP financial measure included in
the accompanying tables and the reconciliation of segment financial
information to consolidated results for the Company in the net
sales and EBITDA from ongoing operations by segment statements. It
is not intended to represent the stand-alone results for Tredegar’s
ongoing operations under GAAP and should not be considered as an
alternative to net income (loss) as defined by GAAP. The Company
believes that EBIT is a widely understood and utilized metric that
is meaningful to certain investors and that including this
financial metric in the reconciliation of management’s performance
metric, EBITDA from ongoing operations, provides useful information
to those investors that primarily utilize EBIT to analyze the
Company’s core operations.
(c)
Gains and losses associated with plant
shutdowns, asset impairments, restructurings and other items for
the three months and the years ended December 31, 2023 and 2022
detailed below are shown in the statements of net sales and EBITDA
from ongoing operations by segment and are included in “Asset
impairments and costs associated with exit and disposal activities,
net of adjustments” in the condensed consolidated statements of
income, unless otherwise noted.
Three Months Ended December 31,
2023
Year Ended December 31, 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
(Gains) losses from sale of assets,
investment writedowns and other items:
Consulting expenses for ERP/MES
project1
0.6
0.5
1.8
1.4
Storm damage to the Newnan, Georgia
plant1
—
—
0.5
0.4
Legal fees associated with the Aluminum
Extruders Trade Case1
0.5
0.4
0.5
0.4
Total for Aluminum Extrusions
$
1.1
$
0.9
$
2.9
$
2.3
PE Films:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Impairment of Richmond, Virginia Technical
Center assets4
$
0.1
$
0.1
$
3.5
$
2.7
Richmond, Virginia Technical Center
closure expenses, including severance4
0.1
0.1
1.3
1.0
Richmond, Virginia Technical Center
accelerated depreciation4
0.3
0.2
0.3
0.2
Richmond, Virginia Technical Center lease
modification4
(0.1
)
(0.1
)
(0.1
)
(0.1
)
Goodwill impairment5
—
—
34.9
27.0
Total for PE Films
$
0.4
$
0.3
$
39.9
$
30.8
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
$
0.7
$
0.6
$
5.3
$
4.2
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.8
0.6
2.0
1.6
Write-down of investment in Harbinger
Capital Partners Special Situations Fund2
—
—
0.2
0.1
Tax expense from adjustment to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits3
—
(0.2
)
—
1.3
Group annuity contract premium
expense2,7
2.0
1.6
2.0
1.6
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination6
0.9
0.7
10.8
8.4
Pension settlement loss7
66.7
31.0
92.3
51.0
Total for Corporate
$
71.1
$
34.3
$
112.6
$
68.2
1. Included in “Selling, R&D and general expenses” in the
condensed consolidated statements of income. 2. Included in “Other
income (expense), net” in the condensed consolidated statements of
income. 3. Included in “Income tax expense (benefit)” in the
condensed consolidated statements of income. 4. For more
information, see “PE Films” section of this press release. 5. For
more information, see Note (g). 6. For more information, see Note
(h). 7. For more information, see “Status of Current Corporate
Strategic Initiatives” section of this press release.
Three Months Ended December 31,
2022
Year Ended December 31, 2022
(In millions)
Pre-Tax
Net of Tax
Pre-Tax
Net of Tax
Aluminum Extrusions:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
$
—
$
—
$
0.1
$
0.1
Environmental charges at Newnan, Georgia
plant4
0.1
0.1
0.1
0.1
Storm damage to the Newnan, Georgia
plant1
0.1
0.1
0.1
0.1
Total for Aluminum Extrusions
$
0.2
$
0.2
$
0.3
$
0.3
PE Films:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
—
$
—
$
0.5
$
0.4
(Gain) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
—
—
0.2
0.1
Total for PE Films
$
—
$
—
$
0.7
$
0.5
Flexible Packaging Films:
(Gains) losses from sale of assets,
investment writedowns and other items:
COVID-19-related expenses2
$
0.1
$
0.1
$
0.1
$
0.1
Total for Flexible Packaging Films
$
0.1
$
0.1
$
0.1
$
0.1
Corporate:
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings:
Other restructuring costs - severance
$
—
$
—
$
0.1
$
0.1
(Gain) losses from sale of assets,
investment writedowns and other items:
Professional fees associated with business
development activities1
0.8
0.6
2.4
1.8
Professional fees associated with
remediation activities related to internal control over financial
reporting1
0.6
0.4
2.6
2.0
Stock compensation expense associated with
the fair value remeasurement of awards granted at the time of the
2020 Special Dividend1
—
—
(0.3
)
(0.2
)
Tax benefit from adjustment to deferred
income tax liabilities under new U.S. tax regulations related to
foreign tax credits3
—
—
—
(3.8
)
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination5
4.0
3.2
14.4
11.3
Total for Corporate
$
5.4
$
4.2
$
19.2
$
11.2
1. Included in “Selling, R&D and
general expenses” in the condensed consolidated statements of
income.
2. Included in “Other income (expense),
net” in the condensed consolidated statements of income.
3. Included in “Income tax expense
(benefit)” in the condensed consolidated statements of income.
4. Included in "Costs of goods sold" in
the condensed consolidated statements of income.
5. For more information, see Note (h).
(d)
On December 27, 2021, the Company
completed the sale of its investment interests in kaleo, Inc. and
received closing cash proceeds of $47.1 million. Subsequently, in
May 2022 and January 2023, additional cash consideration of $1.4
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 months and years ended December 31, 2023
and 2022 and are shown below in order to show the impact on the
effective tax rate:
(In millions)
Pre-Tax
Taxes Expense (Benefit)
After-Tax
Effective Tax Rate
Three Months Ended December 31,
2023
(a)
(b)
(b)/(a)
Net income (loss) reported under GAAP
$
(73.4
)
$
(37.8
)
$
(35.6
)
51.5
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.4
0.1
0.3
(Gains) losses from sale of assets and
other
4.6
1.1
3.5
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
0.9
0.2
0.7
Pension settlement loss
66.7
35.7
31.0
Net income (loss) from ongoing
operations
$
(0.8
)
$
(0.7
)
$
(0.1
)
87.5
%
Three Months Ended December 31,
2022
Net income (loss) reported under GAAP
$
(6.9
)
$
(3.0
)
$
(3.9
)
43.5
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
—
—
—
(Gains) losses from sale of assets and
other
1.7
0.5
1.2
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
4.0
0.8
3.2
Net income (loss) from ongoing
operations
$
(1.2
)
$
(1.7
)
$
0.5
141.7
%
Year Ended December 31, 2023
Net income (loss) reported under GAAP
$
(160.0
)
$
(54.1
)
$
(105.9
)
33.8
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
5.2
1.2
4.0
(Gains) losses from sale of assets and
other
12.0
1.2
10.8
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
10.8
2.4
8.4
Pension settlement loss
92.3
41.3
51.0
Goodwill impairment
34.9
7.9
27.0
Net income (loss) from ongoing
operations
$
(4.8
)
$
(0.1
)
$
(4.7
)
2.1
%
Year Ended December 31, 2022
Net income (loss) reported under GAAP
$
32.8
$
4.3
$
28.5
13.4
%
(Gains) losses associated with plant
shutdowns, asset impairments and restructurings
0.6
0.1
0.5
(Gains) losses from sale of assets and
other
3.9
4.7
(0.8
)
Net periodic benefit cost for the frozen
defined benefit pension plan in process of termination
14.4
3.1
11.3
Net income (loss) from ongoing
operations
$
51.7
$
12.2
$
39.5
23.8
%
(f)
Net debt is calculated as follows:
(In millions)
December 31,
December 31,
2023
2022
ABL revolving facility (matures on June
30, 2026) (i)
$
126.3
$
—
Long-term debt
20.0
137.0
Total debt
146.3
137.0
Less: Cash and cash equivalents
9.7
19.2
Less: Restricted cash
3.8
—
Net debt
$
132.8
$
117.8
Receipts that have not yet been applied to
the ABL Facility are classified as restricted cash in the
accompanying condensed consolidated balance sheets. 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)
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.
(h)
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 Prior Credit
Agreement, which is used to compute certain borrowing ratios and to
compute non-GAAP net income (loss) from ongoing operations.
(i)
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 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 December 31, 2023, the Company was in compliance with
all debt covenants.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240315041644/en/
Tredegar Corporation Neill Bellamy, 804-330-1211
neill.bellamy@tredegar.com
Grafico Azioni Tredegar (NYSE:TG)
Storico
Da Dic 2024 a Gen 2025
Grafico Azioni Tredegar (NYSE:TG)
Storico
Da Gen 2024 a Gen 2025
