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, 2000
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 Corporation
--------------------------------------------------------------------------------
(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 25, 2000: 37,986,967.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
Tredegar Corporation
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
June 30, Dec. 31,
2000 1999
--------- ---------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 15,431 $ 25,752
Receivable from securities brokers 1,984 -
Accounts and notes receivable 114,968 121,820
Inventories 50,081 53,129
Deferred income taxes 12,085 11,230
Prepaid expenses and other 4,314 2,657
--------- ---------
Total current assets 198,863 214,588
--------- ---------
Property, plant and equipment, at cost 487,714 467,565
Less accumulated depreciation and amortization 230,163 224,158
--------- ---------
Net property, plant and equipment 257,551 243,407
--------- ---------
Venture capital investments 262,277 140,698
Other assets and deferred charges 44,188 41,250
Goodwill and other intangibles 149,164 152,544
--------- ---------
Total assets $912,043 $792,487
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 53,512 $ 61,476
Accrued expenses 40,236 45,030
Income taxes payable 466 1,736
--------- ---------
Total current liabilities 94,214 108,242
Long-term debt 275,000 270,000
Deferred income taxes 62,632 33,205
Other noncurrent liabilities 9,339 8,812
--------- ---------
Total liabilities 441,185 420,259
--------- ---------
Shareholders' equity:
Common stock, no par value 106,814 103,327
Common stock held in trust for savings
restoration plan (1,212) (1,212)
Unrealized gain on available-for-sale securities 62,387 8,330
Foreign currency translation adjustment (2,380) (1,672)
Retained earnings 305,249 263,455
--------- ---------
Total shareholders' equity 470,858 372,228
--------- ---------
Total liabilities and shareholders' equity $912,043 $792,487
========= =========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
<TABLE>
Tredegar Corporation
Consolidated Statements of Income
(In Thousands)
(Unaudited)
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
------------------- -------------------
2000 1999 2000 1999
--------- --------- -------- ----------
Revenues:
<S> <C> <C> <C> <C>
Net sales $ 223,503 $ 194,840 $455,731 $ 374,381
Other income (expense), net 20,694 (1,277) 33,926 (1,018)
--------- --------- -------- ----------
Total 244,197 193,563 489,657 373,363
--------- --------- -------- ----------
Costs and expenses:
Cost of goods sold 178,608 153,986 365,002 294,225
Selling, general and administrative 13,323 11,149 25,925 22,522
Research and development 5,687 5,753 11,977 9,850
Amortization of intangibles 1,276 782 2,552 869
Interest 4,307 1,517 8,602 1,806
Unusual items (525) 4,628 4,959 4,628
--------- --------- -------- ----------
Total 202,676 177,815 419,017 333,900
--------- --------- -------- ----------
Income before income taxes 41,521 15,748 70,640 39,463
Income taxes 15,153 5,558 25,809 13,975
--------- --------- -------- ----------
Net income $ 26,368 $ 10,190 $ 44,831 $ 25,488
========= ========= ======== ==========
Earnings per share:
Basic $ .70 $ .28 $ 1.19 $ .69
Diluted .68 .26 1.15 .65
Shares used to compute earnings per share:
Basic 37,911 36,852 37,815 36,789
Diluted 39,067 38,798 38,999 38,770
Dividends per share $ .04 $ .04 $ .08 $ .08
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
Tredegar Corporation
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
--------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 44,831 $ 25,488
Adjustments for noncash items:
Depreciation 16,189 12,544
Amortization of intangibles 2,552 869
Write-off of in-process R&D acquired - 3,458
Deferred income taxes (1,446) (1,492)
Accrued pension income and postretirement benefits (3,809) (1,837)
(Gain) loss on sale of venture capital investments (33,541) 1,183
Loss on equipment writedowns and divestitures 4,768 1,170
Changes in assets and liabilities, net of
effects from acquisitions and divestitures:
Accounts and notes receivable 4,783 (1,088)
Inventories 702 4,350
Income taxes recoverable - (1,219)
Prepaid expenses and other (1,701) 1,923
Accounts payable (7,337) 5,596
Accrued expenses and income taxes payable (7,679) 2,907
Other, net 480 (1,482)
--------- ---------
Net cash provided by operating activities 18,792 52,370
--------- ---------
Cash flows from investing activities:
Capital expenditures (39,489) (23,182)
Acquisitions - (213,665)
Venture capital investments (47,011) (31,837)
Proceeds from the sale of venture capital investments 41,451 2,189
Proceeds from property disposals and divestitures 9,357 252
Other, net 1,129 (126)
--------- ---------
Net cash used in investing activities (34,563) (266,369)
--------- ---------
Cash flows from financing activities:
Dividends paid (3,037) (2,940)
Net increase (decrease) in borrowings 5,000 209,000
Proceeds from exercise of stock options (including
related income tax benefits realized) 3,487 2,397
--------- --------
Net cash provided by financing activities 5,450 208,457
--------- --------
(Decrease) increase in cash and cash equivalents (10,321) (5,542)
Cash and cash equivalents at beginning of period 25,752 25,409
--------- --------
Cash and cash equivalents at end of period $ 15,431 $ 19,867
========= =========
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
TREDEGAR CORPORATION
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying consolidated financial
statements of Tredegar Corporation and Subsidiaries ("Tredegar")
contain all adjustments necessary to present fairly, in all material
respects, Tredegar's consolidated financial position as of June 30,
2000, and the consolidated results of operations and cash flows for the
six months ended June 30, 2000 and 1999. 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 related notes included in Tredegar's Annual Report on
Form 10-K for the year ended December 31, 1999. The results of
operations for the six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the full year.
2. See pages 9 through 11 for information on unusual items recognized
during the quarter and the six months ended June 30, 2000 and 1999.
On April 10, 2000, we announced the completion of the sale of
Fiberlux, Inc., a U.S. producer of vinyl extrusions to Westech Windows,
Inc., an affiliate of the Westlake Group based in Houston, Texas. In
the second quarter, we recognized a gain of $525,000 ($336,000 after
income taxes) in connection with this transaction. Fiberlux had sales
of $9.1 million and operating profit of $57,000 for the year ended
December 31, 1999 and net assets of $7.2 million at March 31, 2000.
3. A summary of our venture capital activities for the quarter and six
months ended June 30, 2000 and 1999, is provided below:
<TABLE>
<CAPTION>
(In Thousands)
Second Quarter Six Months
Ended June 30 Ended June 30
------------------- -------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Carrying value, beginning of period $224,980 $ 73,311 $140,698 $ 60,024
Activity for period (pre-tax):
New investments 25,408 16,427 47,011 31,837
Proceeds from the sale of investments (25,112) - (43,435) (2,189)
Realized gains 20,746 - 37,005 1,926
Realized losses, write-offs and write-downs (310) (1,351) (3,464) (3,109)
Transfer of carrying value of Therics out of
portfolio (acquired by Tredegar) - (3,380) - (3,380)
Increase in net unrealized gain on
available-for-sale securities 16,565 147 84,462 45
--------- --------- --------- ---------
Carrying value, end of period $262,277 $ 85,154 $262,277 $ 85,154
========= ========= ========= =========
</TABLE>
Our remaining unfunded commitments to private venture capital
funds totaled approximately $48 million at June 30, 2000, and $30
million at December 31, 1999.
A schedule of investments is provided on the following two
pages.
5
<PAGE>
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------------
Tredegar Corporation
Schedule of Investments at June 30, 2000 and December 31, 1999
(In Thousands, Except Per-Share Amounts)
<CAPTION>
Yrs. Web Site
Investment Symbol Held (a) Description (www.)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities of Public Companies Held:
Software.com, Inc. SWCM .6 Infrastructure applications for the Internet software.com
Superconductor Tech, Inc. SCON 1.0 Manufactures filters for wireless networks suptech.com
Eprise Corporation EPRS 2.5 Web site maintenance & development tool eprise.com
Watchguard Technologies WGRD 3.1 Computer and network perimeter defense system watchguard.com
Eclipse Surgical Tech., Inc. ESTI 6.1 Coronary revascularization eclipsesurg.com
Cisco Systems CSCO 1.0 Networking for the Internet cisco.com
Yahoo! Inc. YHOO 1.4 Internet media company yahoo.com
Akamai Technologies, Inc. AKAM .9 Global delivery service of Internet content akamai.com
America Online, Inc. AOL 1.1 Internet services aol.com
Copper Mountain Networks CMTN .4 Digital subscriber line communication products coppermountain.com
Caliper Technologies Corp. CALP 2.9 Lab on a chip calipertech.com
-----------------------------------------------------------------------------------------------------------------------------------
Total securities of public companies held
-----------------------------------------------------------------------------------------------------------------------------------
Securities of Private Companies Held:
CyroGen 4.8 Micro-cryogenic catheters for medical applications cyrogen-inc.com
Sensitech Inc. 3.3 Perishable product management solutions sensitech.com
Rosetta Inpharmatics, Inc. 3.1 Gene function/drug screening on a chip rii.com
Bell Geospace 3.0 Presentation of 3D data to the oil & gas industry bellgeo.com
Songbird Medical, Inc. 2.9 Disposable hearing aids
RedCreek Communications 2.9 Internet and intranet security redcreek.com
Appliant, Inc. 2.7 Software tools for managing executable software appliant.com
Ellipsys Technologies, Inc. 2.7 Telephone system error detection ellipsystech.com
HemoSense 2.6 Point of care blood coagulation time test device hemosense.com
Moai Technologies, Inc. 2.5 System for holding auctions on the Internet moai.com
Vascular Solutions 2.5 Vascular access site closure system vascularsolutions.com
Babycare, Ltd. 2.4 Direct retailing of baby care products in China
SignalSoft Corporation 2.3 Wireless caller location detection software signalsoftcorp.com
EPiCON 2.3 Network software manager epicon.com
NovaLux, Inc. 2.1 Blue-green light lasers novalux.com
IRSI 2.1 Optical inspection systems irsinc.com
Xycte Therapies, Inc. 1.9 Develops drugs to treat cancer & other disorders xcytetherapies.com
Illumina, Inc. 1.6 Fiber optic sensor technology for drug screening illumina.com
Advanced Diagnostics, Inc. 1.6 3-D medical imaging equipment
Adolor Corporation 1.6 Develops pain-management therapeutic drugs adolor.com
Praxon, Inc. 1.5 Integrated business communications equipment praxon.com
AdiCom Wireless, Inc. 1.5 Wireless local loop technology adicomwireless.com
EndoVasix, Inc. 1.4 Device for treatment of ischemic strokes endovasix.com
eWireless, inc. 1.4 Technology linking cell phone users & advertising ewireless.com
Cooking.com, Inc. 1.3 Sales of cooking-related items over the Internet cooking.com
MediaFlex.com 1.2 Internet-based printing & publishing mediaflex.com
eBabyCare Ltd. 1.1 Sales of babycare products over the Internet in China
Kodiak Technologies, Inc. 1.0 Cooling products for organ & pharma transport kodiaktech.com
Genesis Medical, Inc. 1.0 Medical devices for breast cancer surgery
CEPTYR, Inc. .9 Develops small molecule drugs ceptyr.com
GreaterGood.com .9 Internet marketing targeted at donors to charities greatergood.com
Etera Corporation .8 Sales of branded perennial plants over the Internet etera.com
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Subtotal securities of private companies held
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------------
Tredegar Corporation
Schedule of Investments at June 30, 2000 and December 31, 1999
(In Thousands, Except Per-Share Amounts)
<CAPTION>
Public Common Stock or
Equivalents at 6/30/00 6/30/00 12/31/99
-------------------------------- --------------------------------------------------------------
Estimated
Restricted Estimated Estimated
Shares Closing Stock Dis- Fair Carrying Cost Fair Carrying Cost
Investment Held (b) Price count (c) Value (b) Value (b) Basis Value (b) Value (b) Basis
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities of Public Companies Held:
Software.com, Inc. 400 $ 129.88 20% $ 41,545 $ 41,545 $ 3,000 $ 2,000 $ 2,000 $ 2,000
Superconductor Tech, Inc. 1,214 39.31 20% 38,169 38,169 3,360 4,613 3,000 3,000
Eprise Corporation 1,838 16.44 20% 24,179 24,179 2,900 7,309 2,900 2,900
Watchguard Technologies 40 54.94 n/a 2,191 2,191 56 - - -
Eclipse Surgical Tech., Inc. 453 4.38 n/a 1,984 1,984 2,464 3,342 3,342 2,464
Cisco Systems 12 63.56 20% 630 630 200 6,276 6,276 2,000
Yahoo! Inc. 3 123.88 n/a 394 394 50 - - -
Akamai Technologies, Inc. 3 118.73 7% 361 361 58 536 536 57
America Online, Inc. 3 52.88 n/a 133 133 20 - - -
Copper Mountain Networks - - 20% - - - 1,460 1,460 1,460
Caliper Technologies Corp. - - 20% - - - 8,386 8,386 1,000
------------------------------------------------------------------------------------------------------------------------------------
Total securities of public companies held 109,586 109,586 12,108 33,922 27,900 14,881
------------------------------------------------------------------------------------------------------------------------------------
Securities of Private Companies Held:
CyroGen 4,070 2,911 2,911 3,759 2,553 2,553
Sensitech Inc. 2,000 2,000 2,000 2,000 2,000 2,000
Rosetta Inpharmatics, Inc. 9,703 4,688 4,688 4,558 3,000 3,000
Bell Geospace - - 3,500 - - 3,500
Songbird Medical, Inc. 5,850 3,960 3,960 5,922 3,960 3,960
RedCreek Communications 549 549 2,256 2,071 2,071 2,256
Appliant, Inc. 6,233 3,899 3,899 5,036 2,599 2,599
Ellipsys Technologies, Inc. 201 201 2,275 1,987 1,987 2,737
HemoSense 2,682 2,485 2,485 1,735 1,485 1,485
Moai Technologies, Inc. 30,767 2,021 2,021 7,389 2,021 2,021
Vascular Solutions 4,340 2,450 2,450 4,409 2,450 2,450
Babycare, Ltd. 1,009 1,009 1,009 1,009 1,009 1,009
SignalSoft Corporation 5,547 3,006 3,006 5,624 2,996 2,996
EPiCON 2,899 750 750 2,945 750 750
NovaLux, Inc. 5,112 3,183 3,183 5,193 3,183 3,183
IRSI 7,907 3,325 4,200 2,848 2,825 3,700
Xycte Therapies, Inc. 5,583 3,795 3,795 3,000 3,000 3,000
Illumina, Inc. 6,746 3,925 3,925 6,853 3,925 3,925
Advanced Diagnostics, Inc. 1,337 1,371 1,371 705 705 705
Adolor Corporation 3,536 3,000 3,000 2,613 2,000 2,000
Praxon, Inc. 2,619 2,309 2,309 2,661 2,309 2,309
AdiCom Wireless, Inc. 3,254 3,254 3,254 3,000 3,000 3,000
EndoVasix, Inc. 4,324 4,000 4,000 2,500 2,500 2,500
eWireless, inc. 32,107 2,250 2,250 2,250 2,250 2,250
Cooking.com, Inc. 6,911 4,500 4,500 7,021 4,500 4,500
MediaFlex.com 3,833 3,500 3,500 1,500 1,500 1,500
eBabyCare Ltd. 314 314 314 120 120 120
Kodiak Technologies, Inc. 1,194 1,194 1,194 1,194 1,194 1,194
Genesis Medical, Inc. 800 800 800 800 800 800
CEPTYR, Inc. 1,750 1,750 1,750 1,750 1,750 1,750
GreaterGood.com 3,678 3,678 3,678 3,200 3,200 3,200
Etera Corporation 4,000 4,000 4,000 3,000 3,000 3,000
------------------------------------------------------------------------------------------------------------------------------------
Subtotal securities of private companies held 170,855 80,077 88,233 98,652 70,642 75,952
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes on page 7.
6
<PAGE>
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------
Tredegar Corporation
Schedule of Investments at June 30, 2000 and December 31, 1999
(In Thousands, Except Per-Share Amounts)
<CAPTION>
Yrs. Web Site
Investment Held (a) Description (www.)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total securities of public companies held (from page 6)
----------------------------------------------------------------------------------------------------------------------------------
Subtotal securities of private companies held (from page 6)
ThinkFree.com .7 Java-based software complementary to Microsoft Office thinkfree.com
PurePacket Communications, Inc. .6 Next generation packet-based CLEC (phone carrier) purepacket.com
Quarry Technologies, Inc. .6 Technology for delivery of differentiated service levels quarrytech.com
Norborn Medical, Inc. .5 Device for treatment of cardiovascular disease
FastTrack Systems, Inc. .4 Clinical trial data management information systems
Riveon .4 Web-based data mining software for business managers
Medmanage Systems, Inc. .2 Management of prescription drug sampling program
Linx Communications, Inc. - Unified communications and messaging system
Infinicon, Inc. - Manufacturer of infiniband input/output products
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Total securities of private companies held
----------------------------------------------------------------------------------------------------------------------------------
Limited partnership interests in private venture capital funds (period held of .1 - 7.5 years) (d)
----------------------------------------------------------------------------------------------------------------------------------
Total investments
Estimated income taxes on assumed disposal at fair value
----------------------------------------------------------------------------------------------------------------------------------
Estimated net asset value ("NAV")
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
----------------------------------------------------------------------------------------------------------------------------------
Tredegar Corporation
Schedule of Investments at June 30, 2000 and December 31, 1999 6/30/00 12/31/99
(In Thousands, Except Per-Share Amounts) ----------------------------------------------------------------
<CAPTION>
Estimated Estimated
Fair Carrying Cost Fair Carrying Cost
Investment Value (b) Value (b) Basis Value (b) Value (b) Basis
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total securities of public companies held (from page 6) 109,586 109,586 12,108 33,922 27,900 14,881
-----------------------------------------------------------------------------------------------------------------------------------
Subtotal securities of private companies held (from page 6) 170,855 80,077 88,233 98,652 70,642 75,952
ThinkFree.com 1,491 1,491 1,491 1,001 1,001 1,001
PurePacket Communications, Inc. 2,408 2,408 2,408 1,797 1,797 1,797
Quarry Technologies, Inc. 3,000 3,000 3,000 3,000 3,000 3,000
Norborn Medical, Inc. 188 188 188 188 188 188
FastTrack Systems, Inc. 3,000 3,000 3,000 - - -
Riveon 600 600 600 - - -
Medmanage Systems, Inc. 4,000 4,000 4,000
Linx Communications, Inc. 3,000 3,000 3,000
Infinicon, Inc. 3,485 3,485 3,485
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Total securities of private companies held 192,027 101,249 109,405 104,638 76,628 81,938
-----------------------------------------------------------------------------------------------------------------------------------
Limited partnership interests in private venture
capital funds (period held of .1 - 7.5 years) (d) 141,799 51,442 54,536 66,803 36,170 38,650
-----------------------------------------------------------------------------------------------------------------------------------
Total investments 443,412 $ 262,277 $ 176,049 205,363 $ 140,698 $ 135,469
------------------------ --------------------
Estimated income taxes on assumed disposal at fair value 96,250 25,162
----------------------------------------------------------------------------- ----------
Estimated net asset value ("NAV") $ 347,162 $ 180,201
----------------------------------------------------------------------------- ----------
</TABLE>
Notes:
------
(a) The period held for an investment in a company or a venture capital fund is
computed using the initial investment date and the current valuation date. If a
company has merged with another company, then the initial investment date is the
date of the investment in the predecessor company.
(b) Amounts are shown net of carried interest estimated using realized and
unrealized net gains to date. Amounts may change due to changes in estimated
carried interest, and such changes are not expected to be material. Carried
interest is the portion of value payable to portfolio managers based on realized
net gains and is a customary incentive in the venture capital industry.
(c) Restricted securities are securities for which an agreement exists not to
sell shares for a specified period of time, usually 180 days. Also included
within the category of restricted securities are unregistered securities, the
sale of which must comply with an exemption to the Securities Act of 1933
(usually SEC Rule 144). These unregistered securities are either the same class
of stock that is registered and publicly traded or are convertible into a class
of stock that is registered and publicly traded.
(d) At June 30, 2000, Tredegar had ownership interests in 26 venture capital
funds, including an indirect interest in the following public companies, among
others (disposition of shares held by venture funds, including distributions to
limited partners, is at the sole discretion of the general partner of the fund):
(e) Our portfolio is subject to risks typically associated with investments in
technology start-up companies, which include business failure, illiquidity and
stock market volatility.
<TABLE>
<CAPTION>
Indirect Investment Symbol Description
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lucent Technologies, Inc. LU Developer and manufacturer of communications systems (lucent.com)
Universal Access, Inc. UAXS Wholesale provider of high bandwidth services (universalaccessinc.com)
Sonus Networks SONS Provider of voice infrastructure products (sonusnet.com)
Digital Island ISLD Web site management (digisle.net)
Cobalt Networks, Inc. COBT Network servers (cobalt.com)
Loudeye Technologies, Inc. LOUD Internet media infrastructure services and applications (loudeye.com)
Tut Systems, Inc. TUTS Local area network products (tutsys.com)
Siebel Systems, Inc. SEBL Provider of eBusiness applications
Telaxis Communications TLXS High speed wireless access equipment (telaxiscomm.com)
Paradigm Genetics, Inc. PDGM Industrialization of the process of determining gene function (paragen.com)
--------------------------------------------------------------------------------------------------------------------
Total
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Indirect Average Indirect
Interest in Restricted Estimated
Common Closing Stock Dis- Fair Cost
Indirect Investment Shares Price count Value Basis
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lucent Technologies, Inc. 684 $ 58.31 20% $ 31,898 $ 624
Universal Access, Inc. 594 24.50 20% 11,644 521
Sonus Networks 58 157.88 20% 7,297 169
Digital Island 68 48.63 20% 2,645 131
Cobalt Networks, Inc. 53 57.88 20% 2,440 99
Loudeye Technologies, Inc. 159 17.44 20% 2,221 437
Tut Systems, Inc. 29 57.38 n/a 1,659 145
Siebel Systems, Inc. 12 163.56 20% 1,587 173
Telaxis Communications 47 31.25 20% 1,171 207
Paradigm Genetics, Inc. 116 12.19 20% 1,129 183
---------------------------------------------------------------------------------------------------------
Total $ 63,691 $ 2,689
---------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
4. Comprehensive income, defined as net income and other comprehensive
income, was $36.7 million for the second quarter of 2000 and $11.1
million for the second quarter of 1999. Comprehensive income was $98.2
million for the first six months of 2000 and $26.5 million for the
first six months of 1999. 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:
(In Thousands)
June 30 Dec. 31
2000 1999
-------------- --------------
Finished goods $8,593 $9,928
Work-in-process 4,443 4,322
Raw materials 27,178 29,174
Stores, supplies and other 9,867 9,705
-------------- --------------
Total $50,081 $53,129
-------------- --------------
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
---------------------- -----------------------
2000 1999 2000 1999
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Weighted average shares outstanding used
to compute basic earnings per share 37,911 36,852 37,815 36,789
Incremental shares issuable upon the
assumed exercise of stock options 1,156 1,946 1,184 1,981
--------- --------- --------- -----------
Shares used to compute diluted earnings
per share 39,067 38,798 38,999 38,770
========= ========= ========= ===========
</TABLE>
Incremental shares issuable upon the assumed exercise of
outstanding stock options are computed using the average market price
during the related period.
7. The Financial Accounting Standards Board has issued a new standard
affecting the accounting for derivative instruments and hedging
activities. This standard is not expected to significantly change our
operating results, financial condition or disclosures. The new standard
will be adopted in the first quarter of 2001.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Second Quarter 2000 Compared with Second Quarter 1999
Net income for the second quarter of 2000 was $26.4 million, up from
$10.2 million in 1999 (68 cents per share versus 26 cents per share). Results in
the second quarter of 2000 include $12.2 million (31 cents per share) of
realized after-tax gains from venture capital investments compared to an
after-tax loss of $1.2 million (3 cents per share) in the second quarter of
1999.
Pretax realized gains and losses from venture capital investment
activities are included in "Other income (expense), net" in the consolidated
statements of income on page 3 and "Venture capital investments" in the
operating profit table on page 12. Operating expenses (primarily employee
compensation, benefits and leased office space and equipment) for our venture
capital investment activities are classified in "Selling, general and
administrative expenses" ("SG&A") in the consolidated statements of income and
"Venture capital investments" in the operating profit table.
After-tax appreciation in the net asset value ("NAV") of the venture
capital investment portfolio during the second quarter was $61.8 million. At
June 30, 2000, the NAV of the portfolio was $347.2 million. For more information
on our venture capital investment activities, see pages 13 through 15 and Note 3
on pages 5 through 7.
Net sales in the second quarter of 2000 increased by 15% over 1999 due
primarily to the acquisition of Exxon Chemical Company's plastic film business
("Exxon Films") on May 17, 1999, continued strong demand in Aluminum Extrusions,
and overall higher selling prices driven by higher raw material costs. On a pro
forma basis, net sales were up 7% in the second quarter of 2000 versus 1999. Pro
forma net sales assume that the acquisition of Exxon Films occurred at the
beginning of 1999.
For more information on net sales, see the business segment review
beginning on page 12.
The gross profit margin during the second quarter of 2000 declined to
20.1% from 21% in 1999 due to lower margins in Film Products.
SG&A expenses in the second quarter of 2000 were $13.3 million, up from
$11.1 million in 1999 due primarily to the acquisition of Exxon Films and
increased operating expenses relative to our venture capital portfolio. As a
percentage of sales, SG&A expenses increased to 6% in the second quarter of 2000
compared with 5.7% in 1999.
R&D expenses remained relatively flat at $5.7 million in the second
quarter of 2000 versus $5.8 million in 1999.
Unusual items in the second quarter of 2000 include a gain of $525,000
($336,000 after income taxes) on the sale of Fiberlux, Inc., a producer of vinyl
extrusions.
9
<PAGE>
Unusual items in the second quarter of 1999 totaled $4.6 million ($3.0
million after income taxes) and included:
- a charge of $3.5 million ($2.2 million after income taxes) related to the
write-off of purchased in-process research and development expenses
associated with the Therics acquisition; and
- a charge of $1.2 million ($749,000 after income taxes) for the write-off of
excess packaging film capacity.
Interest income, which is included in "Other income (expense), net" in
the consolidated statements of income, was $503,000 in the second quarter of
2000 and $257,000 in 1999. The average tax-equivalent yield earned on cash
equivalents was approximately 6.3% in the second quarter of 2000 and 4.8% in the
second quarter of last year. Our 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 our policy are safety of principal
and liquidity.
Interest expense increased to $4.3 million in the second quarter of
2000 from $1.5 million in 1999 due to higher average debt outstanding (up $143
million) from acquisitions and investments made in 1999. The average rate on
variable-rate debt ($250 million in 2000 versus $102 million in 1999) was 7.1%
in the second quarter of 2000 versus 5.2% in 1999. The average rate on
fixed-rate debt ($19 million in the second quarter of 2000 and $24 million in
the second quarter of 1999) was 7.2% in both periods.
The effective tax rate, excluding unusual items, increased to 36.5% in
the second quarter of 2000 from 35.5% in 1999 due to higher taxes accrued on
income from foreign operations.
Six Months 2000 Compared with Six Months 1999
Net income for the first six months of 2000 was $44.8 million, up from
$25.5 million in 1999 ($1.15 per share versus 65 cents per share). Results for
2000 include $20 million (51 cents per share) of realized after-tax gains from
venture capital investments compared to a loss of $1.5 million (4 cents per
share) in 1999.
The after-tax appreciation in the NAV through the first six months of
this year was $148.6 million.
Net sales for the six months ended June 30, 2000, increased by 22% over
the same period of last year. The improved net sales are due primarily to the
acquisition of Exxon Films, higher volume in Aluminum Extrusions (up 6%), and
overall higher selling prices driven by higher raw material costs. On a pro
forma basis, net sales increased 9%.
For more information on net sales, see the business segment review
beginning on page 12.
The gross profit margin for the first six months of 2000 decreased to
19.9% from 21.4% in 1999 due to increases in average plastic resin and aluminum
ingot prices.
SG&A expenses were $25.9 million in 2000, up from $22.5 million in 1999
due primarily to the acquisition of Exxon Films. As a percentage of sales, SG&A
expenses decreased to 5.7% in the first six months of 2000 compared with 6% in
the same period of 1999 due to higher sales from raw material-driven price
increases.
10
<PAGE>
R&D expenses increased to $12 million in 2000 from $9.9 million in 1999
due to the acquisition of Therics (impact of $1.6 million), higher spending at
Molecumetics in support of collaboration programs (up $320,000) and slightly
higher product development spending at Film Products (up $180,000).
Unusual items for the six months ended June 30, 2000, totaled $5
million ($3.2 million after income taxes) and included:
- a charge of $5.3 million ($3.4 million after income taxes) for the planned
shutdown of a plastic films manufacturing facility in Manchester, Iowa,
including an impairment loss for building and equipment ($4.1 million),
severance costs ($700,000), and excess inventory and other items
($450,000);
- a charge of $191,000 ($122,000 after income taxes) for costs associated
with the evaluation of financing and structural options for the Technology
Group; and
- a gain of $525,000 ($336,000 after income taxes) for the sale of Fiberlux,
Inc.
Unusual items for the six months ended June 30, 1999, totaled $4.6
million ($3.0 million after income taxes) and included:
- a charge of $3.5 million ($2.2 million after income taxes) related to the
write-off of purchased in-process research and development expenses
associated with the Therics acquisition; and
- a charge of $1.2 million ($749,000 after income taxes) for the write-off of
excess packaging film capacity.
Interest income for 2000 was $897,000 versus $582,000 in 1999. The
average tax-equivalent yield earned on cash equivalents was approximately 6.02%
for 2000 and 4.9% for 1999.
Interest expense increased to $8.6 million in 2000 from $1.8 million in
1999 due to higher average debt outstanding (up $194 million) from acquisitions
and investments made in 1999. The average rate on variable-rate debt ($250
million) was 7% in 2000 versus 5.2% in 1999. The average rate on fixed-rate debt
($20 million in 2000 and $25 million in 1999) was 7.2% in both periods.
The effective income tax rate, excluding unusual items, increased to
36.5% in 2000 from 35.5% in 1999 due to higher taxes accrued on income from
foreign operations.
11
<PAGE>
Business Segment Review
The following tables present Tredegar's net sales and operating profit
by segment for the second quarter and six months ended June 30, 2000 and 1999.
<TABLE>
Net Sales by Segment
(In Thousands)
(Unaudited)
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
---------------------- -----------------------
2000 1999 2000 1999
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Film Products $ 93,904 $ 75,267 $ 193,390 $ 143,019
Fiberlux 74 2,218 1,856 4,478
Aluminum Extrusions 127,605 115,435 256,845 223,119
Technology:
Molecumetics 1,826 1,920 3,452 3,765
Therics 94 - 188 -
----------- ---------- ----------- -----------
Total net sales $ 223,503 $ 194,840 $ 455,731 $ 374,381
=========== ========== =========== ===========
</TABLE>
<TABLE>
Operating Profit by Segment
(In Thousands)
(Unaudited)
<CAPTION>
Second Quarter Six Months
Ended June 30 Ended June 30
---------------------- -----------------------
2000 1999 2000 1999
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Film Products:
Ongoing operations $ 12,781 $ 12,344 $ 28,531 $ 25,548
Unusual items - (1,170) (5,293) (1,170)
----------- ---------- ----------- -----------
Total Film Products 12,781 11,174 23,238 24,378
----------- ---------- ----------- -----------
Fiberlux:
Ongoing operations (55) (53) (264) (141)
Unusual items 525 - 525 -
----------- ---------- ----------- -----------
Total Fiberlux 470 (53) 261 (141)
----------- ---------- ----------- -----------
Aluminum Extrusions 17,131 14,634 32,845 28,480
----------- ---------- ----------- -----------
Technology:
Molecumetics (1,278) (893) (2,507) (1,747)
Therics (2,054) (1,597) (3,853) (1,597)
Venture capital investments 19,060 (1,956) 31,203 (2,347)
Unusual items - (3,458) (191) (3,458)
----------- ---------- ----------- -----------
Total technology 15,728 (7,904) 24,652 (9,149)
----------- ---------- ----------- -----------
Total operating profit 46,110 17,851 80,996 43,568
Interest income 503 257 897 582
Interest expense 4,307 1,517 8,602 1,806
Corporate expenses, net 785 843 2,651 2,881
----------- ---------- ----------- -----------
Income before income taxes 41,521 15,748 70,640 39,463
Income taxes 15,153 5,558 25,809 13,975
----------- ---------- ----------- -----------
Net income $ 26,368 $ 10,190 $ 44,831 $ 25,488
=========== ========== =========== ===========
</TABLE>
12
<PAGE>
Second quarter sales in Film Products rose 25% to $93.9 million while
operating profit (excluding unusual items) was $12.8 million, up 3.5% versus the
second quarter of 1999. On a year-to-date basis, sales in Film Products
increased 35% to $193.4 million while operating profit (excluding unusual items)
was $28.5 million, up 11.7%. The increase in sales and profits was due to the
mid-1999 acquisition of Exxon Films. On a pro forma basis (i.e., assuming the
acquisition had occurred at the beginning of 1999), second-quarter sales in
films were up 5.5% while year-to-date sales increased 3.8% due to raw
material-driven price increases. On a pro forma basis, year-to-date operating
profit decreased by 7.6% due to lower volume, continued delays in new product
introductions, and higher spending on new product development and
commercialization.
In Aluminum Extrusions, second quarter sales rose 11% to $127.6 million
while operating profit was $17.1 million, up 17% versus the second quarter of
1999. On a year-to-date basis, sales rose 15% to $256.9 million while operating
profit was $32.9 million, up 15% compared to the same period of the prior year.
Sales and operating profit increased due to higher volumes (up 2.6% for the
quarter and 5.9% for the six months), reflecting continued strong demand and due
to higher selling prices, reflecting higher raw material costs.
For the technology operating companies, revenue was relatively flat for
both the quarter and six months ended June 30, 2000 compared to the same periods
of the prior year. The second quarter operating loss for the technology
operating companies in 2000, excluding unusual items, was $3.3 million versus
$2.5 million in 1999. On a year-to-date basis, excluding unusual items, the
operating loss was $6.4 million in 2000 versus $3.3 million in 1999. The higher
losses in 2000 were due primarily to the acquisition of Therics in April 1999
and to increased spending at Molecumetics.
The appreciation in NAV related to venture capital investment
activities for the second quarter and six months ended June 30, 2000 and 1999 is
summarized below:
<TABLE>
<CAPTION>
(In Millions)
Second Quarter Six Months
Ended June 30 Ended June 30
---------------------- ----------------------
2000 1999 2000 1999
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net realized gains, losses, write-downs and
related operating expenses for venture
capital investments reflected in
Tredegar's consolidated statements of
income (net of tax) $ 12.2 $ (1.3) $ 20.0 $ (1.5)
Change in unrealized appreciation of venture
capital investments (net of tax) 49.6 .6 128.6 1.6
---------- --------- --------- ---------
Appreciation (depreciation) in net asset value
("NAV") related to investment performance $ 61.8 $ (.7) $ 148.6 $ .1
========== ========= ========= =========
</TABLE>
The appreciation was driven by a combination of events including
acquisitions, IPOs, and private investment asset write-ups. The following
companies held directly in the portfolio, or indirectly through our interests in
other venture capital funds, accounted for most of the net appreciation in NAV
during the quarter and six months ended June 30, 2000:
13
<PAGE>
<TABLE>
<CAPTION>
(In Millions)
Appreciation (Depreciation)
in Estimated NAV
---------------------------
2nd Quarter Six Months
Ended Ended
Investment Reason for Change 6/30/00 6/30/00
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Public companies:
Software.com, Inc Acquisition of @mobile.com, Inc., a direct holding $ 21.4 $ 26.4
Superconductor Tech., Inc. Change in stock price (1.8) 21.2
Lucent Technologies, Inc. Acquisition of Chromatis Networks, an indirect holding 19.6 19.6
Eprise Corporation Initial public offering, a direct holding 0.8 11.7
Copper Mountain Networks Acquisition of OnPrem Networks, Inc, a direct holding 1.1 8.4
Universal Access, Inc. Change in stock price (2.7) 6.9
Sonus Networks Initial public offering, an indirect holding 4.5 4.5
Cisco Systems, Inc. Change in stock price (0.6) 3.9
Watchguard Technologies, Inc. Change in stock price (0.6) 1.2
Loudeye Technologies, Inc. Change in stock price (1.3) 1.1
Eclipse Surgical Technologies Change in stock price (1.0) (1.0)
Caliper Technologies Corp. Change in stock price (2.1) (1.1)
Cobalt Networks, Inc. Change in stock price 0.3 (1.4)
Digital Island, Inc. Change in stock price (0.4) (1.6)
Private companies:
eWireless, Inc. New round of financing at higher valuation 19.1 19.1
Moai Technologies, Inc. New round of financing at higher valuation - 15.0
Venture capital funds Various 6.9 9.7
IRSI New round of financing at higher valuation (0.1) 2.9
Rosetta Inpharmatics, Inc. New round of financing at higher valuation - 2.2
Ellipsys Technologies, Inc. Write-down - (0.8)
RedCreek Communications Write-down - (1.0)
Other public and private companies Various (0.4) 3.0
------------- ------------
Appreciation in NAV before operating expenses 62.7 150.1
After-tax operating expenses (0.9) (1.5)
------------- ------------
Appreciation in NAV related to investment performance $ 61.8 $ 148.6
============= ============
</TABLE>
The cost basis, carrying value and NAV of the venture capital portfolio
is reconciled below:
<TABLE>
<CAPTION>
(In Millions)
June 30, Dec. 31,
2000 1999
-----------------------
<S> <C> <C>
Cost basis of investments $ 176.0 $ 135.5
Write-downs taken on securities held (charged to earnings) (11.2) (7.8)
Unrealized appreciation on public securities held by Tredegar
(reflected directly in equity net of deferred income taxes) 97.5 13.0
----------- -----------
Carrying value of investments reflected in the balance sheet 262.3 140.7
Unrealized appreciation in private securities held by Tredegar
and in its indirect interest in all securities held by venture
capital funds 181.1 64.7
----------- -----------
Estimated fair value of venture capital investments 443.4 205.4
Estimated income taxes on assumed disposal at fair value (96.2) (25.2)
----------- -----------
NAV of venture capital investments $ 347.2 $ 180.2
=========== ===========
</TABLE>
14
<PAGE>
Changes in NAV for the quarter and six months ended June 30, 2000 and
1999 are summarized below:
<TABLE>
<CAPTION>
(In Millions)
Second Quarter Six Months
Ended June 30 Ended June 30
---------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NAV at beginning of period $ 276.7 $ 82.2 $ 180.2 $ 67.2
---------- ---------- ----------- -----------
After-tax appreciation (depreciation) in NAV
related to investment performance
(net of operating expenses) 61.8 (.7) 148.6 .1
After-tax operating expenses funded by Tredegar .9 .4 1.5 .7
New investments 25.4 16.4 47.0 31.8
Transfer of the NAV of Therics out of portfolio
(acquired by Tredegar) - (4.3) - (4.3)
Reduction in NAV due to the sale of investments (17.6) - (30.1) (1.5)
---------- ---------- ----------- -----------
Increase in NAV 70.5 11.8 167.0 26.8
---------- ---------- ----------- -----------
NAV at end of the period $ 347.2 $ 94.0 $ 347.2 $ 94.0
========== ========== =========== ===========
</TABLE>
Our internal rate of return ("IRR") since inception in 1992 through June
30, 2000, is estimated at 83% (62% after income taxes), but is not necessarily
indicative of the IRR that we will generate in the future. IRR is the discount
rate that equates the net present value of investment cash inflows with
investment cash outflows. The IRR is calculated as an annualized compounded rate
of return using actual investment cash flows, modified to incorporate our share
of the current valuation of unliquidated holdings and operating expenses (and
taxes in case of the after-tax IRR).
Our portfolio is subject to risks typically associated with investments
in technology start-up companies, which include business failure, illiquidity
and stock market volatility.
Liquidity and Capital Resources
Tredegar's total assets increased to $912 million at June 30, 2000,
from $792.5 million at December 31, 1999, due primarily to an increase in the
venture capital investments. The carrying value of the venture capital
investments increased compared to December 31, 1999, due to an increase in
unrealized gains on available-for-sale securities of $84.5 million and an
increase in the cost basis of investments of $37.1 million, net of write-downs
taken.
15
<PAGE>
The reasons for the decrease in cash and cash equivalents to $15.4
million at June 30, 2000, from $25.8 million at December 31, 1999, are
summarized below:
<TABLE>
<CAPTION>
(In Thousands)
Six Months
Ended June 30
----------------------
2000 1999
---------- -----------
<S> <C> <C>
Cash and cash equivalents, beginning of period $ 25,752 $ 25,409
---------- -----------
Cash provided by operating activities net of
capital expenditures and dividends (23,734) 26,248
Proceeds from the exercise of stock options 3,487 2,397
Net increase in borrowings 5,000 209,000
Acquisitions - (213,665)
New venture capital investments, net of proceeds
from disposals (5,560) (29,648)
Proceeds from divestitures and property disposals 9,357 252
Other, net 1,129 (126)
---------- -----------
Net (decrease) increase in cash and cash equivalents (10,321) (5,542)
---------- -----------
Cash and cash equivalents, end of period $ 15,431 $ 19,867
========== ===========
</TABLE>
Cash provided by operating activities decreased from $52.4 million in
1999 to $18.8 million in 2000 due mainly to higher working capital and higher
income taxes (approximately $12.5 million) on realized gains from venture
capital activities. Capital expenditures have increased from $23.2 million in
1999 to $39.5 million in 2000. Capital expenditures in 2000 reflect the normal
replacement of machinery and equipment and the following key capital projects:
- A new feminine pad topsheet film production line at the plant in Terre
Haute, Indiana;
- Machinery and equipment purchased for the manufacture of breathable and
elastomeric films (these films are replacing conventional diaper backsheet
and other components in order to improve comfort and fit);
- Expansion of capacity in Brazil for disposable films for hygiene products,
such as feminine pads and diapers;
- Continued expansion of capacity at the Hungary facility, which produces
disposable films for hygiene products marketed in Europe;
- A new plastic film manufacturing facility in Shanghai, China (this plant,
which is expected to begin production in the second quarter of 2001, will
make film used primarily for hygiene products); and
- The second phase of a modernization program at the aluminum extrusion plant
in Newnan, Georgia.
Quantitative and Qualitative Disclosures About Market Risk
Tredegar has exposure to the volatility of interest rates, polyethylene
and polypropylene resin prices, aluminum ingot and scrap prices, foreign
currencies, emerging markets and technology stocks.
Changes in resin prices, and the timing of those changes, could have a
significant impact on profit margins in Film Products; however, those 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
16
<PAGE>
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, we enter 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 our exposure to
aluminum price volatility under these fixed-price arrangements, which generally
have a duration of not more than 12 months, we enter into a combination of
forward purchase commitments and futures contracts to acquire aluminum, based on
the scheduled deliveries.
We sell to customers in foreign markets through our foreign operations
and through exports from U.S. plants. The percentage of consolidated pretax
income earned by geographic area for the six months ended June 30, 2000 and 1999
are presented below:
Percentage of Consolidated Pretax
Income Earned by Geographic Area*
----------------------------------
Six Months
Ended June 30
-------------------
2000 1999
-------- --------
United States 48 % 58 %
Canada 21 17
Europe 10 9
Latin America 13 8
Asia 8 8
--------- ---------
Total 100 % 100 %
========= =========
* Based on consolidated pretax income from
continuing operations excluding venture capital
activities and unusual items.
We attempt to match the pricing and cost of our products in the same
currency and generally view the volatility of foreign currencies and emerging
markets, and the corresponding impact on earnings and cash flow, as part of the
overall risk of operating in a global environment. Exports from the U.S. are
generally denominated in U.S. Dollars. Our foreign operations in emerging
markets have agreements with certain customers that index the pricing of our
products to the U.S. Dollar, the German Mark or the Euro. Our foreign currency
exposure on income from foreign operations in Europe primarily relates to the
German Mark and the Euro. We believe that our exposure to the Canadian Dollar
has been substantially neutralized by the U.S. Dollar-based spread (the
difference between selling prices and aluminum costs) generated from Canadian
casting operations and exports from Canada to the U.S. The acquisition of Exxon
Films on May 17, 1999, has increased the proportion of assets located in the
U.S. It has also increased the amount of operating profit earned in the U.S.,
partially offset by higher U.S. Dollar interest expense on higher debt related
to the acquisition.
We have 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. The portfolio
is subject to risks typically associated with investments in technology start-up
companies, which include business failure, illiquidity and stock market
volatility. Furthermore, publicly
17
<PAGE>
traded stocks of emerging, technology-based companies have higher volatility and
risk than the U.S. stock market as a whole. See pages 13-15 and Note 3 on pages
5-7 for more information.
New Accounting Standards
The Financial Accounting Standards Board has issued a new standard
affecting the accounting for derivative instruments and hedging activities. This
standard is not expected to significantly change our operating results,
financial condition or disclosures. The new standard will be adopted in the
first quarter of 2001.
18
<PAGE>
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 24,
2000. 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 34,503,886 728,374
William M. Gottwald 34,458,993 773,267
Richard L. Morrill 34,493,367 738,893
Norman A. Scher 34,485,107 747,153
There were no broker non-votes with respect to the election of
directors.
(b) Approval of Auditors
Approval of the designation of PricewaterhouseCoopers LLP as
the auditors for Tredegar for the fiscal year ending December
31, 2000:
No. of Votes No. of Votes No. of
"For" "Against" Abstentions
----- --------- -----------
35,093,134 96,634 42,492
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.
10 Consulting Agreement made as of April 1, 2000 between
Tredegar Corporation and Richard W. Goodrum
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, 2000.
19
<PAGE>
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 Corporation
(Registrant)
Date: August 2, 2000 /s/ N. A. Scher
---------------------- --------------------------------------
Norman A. Scher
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 2, 2000 /s/ Michelle O. Mosier
---------------------- --------------------------------------
Michelle O. Mosier
Corporate Controller
(Principal Accounting Officer)
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
10 Consulting Agreement made as of April 1, 2000 between Tredegar
Corporation and Richard W. Goodrum
27 Financial Data Schedule
21
