T
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
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£
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
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For
the transition period from
|
to
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Tredegar
Corporation
|
(Exact
Name of Registrant as Specified in Its
Charter)
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Virginia
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54-1497771
|
|
(State
or Other Jurisdiction of Incorporation or Organization)
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(I.R.S.
Employer Identification No.)
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1100 Boulders Parkway
Richmond, Virginia
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23225
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|
(Address
of Principal Executive Offices)
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(Zip
Code)
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Large
accelerated filer
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£
|
Accelerated
filer
|
T
|
|
Non-accelerated
filer
|
£
|
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
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£
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September 30,
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December 31,
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|||||||
2009
|
2008
|
|||||||
Assets
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||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 82,053 | $ | 45,975 | ||||
Accounts
and notes receivable, net of allowance for doubtful accounts and sales
returns of $5,213 in 2009 and $3,949 in 2008
|
85,840 | 91,400 | ||||||
Income
taxes recoverable
|
1,300 | 12,549 | ||||||
Inventories
|
30,663 | 36,809 | ||||||
Deferred
income taxes
|
6,055 | 7,654 | ||||||
Prepaid
expenses and other
|
3,933 | 5,374 | ||||||
Total
current assets
|
209,844 | 199,761 | ||||||
Property,
plant and equipment, at cost
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667,489 | 640,492 | ||||||
Less
accumulated depreciation
|
434,270 | 403,622 | ||||||
Net
property, plant and equipment
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233,219 | 236,870 | ||||||
Other
assets and deferred charges
|
40,692 | 38,926 | ||||||
Goodwill
and other intangibles
|
104,729 | 135,075 | ||||||
Total
assets
|
$ | 588,484 | $ | 610,632 | ||||
Liabilities
and Shareholders' Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 57,737 | $ | 54,990 | ||||
Accrued
expenses
|
35,129 | 38,349 | ||||||
Current
portion of long-term debt
|
862 | 529 | ||||||
Total
current liabilities
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93,728 | 93,868 | ||||||
Long-term
debt
|
746 | 22,173 | ||||||
Deferred
income taxes
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53,279 | 45,152 | ||||||
Other
noncurrent liabilities
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25,691 | 29,023 | ||||||
Total
liabilities
|
173,444 | 190,216 | ||||||
Shareholders'
equity:
|
||||||||
Common
stock, no par value
|
40,528 | 40,719 | ||||||
Common
stock held in trust for savings restoration plan
|
(1,320 | ) | (1,313 | ) | ||||
Foreign
currency translation adjustment
|
26,934 | 23,443 | ||||||
Loss
on derivative financial instruments
|
(463 | ) | (6,692 | ) | ||||
Pension
and other postretirement benefit adjustments
|
(64,288 | ) | (64,788 | ) | ||||
Retained
earnings
|
413,649 | 429,047 | ||||||
Total
shareholders' equity
|
415,040 | 420,416 | ||||||
Total
liabilities and shareholders' equity
|
$ | 588,484 | $ | 610,632 |
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended Sept. 30
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Ended Sept. 30
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|||||||||||||||
2009
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2008
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2009
|
2008
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|||||||||||||
Revenues
and other items:
|
||||||||||||||||
Sales
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$ | 175,662 | $ | 228,709 | $ | 486,843 | $ | 691,197 | ||||||||
Other
income (expense), net
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300 | 7,709 | 1,657 | 8,929 | ||||||||||||
175,962 | 236,418 | 488,500 | 700,126 | |||||||||||||
Costs
and expenses:
|
||||||||||||||||
Cost
of goods sold
|
135,779 | 195,438 | 386,652 | 585,926 | ||||||||||||
Freight
|
4,692 | 5,450 | 11,791 | 16,348 | ||||||||||||
Selling,
general and administrative
|
16,152 | 13,602 | 45,191 | 44,376 | ||||||||||||
Research
and development
|
2,469 | 3,027 | 7,980 | 8,361 | ||||||||||||
Amortization
of intangibles
|
30 | 30 | 90 | 93 | ||||||||||||
Interest
expense
|
197 | 483 | 585 | 1,921 | ||||||||||||
Asset
impairments and costs associated with exit and disposal
activities
|
- | - | 1,482 | 5,159 | ||||||||||||
Goodwill
impairment charge
|
- | - | 30,559 | - | ||||||||||||
Total
|
159,319 | 218,030 | 484,330 | 662,184 | ||||||||||||
Income
from continuing operations before income taxes
|
16,643 | 18,388 | 4,170 | 37,942 | ||||||||||||
Income
taxes
|
5,647 | 7,310 | 15,504 | 14,214 | ||||||||||||
Income
(loss) from continuing operations
|
10,996 | 11,078 | (11,334 | ) | 23,728 | |||||||||||
Loss
from discontinued operations
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- | - | - | (930 | ) | |||||||||||
Net
income (loss)
|
$ | 10,996 | $ | 11,078 | $ | (11,334 | ) | $ | 22,798 | |||||||
Earnings
(loss) per share:
|
||||||||||||||||
Basic:
|
||||||||||||||||
Continuing
operations
|
$ | .32 | $ | .33 | $ | (.33 | ) | $ | .70 | |||||||
Discontinued
operations
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- | - | - | (.03 | ) | |||||||||||
Net
income (loss)
|
$ | .32 | $ | .33 | $ | (.33 | ) | $ | .67 | |||||||
Diluted:
|
||||||||||||||||
Continuing
operations
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$ | .32 | $ | .33 | $ | (.33 | ) | $ | .69 | |||||||
Discontinued
operations
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- | - | - | (.03 | ) | |||||||||||
Net
income (loss)
|
$ | .32 | $ | .33 | $ | (.33 | ) | $ | .66 | |||||||
Shares
used to compute earnings (loss) per share:
|
||||||||||||||||
Basic
|
33,878 | 33,672 | 33,873 | 34,042 | ||||||||||||
Diluted
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33,922 | 33,903 | 33,873 | 34,262 | ||||||||||||
Dividends
per share
|
$ | .04 | $ | .04 | $ | .12 | $ | .12 |
Nine
Months
|
||||||||
Ended Sept. 30
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||||||||
2009
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2008
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|||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | (11,334 | ) | $ | 22,798 | |||
Adjustments
for noncash items:
|
||||||||
Depreciation
|
29,607 | 32,844 | ||||||
Amortization
of intangibles
|
90 | 93 | ||||||
Goodwill
impairment charge
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30,559 | - | ||||||
Deferred
income taxes
|
3,647 | 17,515 | ||||||
Accrued
pension and postretirement benefits
|
(2,219 | ) | (3,354 | ) | ||||
Loss
on asset impairments and divestitures
|
- | 3,337 | ||||||
Gain
on the write-up of an investment accounted for under the fair value
method
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- | (5,000 | ) | |||||
Gain
on sale of assets
|
(1,004 | ) | (2,500 | ) | ||||
Changes
in assets and liabilities, net of effects of acquisitions and
divestitures:
|
||||||||
Accounts
and notes receivable
|
7,087 | (22,101 | ) | |||||
Inventories
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7,088 | 16,430 | ||||||
Income
taxes recoverable
|
11,249 | (13,544 | ) | |||||
Prepaid
expenses and other
|
1,466 | (1,600 | ) | |||||
Accounts
payable and accrued expenses
|
10,425 | 12,120 | ||||||
Other,
net
|
(1,154 | ) | 3,359 | |||||
Net
cash provided by operating activities
|
85,507 | 60,397 | ||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures (including settlement of related accounts payable of $1,709
in 2009)
|
(25,507 | ) | (13,849 | ) | ||||
Proceeds
from the sale of the aluminum extrusions business in Canada (net of cash
included in sale and transaction costs)
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- | 23,616 | ||||||
Proceeds
from the sale of assets and property disposals
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1,118 | 3,682 | ||||||
Investments
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- | (2,059 | ) | |||||
Net
cash provided by (used in) investing activities
|
(24,389 | ) | 11,390 | |||||
Cash
flows from financing activities:
|
||||||||
Dividends
paid
|
(4,071 | ) | (4,090 | ) | ||||
Debt
principal payments
|
(21,094 | ) | (75,657 | ) | ||||
Borrowings
|
- | 22,000 | ||||||
Repurchases
of Tredegar common stock (including settlement of payable of $3,368 in
2008)
|
(1,523 | ) | (19,792 | ) | ||||
Proceeds
from exercise of stock options and other
|
224 | 4,069 | ||||||
Net
cash used in financing activities
|
(26,464 | ) | (73,470 | ) | ||||
Effect
of exchange rate changes on cash
|
1,424 | 90 | ||||||
Increase
(decrease) in cash and cash equivalents
|
36,078 | (1,593 | ) | |||||
Cash
and cash equivalents at beginning of period
|
45,975 | 48,217 | ||||||
Cash
and cash equivalents at end of period
|
$ | 82,053 | $ | 46,624 |
Accumulated
Other
|
||||||||||||||||||||||||||||
Comprehensive Income (Loss)
|
||||||||||||||||||||||||||||
Common Stock
|
Retained Earnings
|
Trust for Savings Restoration
Plan
|
Foreign
Currency
Translation
|
Gain (Loss) on Derivative Financial
Instruments
|
Pension & Other Post- retirement Benefit
Adjust.
|
Total
Shareholders'
Equity
|
||||||||||||||||||||||
Balance December 31, 2008
|
$ | 40,719 | $ | 429,047 | $ | (1,313 | ) | $ | 23,443 | $ | (6,692 | ) | $ | (64,788 | ) | $ | 420,416 | |||||||||||
Comprehensive
income (loss):
|
||||||||||||||||||||||||||||
Net
income (loss)
|
- | (11,334 | ) | - | - | - | - | (11,334 | ) | |||||||||||||||||||
Other
comprehensive income (loss):
|
||||||||||||||||||||||||||||
Foreign
currency translation adjustment (net of tax of $1,927)
|
- | - | - | 3,491 | - | - | 3,491 | |||||||||||||||||||||
Derivative
financial instruments adjustment (net of tax of $3,837)
|
- | - | - | - | 6,229 | - | 6,229 | |||||||||||||||||||||
Amortization
of prior service costs and net gains or losses (net of tax of
$281)
|
- | - | - | - | - | 500 | 500 | |||||||||||||||||||||
Comprehensive
income (loss)
|
(1,114 | ) | ||||||||||||||||||||||||||
Cash
dividends declared ($.12 per share)
|
- | (4,071 | ) | - | - | - | - | (4,071 | ) | |||||||||||||||||||
Stock-based
compensation expense & other
|
1,950 | - | - | - | - | - | 1,950 | |||||||||||||||||||||
Issued
upon exercise of stock options (including related income tax expense of
$65) & other
|
(618 | ) | - | - | - | - | - | (618 | ) | |||||||||||||||||||
Repurchases
of Tredegar common stock
|
(1,523 | ) | - | - | - | - | - | (1,523 | ) | |||||||||||||||||||
Tredegar
common stock purchased by trust for savings
restoration plan
|
- | 7 | (7 | ) | - | - | - | - | ||||||||||||||||||||
Balance September 30, 2009
|
$ | 40,528 | $ | 413,649 | $ | (1,320 | ) | $ | 26,934 | $ | (463 | ) | $ | (64,288 | ) | $ | 415,040 |
1.
|
In
the opinion of management, the accompanying consolidated financial
statements of Tredegar Corporation and Subsidiaries (“Tredegar,” “we,”
“us” or “our”) contain all adjustments necessary to present fairly, in all
material respects, Tredegar’s consolidated financial position as of
September 30, 2009, the consolidated results of operations for the three
and nine months ended September 30, 2009 and 2008, the consolidated cash
flows for the nine months ended September 30, 2009 and 2008, and the
consolidated changes in shareholders’ equity for the nine months ended
September 30, 2009. All such adjustments are deemed to be of a
normal, recurring nature. The preparation of these interim
financial statements also includes an evaluation of subsequent events
through November 2, 2009. These financial statements should be
read in conjunction with the consolidated financial statements and related
notes included in Tredegar’s Annual Report on Form 10-K for the year ended
December 31, 2008. The results of operations for the nine
months ended September 30, 2009, are not necessarily indicative of the
results to be expected for the full
year.
|
2.
|
Plant
shutdowns, asset impairments, restructurings and other charges in the
third quarter of 2009 shown in the net sales and operating profit by
segment table in Note 10 include:
|
|
·
|
Pretax
losses of $111,000 for timing differences between the recognition of
realized losses on aluminum futures contracts and related revenues from
the delayed fulfillment by customers of fixed-price forward purchase
commitments (included in “Cost of goods sold” in the consolidated
statements of income, see Note 8 on page 11 for additional
detail).
|
|
·
|
Pretax
charges of $1.6 million for severance and other employee-related costs in
connection with restructurings in Film Products ($1.1 million), Aluminum
Extrusions ($369,000) and corporate headquarters ($178,000, included in
“Corporate expenses, net” in the net sales and operating profit by segment
table in Note 10);
|
|
·
|
Pretax
losses of $1.5 million for timing differences between the recognition of
realized losses on aluminum futures contracts and related revenues from
the delayed fulfillment by customers of fixed-price forward purchase
commitments (included in “Cost of goods sold” in the consolidated
statements of income, see Note 8 on page 11 for additional
detail);
|
|
·
|
Pretax
gain of $276,000 related to the
reduction of future environmental costs expected to be incurred by
Aluminum Extrusions (included in “Cost of goods sold” in the consolidated
statements of income);
|
|
·
|
Pretax
gain of $275,000 on the sale of equipment (included in “Other income
(expense), net” in the consolidated statements of income) from a
previously shutdown films manufacturing facility in LaGrange,
Georgia;
|
|
·
|
Pretax
gain of $175,000 on the sale of a previously shutdown aluminum extrusions
manufacturing facility in El Campo, Texas (included in “Other income
(expense), net” in the consolidated statements of income);
and
|
|
·
|
Pretax
gain of $149,000 related to the reversal to income of certain inventory
impairment accruals in Film
Products.
|
|
·
|
Pretax
charges of $2.7 million for severance and other employee-related costs in
connection with restructurings in Film Products ($2.2 million) and
Aluminum Extrusions ($510,000);
|
|
·
|
Pretax
charges of $2.5 million for asset impairments in Film Products;
and
|
|
·
|
Pretax
charge of $105,000 related to expected future environmental costs at the
aluminum extrusions facility in Newnan, Georgia (included in “Cost of
goods sold” in the consolidated statements of
income).
|
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
Sept. 30
|
Sept. 30
|
|||||||||||||||
(In Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Loss
from operations before income taxes
|
$ | - | $ | - | $ | - | $ | (391 | ) | |||||||
Income
tax cost (benefit) on operations
|
- | - | - | (98 | ) | |||||||||||
- | - | - | (293 | ) | ||||||||||||
Loss
associated with asset impairments and disposal activities
|
- | - | - | (1,337 | ) | |||||||||||
Income
tax cost (benefit) on asset impairments and costs associated with disposal
activities
|
- | - | - | (700 | ) | |||||||||||
- | - | - | (637 | ) | ||||||||||||
Loss from discontinued
operations
|
$ | - | $ | - | $ | - | $ | (930 | ) |
(In Thousands)
|
Severance
|
Other (a)
|
Total
|
|||||||||
Balance
at December 31, 2008
|
$ | 431 | $ | 4,491 | $ | 4,922 | ||||||
Changes
in 2009:
|
||||||||||||
Charges
|
1,631 | - | 1,631 | |||||||||
Cash spent
|
(1,435 | ) | (999 | ) | (2,434 | ) | ||||||
Balance at September 30,
2009
|
$ | 627 | $ | 3,492 | $ | 4,119 |
(a)
|
Other
primarily includes accrued losses on a sub-lease at a facility in
Princeton, New Jersey.
|
3.
|
We
assess goodwill for impairment when events or circumstances indicate that
the carrying value may not be recoverable, or, at a minimum, on an annual
basis (December 1st
of each year). Our reporting units include Film Products and
Aluminum Extrusions, each of which may have separately identifiable
operating net assets (operating assets including goodwill and intangible
assets net of operating liabilities). We estimate the fair
value of our reporting units using discounted cash flow analysis and
comparative enterprise value-to-EBITDA multiples. Based on the
severity of the economic downturn and its impact on the sales volumes of
our aluminum extrusions business (a 36.8% decline in sales volume in the
first quarter of 2009 compared with the first quarter of 2008), the
resulting first quarter operating loss (see Note 10), possible future
losses and the uncertainty in the amount and timing of an economic
recovery, we determined that impairment indicators
existed. Upon completing the impairment analysis as of March
31, 2009, a goodwill impairment charge of $30.6 million ($30.6 million
after tax) was recognized in Aluminum Extrusions in the first quarter of
2009. This was the entire amount of goodwill associated with
the Aluminum Extrusions reporting unit and an anomalous write-off under
U.S. GAAP since the decline in the estimated fair value below the carrying
value of the operating net assets of Aluminum Extrusions was far less than
$30.6 million. The goodwill of Film Products will be tested for
impairment at the annual testing date unless there is an indicator of
impairment identified at an earlier
date.
|
4.
|
The
components of other comprehensive income or loss are as
follows:
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended Sept. 30
|
Ended Sept. 30
|
|||||||||||||||
(In Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Net
income (loss)
|
$ | 10,996 | $ | 11,078 | $ | (11,334 | ) | $ | 22,798 | |||||||
Other
comprehensive income (loss), net of tax:
|
||||||||||||||||
Foreign
currency translation adjustment:
|
||||||||||||||||
Unrealized
foreign currency translation adjustment arising during
period
|
2,878 | (6,656 | ) | 3,491 | 508 | |||||||||||
Reclassification
adjustment of foreign currency translation gain included in income
(related to sale of aluminum extrusions business in Canada - see Note
2)
|
- | - | - | (14,292 | ) | |||||||||||
Foreign
currency translation adjustment
|
2,878 | (6,656 | ) | 3,491 | (13,784 | ) | ||||||||||
Derivative
financial instrument adjustment
|
1,279 | (3,655 | ) | 6,229 | (1,068 | ) | ||||||||||
Pension
and other post-retirement benefit adjustment:
|
||||||||||||||||
Amortization
of prior service costs and net gains or losses
|
109 | 547 | 500 | 315 | ||||||||||||
Reclassification
of net actuarial losses and prior service costs (related to sale of
aluminum extrusions business in Canada - see Note 2)
|
- | - | - | 4,871 | ||||||||||||
Pension
and other post-retirement benefit
adjustment
|
109 | 547 | 500 | 5,186 | ||||||||||||
Comprehensive income (loss)
|
$ | 15,262 | $ | 1,314 | $ | (1,114 | ) | $ | 13,132 |
5.
|
The
components of inventories are as
follows:
|
Sept.
30
|
Dec.
31
|
|||||||
(In Thousands)
|
2009
|
2008
|
||||||
Finished
goods
|
$ | 5,578 | $ | 7,470 | ||||
Work-in-process
|
1,653 | 2,210 | ||||||
Raw
materials
|
8,898 | 14,264 | ||||||
Stores, supplies and other
|
14,534 | 12,865 | ||||||
Total
|
$ | 30,663 | $ | 36,809 |
6.
|
Basic
earnings per share is computed by dividing net income by the weighted
average number of shares of common stock
outstanding. Diluted earnings per share is computed by
dividing net income by the weighted average common and potentially
dilutive common equivalent shares outstanding, determined as
follows:
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended Sept. 30
|
Ended Sept. 30
|
|||||||||||||||
(In Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Weighted
average shares outstanding used to compute basic earnings (loss) per
share
|
33,878 | 33,672 | 33,873 | 34,042 | ||||||||||||
Incremental
dilutive shares attributable to stock
options and restricted stock
|
44 | 231 | - | 220 | ||||||||||||
Shares
used to compute diluted earnings (loss) per
share
|
33,922 | 33,903 | 33,873 | 34,262 |
7.
|
Our
investment in Harbinger Capital Partners Special Situations Fund, L.P.
(“Harbinger Fund”) had a reported capital account value of $11.5 million
at September 30, 2009, compared with $10.1 million at December 31,
2008. This investment has a carrying value in Tredegar’s
balance sheet (included in “Other assets and deferred charges”) of $10.0
million, which represents the amount invested on April 2,
2007.
|
8.
|
We
use derivative financial instruments for the purpose of hedging margin
exposure from fixed-price forward sales contracts in Aluminum Extrusions
and currency exchange rate exposures that exist as part of ongoing
business operations primarily in Film Products. Our derivative
financial instruments are designated as and qualify as cash flow hedges
and are recognized in the consolidated balance sheet at fair
value. A change in the fair value of derivatives that are
highly effective as and that are designated and qualify as cash flow
hedges is recorded in other comprehensive income (loss). Gains
and losses accumulated in other comprehensive income (loss) are
reclassified to earnings in the periods in which earnings are affected by
the variability of cash flows of the hedged transaction. Such
gains and losses are reported on the same line as the underlying hedged
item. Any hedge ineffectiveness (which represents the amount by
which the changes in the fair value of the derivative exceed the
variability in the cash flows of the forecasted transaction) is recorded
in current period earnings. The amount of gains and losses
recognized for hedge ineffectiveness was not material to the three and
nine month periods ended September 30, 2009 and
2008.
|
(In
Thousands)
|
September 30, 2009
|
December 31, 2008
|
||||||||||
Balance
Sheet
|
Fair
|
Balance
Sheet
|
Fair
|
|||||||||
Account
|
Value
|
Account
|
Value
|
|||||||||
Derivatives Designated as Hedging
Instruments
|
||||||||||||
Asset
derivatives:
|
||||||||||||
Aluminum
futures contracts (before margin deposits)
|
Accrued expenses
|
$ | 506 |
Accrued expenses
|
$ | - | ||||||
Liability
derivatives:
|
||||||||||||
Aluminum
futures contracts (before margin
deposits)
|
Accrued expenses
|
$ | 1,069 |
Accrued expenses
|
$ | 11,042 | ||||||
Derivatives Not Designated as Hedging
Instruments
|
||||||||||||
Asset
derivatives:
|
||||||||||||
Aluminum
futures contracts (before margin deposits)
|
Accrued
expenses
|
$ | 231 |
Accrued
expenses
|
$ | 973 | ||||||
Liability
derivatives:
|
||||||||||||
Aluminum
futures contracts (before margin
deposits)
|
Accrued expenses
|
$ | 231 |
Accrued expenses
|
$ | 973 |
(In
Thousands)
|
September 30, 2009
|
December 31, 2008
|
||||||||||
Balance
Sheet
|
Fair
|
Balance
Sheet
|
Fair
|
|||||||||
Account
|
Value
|
Account
|
Value
|
|||||||||
Derivatives Designated as Hedging
Instruments
|
||||||||||||
Asset
derivatives:
|
||||||||||||
Foreign currency forward
contracts
|
Prepaid expenses and other
|
$ | 109 |
Prepaid expenses and other
|
$ | 56 |
U.S. Dollar Equivalent Strike Prices of Options
Bought and Sold on USD/EUR
|
||||||||||||
Period Covered by Contract
|
Notional Amount (In
Thousands)
|
Call Options Sold
|
Put Options Bought
|
|||||||||
4th Qtr 2009
|
$ | 3,500 | $ | 1.39 | $ | 1.28 |
(In
Thousands)
|
September 30, 2009
|
December 31, 2008
|
||||||||||
Balance
Sheet
|
Fair
|
Balance
Sheet
|
Fair
|
|||||||||
Account
|
Value
|
Account
|
Value
|
|||||||||
Derivatives Designated as Hedging
Instruments
|
||||||||||||
Asset
derivatives:
|
||||||||||||
Foreign
currency option contracts
|
Accrued expenses
|
$ | - |
Not
Applicable
|
||||||||
Liability
derivatives:
|
||||||||||||
Foreign currency option
contracts
|
Accrued expenses
|
$ | 178 |
Not Applicable
|
(In
Thousands)
|
Cash Flow Derivative Hedges
|
|||||||||||||||
Aluminum Futures Contracts
|
Foreign Currency Forwards and
Options
|
|||||||||||||||
Three Months Ended September
30,
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Amount
of pre-tax gain (loss) recognized in other
comprehensive income
|
$ | 931 | $ | (5,489 | ) | $ | (72 | ) | $ | - | ||||||
Location
of gain (loss) reclassified from accumulated other comprehensive income
into net income (effective portion)
|
Cost
of sales
|
Cost
of sales
|
Selling,
general and admin. exp.
|
Not
Applicable
|
||||||||||||
Amount
of pre-tax gain (loss) reclassified from accumulated other
comprehensive income to net income
(effective portion)
|
$ | (1,113 | ) | $ | 717 | $ | (95 | ) | $ | - |
(In
Thousands)
|
Cash Flow Derivative Hedges
|
|||||||||||||||
Aluminum Futures Contracts
|
Foreign Currency Forwards and
Options
|
|||||||||||||||
Nine Months Ended September
30,
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Amount of pre-tax gain (loss) recognized in other
comprehensive income
|
$ | 289 | $ | (111 | ) | $ | (321 | ) | $ | - | ||||||
Location
of gain (loss) reclassified from accumulated other comprehensive income
into net income (effective portion)
|
Cost
of sales
|
Cost
of sales
|
Selling,
general and admin. exp.
|
Not
Applicable
|
||||||||||||
Amount
of pre-tax gain (loss) reclassified from accumulated other
comprehensive income to net income
(effective portion)
|
$ | (9,974 | ) | $ | 1,848 | $ | (95 | ) | $ | - |
9.
|
The
components of net periodic benefit income (cost) for our pension and other
post-retirement benefit programs reflected in consolidated results for
continuing operations are shown
below:
|
Pension
|
Other
Post-Retirement
|
|||||||||||||||
Benefits
for Three Months
|
Benefits
for Three Months
|
|||||||||||||||
Ended Sept. 30
|
Ended Sept. 30
|
|||||||||||||||
(In Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Service
cost
|
$ | (741 | ) | $ | (480 | ) | $ | (17 | ) | $ | (18 | ) | ||||
Interest
cost
|
(3,277 | ) | (3,572 | ) | (114 | ) | (105 | ) | ||||||||
Expected
return on plan assets
|
5,223 | 5,523 | - | - | ||||||||||||
Amortization
of prior service costs, gains or losses and
net transition asset
|
(171 | ) | (854 | ) | 49 | 35 | ||||||||||
Net periodic benefit income
(cost)
|
$ | 1,034 | $ | 617 | $ | (82 | ) | $ | (88 | ) |
Pension
|
Other
Post-Retirement
|
|||||||||||||||
Benefits
for Nine Months
|
Benefits
for Nine Months
|
|||||||||||||||
Ended Sept. 30
|
Ended Sept. 30
|
|||||||||||||||
(In Thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Service
cost
|
$ | (2,307 | ) | $ | (2,586 | ) | $ | (53 | ) | $ | (53 | ) | ||||
Interest
cost
|
(9,965 | ) | (9,681 | ) | (371 | ) | (363 | ) | ||||||||
Expected
return on plan assets
|
15,601 | 16,495 | - | - | ||||||||||||
Amortization
of prior service costs, gains or losses and
net transition asset
|
(781 | ) | (493 | ) | 95 | 35 | ||||||||||
Net periodic benefit income
(cost)
|
$ | 2,548 | $ | 3,735 | $ | (329 | ) | $ | (381 | ) |
10.
|
Information
by business segment is reported below. There are no accounting
transactions between segments and no allocations to
segments. There have been no significant changes to
identifiable assets by segment since December 31, 2008, except for the
goodwill impairment charge relating to Aluminum Extrusions described in
Note 3, and working capital fluctuations resulting from changes in
business conditions or seasonal factors, changes caused by movement of
foreign exchange rates and changes in property, plant and equipment due to
capital expenditures, depreciation, asset impairments and other activity,
which are described under Item 2 of Part I of this report. Net
sales (sales less freight) and operating profit from ongoing operations
are the measures of sales and operating profit used by the chief operating
decision maker for purposes of assessing
performance.
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended Sept. 30
|
Ended Sept. 30
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net Sales
|
||||||||||||||||
Film
Products
|
$ | 123,397 | $ | 131,187 | $ | 335,984 | $ | 399,030 | ||||||||
Aluminum
Extrusions
|
47,573 | 92,072 | 139,068 | 275,819 | ||||||||||||
Total
net sales
|
170,970 | 223,259 | 475,052 | 674,849 | ||||||||||||
Add
back freight
|
4,692 | 5,450 | 11,791 | 16,348 | ||||||||||||
Sales
as shown in the Consolidated Statements of Income
|
$ | 175,662 | $ | 228,709 | $ | 486,843 | $ | 691,197 | ||||||||
Operating Profit (Loss)
|
||||||||||||||||
Film
Products:
|
||||||||||||||||
Ongoing
operations
|
$ | 21,750 | $ | 10,454 | $ | 48,978 | $ | 34,719 | ||||||||
Plant
shutdowns, asset impairments, restructurings and other
|
- | - | (660 | ) | (4,649 | ) | ||||||||||
Aluminum
Extrusions:
|
||||||||||||||||
Ongoing
operations
|
(927 | ) | 3,861 | (2,090 | ) | 7,809 | ||||||||||
Goodwill
impairment charge
|
- | - | (30,559 | ) | - | |||||||||||
Plant
shutdowns, asset impairments, restructurings and other
|
(111 | ) | - | (1,417 | ) | (615 | ) | |||||||||
AFBS:
|
||||||||||||||||
Gain
on sale of investments in Theken Spine and Therics, LLC
|
- | 1,499 | 150 | 1,499 | ||||||||||||
Total
|
20,712 | 15,814 | 14,402 | 38,763 | ||||||||||||
Interest
income
|
215 | 209 | 649 | 655 | ||||||||||||
Interest
expense
|
197 | 483 | 585 | 1,921 | ||||||||||||
Gain
on sale of corporate assets
|
- | 1,001 | 404 | 1,001 | ||||||||||||
Gain
on investment accounted for under the fair value method
|
- | 5,000 | - | 5,000 | ||||||||||||
Stock
option-based compensation costs
|
424 | 178 | 1,227 | 516 | ||||||||||||
Corporate
expenses, net
|
3,663 | 2,975 | 9,473 | 5,040 | ||||||||||||
Income
from continuing operations before income taxes
|
16,643 | 18,388 | 4,170 | 37,942 | ||||||||||||
Income
taxes
|
5,647 | 7,310 | 15,504 | 14,214 | ||||||||||||
Income
(loss) from continuing operations
|
10,996 | 11,078 | (11,334 | ) | 23,728 | |||||||||||
Loss
from discontinued operations
|
- | - | (930 | ) | ||||||||||||
Net
income (loss)
|
$ | 10,996 | $ | 11,078 | $ | (11,334 | ) | $ | 22,798 |
11.
|
The
effective tax rate for the third quarter of 2009 was 33.9% compared to
39.7% for the third quarter of 2008. The change in the
effective tax rate for continuing operations for the third quarter
reflects the impact to income taxes during the third quarter to adjust the
effective tax rate for the first nine months of the year to the rate
estimated for the entire year.
|
Percent of Income (Loss) Before Income Taxes for
Continuing Operations
|
||||||||
Nine Months Ended September
30
|
2009
|
2008
|
||||||
Income
tax expense at federal statutory rate
|
35.0 | 35.0 | ||||||
Goodwill
impairment charge
|
256.5 | - | ||||||
Valuation
allowance for capital loss carry-forwards
|
78.4 | (2.8 | ) | |||||
Unremitted
earnings from foreign operations
|
32.4 | 6.0 | ||||||
Remitted
earnings from foreign operations
|
11.5 | - | ||||||
State
taxes, net of federal income tax benefit
|
6.6 | 1.3 | ||||||
Non-deductible
expenses
|
1.0 | 0.2 | ||||||
Valuation
allowance for foreign operating loss carry-forwards
|
(3.3 | ) | 0.8 | |||||
Research
and development tax credit
|
(5.5 | ) | - | |||||
Foreign
rate differences
|
(39.6 | ) | (3.0 | ) | ||||
Other
|
(1.2 | ) | - | |||||
Effective income tax rate
|
371.8 | 37.5 |
(In
Thousands)
|
Balance
at January 1, 2009
|
Increase
(Decrease) Due to Tax Positions Taken
in
|
Increase
(Decrease) Due to Settlements with Taxing
Authorities
|
Reductions
Due to Lapse of Statute of
Limitations
|
Balance
at September 30, 2009
|
|||||||||||||||||||
Current Period
|
Prior Period
|
|||||||||||||||||||||||
Gross
unrecognized tax benefits on uncertain tax positions (reflected in current
income tax and other noncurrent liability accounts in the balance
sheet)
|
$ | 2,553 | $ | 73 | $ | 201 | $ | (1,440 | ) | $ | - | $ | 1,387 | |||||||||||
Deferred
income tax assets related to unrecognized tax benefits on uncertain tax
positions for which ultimate deductibility is highly certain but for which
the timing of the deduction is uncertain (reflected indeferred income tax accounts in the balance
sheet)
|
(1,828 | ) | (514 | ) | ||||||||||||||||||||
Net
unrecognized tax benefits on uncertain tax positions, which would impact
the effective tax rate if
recognized
|
725 | 873 | ||||||||||||||||||||||
Interest
and penalties accrued on deductions taken relating to uncertain tax
positions with the balance shown in current income tax and other
noncurrent liability accounts in the balance sheet
|
1,303 | 958 | ||||||||||||||||||||||
Related
deferred income tax assets recognized on
interest and penalties
|
(476 | ) | (353 | ) | ||||||||||||||||||||
Interest
and penalties accrued on uncertain tax positions net of related deferred
income tax benefits, which would impact the effective tax rate if recognized
|
827 | 605 | ||||||||||||||||||||||
Total
net unrecognized tax benefits on uncertain tax positions reflected in the
balance sheet, which would impact the
effective tax rate if recognized
|
$ | 1,552 | $ | 1,478 |
12.
|
In
December 2008, the Financial Accounting Standards Board (the “FASB”)
issued new guidance that provided objectives for enhanced disclosure
information about postretirement benefit plan assets, thereby addressing
financial statement user concerns regarding the lack of transparency
previously surrounding such disclosures. New disclosures are
intended to provide users with an understanding of (1) how investment
allocation decisions are made, including an understanding of investment
policies and strategies, (2) major classes of plan assets, (3) the inputs
and valuation techniques used to measure fair value of plan assets, (4)
the effect of fair value measurements using significant unobservable
inputs (Level 3) on changes in plan assets, and (5) significant
concentrations of risk within plan assets. The enhanced
disclosures for postretirement benefit plan assets are effective for
annual periods ending after December 15, 2009. We do not
believe that the adoption of these enhanced disclosure requirements will
have a material impact on our financial statements and related
disclosures.
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended Sept. 30
|
Ended Sept. 30
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net Sales
|
||||||||||||||||
Film
Products
|
$ | 123,397 | $ | 131,187 | $ | 335,984 | $ | 399,030 | ||||||||
Aluminum
Extrusions
|
47,573 | 92,072 | 139,068 | 275,819 | ||||||||||||
Total
net sales
|
170,970 | 223,259 | 475,052 | 674,849 | ||||||||||||
Add
back freight
|
4,692 | 5,450 | 11,791 | 16,348 | ||||||||||||
Sales
as shown in the Consolidated Statements of Income
|
$ | 175,662 | $ | 228,709 | $ | 486,843 | $ | 691,197 | ||||||||
Operating Profit (Loss)
|
||||||||||||||||
Film
Products:
|
||||||||||||||||
Ongoing
operations
|
$ | 21,750 | $ | 10,454 | $ | 48,978 | $ | 34,719 | ||||||||
Plant
shutdowns, asset impairments, restructurings and other
|
- | - | (660 | ) | (4,649 | ) | ||||||||||
Aluminum
Extrusions:
|
||||||||||||||||
Ongoing
operations
|
(927 | ) | 3,861 | (2,090 | ) | 7,809 | ||||||||||
Goodwill
impairment charge
|
- | - | (30,559 | ) | - | |||||||||||
Plant
shutdowns, asset impairments, restructurings and other
|
(111 | ) | - | (1,417 | ) | (615 | ) | |||||||||
AFBS:
|
||||||||||||||||
Gain
on sale of investments in Theken Spine and Therics, LLC
|
- | 1,499 | 150 | 1,499 | ||||||||||||
Total
|
20,712 | 15,814 | 14,402 | 38,763 | ||||||||||||
Interest
income
|
215 | 209 | 649 | 655 | ||||||||||||
Interest
expense
|
197 | 483 | 585 | 1,921 | ||||||||||||
Gain
on sale of corporate assets
|
- | 1,001 | 404 | 1,001 | ||||||||||||
Gain
on investment accounted for under the fair value method
|
- | 5,000 | - | 5,000 | ||||||||||||
Stock
option-based compensation costs
|
424 | 178 | 1,227 | 516 | ||||||||||||
Corporate
expenses, net
|
3,663 | 2,975 | 9,473 | 5,040 | ||||||||||||
Income
from continuing operations before income taxes
|
16,643 | 18,388 | 4,170 | 37,942 | ||||||||||||
Income
taxes
|
5,647 | 7,310 | 15,504 | 14,214 | ||||||||||||
Income
(loss) from continuing operations
|
10,996 | 11,078 | (11,334 | ) | 23,728 | |||||||||||
Loss
from discontinued operations
|
- | - | (930 | ) | ||||||||||||
Net
income (loss)
|
$ | 10,996 | $ | 11,078 | $ | (11,334 | ) | $ | 22,798 |
|
·
|
Pretax
losses of $111,000 for timing differences between the recognition of
realized losses on aluminum futures contracts and related revenues from
the delayed fulfillment by customers of fixed-price forward purchase
commitments (included in “Cost of goods sold” in the consolidated
statements of income, see Note 8 on page 11 for additional
detail).
|
Three
Months
|
||||||||
Ended Sept. 30
|
||||||||
(In Millions)
|
2009
|
2008
|
||||||
Floating-rate
debt with interest charged on a rollover basis at one-month LIBOR plus a
credit spread:
|