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TREDEGAR REPORTS HIGHER SECOND-QUARTER EARNINGS
ALUMINUM PROFITS DRIVE IMPROVED MANUFACTURING RESULTS
RICHMOND, Va., July 21, 2004–Tredegar Corporation (NYSE:TG) reported second-quarter income from continuing operations of $5.2 million (14 cents per share) compared to $1.7 million (4 cents per share) in 2003. Earnings from manufacturing operations were $10.6 million (27 cents per share) versus $7.6 million (20 cents per share). Second-quarter sales were $216.1 million compared to $181.6 million in 2003. A summary of second-quarter and year-to-date results from continuing operations is shown below:
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(In millions, except per-share data)
|
Second Quarter
Ended June 30
|
Six Months
Ended June 30
|
|
2004
|
2003
|
2004
|
2003
|
Income from continuing operations as
reported under generally accepted
accounting principles (GAAP) |
$ 5.2 |
$ 1.7 |
$ 7.6 |
$ 6.5 |
| After-tax effects of: |
|
|
|
|
| Loss related to unusual items |
- |
- |
- |
.7 |
Loss associated with plant shutdowns,
asset impairments and restructurings |
4.0 |
3.8 |
11.0 |
3.8 |
| Loss from Therics ongoing operations |
1.7 |
2.1 |
3.3 |
4.3 |
| Gain on sale of other assets |
(.03) |
- |
(4.2) |
- |
| Income from manufacturing operations* |
$10.6 |
$ 7.6 |
$ 17.7 |
$ 15.3 |
| |
Diluted earnings per share from continuing
operations as reported under GAAP |
$ .14 |
$ .04 |
$ .20 |
$ .17 |
| After-tax effects per diluted share of: |
|
|
|
|
| Loss related to unusual items |
- |
- |
- |
.02 |
Loss associated with plant shutdowns,
asset impairments and restructurings |
.10 |
.10 |
.29 |
.10 |
| Loss from Therics ongoing operations |
.04 |
.06 |
.08 |
.11 |
| Gain on sale of other assets |
(.01) |
- |
(.11) |
- |
Diluted earnings per share from
manufacturing operations* |
$ .27 |
$ .20 |
$ .46 |
$ .40 |
* The after-tax effects of unusual items, plant shutdowns, asset impairments and restructurings, Therics’ ongoing operations, and gain on sale of other assets have been presented separately and removed from income and earnings per share from continuing operations as reported under GAAP to determine Tredegar’s presentation of income and earnings per share from manufacturing operations. Income and earnings per share from manufacturing operations are key financial and analytical measures used by Tredegar to gauge the operating performance of its manufacturing businesses. They are not intended to represent the stand-alone results for Tredegar’s manufacturing businesses under GAAP and should not be considered as an alternative to net income or earnings per share as defined by GAAP. They exclude items that we believe do not relate to Tredegar’s ongoing manufacturing operations. They also exclude Therics, a technology company that cannot be analyzed and valued by historical measures of earnings and cash flow. Therics’ prospects and value currently depend on its ability to develop, manufacture, market, sell and profit from its orthopaedic product line. There is no assurance whether or when we might realize any return on our investment in Therics.
Norman A. Scher, Tredegar’s president and chief executive officer, said: “The increase in second-quarter earnings was led by our aluminum extrusions business, where improved market conditions, higher volume and cost reductions boosted profits. Volume and profits in films were also up, and we remain optimistic that near-term opportunities will lead to meaningful profit growth in this business by the end of this year or early 2005.”
Regarding Therics, Scher said: “We continue to monitor Therics closely and hope to see further acceptance of its new bone void filler products during the second half of 2004.”
MANUFACTURING OPERATIONS
Film Products
Second-quarter net sales in Film Products were $101.5 million, up 15% from $88.4 million in 2003. Operating profit from ongoing operations was $10.9 million, up 8% from $10.1 million last year. Volume for the quarter increased 9% to 71.2 million pounds from 65.5 million pounds in 2003.
On a sequential basis, net sales, operating profit from ongoing operations and volume in the first quarter of 2004 were $95.9 million, $10.0 million and 69.1 million pounds, respectively.
Film Products has successfully introduced a variety of new elastic diaper laminates and feminine hygiene topsheet products to several global customers, and sales of new packaging and specialty films are increasing. The company continues to invest aggressively to support new global growth opportunities. The ongoing success of P&G's new feminine pad topsheet, which was rolled out in Europe and Japan in 2003, is leading to new opportunities in other regions. While current capacity is sufficient to meet near-term demand, Film Products is increasing 2004 capital spending from $40 million to $55 million to support additional growth expectations for this product. This increase in capital expenditures is tied to contracted volume commitments.
Year-to-date net sales were $197.4 million versus $181.8 million in 2003. Operating profit from ongoing operations was $20.9 million compared to $24.0 million in 2003. Year-to-date volume increased slightly to 140.3 million pounds from 138.8 million pounds. Prior-year results include sales of certain domestic backsheet that were discontinued at the end of the first quarter of 2003.
Capital spending in Film Products through June 30 totaled $21 million.
Aluminum Extrusions
Second-quarter net sales in Aluminum Extrusions were $109.0 million, up 23% from $88.6 million in 2003. Volume was up 8% to 62.0 million pounds from 57.6 million pounds in 2003. Operating profit from ongoing operations increased 69% to $8.3 million from $4.9 million in 2003. The profit increase was driven by volume growth, higher selling prices and improved operating efficiencies. Shipments were up in all end markets, with the strongest growth in the commercial building and construction, transportation, and machinery and equipment segments.
Year-to-date net sales were $204.2 million, up 18% from $173.1 million in 2003. Operating profit from ongoing operations for the six-month period nearly doubled to $12.0 million from $6.1 million in 2003. Year-to-date volume increased 8% to 120.0 million pounds, up from 111.6 million pounds in 2003.
Through June 30, capital expenditures totaled $3 million and are expected to be approximately $15 million for the year.
THERICS
The second-quarter operating loss from ongoing operations at Therics was $2.5 million compared to a loss of $3.3 million in 2003. Therics launched its initial product line earlier this year. Net sales were $120,000 for the quarter, up from $11,000 in the first quarter. The year-to-date operating loss was $5.0 million compared to $6.6 million in 2003.
Quarterly operating losses are expected to continue at about the second-quarter level until meaningful sales are achieved.
OTHER ITEMS
Second-quarter results include a net after-tax charge of $4.0 million (10 cents per share) for plant shutdowns, asset impairments and restructurings, including asset impairment charges of $1.9 million related to the films business in Argentina, which is for sale. Second-quarter results also include a net after-tax gain of $268,000 on the sale of other assets. Last year’s second-quarter results included a net after-tax charge of $3.8 million (10 cents per share) related to plant shutdowns, asset impairments and restructurings.
Year-to-date net after-tax charges for unusual items, plant shutdowns, asset impairments and restructurings were $11.0 million (29 cents per share), including $6.2 million related to the planned shutdown of the aluminum extrusions plant in Aurora, Ontario. Comparable charges in 2003 totaled $4.5 million (12 cents per share). The year-to-date gain on the sale of other assets in 2004 was $4.2 million (11 cents per share) and was related primarily to the sale of securities.
Second-quarter results for 2003 include a net gain from discontinued operations of $891,000 (2 cents per share) related to the sale of intellectual property formerly owned by Tredegar’s Molecumetics subsidiary, which was closed in 2002. The year-to-date net loss for discontinued operations in 2003 totaled $48.6 million ($1.26 per share) and was related primarily to the company’s venture capital activities.
Additional details regarding these items are provided in the financial tables included with this press release.
CAPITAL STRUCTURE
Net debt (debt net of cash) was $70 million, or less than one times the last twelve months adjusted EBITDA.
See notes to financial tables for reconciliations to comparable GAAP measures.
QUARTERLY CONFERENCE CALL
Tredegar management will host a conference call on July 22 at 11:00 a.m. EDT to discuss its earnings results. Individuals can access the call by dialing 877-692-2592. Individuals calling from outside the United States should dial 973-582-2700. A replay of the call will be available, beginning at 2:00 p.m. on July 22 through July 29, by dialing 877-519-4471 (domestic) or 973-341-3080 (international), conference ID 4933620.
Alternatively, individuals may listen to the live audio webcast of the presentation by visiting the Tredegar Web site at www.tredegar.com. The webcast of the call may be accessed by selecting the “Webcast of second-quarter results” link on the home page. An archived version of the call will be available for replay on the Web site.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
The words “believe,” “hope,” “expect,” “are likely,” and similar expressions identify “forward-looking” statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements, including without limitation the following:
Film Products is highly dependent on sales to one customer, which comprised approximately 30% of Tredegar’s net sales in 2003. Film Products' success in this regard depends on its ability to develop products that meet this customer’s requirements as well as market acceptance of this customer’s products. Our ability to grow Film Products and attract new customers depends on developing and delivering new products, especially in the personal care market. Personal care products are now being made with a variety of new materials, replacing traditional backsheet and other components. While we have substantial technical resources, there can be no assurance that our new products can be brought to market successfully, or at the same level of profitability and market share of replaced films. A shift in customer preferences away from our technologies, our inability to develop and deliver new profitable products, or delayed acceptance of our new products in domestic and foreign markets, could have a material adverse effect on our business.
Aluminum Extrusions is a cyclical business that is highly dependent on the economic conditions of its end-use markets in the U.S. and Canada, particularly in the construction, distribution and transportation industries. This business is also subject to seasonal slowdowns during the winter months. Aluminum Extrusions is under increasing domestic and foreign competitive pressures, including a growing presence of foreign imports in a number of its markets.
Therics’ prospects and value depend on its ability to develop, manufacture, market, sell and profit from its orthopaedic product line and to achieve specified milestones, all of which will depend on its preclinical, clinical, regulatory, procurement, manufacturing, and sales and marketing capabilities or, where appropriate, its ability to enter into satisfactory arrangements with third parties to provide those functions.
Future performance is also influenced by the costs incurred by Tredegar’s businesses. There is no assurance that cost control efforts will offset cost increases or any additional declines in revenues. Likewise, there is no assurance of our ability to pass through to our customers cost increases in raw materials.
Tredegar does not undertake to update any forward-looking statement made in this press release to reflect any change in management's expectations or any change in conditions, assumptions or circumstances on which such statements are based.
To the extent that this release contains non-GAAP financial measures, it also presents both the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the difference between any such non-GAAP measures and such comparable GAAP financial measures. Accompanying the reconciliation is management ’ s statement concerning the reasons why management believes that presentation of non-GAAP measures provides useful information to investors concerning Tredegar’ s financial condition and results of operations.
Based in Richmond, Va., Tredegar Corporation is a global manufacturer of plastic films and aluminum extrusions.
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