FINANCIAL REVIEW TABLE OF CONTENTS
SIX-YEAR SUMMARY 20
SEGMENT TABLES 22
SHAREHOLDER VALUE 25
RESULTS OF CONTINUING OPERATIONS 26
FINANCIAL CONDITION 28
BUSINESS SEGMENT REVIEW 29
SELECTED QUARTERLY FINANCIAL DATA 33
NOTES TO FINANCIAL TABLES 34
INDEPENDENT ACCOUNTANTS' & MANAGEMENT'S REPORTS 35
CONSOLIDATED STATEMENTS OF INCOME 36
CONSOLIDATED BALANCE SHEETS 37
CONSOLIDATED STATEMENTS OF CASH FLOWS 38
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY 39
NOTES TO FINANCIAL STATEMENTS 40
SHAREHOLDER INFORMATION 52
SIX-YEAR SUMMARY
Tredegar Industries, Inc., and Subsidiaries
Years Ended December 31 1995 1994 1993 1992 1991 1990
(In thousands, except per-share data)
RESULTS OF OPERATIONS (a)(b):
Net sales $589,454 $502,208 $449,208 $445,229 $439,186 $505,884
Other income (expense), net (669) (296) (387) 226 745 861
588,785 501,912 448,821 445,455 439,931 506,745
Cost of goods sold 490,510 419,823 379,286 370,652 373,429 450,843
Selling, general & administrative expenses 48,229 47,978 47,973 48,130 49,764 54,457
Research and development expenses 8,763 8,275 9,141 5,026 4,541 4,850
Interest expense (c) 3,039 4,008 5,044 5,615 7,489 7,101
Unusual items (78)(d) 16,494(e) 452(f) 90(g) 721(h) 32,915(i)
550,463 496,578 441,896 429,513 435,944 550,166
Income (loss) from continuing operations before income taxes 38,322 5,334 6,925 15,942 3,987 (43,421)
Income taxes 14,269 3,917 3,202 6,425 1,468 (14,734)
Income (loss) from continuing operations (a) 24,053 1,417 3,723 9,517 2,519 (28,687)
Income from discontinued operations (j) - 37,218 6,784 5,795 3,104 4,001
Net income (loss) before extraordinary item and cumulative
effect of accounting changes 24,053 38,635 10,507 15,312 5,623 (24,686)
Extraordinary item - prepayment premium on extinguishment
of debt (net of tax) - - (1,115) - - -
Cumulative effect of accounting changes - - 150 - - -
Net income (loss) $ 24,053 $ 38,635 $ 9,542 $ 15,312 $ 5,623 $(24,686)
SHARE DATA (AFTER 3-FOR-2 STOCK SPLIT):
Earnings (loss) per common and dilutive common equivalent share:
Continuing operations (a) $ 1.80 $ .09 $ .23 $ .58 $ .15 $ (1.69)
Discontinued operations (j) - 2.40 .42 .36 .19 .24
Before extraordinary item and cumulative effect of
accounting changes 1.80 2.49 .65 .94 .34 (1.45)
Net income (loss) 1.80 2.49 .59 .94 .34 (1.45)
Equity per share 14.00 12.74 10.35 9.94 9.19 9.01
Cash dividends declared per share .18 .16 .16 .16 .16 .16
Weighted average shares outstanding 13,370 15,524 16,343 16,341 16,341 16,944
Shares outstanding at end of period 12,176 13,488 16,343 16,341 16,341 16,341
Closing market price per share:
High 23.17 12.42 12.00 12.42 7.17 10.50
Low 11.58 9.33 8.33 6.67 4.25 4.67
End of year 21.50 11.58 10.00 10.33 6.67 4.92
Total return to shareholders (k) 87.2% 17.4% (1.7)% 57.4% 38.8% (52.0)%
FINANCIAL POSITION AND OTHER DATA:
Total assets 314,052 318,345 353,383 354,910 335,415 339,114
Working capital excluding cash and cash equivalents 54,504 53,087 62,064 56,365 60,341 70,890
Current ratio 1.8:1 1.9:1 2.1:1 2.0:1 2.1:1 2.2:1
Cash and cash equivalents 2,145 9,036 - - 500 2,290
Net assets of discontinued operations - - 30,976 29,804 24,356 22,846
Debt 35,000 38,000 97,000 101,500 100,000 100,000
Shareholders' equity 170,521 171,878 169,088 162,397 150,223 147,261
Ending capital employed for continuing operations (l) 203,376 200,842 235,112 234,093 225,367 222,125
Average capital employed for continuing operations (l) 202,109 217,977 234,603 229,730 223,746 230,136
EBITDA from continuing operations
(excluding unusual items)(m) 64,785 50,137 38,244 44,524 37,399 21,000
Unleveraged after-tax earnings from continuing operations
(excluding unusual items)(a)(n) 25,745 15,565 7,394 13,500 7,609 139
Return on average capital employed for continuing operations
(excluding unusual items)(a)(o) 12.7% 7.1% 3.2% 5.9% 3.4% 0.1%
Net debt (debt less cash and cash equivalents) as a % of
net capitalization 16.2% 14.4% 36.5% 38.5% 39.8% 39.9%
Depreciation (continuing operations) 23,256 23,491 23,117 21,963 24,089 23,641
Amortization of intangibles (continuing operations) 579 1,354 2,706 914 1,113 764
Capital expenditures (continuing operations) 25,138 15,579 16,480 20,705 21,360 34,799
Acquisitions and other investments 5,541 1,400 5,699 17,622 25,654 -
Gross margin as a % of net sales (continuing operations) 16.8% 16.4% 15.6% 16.8% 15.0% 10.9%
Effective income tax rate (continuing operations,
excluding unusual items)(a) 37.0% 38.3% 41.5% 37.5% 37.0% 21.1%
Refer to Notes to Financial Tables on page 34.
SEGMENT TABLES
Tredegar Industries, Inc., and Subsidiaries
NET SALES
Segment 1995 1994 1993 1992 1991 1990
(In thousands)
Plastics (p):
Film Products and Fiberlux $249,099 $200,151 $187,291 $193,772 $193,753 $176,705
Molded Products (b) 84,911 76,579 68,233 80,834 87,860 107,995
334,010 276,730 255,524 274,606 281,613 284,700
Metal Products:
Aluminum Extrusions 221,657 193,870 166,465 150,524 143,398 193,347
Brudi and plant shut down
and business held
for sale in 1990 (b) 31,834 28,891 24,225 20,099 14,175 27,837
253,491 222,761 190,690 170,623 157,573 221,184
Technology (q) 1,953 2,717 2,994 - - -
Total (r) $589,454 $502,208 $449,208 $445,229 $439,186 $505,884
OPERATING PROFIT
Segment 1995 1994 1993 1992 1991 1990
(In thousands)
Plastics:
Film Products and Fiberlux $36,471 $35,676 $22,877 $26,573 $32,945 $20,311
Molded Products (b) 2,718 (2,484) (228) 1,176 (9,307) (8,908)
Unusual items 1,750(d) (6,973)(e) (1,815)(f) (1,182)(g) (721)(h) (2,831)(i)
40,939 26,219 20,834 26,567 22,917 8,572
Metal Products:
Aluminum Extrusions 16,777 11,311 7,964 4,180 (4,247) (1,713)
Brudi and plant shut down
and business held
for sale in 1990 (b) 222 (356) 177 513 1,870 (3,304)
Unusual items - - - - - (30,084)(i)
16,999 10,955 8,141 4,693 (2,377) (35,101)
Technology (q):
Ongoing operations (6,030) (8,888) (9,704) (1,865) - -
Unusual items (1,672)(d) (9,521)(e) 2,263(f) 1,092(g) - -
(7,702) (18,409) (7,441) (773) - -
Total operating profit (loss) 50,236 18,765 21,534 30,487 20,540 (26,529)
Interest expense 3,039 4,008 5,044 5,615 7,489 7,101
Corporate expenses, net 8,875 9,423 9,565(f) 8,930 9,064 9,791
Income (loss) from continuing
operations before income taxes 38,322 5,334 6,925 15,942 3,987 (43,421)
Income taxes 14,269 3,917 3,202 6,425 1,468 (14,734)
Income (loss) from continuing
operations (a) 24,053 1,417 3,723 9,517 2,519 (28,687)
Income from discontinued
operations (j) - 37,218 6,784 5,795 3,104 4,001
Net income (loss) before
extraordinary item and
cumulative effect of
accounting changes $24,053 $38,635 $10,507 $15,312 $ 5,623 $(24,686)
Refer to Notes to Financial Tables on page 34.
IDENTIFIABLE ASSETS
Segment 1995 1994 1993 1992 1991 1990
(In thousands)
Plastics:
Film Products and Fiberlux $124,426 $115,310 $116,583 $119,915 $110,630 $ 98,716
Molded Products (b) 44,173 48,932 54,487 50,151 52,132 77,566
168,599 164,242 171,070 170,066 162,762 176,282
Metal Products:
Aluminum Extrusions 80,955 89,406 89,498 93,365 95,000 116,391
Brudi and business held
for sale in 1990 (b) 28,510 30,538 30,956 28,744 26,416 5,238
109,465 119,944 120,454 122,109 121,416 121,629
Technology (q) 7,460 7,316 15,247 16,856 3,334 750
Identifiable assets 285,524 291,502 306,771 309,031 287,512 298,661
Nonoperating assets held for sale (s) 6,057 5,018 3,605 4,330 13,600 8,670
General corporate 22,471 21,825 12,031 11,745 9,947 8,937
Net assets of discontinued
energy operations (j) - - 30,976 29,804 24,356 22,846
Total $314,052 $318,345 $353,383 $354,910 $335,415 $339,114
Depreciation and Amortization
Segment 1995 1994 1993 1992 1991 1990
(In thousands)
Plastics:
Film Products and Fiberlux $10,343 $ 9,741 $10,026 $ 8,580 $ 7,847 $ 5,644
Molded Products (b) 5,055 5,956 5,289 5,416 7,835 7,958
15,398 15,697 15,315 13,996 15,682 13,602
Metal Products:
Aluminum Extrusions 5,966 5,948 6,240 7,093 8,033 9,153
Brudi and plant shut down
and business held
for sale in 1990 (b) 1,201 1,337 1,272 1,085 798 1,083
7,167 7,285 7,512 8,178 8,831 10,236
Technology (q) 789 1,293 2,311 - - -
Subtotal 23,354 24,275 25,138 22,174 24,513 23,838
General corporate 481 570 685 703 689 567
Total $23,835 $24,845 $25,823 $22,877 $25,202 $24,405
Refer to Notes to Financial Tables on page 34.
CAPITAL EXPENDITURES
Segment 1995 1994 1993 1992 1991 1990
(In thousands)
Plastics:
Film Products and Fiberlux $11,199 $ 7,126 $ 6,575 $13,214 $10,055 $15,254
Molded Products (b) 6,553 2,988 3,235 2,441 2,897 8,891
17,752 10,114 9,810 15,655 12,952 24,145
Metal Products:
Aluminum Extrusions 5,454 4,391 1,870 2,487 7,594 9,302
Brudi and plant shut down
and business held for
sale in 1990 (b) 807 606 516 833 391 207
6,261 4,997 2,386 3,320 7,985 9,509
Technology (q) 894 277 1,844 1,414 - -
Subtotal 24,907 15,388 14,040 20,389 20,937 33,654
General corporate 231 191 2,440 316 423 1,145
Total capital expenditures 25,138 15,579 16,480 20,705 21,360 34,799
Acquisitions and other
investments 5,541 1,400 5,699 17,622 25,654 -
Total capital expenditures,
acquisitions and
investments $30,679 $16,979 $22,179 $38,327 $47,014 $34,799
Refer to Notes to Financial Tables on page 34.
[insert graphs here]
NET SALES
BY SEGMENT
$ millions
1995 1994 1993 1992 1991 1990
589.5 502.2 449.2 445.2 439.2 505.9
OPERATING PROFIT
BY SEGMENT
$ millions
1995 1994 1993 1992 1991 1990
50.2 18.8 21.5 30.5 20.5 (26.5)
IDENTIFIABLE ASSETS
BY SEGMENT
$ millions
1995 1994 1993 1992 1991 1990
285.5 291.5 306.8 309 287.5 298.7
DEPRECIATION & AMORTIZATION
BY SEGMENT
$ millions
1995 1994 1993 1992 1991 1990
23.4 24.3 25.1 22.2 24.5 23.8
CAPITAL EXPENDITURES
BY SEGMENT
$ millions
1995 1994 1993 1992 1991 1990
24.9 15.4 14 20.4 20.9 33.7
SHAREHOLDER VALUE
Tredegar's primary objective is to enhance shareholder value. The ultimate
measure of value creation is total return on common stock. During 1995, the
total return on Tredegar's common stock was 87.2%. This compares favorably to
the total return for the S&P SmallCap 600(Registration Mark) Index in which
Tredegar is included.
Key operational value drivers affecting total return include sales
growth rate, operating profit margin, income tax rate, and fixed and working
capital investment. Tredegar attributes its favorable total return in 1995
primarily to an increase in profits and cash flow in Aluminum Extrusions and
Film Products, improved results in Molded Products, Brudi and APPX Software, and
accretion in earnings per share due to stock repurchases.
Tredegar's value creation efforts also link pay to performance,
primarily through the issuance of bonuses and stock options. The charts on this
page depict the relationship between CEO pay, incentives and selected
performance measures. Additional information on compensation paid to Mr.
Gottwald is included in Tredegar's 1996 proxy statement.
In addition to cash compensation, Mr. Gottwald was granted the
following stock options:
Number of Per-Share
Year Options Exercise Price
1989 47,850 $11.14
1992 45,000 8.09
1994 33,750 10.09
22,500 16.00
1995 22,500 12.50
The per-share exercise price of the stock options was equal to or greater than
the market price of Tredegar common stock on the date of grant.
TOTAL CASH COMPENSATION
JOHN D. GOTTWALD
PRESIDENT AND CEO
$ thousands
1995 1994 1993 1992 1991 1990 1989
458 423 365 384 324 283 385
RETURN ON AVERAGE
CAPITAL EMPLOYED
Continuing Operations
Excluding unusual items
as a percentage
1995 1994 1993 1992 1991 1990
12.7 7.1 3.2 5.9 3.4 .1
CUMULATIVE TOTAL RETURN
Based on investment of $100
Beginning December 31, 1990
dollars
1995 1994 1993 1992 1991 1990
Tredegar 475 254 216 219 139 100
S&P 500 215 157 155 140 130 100
S&P Manufacturing
(Diversified Ind.) Index 235 167 161 133 123 100
S&P SmallCap 600 264 203 213 180 148 100
Tredegar is included in the
S&P SmallCap 600
RESULTS OF CONTINUING OPERATIONS
1995 SUMMARY
The following analysis refers to Tredegar's continuing operations.
On September 28, 1995, Tredegar's Board of Directors declared a
three-for-two stock split payable on January 1, 1996, to shareholders of record
on December 8, 1995. Accordingly, all historical references to the number of
shares, per-share amounts, stock option data and market prices of Tredegar's
common stock have been restated to reflect the split. As a result of the stock
split, Tredegar's regular cash dividend of six cents per share will be paid on
50% more shares than previous dividends, thereby increasing the cash payout to
shareholders by 50%.
Net income from continuing operations in 1995 was $24.1 million or
$1.80 per share, compared with $1.4 million or 9 cents per share in 1994.
Results for 1995 and 1994 include several unusual items that affect
comparability between periods as well as operating results of businesses held
for sale.
Excluding the after-tax effects of unusual items, which are described
in the next section of this report, net income from continuing operations was
$24.1 million or $1.80 per share, up significantly from $13.5 million or 87
cents per share in 1994. The increase was due primarily to higher profits in
Aluminum Extrusions and Film Products, improved results in Molded Products,
Brudi and APPX Software, and accretion in earnings per share due to stock
repurchases.
During July and August of 1995, Tredegar announced that it was
exploring the sale of Molded Products and Brudi. These divestitures could be
completed in the first half of 1996. Tredegar anticipates investing related
proceeds on a short-term basis until other opportunities, in existing businesses
or elsewhere, are identified.
The net sales, ongoing operating profit, identifiable assets,
depreciation and amortization and capital expenditures of Molded Products and
Brudi have been disclosed separately in the segment tables on pages 22-24
(Molded Products is part of the Plastics segment and Brudi is part of the Metal
Products segment). Additional information on the combined results of operations
and net assets of these businesses is provided in Note 2 on page 42.
Excluding the after-tax results of Molded Products and Brudi and the
after-tax effects of unusual items, net income from continuing operations during
1995, 1994 and 1993 was $23 million ($1.72 per share), $16.2 million ($1.05 per
share) and $5.4 million (33 cents per share), respectively.
UNUSUAL ITEMS
Unusual income (net) affecting continuing operations in 1995 totaled $78,000
($41,000 after income taxes) and included:
(bullet) A third-quarter gain of $728,000 ($451,000 after taxes)
on the sale of Regal Cinema shares
(bullet) A first-quarter charge of $2.4 million ($1.6 million after
taxes) related to the restructuring of APPX Software
(bullet) A first-quarter recovery of $1.8 million ($1.1 million
after taxes) in connection with a Film Products product
liability lawsuit
Unusual charges affecting continuing operations in 1994 totaled $16.5 million
($12.1 million after taxes) and included:
(bullet) A third-quarter charge of $4.9 million ($3.1 million after
taxes) for the write-off of certain Molded Products goodwill
(bullet) A third-quarter charge of $2.1 million ($1.3 million
after taxes) for the shutdown of a Molded Products
plant in Alsip, Illinois
(bullet) A first-quarter charge of $9.5 million ($7.6 million after
taxes) for the write-off of goodwill and other intangibles
in APPX Software
The goodwill write-off in Molded Products in 1994 resulted from continued
disappointing results in certain lines of business. The plant closing relates to
the 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 United States. During
1995, Molded Products' operating performance improved significantly due
primarily to substantially higher sales volume and related margins (for further
discussion, see the business segment review beginning on page 29).
The write-off in APPX Software in 1994 is the result of management's
determination that income generated by the acquired products would not be
sufficient to recover the unamortized costs associated with the intangible
software assets purchased by Tredegar in December 1992. In addition, in the
first quarter of 1995, APPX Software was restructured in an effort to eliminate
its operating losses, which were $478,000 in the first quarter of 1995 and $4.7
million in 1994. While new product development activities have been curtailed,
APPX Software continues to sell, maintain and support existing products. For the
post-restructuring period April 1 to December 31, 1995, APPX Software had an
operating profit of $382,000.
1995 VERSUS 1994
REVENUES
Net sales increased 17.4% in 1995 due primarily to higher selling prices in Film
Products and Aluminum Extrusions, reflecting higher raw material costs. Higher
sales volume in Molded Products, Film Products and Brudi also contributed to the
increase. Aluminum Extrusions sales volume declined 3.1% during 1995. For
further discussion, see the business segment review on pages 29-32.
OPERATING COSTS AND EXPENSES
The gross profit margin increased to 16.8% in 1995 from 16.4% in 1994 due to
higher volume in Molded Products, ongoing cost and quality improvements in
Aluminum Extrusions and the restructuring of APPX Software, partially offset by
startup costs at Molded Products' new facility in Graham, North Carolina, and
lower margins in Film Products. Lower margins in Film Products were due to
higher resin prices, startup costs associated with nonwoven film laminate
backsheet production and costs incurred (which were anticipated) to upgrade the
Argentine business acquired in March 1995.
Selling, general and administrative expenses increased by less than 1%
in 1995 due primarily to the acquisition in Argentina and a $700,000 charge
associated with stock appreciation rights, partially offset by reductions at
APPX Software and Molded Products, lower bad debt expenses and commissions at
Aluminum Extrusions, lower corporate services costs and lower pension expense
for salaried employees. As a percentage of sales, selling, general and
administrative expenses declined to 8.2% in 1995, compared with 9.6% a year ago.
Research and development expenses increased 5.9% compared with 1994 due
to higher spending at Film Products and Molecumetics, partially offset by the
curtailment of product development spending at APPX Software.
Unusual income (net) totaling $78,000 in 1995 is described on page 26.
INTEREST EXPENSE
Interest expense for continuing operations decreased 24.2% due to lower average
debt levels resulting from the paydown of variable-rate debt in 1994 with
proceeds from the divestiture of the Energy segment. The average interest rate
on debt outstanding was 7.2% in 1995 (primarily fixed-rate debt) and 6.2% in
1994 (a mix of fixed- and floating-rate debt). Average consolidated debt
outstanding during 1995 declined to $38.3 million, down from $61.6 million in
1994. Interest expense of $337,000 was allocated to discontinued energy
operations in 1994.
INCOME TAXES
The effective tax rate for continuing operations (excluding
unusual items) decreased to 37% in 1995, compared with 38.3% for 1994. The
decrease was due mainly to a lower effective state income tax rate. See Note
16 on page 48 for additional tax rate information.
1994 VERSUS 1993
REVENUES
Net sales from continuing operations increased 11.8% in 1994 due primarily to
higher sales in Aluminum Extrusions and Film Products, and the inclusion of
Polestar's full-year results. Polestar, acquired in July 1993, is an injection
molder of medical and electronic components. Sales for Brudi and Fiberlux also
increased. For further discussion, see the business segment review on pages
29-32.
OPERATING COSTS AND EXPENSES
The gross profit margin in 1994 was 16.4%, up from 15.6%
in 1993. Higher volume and improved capacity utilization in
Aluminum Extrusions and Film Products, and the inclusion
of Polestar's full-year results, were the primary drivers of
this improvement.
Selling, general and administrative expenses were virtually unchanged
due to ongoing cost reduction efforts, despite normal inflation of 3%-4%.
Research and development expenses decreased 9.5% due to lower spending
in Film Products, partially offset by higher spending in Molecumetics.
Unusual charges totaling $16.5 million in 1994 are described on
page 26.
INTEREST EXPENSE
Interest expense has been allocated between continuing operations and
discontinued operations based on relative capital employed (see Note 19 on page
51). Interest expense for continuing operations decreased 20.6% due to lower
debt levels, partially offset by higher interest rates. The weighted average
interest rate on consolidated debt outstanding during 1994 was 6.2% compared
with 5.6% in 1993. Average consolidated debt outstanding during 1994 declined
35.7% to $61.6 million, down from $95.8 million in 1993. Divestiture proceeds
and cash generated by operating activities were used to achieve this significant
debt reduction. Interest expense of $337,000 and $653,000 was allocated to
discontinued operations in 1994 and 1993, respectively.
INCOME TAXES
The effective tax rate for continuing operations (excluding unusual items)
decreased to 38.3% in 1994 from 41.5% in 1993. The higher rate in 1993 was due
primarily to the combined effects of non-deductible goodwill amortization and
relatively low income. See Note 16 on page 48 for additional tax rate
information.
FINANCIAL CONDITION
ASSETS
Tredegar's total assets at December 31, 1995, were $314.1 million, a decrease of
$4.3 million from December 31, 1994. The decrease is due primarily to a decrease
in cash and cash equivalents (see cash flow discussion below) and improved
accounts receivable and inventory turnover, partially offset by the acquisition
of a films business in Argentina and the deferral of costs for razing the films
plant in Fremont, California, in anticipation of the sale of the land. Capital
expenditures of $25.1 million exceeded depreciation by $1.9 million.
LIABILITIES
Total liabilities decreased by $2.9 million to $143.5 million while the ratio of
current assets to current liabilities was 1.8 to 1 at December 31, 1995,
compared with 1.9 to 1 at December 31, 1994. Debt decreased from $38 million at
December 31, 1994, to $35 million at December 31, 1995, and consisted of a $35
million, 7.2% note maturing in June 2003 (annual principal payments of $5
million will begin in 1997). On September 7, 1995, Tredegar replaced its two
revolving credit facilities dated August 18 and 19, 1994, with one new,
five-year facility that permits borrowings of up to $275 million (no amounts
borrowed at December 31, 1995 - see Note 10 on page 44 for further information
on debt agreements). Net debt (debt less cash and cash equivalents) as a
percentage of net capitalization was 16.2% at December 31, 1995, compared with
14.4% at December 31, 1994.
SHAREHOLDERS' EQUITY
On May 15, 1995, Tredegar completed a "Dutch Auction" tender offer, repurchasing
964,196 shares (post-split basis) of its common stock for approximately $15
million, or $15.53 per share. During the fourth quarter of 1995, Tredegar
purchased an additional 533,100 shares in open market transactions at prices
ranging from $18.67 to $20 per share. During 1995, in aggregate, Tredegar
purchased 1,497,296 shares of its common stock for $25.5 million, or $17.06 per
share. During 1994, in aggregate, Tredegar purchased 2,865,359 shares for $34.1
million, or $11.90 per share. Since becoming an independent company in 1989,
Tredegar has purchased a total of 6.1 million shares, or 34% of its originally
outstanding common stock, for $74.2 million. Under a standing authorization from
its board of directors, Tredegar may purchase an additional one million shares
in the open market or in privately negotiated transactions at prices management
deems appropriate.
At December 31, 1995, Tredegar had 12,176,295 shares of common stock
outstanding and a total market capitalization of $261.8 million, compared with
13,488,387 shares outstanding at December 31, 1994, and a total market
capitalization of $156.2 million.
CASH FLOWS
Net cash provided by continuing operating activities in excess of capital
expenditures and dividends increased to $22.2 million in 1995 from $21 million
in 1994 due primarily to improved operating results, partially offset by higher
capital expenditures (see business segment review on pages 29-32 for further
information). This excess cash combined with the $9 million cash and cash
equivalents balance at December 31, 1994, and cash from property disposals and
other sources ($4.9 million), was used to fund a films acquisition in Argentina
($3.6 million), repay amounts borrowed to fund the Dutch Auction ($15 million),
fund additional share repurchases ($10.5 million), fund technology-related
investments in which Tredegar's ownership is less than 20% ($1.9 million) and
repay other borrowings ($3 million), leaving $2.1 million of cash and cash
equivalents at December 31, 1995.
Overall cash and cash equivalents increased $9 million in 1994 over
1993. The major sources of cash during 1994 were the divestiture of The Elk Horn
Coal Corporation ($67.5 million after minority interest and transaction costs);
cash from continuing operating activities in excess of capital expenditures and
dividends ($21 million) (see business segment review on pages 29-32 for further
information); cash from discontinued operating activities in excess of capital
expenditures ($3.5 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
proceeds from other property disposals ($3.5 million) related primarily to
facilities previously shut down. Cash was used primarily to repay debt ($59
million), to repurchase shares of Tredegar common stock ($34.1 million), and
for technology-related investments in which Tredegar's ownership is less than
20% ($1.4 million).
CASH FLOWS AND CAPITAL EXPENDITURES
FROM CONTINUING OPERATIONS
$ millions
1995 1994 1993 1992 1991 1990
Gross Cash Flow 47.9 38.3 30.1 32.9 28.2 20.1
Capital Expenditures 25.1 15.6 16.5 20.7 21.4 34.8
*Net income from continuing operations excluding unusual
items plus depreciation and amortization.
In 1993, overall net cash provided by consolidated operating activities
exceeded net cash used in consolidated investing activities by $7.9 million.
The excess cash was sufficient to pay dividends of $3.3 million and to repay
$4.5 million of debt.
Normal operating cash requirements over the next 3-5 years are expected
to be met from continuing operations. Tredegar expects that proceeds from the
possible divestiture of Molded Products and Brudi will be invested on a
short-term basis until other opportunities, in existing businesses or
elsewhere, are identified. The amount and timing of any additions to capital
will depend on Tredegar's specific cash requirements and the cost of such
capital.
OTHER
Tredegar has two stock option plans whereby stock options may be granted to
purchase a specified number of shares of Tredegar common stock at a price not
less than the fair market value on the date of grant and for a term not to
exceed 10 years. In addition to the stock options, recipients may also be
granted stock appreciation rights ("SARs") and restricted stock. Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," was issued in October 1995 and allows companies to either (i) use
existing methods to account for stock-based compensation arrangements with
additional pro forma disclosures of the fair value-based method or (ii) adopt
the statement's fair value-based method. Tredegar will adopt the new standard in
1996 and has elected to use existing methods with pro forma disclosures of the
fair value-based method.
BUSINESS SEGMENT REVIEW
PLASTICS SEGMENT
The Plastics segment is composed of the Film Products division, Tredegar Molded
Products Company and Fiberlux, Inc. Film Products and Molded Products
manufacture a wide range of products, including specialty films,
injection-molded products and custom injection molds. Broad application for
these products is found in films for packaging, medical, industrial,
agricultural and disposable personal hygiene products, including diapers, and in
molded products for industrial, household, personal care, medical and electronic
products. Fiberlux produces vinyl extrusions for windows and patio doors.
Products are produced at various locations throughout the United States and are
sold both directly and through distributors. Tredegar also has films plants
located in the Netherlands, Brazil and Argentina, where it produces films
primarily for the European and Latin American markets.
During July 1995, Tredegar announced that it was exploring the sale of
Molded Products. See Note 2 on page 42 for further discussion.
Film Products is one of the largest U.S. suppliers of embossed and
permeable films for disposable personal products. In each of the last three
years, this class of products accounted for more than 30% of the consolidated
revenues of Tredegar.
Film Products supplies embossed films and nonwoven film laminates
(cloth-like) for use as backsheet in such disposable products as baby diapers
and adult incontinent products, feminine hygiene products and hospital
underpads. Film Products' primary customer for embossed films and nonwoven film
laminates for backsheet is the Procter & Gamble Company ("P&G"), the leading
global disposable diaper manufacturer.
Film Products also supplies permeable films to P&G for use as liners in
feminine hygiene products, adult incontinent products and hospital underpads. In
addition, P&G purchases molded plastic products from Molded Products. P&G and
Tredegar have had a successful, long-term relationship based on cooperation,
product innovation and continuous process improvement. The loss or significant
reduction of business associated with P&G would have a material adverse effect
on Tredegar's business.
Pages 2-3 and 8-11 provide further information on Plastics segment
products and markets.
PLASTIC SALES
$ millions
1995 1994 1993 1992 1991 1990
Films Products and Fiberlux 249.1 200.2 187.3 193.8 193.8 176.7
Molded Products 84.9 76.6 68.2 80.8 87.9 108
PLASTICS OPERATING PROFIT
Excluding Unusual Items
$ millions
1995 1994 1993 1992 1991 1990
Films Products and Fiberlux 36.5 35.7 22.9 26.6 32.9 20.3
Molded Products 2.7 (2.5) (.2) 1.2 (9.3) (8.9)
SALES
Tredegar Film Products sales improved in 1995 due primarily to higher selling
prices, which were driven by higher raw material costs. Sales also increased
during 1995 as a result of the acquisition in March 1995 of a films business in
Argentina, higher permeable films volume in Europe, higher films volume in
Brazil and higher domestic diaper backsheet film volume. Film Products sales
improved in 1994 due to higher domestic backsheet and permeable films volume,
partially offset by the exit in early 1994 from the conventional films business.
Higher volumes in industrial films and in foreign operations also contributed to
the improvement in sales in 1994. While selling prices began increasing at
year-end due to higher raw material costs, average prices for 1994 were
relatively flat.
Tredegar Molded Products sales increased by 10.9% in 1995 due to higher
volume from new product promotions by its major customers and higher sales of
existing products. Molded Products sales increased in 1994 due to the inclusion
of Polestar for 12 months in 1994 versus 5 months in 1993. Packaging, industrial
and tooling sales were virtually unchanged from 1993 levels.
Fiberlux sales declined slightly in 1995 due to the divestiture in
October 1995 of its fabrication business and the delay in the introduction of a
new patio door. Fiberlux sales increased in 1994 due to improved building and
construction markets and new product introductions.
OPERATING PROFIT
Excluding unusual items (see page 26), Plastics segment operating profit
increased 18.1% over 1994 due primarily to higher volume and related margins in
Molded Products, higher permeable films volume in Europe, higher films volume in
South America, and higher domestic backsheet films volume, partially offset by
startup costs at Molded Products' new facility in Graham, North Carolina, lower
films margins due to higher resin prices, startup costs associated with nonwoven
film laminate (cloth-like) backsheet production and costs incurred (which were
anticipated) to upgrade the Argentine films operation acquired in March 1995.
Fiberlux profits declined due to lower volume and margins.
Excluding unusual items (see page 26), Plastics segment operating pro
fit increased 46.5% in 1994 over 1993 due primarily to higher diaper backsheet
and permeable films volume, resulting in greater capacity utilization and
higher margins. Industrial films, Polestar and Fiberlux also contributed to the
improvement in operating results. Cost reduction programs were another important
performance driver.
IDENTIFIABLE ASSETS
Identifiable assets in Film Products and Fiberlux increased to $124.4 million in
1995 from $115.3 million in 1994 due primarily to the acquisition of the
Argentine films business, expansion of permeable film capacity in Europe and
Brazil, and capital additions in the fourth quarter for new nonwoven film
laminate capacity. Identifiable assets in Molded Products declined by $4.7
million in 1995 compared with 1994 due to improved accounts receivable and
inventory turnover, partially offset by higher net property, plant and equipment
resulting from the new Graham, North Carolina, facility.
Plastics segment assets decreased $6.8 million in 1994 due primarily to
depreciation in excess of capital expenditures, the third-quarter write-off of
certain Molded Products goodwill, and the writedown of the Molded Products plant
in Alsip to estimated net realizable value, partially offset by higher accounts
receivable and inventories supporting higher sales.
PLASTICS SEGMENT
IDENTIFIABLE ASSETS
$ millions
1995 1994 1993 1992 1991 1990
Film Products and Fiberlux 124.4 115.3 116.6 119.9 110.6 98.7
Molded Products 44.2 48.9 54.5 50.2 52.1 77.6
(Insert Graph Here)
PLASTICS SEGMENT
DEPRECIATION & AMORTIZATION
AND CAPITAL EXPENDITURES
$ millions
1995 1994 1993 1992 1991 1990
Depreciation and Amortization
Film Products and Fiberlux 10.3 9.7 10.0 8.6 7.8 5.6
Molded Products 5.1 5.9 5.3 5.4 7.8 8.0
Capital Expenditures
Film Products and Fiberlux 11.2 7.1 6.6 13.2 10.1 15.3
Molded Products 6.6 3.0 3.2 2.4 2.9 8.9
(Insert Graph Here)
DISPOSABLE FILMS VOLUME
DOMESTIC VS. INTERNATIONAL
Percentage of total
pounds shipped
1995 1994 1993 1992 1991 1990
United States & Canada 54.9 60.5 64.5 69.0 73.9 79.6
International 45.1 39.5 35.5 31.0 26.1 20.4
(Insert Graph Here)
DEPRECIATION, AMORTIZATION AND CAPITAL EXPENDITURES
Depreciation and amortization for Film Products and Fiberlux increased to $10.3
million in 1995 from $9.7 million in 1994 due to higher depreciation of blown
film machinery and equipment, the acquisition of the Argentine films business
and expansion of permeable film capacity in Europe. Higher capital expenditures
in Film Products and Fiberlux in 1995 reflect the expansion of permeable film
capacity in Europe and Brazil, and capital additions in the fourth quarter for
new nonwoven film laminate capacity. Depreciation and amortization in Molded
Products decreased by $901,000 in 1995 to $5.1 million due to full depreciation
of certain machinery and equipment and lower combined depreciation from the
gradual shutdown of the Alsip, Illinois, facility and the startup of the new
Graham, North Carolina, facility. Capital expenditures in Molded Products
increased by $3.6 million in 1995 over 1994 due to the new Graham facility.
Depreciation and amortization increased 2.5% in 1994 as higher
depreciation at the films plant in Tacoma, Washington, and a full year of
depreciation at Polestar were partially offset by the effects of plant closings.
Plastics segment capital spending increased 3.1% in 1994 due to the upgrade of
two extrusion lines in Tacoma, capacity expansions at Polestar, and machine
upgrading and replacement at other Molded Products facilities.
METAL PRODUCTS SEGMENT
The Metal Products segment is comprised of the Aluminum Extrusions business and
Brudi, Inc. Aluminum Extrusions produces soft alloy aluminum extrusions for sale
directly to fabricators and distributors that serve primarily the building and
construction industry, as well as transportation and consumer durables markets.
Brudi, acquired by Tredegar in April 1991, produces steel attachments and
uprights for sale primarily to dealers and original equipment manufacturers of
forklift trucks. During August 1995, Tredegar announced that it is exploring the
sale of Brudi. See Note 2 on page 42 for further discussion.
Pages 2-3 and 12-15 provide further information on Metal Products
segment products and markets.
METAL PRODUCT
SALES
$ millions
1995 1994 1993 1992 1991 1990
Aluminum Extrusions 221.7 193.9 166.5 150.5 143.4 193.3
Brudi and plant shut
down and business held
for sale in 1990 31.8 28.9 24.2 20.1 14.2 27.8
(Insert Graph Here)
METAL PRODUCTS
OPERATING PROFIT
Excluding Unusual Items
$ millions
1995 1994 1993 1992 1991 1990
Aluminum Extrusions 16.8 11.3 8.0 4.2 (4.2) (1.7)
Brudi and plant shut
down and business held
for sale in 1990 .2 (.4) .2 .5 1.9 (3.3)
METAL PRODUCTS SEGMENT
IDENTIFIABLE ASSETS
$ millions
1995 1994 1993 1992 1991 1990
Aluminum Extrusions 81.0 89.4 89.5 93.4 95.0 116.4
Brudi and business held
for sale in 1990 28.5 30.5 31.0 28.7 26.4 5.2
SALES
Metal Products sales increased 13.8% during 1995 due primarily to higher average
prices in Aluminum Extrusions, reflecting higher average aluminum costs. Volume
declined in Aluminum Extrusions during 1995 by approximately 3.1%. Brudi sales
increased by 10.2% in 1995 due primarily to higher forklift attachment sales in
the U.S.
Metal Products sales increased 16.8% in 1994 over 1993 due to higher
volume and higher sales prices in Aluminum Extrusions. Improved economic
conditions in construction and automotive markets enabled Tredegar's extrusions
plants to operate at near-capacity levels. Selling prices and raw material costs
increased significantly during 1994. Increased levels of secondary operations
(cutting, drilling, etc.) also contributed to the sales improvement. Brudi's
sales also increased over 1993, reflecting an increase in overall forklift truck
sales.
OPERATING PROFIT
Metal Products operating profit increased by 55.2% in 1995 due primarily to
ongoing cost and quality improvements in Aluminum Extrusions. Economic
conditions in key construction markets continue to put pressure on selling
prices and margins. Brudi operating results improved from higher U.S. forklift
attachment sales, a reduction in inventory obsolescence charges and a lower
provision for doubtful accounts.
Driven by an 8.8% increase in Aluminum Extrusions volume, Metal Products
operating profit increased 34.6% in 1994. Brudi's operating profit declined
due to lower margins and an increase in its provision for doubtful accounts,
partially offset by lower selling, general and administrative expenses
relative to sales.
IDENTIFIABLE ASSETS
Identifiable assets in Metal Products declined to $109.5 million from $120
million due primarily to tightened credit policies, resulting in a significant
reduction in average days sales outstanding.
Identifiable assets in Metal Products decreased in 1994 due to
depreciation in excess of capital spending and better management of inventories,
partially offset by higher receivables to support higher sales levels.
DEPRECIATION, AMORTIZATION AND CAPITAL EXPENDITURES
Depreciation and amortization in 1995 for Aluminum Extrusions and Brudi
remained consistent with 1994 levels. Higher capital expenditures in Aluminum
Extrusions in 1995 (up $1.1 million or 24.2%) were due primarily to the
initial phase of a modernization program to upgrade certain areas of the
Newnan, Georgia, facility and the purchase of 13 trailers for the delivery
of product. Future capital expenditures for the Newnan facility modernization
program are expected to be approximately $4.2 million, most of which will
be spent in 1996. This program is expected to improve productivity at the plant
as well as reduce scrap and sales returns.
Capital expenditures increased to $5 million in 1994 from $2.4 million
in 1993, and consisted of ongoing fixed capital programs that are necessary
to support current operating levels.
METAL PRODUCTS SEGMENT
DEPRECIATION & AMORTIZATION
AND CAPITAL EXPENDITURES
$ millions
1995 1994 1993 1992 1991 1990
Depreciation and Amortization
Aluminum Extrusions 6.0 6.0 6.2 7.1 8.0 9.2
Brudi and plant shut
down and business held for
sale in 1990 1.2 1.3 1.3 1.1 0.8 1.1
Capital Expenditures
Aluminum Extrusions 5.5 4.4 1.9 2.5 7.6 9.3
Brudi and plant shut
down and business held for
sale in 1990 0.8 0.6 0.5 0.8 0.4 0.2
(Insert graph here)
COMMERCIAL CONSTRUCTION
$ billions
1996F 1995 1994 1993 1992 1991 1990
61.8 58.9 52.7 46.9 44.5 54.1 71.7
Source: Cahners Building and Construction Market Forecast
(Insert graph here)
HOUSING STARTS
Millions of Units
1996F 1995 1994 1993 1992 1991 1990
1.36 1.35 1.45 1.29 1.20 1.01 1.19
Source: Blue Chip Economic Indicators
(Insert graph here)
AUTOMOBILE
AND LIGHT TRUCK SALES
Millions of Units
1996F 1995 1994 1993 1992 1991 1990
14.8 14.8 15.4 14.2 13.1 12.7 14.2
Source: Bureau of Economic Analysis
(Insert graph here)
TECHNOLOGY SEGMENT
The Technology segment is comprised primarily of Molecumetics, which conducts
drug discovery research using synthetic chemistry techniques (additional
information on Molecumetics is provided on pages 16-17), APPX Software, a
supplier of flexible software development environments and business applications
software, and certain technology-related investments in which Tredegar's
ownership is less than 20% (see Note 7 on page 43 for additional information on
these investments).
Technology segment sales consist primarily of revenues from APPX
Software. Technology operating losses (excluding unusual items) declined $2.9
million in 1995 due to the restructuring of APPX Software in the first quarter
of 1995, partially offset by higher spending on research and development at
Molecumetics and a $694,000 write-off of a medical technology investment. The
Technology segment generated operating losses (excluding unusual items) of $8.9
million in 1994 and $9.7 million in 1993.
Technology segment identifiable assets increased to $7.5 million in
1995 from $7.3 million in 1994 due to the expansion of Molecumetics' research
lab in Bellevue, Washington, and additional technology investments of $1.9
million, partially offset by the disposal of Tredegar's investment in Regal
Cinema (see unusual items on page 26), the $694,000 write-off of a medical
technology investment and the downsizing of APPX Software. Depreciation and
amortization declined in 1995 to $789,000 from $1.3 million in 1994 due to the
write-off at the end of the first quarter of 1994 of goodwill and other
intangibles in APPX Software.
Technology segment identifiable assets and depreciation and
amortization decreased in 1994 compared with 1993 due primarily to the
first-quarter write-off of goodwill and other intangibles in APPX Software.
Technology segment identifiable assets in 1994 also reflect technology-related
investments of $1.4 million. The 1993 depreciation and amortization primarily
relates to the amortization of APPX Software intangibles acquired in December
1992.
SELECTED QUARTERLY FINANCIAL DATA
Tredegar Industries, Inc., and Subsidiaries
(In thousands, except per-share amounts) First Second Third Fourth
(Unaudited) Quarter Quarter Quarter Quarter
1995
Net sales $151,083 $149,682 $145,955 $142,734
Gross profit 23,078 25,352 24,149 26,365
Operating profit 10,315 13,506 13,428 12,987
Net income (t) 4,445 6,074 6,626 6,908
Earnings per common and dilutive
common equivalent share (t) .33 .45 .50 .53
Shares used to compute earnings per common
and dilutive common equivalent share 13,512 13,445 13,202 12,981
1994
Net sales $120,994 $122,913 $132,191 $126,110
Gross profit 18,744 20,229 21,728 21,684
Operating profit (loss) (1,239) 8,466 2,918 8,620
Income (loss) from continuing operations (t) (5,093) 3,074 (278) 3,714
Income from discontinued operations (j) 8,693 1,772 26,753 -
Net income 3,600 4,846 26,475 3,714
Earnings (loss) per share:
Continuing operations (t) (.31) .19 (.02) .27
Discontinued operations (j) .53 .11 1.68 -
Net income .22 .30 1.66 .27
Shares used to compute earnings per share 16,344 16,083 15,885 13,808
Refer to Notes to Financial Tables on page 34.
QUARTERLY EARNINGS PER SHARE
Continuing Operations
Dollars
(Insert graph here)
Earnings Per Share Earnings Per Share
Excluding Unusual Items As Reported
1994
1st Qtr. .15 (.31)
2nd Qtr. .19 .19
3rd Qtr. .26 (.02)
4th Qtr. .27 .27
1995
1st Qtr. .36 .33
2nd Qtr. .45 .45
3rd Qtr. .47 .50
4th Qtr. .53 .53
NOTES TO FINANCIAL TABLES
(In thousands, except per-share amounts)
(a) Income (loss) and earnings (loss) per share from continuing operations,
adjusted for unusual items affecting the comparability of operating results
between years as well as operating results of businesses held for sale, are
presented below:
1995 1994 1993 1992 1991 1990
Income (loss) from continuing operations as reported $24,053 $ 1,417 $3,723 $ 9,517 $2,519 $(28,687)
After-tax effects of unusual items related to continuing operations:
Unusual charges, net (d-i) 41 12,051 246 502 447 24,424
Impact on deferred taxes of 1% increase in federal income tax rate - - 348 - - -
Income (loss) from continuing operations as adjusted for unusual
items 24,094 13,468 4,317 10,019 2,966 (4,263)
Income (loss) from Molded Products and Brudi as adjusted for unusual
items (b) 1,128 (2,772) (1,059) (107) (6,164) (6,801)
Income from continuing operations as adjusted for unusual items and
businesses held for sale $22,966 $16,240 $5,376 $10,126 $9,130 $ 2,538
Earnings (loss) per common and dilutive common equivalent share:
As reported $ 1.80 $ .09 $ .23 $ .58 $ .15 $ (1.69)
As adjusted for unusual items 1.80 .87 .26 .61 .18 (.25)
As adjusted for unusual items and businesses held for sale 1.72 1.05 .33 .62 .56 .15
(b) During July and August of 1995, Tredegar announced that it was exploring the
sale of Molded Products and Brudi (part of the Plastics and Metal Products
segments, respectively). See Note 2 on page 42.
(c) Interest expense has been allocated between continuing and discontinued
operations based on relative capital employed. See Note 19 on page 51.
(d) Unusual items in 1995 include a gain on the sale of Regal Cinemas shares
($728), a charge related to the restructuring of APPX Software ($2,400) and
a recovery in connection with a Film Products product liability lawsuit
($1,750).
(e) Unusual items in 1994 include the write-off of certain goodwill and
intangibles in APPX Software ($9,521), the write-off of certain goodwill in
Molded Products ($4,873) and the estimated costs related to the closing of a
Molded Products plant in Alsip, Illinois ($2,100).
(f) Unusual items in 1993 include estimated costs related to the sale of a Film
Products plant in Flemington, New Jersey ($1,815), and the reorganization of
corporate functions ($900), partially offset by the gain on the sale of
Tredegar's remaining investment in Emisphere ($2,263).
(g) Unusual items in 1992 include the write-off of certain goodwill in
Molded Products ($1,182), partially offset by the gain on the sale of a
portion of an investment in Emisphere ($1,092).
(h) Unusual items in 1991 include costs related to plant closings in Molded
Products ($4,412) offset by a credit ($2,797) related to management's
decision to continue operating the vinyl extrusions business, and the gain
on the sale of Molded Products' beverage closure business ($894).
(i) Unusual items in 1990 include costs related to divestitures and
reorganization, including results of operations from August 1. The Metal
Products segment also includes provisions for environmental review and
cleanup, and costs related to certain legal proceedings for ongoing
operations.
(j) On August 16, 1994, Tredegar completed the divestiture of its coal
subsidiary, The Elk Horn Coal Corporation. On February 4, 1994, Tredegar
sold its remaining oil and gas properties. As a result of these events,
Tredegar is reporting its Energy segment as discontinued operations. See
Note 19 on page 51.
(k) Total return to shareholders is computed as the sum of the change in stock
price during the year plus dividends per share, divided by the stock price
at the beginning of the year.
(l) Capital employed for continuing operations is debt plus shareholders' equity
minus net assets of discontinued operations minus cash and cash equivalents.
(m) EBITDA from continuing operations (excluding unusual items) is income before
income taxes from continuing operations plus depreciation and amortization
plus interest expense minus interest income plus or minus unusual items.
EBITDA is not intended to represent cash flow from operations as defined by
generally accepted accounting principles and should not be considered as an
alternative to net income as an indicator of operating performance or to
cash flow as a measure of liquidity.
(n) Unleveraged after-tax earnings from continuing operations (excluding unusual
items) is net income (loss) from continuing operations plus after-tax
interest expense minus after-tax interest income plus or minus after-tax
unusual items. Unleveraged after-tax earnings should not be considered as an
alternative to net income as defined by generally accepted accounting
principles.
(o) Return on average capital employed for continuing operations (excluding
unusual items) is unleveraged after-tax earnings from continuing operations
(excluding unusual items) divided by average capital employed for continuing
operations.
(p) Net sales include sales to P&G totaling $205,708, $163,120 and $145,631 in
1995, 1994 and 1993, respectively.
(q) In 1993, Tredegar began reporting its business development activities,
primarily investments in high-technology businesses (Molecumetics, APPX
Software, Emisphere and technology-related investments in which Tredegar's
ownership is less than 20%), as a separate segment.
(r) Export sales totaled $80,878, $63,345 and $52,642 in 1995, 1994 and 1993,
respectively. The majority of these export sales were made by the Plastics
segment.
(s) Nonoperating assets held for sale include $1,721 in current assets in 1992
and $6,057, $5,018 and $3,605 in noncurrent assets in 1995, 1994 and 1993,
respectively. In addition, see (b) regarding the possible divestiture of
Molded Products and Brudi.
(t) Quarterly net income and earnings per share from continuing operations,
adjusted for unusual items affecting the comparability of operating results
between quarters, are presented below (see also (a) and (b) regarding the
annual historical operating results of businesses held for sale):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
1995
Income $4,937 $6,074 $6,175 $6,908
Earnings per share .36 .45 .47 .53
1994
Income 2,549 3,074 4,131 3,714
Earnings per share .15 .19 .26 .27
INDEPENDENT ACCOUNTANTS' AND MANAGEMENT'S REPORTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Tredegar Industries, Inc.:
We have audited the accompanying consolidated balance sheets of Tredegar
Industries, Inc., and Subsidiaries ("Tredegar") as of December 31, 1995 and
1994, and the related consolidated statements of income, cash flows and
shareholders' equity for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of Tredegar's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. A n audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Tredegar as of December 31, 1995 and 1994, and the consolidated results of their
operations and cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements,
effective as of the beginning of 1993, Tredegar changed its method of accounting
for postretirement benefits other than pensions to conform with Statement of
Financial Accounting Standards No. 106 and its method of accounting for income
taxes to conform with Statement of Financial Accounting Standards No. 109.
/s/ COOPERS & LYBRAND L.L.P.
Richmond, Virginia
January 17, 1996
MANAGEMENT'S REPORT ON THE
FINANCIAL STATEMENTS
Tredegar's management has prepared the financial statements and related notes
appearing on pages 36-51 in conformity with generally accepted accounting
principles. In so doing, management makes informed judgments and estimates of
the expected effects of events and transactions. Financial data appearing
elsewhere in this annual report are consistent with these financial statements.
Tredegar maintains a system of internal controls to provide reasonable,
but not absolute, assurance of the reliability of the financial records and the
protection of assets. The internal control system is supported by written
policies and procedures, careful selection and training of qualified personnel
and an extensive internal audit program.
These financial statements have been audited by Coopers & Lybrand
L.L.P., independent certified public accountants. Their audit was made in
accordance with generally accepted auditing standards and included a review of
Tredegar's internal accounting controls to the extent considered necessary to
determine audit procedures.
The Audit Committee of the Board of Directors, composed of outside
directors only, meets with management, internal auditors and the independent
accountants to review accounting, auditing and financial reporting matters. The
independent accountants are appointed by the Board on recommendation of the
Audit Committee, subject to shareholder approval.
CONSOLIDATED STATEMENTS OF INCOME
Tredegar Industries, Inc., and Subsidiaries
Years Ended December 31 1995 1994 1993
(in thousands, except per-share amounts)
REVENUES:
Net sales $589,454 $502,208 $449,208
Other income (expense), net (669) (296) (387)
Total 588,785 501,912 448,821
COSTS AND EXPENSES:
Cost of goods sold 490,510 419,823 379,286
Selling, general and administrative 48,229 47,978 47,973
Research and development 8,763 8,275 9,141
Interest 3,039 4,008 5,044
Unusual items (78) 16,494 452
Total 550,463 496,578 441,896
Income from continuing operations
before income taxes 38,322 5,334 6,925
Income taxes 14,269 3,917 3,202
Income from continuing operations 24,053 1,417 3,723
Discontinued operations:
Income from energy segment operations _ 4,220 6,784
Gain on disposition of interest in The Elk Horn
Coal Corporation (net of income tax of $16,224) - 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
financial reporting and income tax basis of
The Elk Horn Coal Corporation - 3,320 -
Net income before extraordinary item and
cumulative effect of accounting changes 24,053 38,635 10,507
Extraordinary item-prepayment premium
of extinguishment of debt (net of income tax
benefit of $685) - - (1,115)
Cumulative effect of accounting changes:
Postretirement benefits other than pensions
(net of income tax benefit of $2,545) - - (4,150)
Income taxes - - 4,300
NET INCOME $ 24,053 $ 38,635 $ 9,542
Earnings per common and dilutive common equivalent share:
Continuing operations $ 1.80 $ .09 $ .23
Discontinued operations - 2.40 .42
Before extraordinary item and cumulative effect
of accounting changes 1.80 2.49 .65
Extraordinary item - - (.07)
Cumulative effect of accounting changes - - .01
Net income $ 1.80 $ 2.49 $ .59
See accompanying notes to financial statements
CONSOLIDATED BALANCE SHEETS
Tredegar Industries, Inc., and Subsidiaries
December 31 1995 1994
(In thousands, except share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 2,145 $ 9,036
Accounts and notes receivable 71,673 73,248
Inventories 33,148 35,369
Income taxes recoverable 2,179 2,534
Deferred income taxes 14,882 14,014
Prepaid expenses and other 2,375 696
Total current assets 126,402 134,897
Property, plant and equipment, at cost:
Land and land improvements 6,713 6,789
Buildings 50,167 50,181
Machinery and equipment 269,646 261,154
Total property, plant and equipment 326,526 318,124
Less accumulated depreciation and amortization 204,074 194,505
Net property, plant and equipment 122,452 123,619
Other assets and deferred charges 35,186 29,073
Goodwill and other intangibles 30,012 30,756
Total assets $314,052 $318,345
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 31,105 $ 31,486
Accrued expenses 38,648 41,288
Total current liabilities 69,753 72,774
Long-term debt 35,000 38,000
Deferred income taxes 22,218 20,336
Other noncurrent liabilities 16,560 15,357
Total liabilities 143,531 146,467
Commitments and contingencies
Shareholders' equity:
Common stock (no par value):
Authorized 50,000,000 shares;
Issued and outstanding - 12,176,295 shares
in 1995 and 13,488,387 post-split shares in 1994 112,908 136,150
Foreign currency translation adjustment 445 327
Retained earnings 57,168 35,401
Total shareholders' equity 170,521 171,878
Total liabilities and shareholders' equity $314,052 $ 318,345
See accompanying notes to financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Tredegar Industries, Inc., and Subsidiaries
Years Ended December 31 1995 1994 1993
(In thousands)
Cash flows from operating activities:
Continuing operations:
Income from continuing operations $ 24,053 $ 1,417 $ 3,723
Adjustments for noncash items:
Depreciation 23,256 23,491 23,117
Amortization of intangibles 579 1,354 2,706
Write-off of intangibles 189 14,394 -
Deferred income taxes 1,540 (6,907) (1,418)
Accrued pension income and postretirement benefits, net (2,396) (623) (621)
Loss on divestitures - 2,100 1,815
Gain on sale of investments (728) - (2,263)
Changes in assets and liabilities, net of effects from acquisitions:
Accounts and notes receivable 4,912 (3,075) (7,194)
Inventories 4,010 (1,158) (2,480)
Income taxes recoverable and other prepaid expenses (1,324) (2,349) 3,347
Accounts payable and accrued expenses (6,228) 12,311 (1,701)
Other, net 1,765 (1,873) (1,435)
Net cash provided by continuing operating activities 49,628 39,082 17,596
Net cash used for extraordinary item - - (1,115)
Net cash provided by discontinued operating activities - 3,435 4,318
Net cash provided by operating activities 49,628 42,517 20,799
Cash flows from investing activities:
Continuing operations:
Capital expenditures (25,138) (15,579) (16,480)
Acquisitions (net of $358 and $398 cash
acquired in 1995 and 1993, respectively) (3,637) - (5,099)
Investments (1,904) (1,400) (600)
Proceeds from sale of investments 1,478 - 5,263
Property disposals 1,238 3,519 3,373
Other, net 85 186 (613)
Net cash used in investing activities of continuing operations (27,878) (13,274) (14,156)
Net cash provided by disposals of discontinued operations - 75,393 1,294
Net cash (used in) provided by investing activities (27,878) 62,119 (12,862)
Cash flows from financing activities:
Dividends paid (2,286) (2,465) (3,270)
Net decrease in borrowings (3,000) (59,000) (4,500)
Repurchase of Tredegar common stock (25,542) (34,105) -
Other, net 2,187 (30) (167)
Net cash used in financing activities (28,641) (95,600) (7,937)
(Decrease) increase in cash and cash equivalents (6,891) 9,036 -
Cash and cash equivalents at beginning of period 9,036 - -
Cash and cash equivalents at end of period $ 2,145 $ 9,036 $ -
Supplemental cash flow information:
Interest payments (net of amount capitalized) $ 3,041 $ 4,412 $ 8,332
Income tax payments, net $ 15,102 $ 26,388 $ 6,673
See accompanying notes to financial statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Tredegar Industries, Inc., and Subsidiaries
Retained Foreign Total
Common Stock Earnings Currency Shareholders'
Years Ended December 31, 1995, 1994 and 1993 Shares Amount (Deficit) Translation Equity
(In thousands, except share and per-share data)
Balance December 31, 1992 10,894,401 $170,131 $(7,695) $(39) $162,397
Net income - - 9,542 - 9,542
Cash dividends declared ($.24 per share) - - (2,616) - (2,616)
Issued upon exercise of SARs 503 9 - - 9
Foreign currency translation adjustment - - - (244) (244)
Balance December 31, 1993 10,894,904 170,140 (769) (283) 169,088
Net income - - 38,635 - 38,635
Cash dividends declared ($.24 per share) - - (2,465) - (2,465)
Repurchases of Tredegar common stock (1,910,239) (34,105) - - (34,105)
Issued upon exercise of stock options 6,000 87 - - 87
Issued upon exercise of SARs 1,593 28 - - 28
Foreign currency translation adjustment - - - 610 610
Balance December 31, 1994 8,992,258 136,150 35,401 327 171,878
Net income - - 24,053 - 24,053
Cash dividends declared ($.24 per share) - - (2,286) - (2,286)
Repurchases of Tredegar common stock (998,197) (25,542) - - (25,542)
Issued upon exercise of stock options 118,500 2,158 - - 2,158
Issued upon exercise of SARs 5,723 142 - - 142
Foreign currency translation adjustment - - - 118 118
Three-for-two stock split 4,058,011 - - - -
Balance December 31, 1995 12,176,295 $112,908 $57,168 $445 $170,521
See accompanying notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
Tredegar Industries, Inc., and Subsidiaries
(In thousands, except share and per-share amounts)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS
Tredegar Industries, Inc., and subsidiaries ("Tredegar") is a diversified
manufacturer of plastics and metal products. Tredegar also has interests in
various technologies, including rational drug design research and computer
software. For further description of Tredegar's products, principal markets and
a significant customer, see the products and market information matrix on pages
2-3, the segment tables on pages 22-24 and the business segment review on pages
29-32.
During July and August of 1995, Tredegar announced that it was
exploring the sale of Molded Products and Brudi (see Note 2 on page 42). In
August 1994, Tredegar completed the divestiture of its energy businesses (see
Note 19 on page 51).
During 1995, Tredegar acquired a plastic films business in Argentina.
During 1993, Tredegar acquired the assets of Polestar Plastics, Inc., a custom
molder of precision plastic parts for the medical and electronics markets.
During 1992, Tredegar acquired APPX Software, Inc., and the assets of a plastic
film business in Brazil and Fielden Engineers, Ltd. (materials handling). These
acquisitions were accounted for using the purchase method; accordingly, the
assets and liabilities of the acquired entities have been recorded at their
estimated fair value at the date of acquisition. The excess of the purchase
price over the estimated fair value of the identifiable net assets acquired had
an original straight-line amortization period of 7 to 15 years. The operating
results of entities acquired have been included in the consolidated statements
of income since the date of acquisition.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts and operations of
Tredegar and all of its subsidiaries. Intercompany accounts and transactions
within Tredegar have been eliminated. Certain previously reported amounts have
been reclassified to conform to the 1995 presentation.
On September 28, 1995, Tredegar's Board of Directors declared a
three-for-two stock split payable on January 1, 1996, to shareholders of record
on December 8, 1995. Accordingly, all historical references to the shares used
to compute earnings per share, per-share amounts, stock option data and market
prices of Tredegar's common stock have been restated to reflect the split. As a
result of the stock split, Tredegar's regular cash dividend of six cents per
share will be paid on 50% more shares than previous dividends, thereby
increasing the cash payout to shareholders by 50%.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenue from the sale of products is recognized when title and risk of loss have
transferred to the buyer, which is generally when product is shipped.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand in excess of daily operating
requirements and highly liquid investments with maturities of three months or
less when purchased. At December 31, 1995 and 1994, Tredegar had approximately
$2,000 and $9,000, respectively, invested primarily in securities with
maturities of one month or less.
Tredegar's policy permits investment of excess cash in marketable
securities that have the highest credit ratings and maturities of less than one
year. The primary objectives of Tredegar's policy are safety of principal and
liquidity.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost principally
determined on the last-in, first-out ("LIFO") basis. Other inventories are
stated on either the weighted average cost or the first-in, first-out basis.
Cost elements included in work-in-process and finished goods inventories are raw
materials, direct labor and manufacturing overhead.
PROPERTY, PLANT AND EQUIPMENT
Accounts include costs of assets constructed or purchased, related delivery and
installation costs and interest incurred on significant capital projects during
their construction periods. Expenditures for renewals and betterments also are
capitalized, but expenditures for repairs and maintenance are expensed as
incurred. The cost and accumulated depreciation applicable to assets retired or
sold are removed from the respective accounts, and gains or losses thereon are
included in income.
Property, plant and equipment includes capitalized interest of $279,
$206 and $320 in 1995, 1994 and 1993, respectively. Maintenance and repairs of
property, plant and equipment were $20,100, $19,400 and $17,300 in 1995, 1994
and 1993, respectively.
Depreciation is computed primarily by the straight-line method based on
the estimated useful lives of the assets.
GOODWILL AND OTHER INTANGIBLES
Goodwill acquired prior to November 1, 1970 ($19,484, $19,629 and $19,629 at
December 31, 1995, 1994 and 1993, respectively), is not being amortized and
relates primarily to Tredegar's Aluminum Extrusions business. Goodwill acquired
subsequently ($9,478, $9,752 and $19,764 at December 31, 1995, 1994 and 1993,
respectively, net of accumulated amortization) that was not written off in 1994
(see Note 8 on page 43) is being amortized on a straight-line basis over
approximately 40 years and relates primarily to Tredegar's acquisition of Brudi,
Inc. in 1991. Other intangibles ($1,050, $1,375 and $6,086 at December 31, 1995,
1994 and 1993, respectively, net of accumulated amortization) consist primarily
of software technology acquired in 1992 and written off in 1994 (see Note 8 on
page 43), and the cost of certain non-competition agreements that are being
amortized on a straight-line basis over 5 years.
IMPAIRMENT OF LONG-LIVED ASSETS
Beginning in 1995, the review for the possible impairment of long-lived tangible
and intangible assets is performed in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." For assets to be
held and used in operations, this standard requires that, whenever events
indicate that an asset may be impaired, the entity estimate the future unlevered
cash flows expected to result from the use of the asset and its eventual
disposition. Assets are grouped for this purpose at the lowest level for which
there are identifiable and independent cash flows. If the sum of these
undiscounted cash flows is less than the carrying amount of the asset, an
impairment loss is recognized. Measurement of the impairment loss is based on
the estimated fair value of the asset.
PENSION PLANS
Actual costs of pension plans are determined actuarially in compliance with SFAS
No.87, "Employers Accounting for Pensions." Tredegar's policy is to fund its
pension plans at amounts not less than the minimum requirements of the Employee
Retirement Income Security Act of 1974.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Effective January 1, 1993, Tredegar adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions." SFAS No. 106 requires
recognition of the cost of postretirement benefits during the employees' service
periods. Previously, such expenses were accounted for on a cash basis. Tredegar
elected to immediately recognize the liability for prior years' service as the
cumulative effect of a change in accounting principle. Accordingly, in the first
quarter of 1993, Tredegar recorded an unfunded, accumulated postretirement
benefit obligation of $6,695 and a noncurrent, deferred income tax benefit of
$2,545, resulting in an after-tax charge of $4,150. Tredegar's current policy is
to fund related benefits when claims are incurred.
POSTEMPLOYMENT BENEFITS
Tredegar periodically provides certain postemployment benefits purely on a
discretionary basis. Accordingly, under SFAS No. 112, "Employers Accounting for
Postemployment Benefits," related costs for these programs are accrued when it
is probable that such benefits will be paid. All other postemployment benefits
are either accrued under current benefit plans or are not material to Tredegar's
financial position or results of operations.
INCOME TAXES
Effective January 1, 1993, Tredegar adopted SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires the asset and liability method of accounting for
deferred income taxes, whereby enacted statutory tax rates are applied to the
differences between the financial reporting and tax bases of assets and
liabilities. The cumulative effect of this change in accounting principle was a
reduction in deferred income taxes and a corresponding increase in net income of
$4,300 in the first quarter of 1993. Deferred income taxes were determined under
Accounting Principles Board ("APB") Opinion No. 11 prior to 1993.
Deferred income taxes arise from temporary differences between
financial and income tax reporting of various items, principally depreciation
and accruals for employee benefits, divestitures, plant shutdowns and
environmental remediation.
SOFTWARE DEVELOPMENT COSTS
Software development costs are accounted for in accordance with SFAS No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed." This statement requires that all costs incurred to establish the
technological feasibility of a computer software product to be sold, leased or
otherwise marketed be considered research and development costs. Such costs are
expensed as incurred. Once technological feasibility is established, all
software development and production costs are capitalized and subsequently
reported at the lower of unamortized cost or net realizable value.
Capitalization is discontinued once software is available for sale or lease.
Capitalized costs are amortized based on current and anticipated future revenues
for each product over periods not exceeding 5 years, with an annual minimum
equal to the straight-line amortization over the estimated remaining life of the
product.
There were no capitalized software costs at December 31, 1995.
Capitalized software costs included in "Other assets and deferred charges"
totaled $260 at December 31, 1994.
EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of post-split
shares of common stock outstanding for each period presented.
Tredegar has historically excluded common stock equivalents (stock
options) from its computation of earnings per common share due to their
immaterial dilutive effect. Immaterial is defined in this context by APB Opinion
No. 15 as dilution of less than 3%. As a result of share repurchases and the
increase in Tredegar's stock price during 1995, stock options currently
outstanding are dilutive in excess of the threshold set forth in APB Opinion No.
15. Accordingly, shares used to compute earnings (loss) per common and dilutive
common equivalent share for 1995 include common stock equivalents of 454,379
shares. Fully diluted earnings (loss) per common share is not materially
different from the earnings (loss) per common and dilutive common equivalent
share presented in the consolidated statements of income. The number of shares
used in computing earnings per share were 13,370,019, 15,524,130 and 16,342,203
in 1995, 1994 and 1993, respectively.
2 BUSINESSES HELD FOR SALE
During July and August of 1995, Tredegar announced that it was exploring the
sale of Molded Products and Brudi. These divestitures could be completed in the
first half of 1996. Tredegar anticipates investing related proceeds on a
short-term basis until other opportunities, in existing businesses or elsewhere,
are identified.
The net sales, ongoing operating profit, identifiable assets,
depreciation and amortization and capital expenditures of Molded Products and
Brudi have been disclosed separately in the segment tables on pages 22-24
(Molded Products is part of the Plastics segment and Brudi is part of the Metal
Products segment). Additional information on the combined results of operations
and net assets of these businesses is provided below:
Condensed Statements of Income
Molded Products and Brudi Combined
(Unaudited) 1995 1994 1993
Net sales $ 116,745 $ 105,470 $ 92,458
Costs and expenses:
Operating costs and expenses 113,805 108,310 92,509
Interest allocated 899 1,170 1,451
Unusual items - 6,973 -
Total 114,704 116,453 93,960
Income (loss) from Molded Products and Brudi
before income taxes 2,041 (10,983) (1,502)
Income tax (benefit) 913 (3,802) (443)
Income (loss) from Molded Products and Brudi $ 1,128 $ (7,181) $ (1,059)
Condensed Statements of Net Assets
Molded Products and Brudi Combined
December 31, December 31,
(Unaudited) 1995 1994
Current assets:
Accounts and notes receivable $ 13,964 $ 16,539
Inventories 13,858 16,127
Deferred income taxes 1,476 2,770
Prepaid expenses and other 82 177
Total current assets 29,380 35,613
Net property, plant and equipment 33,129 32,888
Other assets and deferred charges - 265
Goodwill and other intangibles 10,174 10,704
Total assets 72,683 79,470
Total current liabilities 9,108 15,898
Deferred income taxes 2,971 3,570
Other noncurrent liabilities 460 735
Total liabilities 12,539 20,203
Net assets of Molded Products and Brudi $ 60,144 $ 59,267
Transactions between Tredegar and Molded Products and Brudi are reflected as
though they are settled immediately and there are no amounts due to or from
Tredegar at the end of any period. All of Molded Products' full-time employees
participate in Tredegar's noncontributory defined benefit plan for salaried
employees. Most of these employees also participate in Tredegar's welfare
(medical, life and disability) and savings plans. Related costs for
participation in these plans have been allocated to Molded Products and are
included in the above combined statements of income. Interest expense was
allocated to Molded Products and Brudi based upon the ratio of their capital
(net assets) to Tredegar's consolidated capital employed.
For federal income tax purposes, operating results of Molded Products and Brudi
have been included in Tredegar's consolidated tax return. Their related
provision for income taxes represents their allocated share of Tredegar's income
tax expense. The allocated share approximates income tax expense that would have
been incurred had Molded Products and Brudi (i) filed a separate consolidated
tax return, and (ii) separately computed income taxes in accordance with SFAS
No. 109
3 BUSINESS SEGMENTS
See pages 22-24 and 29-32 for net sales, operating profit, identifiable assets
and related information about Tredegar's segments that are presented for the
years 1990-1995. The discussion of segment information is unaudited.
4 ACCOUNTS AND NOTES RECEIVABLE
Accounts and notes receivable consist of the following:
December 31 1995 1994
Trade, less allowance for doubtful accounts and sales
returns of $5,330 and $5,211 in 1995 and 1994 $69,618 $71,470
Other 2,055 1,778
Total $71,673 $73,248
5 INVENTORIES
Inventories consist of the following:
December 31 1995 1994
Finished goods $4,619 $4,970
Work-in-process 4,217 5,243
Raw materials 17,946 18,004
Stores, supplies and other 6,366 7,152
Total $33,148 $35,369
Inventories stated on the LIFO basis amounted to $15,974 and $15,736 at
December 31, 1995 and 1994, respectively, which are below replacement costs by
approximately $14,212 and $18,100, respectively.
6 NONOPERATING ASSETS HELD FOR SALE
Included in "Other assets and deferred charges" are nonoperating assets held for
sale, primarily land and buildings related to closed facilities, totaling $6,057
and $5,018 as of December 31, 1995 and 1994, respectively. Such assets are
stated at the lower of carrying value or estimated fair value less cost to sell
and are expected t o be sold over the next 1 to 2 years. See Note 2 on page 42
regarding the possible divestiture of Molded Products and Brudi.
7 INVESTMENTS
As of December 31, 1995, Tredegar, through a subsidiary, owned 5% of a venture
capital limited partnership. Tredegar's total capital commitment is $2,000 with
$1,800 and $1,200 invested at December 31, 1995 and 1994, respectively.
Additional contributions of $200 are expected to be made over the next year. In
addition, during 1995 and 1994, Tredegar invested an aggregate of $1,300 and
$1,000, respectively, in the restricted convertible preferred stock of several
medical technology companies. Tredegar's ownership in each of these companies on
a fully diluted basis is less than 20%. Tredegar's investments are carried at
the lower of cost or estimated fair value and are included in "Other assets and
deferred charges." During 1995, Tredegar recognized a charge of $694 for the
write-off of one of its medical technology investments.
During 1991 and 1992, Tredegar acquired 541,071 shares of Emisphere
Technologies, Inc. ("Emisphere") common stock for $3,900. In December 1992,
Tredegar sold 112,500 shares for $1,992 and recognized a pretax gain of $1,092
($680 after income taxes). In 1993, Tredegar sold its remaining 428,571 shares
for $5,263 and recognized a pretax gain of $2,263 ($1,410 after income taxes).
In total, Tredegar received $7,255 for its $3,900 investment in Emisphere common
stock, resulting in a pretax gain of $3,355 ($2,090 after income taxes).
8 GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles, and the related accumulated amortization, are as
follows:
December 31 1995 1994
Goodwill and other intangibles $ 50,424 $ 64,043
Additions and reclassifications 24 775
Write-offs (189) (14,394)
Subtotal 50,259 50,424
Accumulated amortization (20,247) (19,668)
Net $ 30,012 $ 30,756
Write-offs in 1994 relate to certain goodwill written off in Molded
Products and goodwill and other intangibles written off in APPX Software. The
goodwill write-off in Molded Products in 1994 resulted from continued
disappointing results in certain lines of its business. The write-off in APPX
Software in 1994 is the result of management's determination that income
generated by the acquired products would not be sufficient to recover the
unamortized costs associated with the intangible software assets purchased by
Tredegar in December 1992. See Note 17 on page 50 regarding the restructuring of
APPX Software and Note 2 on page 42 regarding the possible divestiture of Molded
Products and Brudi.
9 ACCRUED EXPENSES
Accrued expenses consist of the following:
December 31 1995 1994
Payrolls, related taxes and
medical and other benefits $10,759 $ 7,378
Workmen's compensation
and disabilities 6,108 6,116
Vacation 5,397 5,478
Divestitures 2,773 3,284
Environmental 2,341 4,153
Other 11,270 14,879
Total $38,648 $41,288
10 DEBT AND CREDIT AGREEMENTS
Long-term debt consists of:
December 31 1995 1994
Borrowings under short-term
variable-rate credit
arrangements $ - $2,500
7.2% note to institutional
lender due in 2003 35,000 35,000
Other - 500
Total $35,000 $38,000
On September 7, 1995, Tredegar replaced its two revolving credit
facilities dated August 18 and 19, 1994, with one new five-year facility that
permits borrowings of up to $275,000 (no amounts borrowed at December 31, 1995).
The new facility provides 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. A facility fee is also charged on
the $275,000 commitment amount. The spread and facility fee charged at various
debt-to-total capitalization levels are as follows:
Debt-to-Total Basis Points
Capitalization Ratio Spread Facility Fee
Less than or equal to 35% 17.50 12.50
Greater than 35% and
less than or equal to 50% 25.00 15.00
Greater than 50% 31.25 18.75
In addition, a utilization fee of 10 basis points is charged on the
outstanding principal amount when more than $137,500 is borrowed under the
agreement.
On June 16, 1993, Tredegar paid a $1,800 ($1,115 after income tax
benefits) prepayment premium to an institutional lender to refinance its
$35,000, 8.6% fixed-rate debt that was due in September 1994. The new note
carries a fixed rate of 7.2% and matures in June 2003. Annual principal payments
of $5,000 will begin in 1997. At December 31, 1995, the prepayment value of the
note was $37,000 and Tredegar estimates that an equivalent rate for similar
debt would be 6.5%.
At December 31, 1994, $2,500 was borrowed under a short-term credit
arrangement at an interest rate of 5%. The balance outstanding was classified as
long-term debt in accordance with Tredegar's ability to refinance such
obligation on a long-term basis.
The weighted average interest rate on all variable-rate loans
outstanding during 1995 was 6.7% compared with 4.9% in 1994.
Tredegar's loan agreements contain restrictions, among others, on the
payment of cash dividends and the maximum debt-to-total capitalization ratio
permitted (65% through September 30, 1996, and 60% thereafter). At December 31,
1995, $53,505 was available for cash dividend payments, and $275,000 was
available to borrow under the 65% debt-to-total capitalization ratio
restriction.
11 SHAREHOLDER RIGHTS AGREEMENT
Pursuant to a Rights Agreement dated as of June 15, 1989 (as amended), between
Tredegar and American Stock Transfer and Trust Company as Rights Agent (the
"Rights Agreement"), two-thirds of one Right is attendant to each share of
Tredegar common stock. Each Right entitles the registered holder to purchase
from Tredegar one one-hundredth of a share of Participating Cumulative Preferred
Stock, Series A (the "Preferred Stock"), at an exercise price of $50 (the
"Purchase Price"). The Rights will become exercisable, if not earlier redeemed,
only if a person or group acquires 10% or more of the outstanding shares of
Tredegar common stock or announces a tender offer, the consummation of which
would result in ownership by a person or group of 10% or more of Tredegar common
stock. Any action by a person who, together with his associates and affiliates,
owned 10% or more of the outstanding shares of Tredegar common stock on July 10,
1989, cannot cause the Rights to become exercisable.
Each holder of a Right, upon the occurrence of certain events, will
become entitled to receive, upon exercise and payment of the Purchase Price,
Preferred Stock (or in certain circumstances, cash, property or other securities
of Tredegar or a potential acquirer) having a value equal to twice the amount of
the Purchase Price.
The Rights will expire on June 30, 1999.
12 STOCK OPTION PLANS
Tredegar has two stock option plans whereby stock options may be granted to
purchase a specified number of shares of Tredegar common stock at a price not
less than the fair market value on the date of grant and for a term not to
exceed 10 years. In addition to the stock options, recipients may also be
granted stock appreciation rights ("SARs") and restricted stock.
Activity for 1993 - 1995 is shown below:
Number of Shares Option Price
Option SAR Per Share Aggregate
Outstanding at 12/31/92 729,900 702,900 $ 8.09 to $11.34 $ 7,248
Granted in 1993 30,000 - $ 8.59 258
Lapsed in 1993 (16,500) (16,500) $11.14 (184)
SARs exercised in 1993 (9,000) (9,000) $ 8.09 to $11.14 (89)
Outstanding at 12/31/93 734,400 677,400 $ 8.09 to $11.34 7,233
Granted in 1994 579,150 - $10.09 to $16.00 6,609
Lapsed in 1994 (56,250) (16,500) $ 8.59 to $11.34 (568)
Options exercised in 1994 (9,000) (9,000) $ 8.09 to $11.14 (87)
SARs exercised in 1994 (40,500) (40,500) $ 8.09 to $11.14 (413)
Outstanding at 12/31/94 1,207,800 611,400 $ 8.09 to $16.00 12,774
Granted in 1995 219,000 - $11.59 to $12.50 2,727
Lapsed in 1995 (10,350) (2,250) $10.09 to $11.59 (108)
Options exercised in 1995 (177,750) (57,000) $ 8.09 to $16.00 (1,817)
SARs exercised in 1995 (49,125) (49,125) $ 8.09 to $11.14 (508)
Outstanding at 12/31/95 1,189,575 503,025 $ 8.09 to $16.00 $13,068
At December 31, 1995 and 1994, options to purchase 883,974 and 646,695
shares, respectively, were exercisable and 397,800 and 606,600 shares,
respectively, were available for grant.
SFAS No. 123, "Accounting for Stock-Based Compensation," was issued in
October 1995 and allows companies to either (i) use existing methods to account
for stock-based compensation arrangements with additional pro forma disclosures
of the fair value-based method or (ii) adopt the statement's fair value-based
method. Tredegar will adopt the new standard in 1996 and has elected to use
existing methods with pro forma disclosures of the fair value-based method.
13 RENTAL EXPENSE AND
CONTRACTUAL COMMITMENTS
Rental expense was $3,355, $3,337 and $2,936 for 1995, 1994 and 1993,
respectively. Rental commitments under all noncancelable operating leases as of
December 31, 1995, are as follows.
1996 $ 2,557
1997 2,464
1998 2,223
1999 1,885
2000 1,606
Remainder 2,513
Total $13,248
Contractual obligations for plant construction and purchases of real
property and equipment amounted to approximately $4,679 and $4,493 at December
31, 1995 and 1994, respectively.
14 RETIREMENT PLANS AND
OTHER POSTRETIREMENT BENEFITS
Tredegar has noncontributory defined benefit plans covering most employees. The
plans for salaried and hourly employees currently in effect are based on a
formula using the participant's years of service and compensation or using the
participant's years of service and a dollar amount. Plan assets consist
principally of common stock and government and corporate obligations.
The components of net pension income for Tredegar's plans for 1995,
1994 and 1993 are as follows:
1995 1994 1993
Return on plan assets:
Actual return $28,434 $ (572) $18,557
Expected return greater (lower) than actual (17,065) 11,494 (8,097)
Expected return 11,369 10,922 10,460
Amortization of transition asset 1,231 1,231 1,231
Service cost (benefits earned during the year) (2,376) (3,016) (3,072)
Interest cost on projected benefit obligation (7,192) (6,885) (6,515)
Amortization of prior service costs and gains or losses (99) (942) (805)
Net pension income $ 2,933 $ 1,310 $ 1,299
The following table presents a reconciliation of the funded status of
Tredegar's pension plans at December 31, 1995, 1994 and 1993, to prepaid pension
expense:
1995 1994 1993
Plan assets at fair value $147,600 $125,390 $130,603
Actuarial present value of benefit obligations:
Accumulated benefit obligation (including vested
benefits of $90,895, $77,858 and $85,828, respectively) (93,077) (80,422) (89,221)
Projected compensation increase (11,097) (9,296) (11,225)
Projected benefit obligation (104,174) (89,718) (100,446)
Plan assets in excess of projected benefit obligation 43,426 35,672 30,157
Unrecognized net gain being amortized (21,863) (16,862) (11,736)
Unrecognized transition asset being amortized (4,226) (5,456) (6,687)
Unrecognized prior service costs being amortized 4,581 5,354 5,464
Prepaid pension expense $ 21,918 $ 18,708 $ 17,198
Prepaid pension expense of $21,918 and $18,708 is included in "Other
assets and deferred charges" in the consolidated balance sheets at December 31,
1995 and 1994, respectively.
Net pension income and plan obligations are calculated using
assumptions of discount rates on projected benefit obligations, estimated rates
of projected increases in compensation and expected rates of return on plan
assets. The discount rate on projected benefit obligations was assumed to be
7.5% at December 31, 1995, 8.25% at December 31, 1994 and 7% at December 31,
1995, 8.25% at December 31, 1994 and 7% at December 31, 1993. The rate of
projected compensation increase and the expected long-term rate of return on
plan assets were assumed to be 5% and 9%, respectively, each year. Net pension
income is determined using assumptions as of the beginning of each year. Funded
status is determined using assumptions as of the end of each year.
In December 1993, Tredegar established a non-qualified supplemental
pension plan covering certain employees. The plan is designed to restore all or
a part of the pension benefits that would have been payable to designated
participants from Tredegar's principal pension plans if it were not for
limitations imposed by income tax regulations. The projected benefit obligation
relating to this unfunded plan ($658, $613 and $612 at December 31, 1995, 1994
and 1993, respectively) is being amortized over the average remaining working
life of participants in the plan (approximately $100 annually), and is included
in the above pension information.
In addition to providing pension benefits, Tredegar provides
postretirement life insurance and health care benefits for certain groups of
employees. Tredegar and retirees share in the cost of postretirement health care
benefits, with employees retiring after July 1, 1993, receiving a fixed subsidy
from Tredegar to cover a portion of their health care premiums. Effective
January 1, 1993, Tredegar adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (see Note 1 on page 40).
Previously, such expenses were accounted for on a cash basis.
The components of net periodic postretirement benefit cost are as
follows:
1995 1994 1993
Service cost (benefits earned during the year) $(118) $(177) $(186)
Interest cost on accumulated
postretirement benefit obligation (493) (492) (492)
Recognition of gains (losses) 74 (18) -
Net postretirement benefit cost $(537) $(687) $(678)
The following table presents a reconciliation of the funded status of
Tredegar's postretirement life insurance and health care benefit plans at
December 31, 1995, 1994 and 1993, to accrued postretirement benefit cost:
1995 1994 1993
Plan assets at fair value $ - $ - $ -
Accumulated postretirement
benefit obligation (APBO):
Retirees (3,438) (3,085) (3,001)
Other fully eligible participants (1,396) (1,593) (2,408)
Other active participants (1,957) (1,852) (1,755)
Total APBO (6,791) (6,530) (7,164)
APBO in excess of plan assets (6,791) (6,530) (7,164)
Unrecognized gain (1,219) (1,124) (52)
Accrued postretirement benefit cost $(8,010) $(7,654) $(7,216)
Accrued postretirement benefit cost of $8,010 and $7,654 is included in
"Other noncurrent liabilities" in the consolidated balance sheets of December
31, 1995 and 1994, respectively.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at December 31, 1995, 8.25% at December 31, 1994,
and 7% at December 31, 1993. The rate of annual pay increase for life insurance
benefits was assumed to be 5% each year. The rate of increase in the per-capita
cost of covered health care benefits for the indemnity plan was assumed to be
12% at December 31, 1995, 13% at December 31, 1994, and 14% at December 31,
1993. The rate of increase in the per-capita cost of covered health care
benefits for the managed care plans was assumed to be 9.7% at December 31, 1995,
10.4% at December 31, 1994, and 11.2% at December 31, 1993. The rates for the
per-capita cost of covered health care benefits were assumed to decrease
gradually for the indemnity and managed care plans to 6% and 5%, respectively,
in year 2002 and remain at that level thereafter. Net postretirement
benefit cost is determined using assumptions as of the beginning of each year.
Funded status is determined using assumptions as of the end of each year.
If the health care cost trend rate assumptions were increased by 1%,
the accumulated postretirement benefit obligation as of December 31, 1995, would
increase by approximately $26. The effect of this increase on the sum of the
service cost and interest cost components of net periodic postretirement benefit
cost for 1995 would be $3.
15 SAVINGS PLAN
Tredegar has a savings plan that allows eligible employees to voluntarily
contribute a percentage of their compensation. Under the provisions of the plan,
Tredegar matches a portion of the employee's contribution to the plan with
shares of Tredegar common stock. Tredegar also has an unfunded non-qualified
plan that restores matching benefits for employees suspended from the savings
plan due to certain limitations imposed by income tax regulations. Charges
recognized by Tredegar for these plans in 1995, 1994 and 1993 amounted to
$2,060, $2,059 and $2,146, respectively. Tredegar's unfunded liability under
the restoration plan was $723 and $327 at December 31, 1995 and 1994,
respectively.
16 INCOME TAXES
Effective January 1, 1993, Tredegar adopted SFAS No. 109, "Accounting for Income
Taxes," which requires use of the asset and liability method of accounting for
deferred income taxes (see Note 1 on page 40). Deferred income taxes were
determined under APB Opinion No. 11 for years prior to 1993.
Income from continuing operations before income taxes and income taxes
are as follows:
1995 1994 1993
Income from continuing operations before income taxes:
Domestic $36,494 $ 2,346 $ 4,460
Foreign 1,828 2,988 2,465
Total $38,322 $ 5,334 $ 6,925
Current income taxes:
Federal $10,050 $ 8,375 $ 2,190
State 1,996 1,622 759
Foreign 683 827 1,671
Total 12,729 10,824 4,620
Deferred income taxes:
Federal 1,448 (6,741) (848)
State 136 (424) (197)
Foreign (44) 258 (721)
Adjustment for 1% increase in federal statutory rate - - 348
Total 1,540 (6,907) (1,418)
Total income taxes $14,269 $ 3,917 $ 3,202
The significant differences between the U.S. federal statutory rate and the
effective income tax rate for continuing operations are as follows:
Percent of Income From Continuing
Operations Before Income Taxes
1995 1994 1993
Income tax expense at federal statutory rate 35.0 35.0 35.0
State taxes, net of federal income tax benefit 3.6 14.6 5.3
Research and development tax credit (1.0) (7.5) (5.8)
Foreign Sales Corporation (1.3) (6.6) (3.1)
Adjustment of deferred income taxes for 1%
increase in federal statutory rate - - 5.0
Write-off of certain goodwill .1 31.1 -
Goodwill amortization .2 3.0 5.1
Other items, net .6 3.8 4.7
Effective income tax rate 37.2 73.4 46.2
Deferred income taxes result from temporary differences between financial and
income tax reporting of various items. The source of these differences and the
tax effects for continuing operations are as follows:
1995 1994 1993
Depreciation $ (14) $(3,472) $(2,002)
Divestitures, plant shutdowns and environmental accruals 743 778 1,229
Employee benefits 499 169 309
Write-offs of certain goodwill and other intangibles - (3,643) -
Other items, net 312 (739) (954)
Total $1,540 $(6,907) $(1,418)
Deferred tax liabilities and deferred tax assets as of December 31, 1995 and
1994, are as follows:
1995 1994
Deferred tax liabilities:
Depreciation $ 13,496 $ 13,510
Pensions 8,274 7,214
Other 2,130 1,348
Total deferred tax liabilities 23,900 22,072
Deferred tax assets:
Employee benefits 8,863 8,302
Allowance for doubtful accounts and sales returns 2,005 1,957
Inventory 1,493 1,651
Divestitures 834 673
Environmental accruals 621 1,525
Other 2,748 1,642
Total deferred tax assets 16,564 15,750
Net deferred tax liability $ 7,336 $ 6,322
Included in the balance sheet:
Noncurrent deferred tax liabilities in excess of assets $ 22,218 $ 20,336
Current deferred tax assets in excess of liabilities 14,882 14,014
Net deferred tax liability $ 7,336 $ 6,322
17 UNUSUAL ITEMS
In 1995, unusual items totaling $78 (income, net) include a gain on the sale of
Regal Cinema shares ($728), a charge related to the restructuring of APPX
Software ($2,400) and a recovery in connection with a Film Products product
liability lawsuit ($1,750). The APPX Software restructuring charge includes
estimated losses on the disposal of assets, severance costs and cost for the
termination of leases and certain contracts. The restructuring, which occurred
in the first quarter of 1995, was aimed at eliminating operating losses. Such
losses were $478 in the first quarter of 1995 and $4.7 million in 1994. While
new product development activities have been curtailed, APPX Software continues
to sell, maintain and support existing products. For the post-restructuring
period April 1 to December 31, 1995, APPX Software had an operating profit of
$382.
In 1994, unusual items totaling $16,494 include the write-off of
certain Molded Products goodwill ($4,873) (see Note 8 on page 43), costs related
to the closing of a Molded Products plant in Alsip, Illinois ($2,100), and the
write-off of goodwill and other intangibles in APPX Software ($9,521) (see Note
8 on page 43).
In 1993, unusual items totaling $452 include estimated costs related to
the disposal of a Film Products plant in Flemington, New Jersey ($1,815), and
the reorganization of corporate functions ($900), offset by a gain on the sale
of a portion of Tredegar's investment in Emisphere ($2,263) (see Note 7 on page
43).
18 CONTINGENCIES
Tredegar is involved in various stages of investigation and cleanup relating to
environmental matters at certain of its plant locations. Where management has
determined the nature and scope of any required environmental cleanup activity,
estimates of cleanup costs have been obtained and accrued. As management
continues its efforts to assure compliance with environmental laws and
regulations, additional contingencies may be identified. If additional
contingencies are identified, it is management's practice to determine the
nature and scope of such contingencies, obtain and accrue estimates of the cost
of remediation, and begin remediation. While it is not possible to predict the
course of ongoing environmental compliance activities, management does not
currently believe that additional costs that could arise from such activities
will have a material adverse effect on its financial position; however, such
costs could have a material adverse effect on quarterly or annual operating
results when resolved in a future period.
Tredegar is involved in various other legal actions arising in the
normal course of business. After taking into consideration legal counsels'
evaluation of such actions, management believes that Tredegar has sufficiently
accrued for possible losses and that these actions will not have a material
adverse effect on Tredegar's financial position; however, the resolution of such
actions in a future period could have a material adverse effect on quarterly or
annual operating results at that time.
19 DISCONTINUED OPERATIONS
On August 16, 1994, the Elk Horn Coal Corporation ("Elk Horn"), Tredegar's 97%
owned coal subsidiary, was acquired by Pen Holdings, Inc., for an aggregate
consideration of approximately $71,000 ($67,485 after minority interest and
transaction costs). Tredegar realized an after-tax gain on the transaction of
$25,740. In the first quarter of 1994, Tredegar recognized an income tax benefit
of $3,320 on the difference between the financial reporting and income tax basis
of Elk Horn. On February 4, 1994, Tredegar sold its remaining oil and gas
properties for approximately $8,000 and recognized an after-tax gain of $3,938.
The divestiture of Elk Horn completed Tredegar's exit from its energy
businesses. Accordingly, information about results of operations, financial
condition, cash flows and segments have been restated where appropriate.
In accordance with applicable accounting pronouncements, a $6,194
charge ($3,964 after income tax benefits) was recognized as a reduction to the
gain on the disposal of Elk Horn for the estimated present value of the portion
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 obligation under the Act is reflected
in Tredegar's consolidated balance sheet in "Other noncurrent liabilities." The
net periodic cost (interest and the amortization of gains or losses) of the
obligation since the Elk Horn divestiture is reflected in Tredegar's
consolidated statements of income in "Other income (expense), net."
At December 31, 1995 and 1994, the accrued costs for Tredegar's
obligation under the Act were $6,000 and $6,102, respectively, including an
unfunded obligation of $4,703 and $5,720, respectively, and an unrecognized gain
of $1,297 and $382, respectively. The discount rate used in determining the
unfunded obligation was 7.5% and 8.25% at December 31, 1995 and 1994,
respectively, and 7% at August 16, 1994. The medical premium trend rate was
assumed to be 12% and 13% at December 31, 1995 and 1994, respectively, and 14%
at August 16, 1994, with a gradual decrease to 6% in year 2004, 6.75% in year
2003 and 5.5% in year 2005, respectively, and remaining at that level
thereafter. The accrued cost was determined using assumptions at the end of each
period, and the net periodic cost was determined using assumptions as of the
beginning of each period. If the medical premium trend rate were increased by
1%, the obligation at December 31, 1995, would increase by approximately $218.
The effect of this increase on the annual interest cost component of the net
period cost would be $16.
The condensed statements of income of the discontinued Energy segment
are presented below through August 16, 1994, the date Elk Horn was acquired by
Pen Holdings, Inc.:
Condensed Statements of Income
Discontinued Energy Segment
January 1, 1994 to
(Unaudited) August 16, 1994 1993
Net sales $19,868 $33,431
Costs and expenses:
Operating costs and expenses 13,229 23,818
Interest allocated 337 653
Unusual items - (1,424)
Total 13,566 23,047
Income from Energy segment operations
before income taxes 6,302 10,384
Income taxes 2,082 3,600
Income from Energy segment operations $ 4,220 $ 6,784
Unusual items totaling $1,424 in 1993 include gains on the sale of
certain oil and gas properties.
Transactions between Tredegar and the Energy segment are reflected as
though they are settled immediately and there are no amounts due to or from
Tredegar at the end of any period. All of the Energy segment's full-time
employees participated in Tredegar's noncontributory defined benefit plan for
salaried employees. These employees also participated in Tredegar's welfare
(medical, life and disability) and savings plans. Accordingly, related costs
have been allocated to discontinued operations. Interest expense was allocated
to discontinued operations operations. Interest expense was allocated to
discontinued operations based upon the ratio of the Energy segment's capital
employed (net assets) to Tredegar's consolidated capital employed.
For federal income tax purposes, results of the Energy segment's
operations through the date of disposal have been included in Tredegar's
consolidated tax return. The Energy segment's provision for income taxes
represents its allocated share of Tredegar's income tax expense. The allocated
share approximates income tax expense that would have been incurred had the
Energy segment (i) filed a separate consolidated tax return, and (ii) separately
computed income taxes in accordance with SFAS No. 109 in 1994 and 1993.
SHAREHOLDER INFORMATION
ANNUAL MEETING
The annual meeting of shareholders of Tredegar Industries, Inc., will be held on
May 21, 1996, beginning at 9:30 a.m. E.D.T. at the Tredegar Iron Works in
Richmond, Virginia. Formal notices of the annual meeting, proxies and proxy
statements will be mailed to shareholders on or before March 31.
CORPORATE HEADQUARTERS
1100 Boulders Parkway
Richmond, Virginia 23225
804-330-1000
NUMBER OF EMPLOYEES
Approximately 3,300
COUNSEL
Hunton & Williams
Richmond, Virginia
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
Richmond, Virginia
STOCK LISTING
New York Stock Exchange
Ticker Symbol: TG
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
New York, New York
INQUIRIES
Inquiries concerning stock transfers, dividend reimbursements,
consolidating accounts, changes of address, or lost or stolen stock certificates
should be directed to:
American Stock Transfer & Trust Company
Shareholder Services Department
40 Wall Street - 46th Floor
New York, New York 10005
Telephone: 800-937-5449
All other inquiries should be directed to:
Tredegar Industries, Inc.
Corporate Communications Department
1100 Boulders Parkway
Richmond, Virginia 23225
Telephone: 804-330-1044
INTERIM REPORT DISTRIBUTION
Tredegar does not distribute quarterly reports through brokerages or banks. If
your shares of Tredegar common stock are held through a third party, such as a
bank or brokerage, and you would like to receive quarterly reports, please
write or call the Corporate Communications Department at the above address.
DIVIDEND INFORMATION
During 1995 and 1994, the Board of Directors declared quarterly dividends of
$.06 per share, or $.24 per share on an annual basis. All decisions with
respect to payment of dividends will be made by the Board of Directors based
upon Tredegar's earnings, financial condition, anticipated cash needs and such
other considerations as the Board deems relevant. See Note 10 of Notes to
Financial Statements on page 44 for details of restrictions on dividends.
MARKET PRICES OF COMMON STOCK AND SHAREHOLDER DATA
The following table shows the reported high and low closing prices of
Tredegar's common stock by quarter for the past two years, adjusted for the
3-for-2 stock split.
1995 1994
High Low High Low
First Quarter $13.92 $11.58 $10.58 $ 9.50
Second Quarter 16.58 13.42 10.25 9.33
Third Quarter 21.25 17.25 12.42 9.83
Fourth Quarter 23.17 18.33 12.42 11.42
Tredegar has no preferred stock outstanding.
There were 12,185,300 shares of common stock held by 6,555 shareholders of
record on January 31, 1996.
PLANTS, FACILITIES AND OFFICES
CORPORATE HEADQUARTERS:
Richmond, Virginia
TREDEGAR FILM PRODUCTS:
Carbondale, Pennsylvania
Cincinnati, Ohio
LaGrange, Georgia
Manchester, Iowa
New Bern, North Carolina
Tacoma, Washington
Terre Haute, Indiana (2)
(plant and technical center)
Kerkrade, the Netherlands
Kobe, Japan
San Juan, Argentina
Sao Paulo, Brazil
TREDEGAR MOLDED PRODUCTS:
Alsip, Illinois
Excelsior Springs, Missouri
Graham, North Carolina
South Grafton, Massachusetts
St. Petersburg, Florida (2)
(2 plants including a technical center)
Philipsburg, Pennsylvania
State College, Pennsylvania
FIBERLUX:
Pawling, New York
Purchase, New York
ALUMINUM EXTRUSIONS:
Carthage, Tennessee
Kentland, Indiana
Newnan, Georgia
BRUDI:
Ridgefield, Washington
Adelaide, Australia
Halifax, United Kingdom
APPX SOFTWARE:
Richmond, Virginia
MOLECUMETICS:
Bellevue, Washington
Copy Rights 1996 Tredegar Industries, Inc.
Publication Design: Communication Design, Inc., Richmond, Virginia