RICHMOND, Va., May 3 /PRNewswire-FirstCall/ -- Tredegar Corporation (NYSE: TG) reported first-quarter net income of $10.3 million (26 cents per share) compared to $8.2 million (21 cents per share) in 2006. Earnings from manufacturing operations in the first quarter were $10.8 million (27 cents per share) versus $9.5 million (24 cents per share) last year. First-quarter sales increased to $281.6 million from $268.0 million in 2006. A summary of results for the first quarter is shown below:
* The after-tax effects of unusual items, plant shutdowns, asset impairments and restructurings, and gains from sale of assets and other items have been presented separately and removed from net income and earnings per share as reported under GAAP to determine Tredegar's presentation of income and earnings per share from manufacturing operations. Income and earnings per share from manufacturing operations are key financial and analytical measures used by Tredegar to gauge the operating performance of its manufacturing businesses. They are not intended to represent the stand-alone results for Tredegar's manufacturing businesses under GAAP and should not be considered as an alternative to net income or earnings per share as defined by GAAP. They exclude items that we believe do not relate to Tredegar's ongoing manufacturing operations.
John D. Gottwald, Tredegar's president and chief executive officer, said: "Driven by strong performance in our films business, lower pension and interest costs and a lower effective income tax rate, earnings per share from manufacturing operations increased by 13% in the first quarter of 2007 compared with the first quarter of last year. In the last twelve months, excluding the effects of resin lag, quarterly operating profit in films has had significant ups and downs. Future performance in this business is likely to exhibit similar fluctuations, with growth primarily dependent on further increases in sales of high-value surface protection, elastic and apertured materials and new products developed using related core technologies."
Mr. Gottwald continued: "In aluminum, operating profit decreased in the first quarter of 2007 compared with 2006 mainly due to lower volume, especially extrusions used in hurricane protection products and residential construction. Overall backlog is down significantly. We're very focused on reducing our operating costs in light of the downturn in these markets, while trying to maintain sufficient flexibility to participate in cyclical upswings. The bright spot continues to be healthy demand for extrusions used in commercial construction applications."
MANUFACTURING OPERATIONS
Film Products
First-quarter net sales in Film Products were $136.1 million, up 7.8% from $126.3 million in the first quarter of 2006, while operating profit from ongoing operations increased to $16.8 million in the first quarter of 2007 from $15.6 million in 2006. Volume was 65.3 million pounds in the first quarter of 2007 compared with 64.5 million pounds in the first quarter of last year.
Net sales and volume were up in the first quarter of 2007 compared with the first quarter of 2006 primarily due to increased sales of high-value surface protection films and elastic materials, partially offset by lower sales of certain commodity barrier films that were dropped in conjunction with the shutdown in the second quarter of 2006 of the plant in LaGrange, Georgia. Volume was up 2.6 million pounds or 4.1% from the depressed level existing in the fourth quarter of 2006, which the company believes was adversely affected by customer inventory adjustments.
Profits increased in the first quarter of 2007 compared with the first quarter of 2006 due primarily to higher volume noted above and appreciation of the U.S. Dollar equivalent value of functional currencies for operations outside of the U.S. The company also estimates that the lag in the pass-through of lower average resin costs had a positive impact on operating profit of $500,000 in the first quarter of 2007. During the first quarter of last year, the company estimates that profits were positively affected by $2.0 million from the lag in the pass-through of lower average resin costs. Film Products has index-based pass-through raw material cost agreements for the majority of its business. However, under certain agreements, changes in resin prices are not passed through for an average period of 90 days.
Capital expenditures were $5.0 million in the first quarter of 2007 and are projected to be approximately $30 million for the year. Depreciation expense was $8.2 million in the first quarter of 2007 and is projected to be $33 million for the year.
Aluminum Extrusions
First-quarter net sales in Aluminum Extrusions were $139.4 million, up 3.1% from $135.2 million in the first quarter of 2006 primarily due to higher selling prices substantially offset by lower volume. Operating profit from ongoing operations decreased to $3.5 million in the first quarter of 2007, down 28.6% from $4.9 million in the first quarter of 2006. The decrease in operating profit was mainly due to lower volume partially offset by higher selling prices. Volume decreased to 57.7 million pounds in the first quarter of 2007, down 9.4% from 63.7 million pounds in the first quarter of 2006. Lower shipments were primarily due to declines in demand for extrusions used in hurricane protection products and residential construction, partially offset by continued growth for extrusions used in commercial construction. Overall backlog at the end of the quarter was 14.3 million pounds, down from 19.7 million pounds at March 31, 2006, and the lowest quarterly level since the December 2003 level of 13.1 million pounds.
Capital expenditures in the first quarter of 2007 were $2.2 million and are projected to be approximately $11 million for the year. Depreciation expense was $3 million in the first quarter of 2007 and is expected to be $12.7 million for the year.
OTHER ITEMS
Net pension income was $596,000 in the first quarter of 2007, a favorable change of $1.3 million (2 cents per share after taxes) from the net pension expense of $675,000 recognized in the first quarter of 2006. Most of this favorable change relates to a pension plan that is reflected in "Corporate expenses, net" in the operating profit by segment table. The company contributed $1.1 million to its pension plans in 2006 and expects to contribute the same amount in 2007.
Interest expense was $824,000 in the first quarter of 2007, a decline of $608,000 (1 cent per share after taxes) versus the first quarter of last year due to lower average debt outstanding.
The effective tax rate used to compute income from manufacturing operations was 35.2% in the first quarter of 2007 compared with 37.9% in the first quarter of 2006. The decrease in the effective tax rate for manufacturing operations, which had a favorable impact of approximately 1 cent per share, was mainly due to differences in income taxes accrued on operations outside of the U.S.
During the first quarter of 2007, the company adopted new accounting standards for maintenance costs and uncertain income tax positions, neither of which had a material impact on Tredegar's results of operations or financial condition.
Results for the first quarters of 2007 and 2006 include net after-tax charges of $539,000 (1 cent per share) and $1.3 million (3 cents per share), respectively, for plant shutdowns, asset impairments and restructurings. Details regarding these items are provided in the financial tables included with this press release.
CAPITAL STRUCTURE
Net debt (debt net of cash) was $3.7 million at March 31, 2007, compared with $21.6 million at December 31, 2006, which is significantly less than the last twelve months adjusted EBITDA from manufacturing operations of $111.5 million. See notes to financial statements and tables for reconciliations to comparable GAAP measures.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
Some of the information contained in this press release may constitute "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. When we use the words "believe," "hope," "expect," "are likely," "project" and similar expressions, we do so to identify forward-looking statements. Such statements are based on our then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause actual results to differ from expectations include, without limitation: Film Products is highly dependent on sales to one customer -- The Procter & Gamble Company; growth of Film Products depends on its ability to develop and deliver new products at competitive prices; sales volume and profitability of Aluminum Extrusions is cyclical and highly dependent on economic conditions of end-use markets in the United States and Canada, particularly in the construction, distribution and transportation industries and are also subject to seasonal slowdowns during the winter months; our substantial international operations subject us to risks of doing business in foreign countries, which could adversely affect our business, financial condition and results of operations; our future performance is influenced by costs incurred by our operating companies including, for example, the cost of energy and raw materials; and the 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 "Risk Factors" in Part I, Item 1A of our 2006 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q for this period that will be filed with the SEC.
Tredegar does not undertake to update any forward-looking statement made in this press release to reflect any change in management's expectations or any change in conditions, assumptions or circumstances on which such statements are based.
To the extent that the financial information portion of this release contains non-GAAP financial measures, it also presents both the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the difference between any such non-GAAP measures and such comparable GAAP financial measures. Accompanying the reconciliation is management's statement concerning the reasons why management believes that presentation of non-GAAP measures provides useful information to investors concerning Tredegar's financial condition and results of operations.
Based in Richmond, Va., Tredegar Corporation is a global manufacturer of plastic films and aluminum extrusions.
Tredegar Corporation | |
Condensed Consolidated Statements of Income | |
(In Thousands, Except Per-Share Data) | |
(Unaudited) | |
| | | | | | |
| | | Three Months Ended |
| | March 31 |
| | | 2007 | | 2006 | |
| | | | | | |
| Sales | | $ | 281,594 | | $ | 267,964 | |
| Other income (expense), net (a)(b) | | | 294 | | | 12 | |
| | | | 281,888 | | | 267,976 | |
| | | | | | | | |
| Cost of goods sold | | | 238,388 | | | 226,638 | |
| Freight | | | 6,147 | | | 6,474 | |
| Selling, R&D and general expenses | | | 19,722 | | | 18,101 | |
| Amortization of intangibles | | | 37 | | | 37 | |
| Interest expense | | | 824 | | | 1,432 | |
| Asset impairments and costs associated with exit and disposal activities (a) | | | 733 | | | 1,692 | |
| | | | 265,851 | | | 254,374 | |
| | | | | | | | |
| Income before income taxes | | | 16,037 | | | 13,602 | |
| Income taxes | | | 5,704 | | | 5,387 | |
| | | | | | | | |
| Net income (a)(b)(c) | | $ | 10,333 | | $ | 8,215 | |
| | | | | | | | |
| | | | | | | | |
| Earnings per share: | | | | | | | |
| Basic | | $ | .26 | | $ | .21 | |
| Diluted | | | .26 | | | .21 | |
| | | | | | | | |
Shares used to compute earnings per share: | | | | | | | |
| Basic | | | 39,272 | | | 38,602 | |
| Diluted | | | 39,487 | | | 38,664 | |
