TREDEGAR CORP - FORM 8-K/A - EX-99.6 - UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

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8-K/A - FORM 8-K AMENDMENT NO. 1 - TREDEGAR CORP	d272633d8ka.htm
EX-99.4 - CONSOLIDATED FINANCIAL STATEMENTS - TREDEGAR CORP	d272633dex994.htm
EX-99.5 - CONSOLIDATED CONDENSED INTERIM FINANCIAL STATEMENTS - TREDEGAR CORP	d272633dex995.htm
EX-23.1 - CONSENT OF PRICEWATERHOUSECOOPERS AUDITORES INDEPENDENTES - TREDEGAR CORP	d272633dex231.htm

Exhibit 99.6

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

TREDEGAR CORPORATION

The unaudited pro forma condensed combined financial information is based upon the historical statements of Tredegar Corporation (“Tredegar”) and Terphane Holdings LLC (“Terphane”) after giving effect to Tredegar’s acquisition of Terphane on October 24, 2011 (the “Transaction”), together with the related financing and other assumptions and adjustments as described in the accompanying notes.

The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2011 is presented as if the Transaction and the borrowings used to finance the Transaction occurred on June 30, 2011. The Unaudited Pro Forma Condensed Combined Income Statements for the year ended December 31, 2010 and the six months ended June 30, 2011 are presented as if the Transaction and the related borrowings used to finance the Transaction occurred on January 1, 2010.

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not intended to represent the consolidated financial position or consolidated results of operations of Tredegar that would have been reported had the Transaction been completed as of the dates described above, and should not be taken as indicative of any future consolidated financial position or consolidated results of operations. The unaudited pro forma condensed combined financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) for the purpose of inclusion in the Form 8-K/A that Tredegar is required to file with the SEC. The corresponding pro forma adjustments to the historical financial statements are based upon information currently available and certain estimates and assumptions. These estimates are subject to change as more information regarding the assets acquired and liabilities assumed becomes available. As a result, final amounts recorded for the Transaction may ultimately differ from the information included herein.

The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of Tredegar and Terphane, respectively. The information related to Tredegar can be found in our Annual Report on Form 10-K for the year ended December 31, 2010 and subsequent Quarterly Report on Form 10-Q for the quarterly and year-to-date periods ended June 30, 2011. The information related to Terphane can be found in Exhibits 99.4 and 99.5 to the Current Report on Form 8-K/A, of which Exhibit 99.6 is a part.

Tredegar Corporation

Pro Forma Condensed Combined Balance Sheet

June 30, 2011

(Unaudited)


(In Thousands)	Tredegar Corporation			Terphane Holdings LLC			Pro Forma Adjustments			Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	93,784		$	6,508		$	(50,736	)A	$	49,556
Accounts and other receivables, net		100,822			19,953			—			120,775
Income taxes recoverable		6,319			(3,970	)		—			2,349
Inventories		35,747			19,710			—			55,457
Deferred income taxes		6,500			—			—			6,500
Prepaid expenses and other		4,205			1,738			—			5,943

Total current assets		247,377			43,939			(50,736	)		240,580

Property, plant and equipment, net		197,837			88,213			(1,250	)B		284,800
Other assets and deferred charges		49,079			2,784						51,863
Goodwill and other intangibles, net		106,561			—			84,387	C		190,948

Total assets	$	600,854		$	134,936		$	32,401		$	768,191


Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	64,726		$	17,195		$	—		$	81,921
Accrued expenses		27,089			4,760			—			31,849
Current portion of long-term debt		122			12,335			(12,335	)D		122

Total current liabilities		91,937			34,290			(12,335	)		113,892

Long-term debt		248			41,337			83,663	D		125,248
Deferred income taxes		55,545			6,527			13,561	E		75,633
Other noncurrent liabilities		16,916			294			—			17,210

Total liabilities		164,646			82,448			84,889			331,983


Shareholders’ equity:
Common stock		12,781			40,000			(40,000	)F		12,781
Common stock held in trust for savings restoration plan		(1,337	)		—			—			(1,337	)
Foreign currency translation adjustment		28,880			6,160			(6,160	)F		28,880
Gain (loss) on derivative financial instruments		64			—			—			64
Pension and other postretirement benefit adjustments		(57,851	)		—			—			(57,851	)
Retained earnings		453,671			6,328			(6,328	)F		453,671

Total shareholders’ equity		436,208			52,488			(52,488	)		436,208

Total liabilities and shareholders’ equity	$	600,854		$	134,936		$	32,401		$	768,191

See accompanying notes to the unaudited pro forma financial statements.

Tredegar Corporation

Pro Forma Condensed Combined Statement of Income

For the Year Ended December 31, 2010

(Unaudited)


(In Thousands)	Tredegar Corporation			Terphane Holdings LLC			Pro Forma Adjustments			Pro Forma
Revenues and other items:
Sales	$	740,475		$	133,030		$	—		$	873,505
Other income (expense), net		(940	)		(3,092	)		4,116	G		84

		739,535			129,938			4,116			873,589

Costs and expenses:
Cost of goods sold		596,330			107,692			184	H		704,206
Freight		17,812			5,278			—			23,090
Selling, general and administrative		68,610			13,028			669	I		82,307
Research and development		13,625			219			—			13,844
Amortization of intangibles		466			—			5,337	J		5,803
Interest expense		1,136			21,195			(18,070	)K		4,261
Asset impairments and costs associated with exit and disposal activities		773			—			—			773

Total		698,752			147,412			(11,880	)		834,284

Income from continuing operations before income taxes		40,783			(17,474	)		15,996			39,305
Income taxes		13,756			256			474	L		14,486

Net income from continuing operations	$	27,027		$	(17,730	)	$	15,522		$	24,819


Earnings per share from continuing operations:
Basic	$	.84								$	.77
Diluted		.83									.76

Shares used to compute earnings per share:
Basic		32,292									32,292
Diluted		32,572									32,572

See accompanying notes to the unaudited pro forma financial statements.

Tredegar Corporation

Pro Forma Condensed Combined Statement of Income

For the Six Months Ended June 30, 2011

(Unaudited)


(In Thousands)	Tredegar Corporation		Terphane Holdings LLC		Pro Forma Adjustments			Pro Forma
Revenues and other items:
Sales	$	392,490	$	88,352	$	—		$	480,842
Other income (expense), net		623		826		—			1,449

		393,113		89,178		—			482,291


Costs and expenses:
Cost of goods sold		324,983		57,840		96	H		382,919
Freight		8,741		3,167		—			11,908
Selling, general and administrative		31,409		7,178		980	I		39,567
Research and development		6,744		191		—			6,935
Amortization of intangibles		258		—		2,669	J		2,927
Interest expense		716		3,371		(1,808	)K		2,279
Asset impairments and costs associated with exit and disposal activities		1,084		—		—			1,084

Total		373,935		71,747		1,937			447,619

Income from continuing operations before income taxes		19,178		17,431		(1,937	)		34,672
Income taxes		6,462		2,876		(947	)L		8,391

Net income from continuing operations	$	12,716	$	14,555	$	(990	)	$	26,281


Earnings per share from continuing operations:
Basic	$	.40						$	.82
Diluted		.39							.82

Shares used to compute earnings per share:
Basic		31,900							31,900
Diluted		32,233							32,233

See accompanying notes to the unaudited pro forma financial statements.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL INFORMATION

TREDEGAR CORPORATION

1. Basis of Presentation

Tredegar Corporation (“Tredegar”) acquired 100% of the outstanding equity interests of Terphane Holdings LLC (“Terphane”) through TAC Holdings, LLC and Tredegar Film Products Corporation, which are indirect and direct, respectively, wholly-owned subsidiaries of Tredegar, on October 24, 2011 (the “Transaction”). These unaudited pro forma condensed combined financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for the purposes of inclusion in the Current Report on Form 8-K/A that Tredegar is required to file with the SEC, and certain information and disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.

Certain historical balances of Terphane, which include freight expenses on customer sales and research and development expenses, have been reclassified to conform to the pro forma condensed combined presentation.

The Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2011 is presented as if the Transaction occurred on June 30, 2011. The Unaudited Pro Forma Condensed Combined Income Statements for the year ended December 31, 2010 and the six months ended June 30, 2011 are presented as if the Transaction occurred on January 1, 2010.

The unaudited pro forma condensed combined financial information of Tredegar is presented for informational purposes only and is not intended to represent the consolidated financial position or consolidated results of operations of Tredegar that would have been reported had the Transaction been completed as of the dates described above, and should not be taken as indicative of any future consolidated financial position or consolidated results of operations.

2. Vision Capital Partners VII LP Acquisition of Terphane Holding Corporation

On September 29, 2010, Vision Capital Partners VII LP (“Vision Capital”), a private equity firm, acquired Terphane Acquisition Corporation from Terphane Holding Corporation (“THC”) through its subsidiary Terphane. In preparing the unaudited condensed combined income statement for the year ended December 31, 2010, the operating results of Terphane represent the combined historical financial results of THC for the nine months ended September 30, 2010 and the historical financial results of Terphane for the three months ended December 31, 2010.

A reconciliation of Terphane’s historical results for the unaudited Pro Forma Condensed Combined Statement of Income for the year ended December 31, 2010 is as follows:

Terphance Holdings LLC and Terphane Holdings Corporation

Condensed Combined Statement of Income

For the Year Ended December 31, 2010


(In Thousands)	THC Nine Months Ended September 30, 2010			Terphane Three Months Ended December 31, 2010			Combined Entity Year Ended December 31, 2010
Revenues and other items:
Sales	$	92,018		$	41,012		$	133,030
Other income (expense), net		414			(3,506	)		(3,092	)

		92,432			37,506			129,938


Costs and expenses:
Cost of goods sold		77,214			30,478			107,692
Freight		3,822			1,456			5,278
Selling, general and administrative		8,723			4,305			13,028
Research and development		153			66			219
Amortization of intangibles		—			—			—
Interest expense		17,106			4,089			21,195
Asset impairments and costs associated with exit and disposal activities		—			—			—

Total		107,018			40,394			147,412

Income from continuing operations before income taxes		(14,586	)		(2,888	)		(17,474	)
Income taxes		(2,551	)		2,807			256

Net income from continuing operations	$	(12,035	)	$	(5,695	)	$	(17,730	)

3. Purchase Price Allocation

The Transaction was accounted for using the acquisition method of accounting in accordance with Accounting Codification Standard Topic 805, Business Combinations. Under the acquisition method of accounting, the total estimated purchase price is allocated to the tangible and intangible assets acquired and liabilities assumed from Terphane as of the date of the completion of the acquisition.

The Transaction was completed in accordance with the Membership Interest Purchase Agreement (“Purchase Agreement”) dated as of October 14, 2011. The total purchase price for the Transaction was $188 million, subject to certain post-closing adjustments provided in the Purchase Agreement. After post-closing adjustments (primarily related to working capital transferred), the total purchase price (net of cash acquired) was $175.7 million, which was used for the purpose of preparing the unaudited pro forma condensed combined financial statements. The purchase price was funded using available cash (net of cash received) of $50.7 million and financing of $125 million secured from Tredegar’s existing $300 million revolving credit facility.

Based upon management’s preliminary valuation of the fair value of tangible and intangible assets acquired (net of cash acquired) and liabilities assumed, the preliminary estimated purchase price allocation is as follows:


(In Thousands)
Accounts receivable	$	15,239
Inventories		19,018
Property, plant & equipment		86,963
Intangible assets:
Customer relationships		32,600
Proprietary technology		14,700
Trade names		9,400
Noncompete agreements		2,300
Goodwill		43,622
Other assets (current & noncurrent)		7,915
Trade payables		(14,277	)
Other liabilities (current & noncurrent)		(18,978	)
Deferred taxes		(22,766	)

Purchase price, net of cash received	$	175,736

If information becomes available which would indicate adjustments are required to the purchase price allocation prior to the end of the measurement period for finalizing the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.

4. Pro Forma Adjustments

Pro forma adjustment to record cash utilized (net of cash acquired) to fund a portion of the $175.7 million purchase price (net of cash acquired).

Pro forma adjustment to record the total fair market value of property, plant and equipment acquired ($87.0 million) at the date of acquisition.

Pro forma adjustment to record the following intangible assets acquired in connection with the acquisition:

•

Customer-related intangible assets, which include customer lists and relationships of Terphane, were estimated using the excess earnings method, and will be amortized on a straight-line basis over its estimated useful life of 12 years;

•

Technology-related intangible assets, which consist of patented and unpatented proprietary technology, were estimated using the relief from royalty method, and will be amortized on a straight-line basis over its estimated useful life of 10 years;

•

Marketing-related intangible assets, which consist of trade names, were estimated using the relief from royalty method, and will have an indefinite useful life;

•

Employee-related intangible assets, which include noncompete arrangements, were estimated using the income approach, and will be amortized on a straight-line basis over its estimated useful life of 2 years; and

•

Goodwill from the transaction, which represents the residual difference between the fair value of the assets acquired and the calculated purchase price, will have an indefinite useful life.

Net adjustment to eliminate Terphane’s long-term debt ($12.3 million in “Current portion of long-term debt” and $41.3 million in “Long-term debt”), which was not assumed in the Transaction, and to record Tredegar’s borrowings against its revolving credit facility ($125 million in “Long-term debt”) to finance a portion of the purchase price.

Pro forma adjustment to deferred taxes to reflect differences between the financial reporting general ledger basis and income tax basis of identifiable intangible and fixed assets in the stock acquisition.

Pro forma adjustment to eliminate Terphane’s historical equity balances, including common stock of $40.0 million, accumulated foreign currency translation adjustment of $6.2 million and retained earnings of $6.3 million.

Pro forma adjustment to “Other income (expense), net” for the year ended December 31, 2010 to eliminate transactions associated with the September 2010 purchase of THC by Vision Capital, which include:

•

Pretax charges of $5.5 million for acquisition-related expenses; and

•

A pretax gain of $1.4 million for the recognition of negative goodwill.

Pro forma adjustment to “Cost of goods sold” related to additional depreciation expense associated with the pro forma adjustment for recording property, plant and equipment at fair value on the date of acquisition.

Pro forma adjustment to “Selling, general and administrative” expenses related to the elimination of foreign currency remeasurement gains associated with long-term borrowings that were not assumed by Tredegar in the Transaction.

Pro forma adjustments for the estimated amortization expense for the year ended December 31, 2010 and six months ended June 30, 2011 are as follows:


	Pro Forma Amortization Expense
(in thousands)	Year Ended December 31, 2010		Six Months Ended June 30, 2011
Proprietary technology	$	1,470	$	735
Customer relationships		2,717		1,359
Trade names		—		—
Noncompete agreements		1,150		575

Total Pro Forma Adjustments	$	5,337	$	2,669

Pro forma adjustments for the estimated interest expense for the year ended December 31, 2010 and six months ended June 30, 2011 include entries to eliminate the historical interest expense of Terphane associated with long-term borrowings that were not assumed by Tredegar in the Transaction and to record pro forma interest expense related to the $125 million borrowed under Tredegar’s revolving credit facility to finance a portion of the purchase price.


	Pro Forma Interest Expense Adjustments
	Year Ended December 31, 2010			Six Months Ended June 30, 2011
Elimination of historical Terphane interest expense	$	(21,195	)	$	(3,371	)
Record pro forma interest expense on acquisition borrowings		3,125		$	1,563

Total Pro Forma Adjustments	$	(18,070	)	$	(1,808	)

Borrowings under Tredegar’s revolving credit facility carry a variable rate of interest. An interest rate of 2.5%, which represents the assumed one-month LIBOR rate of 25 basis points plus an applicable credit spread of 225 basis points (consistent with the terms of the revolving credit facility), was used in calculating pro forma interest expense for each of the periods noted above. An increase or decrease of 12.5 basis points held constant over the relevant period would increase or decrease, respectively, the total interest cost by approximately $156,000 for the year ended December 31, 2010 and approximately $78,000 for the six months ended June 30, 2011.

Pro forma adjustments for the estimated net income tax benefit associated with the previously described adjustments to the pro forma condensed combined income statements for the year ended December 31, 2010 and six months ended June 30, 2011. An assumed effective tax rate of 36% for transactions based in the United States and 15% for transactions based in Brazil was used in the calculation of pro forma tax expense.

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