Tredegar's Q1 net income up 15.5% to US$6.7M, sales up 9.4% to US$191.5M; results benefited from volume improvement for Bonnell Aluminum, but were offset by lower volume in film products
May 4, 2011
A summary of results for ongoing operations for the three months ended March 31, 2011 and 2010 is shown below:
* Ongoing operations include operating profit (loss) of Film Products, Aluminum Extrusions and the Other segment as well as Corporate Expenses, Interest and Taxes. See Notes to the Financial Tables included with this press release for further detail regarding the items included in the reconciliation between net income (loss) as reported under generally accepted accounting principles (GAAP) and income from ongoing operations, a non-GAAP financial measure. In addition, Note (e) within the Notes to the Financial Tables provides the definition of income from ongoing operations and the reasons why the measure is presented.
Nancy M. Taylor, Tredegar’s president and chief executive officer, said: “Film Products experienced a slight decrease in volume this quarter versus the first quarter of 2010, largely resulting from weakened demand for personal care materials. Operating profits declined as a result of lower volumes and continued spending on strategic initiatives. As we look forward, we are cautious about weakening demand for our customers’ products in the personal care and surface protection markets. With that in mind, we are focused on containing costs and improving efficiencies while continuing to support key strategic initiatives.”
Ms. Taylor added: “We are pleased with the volume improvement for Bonnell Aluminum, which has allowed us to reduce our losses versus the prior year. Although we do not yet see signs of a recovery in the building and construction market, we are prepared to respond when it occurs. The Bonnell management team continues to focus on managing costs.”
A summary of first quarter operating results for Film Products is provided below:
Net sales (sales less freight) in the first quarter of 2011 increased 4% from the first quarter of 2010 primarily due to an increase in average selling prices as a result of the pass-through of higher average resin costs to customers, partially offset by lower volumes. First-quarter sales volume decreased 3% compared to the first quarter of 2010, primarily due to lower volumes in personal care products, partially offset by higher volumes in films for the specialty and construction markets. Compared to the fourth quarter of 2010, sales volume was 2% lower as volumes declined across the board.
Operating profit from ongoing operations decreased in the first quarter of 2011 compared to the first quarter of the prior year, primarily due to the lower volumes noted above and increased operating costs and selling, general, and administrative expenses, which were primarily associated with planned expenditures in support of strategic initiatives. Additionally, preventative maintenance expense was accelerated into the first quarter to take advantage of downtime in certain facilities. The estimated impact on operating profits of the quarterly lag in the pass-through of average resin costs was a negative $1.7 million in the first quarter of 2011 versus a negative $2.3 million in the first quarter of 2010. The change in the U.S. dollar value of currencies for operations outside the U.S. had an unfavorable impact of approximately $275,000 in the first quarter of 2011 compared to the first quarter of 2010.
Capital expenditures in Film Products were $4.1 million in the first quarter of 2011 compared to $1.9 million in the first quarter of 2010. Film Products currently projects that capital expenditures will be approximately $16 million in 2011. Depreciation expense was $8.2 million in the first quarter of 2011 and $8.5 million in the first quarter of 2010, and is projected to be approximately $35 million in 2011.
A summary of first quarter operating results for Aluminum Extrusions, which is also referred to as Bonnell Aluminum, is provided below:
Net sales in the first quarter of 2011 increased in comparison to the first quarter of the previous year, largely due to increased volume and higher average selling prices, driven by an increase in aluminum prices. The favorable change in the operating loss of approximately $1.8 million versus the first quarter of 2010 was primarily driven by higher volume in most markets.
Capital expenditures for Aluminum Extrusions were $512,000 in the first quarter of 2011 compared with $1.2 million in the first quarter of 2010. Capital expenditures are projected to be approximately $5 million in 2011. Depreciation expense was $2.1 million in the first quarter of 2011 compared with $2.4 million in 2010, and is projected to be approximately $8.5 million in 2011.
The Other segment is comprised of the start-up operations of Bright View Technologies Corporation (Bright View Technologies) and Falling Springs, LLC (Falling Springs). Bright View Technologies is a developer and producer of high-value microstructure-based optical films for the LED (light emitting diode) and fluorescent lighting markets. Falling Springs develops, owns and operates multiple mitigation banks. Through the establishment of perpetual easements to restore, enhance and preserve wetlands, streams or other protected environmental resources, these mitigation banks create saleable credits that are used by the purchaser of credits to offset the negative environmental impacts from private and public development projects.
Net sales for this segment can fluctuate from quarter-to-quarter as Bright View Technologies is a late-stage development company and Falling Springs’ revenue can vary based upon the timing of development projects within its markets. Operating losses from ongoing operations were $1.2 million in the first quarter of 2011 compared to $636,000 in the first quarter of 2010. Losses increased in the first quarter of 2011 versus the prior year as a result of lower sales for the segment and a full quarter of operating losses for Bright View Technologies, whose assets were purchased on February 3, 2010.
Corporate Expenses, Interest and Taxes
Pension expense was $556,000 in the first quarter of 2011, an unfavorable change of $512,000 from the comparable period of 2010. Most of the pension impact on earnings is reflected in “Corporate expenses, net” in the net sales and operating profit by segment table. Corporate expenses, net decreased in the first quarter of 2011 versus 2010 primarily due to the favorable impact of the timing of the recognition of certain performance-based incentives and other corporate-related expenses, partially offset by the higher pension expenses noted above.
The effective tax rate used to compute income taxes from ongoing operations was 32.2% in the first quarter of 2011 compared with 43.1% in the first quarter of 2010. The decrease in the effective tax rate for ongoing operations for the first quarter of 2011 versus 2010, which had a favorable impact of approximately three cents per share, was primarily attributed to the prior year recognition of a reserve for an uncollectable tax indemnification receivable and a current year adjustment for a foreign tax rate difference.
Net cash (cash and cash equivalents in excess of debt) was $71.6 million at March 31, 2011, compared with net cash of $72.7 million at December 31, 2010. Net cash is a financial measure that is not calculated or presented in accordance with generally accepted accounting principles (GAAP). See the Notes to the Financial Tables for reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.
Based in Richmond, Va., Tredegar Corporation is primarily a global manufacturer of plastic films and aluminum extrusions.
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