•loss or gain of sales to significant customers on which the Company's business is highly dependent;
•inability to achieve sales to new customers to replace lost business;
•inability to develop, efficiently manufacture and deliver new products at competitive prices;
•failure of the Company's customers to achieve success or maintain market share;
•failure to protect our intellectual property rights;
•risks of doing business in countries outside the U.S. that affect our international operations;
•political, economic, and regulatory factors concerning the Company's products;
•uncertain economic conditions in countries in which the Company does business, including rising inflation and the effects of the Russian invasion of Ukraine;
•competition from other manufacturers, including manufacturers in lower-cost countries and manufacturers benefiting from government subsidies;
•impact of fluctuations in foreign exchange rates;
•an increase in the operating costs incurred by the Company's business units, including, for example, the cost of raw materials and energy;
•inability to successfully identify, complete or integrate strategic acquisitions; failure to realize the expected benefits of such acquisitions and assumption of unanticipated risks in such acquisitions;
•disruptions to the Company's manufacturing facilities, including those resulting from labor shortages;
•failure to continue to attract, develop and retain certain key officers or employees;
•the impact of public health epidemics on employees, production and the global economy, such as the COVID-19 pandemic;
•an information technology system failure or breach;
•the impact of the imposition of tariffs and sanctions on imported aluminum ingot used by Bonnell Aluminum;
•the impact of new tariffs, duties or other trade restrictions imposed as a result of trade tensions between the U.S. and other countries;
•the termination of anti-dumping duties on products imported to Brazil that compete with products produced by Flexible Packaging;
•failure to establish and maintain effective internal control over financial reporting;
Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K"). Readers are urged to review and consider carefully the disclosures Tredegar makes in its filings with the SEC.
References herein to "Tredegar," "the Company," "we," "us" and "our" are to Tredegar Corporation and its subsidiaries, collectively, unless the context otherwise indicates or requires.
Unless otherwise stated or indicated, all comparisons are to the prior year period. References to "Notes" are to notes to our condensed consolidated financial statements found in Part I, Item 1 of this Form 10-Q.
Second Quarter Financial Results Highlights
Second quarter 2022 net income from continuing operations was $14.8 million ($0.44 per diluted share) compared with net income from continuing operations of $20.7 million ($0.61 per diluted share) in the second quarter of 2021.
•EBITDA from ongoing operations for Aluminum Extrusions of $21.9 million was $2.2 million higher than the second quarter of 2021
•EBITDA from ongoing operations for PE Films of $7.1 million was $1.9 million lower than the second quarter of 2021
•EBITDA from ongoing operations for Flexible Packaging Films of $7.6 million was $0.6 million lower than the second quarter of 2021
Second Quarter of 2022 Compared with the Second Quarter of 2021
Income (loss) from continuing operations before income taxes for the three months ended June 30, 2021
Income (loss) from continuing operations before income taxes for the three months ended June 30, 2022
Net income from continuing operations for the three months ended June 30, 2022 $ 14,788
(Gains) losses from sale of assets, investment writedowns and other items: Professional fees associated with business development activities and other2 0.1
Professional fees associated with internal control over financial reporting2 0.8
Write-down of investment in Harbinger Capital Partners Special Situations Fund1
Stock-based compensation expense associated with the fair value remeasurement of awards granted at the time of the 2020 special dividend2
Transition service fees, net of corporate costs associated with the divested Personal Care Films business1
Net periodic benefit cost for the frozen defined benefit pension plan in process of termination3
Average debt outstanding and interest rates were as follows:
Floating-rate debt with interest charged on a rollover basis plus a credit spread1: Average outstanding debt balance
First Six Months of 2022 Results vs. First Six Months of 2021 Results
Income (loss) from continuing operations before income taxes for the first six months ended June 30, 2021
Income (loss) from continuing operations before income taxes for the first six months ended June 30, 2022
(Gains) losses from sale of assets, investment writedowns and other items: Professional fees associated with business development activities and other2 1.6
Professional fees associated with internal control over financial reporting2 1.2
Write-down of investment in Harbinger Capital Partners Special Situations Fund1
Stock-based compensation expense associated with the fair value remeasurement of awards granted at the time of the 2020 special dividend2
Transition service fees, net of corporate costs associated with the divested Personal Care Films business1
Net periodic benefit cost for the frozen defined benefit pension plan in process of termination3
Average debt outstanding and interest rates were as follows:
Floating-rate debt with interest charged on a rollover basis plus a credit spread1: Average outstanding debt balance
A summary of results for Aluminum Extrusions is provided below:
*See the table in Note 10 for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.
Second Quarter 2022 Results vs. Second Quarter 2021 Results
EBITDA from ongoing operations in the second quarter of 2022 increased by $2.2 million in comparison to the second quarter of 2021 primarily due to:
First Six Months of 2022 Results vs. First Six Months of 2021 Results
EBITDA from ongoing operations in the first six months of 2022 increased by $12.8 million in comparison to the first six months of 2021 primarily due to:
Projected Capital Expenditures and Depreciation & Amortization
A summary of results for PE Films is provided below:
* See the table in Note 10 for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.
Second Quarter 2022 Results vs. Second Quarter 2021 Results
EBITDA from ongoing operations in the second quarter of 2022 decreased by $1.9 million versus the second quarter of 2021, primarily due to:
First Six Months of 2022 Results vs. First Six Months of 2021 Results
EBITDA from ongoing operations in the first six months of 2022 decreased by $2.1 million versus the first six months of 2021, primarily due to:
Refer to Item 3. Quantitative and Qualitative Disclosures About Market Risk in this Form 10-Q for additional information on resin prices.
Customer Product Transitions and Other Factors in Surface Protection
Projected Capital Expenditures and Depreciation & Amortization
A summary of results for Flexible Packaging Films is provided below:
* See the table in Note 10 for a reconciliation of this non-GAAP measure to the most comparable measure calculated in accordance with GAAP.
Second Quarter 2022 Results vs. Second Quarter 2021 Results
EBITDA from ongoing operations in the second quarter of 2022 decreased by $0.6 million versus the second quarter of 2021 primarily due to:
•Net unfavorable foreign currency translation of Real-denominated operating costs ($1.2 million); and
First Six Months of 2022 Results vs. First Six Months of 2021 Results
EBITDA from ongoing operations in the first six months of 2022 decreased by $5.2 million versus the first six months of 2021 primarily due to:
•Net unfavorable foreign currency translation of Real-denominated operating costs ($1.5 million); and
Projected Capital Expenditures and Depreciation & Amortization
Corporate Expenses, Interest & Other
Net capitalization and other credit measures are provided in Liquidity and Capital Resources below.
•Accounts and other receivables increased $24.7 million (23.9%).
•Identifiable intangible assets, net decreased $1.3 million (9.0%) due to amortization expense.
•Accounts payable increased $50.9 million (41.1%).
Net capitalization and indebtedness as defined under the Credit Agreement as of June 30, 2022 were as follows:
Net Capitalization and Indebtedness as of June 30, 2022
The primary restrictive covenants in the Credit Agreement include:
•Total Net Leverage Ratio of 4.00x;
•Interest Coverage Ratio of 3.00x; and
•Interest Coverage Ratio is defined as the ratio of (a) Credit EBITDA to (b) interest expense.
Computations of Credit EBITDA, Total Net Leverage Ratio and Interest Coverage Ratio (in each case,
as Defined in the Credit Agreement) Along with Related Primary Restrictive Covenants as of and for
Computation of Credit EBITDA for the twelve months ended June 30, 2022 (In Thousands): Net income (loss)
Charges related to stock option grants and awards accounted for under the fair value-based method
Losses related to the application of the equity method of accounting
Losses related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting
Income related to changes in estimates for stock option grants and awards accounted for under the fair value-based method
Income related to the application of the equity method of accounting
Income related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting
Plus cash dividends declared on investments in an amount not to exceed $10,000 for such period
Plus or minus, as applicable, pro forma EBITDA adjustments associated with acquisitions and asset dispositions
Plus or minus, as applicable, pro forma EBITDA adjustments to pension expense associated with the early payment of pension obligations
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