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Tredegar Reports Second-Quarter Results

August 7, 2007 at 7:32 AM EDT
RICHMOND, Va., Aug 07, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Tredegar Corporation (NYSE: TG) reported second-quarter net income of $9.9 million (25 cents per share) compared to $9.3 million (24 cents per share) in 2006. Earnings from manufacturing operations in the second quarter were $9.3 million (24 cents per share) versus $9.1 million (23 cents per share) last year. Second-quarter sales decreased to $279.6 million from $282.5 million in 2006. A summary of results for the second quarter and first six months of 2007 and 2006 are shown below:
     (In Millions, Except Per-Share Data)  Three Months Ended Six Months Ended
                                                June 30           June 30
                                             2007     2006     2007     2006
     Sales                                  $279.6   $282.5   $561.2   $550.5

     Net income as reported under generally
      accepted accounting principles (GAAP)   $9.9     $9.3    $20.3    $17.5
     After-tax effects of:
       Loss associated with plant shutdowns,
        asset impairments and restructurings    .1       .6       .6      1.9
       (Gains) losses from sale of assets
        and other items                        (.7)     (.8)     (.7)     (.9)
     Income from manufacturing operations*    $9.3     $9.1    $20.2    $18.5


     Diluted earnings per share as reported
      under GAAP                              $.25     $.24     $.51     $.45
     After-tax effects per diluted share of:
       Loss associated with plant shutdowns,
        asset impairments and restructurings   .01      .01      .02      .05
       (Gains) losses from sale of assets
        and other items                       (.02)    (.02)    (.02)    (.02)
     Diluted earnings per share from
      manufacturing operations*               $.24     $.23     $.51     $.48

* The after-tax effects of unusual items, plant shutdowns, asset impairments and restructurings, and gains or losses 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.

John D. Gottwald, Tredegar's president and chief executive officer, said: "Overall earnings per share from manufacturing operations increased by 1 cent per share or 4.3% in the second quarter of 2007 compared with the second quarter of last year. The increase was due to lower pension and interest costs, a lower effective income tax rate and higher profits in our films business, partially offset by significantly lower profits in our aluminum business. Profit growth in films was driven by increases in sales of high-value surface protection, elastic and apertured materials. Since the second quarter of last year, excluding the effects of the lag in the passthrough of changes in resin costs, quarterly operating profit in films has had significant ups and downs. Future performance is likely to exhibit similar fluctuations."

Mr. Gottwald continued: "In aluminum, operating profit decreased by $2.4 million or 42% in the second quarter of 2007 compared with 2006 mainly due to lower volume, especially extrusions used in hurricane protection products and residential construction. Demand for extruded aluminum shapes is down significantly in most market segments. Our bookings and backlog are at historic lows for this time of year. The combination of poor demand and a much stronger Canadian Dollar, which impacts our costs, make the prospects for this unit look weak in the near future."

                           MANUFACTURING OPERATIONS
                                Film Products

Second-quarter net sales in Film Products were $130.3 million, up 7.3% from $121.4 million in the second quarter of 2006, while operating profit from ongoing operations increased to $13.8 million in the second quarter of 2007 from $13.3 million in 2006. Volume was 60.4 million pounds in the second quarter of 2007 compared with 61.9 million pounds in the second quarter of last year.

Net sales were up in the second quarter of 2007 compared with the second quarter of 2006 primarily due to increased sales of high-value elastic, apertured and surface protection materials, partially offset by lower sales of certain commodity barrier films that were dropped in conjunction with the shutdown in the second quarter of 2006 of the plant in LaGrange, Georgia. Volume declined as a result of exiting this market.

Profits increased in the second quarter of 2007 compared with the second quarter of 2006 due primarily to appreciation of the U.S. Dollar equivalent value of functional currencies for operations outside of the U.S. and improvement in the sales of high-value materials noted above. The company estimates that the impact of the lag in the pass-through of changes in average resin costs was not significant in the second quarter of 2007 compared with a positive impact on operating profit of $500,000 in the second quarter of 2006. 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 in Film Products were $266.3 million in the first six months of 2007, up 7.5% versus $247.7 million in the first six months of 2006. Operating profit from ongoing operations was $30.6 million in the first six months of 2007, up 6.3% compared with $28.8 million in the first six months of 2006. Operating profit from ongoing operations excluding the estimated effects of resin pass-through lag was $30.1 million in the first six months of 2007, up 14.0% versus $26.4 million in the first six months of 2006. Volume decreased to 125.7 million pounds in the first six months of 2007 from 126.4 million pounds in the first six months of 2006. The growth in sales and operating profit and decline in volume during the first six months of 2007 versus 2006 were primarily due to the same factors discussed for the second quarter of 2007 versus 2006.

Capital expenditures were $8.7 million in the first six months of 2007 and are projected to be approximately $20 million for the year. Depreciation expense was $16.5 million in the first six months of 2007 and is projected to be $33 million for the year.

Aluminum Extrusions

Second-quarter net sales in Aluminum Extrusions were $142.8 million, down 7.2% from $153.8 million in the second quarter of 2006. Operating profit from ongoing operations decreased to $3.3 million in the second quarter of 2007, down 42.1% from $5.7 million in the second quarter of 2006. Volume decreased to 56.9 million pounds in the second quarter of 2007, down 18.0% from 69.4 million pounds in the second quarter of 2006.

Net sales in Aluminum Extrusions were $282.2 million in the first six months of 2007, down 2.4% from $289.0 million in the first six months of 2006. Operating profit from ongoing operations decreased to $6.8 million in the first six months of 2007, down 35.2% from $10.5 million in the first six months of 2006. Volume decreased to 114.7 million pounds in the first six months of 2007, down 13.8% from 133.0 million pounds in the first six months of 2006.

The decreases in net sales and operating profit in the second quarter and first six months were mainly due to lower volume partially offset by higher selling prices. Shipments declined in most markets, especially extrusions used in hurricane protection products and residential construction. Overall backlog at the end of the quarter was 16.6 million pounds, down from 29.5 million pounds at June 30, 2006.

Capital expenditures were $3.4 million in the first six months of 2007 and are projected to be approximately $8 million for the year. Depreciation expense was $6.2 million in the first six months of 2007 and is projected to be $13 million for the year.

OTHER ITEMS

Net pension income was $587,000 in the second quarter of 2007 and $1.2 million in the first six months of 2007, a favorable change of $1.3 million (2 cents per share after taxes) and $2.6 million (4 cents per share after taxes) from amounts recognized in the second quarter and first six months of 2006, respectively. Most of the favorable changes relate 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 to contribute the same amount in 2007.

Interest expense was $557,000 in the second quarter of 2007 and $1.4 million in first six months of 2007, a decline of $911,000 (2 cent per share after taxes) and $1.5 million (3 cents per share after taxes) versus the second quarter and first six months of last year, respectively, due to lower average debt outstanding.

The effective tax rate used to compute income from manufacturing operations was 34.8% in the second quarter of 2007 and 35.0% in the first six months of 2007, compared with 37.5% in the second quarter of 2006 and 37.7% in the first six months of 2006. The decrease in the effective tax rate for manufacturing operations, which had a favorable impact of approximately 1 cent and 2 cents per share in the second quarter and first six months of 2007 versus last year, respectively, was mainly due to differences in income taxes accrued on operations outside of the U.S.

During the first quarter of 2007, the company adopted new accounting standards for maintenance costs and uncertain income tax positions, neither of which had a material impact on Tredegar's results of operations or financial condition. In addition, Tredegar adopted new accounting standards on fair value measurements and the fair value option for financial assets and liabilities, neither of which had an impact on results for the second quarter or first six months of 2007.

Results for 2007 and 2006 also include certain special items. After-tax charges for plant shutdowns, asset impairments and restructurings were 1 cent and 2 cents per share in the second quarter and first six months of 2007, respectively. After-tax charges for plant shutdowns, asset impairments and restructurings were 1 cent and 5 cents per share in the second quarter and first six months of 2006, respectively. In addition, the results for the second quarter and first six months of 2007 include after-tax income of $682,000 (2 cents per share) resulting from an adjustment of deferred income taxes for a reduction in statutory income tax rates in Canada (reflected as a credit to income tax expense). Results for the second quarter and first six months of 2006 include after-tax income of $835,000 (2 cents per share) for liquidation of inventories from the shutdown of the films plant in LaGrange, Georgia that were accounted for on the last-in, first-out ("LIFO") method. Further details regarding these items are provided in the financial tables included with this press release.

On April 2, 2007, Tredegar invested $10 million in Harbinger Capital Partners Special Situations Fund, L.P. ("Harbinger"), a fund that seeks to achieve superior absolute returns by participating primarily in medium to long-term investments involving distressed/high yield debt securities, special situation equities and private loans and notes. The fund is a highly speculative investment subject to a two-year lock-up and additional limitations on withdrawal. There is no secondary market for interests in the fund. Tredegar's investment in Harbinger, which represents less than 2% of Harbinger's total partnership capital, is accounted for under the cost method. At June 30, 2007, Harbinger reported Tredegar's capital account value at $12.4 million reflecting $2.4 million of unrealized appreciation ($1.5 million or 4 cents per share after taxes) versus the carrying value in Tredegar's balance sheet of $10 million.

CAPITAL STRUCTURE AND ADJUSTED EBITDA

Cash in excess of debt was $218,000 at June 30, 2007, compared with net debt (debt in excess of cash) of $3.7 million at March 31, 2007 and $21.6 million at December 31, 2006. Adjusted EBITDA from manufacturing operations, a key valuation and borrowing capacity measure, was $110.8 million for the last twelve months ended June 30, 2007. See notes to financial statements and tables for reconciliations to comparable GAAP measures.

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; 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 (the "SEC") 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 and our Quarterly Report on Form 10-Q for this period that will be filed with the SEC.

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)

                                  Second Quarter Ended     Six Months Ended
                                         June 30                June 30
                                    2007         2006       2007       2006

    Sales                         $279,582     $282,491   $561,176   $550,455
    Other income (expense),
     net (a) (b)                       160          248        454        260
                                   279,742      282,739    561,630    550,715

    Cost of goods sold (a)         239,534      239,691    477,922    466,329
    Freight                          6,476        7,250     12,623     13,724
    Selling, R&D and general
     expenses                       18,829       18,432     38,551     36,533
    Amortization of intangibles         38           38         75         75
    Interest expense                   557        1,468      1,381      2,900
    Asset impairments and costs
     associated with exit and
     disposal activities (a)           125        1,026        858      2,718
                                   265,559      267,905    531,410    522,279

    Income before income taxes      14,183       14,834     30,220     28,436
    Income taxes (b)                 4,248        5,584      9,952     10,971

    Net income (a) (b) (c)          $9,935       $9,250    $20,268    $17,465


    Earnings per share:
      Basic                           $.25         $.24       $.52       $.45
      Diluted                          .25          .24        .51        .45

    Shares used to compute
     earnings per share:
      Basic                         39,402       38,632     39,337     38,617
      Diluted                       39,584       38,837     39,537     38,751


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

                                    Second Quarter Ended   Six Months Ended
                                           June 30              June 30
                                       2007       2006      2007       2006
    Net Sales
    Film Products                    $130,259   $121,405  $266,320   $247,736
    Aluminum Extrusions               142,847    153,836   282,233    288,995
    Total net sales                   273,106    275,241   548,553    536,731
    Add back freight                    6,476      7,250    12,623     13,724
    Sales as shown in the
     Consolidated
      Statements of Income           $279,582   $282,491  $561,176   $550,455

    Operating Profit
    Film Products:
      Ongoing operations              $13,762    $13,264   $30,582    $28,841
      Plant shutdowns, asset
       impairments and
       restructurings, net of gains
       on sale of assets and
       related income from LIFO
       inventory liquidations (a)         (26)       768      (393)      (815)

    Aluminum Extrusions:
      Ongoing operations                3,288      5,674     6,754     10,540
      Plant shutdowns, asset
       impairments and
       restructurings (a)                 (99)      (405)      (99)      (514)

    AFBS (d):
      Loss on investment in Therics,
       LLC                                  -          -         -        (25)
      Plant shutdowns, asset
       impairments and
       restructurings (a)                   -          -      (366)         -
    Total                              16,925     19,301    36,478     38,027
    Interest income                       283        285       671        507
    Interest expense                      557      1,468     1,381      2,900
    Gain on the sale of corporate
     assets (b)                             -          -         -         56
    Stock option-based compensation
     costs (e)                            196        282       465        493
    Corporate expenses, net             2,272      3,002     5,083      6,761
    Income before income taxes         14,183     14,834    30,220     28,436
    Income taxes (b)                    4,248      5,584     9,952     10,971
    Net income (a) (b) (c)             $9,935     $9,250   $20,268    $17,465


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

                                                  June 30,       December 31,
                                                    2007             2006
    Assets

    Cash & cash equivalents                         $32,397          $40,898
    Accounts & notes receivable, net                149,650          121,834
    Income taxes recoverable                          5,265           10,975
    Inventories                                      69,272           68,930
    Deferred income taxes                             8,101            6,055
    Prepaid expenses & other                          3,660            4,558
    Total current assets                            268,345          253,250

    Property, plant & equipment, net                317,478          325,763
    Other assets (f)                                 76,923           64,078
    Goodwill & other intangibles                    140,226          138,696

    Total assets                                   $802,972         $781,787

    Liabilities and Shareholders' Equity

    Accounts payable                                $86,757          $69,426
    Accrued expenses                                 36,425           41,906
    Current portion of long-term debt                   488              678
    Total current liabilities                       123,670          112,010

    Long-term debt                                   31,691           61,842
    Deferred income taxes                            80,121           75,772
    Other noncurrent liabilities (f)                 17,800           15,568
    Shareholders' equity (f)                        549,690          516,595

    Total liabilities and shareholders' equity     $802,972         $781,787


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

                                                      Six Months Ended
                                                           June 30
                                                   2007              2006
    Cash flows from operating activities:
      Net income                                   $20,268           $17,465
      Adjustments for noncash items:
        Depreciation                                22,785            21,757
        Amortization of intangibles                     75                75
        Deferred income taxes                       (2,528)            9,708
        Accrued pension income and postretirement
         benefits                                     (897)            1,683
        Gain on sale of assets                           -               (56)
        Loss on asset impairments and
         divestitures                                  338             1,150
      Changes in assets and liabilities, net of
       effects of acquisitions and divestitures:
        Accounts and notes receivables             (24,774)          (35,838)
        Inventories                                  2,323             2,352
        Income taxes recoverable                     5,710            (1,345)
        Prepaid expenses and other                   1,658             2,248
        Accounts payable                            15,196            30,119
        Accrued expenses                            (3,853)              842
      Other, net                                       719            (1,846)
        Net cash provided by operating activities   37,020            48,314
    Cash flows from investing activities:
      Capital expenditures                         (12,070)          (24,903)
      Investment in Harbinger ($10 million) and
       real estate in 2007 and Novalux in 2006     (11,056)             (400)
      Proceeds from the sale of assets and
       property disposals & reimbursements from
       customers for purchases of equipment          3,842                56
      Other, net                                         -               (88)
        Net cash used in investing activities      (19,284)          (25,335)
    Cash flows from financing activities:
      Dividends paid                                (3,163)           (3,104)
      Debt principal payments                      (30,341)          (22,889)
      Borrowings                                         -             4,000
      Proceeds from exercise of stock options        6,437               663
        Net cash (used in) provided by
         financing activities                      (27,067)          (21,330)
    Effect of exchange rate changes on cash            830               342
    Increase in cash and cash equivalents           (8,501)            1,991
    Cash and cash equivalents at beginning
     of period                                      40,898            23,434
    Cash and cash equivalents at end of period     $32,397           $25,425


                         Selected Financial Measures
                                (In Millions)
                                 (Unaudited)

                                          For the Twelve Months Ended June 30,
                                                        2007
                                              Film      Aluminum
                                            Products   Extrusions    Total
    Operating profit from ongoing
     operations                               $59.4       $18.2       $77.6
    Allocation of corporate overhead           (8.9)       (3.1)      (12.0)
    Add back depreciation and amortization     32.7        12.5        45.2
    Adjusted EBITDA (g)                       $83.2       $27.6      $110.8

    Selected balance sheet and other data
     as of June 30, 2007:
      Net debt (cash) (h)                      $(.2)
      Shares outstanding                       39.6


    Notes to the Financial Tables

    (a)  Plant shutdowns, asset impairments and restructurings in the second
         quarter of 2007 include:
         -- A pretax charge of $99,000 for severance and other
            employee-related costs in Aluminum Extrusions; and
         -- A pretax charge of $26,000 for costs related to the shutdown
            of the films manufacturing facility in LaGrange, Georgia.

         Plant shutdowns, asset impairments and restructurings in the first
         six months of 2007 include:
         -- A pretax charge of $366,000 related to the estimated loss on the
            sub-lease of a portion of the AFBS (formerly Therics) facility in
            Princeton, New Jersey;
         -- Pretax charges of $338,000 for asset impairments in Film Products;
         -- A pretax charge of $99,000 for severance and other
            employee-related costs in Aluminum Extrusions; and
         -- A pretax charge of $55,000 for costs related to the shutdown of
            the films manufacturing facility in LaGrange, Georgia.

         Plant shutdowns, asset impairments and restructurings in the second
         quarter of 2006 include:
         -- A net pretax gain of $822,000 associated with the shutdown of the
            films manufacturing facility in LaGrange, Georgia, including a
            gain of $1.4 million for related LIFO inventory liquidations
            (included in "Cost of goods sold" in the condensed consolidated
            statements of income), partially offset by severance and other
            costs of $567,000; and
         -- Pretax charges of $459,000 for severance and other
            employee-related costs in connection with restructurings in
            Aluminum Extrusions ($405,000) and Film Products ($54,000).

         Plant shutdowns, asset impairments and restructurings in the first
         six months of 2006 include:
         -- A net pretax gain of $418,000 associated with the shutdown of the
            films manufacturing facility in LaGrange, Georgia, including a
            gain of $1.4 million for related LIFO inventory liquidations
            (included in "Cost of goods sold" in the condensed consolidated
            statements of income), partially offset by severance and other
            costs of $841,000 and asset impairment charges of $130,000;
         -- Pretax charges of $1 million for asset impairments in Film
            Products; and
         -- 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).

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

         Income taxes in 2007 include a tax benefit of $682,000 recorded in
         the second quarter related to an adjustment to deferred income taxes
         for a reduction in statutory income tax rates in Canada.

    (c)  Comprehensive income (loss), defined as net income and other
         comprehensive income (loss), was a gain of $16.2 million for the
         second quarter of 2007 and a gain of $11.4 million for the second
         quarter of 2006. Comprehensive income (loss) was a gain of $29.1
         million for the first six months of 2007 and a gain of $20.3 million
         for the first six months of 2006. 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 amortization
         of prior service cost and net gains or losses from pension and other
         postretirement benefit plans 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, 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. 123(R), ''Share-Based Payment"
         (SFAS 123(R)) using the modified prospective method. SFAS 123(R)
         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, was 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 June 30, 2007, 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                                              $32.2
           Less:  Cash and cash equivalents                  (32.4)
           Net debt                                           $(.2)

SOURCE Tredegar Corporation

D. Andrew Edwards of Tredegar Corporation, +1-804-330-1041, Fax, +1-804-330-1777, daedward@tredegar.com

http://www.tredegar.com

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