News Release

• Bonnell Aluminum’s operating profit increased $2.3 million from the second quarter of 2011 due to margin improvements.
• Film Products’ operating profit increased $0.6 million from the second quarter of 2011, primarily driven by operating profit of $4.0 million from the addition of Terphane Holdings LLC (“Terphane”), partially offset by lower volumes and margins in the surface protection and personal care businesses.

RICHMOND, Va.--(BUSINESS WIRE)--Aug. 1, 2012-- Tredegar Corporation (NYSE:TG) reported second-quarter net income from continuing operations of $7.4 million (23 cents per share) compared to $6.0 million (19 cents per share) in the second quarter of 2011. Results from continuing operations in the second quarter of 2012 include a net after-tax loss of $0.2 million for special items primarily associated with the shutdown of our aluminum extrusions manufacturing facility in Kentland, Indiana and an unrealized gain on an investment accounted for under the fair value method. Income from ongoing operations in the second quarter was $7.6 million (23 cents per share) versus $6.7 million (21 cents per share) in the second quarter of last year.

Net income from continuing operations for the first six months of 2012 was $15.2 million (47 cents per share) compared to $12.7 million (39 cents per share) for the first six months of 2011. Results from continuing operations in the first six months of 2012 include a net after-tax loss of $0.4 million (2 cent per share) for special items primarily associated with the shutdown of our aluminum extrusions manufacturing facility in Kentland, Indiana and an unrealized gain on an investment accounted for under the fair value method. Income from ongoing operations in the first six months of 2012 was $15.6 million (49 cents per share) versus $13.3 million (41 cents per share) in the first six months of last year. Further details regarding special items and other non-recurring transactions included in net income from continuing operations are provided in the financial tables included with this press release.

A summary of results for ongoing operations for the three and six months ended June 30, 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: “Unfortunately, the difficult market dynamics that have negatively impacted the markets for our personal care and surface protection films, as discussed in previous quarters, continue. While we anticipate ordinary fluctuations from quarter to quarter, improvement in profitability will depend on accelerating cost reductions and new product introductions.”

Ms. Taylor added, “Film Products’ acquisition of Terphane continues to deliver on our strategic objectives, and we are pleased with its contribution to our Film Products business. Profitability improved from the first quarter of 2012 as we made significant progress in resolving the production issues associated with upgrading an existing flexible packaging line in Brazil.”

Ms. Taylor continued, “Despite relatively flat volume versus the second quarter of last year, Bonnell Aluminum demonstrated strong profit growth this quarter, as we continued to focus on margin improvement and benefitted from lower conversion costs. In recent quarters, we have seen the benefits of our rigorous focus on cost reductions, which will continue to be important as unfavorable market conditions in commercial construction persist.”

OPERATIONS REVIEW

Film Products

A summary of second quarter and year-to-date operating results for Film Products is provided below:

Net sales (sales less freight) in the second quarter and first six months of 2012 increased in comparison to the same periods of the prior year, due to the addition of Terphane, partially offset by lower volumes in the remainder of the Film Products business. Terphane, which was acquired in the fourth quarter of 2011, generated net sales of $34.6 million in the second quarter of 2012 and $66.8 million in the first six months of 2012.

Operating profit from ongoing operations in 2012 was higher compared to the second quarter and first six months of the prior year as a result of 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, partially offset by the lower volumes as noted above and margin compression for surface protection and personal care products. Consumer trends toward value segment products and low growth rates in developed markets are adversely affecting the demand for our customers’ products that utilize our materials for these markets. Consequently, we are experiencing margin compression in our efforts to address these market dynamics.

Terphane had operating profit of $4.0 million and $6.6 million in the second quarter and first six months of 2012, respectively, which included amortization expense of $1.3 million and $2.6 million, respectively. During the second quarter, Terphane made significant progress in resolving production efficiency issues associated with the upgrade of an existing production line. Although production has been stabilized, further effort to increase production output on the line will continue throughout the rest of the year. As anticipated, Terphane’s margins were below those of the prior year, as we believe the first half of 2011 was near the peak of an industry cycle.

The estimated impact on operating profit from ongoing operations of the quarterly lag in the pass-through of average resin costs was a negative $1.1 million in the second quarter of 2012 compared to a negative $2.6 million in the second 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 $0.3 million in the second quarter of 2012 compared to the second quarter of 2011. The estimated impact on operating profit from ongoing operations of the quarterly lag in the pass-through of average resin costs was a negative $1.6 million for the first six months of 2012 compared to a negative $4.3 million for the first six months of 2011. The change in the U.S. dollar value of currencies for operations outside the U.S. had an unfavorable impact of approximately $0.5 million in the first six months of 2012 compared to the first six months of 2011.

Effective January 1, 2012, the operations of Bright View Technologies Corporation (“Bright View”) were incorporated into Film Products to leverage research and development efforts and accelerate 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 in the first half of 2012 were $2.0 million, which were consistent with the first half of 2011.

Capital expenditures in Film Products were $7.3 million in the first six months of 2012 compared to $7.1 million in the first six months of 2011. Film Products currently estimates that capital expenditures will be approximately $44 million in 2012, which includes approximately $24 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 $18.8 million in the first half of 2012 and $17.3 million in the first half of 2011, and is projected to be approximately $38 million in 2012.

Aluminum Extrusions

A summary of second quarter and year-to-date operating results for Aluminum Extrusions, which is also referred to as Bonnell Aluminum, is provided below:

Despite a modest increase in sales volume, net sales in the second quarter and first half of 2012 decreased in comparison to the same periods of the prior year due to lower average selling prices as a result of a decrease in aluminum prices. The favorable change in the operating profit from ongoing operations versus the second quarter and first six months of 2011 was primarily driven by margin improvements resulting from favorable product mix, improved pricing and lower energy costs.

The shutdown of the Kentland, Indiana facility continues to proceed smoothly, including the transfer of a portion of the business to our other facilities. The plant closure is expected to be completed during the third quarter of 2012.

Capital expenditures for Aluminum Extrusions were $1.5 million in the first six months of 2012 and $1.3 million in the first six months of 2011. Capital expenditures are projected to be approximately $4 million in 2012. Depreciation expense was $5.5 million in the first six months of 2012 compared with $4.2 million in first six months of 2011, and is projected to be approximately $9 million in 2012. Higher depreciation expense in 2012 is primarily related to approximately $2.5 million in accelerated depreciation on fixed assets at the Kentland, Indiana manufacturing facility.

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 six months of 2012 compared to an operating loss from ongoing operations of $0.2 million in the first six months of 2011.

Corporate Expenses, Interest and Taxes

Pension expense was $3.9 million in the first six months of 2012, an unfavorable change of $2.8 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 2012 versus 2011 primarily due to the higher pension expenses noted above, 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) and the timing of certain non-recurring corporate related expenses.

Interest expense, which includes the amortization of debt issue costs, was $2.0 million in the first half of 2012 in comparison to $0.7 million in the first half 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 31.2% in the first six months of 2012 compared with 33.7% in the first six months of 2011. The decrease in the effective tax rate from continuing operations for 2012 versus 2011 was primarily attributed to the benefit of current year foreign tax incentives, which were partially offset by the current year recognition of a valuation reserve on deferred tax assets recorded 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).

CAPITAL STRUCTURE

Net debt (debt in excess of cash and cash equivalents) was $45.4 million at June 30, 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.

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 (the “2011 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, which include the 2011 Form 10-K.

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, www.tredegar.com. 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.

Source: Tredegar Corporation

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