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Sep 30, 2020
Tredegar Q3 2020 Earnings Report
Tredegar reported a net loss from continuing operations, but net income from ongoing operations was nearly flat compared to the same quarter last year.
Key Takeaways
Tredegar Corporation reported a net loss from continuing operations of $17.0 million, compared to a net income of $15.1 million in Q3 2019. However, net income from ongoing operations was $13.2 million, slightly lower than the $13.3 million in the same quarter of the previous year. The company divested its Personal Care Films business for gross proceeds of $60.5 million.
Net loss from continuing operations was $17.0 million ($0.51 per diluted share), compared to net income from continuing operations of $15.1 million ($0.45 per diluted share) in Q3 2019.
Net income from ongoing operations was $13.2 million ($0.39 per diluted share), compared with $13.3 million ($0.40 per diluted share) in Q3 2019.
EBITDA from ongoing operations for Aluminum Extrusions was $16.5 million, slightly higher than Q3 2019.
Strong cash flow during the third quarter with net cash in excess of debt as of September 30, 2020 of $28.0 million.
Tredegar
Tredegar
Tredegar Revenue by Segment
Revenue by Segment
Aluminum Extrusions Revenue
CapyFin.comPE Films Revenue
CapyFin.com Forward Guidance
The company expects a slowdown in the Surface Protection business in the fourth quarter of 2020, based on industry projections for products using flat panel displays and current customer inventory corrections. The company estimates that the contribution to EBITDA from ongoing operations for PE Films could decline due to the remaining customer product transitions by $18 million in 2021 versus 2020 and $4 million in 2022 versus 2021.
Positive Outlook
- The Company is aggressively pursuing and making progress in generating contribution from sales from new surface protection products, applications and customers.
- Annual contribution to EBITDA from ongoing operations for PE Films on surface protection products unrelated to the customer product transitions has increased since 2018 by approximately $11 million.
- Tredegar had debt (all under its revolving credit agreement) of $7.0 million and cash of $35.0 million at September 30, 2020.
- The revolving credit agreement allows borrowings of up to $500 million and matures in June 2024.
- The Company’s current stress testing under a COVID-19-driven recession indicates a low probability that a future leverage ratio will exceed 4.0x.
Challenges Ahead
- The PE Films segment experienced a decline in profitability during the third quarter versus last year due to previously disclosed customer product transitions in the Surface Protection component that had been delayed.
- Much of the current sales volume associated with the B&C market is related to contracts that existed at the start of the COVID-19 pandemic. Once completed, the level of new contracts is uncertain.
- The Company estimates COVID-19-related changes to the values of pension plan assets and liabilities resulted in an increase in the underfunding from $100 million to $120 million at September 30, 2020.
- The decline in estimated fair value during the first nine months of 2020 was primarily due to: (i) lower expectations for 2020 EBITDA and net cash flow associated with lower market demand for epinephrine delivery devices, resulting from COVID-19-related delays in in-person back-to-school schedules which significantly impacted kaléo’s peak back-to-school season, and social distancing guidelines which disrupted 2020 summer and after-school activities, (ii) pricing pressure, and (iii) a higher private company liquidity discount.
- The Company believes that previously reported delays in this customer's transitions were recently resolved by the customer and much of the remaining transitions could occur by the end of 2021.
Revenue & Expenses
Visualization of income flow from segment revenue to net income