17:03: Tredegar Corporation (NYSE:TG) Q4 2013 Earnings Conference Call February 24, 2014 5.00 PM EST

Neill Bellamy – Investor Relations and Corporate Communications Nancy M. Taylor – President and Chief Executive Officer Kevin A. O'Leary – Vice President, Chief Financial Officer and Treasurer

Robert R. Marshall – Davenport & Co. LLC Justin Bergner – Gabelli & Company

Good day and welcome to the Tredegar Corporation 2013 Annual Financial Results Webcast. My name is Ryan and I’ll be your web event specialist today. If you would like to view the presentation in a full screen view, click the full screen button in the lower right hand corner of your screen. Press the escape key on our keyboard to return to your original view. And finally for optimal viewing and participation, please disable your pop-up blockers. Should you need technical assistance as a best practice we suggest you first refresh your browser. If that does not resolve the issue, please click on the support option in the upper right hand corner of your screen for online troubleshooting. It is now my pleasure to turn the webcast over to Neill Bellamy with the Tredegar Corporation.

Thank you, Ryan and welcome to the Tredegar 2013 annual financial results review. Our earnings for the fourth quarter and full year 2013 were released after the close of the market today. And you will find our press release as well as supplemental materials including non-GAAP reconciliation on our website under the investors section at www.tredegar.com. As a reminder some of the statements made here about the future performance of the company constitute forward-looking statements within the meaning of Federal Securities Laws. Please note that cautionary language about our forward-looking statements that is contained in our press release that same language applies to this call. Please note that our comments today regarding financial results exclude all non-operating or special items and reconciliation’s related to any non-GAAP financial measures discussed today maybe found in the slides accompanying this presentation and our supplemental materials on our website. With that I will turn it over to Nancy Taylor.

Good afternoon, I am Nancy Taylor, Tredegar’s Chief Executive Officer. With me today is Kevin O'Leary, Tredegar’s Chief Financial Officer. Thank you for joining us today for our first annual financial results review. As part of our efforts to expand our shareholders communications, we are establishing an annual conference call to discuss our year end performance and update you on our strategic initiative. On our call today, I will review Tredegar’s strategy, our progress against our strategy and our 2013 financial highlights. Kevin will provide a more in-depth look at our fourth quarter and full year financial performance then I will share our view of market dynamics for the coming year and comment on our outlook for 2014. : In early 2010, we took stock of Tredegar’s strength and vulnerabilities. On the vulnerability side, we were struggling to realize sustained top line growth and our businesses had heavy customer and market dependence. We also recognized our many strength, which include a strong track record of manufacturing excellence, leadership positions, and attractive markets with good growth trends, global capabilities, product innovation, a strong balance sheet, and businesses with strong cash generation. With that assessment the strategy was very clear to us. Focus intensely on manufacturing as we pursuit organic and inorganic growth to reduce our customer and market concentration. We are fortunate that we participate in markets with favorable trends and that we have deep knowledge about those markets. Our knowledge of our market also allowed us to identify near term challenges, which in turn under support the need to pursue additional markets with attractive growth trends, where our strengths would be in assets. An example that we know that there is high penetration and low growth rates for certain personal care products, such as feminine hygiene pads, in the developed…

Thank you, Nancy. I’ll start off with an overview of reported net income for the fourth quarter and full year for Tredegar Corporation. For the fourth quarter diluted earnings per share from continuing operations were $0.29 per share, excluding special items, earnings per share from ongoing operations were $0.27 per share. For the full year diluted earnings per share from continuing operations were $1.10 excluding special items earnings per share from ongoing operations were $1.15 per share. In 2013, we had an after-tax charge to discontinued operations of $14 million or $0.43 per share for spending related to an environmental claim at a facility that was part of our February 2008 sale of Bonnell Canada, we believe we recognized all expenses relating to this matter. Details of special items which include the impact of non-operating investments, asset impairments and restructuring charges are available on our website along with additional information on discontinued operations. Now let’s focus on earnings per share from ongoing operations, for the full year earnings per share from ongoing operations was $1.15 per share, the combined operating profit from ongoing operations of our business segments, film products and Bonnell was essentially flat for the fourth quarter and up 13% for the full year. Full year results include 9% increase in net sales driven primarily by the addition of AACOA acquired in the fourth quarter of 2012. I’ll get into the details of results for film products and Bonnell in a moment. Non-cash pension expense was up for the fourth quarter and full year compared to 2012. Pension expense for 2013 was $13.7 million an increase of $5.6 million or $0.11 per share compared to 2012. Looking into 2014, we expect pension expense to be quite a bit lower and roughly $7.5 million due to a 78 basis…

Thanks Kevin. As we move the agenda towards our outlook for 2014 and beyond, I want to get a bit more specific about the growth expectation for our key markets. We are playing in attractive market and the growth rates in our markets give us confidence that we are pursuing the right strategy. As you would expect the estimated CAGR of 4% for feminine hygiene products and 5% for baby diapers are driven by the demographics and emerging markets as new users increased demand for these products. We have the right footprint to participate in this growth with plant in Brazil, China and India and we are adding capacity and capabilities in those plants and respond to our customers needs for local supply and service in those emerging market. In developed countries the aging population is driving demand for adult incontinence products and the forecasted global growth rate of 8% through 2017. We have been serving this market for sometime and are excited about the growth and have products to offer help our customers deliver on the performance attributes needed to meet consumers’ expectation. With expected growth to 2017 of 16% per year for mobile devices like tablets and smartphones and increasing average panel sizes of TVs, we are well suited to meet the increasing demand for high-quality surface protection films. Higher fuel efficiency standards are increasingly used of light-weight aluminum extrusions in vehicles with growth and aluminium content in vehicles expected to outpace the overall growth rate of new automobiles. We are in the early part of the demand curve, and I’m very pleased without quickly retranslated the identification of this trend into a meaningful growth driver for Bonnell. Packaging innovation and economic development in Latin America are driving demand for flexible food packaging and we will benefit once…

(Operator Instructions) Your first question comes from the line of Robert Marshall with Davenport. Robert R. Marshall – Davenport & Co. LLC: How are you guys today?

Hi, Bob.

Bob. Robert R. Marshall – Davenport & Co. LLC: Could you kind of give us a little more granularity on the automotive aluminum extrusion line and how fast it’s ramping up and when you expect it to be online and what do you expect the next couple of years to looks like?

Well, it’s coming online in the end of the first quarter, so we’re in that process now. And we’ll be ramping up over the course of 2014. And so 2015 would represent really the first full year of that line being at, it’s running at its full capacity. Robert R. Marshall – Davenport & Co. LLC: All right, and is the production spoken for at this point, are you entertaining new customers and you commented that you were pretty pleased with the uptake?

Yes. We are, we’ve gotten as I said we’ve gotten really a lot of inbound calls and interest in that line. We absolutely fully expect that we’ve got volumes to fill that line in 2014 and we continue to be looking at additional customers and additional opportunities beyond that. Robert R. Marshall – Davenport & Co. LLC: Okay. Second question, can you kind of give us a little bit more detail in terms of what you are seeing down in Brazil at this point, you think the situation stabilized, pricing stabilized and you anticipate any issues kind of ramping up the lines here over the next couple of years?

Again, we believe we’re at or near the bottom of the down cycle. We’re putting in the way, with the way this business works is that you do put in large increments of capital. And so it will be a number of years before that capital will be fully absorbed by the demand, we knew that going into it, that’s just a nature of that equipment. Robert R. Marshall – Davenport & Co. LLC: All right. You are pretty confident things were on track there and don’t anticipate –paid any big issues?

Yes, we’re expecting a smooth start up and ramp up of that line, but again I just want to make sure everybody keeps in mind that that it’ll, I mean, we’re putting in more capacity than the demand in order to make sure that we’ve adequate capacity to absorb that demand as that market continues to grow. We are the market leader in Brazil and we are the only local producer in Brazil of PET film. Robert R. Marshall – Davenport & Co. LLC: Okay. Kind of last question here, are you seeing any signs of a pick-up in your non-residential Bonnell business at this point or you sounded little bit optimistic there when you’re making the presentation, if you’re optimistic what’s leading to believe, that things are picking up is it customer feedback or just the overall kind of outlook for non-residential?

Well we see, we’ve seen some pick up in consumer durables and transportation I believe, but and it’s typical as what we would have expect in this industry, so with this acquisition that we’ve made. So we had a nice diversification, we do see some modest pick up there and that’s we look forward to growing that. Robert R. Marshall – Davenport & Co. LLC: All right.

But on the non-residential building and construction, basically there is industry forecast out there and we’re expecting in 2014 that we’ll maintain our market share and be able to participate with any growth – with the growth that’s currently being estimated for building and construction, it’s around I think 4.5% for 2014. Robert R. Marshall – Davenport & Co. LLC: All right. Great, well thank you very much.

Great, thanks Rob.

(Operator Instructions) Your next question comes from the line of Justin Bergner with Gabelli & Company.

Hi, Justin.

Hey, Justin.

And Justin was driven the question.

Okay.

Your next question comes from the line of Justin Bergner with Gabelli & Company. Justin Bergner – Gabelli & Company: Hi, again, I’m not sure what happened there, but you have a question or too I would like to ask.

Good, yes.

Because I’m back. Justin Bergner – Gabelli & Company: I guess the guidance for Bonnell Aluminum is for margins to be at or perhaps slightly below 2013 levels, if I’m doing my math correctly. And I just wanted to get a sense as to if that relates to startup costs for your automotive line, and potentially why can’t the fourth quarter run rate of profitability in Bonnell be maintained into 2014?

Hi, Justin, thanks for the question. I think, for Bonnell the product mix we have is toward mill finish. So ultimately, it’s an unfavorable product mix, the aluminum we expect to be about flat year-over-year. Obviously we would look to move towards out of mill finish chased into other value-added services. But when you look at 2014, we expect that margin to be relatively flat. We’re pleased with the addition of AACOA, where we have fabrication and other services that we can bring to the party to improve those margins. But for the – for the year-over-year, we’re going to be essentially flat. Justin Bergner – Gabelli & Company: Okay, great. Two other questions if I may it doesn’t seem like the line up is too long today, first off beyond 2014, would you sort of be comfortable speaking to where CapEx should settle down towards?

Well, I certainly will speak to that. So our CapEx basically for the return on invested capital that you’ll see in 2016 that the significant CapEx is already in place or well underway we’ve discussed for sometime. So we see CapEx ramping down in a meaningful way in 2015 and 2016, I’m not comfortable giving numbers but there are $80 million in 2013 will be $60 in 2014, we expect to be quite a bit lower for 2015 and 2016. Justin Bergner – Gabelli & Company: Okay, thank you for that, clarity and then finally with respect to sort of non-segment costs which I believe includes your pension cost. Are there other sort of puts and takes, that one should be thinking about as one sort of models non-segment costs looking into 2014, versus 2013?

I think the biggest item is the continued 13D expense you will see another $1 million to $2 million. On that, that will be, but I don’t see there is not the biggest thing is pension we will see 13D expense that could be a little more than 2013. Justin Bergner – Gabelli & Company: Okay, so we should expect most of the decline in pension expense to carry through to a decline in corporate overhead, is that a safe assumption?

Yes. Justin Bergner – Gabelli & Company: Okay, great and what sort of concerns – I mean what sort of concerns you on the film products business going forward. I mean obviously you want to talk about the positives and the parts of the business there are turning up, but what gives you continued concern as you look into the future?

I think that, I think we’ve – I mean the only thing that I would say is obviously as we have mentioned, we do have challenges, continued to have challenges with the market dynamics for our flexible packaging business and that’s going to continue and as we said we put in this slug of capacity and it’s going to take sometime to absorb that, other than that, we – you’re encounter that normal ups and downs that you have in the emerging markets we describe that. So again we – over the long-term we think that we’re going to benefit from that. But they are could be some stops and starts there. And then the other dynamic that does play out for us from time-to-time is in surface protection were we do see a cycle, the one thing that I can say is that up to this point each time we’ve seen that downturn the cycle we always come back was higher demand and more volume. So and I think those are that normal dynamics that we’ve in our films business. Justin Bergner – Gabelli & Company: Okay, well thank you very much. And good luck going-forward.

Thank you.

Great. Thank you. I appreciate your comments.

(Operator Instructions)

:

Well, I’d like to thank you all for joining us today. In 2013, we continued to strengthen our foundation for growth and we look forward to demonstrating further progress against our strategy in the year ahead. Thanks again for listening in.

Thanks to all our participants for joining us today. We hope you found this webcast presentation informative. This does conclude our webcast. You may now disconnect. Have a good day.