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Tredegar Reports Fourth-Quarter Results

February 15, 2007 at 5:07 PM EST

RICHMOND, Va., Feb. 15 /PRNewswire-FirstCall/ -- Tredegar Corporation (NYSE: TG) reported fourth-quarter net income of $11.0 million (28 cents per share) compared to $890,000 (2 cents per share) in 2005. Earnings from manufacturing operations in the fourth quarter were $10.5 million (27 cents per share) versus $6.1 million (15 cents per share) last year. Fourth-quarter sales increased to $269.8 million from $239.8 million in 2005. A summary of results for the fourth quarter and year is shown below:


     (In Millions, Except Per-Share Data)
                                         Three Months Ended    Year Ended
                                             December 31       December 31
                                            2006    2005     2006     2005
     Sales                                 $269.8  $239.8  $1,116.5  $957.0

     Net income as reported under
      generally accepted accounting
      principles (GAAP)                     $11.0     $.9     $38.2   $16.2
     After-tax effects of:
       Loss associated with plant
        shutdowns, asset impairments and
        restructurings                         .4     2.4       3.3    11.9
       Loss from AFBS (formerly Therics)
        ongoing operations                      -      .1         -     2.4
      (Gains) losses from sale of assets,
        investment writedown and other items  (.9)    2.7      (2.5)     .9
     Income from manufacturing operations*  $10.5    $6.1     $39.0   $31.4

     Diluted earnings per share as
      reported under GAAP                    $.28    $.02      $.98    $.42
     After-tax effects per diluted share of:
       Loss associated with plant shutdowns,
        asset impairments and restructurings  .01     .06       .08     .31
       Loss from AFBS (formerly Therics)
        ongoing operations                      -       -         -     .06
      (Gains) losses from sale of assets,
        investment writedown and other items (.02)    .07      (.06)    .02
     Diluted earnings per share from
      manufacturing operations*              $.27    $.15     $1.00    $.81

* The after-tax effects of unusual items, plant shutdowns, asset impairments and restructurings, AFBS' (formerly Therics, Inc.) ongoing operations, and gains from sale of assets and other items have been presented separately and removed from net income and earnings per share as reported under GAAP to determine Tredegar's presentation of income and earnings per share from manufacturing operations. Income and earnings per share from manufacturing operations are key financial and analytical measures used by Tredegar to gauge the operating performance of its manufacturing businesses. They are not intended to represent the stand-alone results for Tredegar's manufacturing businesses under GAAP and should not be considered as an alternative to net income or earnings per share as defined by GAAP. They exclude items that we believe do not relate to Tredegar's ongoing manufacturing operations. They also exclude AFBS. On June 30, 2005, substantially all of the assets of AFBS were sold or assigned to a newly- created limited liability company, Therics, LLC, which is controlled and managed by an individual not affiliated with Tredegar.

John D. Gottwald, Tredegar's president and chief executive officer, said: "We're pleased with performance for all of 2006. Earnings per share from manufacturing operations increased 23% and net debt declined by $68 million due to strong cash flow. In the fourth quarter, profits in films were up over 2005, but include the impact of the lag in the pass-through of changes in resin costs and adjustments for inventories accounted for under the last-in first-out method. Excluding these items, profits in films were down in the fourth quarter of 2006 compared with 2005 due primarily to lower volume of certain high-value materials that are used in hygiene applications. We believe that the decline in these sales is mainly due to customer inventory corrections. In aluminum, operating profit increased in the fourth quarter of 2006 compared with 2005 mainly due to higher selling prices and lower energy costs."


                           MANUFACTURING OPERATIONS
                                Film Products

Fourth-quarter net sales in Film Products were $128.5 million, up 10.8% from $116.0 million in the fourth quarter of 2005 while operating profit from ongoing operations increased to $15.0 million in the fourth quarter of 2006 from $8.2 million in 2005. Profits in the fourth quarter of 2006 were positively affected by approximately $3.5 million from the lag in the pass- through of lower average resin costs and favorable adjustments for inventories accounted for under the last-in first-out method ("LIFO"). Profits in the fourth quarter of 2006 also benefited from a customer reimbursement of $1 million for certain new product start-up costs that were incurred during the first half of 2006. Profits in the fourth quarter of 2005 were negatively affected by approximately $5.5 million from the lag in the pass-through of significantly higher average resin costs (primarily resulting from supply shortages related to Gulf Coast hurricanes in 2005), partially offset by favorable LIFO adjustments.

The change in sales in the fourth quarter of 2006 versus 2005 primarily relates to product mix changes, lower volume of certain high-value materials that are used in hygiene applications, resin pass-through lag and appreciation of foreign currencies relative to the U.S. Dollar. The decline in operating profit in the fourth quarter of 2006 versus 2005 excluding for both periods the resin pass-through lag and impact of LIFO adjustments was primarily due to the decline in fourth-quarter volume of certain high-value materials that are used in hygiene applications, which the company believes is mainly related to customer inventory corrections. In addition, operating profits during the fourth quarter of 2006 were adversely affected by production problems associated with the growth in sales of certain high-value materials that are used in non-hygiene applications. Volume was 62.7 million pounds in the fourth quarter of 2006 compared with 63.3 million pounds in the fourth quarter of 2005.

Film Products has index-based pass-through raw material cost agreements for the majority of its business. However, under certain agreements, changes in resin prices are not passed through for an average period of 90 days.

Net sales were $511.2 million in 2006, up 11.1% versus $460.3 million in 2005. Operating profit from ongoing operations was $57.6 million in 2006, up 28.3% compared to $44.9 million in 2005. Operating profit from ongoing operations excluding the estimated effects of resin pass-through lag and year- end LIFO adjustments was $53.1 million in 2006, up 8.6% versus $48.9 million in 2005. Volume decreased to 253.5 million pounds in 2006 from 261.1 million pounds in 2005. The company estimates that the growth in net sales excluding the effects of the pass-through of resin price changes and foreign exchange rate changes was approximately 6% in 2006. Sales and operating profit growth in 2006 were driven primarily by increased sales of high-value surface protection films, elastic materials and new apertured topsheets, partially offset by lower sales of certain commodity barrier films that were dropped in conjunction with the shutdown of the plant in LaGrange, Georgia. Nancy Taylor, President of Film Products, commented: "Overall, we're encouraged with the progress made this past year in marketing our newer products and are focused on continuing that trend."

Capital expenditures were $33.2 million in 2006 versus $50 million in 2005 and are expected to be approximately $35 million in 2007. Depreciation expense was $31.7 million in 2006 compared with $26.5 million in 2005, and is projected to be $34 million in 2007.

                             Aluminum Extrusions

Fourth-quarter net sales in Aluminum Extrusions were $134.2 million, up 14.0% from $117.7 million in the fourth quarter of 2005 primarily due to higher selling prices partially offset by lower volume. Operating profit from ongoing operations increased to $6.1 million in the fourth quarter of 2006, up 29.8% from $4.7 million in the fourth quarter of 2005. The increase in operating profit was mainly due to higher selling prices and lower energy costs. Energy costs surged in the fourth quarter of 2005 as a result of Gulf Coast hurricanes. Volume decreased to 58.5 million pounds in the fourth quarter of 2006 versus 60.7 million pounds in the fourth quarter of 2005. Lower shipments were primarily due to declines in demand for extrusions used in residential construction and hurricane protection products, partially offset by continued growth for extrusions used in commercial construction.

Net sales were $577.3 million in 2006, up 22.4% versus $471.7 million in 2005. Operating profit from ongoing operations was $22.0 million in 2006, up 14.0% compared to $19.3 million in 2005. Volume increased to 259.9 million pounds in 2006, up 5.5% compared to 246.4 million pounds in 2005. Growth in shipments in 2006 was driven by demand for extrusions used in commercial construction and hurricane protection products, partially offset by a decline in extrusions used in residential construction. The increase in operating profit during 2006 was primarily due to higher volume and selling prices and lower energy costs (energy costs were down $1.1 million), partially offset by appreciation of the Canadian Dollar ($2.8 million) and higher charges for possible uncollectible accounts ($1.4 million). Duncan Crowdis, President of Aluminum Extrusions, said: "We're pleased with the improved performance in 2006, particularly with initiatives identified in our strategic reviews to lower and control our cost base. The overall outlook for volume growth in 2007 will become clearer as we exit the seasonally slow first quarter."

Capital expenditures in 2006 were $7.4 million versus $12 million in 2005 and are expected to be approximately $14 million in 2007. Depreciation expense was $12.3 million in 2006 compared with $11.5 million in 2005, and is projected to be $12.8 million in 2007.

                                 OTHER ITEMS

Net pension expense was $2.6 million in 2006, an increase of $5.3 million (9 cents per share after taxes) from the net pension income of $2.7 million recognized in 2005. Most of this unfavorable change relates to a pension plan that is reflected in "Corporate expenses, net" in the operating profit by segment table. The company contributed $1.1 million to its pension plans in 2006 and expects required contributions of $1.1 million in 2007.

On October 26, 2006, the company announced changes to its U.S. defined benefit (pension) and savings plans covering salaried and certain other employees. The changes had no impact on the company's net income or earnings per share in 2006. Changes relating to the pension plan reduced the company's projected benefit obligation by approximately $10 million as of December 31, 2006. In 2007, the changes to the pension plan are expected to reduce the company's service cost, interest cost and amortization of prior service cost components of pension expense by approximately $600,000, $600,000 and $1.5 million, respectively, and the savings plan changes are expected to increase charges for company matching contributions by approximately $700,000. Based on these changes and other factors, the company expects pension income of $2.0 million in 2007, a favorable change of $4.6 million or 7 cents per share after taxes compared with 2006.

Effective December 31, 2006, the company adopted Statement of Financial Accounting Standards ("SFAS") No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No 87, 88, 106 and 132R. In accordance with this new standard the company recognized the funded status of its pension and other postretirement plans in its balance sheet as of December 31, 2006, which included plan assets at fair value in excess of benefit obligations of $41.0 million. The adjustments in the company's balance sheet of its pension and other postretirement plans to recognize their funded status resulted in a decrease in prepaid pension cost of $27.7 million, an increase in related liabilities of $3.3 million, a decrease in non-current deferred income tax liabilities of $11.4 million and a decrease in shareholders' equity of $19.6 million.

During the first quarter of 2006, the company adopted SFAS No. 123R, Share-Based Payment, which requires all stock-based compensation to be expensed and accounted for using a fair value-based method. The adoption of SFAS No. 123R and the granting of stock options in 2006 resulted in first, second, third and fourth quarter pretax charges for stock option-based compensation of $211,000, $282,000, $215,000 and $262,000, respectively (pretax charges of $970,000 for all of 2006 or 2 cents per share after taxes).

Results for 2006 and 2005 also include net after-tax charges of $3.3 million (8 cents per share) and $11.9 million (31 cents per share), respectively, for plant shutdowns, asset impairments and restructurings. In addition, results for 2006 and 2005 include after-tax gains totaling $2.5 million (6 cents per share) and losses totaling $874,000 (2 cents per share), respectively, from the sale of assets, an investment writedown and other items. Details regarding these items are provided in the financial tables included with this press release.

                              CAPITAL STRUCTURE

Net debt (debt net of cash) was $21.6 million at December 31, 2006 compared with $89.6 million at December 31, 2005, and less than one times the last twelve months adjusted EBITDA from manufacturing operations of $110.2 million. See notes to financial statements and tables for reconciliations to comparable GAAP measures. Cash flow during 2006 included proceeds from the exercise of stock options of $9.7 million, including $8.5 million in the fourth quarter due to an increase in the company's stock price and certain stock option expiration dates in early 2007.

                  FORWARD-LOOKING AND CAUTIONARY STATEMENTS

Some of the information contained in this press release may constitute "forward-looking statements" within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. When we use the words "believe," "hope," "expect," "are likely," "project" and similar expressions, we do so to identify forward-looking statements. Such statements are based on our then current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those addressed in the forward-looking statements. It is possible that our actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Factors that could cause actual results to differ from expectations include, without limitation: Film Products is highly dependent on sales to one customer -- The Procter & Gamble Company; growth of Film Products depends on its ability to develop and deliver new products at competitive prices, especially in the personal care market; sales volume and profitability of Aluminum Extrusions is cyclical and highly dependent on economic conditions of end-use markets in the United States and Canada, particularly in the construction, distribution and transportation industries and are also subject to seasonal slowdowns during the winter months; our substantial international operations subject us to risks of doing business in foreign countries, which could adversely affect our business, financial condition and results of operations; our future performance is influenced by costs incurred by our operating companies including, for example, the cost of energy and raw materials; and the factors discussed in the reports Tredegar files with or furnishes to the Securities and Exchange Commission from time- to-time, including the risks and important factors set forth in "Risk Factors" in Part I, Item 1A of our 2006 Annual Report on Form 10-K that will be filed with the Securities and Exchange Commission.

Tredegar does not undertake to update any forward-looking statement made in this press release to reflect any change in management's expectations or any change in conditions, assumptions or circumstances on which such statements are based.

To the extent that the financial information portion of this release contains non-GAAP financial measures, it also presents both the most directly comparable financial measures calculated and presented in accordance with GAAP and a quantitative reconciliation of the difference between any such non-GAAP measures and such comparable GAAP financial measures. Accompanying the reconciliation is management's statement concerning the reasons why management believes that presentation of non-GAAP measures provides useful information to investors concerning Tredegar's financial condition and results of operations.

Based in Richmond, Va., Tredegar Corporation is a global manufacturer of plastic films and aluminum extrusions.



                             Tredegar Corporation
                 Condensed Consolidated Statements of Income
                    (In Thousands, Except Per-Share Data)
                                 (Unaudited)

                              Fourth Quarter Ended          Year Ended
                                   December 31              December 31
                                 2006        2005          2006        2005

    Sales                     $269,814    $239,772    $1,116,525    $956,969
    Other income (expense),
     net (a) (b)                   710      (3,648)        1,444        (544)
                               270,524     236,124     1,117,969     956,425

    Cost of goods sold (a)     225,662     206,275       944,839     810,621
    Freight                      7,107       6,065        28,096      24,691
    Selling, R&D and
     general expenses (a)       19,764      17,288        76,448      73,705
    Amortization of
     intangibles                    37          37           149         299
    Interest expense             1,289       1,321         5,520       4,573
    Asset impairments and
     costs associated with
     exit and disposal
     activities (a)                670       3,817         4,080      16,334
                               254,529     234,803     1,059,132     930,223

    Income before income
     taxes                      15,995       1,321        58,837      26,202
    Income taxes (b)             4,949         431        20,636       9,973

    Net income (a) (b) (c)    $ 11,046    $    890    $   38,201    $ 16,229


    Earnings per share:
           Basic              $    .28    $    .02    $      .99    $    .42
           Diluted                 .28         .02           .98         .42

    Shares used to compute
     earnings per share:
           Basic                38,793      38,527        38,671      38,471
           Diluted              39,092      38,594        38,931      38,597


                             Tredegar Corporation
                  Net Sales and Operating Profit by Segment
                                (In Thousands)
                                 (Unaudited)

                              Fourth Quarter Ended          Year Ended
                                   December 31               December 31
                                 2006        2005          2006        2005
    Net Sales
    Film Products             $128,472    $115,972    $  511,169    $460,277
    Aluminum Extrusions        134,235     117,735       577,260     471,749
    AFBS (formerly Therics)
     (d)                             -           -             -         252
    Total net sales            262,707     233,707     1,088,429     932,278
    Add back freight             7,107       6,065        28,096      24,691
    Sales as shown in the
     Consolidated Statements
     of Income                $269,814    $239,772    $1,116,525    $956,969

    Operating Profit
    Film Products:
       Ongoing operations     $ 15,034    $  8,150    $   57,645    $ 44,946
       Plant shutdowns, asset
        impairments and
        restructurings, net
        of gains on sale of
        assets and related
        income from LIFO
        inventory liquidations
        (a)                         14      (3,143)          221      (3,955)

    Aluminum Extrusions:
       Ongoing operations        6,084       4,722        22,031      19,302
       Plant shutdowns, asset
        impairments and
        restructurings, net of
        gains on sale of
        assets (a)                   -       1,368        (1,434)        122

    AFBS (formerly Therics)
     (d):
       Ongoing operations            -           -             -      (3,467)
       Loss on investment in
       Therics, LLC                  -         (54)          (25)       (145)
       Plant shutdowns, asset
        impairments and
        restructurings (a)        (143)       (269)         (637)    (10,318)

    Total                       20,989      10,774        77,801      46,485
    Interest income                418         200         1,240         586
    Interest expense             1,289       1,321         5,520       4,573
    Gain on the sale of
     corporate assets (b)            -           -            56          61
    Loss from write-down of
     investment in Novalux (b)       -       5,000             -       5,000
    Stock option-based
     compensation costs (e)        262           -           970           -
    Corporate expenses, net
     (a)                         3,861       3,332        13,770      11,357
    Income before income
     taxes                      15,995       1,321        58,837      26,202
    Income taxes (b)             4,949         431        20,636       9,973
    Net income (a) (b) (c)    $ 11,046    $    890    $   38,201    $ 16,229


                             Tredegar Corporation
                    Condensed Consolidated Balance Sheets
                                (In Thousands)
                                 (Unaudited)

                                                 December 31,     December 31,
                                                     2006             2005
    Assets

    Cash & cash equivalents                        $ 40,898         $ 23,434
    Accounts & notes receivable, net                121,834          119,330
    Income taxes recoverable                         10,975            7,163
    Inventories                                      68,930           62,438
    Deferred income taxes                             6,055            7,778
    Prepaid expenses & other                          4,558            4,224
    Total current assets                            253,250          224,367

    Property, plant & equipment, net                325,763          322,876
    Other assets (f)                                 64,078           96,527
    Goodwill & other intangibles                    138,696          137,988

    Total assets                                   $781,787         $781,758

    Liabilities and Shareholders' Equity

    Accounts payable                               $ 69,426         $ 61,731
    Accrued expenses                                 41,906           36,031
    Current portion of long-term debt                   678                -
    Total current liabilities                       112,010           97,762

    Long-term debt                                   61,842          113,050
    Deferred income taxes                            75,772           74,287
    Other noncurrent liabilities (f)                 15,568           11,297
    Shareholders' equity (f)                        516,595          485,362

    Total liabilities and shareholders'
     equity                                        $781,787         $781,758


                             Tredegar Corporation
                Condensed Consolidated Statement of Cash Flows
                                (In Thousands)
                                 (Unaudited)

                                                          Year Ended
                                                          December 31
                                                     2006              2005
    Cash flows from operating activities:
      Net income                                   $38,201           $16,229
      Adjustments for noncash items:
        Depreciation                                44,132            38,490
        Amortization of intangibles                    149               299
        Deferred income taxes                       10,155             9,217
        Accrued pension income and
         postretirement benefits                     3,178            (1,979)
        Loss from write-down of investment
         in Novalux                                      -             5,000
        Gain on sale of assets                        (317)           (4,174)
        Loss on asset impairments and
         divestitures                                1,150             9,378
      Changes in assets and liabilities,
       net of effects of acquisitions
       and divestitures:
        Accounts and notes receivables                 151            (3,361)
        Inventories                                 (5,080)            2,803
        Income taxes recoverable                     1,991           (12,966)
        Prepaid expenses and other                    (275)              530
        Accounts payable                             6,218              (648)
        Accrued expenses                             5,374            (2,942)
      Other, net                                      (422)           (2,173)
        Net cash provided by operating
         activities                                104,605            53,703
    Cash flows from investing activities:
      Capital expenditures                         (40,573)          (62,543)
      Novalux investment                              (542)           (1,095)
      Proceeds from the sale of assets and
       property disposals                              475             8,018
      Other, net                                         -               636
        Net cash used in investing
         activities                                (40,640)          (54,984)
    Cash flows from financing activities:
      Dividends paid                                (6,221)           (6,190)
      Debt principal payments                      (54,530)         (147,846)
      Borrowings                                     4,000           156,500
      Proceeds from exercise of stock
       options                                       9,702             1,130
        Net cash (used in) provided by
         financing activities                      (47,049)            3,594
    Effect of exchange rate changes on cash            548            (1,873)
    Increase in cash and cash equivalents           17,464               440
    Cash and cash equivalents at beginning
     of period                                      23,434            22,994
    Cash and cash equivalents at end of
     period                                        $40,898           $23,434


                         Selected Financial Measures
                                (In Millions)
                                 (Unaudited)

                                             For the Twelve Months Ended
                                                   December 31, 2006
                                            Film      Aluminum
                                          Products   Extrusions     Total
    Operating profit from ongoing
     operations                           $  57.6    $  22.0      $  79.6
    Allocation of corporate overhead         (9.9)      (3.7)       (13.6)
    Add back depreciation and
     amortization                            31.9       12.3         44.2
    Adjusted EBITDA (g)                   $  79.6    $  30.6      $ 110.2

    Selected balance sheet and other
     data as of December 31, 2006:
      Net debt (h)                        $  21.6
      Shares outstanding                     39.3

    Notes to the Financial Tables

    (a) Plant shutdowns, asset impairments and restructurings in the
        fourth quarter of 2006 include:
        -- A net pretax gain associated with the shutdown of the films
           facility in LaGrange, Georgia, including a gain of $280,000 for
           related LIFO inventory liquidations (included in "Cost of goods
           sold" in the condensed statements of income) and a gain of $261,000
           on the sale of related property and equipment (included in "Other
           income (expense), net" in the condensed consolidated statements of
           income), partially offset by other shutdown-related costs of
           $527,000; and
        -- A pretax charge of $143,000 related to the estimated loss on the
           sub-lease of a portion of the AFBS (formerly Therics) facility in
           Princeton, New Jersey.

        Plant shutdowns, asset impairments and restructurings in 2006 include:
        -- A net pretax gain of $1.4 million associated with the shutdown of
           the films manufacturing facility in LaGrange, Georgia, including a
           gain of $2.9 million for related LIFO inventory liquidations
           (included in "Cost of goods sold" in the condensed consolidated
           statements of income) and a gain of $261,000 on the sale of related
           property and equipment (included in "Other income (expense), net"
           in the condensed consolidated statements of income), partially
           offset by severance and other costs of $1.6 million and asset
           impairment charges of $130,000;
        -- Pretax charges of $1 million for asset impairments in Film
           Products;
        -- A pretax charge of $920,000 related to expected future
           environmental costs at the aluminum extrusions facility in Newnan,
           Georgia (included in "Cost of goods sold" in the condensed
           consolidated statements of income);
        -- Pretax charges of $727,000 for severance and other employee-related
           costs in connection with restructurings in Film Products ($213,000)
           and Aluminum Extrusions ($514,000); and
        -- A pretax charge of $637,000 related to the estimated loss on the
           sub-lease of a portion of the AFBS (formerly Therics) facility in
           Princeton, New Jersey.

        Plant shutdowns, asset impairments and restructurings in the fourth
         quarter of 2005 include:
        -- A pretax charge of $2.1 million related to the planned shutdown of
           the films manufacturing facility in LaGrange, Georgia, including
           asset impairment charges of $1.6 million and severance and other
           costs of $486,000;
        -- A pretax gain of $1.9 million related to the shutdown of the
           aluminum extrusions facility in Aurora, Ontario, including a $1.7
           million gain on the sale of the facility (included in "Other income
           (expense), net" in the condensed consolidated statements of
           income), and a net gain of $195,000 primarily due to the reversal
           to income of certain shutdown-related items of
           $235,000;
        -- Pretax charges of $583,000 for asset impairments in Film Products;
        -- A net pretax charge of $495,000 in Aluminum Extrusions, including
           an asset impairment of $597,000, partially offset by the reversal
           to income of certain shutdown-related accruals of $102,000;
        -- Pretax charges of $397,000 for severance and other employee-related
           costs in connection with restructurings in Film Products ($127,000)
           and at corporate headquarters ($270,000; included in "Corporate
           expenses, net" in the net sales and operating profit by
           segment table);
        -- A net pretax charge of $269,000 in AFBS (formerly Therics),
           including an additional charge of $353,000 related to the estimated
           loss on the sub-lease of a portion of the facility in Princeton,
           New Jersey, partially offset by the reversal to income of $84,000
           related to certain sale transaction accruals;
        -- A pretax charge of $182,000 in Film Products related to the
           write-off of an investment;
        -- A net pretax charge of $118,000 related to severance and other
           employee-related costs associated with the restructuring of the
           research and development operations in Film Products (of this
           amount, $164,000 in pretax charges for employee relocation and
           recruitment is included in "Selling, R&D and general expenses" in
           the condensed consolidated statements of income); and
        -- Pretax charges of $31,000 for accelerated depreciation related to
           restructurings in Film Products.

        Plant shutdowns, asset impairments and restructurings in 2005 include:
        -- Pretax charges of $10.3 million related to the sale or assignment
           of substantially all of AFBS' (formerly Therics) assets, including
           asset impairment charges of $5.6 million, lease-related losses of
           $3.3 million and severance and other transaction-related costs of
           $1.4 million (see Note (b) for additional information);
        -- Pretax charges of $2.2 million related to severance and other
           employee-related costs in connection with restructurings in Film
           Products ($1.1 million), Aluminum Extrusions ($648,000) and at
           corporate headquarters ($455,000; included in "Corporate expenses,
           net" in the net sales and operating profit by segment table);
        -- A pretax charge of $2.1 million related to the planned shutdown of
           the films manufacturing facility in LaGrange, Georgia, including
           asset impairment charges of $1.6 million and severance and other
           costs of $486,000;
        -- A pretax gain of $1.6 million related to the shutdown of the films
           manufacturing facility in New Bern, North Carolina, including a
           $1.8 million gain on the sale of the facility (included in "Other
           income (expense), net" in the condensed consolidated statements of
           income), partially offset by shutdown-related expenses of $225,000;
        -- A net pretax gain of $1.3 million related to the shutdown of the
           aluminum extrusions facility in Aurora, Ontario, including a $1.7
           million gain on the sale of the facility (included in "Other income
           (expense), net" in the condensed consolidated statements of
           income), $1.1 million of shutdown-related costs, partially offset
           by the reversal to income of certain accruals associated with
           severance and employee costs ($474,000) and other shutdown-related
           costs ($235,000);
        -- A pretax charge of $1 million for process reengineering costs
           associated with the implementation of a global information system
           in Film Products (included in "Costs of goods sold" in the
           condensed consolidated statements of income);
        -- A net pretax charge of $843,000 related to severance and other
           employee-related costs associated with the restructuring of the
           research and development operations in Film Products (of this
           amount, $1.4 million in pretax charges for employee relocation and
           recruitment is included in "Selling, R&D and general expenses" in
           the condensed consolidated statements
           of income);
        -- A pretax gain of $653,000 related to the shutdown of the films
           manufacturing facility in Carbondale, Pennsylvania, including a
           $630,000 gain on the sale of the facility (included in "Other
           income (expense), net" in the condensed consolidated statements of
           income), and the reversal to income of certain shutdown-related
           accruals of $23,000;
        -- Pretax charges of $583,000 for asset impairments in Film Products;
        -- A pretax gain of $508,000 for interest receivable on tax refund
           claims (included in "Corporate expenses, net" in the net sales and
           operating profit by segment table and "Other income (expense), net"
           in the condensed consolidated statements of income);
        -- A net pretax charge of $495,000 in Aluminum Extrusions, including
           an asset impairment of $597,000, partially offset by the reversal
           to income of certain shutdown-related accruals of $102,000;
        -- Pretax charges of $353,000 for accelerated depreciation related to
           restructurings in Film Products; and
        -- A pretax charge of $182,000 in Film Products related to the write-
           off of an investment.

    (b) Gain on the sale of corporate assets in 2006 includes a gain related
        to the sale of public equity securities. Gain on the sale of corporate
        assets in 2005 includes a gain related to the sale of corporate real
        estate.

        As of December 31, 2005, the investment in Novalux, Inc. of $6.1
        million was written down to estimated fair value of $1.1 million.
        Novalux is developing a laser technology for potential use in a
        variety of applications.  The loss from the write-down is included in
        "Other income (expense), net" in the condensed consolidated statements
        of income.

        Income taxes in 2006 includes a reversal of a valuation allowance of
        $577,000 for deferred tax assets associated with capital loss
        carryforwards recorded with the write-down of the investment in
        Novalux.  Outside appraisal of the value of corporate assets,
        primarily real estate, performed in December 2006, indicates that
        realization of related deferred tax assets is more likely than not.

    (c) Comprehensive income (loss), defined as net income and other
        comprehensive income (loss), was income of $14.1 million for the
        fourth quarter of 2006 and a loss of $1.5 million for the fourth
        quarter of 2005. Comprehensive income (loss) was income of $46.3
        million in 2006 and income of $9.4 million in 2005.  Other
        comprehensive income (loss) includes changes in unrealized gains and
        losses on available-for-sale securities, foreign currency translation
        adjustments, unrealized gains and losses on derivative financial
        instruments and minimum pension liability recorded net of deferred
        taxes directly in shareholders' equity.

    (d) On June 30, 2005, substantially all of the assets of AFBS, Inc.
        (formerly Therics, Inc.), a wholly-owned subsidiary of Tredegar, were
        sold or assigned to a newly-created limited liability company,
        Therics, LLC, which is controlled and managed by an individual not
        affiliated with Tredegar.  AFBS retained substantially all of its
        liabilities in the transaction, which included customary
        indemnification provisions for pre-transaction liabilities.  AFBS
        received a 17.5% equity interest in the new company valued at $170,000
        and a 3.5% interest in Theken Spine, LLC valued at $800,000, along
        with potential future payments on the sale of certain products by
        Therics, LLC.

    (e) Effective January 1, 2006, Tredegar adopted Statement of Financial
        Accounting Standards (SFAS) No. 123R, "Share-Based Payment" (SFAS
        123R) using the modified prospective method. SFAS 123R requires
        the company to record compensation expense for all share-based
        awards. Tredegar previously applied Accounting Principles Board (APB)
        Opinion No. 25, "Accounting for Stock Issued to Employees," and
        related interpretations and provided the required pro forma
        disclosures of SFAS No. 123, "Accounting for Stock-Based Compensation"
        (SFAS 123).  Prior periods were not restated.

    (f) Effective December 31, 2006, Tredegar adopted SFAS No. 158,
        "Employers' Accounting for Defined Benefit Pension and Other
        Postretirement Plans" (SFAS 158).  This statement requires the
        recognition in the balance sheet of the funded status of each of our
        defined benefit pension and other postretirement plans.  Each
        overfunded plan is recognized as an asset and each underfunded plan is
        recognized as a liability.  The initial impact of SFAS 158, net of
        deferred taxes, is recognized directly in shareholders' equity.
        Adjustments from the new standard will not impact our debt covenant
        computations since our credit agreement allows us to elect to use
        generally accepted accounting principles in effect when the agreement
        was signed.

    (g) Adjusted EBITDA for the twelve months ended December 31, 2006,
        represents income from continuing operations before interest, taxes,
        depreciation, amortization, unusual items and losses associated with
        plant shutdowns, asset impairments and restructurings, gains from the
        sale of assets, investment write-down, charges related to stock
        option awards accounted for under the fair value-based method and
        other items.  Adjusted EBITDA is not intended to represent cash flow
        from operations as defined by GAAP and should not be considered as
        either an alternative to net income (as an indicator of operating
        performance) or to cash flow (as a measure of liquidity). Tredegar
        uses Adjusted EBITDA as a measure of unlevered (debt-free) operating
        cash flow.  We also use it when comparing relative enterprise values
        of manufacturing companies and when measuring debt capacity.  When
        comparing the valuations of a peer group of manufacturing companies,
        we express enterprise value as a multiple of Adjusted EBITDA.  We
        believe Adjusted EBITDA is preferable to operating profit and other
        GAAP measures when applying a comparable multiple approach to
        enterprise valuation because it excludes the items noted above,
        measures of which may vary among
        peer companies.

    (h) Net debt is calculated as follows (in millions):
          Debt                                             $  62.5
          Less:  Cash and cash equivalents                   (40.9)
          Net debt                                         $  21.6

        Net debt is utilized by management in evaluating the company's
        financial leverage and equity valuation and the company believes that
        investors also may find net debt to be helpful for the same purposes.

SOURCE  Tredegar Corporation
    -0-                             02/15/2007
    /CONTACT:  D. Andrew Edwards of Tredegar Corporation, +1-804-330-1041,
Fax: +1-804-330-1777, daedward@tredegar.com/
    /Web site:  http://www.tredegar.com /
    (TG)

CO:  Tredegar Corporation
ST:  Virginia
IN:  CHM MNG
SU:  ERN

AR-LM
-- DCTH006 --
8864 02/15/2007 17:06 EST http://www.prnewswire.com
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