SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q (Mark One) ___ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) / X / OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) / / OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------------- ----------------------- Commission file number 1-10258 Tredegar Industries, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Virginia 54-1497771 - ------------------------------- -------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1100 Boulders Parkway Richmond, Virginia 23225 - ---------------------------------------- ---------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (804) 330-1000 Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares of Common Stock, no par value, outstanding as of July 31, 1997: 12,306,974. PART I - FINANCIAL INFORMATION Item 1. Financial Statements. <TABLE> Tredegar Industries, Inc. Consolidated Balance Sheets (In Thousands) (Unaudited) <CAPTION> June 30, Dec. 31, 1997 1996 --------- --------- <S> <C> <C> Assets Current assets: Cash and cash equivalents $ 109,151 $ 101,261 Accounts and notes receivable 75,872 61,076 Inventories 20,413 17,658 Income taxes recoverable - 2,023 Deferred income taxes 9,439 9,484 Prepaid expenses and other 3,287 2,920 --------- --------- Total current assets 218,162 194,422 --------- --------- Property, plant and equipment, at cost 273,479 260,200 Less accumulated depreciation and amortization 177,322 169,771 --------- --------- Net property, plant and equipment 96,157 90,429 --------- --------- Other assets and deferred charges 45,231 36,094 Goodwill and other intangibles 20,107 20,132 ========= ========= Total assets $ 379,657 $ 341,077 ========= ========= Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 44,537 $ 28,814 Accrued expenses 34,122 32,487 Income taxes payable 3,202 - --------- --------- Total current liabilities 81,861 61,301 Long-term debt 30,000 35,000 Deferred income taxes 16,736 16,994 Other noncurrent liabilities 14,223 15,237 --------- --------- Total liabilities 142,820 128,532 --------- --------- Shareholders' equity: Common stock, no par value 112,412 113,019 Foreign currency translation adjustment 60 499 Retained earnings 124,365 99,027 --------- --------- Total shareholders' equity 236,837 212,545 --------- --------- Total liabilities and shareholders' equity $379,657 $ 341,077 ========= ========= </TABLE> See accompanying notes to financial statements.
<TABLE> Tredegar Industries, Inc. Consolidated Statements of Income (In Thousands) (Unaudited) <CAPTION> Second Quarter Six Months Ended June 30 Ended June 30 ------------------- ------------------- 1997 1996 1997 1996 --------- --------- --------- --------- <S> <C> <C> <C> <C> Revenues: Net sales $ 144,969 $ 126,331 $ 278,314 $ 267,718 Other income (expense), net 5,058 798 7,903 415 --------- --------- --------- --------- Total 150,027 127,129 286,217 268,133 --------- --------- --------- --------- Costs and expenses: Cost of goods sold 114,295 100,488 221,255 214,222 Selling, general and administrative 8,929 9,895 17,490 21,115 Research and development 3,181 2,591 6,447 5,020 Interest 621 499 1,142 1,149 Unusual items (2,250) - (2,250) (10,747) --------- --------- --------- --------- Total 124,776 113,473 244,084 230,759 --------- --------- --------- --------- Income before income taxes 25,251 13,656 42,133 37,374 Income taxes 8,904 4,983 14,832 12,354 --------- --------- --------- --------- Net income $ 16,347 $ 8,673 $ 27,301 $ 25,020 ========= ========= ========= ========= Earnings per common and dilutive common equivalent share $ 1.25 $ .66 $ 2.08 $ 1.92 ========= ========= ========= ========= Shares used to compute earnings per common and dilutive common equivalent share 13,129 13,124 13,103 13,020 ========= ========= ========= ========= </TABLE> See accompanying notes to financial statements.
<TABLE> Tredegar Industries, Inc. Consolidated Statements of Cash Flows (In Thousands) (Unaudited) <CAPTION> Six Months Ended June 30 ------------------- 1997 1996 --------- --------- <S> <C> <C> Cash flows from operating activities: Net income $ 27,301 $ 25,020 Adjustments for noncash items: Depreciation 9,109 10,566 Amortization of intangibles 26 226 Deferred income taxes 23 (2,279) Accrued pension income and postretirement benefits (1,877) (1,136) Gain on divestitures, net (2,250) (10,747) Gain on sale of technology-related investment (6,358) - Changes in assets and liabilities, net of effects from divestitures: Accounts and notes receivable (8,137) (4,770) Inventories 589 1,719 Income taxes recoverable 2,023 2,179 Prepaid expenses and other (367) (118) Accounts payable 12,662 5,681 Accrued expenses and income taxes payable 4,423 689 Other, net (836) 611 --------- --------- Net cash provided by operating activities 36,331 27,641 --------- --------- Cash flows from investing activities: Capital expenditures (8,404) (13,506) Acquisition (13,469) - Investments (6,828) (1,232) Proceeds from the sale of investments 5,783 - Property disposals 105 45 Proceeds from the sale of Molded Products and Brudi 2,250 71,598 Other, net (308) (362) --------- --------- Net cash (used in) provided by investing activities (20,871) 56,543 --------- --------- Cash flows from financing activities: Dividends paid (1,963) (1,465) Net decrease in borrowings (5,000) - Repurchases of Tredegar common stock (1,955) (583) Other, net 1,348 746 --------- --------- Net cash used in financing activities (7,570) (1,302) --------- --------- Increase in cash and cash equivalents 7,890 82,882 Cash and cash equivalents at beginning of periof 101,261 2,145 ========= ========= Cash and cash equivalents at end of period $ 109,151 $ 85,027 ========= ========= </TABLE> See accompanying notes to financial statements.
TREDEGAR INDUSTRIES, INC. NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying consolidated financial statements of Tredegar Industries, Inc. and Subsidiaries ("Tredegar") contain all adjustments necessary to present fairly, in all material respects, Tredegar's consolidated financial position as of June 30, 1997, and the consolidated results of their operations and their cash flows for the six months ended June 30, 1997 and 1996. All such adjustments are deemed to be of a normal recurring nature. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Tredegar's Annual Report on Form 10-K for the year ended December 31, 1996. The results of operations for the six months ended June 30, 1997, are not necessarily indicative of the results to be expected for the full year. 2. Historical and pro forma net income and earnings per common and dilutive common equivalent share, adjusted for unusual items and technology-related investment gains/losses affecting the comparability of operating results and the pro forma effects of the Molded Products and Brudi divestitures, are presented below: <TABLE> <CAPTION> (In Thousands Except Per-Share Amounts) Second Quarter Six Months Year Ended Ended June 30 Ended June 30 Dec. 31, ------------------- ------------------- 1997 1996 1997 1996 1996 --------- --------- --------- --------- -------- <S> <C> <C> <C> <C> <C> <C> Historical net income as reported $ 16,347 $ 8,673 $ 27,301 $ 25,020 $ 45,035 After-tax effects of unusual items: Redemption of preferred stock received in connection with the divestiture of Molded Products (1,440) - (1,440) - - Gain on sale of property in Fremont, CA - - - - (1,215) Write-off of specialized machinery and equipment due to excess capacity in certain industrial packaging-films - - - 795 Combined net gain on the Molded Products and Brudi divestitures - - - (8,059) (8,059) --------- --------- --------- --------- -------- Historical net income as adjusted for unusual items 14,907 8,673 25,861 16,961 36,556 After-tax effect of technology-related investment (gains) losses (2,863) - (4,069) - (1,369) --------- --------- --------- --------- -------- Net income as adjusted for unusual items and technology- related investment gains/losses 12,044 8,673 21,792 16,961 35,187 Pro forma adjustments: Combined after-tax operating profit of Molded Products and Brudi - 22 - (715) (715) Reduction of Tredegar's after-tax cost for certain benefit plans due to the curtailment of participation by Molded Products employees - - - 161 161 After-tax interest income on assumed investment in cash equivalents of expected after-tax divestiture proceeds at an annual rate of approximately 5.4% - 153 - 724 724 --------- --------- --------- --------- -------- Pro forma net income as adjusted for unusual items, technology-related investment gains/losses and the pro forma effects of the Molded Products and Brudi divestitures $ 12,044 $8,848 $ 21,792 $ 17,131 $ 35,357 ========= ========= ========= ========= ========= Earnings per common and dilutive common equivalent share: As reported $ 1.25 $ .66 $ 2.08 $ 1.92 $ 3.44 As adjusted for unusual items 1.14 .66 1.97 1.30 2.79 As adjusted for unusual items and technology- related investment gains/losses .92 .66 1.66 1.30 2.69 Pro forma as adjusted for unusual items, technology-related investment gains/losses and the pro forma effects of the Molded Products and Brudi divestitures .92 .67 1.66 1.32 2.70 </TABLE> The pro forma operating results presented above assume that Tredegar sold Molded Products and Brudi at the beginning of 1996 (Molded Products was sold on March 29, 1996, and the Brudi divestiture was completed in the second quarter of 1996) and invested related after-tax proceeds of approximately $48 million and $21 million, respectively, in cash equivalents. The pro forma financial information is unaudited and does not purport to be indicative of the future results or financial position of Tredegar or the net income and financial position that would actually have been attained had the divestitures occurred on the dates or for the period indicated. At June 30, 1997 and December 31, 1996, Tredegar had technology-related investments with a cost basis of $12.2 million and $6 million, respectively, which represented ownership (either in the form of limited partnership shares, the stock of privately held companies or the restricted or unrestricted stock of companies that recently registered shares in initial public offerings) of less than 20% in twelve and seven separate entities, respectively. These investments are included in "Other assets and deferred charges" in the consolidated balance sheets and each security is accounted for at the lower of cost or estimated fair value. Management estimates the fair value of these investments to be approximately $25 million at June 30, 1997. However, because of the inherent uncertainty of the valuations of restricted securities or securities for which there is no public market, these estimates may differ significantly from the values that would have been used had a ready market for the securities existed. Furthermore, the publicly-traded stock of emerging, technology-based companies usually has higher volatility and risk than the U.S. stock market as a whole. In February 1997, the Financial Accounting Standards Board (the "FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings per Share." The standard must be adopted by Tredegar in the fourth quarter of 1997, with all prior periods restated to conform to the new method. Early application is not permitted. The new standard requires the presentation in the income statement of basic and diluted earnings per share. In contrast to primary earnings per share under existing standards, basic earnings per share excludes common stock equivalents (for example, stock options). Accordingly, for the periods shown below, under the new requirements basic earnings per share for Tredegar will be higher than amounts previously reported, while diluted earnings per share will be the same as amounts previously reported: <TABLE> <CAPTION> Six Months Years Ended Ended June 30 December 31 ------------------- ------------------- 1997 1996 1996 1995 --------- --------- --------- --------- <S> <C> <C> <C> <C> Percentage basic earnings per share higher (lower) than earnings per share as reported 6.9% 6.7% 7.3% 3.5% Percentage diluted earnings per share higher (lower) than earnings per share as reported - - - - </TABLE> During the first six months of 1997, the FASB also issued new standards affecting disclosures of information about capital structure, comprehensive income and business segments, none of which should have a significant impact on Tredegar. 3. On May 30, 1997, Tredegar announced that its William L. Bonnell subsidiary had acquired an aluminum extrusions and fabrication plant in El Campo, Texas, from Reynolds Metals Company. The El Campo facility, which had sales of about $45 million in 1996, extrudes and fabricates products used primarily in transportation, electrical and consumer durables markets. The acquisition was accounted for using the purchase method; accordingly, assets acquired and liabilities assumed were recorded at their estimated fair values at the date of acquisition. No goodwill arose from the transaction. The operating results for the El Campo facility have been included in the consolidated statements of income since the date acquired. 4. On July 9, 1997, Tredegar replaced its revolving credit facility dated September 7, 1995, with a new five-year facility that permits borrowings up to $275 million. The new facility provides for interest to be charged at a base rate (which is generally expected to be the London Interbank Offered Rate ("LIBOR")) plus a spread that is dependent on Tredegar's quarterly debt-to-total capitalization ratio. A facility fee is also charged on the $275 million commitment amount. The spread and facility fee charged at various debt-to-total capitalization levels are as follows: <TABLE> <CAPTION> (Basis Points) LIBOR Facility Debt-to-Total Capitalization Ratio Spread Fee ---------------------------------- ------ ------- <S> <C> <C> Less than or equal to 35% 16.50 8.50 Greater than 35% and less than or equal to 50% 22.50 10.00 Greater than 50% 30.00 15.00 </TABLE> In addition, a utilization fee of five basis points is charged on the outstanding principal amount when more than $137.5 million is borrowed under the agreement. The new facility contains restrictions similar to the prior facility including, among others, restrictions on the payments of cash dividends and the maximum debt-to-total capitalization ratio permitted (60%). At June 30, 1997, $100 million was available for cash dividend payments and $275 million was available to borrow under the 60% debt-to-total capitalization ratio restriction. 5. The components of inventories are as follows: (In Thousands) June 30 Dec. 31 1997 1996 -------------- -------------- Finished goods $2,635 $ 1,677 Work-in-process 2,358 1,782 Raw materials 8,626 7,958 Stores, supplies and other 6,794 6,241 ============== ============== Total $20,413 $17,658 ============== ============== The increase in inventory was due primarily to the acquisition of an aluminum extrusions and fabrication facility in El Campo, Texas (see Note 3).
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Second Quarter 1997 Compared with Second Quarter 1996 Net income for the second quarter of 1997 was $16.3 million or $1.25 per share, up from $8.7 million or 66 cents per share in the second quarter of 1996. The 1997 results include a gain of $2.3 million ($1.4 million after income taxes) related to the redemption of preferred stock received in connection with the 1996 divestiture of Molded Products. This gain has been classified as an unusual item in the consolidated statements of income. Results for 1997 also include technology-related investment gains of $4.5 million ($2.9 million after income taxes). See Note 2 on page 5 for further information on technology-related investments as of June 30, 1997. Net income excluding unusual items and technology-related investment gains for the second quarter of 1997 was $12 million or 92 cents per share, up from $8.7 million or 66 cents per share in the second quarter of 1996. The improved results were driven primarily by strong performance in aluminum extrusions and plastic films. Excluding the effects of the Brudi divestiture in the second quarter of 1996, second-quarter net sales increased 20% in 1997 due to higher sales in Film Products and Aluminum Extrusions. Revenues also increased at Tredegar's Molecumetics subsidiary due to a drug development partnership with Asahi Chemical Industry Co., Ltd. The increase in sales in Film Products was driven by higher volume of lower margin nonwoven film laminates, higher volume for foreign operations and higher selling prices (reflecting higher average plastic resin costs). Higher sales in Aluminum Extrusions reflected strength in commercial windows and curtain walls and higher volume to distributors, as well as the acquisition of an aluminum extrusions and fabrication facility in El Campo, Texas (see Note 3 on page 7). The gross profit margin during the second quarter of 1997 increased to 21.2% from 20.5% in 1996 due primarily to higher volume in Aluminum Extrusions and Film Products. Selling, general and administrative expenses decreased by $966,000 or 9.8% due to the Brudi divestiture and lower corporate overhead, partially offset by higher selling, general and administrative costs in Film Products. Selling, general and administrative expenses, as a percentage of sales, declined to 6.2% in 1997 compared with 7.8% in 1996. Research and development expenses increased by $590,000 or 23% due to higher product development spending at Film Products and higher spending at Molecumetics. Interest income, which is included in "Other income (expense), net" in the consolidated statements of income, increased to $1.2 million in 1997 from $740,000 in 1996 due to the investment of Brudi divestiture proceeds and cash generated from operations. The average tax- equivalent yield earned on cash equivalents was 5.85% in 1997 and 5.60% in 1996. Tredegar's policy permits investment of excess cash in marketable securities that have the highest credit ratings and maturities of less than one year. The primary objectives of Tredgar's investment policy are safety of principal and liquidity. Interest expense increased by $122,000 due primarily to the write-off of deferred financing costs related to the refinancing of Tredegar's revolving credit facility (see Note 4 on page 7) and lower capitalized interest. The effective tax rate excluding unusual items, the effects of tax-exempt interest income and investment gains declined to 36.1% in 1997 from 36.5% in 1996. Six Months 1997 Compared with Six Months 1996 Net income for the first six months of 1997 was $27.3 million or $2.08 per share, up from $25 million or $1.92 per share in the first six months of 1996. The 1997 results include a gain of $2.3 million ($1.4 million after income taxes) related to the redemption of preferred stock received in connection with the 1996 divestiture of Molded Products. This gain has been classified as an unusual item in the consolidated statements of income. Results for 1997 also include technology-related investment gains of $6.4 million ($4.1 million after income taxes). See Note 2 on page 5 for further information on technology-related investments as of June 30, 1997. Unusual items recognized during the first six months of 1996 include a gain of $19.9 million ($13.7 million after income taxes) on the sale of Molded Products on March 29, 1996, partially offset by a charge of $9.1 million ($5.7 million after income tax benefits) related to a loss on the divestiture of Brudi (the Brudi divestiture was completed in the second quarter of 1996). Net income excluding unusual items and technology-related investment gains for the first six months of 1997 was $21.8 million or $1.66 per share, up from $17 million or $1.30 per share in the first six months of 1996. The improved results were driven primarily by strong performance in aluminum extrusions and plastic films. Excluding the effects of the Molded Products and Brudi divestitures, net sales during the first six months of 1997 increased 19% due to higher sales in Film Products and Aluminum Extrusions. Revenues also increased at Tredegar's Molecumetics subsidiary due to a drug development partnership with Asahi Chemical Industry Co., Ltd. The increase in sales in Film Products was driven by higher volume of lower margin nonwoven film laminates, higher volume for foreign operations and higher selling prices (reflecting higher average plastic resin costs). Higher sales in Aluminum Extrusions reflected strength in residential and commercial windows and curtain walls and higher volume to distributors, as well as the acquisition of an aluminum extrusions and fabrication facility in El Campo, Texas (see Note 3 on page 7). The gross profit margin during the first six months of 1997 increased to 20.5% from 20% in 1996 due primarily to higher volume in Aluminum Extrusions and Film Products. Selling, general and administrative expenses decreased by $3.6 or 17% due to the Molded Products and Brudi divestitures and lower corporate overhead, partially offset by higher selling, general and administrative costs in Film Products. Selling, general and administrative expenses, as a percentage of sales, declined to 6.3% in the first six months of 1997 compared with 7.9% in 1996. Research and development expenses increased by $1.4 million or 28% due to higher product development spending at Film Products and higher spending at Molecumetics. Interest income, which is included in "Other income (expense), net" in the consolidated statements of income, increased to $2.4 million in the first six months of 1997 from $832,000 in 1996 due to the investment of Molded Products and Brudi divestiture proceeds and cash generated from operations. The average tax-equivalent yield earned on cash equivalents was 5.73% during the first six months of 1997 and 5.50% in 1996. Interest expense decreased by $7,000 due to lower average debt outstanding, partially offset by the second-quarter write-off of deferred financing costs related to the refinancing of Tredegar's revolving credit facility (see Note 4 on page 7). The effective tax rate excluding unusual items, the effects of tax-exempt interest income and investment gains declined to 36.6% during the first six months of 1997 from 36.7% in 1996.
Segment Results The following tables present Tredegar's net sales and operating profit by segment for the second quarter and six months ended June 30, 1997 and 1996. <TABLE> Net Sales by Segment (In Thousands) (Unaudited) <CAPTION> Second Quarter Six Months Ended June 30 Ended June 30 ------------------- ------------------- 1997 1996 1997 1996 --------- --------- --------- --------- <S> <C> <C> <C> <C> Film Products and Fiberlux $ 78,220 $ 63,724 $ 153,657 $ 123,181 Aluminum Extrusions 66,042 56,298 123,537 109,214 Technology 707 441 1,120 812 --------- --------- --------- --------- Total ongoing operations 144,969 120,463 278,314 233,207 Divested operations: Molded Products - - - 21,131 Brudi - 5,868 - 13,380 ========= ========= ========= ========= Total net sales $ 144,969 $ 126,331 $ 278,314 $ 267,718 ========= ========= ========= ========= </TABLE> <TABLE> Operating Profit by Segment (In Thousands) (Unaudited) <CAPTION> Second Quarter Six Months Ended June 30 Ended June 30 ------------------- ------------------- 1997 1996 1997 1996 --------- --------- --------- --------- <S> <C> <C> <C> <C> Film Products and Fiberlux $ 12,546 $ 10,512 $ 23,514 $ 21,557 Aluminum Extrusions 9,069 6,270 15,771 11,246 Technology: Molecumetics (1,494) (1,554) (3,159) (2,780) Investments and other 4,450 14 6,293 (5) --------- --------- --------- --------- 2,956 (1,540) 3,134 (2,785) --------- --------- --------- --------- Divested operations: Molded Products - - - 1,011 Brudi - 8 - 231 Unusual items 2,250 - 2,250 10,747 --------- --------- --------- --------- 2,250 8 2,250 11,989 --------- --------- --------- --------- Total operating profit 26,821 15,250 44,669 42,007 Interest income 1,209 740 2,360 832 Interest expense 621 499 1,142 1,149 Corporate expenses, net 2,158 1,835 3,754 4,316 --------- --------- --------- --------- Income before income taxes 25,251 13,656 42,133 37,374 Income taxes 8,904 4,983 14,832 12,354 ========= ========= ========= ========= Net income $ 16,347 $ 8,673 $ 27,301 $ 25,020 ========= ========= ========= ========= </TABLE>
The 1997 results for divested operations include a gain of $2.3 million related to the redemption of preferred stock received in connection with the 1996 divestiture of Molded Products. During the second quarter and six months ended June 30, 1997, "Investments and other" includes pretax gains on technology-related investments of $4.5 million and $6.4 million, respectively. Unusual items during 1996 include a pretax gain recognized in the first quarter of that year on the sale of Molded Products ($19.9 million), partially offset by a pretax loss accrued in the same period on the divestiture of Brudi ($9.1 million; the Brudi divestiture was completed in the second quarter of 1996). See Note 2 on page 5 for further information on items affecting the comparability of operating results. Sales in Film Products during the second quarter and year-to-date increased due to higher volume of lower margin nonwoven film laminates, higher volume for foreign operations and higher selling prices (reflecting higher average plastic resin costs). Operating profit improved in Film Products during each period due to improved production efficiencies for nonwoven film laminates supplied to the Proctor & Gamble Company ("P&G") for diapers and higher volume in North America and Europe of permeable film supplied to P&G for feminine pads, partially offset by higher new product development expenses and start-up costs for a new production site in China. Operating profit declined at Fiberlux. Sales in Aluminum Extrusions increased during the second quarter and year-to-date due primarily to higher volume (up 15%), reflecting continued strength in residential and commercial windows and curtain walls and higher volume to distributors, as well as the acquisition of an aluminum extrusions and fabrication facility in El Campo, Texas (see Note 3 on page 7). Operating profit increased significantly during each period due to higher volume and related lower unit conversion costs. Conversion costs also improved as a result of the Newnan press improvement project completed late last year. Excluding investment gains, technology segment losses decreased by $22,000 during the second quarter of 1997 due to revenues generated from a drug development partnership with Asahi Chemical Industry Co., Ltd. For the first six months of 1997, excluding investment gains, technology segment losses are up $440,000 due primarily to higher research and development spending at Molecumetics, partially offset by drug development partnership revenues. Liquidity and Capital Resources Tredegar's total assets increased to $379.7 million at June 30, 1997, from $341.1 million at December 31, 1996, due mainly to an increase in cash and cash equivalents (see further discussion below), the El Campo, Texas aluminum extrusions and fabrication plant acquisition (see Note 3 on page 7), higher accounts receivable supporting higher sales and an increase in technology-related investments (see Note 2 on page 5). Total liabilities increased to $142.8 million at June 30, 1997, from $128.5 million at December 31, 1996, due primarily to higher accounts payable in Aluminum Extrusions resulting from more favorable trade terms with suppliers and the El Campo, Texas acquisition. Income taxes payable of $3.2 million relate to timing differences between income tax accruals and payments during the year. Debt was $30 million at June 30, 1997, with interest payable semi-annually at 7.2% per year. Annual principal payments of $5 million are due each June through 2003. Tredegar had cash and cash equivalents in excess of debt of $79.2 million at June 30, 1997, compared to $66.3 million at December 31, 1996. Net cash provided by operating activities in excess of capital expenditures and dividends increased to $25.9 million in the first six months of 1997 from $12.7 million in 1996 due primarily to improved operating results, improved trade terms with suppliers, lower capital expenditures (particularly in Film Products) and the effect on capital expenditures of the Molded Products and Brudi divestitures (Molded Products and Brudi had combined capital expenditures of $1.3 million in the first six months of 1996). Capital expenditures for Film Products in 1997 were related to normal replacement of machinery and equipment, expansion into China and permeable film additions, while 1996 included normal replacement as well as nonwoven film laminate capacity additions, expansion of permeable film capacity in Europe and expansion of permeable and diaper backsheet film capacity in Brazil. The increase in cash and cash equivalents to $109.2 million at June 30, 1997, from $101.3 million at December 31, 1996, was due to the $25.9 million of excess cash generated during the first six months of 1997 combined with additional proceeds related to the Molded Products divestiture ($2.3 million) and other sources ($1.3 million, primarily proceeds from the exercise of stock options), partially offset by funds used to acquire the El Campo, Texas aluminum extrusions and fabrication plant ($13.5 million), an annual debt principal payment in June 1997 ($5 million), uses of funds for technology-related investments ($1.1 million, net of proceeds from the sale of investments) and the repurchase of Tredegar common stock ($2 million).
PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. Tredegar's Annual Meeting of Shareholders was held on May 22, 1997. The following sets forth the vote results with respect to each of the matters voted upon at the meeting: (a) Election of Directors No. of No. of Votes Nominee Votes "For" "Withheld" Austin Brockenbrough, III 11,273,126 129,112 William M. Gottwald 11,239,650 162,588 Richard L. Morrill 11,247,737 154,501 Norman A. Scher 11,271,137 131,101 There were no broker non-votes with respect to the election of directors. (b) Approval of Auditors Approval of th designation of Coopers & Lybrand L.L.P. as the auditors for Tredegar for 1997: No. of Votes No. of Votes No. of "For" "Against" Abstentions 11,360,924 29,982 11,329 There were no broker non-votes with respect to the approval of auditors.
Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit No. 3 Amended By-laws 4.1 Revolving Credit Facility Agreement, dated as of July 9, 1997, among Tredegar Industries, Inc., the banks named therein, The Chase Manhattan Bank as Administrative Agent, NationsBank, N.A. as Documentation Agent and Long-Term Credit Bank of Japan, Limited as Co-Agent 11 Statement re computation of earnings per share 27 Financial Data Schedule (b) Reports on Form 8-K. No reports on Form 8-K have been filed for the quarter ended June 30, 1997.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Tredegar Industries, Inc. (Registrant) Date: August 13, 1997 /s/ N. A. Scher ---------------------- --------------------------------------- Norman A. Scher Executive Vice President and Chief Financial Officer (Principal Financial Officer) Date: August 13, 1997 /s/ D. Andrew Edwards ---------------------- --------------------------------------- D. Andrew Edwards Corporate Controller and Treasurer (Principal Accounting Officer)
EXHIBIT INDEX Exhibit No. Description 3 Amended By-laws 4.1 Revolving Credit Facility Agreement, dated as of July 9, 1997, among Tredegar Industries, Inc., the banks named therein, The Chase Manhattan Bank as Administrative Agent, NationsBank, N.A. as Documentation Agent and Long-Term Credit Bank of Japan, Limited as Co-Agent 11 Statement re computation of earnings per share 27 Financial Data Schedule