News Release

• Bonnell Aluminum’s operating profit increased $2.9 million from the first quarter of 2011 due to higher volume, margin improvements and lower conversion costs.
• Film Products’ operating profit was essentially flat with the prior year as lower volumes in the surface protection and personal care businesses were offset by operating profit of $2.6 million from the addition of Terphane Holdings LLC (“Terphane”).
• Tredegar completed a new $350 million five-year, unsecured revolving credit facility.

RICHMOND, Va.--(BUSINESS WIRE)--May 3, 2012-- Tredegar Corporation (NYSE:TG) reported first-quarter net income from continuing operations of $7.8 million (24 cents per share) compared to $6.7 million (21 cents per share) in the first quarter of 2011. Income from ongoing operations in the first quarter was $8.0 million (24 cents per share) versus $6.6 million (21 cents per share) in the first quarter of last year. A summary of results for ongoing operations for the three months ended March 31, 2012 and 2011 is shown below:

* Ongoing operations include operating profit (loss) of Film Products, Aluminum Extrusions and the Other segment as well as Corporate Expenses, Interest and Taxes. See Notes to the Financial Tables included with this press release for further detail regarding the items included in the reconciliation between net income and diluted earnings per share as reported under GAAP and income from ongoing operations and diluted earnings per share from ongoing operations, each being a non-GAAP financial measure. In addition, Note (h) within the Notes to the Financial Tables provides the definition of income from ongoing operations and the reasons why the measure is presented.

Nancy M. Taylor, Tredegar’s president and chief executive officer, said: “Over the past year we have highlighted the external market conditions tied to lower demand for the end products using our surface protection and personal care materials which are negatively impacting both volumes and margins in these businesses, especially in mature markets. As we expect these difficult market dynamics to persist for at least the remainder of the year, our challenge will be to effectively control costs while continuing to strategically invest in new product offerings, some of which should come on stream this year.”

Ms. Taylor added, “First quarter results for Film Products include a full quarter’s performance for Terphane, which we acquired in late 2011. We are pleased with the pace of its integration, and the business is performing in line with our expectations on a margin basis. Terphane experienced some operating inefficiencies, primarily driven by downtime associated with the upgrade of an existing production line. This expansion, which is expected to be completed in the second quarter, resulted in a volume shortfall in the first quarter.”

Ms. Taylor continued, “Bonnell Aluminum was profitable again this quarter in what is a historically slow period of the year, despite the ongoing challenging market conditions in the non-residential construction market. We are pleased with Bonnell’s continued demonstration of its ability to capitalize on the operating leverage of cost and margin improvements while developing opportunities in new markets.”

OPERATIONS REVIEW

Film Products

A summary of first quarter operating results for Film Products is provided below:

Net sales (sales less freight) in the first quarter of 2012 increased 17% from the first quarter of 2011, primarily due to the addition of Terphane, partially offset by lower volumes in surface protection materials and personal care films. Terphane generated net sales of $32.2 million in the first quarter of 2012.

Operating profit from ongoing operations was essentially flat in the first quarter of 2012 compared to the first quarter of the prior year as a result of the lower volumes in surface protection materials and personal care films referenced above, offset by operating profit generated by the addition of Terphane and a reduction in the unfavorable impact of the lag in the pass-through of higher resin costs. Volume for these products continues to be adversely affected by a consumer shift to lower price tiers and slow growth in developed markets. Consequently, we are experiencing margin compression as a result of competitive pressures.

Terphane, acquired in the fourth quarter of 2011, had operating profit of $2.6 million in the first quarter of 2012. As previously discussed, Terphane’s profit was negatively impacted by a volume shortfall resulting from operating inefficiencies, primarily driven by downtime associated with the upgrade of an existing production line. While in line with our expectations, Terphane’s margins were below those of the prior year, as we believe the first half of 2011 was near the peak of an earnings cycle.

The estimated impact on operating profits from ongoing operations of the quarterly lag in the pass-through of average resin costs was a negative $0.5 million in the first quarter of 2012 compared to a negative $1.7 million in the first quarter of 2011. The change in the U.S. dollar value of currencies for operations outside the U.S. had an unfavorable impact of approximately $0.2 million in the first quarter of 2012 compared to the first quarter of 2011.

The operations of Bright View Technologies Corporation (“Bright View”), a late-stage development company producing high-value microstructure-based optical films for the LED (light emitting diode) and fluorescent lighting markets, were incorporated into the Film Products group on January 1, 2012, leveraging R&D efforts and accelerating new product development. Prior year balances for Bright View have been reclassified to Film Products to conform with the current year presentation. Operating losses for Bright View Technologies were $1.1 million in the first quarter of 2012, which are relatively consistent with those for the first quarter of 2011.

Capital expenditures in Film Products were $4.9 million in the first quarter of 2012 compared to $4.1 million in the first quarter of 2011. Film Products currently estimates that capital expenditures will be approximately $48 million in 2012, which includes approximately $27 million in capital expenditures for a project that will expand our capacity at the manufacturing facility in Cabo de Santo Agostinho, Brazil. This multi-year project will significantly increase capacity in Brazil and will primarily serve polyester films customers in Latin America. Depreciation expense was $9.2 million in the first quarter of 2012 and $8.2 million in the first quarter of 2011, and is projected to be approximately $39 million in 2012.

Aluminum Extrusions

A summary of first quarter operating results for Aluminum Extrusions, which is also referred to as Bonnell Aluminum, is provided below:

Net sales in the first quarter of 2012 increased in comparison to the first quarter of the previous year due to higher volume, partially offset by lower average selling prices as a result of a decrease in aluminum prices. The favorable change in the operating profit from ongoing operations of approximately $2.9 million versus the first quarter of 2011 was primarily driven by increased volume, margin improvements on value-added services and lower energy costs.

Capital expenditures for Aluminum Extrusions were $0.5 million in the first quarters of 2012 and 2011. Capital expenditures are projected to be approximately $5.1 million in 2012. Depreciation expense was $2.6 million in the first quarter of 2012 compared with $2.1 million in 2011, and is projected to be approximately $10 million in 2012. Higher depreciation expense in 2012 is primarily related to approximately $3 million in accelerated depreciation on fixed assets at the Kentland, Indiana manufacturing facility, which we previously announced would be closed by September 30, 2012.

Other

The Other segment includes the mitigation banking business, which is also referred to as Falling Springs. Net sales for this business can fluctuate from quarter-to-quarter as Falling Springs’ revenue varies based upon the timing of development projects within its markets. Operating profit from ongoing operations was $0.2 million in the first quarter of 2012 compared to an operating loss from ongoing operations of $0.2 million in the first quarter of 2011.

Corporate Expenses, Interest and Taxes

Pension expense was $2.0 million in the first quarter of 2012, an unfavorable change of $1.4 million from the comparable period of 2011. Most of the pension impact on earnings is reflected in “Corporate expenses, net” in the net sales and operating profit by segment table. Corporate expenses, net increased in the first quarter of 2012 versus 2011 primarily due to the higher pension expenses noted above and an unrealized loss on our investment in the Harbinger Capital Partners Special Situations Fund, L.P. (see Note (d) within the Notes to the Financial Tables for additional detail).

Interest expense, which includes the amortization of debt issue costs, was $1.0 million in the first quarter of 2012 in comparison to $0.4 million in the first quarter of last year as a result of an increase in the average borrowings under our revolving credit facility, which were used to finance a portion of the purchase price for the acquisition of Terphane.

The effective tax rate used to compute income taxes from continuing operations was 34.8% in the first quarter of 2012 compared with 31.0% in the first quarter of 2011. The increase in the effective tax rate from continuing operations for the first quarter of 2012 versus 2011 was primarily attributed to the current year recognition of a valuation reserve for expected limitations on the utilization of assumed capital losses on certain investments recognized in previous years (see Note (e) within the Notes to the Financial Tables for additional detail), partially offset by the benefit of foreign tax incentives.

CAPITAL STRUCTURE

Net debt (debt in excess of cash and cash equivalents) was $51.2 million at March 31, 2012, compared with $56.1 million at December 31, 2011. Net debt is a financial measure that is not calculated or presented in accordance with generally accepted accounting principles (GAAP). See the Notes to the Financial Tables for reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.

On April 23, 2012, we entered into a $350 million five-year, unsecured revolving credit facility, with an option to increase the amount by an additional $75 million. Our new credit agreement replaces our previous $300 million four-year, unsecured revolving credit facility that was due to expire on June 21, 2014. In connection with the refinancing, we borrowed $102 million under the new revolving credit facility, which was used together with available cash on hand, to repay all indebtedness under our previous credit agreement.

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,” “estimate,” “anticipate,” “expect,” “project,” “likely,” “may” 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 or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these forward-looking statements. Factors that could cause actual results to differ from expectations include, without limitation: acquired businesses, including Terphane, may not achieve the levels of revenue, profit, productivity, or otherwise perform as we expect; acquisitions, including our acquisition of Terphane, involve special risks, including without limitation, diversion of management’s time and attention to our existing businesses, the potential assumption of unanticipated liabilities and contingencies and potential difficulties in integrating acquired businesses and achieving anticipated operational improvements; 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 are cyclical and highly dependent on economic conditions of end-use markets in the U.S., particularly in the construction sector, and are also subject to seasonal slowdowns; 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 other 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 additional detail in “Risk Factors” in Part I, Item 1A of Tredegar’s 2011 Annual Report on Form 10-K filed with the SEC. Readers are urged to review and consider carefully the disclosures Tredegar makes in its filings with the SEC.

Tredegar does not undertake, and expressly disclaims any duty, 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. Reconciliations of non-GAAP financial measures are provided in the Notes to the Financial Tables included with this press release and can also be found within Presentations in the Investor Relations section of our website, http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.tredegar.com&esheet=50261128&lan=en-US&anchor=www.tredegar.com&index=1&md5=4668c62cb4ec72d3e1f382f0adb6903a. Tredegar uses its website as a channel of distribution of material company information. Financial information and other material information regarding Tredegar is posted on and assembled in the Investor Relations section of our website.

Tredegar Corporation is primarily a manufacturer of plastic films and aluminum extrusions. A global company headquartered in Richmond, Virginia, Tredegar had sales of $800 million in 2011. With approximately 2,200 employees, the company operates manufacturing facilities in North America, South America, Europe and Asia.

Selected Financial Measures
(In Millions)
(Unaudited)

Source: Tredegar Corporation

Tredegar Corporation
Neill Bellamy, 804-330-1211
Fax: 804-330-1777
neill.bellamy@tredegar.com