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, 1998
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, 1998: 36,052,283.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
Tredegar Industries, Inc.
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
June 30, Dec. 31,
1998 1997
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 26,573 $120,065
Accounts and notes receivable 95,321 69,672
Inventories 34,991 20,008
Income taxes recoverable 1,071 294
Deferred income taxes 8,675 8,722
Prepaid expenses and other 3,569 4,369
--------- ---------
Total current assets 170,200 223,130
--------- ---------
Property, plant and equipment, at cost 342,306 283,995
Less accumulated depreciation and amortization 192,186 183,397
--------- ---------
Net property, plant and equipment 150,120 100,598
--------- ---------
Other assets and deferred charges 89,791 67,134
Goodwill and other intangibles 33,027 20,075
--------- ---------
Total assets $443,138 $410,937
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 45,268 $ 33,168
Accrued expenses 46,546 39,618
--------- ---------
Total current liabilities 91,814 72,786
Long-term debt 25,000 30,000
Deferred income taxes 30,394 22,108
Other noncurrent liabilities 13,808 13,497
--------- ---------
Total liabilities 161,016 138,391
--------- ---------
Shareholders' equity:
Common stock, no par value 93,778 115,291
Common stock held in trust for savings
restoration plan (1,212) (1,020)
Unrealized gain on available-for-sale securities 7,145 5,020
Foreign currency translation adjustment (830) (37)
Retained earnings 183,241 153,292
--------- ---------
Total shareholders' equity 282,122 272,546
--------- ---------
Total liabilities and shareholders' equity $443,138 $410,937
========= =========
See accompanying notes to financial statements.
</TABLE>
2
<PAGE>
<TABLE>
Tredegar Industries, Inc.
Consolidated Statements of Income
(In Thousands)
(Unaudited)
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 169,946 $ 144,969 $ 326,606 $ 278,314
Other income (expense), net 1,911 5,058 3,301 7,903
--------- --------- --------- ---------
Total 171,857 150,027 329,907 286,217
--------- --------- --------- ---------
Costs and expenses:
Cost of goods sold 134,475 114,295 257,571 221,255
Selling, general and administrative 10,136 8,929 18,976 17,490
Research and development 3,600 3,181 6,947 6,447
Interest 292 621 686 1,142
Unusual items - (2,250) (765) (2,250)
--------- --------- --------- ---------
Total 148,503 124,776 283,415 244,084
--------- --------- --------- ---------
Income before income taxes 23,354 25,251 46,492 42,133
Income taxes 8,193 8,904 14,035 14,832
--------- --------- --------- ---------
Net income $ 15,161 $ 16,347 $ 32,457 $ 27,301
========= ========= ========= =========
Earnings per share:
Basic $ .42 $ .44 $ .90 $ .74
Diluted .39 .42 .84 .69
Shares used to compute earnings per share:
Basic 35,904 36,789 36,150 36,759
Diluted 38,557 39,387 38,788 39,309
Dividends per share $ .04 $ .027 $ .07 $ .053
See accompanying notes to financial statements.
</TABLE>
3
<PAGE>
<TABLE>
Tredegar Industries, Inc.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months
Ended June 30
-------------------
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 32,457 $ 27,301
Adjustments for noncash items:
Depreciation 10,385 9,109
Amortization of intangibles 34 26
Deferred income taxes 588 23
Accrued pension income and postretirement
benefits (1,773) (1,877)
Gain on sale of technology-related investments (2,185) (6,359)
Gain on divestitures (765) (2,250)
Changes in assets and liabilities, net of
effects from acquisitions and divestitures:
Accounts and notes receivable (4,110) (8,137)
Inventories (4,015) 589
Income taxes recoverable (777) 2,023
Prepaid expenses and other 970 (367)
Accounts payable 6,994 12,662
Accrued expenses and income taxes payable (4,185) 4,423
Other, net (1,575) (835)
--------- ---------
Net cash provided by operating activities 32,043 36,331
--------- ---------
Cash flows from investing activities:
Capital expenditures (13,604) (8,404)
Acquisitions (net of cash acquired of $1,097 in
1998; excludes equity issued of $11,219 in 1998) (60,527) (13,469)
Investments (13,726) (6,828)
Proceeds from the sale of investments 2,919 5,783
Proceeds from property disposals and divestitures 690 2,355
Other, net (855) (308)
--------- ---------
Net cash used in investing activities (85,103) (20,871)
--------- ---------
Cash flows from financing activities:
Dividends paid (2,508) (1,963)
Net decrease in borrowings (5,000) (5,000)
Repurchases of Tredegar common stock (34,163) (1,955)
Tredegar common stock purchased by trust for
savings restoration plan (192) -
Proceeds from exercise of stock options 1,431 1,348
--------- ---------
Net cash used in financing activities (40,432) (7,570)
--------- ---------
(Decrease) increase in cash and cash equivalents (93,492) 7,890
Cash and cash equivalents at beginning of period 120,065 101,261
--------- ---------
Cash and cash equivalents at end of period $ 26,573 $109,151
========= =========
See accompanying notes to financial statements.
</TABLE>
4
<PAGE>
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,
1998, and the consolidated results of their operations and their cash
flows for the six months ended June 30, 1998 and 1997. 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,
1997. The results of operations for the six months ended June 30, 1998,
are not necessarily indicative of the results to be expected for the
full year.
On May 20, 1998, Tredegar's Board of Directors declared a
three-for-one stock split payable on July 1, 1998, to shareholders of
record on June 15, 1998. Accordingly, all historical references to
per-share amounts, shares repurchased and the shares used to compute
earnings per share have been restated to reflect the split.
2. Unusual items in 1998 include a first-quarter pretax gain of $765,000
on the sale of APPX Software. Income taxes include a tax benefit of $2
million related to the sale, including a tax benefit for the excess of
APPX Software's income tax basis over its financial reporting basis.
Unusual items in 1997 include a gain of $2.25 million related to the
redemption of preferred stock received in connection with the 1996
divestiture of Molded Products. Net income and earnings per share,
adjusted for unusual items and technology-related investment activities
affecting the comparability of operating results, are presented below:
<TABLE>
<CAPTION>
(In Thousands Except Per-Share Amounts)
Second Quarter Six Months
Ended June 30 Ended June 30
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net income as reported $ 15,161 $ 16,347 $ 32,457 $ 27,301
After-tax effect of unusual items:
Gain on sale of APPX Software - - (2,766) -
Redemption of preferred stock received in connection
with the divestiture of Molded Products - (1,440) - (1,440)
--------- --------- --------- ---------
Net income as adjusted for unusual items 15,161 14,907 29,691 25,861
After-tax effect of technology-related net investment
(gains) losses (671) (2,863) (1,103) (4,069)
--------- --------- --------- ---------
Net income as adjusted for unusual items and technology-
related investment activities $ 14,490 $ 12,044 $ 28,588 $ 21,792
========= ========= ========= =========
Diluted earnings per share:
As reported $ .39 $ .42 $ .84 $ .69
As adjusted for unusual items .39 .38 .77 .65
As adjusted for unusual items and technology-related
investment activities .37 .31 .74 .55
</TABLE>
3. The carrying value of technology-related investments (included in
"Other assets" in the consolidated balance sheet) at June 30, 1998 and
December 31, 1997, was $49.8 million ($39.3 million cost basis) and
$33.5 million ($25.8 million cost basis), respectively. The excess of
the carrying value over the cost basis is related to available-for-sale
5
<PAGE>
securities stated at their closing market price, with unrealized
holding gains excluded from earnings and reported net of deferred
income taxes in shareholders' equity until realized. The estimated fair
value of technology-related investments was $55.8 million and $40.8
million at June 30, 1998 and December 31, 1997, respectively.
4. Comprehensive income, defined as net income and other comprehensive
income, for the second quarters ended June 30, 1998 and 1997 was $17.8
million and $16.2 million, respectively. Comprehensive income for the
six months ended June 30, 1998 and 1997 was $33.8 million and $26.9
million, respectively. Other comprehensive income includes changes in
unrealized gains and losses on available-for-sale securities and
foreign currency translation adjustments recorded net of deferred
income taxes directly in shareholders' equity.
5. The components of inventories are as follows:
<TABLE>
<CAPTION>
(In Thousands)
June 30 Dec. 31
1998 1997
-------------- --------------
<S> <C> <C>
Finished goods $ 4,755 $ 1,865
Work-in-process 5,193 2,340
Raw materials 17,305 9,297
Stores, supplies and other 7,738 6,506
-------------- --------------
Total $34,991 $20,008
============== ==============
</TABLE>
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:
<TABLE>
<CAPTION>
(In Thousands)
Second Quarter Six Months
Ended June 30 Ended June 30
-------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average shares outstanding used
to compute basic earnings per share 35,904 36,789 36,150 36,759
Incremental shares issuable upon the
assumed exercise of stock options 2,653 2,598 2,638 2,550
--------- --------- --------- ---------
Shares used to compute diluted earnings
per share 38,557 39,387 38,788 39,309
========= ========= ========= =========
</TABLE>
Incremental shares issuable upon the assumed exercise of
outstanding stock options is computed using the average market price
during the related period.
7. On February 13, 1998, Tredegar completed a "Dutch auction" tender offer
in which it repurchased 1,508,772 shares of its common stock for $32.7
million or $21.67 per share (excluding transaction costs). Since
becoming an independent company in 1989, Tredegar has repurchased a
total of 20.1 million shares, or 36% of its issued and outstanding
common stock, for $112.9 million ($5.61 per share). As of June 30,
1998, under a standing authorization from its board of directors,
6
<PAGE>
Tredegar may purchase an additional 4.1 million shares in the open
market or in privately negotiated transactions at prices management
deems appropriate.
8. On June 11, 1998, Tredegar acquired Canada-based Exal Aluminum Inc.
("Exal"). Exal operates two aluminum extrusion plants in Pickering,
Ontario and Aurora, Ontario. The two plants collectively generated
sales of approximately $94 million in 1997 and $4.5 million for the
period from June 11 through June 30, 1998. Both facilities manufacture
extrusions for distribution, transportation, electrical, machinery and
equipment, and building and construction markets. The Pickering
facility also produces aluminum logs and billet for internal use and
for sale to customers. Tredegar filed a Form 8-K on June 23, 1998, with
respect to the acquisition of Exal.
On February 6, 1998, Tredegar acquired two Canada-based
aluminum extrusion and fabrication plants from Reynolds Metals Company
("Reynolds"). The plants are located in Ste-Therese, Quebec, and
Richmond Hill, Ontario. The two plants collectively generated sales of
approximately $55 million in 1997 and $23.7 million for the period from
February 6 through June 30, 1998. Both facilities manufacture products
used primarily in building and construction, transportation,
electrical, machinery and equipment, and consumer durables markets.
On May 30, 1997, Tredegar acquired an aluminum extrusion and
fabrication plant in El Campo, Texas, from Reynolds. The El Campo
facility, which had sales of $21.6 million for the six months ended
June 30, 1998 and $3.2 million for the period May 30 through June 30,
1997, extrudes and fabricates products used primarily in
transportation, electrical and consumer durables markets.
These acquisitions were accounted for using the purchase
method. No goodwill arose from the acquisitions of the former Reynolds
plants since the estimated fair value of the identifiable net assets
acquired equaled the purchase price. Goodwill (the excess of the
purchase price over the estimated fair value of identifiable net assets
acquired) of $13 million was recorded on the acquisition of Exal and is
being amortized on a straight-line basis over 40 years. The operating
results for the five plants have been included in the consolidated
statements of income since the date acquired.
Pro forma financial information with respect to these
acquisitions required by Item 7 of Form 8-K will be filed not later
than August 21, 1998 (60 days from the date the Current Report on Form
8-K was required to be filed for the Exal acquisition).
9. The Financial Accounting Standards Board has issued new standards
affecting the accounting for derivative instruments and hedging
activities and disclosures of information about business segments,
pensions and other postretirement benefits. These standards are not
expected to significantly change Tredegar's operating results,
financial condition or disclosures when adopted. Each of the new
standards will be adopted in the fourth quarter of 1998, except for the
derivatives and hedging standard which will be adopted in the first
quarter of 2000.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Second Quarter 1998 Compared with Second Quarter 1997
Net income for the second quarter of 1998 was $15.2 million or 39 cents
per share, down from $16.3 million or 42 cents per share in the second quarter
of 1997 (all per share amounts in this analysis are expressed on a diluted
basis). Results for 1997 include an unusual gain of $2.25 million ($1.4 million
after income taxes or 4 cents per share) related to the redemption of preferred
stock received in connection with the 1996 divestiture of Molded Products (see
Note 2 on page 5). In addition, results for 1998 and 1997 include net gains from
technology-related investment activities of $1 million ($671,000 after income
taxes or 2 cents per share) and $4.5 million ($2.9 million after income taxes or
7 cents per share), respectively.
Net income excluding unusual items and technology-related investment
activities for the second quarter of 1998 was $14.5 million or 37 cents per
share, up from $12 million or 31 cents per share in the second quarter of 1997.
The improved operating earnings were driven by continued volume growth and
acquisitions in Tredegar's aluminum extrusion business, where profits were up
41%. Tredegar operates eight aluminum plants in the U.S. and Canada, five of
which have been acquired since May 1997 (see Note 8 on page 7). Lower losses at
Molecumetics, Tredegar's drug discovery subsidiary, also contributed to the
improved results. Profits in the company's plastics operations declined 4% due
primarily to weakness in Asian markets and higher costs related to new product
introductions. See Notes 2, 3, 7 and 8 on pages 5 through 7 for further
information on items affecting the comparability of operating results and
technology-related investments.
Second-quarter net sales increased 17% in 1998. Excluding revenue from
aluminum acquisitions, sales were down 3% for the quarter due primarily to lower
volume of plastic film exported to Asian markets and lower selling prices
reflecting a decline in plastic resin and aluminum ingot costs and pricing
pressure in Asia, partially offset by higher aluminum extrusion volume and
collaboration revenues at Molecumetics. Higher aluminum extrusions volume was
driven by strength in all building and construction markets and sales to
distributors.
The gross profit margin during the second quarter of 1998 decreased to
20.9% from 21.2% in 1997 due primarily to lower margins in Film Products from
lower volume and pricing pressure in Asian markets and higher costs related to
new product introductions, partially offset by higher volume and margins in
Aluminum Extrusions and higher contract research revenues. Contract research
revenues help to support research and development programs at Molecumetics.
Selling, general and administrative expenses in the second quarter of
1998 increased to $10.2 million from $8.9 million in 1997, but as a percentage
of sales declined to 6% in 1998 compared with 6.2% in 1997.
Research and development expenses increased by $419,000 or 13% due to
higher spending at Molecumetics and Film Products.
8
<PAGE>
Interest income, which is included in "Other income (expense), net" in
the consolidated statements of income, decreased in the second quarter of 1998
by $580,000 or 48% due to a lower average cash equivalents balance (see
Liquidity and Capital Resources on page 12). The average tax-equivalent yield
earned on cash equivalents was approximately 5.7% in 1998 and 5.9% in 1997.
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 Tredegar's investment policy are safety of principal and
liquidity. Interest expense decreased by $329,000 during the period due
primarily to higher capitalized interest from higher capital expenditures, the
writeoff in 1997 of deferred financing costs related to the refinancing of
Tredegar's revolving credit facility, and lower average debt outstanding.
The effective tax rate excluding unusual items and technology-related
investment activities was 35% in the second quarters of 1998 and 1997, as the
impact of a decline in average tax-exempt investments was offset by a lower
effective state income tax rate.
Six Months 1998 Compared with Six Months 1997
Net income for the first six months of 1998 was $32.5 million or 84
cents per share, up from $27.3 million or 69 cents per share in the first six
months of 1997. Results for 1998 include an unusual gain of $765,000 ($2.8
million after income taxes or 7 cents per share) on the sale of APPX Software on
January 16, 1998. Results for 1997 include an unusual gain of $2.25 million
($1.4 million after income taxes or 4 cents per share) related to the redemption
of preferred stock received in connection with the 1996 divestiture of Molded
Products. In addition, results for 1998 and 1997 include net gains from
technology-related investment activities of $1.7 million ($1.1 million after
income taxes or 3 cents per share) and $6.4 million ($4.1 million after income
taxes or 10 cents per share), respectively.
Net income excluding unusual items and technology-related investment
activities for the first six months of 1998 was $28.6 million or 74 cents per
share, up from $21.8 million or 55 cents per share in the first six months of
1997. The improved operating earnings were driven by continued volume growth and
acquisitions in Aluminum Extrusions, higher profits in Film Products and higher
collaboration revenues supporting research and development programs at
Molecumetics. The increase in profits in Film Products was driven by higher
volume and efficiencies in nonwoven film laminates, higher shipments of
Vispore(R) film and higher volume and profit related to European and Latin
American operations, partially offset by weakness in Asian markets and higher
costs related to new product introductions. See Notes 2, 3, 7 and 8 on pages 5
through 7 for further information on items affecting the comparability of
operating results and technology-related investments.
Net sales increased 17% in the first six months of 1998 compared to
1997. Excluding revenue from aluminum acquisitions, sales were up slightly for
the year due primarily to higher volume in Aluminum Extrusions, higher volume in
Film Products in all markets except Asia and collaboration revenues at
Molecumetics, partially offset by lower selling prices reflecting a decline in
plastic resin and aluminum ingot costs and pricing pressure in Asia. Higher
aluminum extrusions volume was driven by strength in all building and
construction markets and sales to distributors.
The gross profit margin during the first six months of 1998 increased
to 21.1% from 20.5% in 1997 due primarily to higher volume and margins in
Aluminum Extrusions, efficiencies in nonwoven film laminates and higher contract
research revenues at Molecumetics, partially offset by lower margins in Film
9
<PAGE>
Products from lower volume and pricing pressure in Asian markets and higher
costs related to new product introductions.
Selling, general and administrative expenses in the first six months of
1998 increased to $19 million from $17.5 million in 1997, but as a percentage of
sales declined to 5.8% in 1998 compared with 6.3% in 1997.
Research and development expenses increased by $500,000 or 8% due to
higher spending at Molecumetics and Film Products.
Interest income, which is included in "Other income (expense), net" in
the consolidated statements of income, decreased in the first six months of 1998
by $616,000 or 26% due to a lower average cash equivalents balance (see
Liquidity and Capital Resources on page 12). The average tax-equivalent yield
earned on cash equivalents was approximately 5.7% in 1998 and 1997. Interest
expense decreased by $456,000 during the period due primarily to higher
capitalized interest from higher capital expenditures, the writeoff in 1997 of
deferred financing costs related to the refinancing of Tredegar's revolving
credit facility, and lower average debt outstanding.
The effective tax rate excluding unusual items and technology-related
investment activities was 35% in the first six months of 1998 and 1997, as the
impact of a decline in average tax-exempt investments was offset by a lower
effective state income tax rate.
10
<PAGE>
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, 1998 and 1997.
<TABLE>
Net Sales by Segment
(In Thousands)
(Unaudited)
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
-------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Film Products and Fiberlux $ 73,703 $ 78,220 $ 151,112 $ 153,657
Aluminum Extrusions 95,076 66,042 172,798 123,537
Technology:
Molecumetics 1,167 216 2,667 216
Other - 491 29 904
--------- --------- --------- ---------
Total net sales $ 169,946 $ 144,969 $ 326,606 $ 278,314
========= ========= ========= =========
</TABLE>
<TABLE>
Operating Profit by Segment
(In Thousands)
(Unaudited)
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
------------------- -------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Film Products and Fiberlux $ 12,015 $ 12,546 $ 27,132 $ 23,514
Aluminum Extrusions 12,808 9,069 21,593 15,771
Technology:
Molecumetics (971) (1,494) (1,465) (3,159)
Investments 1,046 4,474 1,722 6,359
Other - (24) (428) (66)
Unusual items - - 765 -
--------- --------- --------- ---------
75 2,956 594 3,134
--------- --------- --------- ---------
Divested operations:
Unusual items - 2,250 - 2,250
--------- --------- --------- ---------
- 2,250 - 2,250
--------- --------- --------- ---------
Total operating profit 24,898 26,821 49,319 44,669
Interest income 629 1,209 1,744 2,360
Interest expense 292 621 686 1,142
Corporate expenses, net 1,881 2,158 3,885 3,754
--------- --------- --------- ---------
Income before income taxes 23,354 25,251 46,492 42,133
Income taxes 8,193 8,904 14,035 14,832
--------- --------- --------- ---------
Net income $ 15,161 $ 16,347 $ 32,457 $ 27,301
========= ========= ========= =========
</TABLE>
11
<PAGE>
Results for 1998 include an unusual gain of $765,000 ($2.8 million
after income taxes) on the sale of APPX Software on January 16, 1998. Results
for 1997 include an unusual gain of $2.25 million ($1.4 million after income
taxes) related to the redemption of preferred stock received in connection with
the 1996 divestiture of Molded Products. The "Investments" category for 1998 and
1997 is comprised of net gains from technology-related investment activities.
See Note 2 on page 5 for further information on items affecting the
comparability of operating results.
Sales in Film Products declined during the second quarter of 1998 due
primarily to lower volume of plastic film exported to The Procter & Gamble
Company ("P&G") in Asia and lower selling prices reflecting a decline in plastic
resin costs and pricing pressure in Asia. Sales during the first six months of
1998 increased due to higher volume of nonwoven film laminates supplied to P&G
for diapers, higher volume of Vispore(R) film and higher volume of plastic films
manufactured and sold by the company's operations in Latin America and Europe,
partially offset by lower volume of plastic film exported to P&G in Asia and
lower selling prices reflecting a decline in plastic resin costs and pricing
pressure in Asia. Changes in operating profit for the second quarter and the
first six months of 1998 compared to 1997 were driven by the volume changes and
pricing pressures in the areas noted above, as well as higher costs related to
new product introductions, start-up costs for a new production site in China and
the adverse impact of the strong U.S. Dollar on profit generated by European
operations. Operating profit increased at Fiberlux during the second quarter and
first six months of 1998 due to higher sales.
Sales in Aluminum Extrusions increased during the second quarter and
first six months of 1998 due to acquisition-related volume (see Note 8 on page
7) as well as strength in all building and construction markets and sales to
distributors. Excluding acquisitions, volume was up 4% in the second quarter and
the first six months of the year. Operating profit increased during the second
quarter and first six months of 1998 due to higher volume, related lower unit
conversion costs and acquisitions.
Excluding net gains from investment activities and unusual items,
technology segment losses decreased by $547,000 and $1.3 million during the
second quarter and first six months of 1998, respectively, due to revenues
generated from drug development partnerships at Molecumetics.
Liquidity and Capital Resources
Tredegar's total assets increased to $443.1 million at June 30, 1998,
from $410.9 million at December 31, 1997, due mainly to the impact of the
acquisitions in Canada, higher accounts receivable and inventories supporting
higher sales and an increase in technology-related investments (see Note 3 on
page 5), partially offset by a decrease in cash and cash equivalents (see
further discussion below). Total liabilities increased to $161 million at June
30, 1998, from $138.4 million at December 31, 1997, due primarily to the
acquisitions and higher accounts payable supporting higher sales, partially
offset by lower debt outstanding.
Net cash provided by operating activities in excess of capital
expenditures and dividends decreased to $15.9 million in the first six months of
1998 from $25.9 million in 1997 due primarily to higher capital expenditures at
Film Products and Molecumetics and higher working capital supporting higher
sales, partially offset by improved operating results. Higher capital
expenditures in Film Products are related to the new facility near Guangzhou,
China, capacity expansion in Brazil and machinery and equipment added for the
manufacture of new products. The China facility, which produces disposable films
12
<PAGE>
for hygiene products marketed in the region, began commercial production in the
second quarter of 1998. Film Products is beginning construction of a new
production site near Budapest, Hungary, which should be operational in mid-1999.
The Hungary facility will produce disposable films for hygiene products marketed
in Eastern Europe. Higher capital expenditures at Molecumetics relate to the
expansion of its research lab in Bellevue, Washington.
The decrease in cash and cash equivalents to $26.6 million at June 30,
1998, from $120.1 million at December 31, 1997, was due to cash used for
acquisitions in Canada ($60.5 million, excluding equity issued of $11.2
million), the repurchase of Tredegar common stock ($34.2 million), cash used for
technology-related investments ($10.8 million, net of proceeds from the sale of
investments), cash used to paydown debt ($5 million) and other net uses
($300,000), partially offset by the $15.9 million of excess cash generated
during the first six months of 1998 and proceeds from the exercise of stock
options ($1.4 million).
Quantitative and Qualitative Disclosures About Market Risk
Tredegar has exposure, among others, to the volatility of polyethylene
resin prices, aluminum ingot and scrap prices, foreign currencies, emerging
markets, interest rates and technology stocks. Changes in resin prices, and the
timing thereof, could have a significant impact on profit margins in Film
Products; however, such changes are generally followed by a corresponding change
in selling prices. Profit margins in Aluminum Extrusions are sensitive to
fluctuations in aluminum ingot and scrap prices but are also generally followed
by a corresponding change in selling prices; however, there is no assurance that
higher ingot costs can be passed along to customers.
In the normal course of business, Tredegar enters into fixed-price
forward sales contracts with certain customers for the sale of fixed quantities
of aluminum extrusions at scheduled intervals. In order to hedge its exposure to
aluminum price volatility under these fixed-price arrangements, which generally
have a duration of not more than 12 months, the company enters into a
combination of forward purchase commitments and futures contracts to acquire
aluminum, based on the scheduled deliveries.
Tredegar sells to customers in foreign markets through its foreign
operations and through export sales from its plants in the U.S. Tredegar
estimates that approximately $15.1 million and $14.6 million of its consolidated
pretax income for the first six months of 1998 and 1997, respectively, relates
to such sales, of which (i) $6.9 million and $9 million, respectively, relates
to income generated from sales and costs denominated in, or indexed to, U.S.
Dollars (primarily income earned on export sales out of the U.S. to Asia ($3
million and $4.6 million, respectively) and Latin America ($1.9 million in each
period)), (ii) $4.7 million and $4.1 million, respectively, relates to income
generated from sales and costs primarily denominated in German Marks and Dutch
Guilders, (iii) $2 million and $1.5 million, respectively, relates to income
generated from sales and costs denominated in the currencies of Brazil and
Argentina and (iv) $1.5 million relates to income generated from Canadian
operations acquired in 1998 (see Note 8 on page 7). Tredegar's exposure to the
relationship between the Canadian Dollar and U.S. Dollar has increased
significantly with its recent acquisitions in Canada; however, the company
believes that this exposure has been substantially neutralized by U.S.
Dollar-based spread (the difference between selling prices and aluminum costs)
generated from its Canadian casting operations and sales exported from Canada to
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the U.S. Generally, Tredegar views the volatility of foreign currencies and
emerging markets as part of the overall risk of operating in such environments
and, accordingly, adjusts the required rate of return on such investments.
At June 30, 1998, Tredegar had cash and cash equivalents of $26.6
million and debt of $25 million. Debt outstanding consisted of a note with
interest payable semi-annually at 7.2% per year. Annual principal payments of $5
million are due each June through 2003. Tredegar also has a revolving credit
facility that permits borrowings of up to $275 million (no amounts borrowed at
June 30, 1998). The facility matures on July 9, 2002.
Tredegar has investments in private venture capital fund limited
partnerships and early-stage technology companies, including the stock of
privately held companies and the restricted and unrestricted stock of companies
that have recently registered shares in initial public offerings. Investments in
non-public companies are illiquid and the investments in public companies are
subject to the volatility of equity markets and technology stocks.
Year 2000 Information Technology Issues
The century date compliance problem, which is commonly referred to as
the "Year 2000" problem, will affect many computers and other electronic devices
that are not programmed to properly recognize dates starting with January 1,
2000. This could result in system failures or miscalculations. The potential
impact of such failures include, among others, an inability to order raw
materials, manufacture products, ship products and be paid for the products on a
timely basis.
Since 1996, Tredegar has been actively planning and responding to the
Year 2000 problem. Year 2000 reviews have and will continue to be made to
Tredegar's Executive Committee and senior management. Periodic reviews with the
Board of Directors will begin in August 1998.
Tredegar's Year 2000 compliance efforts are focused on internal
computer-based information systems, external electronic interfaces and
communication equipment, shop floor machines and other manufacturing and
research process control devices. Remediation of systems requiring changes
should be completed by the end of 1998, except for revisions to a small portion
of certain software programs and the replacement of certain software for the
four aluminum extrusion plants recently acquired in Canada (see Note 8 on page
7). Remediation efforts for exceptions will extend into 1999. Testing of systems
began in mid-1998 and will continue through 1999. Tredegar does not believe
contingency plans are necessary for internal systems at this time. The company
is also actively evaluating the Year 2000 capabilities of parties with whom
Tredegar has key business relationships (suppliers, customers and banks, for
example). Contingency plans will be developed for these relationships as needed.
Work to fix the Year 2000 problem is being performed largely by internal
personnel, and the incremental costs associated with correcting the problem are
not expected to have a material adverse effect on the company's operating
results or financial condition.
While Tredegar believes that it is taking the necessary steps to
resolve its Year 2000 issues in a timely manner, there can be no assurance that
there will be no Year 2000 problems. If any such problems occur, Tredegar will
work to solve them as quickly as possible. At present, Tredegar does not expect
that any such problems will have a material adverse effect on its business. The
14
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failure, however, of a major customer or supplier to be Year 2000 compliant
could have a material adverse effect on Tredegar.
New Accounting Standards
The Financial Accounting Standards Board has issued new standards
affecting the accounting for derivative instruments and hedging activities and
disclosures of information about business segments, pensions and other
postretirement benefits. These standards are not expected to significantly
change Tredegar's operating results, financial condition or disclosures when
adopted. Each of the new standards will be adopted in the fourth quarter of
1998, except for the derivatives and hedging standard which will be adopted in
the first quarter of 2000.
15
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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 20,
1998. The following sets forth the vote results (adjusted for
the three-for-one stock split payable on July 1, 1998, to
shareholders of record on June 15, 1998) 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"
------- ----------- ----------
John D. Gottwald 32,595,162 81,720
Andre B. Lacy 32,563,842 113,040
Emmett J. Rice 32,537,979 138,903
Thomas G. Slater, Jr. 32,521,608 155,274
There were no broker non-votes with respect to the election of
directors.
(b) Approval of Auditors
Approval of the designation of PricewaterhouseCoopers LLP
(formerly Coopers & Lybrand L.L.P.) as the auditors for
Tredegar for 1998:
No. of Votes No. of Votes No. of
"For" "Against" Abstentions
32,693,289 188,184 65,409
There were no broker non-votes with respect to the approval of
auditors.
(c) Approval of Directors' Stock Plan
No. of Votes No. of Votes No. of
"For" "Against" Abstentions
28,646,178 4,001,664 299,040
There were no broker non-votes with respect to the approval of
the Directors' Stock Plan.
16
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No.
3.1 Articles of Amendment
3.2 Amended By-laws
27 Financial Data Schedule
(b) Reports on Form 8-K. Registrant filed a Form 8-K on June 23,
1998, with respect to the acquisition of Exal Aluminum Inc.
(see further information regarding this acquisition in Note 8
on page 7). Pro forma financial information with respect to
the acquisition required by Item 7 of Form 8-K will be filed
not later than August 21, 1998 (60 days from the date the
Current Report on Form 8-K was required to be filed).
17
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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 12, 1998 /s/ N. A. Scher
-------------------- ---------------------------------------
Norman A. Scher
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 12, 1998 /s/ D. Andrew Edwards
-------------------- ---------------------------------------
D. Andrew Edwards
Corporate Controller and Treasurer
(Principal Accounting Officer)
18
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EXHIBIT INDEX
Exhibit No. Description
3.1 Articles of Amendment
3.2 Amended By-laws
27 Financial Data Schedule
19
ARTICLES OF AMENDMENT
OF
TREDEGAR INDUSTRIES, INC.
I.
The name of the Corporation is Tredegar Industries, Inc.
II.
The Amendments adopted are:
A. Article III of the Corporation's Amended and Restated Articles of
Incorporation shall be amended to read as follows:
The Corporation shall have authority to issue 150,000,000
shares of Common Stock and 10,000,000 shares of Preferred
Stock.
B. At the effective time of the Certificate of Amendment to be issued
by the State Corporation Commission, each issued and unissued
authorized share of Common Stock shall be changed to three shares
of Common Stock.
III.
The foregoing amendments were duly adopted by the Corporation's Board
of Directors on May 20, 1998. No shareholder action was required with
respect to the adoption of the amendments.
IV.
There are no shares of any class of the Corporation's stock outstanding
other than Common Stock.
V.
The Certificate of Amendment with respect to the foregoing amendments
shall become effective at 11:59 p.m. on June 30, 1998.
The undersigned Secretary declares that the facts herein stated are
true as of June 25, 1998.
/s/ Nancy M. Taylor
-----------------------------------
Nancy M. Taylor, Secretary
================================================================================
TREDEGAR INDUSTRIES, INC.
AMENDED BY-LAWS
As amended and in effect on May 20, 1998
================================================================================
<PAGE>
TREDEGAR INDUSTRIES, INC.
AMENDED BY-LAWS
ARTICLE I
Meeting of Shareholders
Section 1. Places of Meetings. All meetings of the shareholders shall
be held at such place, either within or without the State of Virginia, as may,
from time to time, be fixed by the Board of Directors.
Section 2. Annual Meetings. The annual meeting of the shareholders, for
the election of directors and transaction of such other business as may come
before the meeting, shall be held in each year on the fourth Wednesday in May,
at 2:00 p.m., Richmond, Virginia time, or on such other date and at such other
time as the Board of Directors of the Corporation may designate from time to
time.
Section 3. Special Meetings. Special meetings of shareholders for any
purpose or purposes may be called at any time by the President of the
Corporation, or by a majority of the Board of Directors. At a special meeting no
business shall be transacted and no corporate action shall be taken other than
that stated in the notice of the meeting.
Section 4. Notice of Meetings. Except as otherwise required by law,
written or printed notice stating the place, day and hour of every meeting of
the shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be mailed not less than ten nor more than
sixty days before the date of the meeting to each shareholder of record entitled
to vote at such meeting, at his address which appears in the share transfer
books of the Corporation. Meetings may be held without notice if all the
shareholders entitled to vote at the meeting are present in person or by proxy
or if notice is waived in writing by those not present, either before or after
the meeting.
Section 5. Quorum. Except as otherwise required by the Articles of
Incorporation, any number of shareholders together holding at least a majority
of the outstanding shares of capital stock entitled to vote with respect to the
business to be transacted, who shall be present in person or represented by
proxy at any meeting duly called, shall constitute a quorum for the transaction
of business. If less than a quorum shall be in attendance at the time for which
a meeting shall have been called, the meeting may be adjourned from time to time
by a majority of the shareholders present or represented by proxy without notice
other than by announcement at the meeting.
Section 6. Voting. At any meeting of the shareholders each shareholder
of a class entitled to vote on the matters coming before the meeting shall have
one vote, in person or by proxy, for each share of capital stock standing in his
or her name on the books of the Corporation at the time of such meeting or on
any date fixed by the Board of Directors not more than seventy (70) days prior
to the meeting. Every proxy shall be in writing, dated and signed by the
shareholder entitled to vote or his duly authorized attorney-in-fact.
Section 7. Voting List. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number of shares held by each. Such list, for a period of ten (10) days
prior to such meeting, shall be kept on file at the registered office of the
Corporation or at its principal place of business or at the office of its
transfer agent or registrar and shall be subject to inspection by any
shareholder at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders. If the requirements of this section have not been
substantially complied with, the meeting shall, on the demand of any shareholder
in person or by proxy, be adjourned until the requirements are complied with.
Section 8. Shareholder Proposals. To be properly brought before an
annual meeting of shareholders, business must be (i) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors, (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (iii) otherwise properly brought before
the meeting by a shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
given, either by personal delivery or by United States mail, postage prepaid, to
the Secretary of the Corporation not later than ninety (90) days in advance of
the annual meeting. A shareholder's notice to the Secretary shall set forth as
to each matter the shareholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting (including the specific proposal to be presented) and the reasons for
conducting such business at the annual meeting, (ii) the name and record address
of the shareholder proposing such business, (iii) the class and number of shares
of the Corporation that are beneficially owned by the shareholder, and (iv) any
material interest of the shareholder in such business.
In the event that a shareholder attempts to bring business before an
annual meeting without complying with the provisions of this Section 8, the
Chairman of the meeting shall declare to the meeting that the business was not
properly brought before the meeting in accordance with the foregoing procedures,
and such business shall not be transacted.
No business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this Section 8, provided, however,
that nothing in this Section 8 shall be deemed to preclude discussion by any
shareholder of any business properly brought before the annual meeting.
Section 9. Inspectors. An appropriate number of inspectors for any
meeting of shareholders may be appointed by the Chairman of such meeting.
Inspectors so appointed will open and close the polls, will receive and take
charge of proxies and ballots, and will decide all questions as to the
qualifications of voters, validity of proxies and ballots, and the number of
votes properly cast.
ARTICLE II
Directors
Section 1. General Powers. The property, affairs and business of the
Corporation shall be managed under the direction of the Board of Directors, and
except as otherwise expressly provided by law, the Articles of Incorporation or
these By-laws, all of the powers of the Corporation shall be vested in such
Board.
Section 2. Number of Directors. The Board of Directors shall be eleven
(11) in number.
Section 3. Election of Directors.
(a) Directors shall be elected at the annual meeting of
shareholders to succeed those Directors whose terms have expired and to fill any
vacancies thus existing.
(b) Directors shall hold their offices for terms as set forth
in the Articles of Incorporation and until their successors are elected. Any
director may be removed from office as set forth in the Articles of
Incorporation.
(c) Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of the majority of the remaining directors though
less than a quorum of the Board of Directors.
(d) A majority of the number of directors fixed by these
By-laws shall constitute a quorum for the transaction of business. The act of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 4. Meetings of Directors. Meetings of the Board of Directors
shall be held at places within or without the State of Virginia and at times
fixed by resolution of the Board, or upon call of the President, and the
Secretary or officer performing the Secretary's duties shall give not less than
twenty-four (24) hours' notice by letter, telegraph or telephone (or in person)
of all meetings of the directors, provided that notice need not be given of
regular meetings held at times and places fixed by resolution of the Board. An
annual meeting of the Board of Directors shall be held as soon as practicable
after the adjournment of the annual meeting of shareholders. Meetings may be
held at any time without notice if all of the Directors are present, or if those
not present waive notice in writing either before or after the meeting.
Directors may be allowed, by resolution of the Board, a reasonable fee and
expenses for attendance at meetings.
Section 5. Nominations. Subject to the rights of holders of any class
or series of stock having a preference over the common stock as to dividends or
upon liquidation, nominations for the election of Directors shall be made by the
Board of Directors or a committee appointed by the Board of Directors or by any
shareholder entitled to vote in the election of Directors generally. However,
any shareholder entitled to vote in the election of Directors generally may
nominate one or more persons for election as Directors at a meeting only if
written notice of such shareholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of shareholders,
ninety (90) days in advance of such meeting, and (ii) with respect to an
election to be held at a special meeting of shareholders for the election of
Directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each notice shall set
forth: (a) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the shareholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a Director of the Corporation if
so elected. The Chairman of the meeting may refuse to acknowledge the nomination
of any person not made in compliance with the foregoing procedure.
ARTICLE III
Committees
Section 1. Executive Committee. The Board of Directors shall, by vote
of a majority of the number of directors fixed by these By-laws, designate an
Executive Committee which shall consist of three or more directors, including
the President. The members of the Executive Committee shall serve until their
successors are designated by the Board of Directors, until removed or until the
Executive Committee is dissolved by the Board of Directors. All vacancies which
may occur in the Executive Committee shall be filled by the Board of Directors.
When the Board of Directors is not in session, the Executive Committee
shall have all power vested in the Board of Directors by law, the Articles of
Incorporation or these By-laws, except as otherwise provided in the Virginia
Stock Corporation Act and except that the Executive Committee shall not have the
power to elect the President of the Corporation. The Executive Committee shall
report at the next regular or special meeting of the Board of Directors all
action which the Executive Committee may have taken on behalf of the Board since
the last regular or special meeting of the Board of Directors.
Meetings of the Executive Committee shall be held at such places and at
such times fixed by resolution of the Committee, or upon call of the President.
Not less than twelve (12) hours' notice shall be given by letter, telegraph or
telephone (or in person) of all meetings of the Executive Committee, provided
that notice need not be given of regular meetings held at times and places fixed
by resolution of the Committee and that meetings may be held at any time without
notice if all of the members of the Committee are present or if those not
present waive notice in writing either before or after the meeting. A majority
of the members of the Executive Committee then serving shall constitute a quorum
for the transaction of business at any meeting.
Section 2. Executive Compensation Committee. The Board of Directors, at
its regular annual meeting, shall designate an Executive Compensation Committee
which shall consist of three or more directors who shall not be eligible for
bonus, stock option or stock appreciation rights. In addition, the Board at any
time may designate one or more alternate members of such Committee who shall be
directors not eligible for bonus, stock option or stock appreciation rights who
may act in place of any absent regular member upon invitation by the Chairman or
Secretary of the Committee.
With respect to bonuses, the Executive Compensation Committee shall
have and may exercise the powers to determine the amounts annually available for
bonuses pursuant to any bonus plan or formula approved by the Board, to
determine bonus awards to executive officers and to exercise such further powers
with respect to bonuses as may from time to time be conferred by the Board of
Directors.
With respect to salaries, the Executive Compensation Committee shall
have and may exercise the power to fix and determine from time to time all
salaries of the executive officers of the Corporation, and such further powers
with respect to salaries as may from time to time be conferred by the Board of
Directors.
The Executive Compensation Committee shall administer the Corporation's
Incentive Stock Option Plan (the Plan) and from time to time may grant,
consistent with the Plan, stock options and stock appreciation rights.
Vacancies in the Executive Compensation Committee shall be filled by
the Board of Directors, and members shall be subject to removal by the Board at
any time.
The Executive Compensation Committee shall fix its own rules of
procedure. A majority of the number of regular members then serving shall
constitute a quorum; and regular and alternate members present shall be counted
to determine whether there is a quorum. The Executive Compensation Committee
shall keep minutes of its meetings, and all action taken by it shall be reported
to the Board of Directors.
Section 3. Audit Committee. The Board of Directors at its regular
annual meeting shall designate an Audit Committee which shall consist of three
or more directors whose membership on the Committee shall meet the requirements
set forth in the rules of the New York Stock Exchange, as amended from time to
time. Vacancies in the Committee shall be filled by the Board of Directors with
directors meeting the requirements set forth above, giving consideration to
continuity of the Committee, and members shall be subject to removal by the
Board at any time. The Committee shall fix its own rules of procedure and a
majority of the members serving shall constitute a quorum. The Committee shall
meet at least twice a year with both the internal and the Corporation's outside
auditors present at each meeting and shall keep minutes of its meetings and all
action taken shall be reported to the Board of Directors. The Committee shall
review the reports and minutes of any audit committees of the Corporation's
subsidiaries. The Committee shall review the Corporation's financial reporting
process, including accounting policies and procedures. The Committee shall
examine the report of the Corporation's outside auditors, consult with them with
respect to their report and the standards and procedures employed by them in
their audit, report to the Board the results of its study and recommend the
selection of auditors for each fiscal year.
Section 4. Nominating Committee. The Board of Directors shall designate
a Nominating Committee which shall consist of three or more directors. The
Committee shall make recommendations to the Board regarding nominees for
election as directors by the shareholders at each Annual Shareholders' Meeting
and make such other recommendations regarding tenure, classification and
compensation of directors as the Committee may deem advisable from time to time.
The Committee shall fix its own rules of procedure and a majority of the members
serving shall constitute a quorum.
Section 5. Other Committees of Board. The Board of Directors, by
resolution duly adopted, may establish such other committees of the Board having
limited authority in the management of the affairs of the Corporation as it may
deem advisable and the members, terms and authority of such committees shall be
as set forth in the resolutions establishing the same.
Section 6. Advisory Committees to President. The President may
establish such advisory committees as he may deem advisable to assist him in the
administration and management of the business of the Corporation; such
committees shall consist of officers, employees or consultants to be appointed
by the President who shall serve for such terms and have such authority as may
be designated by the President.
ARTICLE IV
Officers
Section 1. Election. The officers of the Corporation shall consist of a
President, a Vice Chairman of the Board, one or more Vice Presidents (any one or
more of whom may be designated as Executive Vice Presidents or Senior Vice
Presidents), a Secretary and a Treasurer. In addition, such other officers as
are provided in Section 3 of this Article may from time to time be elected by
the Board of Directors. All officers shall hold office until the next annual
meeting of the Board of Directors or until their successors are elected. The
President shall be chosen from among the directors. Any two officers may be
combined in the same person as the Board of Directors may determine, except that
the President and Secretary may not be the same person.
Section 2. Removal of Officers; Vacancies. Any officer of the
Corporation may be removed summarily with or without cause, at any time by a
resolution passed at any meeting by affirmative vote of a majority of the number
of directors fixed by these By-laws. Vacancies may be filled at any meeting of
the Board of Directors.
Section 3. Other Officers. Other officers may from time to time be
elected by the Board, including, without limitation, one or more Assistant
Secretaries and Assistant Treasurers, and one or more Divisional Presidents and
Divisional Vice Presidents (any one or more of whom may be designated as
Divisional Executive Vice Presidents or Divisional Senior Vice Presidents).
Section 4. Duties. The officers of the Corporation shall have such
duties as generally pertain to their offices, respectively, as well as such
powers and duties as are hereinafter provided and as from time to time shall be
conferred by the Board of Directors. The Board of Directors may require any
officer to give such bond for the faithful performance of his duties as the
Board may see fit.
Section 5. Duties of the President. The President shall be the chief
executive and administrative officer of the Corporation, shall serve as the
Chairman of the Board of Directors and the Chairman of the Executive Committee
and shall have direct supervision over the business of the Corporation and its
several officers, subject to the Board of Directors. The President shall preside
at all meetings of shareholders and the Board of Directors. The President may
sign and execute in the name of the Corporation deeds, mortgages, bonds,
contracts or other instruments, except in cases where the signing and the
execution thereof shall be expressly delegated by the Board of Directors or by
these By-laws to some other officer or agent of the Corporation or shall be
required by law otherwise to be signed or executed. He may appoint advisory
committees as provided in Section 6 of Article III. In addition, he shall
perform all duties incident to the office of the President and such other duties
as from time to time may be assigned to him by the Board of Directors.
Section 6. Duties of Vice Chairman. In the absence or incapacity of the
President, the Vice Chairman shall perform the duties of the Chairman of the
Board, shall have the same authority, including, but not limited to, presiding
at all meetings of the Board of Directors and the Corporation's shareholders,
and shall serve as a member of all committees of the Board of which the
President is a member. In addition, the Vice Chairman of the Board shall perform
all duties as from time to time may be assigned to him by the Board of
Directors.
Section 7. Duties of the Vice Presidents. Each Vice President of the
Corporation (including any Executive Vice President and Senior Vice President)
shall have powers and duties as may from time to time be assigned to him by the
Board of Directors or the President. When there shall be more than one Vice
President of the Corporation, the Board of Directors may from time to time
designate one of them to perform the duties of the President in the absence of
the President, except that the Vice Chairman of the Board shall perform the
President's duties as Chairman of the Board and as a member of all committees of
the Board of which the President is a member. Any Vice President of the
Corporation may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts and other instruments, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these By-laws to some other officer or agent of the Corporation
or shall be required by law otherwise to be signed or executed.
Section 8. Duties of the Treasurer. The Treasurer shall have charge and
custody of and be responsible for all funds and securities of the Corporation,
and shall cause all such funds and securities to be deposited in such banks and
depositories as the Board of Directors from time to time may direct. He shall
maintain adequate accounts and records of all assets, liabilities and
transactions of the Corporation in accordance with generally accepted accounting
practices; shall exhibit his accounts and records to any of the directors of the
Corporation at any time upon request at the office of the Corporation; shall
render such statements of his accounts and records and such other statements to
the Board of Directors and officers as often and in such manner as they shall
require; and shall make and file (or supervise the making and filing of) all tax
returns required by law. He shall in general perform all duties incident to the
office of Treasurer and such other duties as from time to time may be assigned
to him by the Board of Directors or the President.
Section 9. Duties of the Secretary. The Secretary shall act as
secretary of all meetings of the Board of Directors, the Executive Committee and
all other Committees of the Board, and the shareholders of the Corporation, and
shall keep the minutes thereof in the proper book or books to be provided for
that purpose. He shall see that all notices required to be given by the
Corporation are duly given and served; shall have custody of the seal of the
Corporation and shall affix the seal or cause it to be affixed to all
certificates for stock of the Corporation and to all documents the execution of
which on behalf of the Corporation under its corporate seal is duly authorized
in accordance with the provisions of these By-laws; shall have custody of all
deeds, leases, contracts and other important corporate documents; shall have
charge of the books, records and papers of the Corporation relating to its
organization and management as a Corporation; shall see that the reports,
statements and other documents required by law (except tax returns) are properly
filed; and shall, in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
Section 10. Other Duties of Officers. Any officer of the Corporation
shall have, in addition to the duties prescribed herein or by law, such other
duties as from time to time shall be prescribed by the Board of Directors or the
President.
Section 11. Duties of Divisional Officers. Divisional Presidents and
Divisional Vice Presidents shall be deemed to be officers of the Corporation
whose duties and authority shall relate only to the Division by which they are
employed, and they may sign and execute in the name of the Corporation deeds,
mortgages, bonds, contracts and other instruments authorized by the Board that
relate only to the business and properties of such Division. Other divisional
officers may be designated from time to time by the Board of Directors and shall
serve at the pleasure of the Board and have such duties as may be assigned by
the Board and such officers shall be officers of the respective divisions but
shall not be deemed to be officers of the Corporation.
ARTICLE V
Capital Stock
Section 1. Certificates. The shares of capital stock of the Corporation
shall be evidenced by certificates in forms prescribed by the Board of Directors
and executed in any manner permitted by law and stating thereon the information
required by law. Transfer agents and/or registrars for one or more classes of
the stock of the Corporation may be appointed by the Board of Directors and may
be required to countersign certificates representing stock of such class or
classes. In the event that any officer whose signature or facsimile thereof
shall have been used on a stock certificate shall for any reason cease to be an
officer of the Corporation and such certificate shall not then have been
delivered by the Corporation, the Board of Directors may nevertheless adopt such
certificate and it may then be issued and delivered as though such person had
not ceased to be an officer of the Corporation.
Section 2. Lost, Destroyed and Mutilated Certificates. Holders of the
stock of the Corporation shall immediately notify the Corporation of any loss,
destruction or mutilation of the certificate therefor, and the Board of
Directors may, in its discretion, cause one or more new certificates for the
same number of shares in the aggregate to be issued to such stockholder upon the
surrender of the mutilated certificate or upon satisfactory proof of such loss
or destruction, and the deposit of a bond in such form and amount and with such
surety as the Board of Directors may require.
Section 3. Transfer of Stock. The stock of the Corporation shall be
transferable or assignable only on the books of the Corporation by the holders
in person or by attorney on surrender of the certificate for such shares duly
endorsed and, if sought to be transferred by attorney, accompanied by a written
power of attorney to have the same transferred on the books of the Corporation.
The Corporation will recognize the exclusive right of the person registered on
its books as the owner of shares to receive dividends and to vote as such owner.
Section 4. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of the shareholders
or any adjournment thereof, or entitled to receive payment for any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
(70) days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. If no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section such determination shall
apply to any adjournment thereof.
ARTICLE VI
Miscellaneous Provisions
Section 1. Seal. The seal of the Corporation shall consist of a
flat-face circular die, of which there may be any number of counterparts, on
which there shall be engraved in the center the words "Tredegar Industries,
Inc."
Section 2. Fiscal Year. The fiscal year of the Corporation shall end on
December 31st of each year, and shall consist of such accounting periods as may
be recommended by the Treasurer and approved by the Executive Committee.
Section 3. Books and Records. The Corporation shall keep correct and
complete books and records of account and shall keep minutes of the proceedings
of its shareholders and Board of Directors; and shall keep at its registered
office or principal place of business, or at the office of its transfer agent or
registrar a record of its shareholders, giving the names and addresses of all
shareholders, and the number, class and series of the shares being held.
Any person who shall have been a shareholder of record for at least six
months immediately preceding his demand or who shall be the holder of record of
at least five percent (5%) of all the outstanding shares of the Corporation,
upon written demand stating the purpose thereof, shall have the right to
examine, in person, or by agent or attorney at any reasonable time or times, for
any proper purpose, its books and records of account, minutes and records of
shareholders and to make extracts therefrom. Upon the written request of a
shareholder, the Corporation shall mail to such shareholder its most recent
published financial statements showing in reasonable detail its assets and
liabilities and the results of its operations.
The Board of Directors shall, subject to the provisions of the
foregoing paragraph of this section, to the provisions of Section 7 of Article I
and to the laws of the State of Virginia, have the power to determine from time
to time whether and to what extent and under what conditions and limitations the
accounts, records and books of the Corporation, or any of them, shall be open to
the inspection of the shareholders.
Section 4. Checks, Notes and Drafts. Checks, notes, drafts and other
orders for the payment of money shall be signed by such persons as the Board of
Directors from time to time may authorize. When the Board of Directors so
authorizes, however, the signature of any such person may be a facsimile.
Section 5. Amendment of By-Laws. These By-laws may be amended or
altered at any meeting of the Board of Directors by affirmative vote of a
majority of the number of directors fixed by these By-laws. The shareholders
entitled to vote in respect of the election of directors, however, shall have
the power to rescind, alter, amend or repeal any By-laws and to enact By-laws
which, if expressly so provided, may not be amended, altered or repealed by the
Board of Directors.
Section 6. Voting of Stock Held. Unless otherwise provided by
resolution of the Board of Directors or of the Executive Committee, the
President or any Executive Vice President shall from time to time appoint an
attorney or attorneys or agent or agents of this Corporation, in the name and on
behalf of this Corporation, to cast the vote which this Corporation may be
entitled to cast as a shareholder or otherwise in any other corporation, any of
whose stock or securities may be held in this Corporation, at meetings of the
holders of the stock or other securities of such other corporation, or to
consent in writing to any action by any of such other corporation, and shall
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent and may execute or cause to be executed on behalf
of this Corporation and under its corporate seal or otherwise, such written
proxies, consents, waivers or other instruments as may be necessary or proper in
the premises; or, in lieu of such appointment, the President or any Executive
Vice President may attend in person any meetings of the holders of stock or
other securities of any such other corporation and there vote or exercise any or
all power of this Corporation as the holder of such stock or other securities of
such other corporation.
Section 7. Restriction on Transfer. To the extent that any provision of
the Rights Agreement between the Corporation and Sovran Bank, N.A., as Rights
Agent, dated as of June 15, 1989, is deemed to constitute a restriction on the
transfer of any securities of the Corporation, including, without limitation,
the Rights, as defined therein, such restriction is hereby authorized by the
By-laws of the Corporation.
Section 8. Control Share Acquisition Statute. Article 14.1 of the
Virginia Stock Corporation Act ("Control Share Acquisitions") shall not apply to
acquisitions of shares of stock of the Corporation.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION FOR TREDEGAR
INDUSTRIES, INC. AND SUBSIDIARIES EXTRACTED FROM THE BALANCE SHEET FOR THE
PERIOD ENDED JUNE 30, 1998 AND THE STATEMENT OF INCOME FOR THE SIX MONTHS ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
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<SECURITIES> 0
<RECEIVABLES> 98,391
<ALLOWANCES> 3,070
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<CURRENT-ASSETS> 170,200
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0
0
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<SALES> 326,606
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<CGS> 257,571
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<INCOME-PRETAX> 46,492
<INCOME-TAX> 14,035
<INCOME-CONTINUING> 32,457
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