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 September 30, 1994
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 November 2, 1994: 8,992,258
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
TREDEGAR INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
September 30 December 31
ASSETS 1994 1993
Cash and cash equivalents $ 10,449 $ -
Accounts and notes receivable 76,617 70,173
Inventories 29,561 34,211
Deferred income taxes 11,016 11,555
Prepaid expenses and other 1,274 881
Total current assets 128,917 116,820
Property, plant and equipment 319,607 323,933
Less accumulated depreciation
and amortization 192,919 188,531
Net property, plant and equipment 126,688 135,402
Other assets and deferred charges 27,773 24,456
Goodwill and other intangibles 30,884 45,729
Cash and cash equivalents designated
for tender offer 22,500 -
Net assets of discontinued operations - 30,976
Total assets $ 336,762 $ 353,383
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 24,194 $ 19,376
Accrued expenses 42,467 35,380
Income taxes payable 6,657 -
Total current liabilities 73,318 54,756
Long-term debt 35,500 97,000
Deferred income taxes 14,326 23,108
Other noncurrent liabilities 15,339 9,431
Total liabilities 138,483 184,295
Shareholders' equity:
Common stock, no par value 165,817 170,140
Foreign currency translation
adjustment 236 (283)
Retained earnings (deficit) 32,226 (769)
Total shareholders' equity 198,279 169,088
Total liabilities and
shareholders' equity $ 336,762 $ 353,383
See accompanying notes to financial statements.
TREDEGAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per-share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
Net sales $132,191 $113,922 $376,098 $333,162
Other (expense) income, net (199) 39 (270) (423)
131,992 113,961 375,828 332,739
Cost of goods sold 110,463 95,827 315,397 281,309
Selling, general & administrative
expenses 11,783 11,659 35,337 36,365
Research & development expenses 2,178 2,476 5,944 6,651
Interest expense 939 1,227 3,282 3,782
Unusual items 6,973 - 16,494 (2,263)
132,336 111,189 376,454 325,844
Income (loss) from continuing
operations before income taxes (344) 2,772 (626) 6,895
Income taxes (66) 1,627 1,671 3,366
Income (loss) from continuing
operations (278) 1,145 (2,297) 3,529
Discontinued operations:
Income from energy segment operations1,013 1,162 4,220 5,157
Gain on disposition of interest in
The Elk Horn Coal Corporation
(net of income tax of $16,224) 25,740 - 25,740 -
Gain on sale of remaining oil & gas
properties (net of income tax of
$2,121) - - 3,938 -
Deferred tax benefit on the difference
between the financial reporting and
income tax basis of The Elk Horn
Coal Corporation - - 3,320 -
Net income before extraordinary item
and cumulative effect of changes
in accounting principles 26,475 2,307 34,921 8,686
Extraordinary item - prepayment
premium on extinguishment of
debt (net of income tax benefits
of $685) - - - (1,115)
Cumulative effect of changes in
accounting for postretirement benefits
other than pensions (net of tax) and
income taxes - - - 150
Net income $ 26,475 $ 2,307 $ 34,921 $ 7,721
Earnings (loss) per share:
Continuing operations $ (.02)$ .10 $ (.21) $ .32
Discontinued operations 2.52 .11 3.47 .48
Before extraordinary item and
cumulative effect of changes
in accounting principles 2.50 .21 3.26 .80
Extraordinary item - - - (.10)
Cumulative effect of changes
in accounting principles - - - .01
Net income $ 2.50 $ .21 $ 3.26 $ .71
See accompanying notes to financial statements.
TREDEGAR INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months
Ended September 30
1994 1993
Cash flows from operating activities:
Continuing operations:
Income (loss) from continuing operations $(2,297) $ 3,529
Adjustments for noncash items:
Depreciation 17,600 17,225
Amortization of intangibles 1,250 1,992
Write-off of intangibles 14,393 -
Deferred income taxes (8,243) 1,093
Accrued pension income and postretirement benefits(52) (245)
Gain on sale of investments - (2,263)
Changes in assets and liabilities, net of
effects from acquisitions:
Accounts and notes receivable (6,444) (8,396)
Inventories 4,650 (3,640)
Prepaid expenses and other (393) 463
Accounts payable 4,818 4,226
Accrued expenses and income taxes payable 6,568 (2,380)
Other, net (1,215) (1,432)
Net cash provided by continuing operating
activities 30,635 10,172
Net cash used for extraordinary item - (1,115)
Net cash provided by discontinued operating
activities 5,665 5,047
Net cash provided by operating activities 36,300 14,104
Cash flows from investing activities:
Continuing operations:
Capital expenditures (11,731) (10,744)
Acquisitions (net of $398 cash acquired) - (5,099)
Investments (1,400) (400)
Proceeds from sales of investments - 5,263
Property disposals 2,263 2,047
Other, net (24) (264)
Net cash used in investing activities
of continuing operations (10,892) (9,197)
Discontinued operations:
Capital expenditures (16) (338)
Property disposals 7,924 1,708
Disposal of interest in The Elk Horn Coal
Corporation 67,485 -
Net cash provided by investing activities of
discontinued operations 75,393 1,370
Net cash provided by (used in) investing
activities 64,501 (7,827)
Cash flows from financing activities:
Dividends paid (1,926) (2,616)
Net decrease in borrowings (61,500) (3,500)
Repurchase of Tredegar common stock (4,438) -
Other, net 12 (161)
Net cash used in financing activities (67,852) (6,277)
Increase (decrease) in cash and cash equivalents 32,949 -
Cash and cash equivalents at beginning of period - -
Cash and cash equivalents at end of period $32,949 $ -
Supplemental cash flow information:
Interest payments (net of amount capitalized) $ 3,051 $ 6,250
Income tax payments, net $17,149 $ 5,806
See accompanying notes to financial statements.
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 September 30, 1994, and
the consolidated results of their operations and their cash
flows for the nine months ended September 30, 1994 and 1993.
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 the 1993 Annual Report. The results
of operations for the nine months ended September 30, 1994 are
not necessarily indicative of the results to be expected for
the full year.
2. Certain prior-period amounts have been reclassified to conform
to the current presentation.
3. The components of inventories are as follows:
(In thousands)
September 30 December 31
1994 1993
Finished goods $ 5,086 $ 5,735
Work-in-process 3,573 5,298
Raw materials 13,690 15,497
Stores, supplies and other 7,212 7,681
Total $ 29,561 $ 34,211
4. On August 19, 1994, Tredegar used a portion of the proceeds
received from the divestiture of The Elk Horn Coal Corporation
("Elk Horn") (see Note 8) to prepay its $35 million variable-
rate term loan due June 7, 1997. On August 18 and 19, 1994,
Tredegar established two new revolving credit facilities that
permit it to borrow up to $235 million (no amounts borrowed
at September 30, 1994) with $200 million maturing on August
18, 1998 and $35 million maturing on August 19, 1999. In
connection with these new agreements, Tredegar terminated its
$180 million facility that was due June 16, 1996 (no amounts
borrowed). The new agreements provide for interest to be
charged at a base rate (generally the London Interbank Offered
Rate) plus a spread that is dependent on Tredegar's quarterly
debt-to-total-capitalization ratio. Facility fees are also
charged on the $235 million commitment amount. The weighted
average spreads and facility fees charged under the new
agreements at various debt-to-total-capitalization levels are
as follows:
(Basis Points)
Spread Facility Fee
Debt to Total
Capitalization Ratio
Less than or equal to 35% 31.1 19.7
Greater than 35% and less
than or equal to 50% 39.6 23.6
Greater than 50% 49.3 26.5
Tredegar's remaining debt outstanding of $35.5 million at
September 30, 1994, consists primarily of a $35 million, 7.2%
note due June 16, 2003 (average remaining maturity of 5.75
years at September 30, 1994).
5. At its meeting on August 29, 1994, Tredegar's Board of
Directors authorized a "Dutch Auction" tender offer for up to
one million shares of the company's common stock at a price
range of $17 to $19 per share. The offer expired on October
6, 1994. More than one million shares were tendered and
Tredegar purchased 1,211,857 shares of stock, the maximum
permitted without requiring an extension of the offer. The
purchase price was $18.25 per share. As a result of the
oversubscription, the number of shares actually purchased from
each tendering shareholder (other than odd lot shareholders)
was prorated using a factor of 98.057%. The total cost to
purchase the tendered shares was approximately $22.5 million.
Between October 28 and November 2, 1994, Tredegar purchased
388,174 additional shares of its common stock in the open
market and in privately negotiated transactions for
approximately $7.1 million. These purchases of Tredegar's
common stock, together with the tender offer, totalled
approximately $29.6 million and were funded with a portion of
the proceeds received from the divestiture of Elk Horn (see
Note 8).
As of November 2, 1994, Tredegar had 8,992,258 shares of
common stock outstanding. Under a standing authorization from
its board of directors, Tredegar may purchase an additional
1.4 million shares in the open market or in privately
negotiated transactions at prices management deems
appropriate.
During 1994 and prior to the tender offer, Tredegar purchased
309,600 shares of its common stock in the open market for $4.4
million. In the first quarter of 1994, Tredegar granted stock
options to purchase 381,000 shares of Tredegar common stock
at prices not less than the fair market value on the date of
grant ($15.125) and for a term not to exceed 10 years.
6. Unusual items in 1994 include the write-off of certain Molded
Products goodwill ($4.9 million) and costs related to the
closing of a Molded Products plant ($2.1 million) in the third
quarter. The goodwill write-off is attributable to continued
disappointing performance in certain lines of business. The
plant closing relates to a planned transfer of business to a
new Molded Products facility in Graham, North Carolina, as
well as other Molded Products facilities in an effort to
reduce costs while improving service to customers in the
eastern U.S. In addition to the above, unusual items for the
nine months in 1994 include the write-off in the first quarter
of goodwill and other intangibles in APPX Software ($9.5
million). This write-off is the result of management's
determination that income generated by the acquired products,
which historically had been marketed to small and medium-sized
companies, will not be sufficient to recover the unamortized
costs associated with the intangible software assets purchased
by Tredegar in December 1992. The goodwill and other
intangibles written off in APPX Software and Molded Products
were being amortized over a remaining period of 5 to 8 years
at an annual rate of approximately $1.9 million after income
taxes. Unusual items in 1993 include gains on the sale of
Emisphere Technologies, Inc. common stock ($2.3 million).
7. Net income and earnings per share from continuing operations,
adjusted for special items affecting the comparability of
operating results, are presented below:
(In thousands, except per-share amounts)
Third Quarter Nine Months
Ended September 30 Ended September 30
1994 1993 1994 1993
Net income (loss) from
continuing operations $ (278) $1,145 $(2,297) $3,529
After-tax effects of
special items:
Write-off of APPX
Software intangibles - - 7,642 -
Write-off of certain
Molded Products goodwill3,109 - 3,109 -
Charges associated with
the shutdown of a Molded
Products plant 1,300 - 1,300 -
Impact on deferred taxes
of 1% increase in federal
income tax rate - 348 - 348
Gain on sale of Emisphere - - - (1,410)
Income from continuing
operations as adjusted
for special items $4,131 $1,493 $9,754 $2,467
Earnings (loss) per share
from continuing operations:
As reported $ (.02) $ .10 $ (.21) $ .32
As adjusted for
special items .39 .13 .91 .22
8. Tredegar is reporting its Energy segment as discontinued
operations. On August 16, 1994, Elk Horn, Tredegar's 97%-
owned coal subsidiary, was acquired by Pen Holdings, Inc., for
an aggregate consideration of approximately $71 million ($67.5
million after minority interests and transaction costs).
Tredegar realized an after-tax gain on the transaction of
$25.7 million. In the first quarter of 1994, Tredegar
recognized an income tax benefit of $3.3 million on the
difference between the financial reporting and income tax
basis of Elk Horn. In February 1994, Tredegar sold its
remaining oil and gas properties for approximately $8 million
and recognized an after-tax gain of $3.9 million. The
divestiture of Elk Horn completes Tredegar's exit from its
energy businesses.
In accordance with applicable accounting pronouncements, a
$6.2 million charge ($4 million after deferred income tax
benefits) was recognized as a reduction to the gain on the
disposal of Elk Horn for the estimated present value of the
unfunded obligation under the Coal Industry Retiree Health
Benefit Act of 1992 (the "Act") assumed by Tredegar in the
divestiture transaction. Under the Act, assigned operators
(former employers) are responsible for a portion of the
funding of medical and death benefits of certain retired
miners and dependents of the United Mine Workers of America.
The $6.2 million unfunded obligation is reflected in
Tredegar's consolidated balance sheet in other noncurrent
liabilities. The interest cost at an annual rate of 7% on the
present value of the unfunded obligation since the Elk Horn
divestiture is reflected in other (expense) income, net.
Results of Energy segment operations up to the dates of
disposal are summarized below:
(In thousands)
Third Quarter Nine Months
Ended September 30 Ended September 30
1994 1993 1994 1993
Revenues $3,714 $8,281 $19,868 $24,212
Costs and expenses:
Operating costs and
expenses 2,346 6,167 13,229 17,186
Interest allocated 68 155 337 489
Unusual items - - - (1,424)
Total 2,414 6,322 13,566 16,251
Income before income taxes1,300 1,959 6,302 7,961
Income taxes 287 797 2,082 2,804
Income from Energy segment
operations $1,013 $1,162 $ 4,220 $ 5,157
Unusual items for 1993 include gains totalling $1.4 million
($938,000 after income taxes) for the sale of certain oil and
gas properties. Also included in the third quarter and nine
months results is a charge of $177,000 related to the
adjustment of deferred income taxes for a 1% increase in the
federal income tax rate.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
On August 16, 1994, Tredegar completed the divestiture of The
Elk Horn Coal Corporation ("Elk Horn") for $71 million and
recognized an after-tax gain of $25.7 million. In February 1994,
Tredegar sold its remaining oil and gas properties for
approximately $8 million and recognized an after-tax gain of $3.9
million. See "Liquidity and Capital Resources" for discussion of
the cash flow effects of these transactions. The Elk Horn
divestiture completes Tredegar's exit from its energy businesses.
The Energy segment is being reported as discontinued operations.
Results of Operations
Third Quarter 1994 Compared with Third Quarter 1993
The loss from continuing operations for the third quarter of
1994 was $278,000, compared with income of $1.1 million in 1993.
Special items recognized in the third quarter of 1994 affecting the
comparability of results from continuing operations include after-
tax charges of $3.1 million for the write-off of certain Molded
Products goodwill and $1.3 million for the shutdown of the Molded
Products plant in Alsip, Illinois. The goodwill write-off resulted
from continued disappointing results in certain Molded Products
lines of business. The plant closing relates to a planned transfer
of business to a new Molded Products facility in Graham, North
Carolina, as well as other Molded Products facilities in an effort
to reduce costs while improving service to customers in the eastern
U.S. Income from continuing operations for the third quarter of
1993 includes a special charge of $348,000 related to the
adjustment of deferred income tax balances for the one percent
increase in the federal income tax rate.
Third quarter net income from continuing operations excluding
special items was $4.1 million, an increase of 177% over $1.4
million in 1993. The improvement in income from continuing
operations is due primarily to improved operating results in Film
Products and Aluminum Extrusions.
Third quarter net sales from continuing operations increased
16% in 1994 due primarily to higher volume in Film Products and
Aluminum Extrusions and the inclusion of Polestar Plastics, Inc.
("Polestar") for the entire third quarter in 1994. Tredegar
acquired the assets of Polestar effective August 1, 1993.
The gross profit margin from continuing operations increased
to 16.4% in 1994 from 15.9% in 1993. The improvement in gross
profit margin was due to higher volumes in Film Products and
Aluminum Extrusions.
Selling, general and administrative expenses increased only
slightly compared with 1993.
Research and development expenses decreased 12% due to lower
spending in Film Products and APPX Software ("APPX Software"),
partially offset by higher spending in Molecumetics.
Interest expense for continuing operations decreased 23% as a
result of significantly lower average debt levels, partially offset
by higher average interest rates. The average interest rate on
debt outstanding during the third quarter of 1994 was 6.6%,
compared with 5.3% in 1993. Interest expense of $68,000 and
$155,000 was allocated to discontinued operations in the third
quarter of 1994 and 1993, respectively, based on relative capital
employed.
The effective tax rate for continuing operations, excluding
special items, decreased to 37.7% in the third quarter of 1994 from
46.1% in the third quarter of 1993. The higher rate in 1993 was
due to the combined effects of non-deductible goodwill amortization
and relatively low income. In addition, a significant portion of
goodwill amortization was eliminated with the write-off of APPX
Software intangibles in the first quarter of 1994.
Nine Months 1994 Compared with Nine Months 1993
The loss from continuing operations for the first nine months
of 1994 was $2.3 million, compared with income of $3.5 million in
1993. Special items recognized in the first nine months of 1994
affecting the comparability of results from continuing operations
include: (i) after-tax charges of $3.1 million for the write-off
of certain Molded Products goodwill and $1.3 million for the
planned shutdown of a Molded Products plant in the third quarter,
and (ii) an after-tax charge of $7.6 million for the write-off of
goodwill and other intangibles in APPX Software in the first
quarter. The goodwill and other intangibles written off in APPX
Software and Molded Products were being amortized over a remaining
period of 5 to 8 years at an annual rate of approximately $1.9
million after income taxes.
The write-off in APPX Software is the result of management's
determination that income generated by the acquired products, which
historically had been marketed to small and medium-sized companies,
will not be sufficient to recover the unamortized costs associated
with the intangible software assets purchased by Tredegar in
December 1992.
Special items recognized in the first nine months of 1993
affecting the comparability of results from continuing operations
include an after-tax gain of $1.4 million on the sale of Emisphere
common stock and a charge of $348,000 related to the adjustment of
deferred income tax balances for the one percent increase in the
federal income tax rate.
Net income from continuing operations excluding special items
for the first nine months was $9.8 million in 1994, up 295% from
$2.5 million in 1993. The increase is due primarily to higher
volumes in Film Products and Aluminum Extrusions.
Net sales from continuing operations for the first nine months
increased 13% in 1994 due primarily to higher Film Products and
Aluminum Extrusions volume, and the inclusion of Polestar Plastics
in 1994.
The gross profit margin from continuing operations increased
to 16.1% in 1994 compared with 15.6% in 1993 as a result of the
higher volume.
Selling, general and administrative expenses decreased 3% in
1994 due to cost-reduction efforts.
Research and development expenses decreased 11% due to lower
spending in Film Products, partially offset by higher spending in
Molecumetics and higher software development costs at APPX
Software.
Interest expense for continuing operations decreased 13% due
to lower average debt levels, partially offset by higher average
interest rates. The average interest rate on debt outstanding
during the nine months was 6% in 1994 compared with 5.6% in 1993.
Interest expense of $337,000 and $489,000 was allocated to
discontinued operations in 1994 and 1993, respectively, based on
average capital employed.
The effective tax rate for continuing operations, excluding
special items, decreased to 38.5% for the first nine months of 1994
from 46.7% for the first nine months of 1993. The higher rate in
1993 was due to the combined effects of non-deductible goodwill
amortization and relatively low income.
Segment Results
The following tables present Tredegar's net sales and
operating profit by industry segment for the third quarter and nine
months ended September 30, 1994 and 1993.
Net Sales by Industry Segment(a)
(In thousands)
(Unaudited)
Third Quarter Nine Months
Ended September 30 Ended September 30
1994 1993 1994 1993
Plastics $ 72,075 $ 64,164 $208,176 $189,801
Metal Products 59,278 48,925 166,166 141,176
Technology 838 833 1,756 2,185
Total $132,191 $113,922 $376,098 $333,162
Operating Profit by Industry Segment(a)
(In thousands)
(Unaudited)
Third Quarter Nine Months
Ended September 30 Ended September 30
1994 1993 1994 1993
Plastics:
Ongoing operations $ 8,570 $ 5,751 $ 25,336 $14,792
Unusual items (b) (6,973) - (6,973) -
1,597 5,751 18,363 14,792
Metal Products 3,100 2,450 7,907 6,773
Technology:
Ongoing operations (1,779) (2,380) (6,604) (6,979)
Unusual items (c) - - (9,521) 2,263
Total Technology (1,779) (2,380) (16,125) (4,716)
Total $ 2,918 $ 5,821 $ 10,145 $16,849
Notes:
(a) Amounts previously reported for 1993 have been reclassified to conform to
the 1994 presentation.
(b) Plastics segment unusual items consist of the write-off of certain Molded
Products goodwill ($4.9 million) and costs related to the closing of a
Molded Products plant ($2.1 million).
(c) Technology segment unusual items consist of the write-off in the first
quarter of goodwill and intangibles in APPX Software in 1994 and gains on
the sale of Emisphere common stock in 1993.
Tredegar Film Products third quarter sales improved over 1993
due to higher volume and higher average prices. For the nine
months, sales increased over 1993 due primarily to significantly
higher volume. Operating profit also improved due to cost
reduction efforts and higher volume. Average raw material costs
were higher in the third quarter, but were virtually flat for the
nine month period.
Tredegar Molded Products third quarter sales increased over
1993 due to the inclusion of Polestar and higher volume in the
packaging and industrial segments. For the nine months, sales
improvement was due primarily to the inclusion of Polestar. Third
quarter results include a pre-tax charge of $4.9 million for the
write-off of goodwill associated with continued disappointing
results in certain lines of Molded Products' business. Third
quarter results also include a pre-tax charge of $2.1 million
related to the planned shutdown of a Molded Products plant in
Alsip, Illinois. The plant closing relates to a planned transfer
of business to a new Molded Products facility in Graham, North
Carolina, as well as other Molded Products facilities in an effort
to reduce costs while improving service to customers in the eastern
U.S. Excluding special items, operating results were favorable
compared with 1993 due to the inclusion of Polestar.
Quarterly and year-to-date results in Fiberlux (extrusions for
vinyl windows and doors) improved over last year due to improved
building and construction markets.
Metal Products sales and operating profit increased for the
third quarter and nine months of 1994 due to higher Aluminum
Extrusions volume and higher sales prices. Volume increased as a
result of better economic conditions in construction and automotive
markets. Prices, as well as raw material costs, have steadily
increased during 1994. Results in materials handling declined for
the quarter and year-to-date periods.
Tredegar's Technology segment (formerly the Other segment)
generated operating losses of $1.8 million in the third quarter of
1994. Operating results in the Technology segment relate primarily
to APPX Software and Molecumetics, Tredegar's synthetic chemistry
research facility. Excluding the pre-tax charge of $9.5 million
for the first quarter write-off of goodwill and other intangibles
in APPX Software, operating losses for the nine months totalled
$6.6 million. For the third quarter and nine months in 1993, the
Technology segment had operating losses of $2.4 million and $4.7
million, respectively. Excluding the pre-tax gains on the sale of
Emisphere common stock ($2.3 million), operating losses for the
nine months in 1993 were $7 million.
Liquidity and Capital Resources
Tredegar's total assets at September 30, 1994, were $336.8
million, a decrease of $16.6 million from December 31, 1993. The
decrease is primarily attributable to the write-offs of goodwill
and other intangibles in APPX Software and Molded Products and the
use of proceeds from divestitures to repay debt and purchase
Tredegar common stock (see Notes 4 and 5 of Notes to the
Consolidated Interim Financial Statements). In addition,
depreciation exceeded capital expenditures by approximately $5.9
million for continuing operations. The ratio of current assets to
current liabilities was 1.8 to 1 at September 30, 1994. Accounts
receivable have increased as sales volumes continue to improve.
Inventories declined as a result of the shutdown and sale of the
Flemington, New Jersey, Film Products plant and temporary declines
in inventory levels at Aluminum Extrusions to satisfy higher sales
activity. Higher accounts payable reflect higher aluminum ingot
costs not fully reflected in inventories as a result of the LIFO
pricing method. Income taxes payable increased due to the timing
of estimated tax payments.
Other noncurrent liabilities increased as a result of a $6.2
million charge ($4 million after deferred income tax benefits)
recognized for the present value of the unfunded obligation under
the Coal Industry Retiree Health Benefit Act of 1992 (the "Act")
assumed by Tredegar in the divestiture of Elk Horn. This charge
was reflected as a reduction to the gain on the disposal. The net
deferred income tax liability declined as a result of higher
depreciation for financial reporting purposes than tax purposes,
the reversal of deferred tax liabilities associated with the write-
off of intangibles and the deferred tax benefit related to the
unfunded obligation under the Act.
For the first nine months of 1994, the net increase in cash
and cash equivalents was $32.9 million. The major sources of cash
during the first nine months for 1994 were the sale of Elk Horn
($67.5 million after minority interests and transaction costs),
continuing operating activities in excess of capital expenditures
and dividends ($17 million), discontinued operating activities in
excess of capital expenditures ($5.6 million, including $8 million
from the liquidation of coal trading working capital and income
taxes paid on divestiture gains), proceeds from the sale of
Tredegar's remaining oil and gas properties ($8 million) and
property disposals ($2.2 million). Property disposals relate
primarily to facilities previously shut down. For the first nine
months, cash was used primarily to repay debt ($61.5 million) and
purchase Tredegar common stock ($4.4 million). On various dates
from October 1 to November 2, 1994, Tredegar used $29.6 million to
purchase additional shares of its common stock (see Note 5 of Notes
to the Consolidated Interim Financial Statements).
Debt was $35.5 million at September 30, 1994, a decrease of
$61.5 million since December 31, 1993. Cash and cash equivalents
was $32.9 million at September 30, 1994, of which $29.6 million was
used on various dates from October 1 to November 2, 1994, to
purchase Tredegar common stock. Debt as a percentage of
capitalization was 15% and 36% at September 30, 1994 and December
31, 1993, respectively. The average interest rate on debt
outstanding at September 30, 1994, was 7.2%, compared with 5.3% at
the end of last year. The higher rate reflects proportionally
higher fixed-rate debt.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No.
4.1 Revolving Credit Facility Agreement dated as of
August 18, 1994 among Tredegar Industries, Inc.,
the banks named therein, Chemical Bank as
Administrative Agent and NationsBank of Virginia,
N.A., as Co-Agent.
4.2 Credit Agreement dated as of August 19, 1994 among
Tredegar Industries, Inc., the banks named therein,
and LTCB Trust Company, as Agent.
11 Statement re computation of earnings per share
27 Financial Data Schedule
(b) Reports on Form 8-K.
On August 31, 1994, Tredegar filed a current report on
Form 8-K for the disposition of its interest in The Elk
Horn Coal Corporation ("Elk Horn") and the announced
self-tender offer to purchase one million shares of its
common stock. Included in the Form 8-K was pro forma
financial information reflecting the Elk Horn
disposition.
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: November 11, 1994 /s/ N. A. Scher
Norman A. Scher
Executive Vice President,
Treasurer and Chief Financial
Officer (Principal Financial
Officer)
Date: November 11, 1994 /s/ D. Andrew Edwards
D. Andrew Edwards
Corporate Controller
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit No. Description
4.1 Revolving Credit Facility Agreement dated
as of August 18, 1994 among Tredegar
Industries, Inc., the banks named
therein, Chemical Bank as Administrative
Agent and NationsBank of Virginia, N.A.,
as Co-Agent.
4.2 Credit Agreement dated as of August 19,
1994 among Tredegar Industries, Inc., the
banks named therein, and LTCB Trust
Company, as Agent.
11 Statement re computation of earnings per
share
27 Financial Data Schedule