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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of report (Date of earliest event reported): August 5, 2008

Tredegar Corporation
(Exact Name of Registrant as Specified in its Charter)
 
Virginia
  
1-10258
  
54-1497771
(State or Other Jurisdiction
of Incorporation)
  
(Commission
File Number)
  
(IRS Employer
Identification No.)
 
1100 Boulders Parkway
Richmond, Virginia
  
 
23225
(Address of Principal Executive Offices)
  
(Zip Code)

Registrant's telephone number, including area code: (804) 330-1000

 
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 

Item 2.02 Results of Operations and Financial Condition.

On August 5, 2008, Tredegar Corporation announced its results of operations for the second quarter of 2008. Furnished as Exhibit 99 and incorporated herein by reference is the press release by Tredegar Corporation containing that announcement.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits.
 
99 Press Release, dated August 5, 2008 (furnished pursuant to Item 2.02).

 
2
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

     
TREDEGAR CORPORATION
       
Date: August 5, 2008
By:
/s/ D. Andrew Edwards
     
D. Andrew Edwards
     
Vice President, Chief Financial Officer
     
and Treasurer
 

 
3
 

EXHIBIT INDEX

EXHIBIT
  
DESCRIPTION
     
99
  
Press Release, dated August 5, 2008 (furnished pursuant to Item 2.02).
 
 
4
 



Contact:
Corporate Communications
D. Andrew Edwards
1100 Boulders Parkway
Phone: 804/330-1041
Richmond, Virginia 23225
Fax: 804/330-1777
E-mail: daedward@tredegar.com
Web Site: www.tredegar.com
  
FOR IMMEDIATE RELEASE

 
TREDEGAR REPORTS SECOND-QUARTER RESULTS
 
RICHMOND, Va., August 5, 2008 – Tredegar Corporation (NYSE:TG) reported second-quarter net income from continuing operations of $8.9 million (26 cents per share) compared to $10.6 million (27 cents per share) in the second quarter of 2007. Earnings from continuing manufacturing operations in the second quarter were $9.6 million (28 cents per share) versus $10.6 million (27 cents per share) last year. Second-quarter sales from continuing operations decreased slightly to $234.0 million from $234.9 million in 2007. On February 12, 2008, Tredegar sold its aluminum extrusions business in Canada. All historical results for this business have been reflected as discontinued operations in the accompanying financial tables.
 
A summary of results for continuing operations for the three and six months ended June 30, 2008 and 2007 is shown below:
 
(In Millions, Except Per-Share Data)
 
Three Months Ended
  
Six Months Ended
  
   
June 30
  
June 30
  
   
2008
  
2007
  
2008
  
2007
  
Sales
 
$
234.0
  
$
234.9
  
$
462.5
  
$
479.8
  
                           
Income from continuing operations as reported under generally accepted accounting principles (GAAP)
 
$
8.9
  
$
10.6
  
$
12.7
  
$
21.7
  
After-tax effects of:
                         
Loss associated with plant shutdowns, asset impairments and restructurings
   
1.0
   
-
   
3.7
   
.6
 
(Gains) losses from sale of assets and other items
   
(.3
)
  
-
   
(.8
)
  
-
 
Income from continuing manufacturing operations*
 
$
9.6
  
$
10.6
  
$
15.6
  
$
22.3
  
                           
Diluted earnings per share from continuing operations as reported under GAAP
 
$
.26
  
$
.27
  
$
.37
  
$
.55
  
After-tax effects per diluted share of:
                         
Loss associated with plant shutdowns, asset impairments and restructurings
   
.03
   
-
   
.11
   
.01
 
(Gains) losses from sale of assets and other items
   
(.01
)
  
-
   
(.03
)
  
-
 
Diluted earnings per share from continuing manufacturing operations*
 
$
.28
  
$
.27
  
$
.45
  
$
.56
  

* 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 from continuing operations as reported under GAAP to determine Tredegar’s presentation of income and earnings per share from continuing manufacturing operations. Income and earnings per share from continuing manufacturing operations are key financial and analytical measures used by Tredegar to gauge the operating performance of its continuing manufacturing businesses. They are not intended to represent the stand-alone results for Tredegar’s continuing 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.

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TREDEGAR EARNINGS, page 2
 
John D. Gottwald, Tredegar’s president and chief executive officer, said: “Earnings from continuing manufacturing operations increased by 1 cent per share or 3.7% in the second quarter of 2008 compared with the second quarter of 2007 due to accretion from share repurchases, higher pension income and adjustments to accruals for performance-based compensation programs. Operating profits declined in both films and continuing operations in aluminum extrusions. Operating profits in films, which continue to fluctuate from quarter-to-quarter, declined by 2.1% in the second quarter of 2008 compared with 2007. Competitive pressures, particularly for personal care materials, packaging materials and lower value surface protection films, have had an adverse impact on volume and profits. Future operating profit levels in films will depend on our ability to deliver product innovations, reduce costs and pass-through unprecedented increases in resin prices and energy costs. During the first quarter of 2008, we announced a restructuring that included a 6% reduction of films’ workforce that is expected to save $4.2 million on an annualized basis.”

Mr. Gottwald continued: “The aluminum extrusions industry in the U.S. continues to suffer from a cyclical downturn. Volume in our continuing operations declined by 14.7% in the second quarter of 2008 compared with the second quarter of last year, with demand down in most market segments. Operating profits declined by $2.9 million or 55%, primarily due to the decrease in volume. We see no rebound in sight. We’re very focused on controlling our variable costs and reducing fixed costs to minimize the adverse impact of the volume drop on profits.”

Mr. Gottwald further stated: “We repurchased 381,200 shares of our stock during the second quarter bringing total repurchases to 5.7 million shares over the last twelve months ended June 30, 2008. Our balance sheet remains strong with debt net of cash of $8.5 million at June 30, 2008, down from $33.8 million at December 31, 2007.”

MANUFACTURING OPERATIONS
Film Products

Second-quarter net sales (sales less freight) in Film Products were $135.5 million, up 4.0% from $130.3 million in the second quarter of 2007, while operating profit from ongoing operations decreased to $13.5 million in the second quarter of 2008 from $13.8 million in 2007. Volume was 56.8 million pounds in the second quarter of 2008, down 6% from 60.4 million pounds in the second quarter of 2007.

Net sales in Film Products for the first six months of 2008 were $267.8 million, up slightly from $266.3 million in the first six months of 2007. Operating profit from ongoing operations was $24.3 million in the first six months of 2008, down 20.6% from $30.6 million in the first six months of last year. Volume was 114.8 million pounds in the first six months of 2008, down 8.7% from 125.7 million pounds in the first six months of 2007.

- - more - -
TREDEGAR EARNINGS, page 3
 
Volume was down in the second quarter and first half of 2008 compared with last year primarily due to a decrease in sales of lower value surface protection films, personal care materials and packaging materials. Net sales increased due to appreciation of the U.S. dollar value of currencies for operations outside of the U.S. and higher selling prices from the pass-through of higher resin costs, partially offset by the decline in volume.
 
Operating profit from ongoing operations decreased in the second quarter and first half of 2008 versus 2007 due primarily to competitive pressures, particularly for personal care materials, packaging materials and lower value surface protection films. In addition, operating profit benefited from appreciation of the U.S. dollar value of currencies for operations outside of the U.S. but was adversely affected by the lag in the pass-through of increases in resin costs. Higher energy costs also had an adverse impact on results. Unfavorable variances were partially offset by cost reduction efforts. 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.
Capital expenditures in Film Products were $7.1 million in the first six months of 2008 compared with $8.7 million in the first six months of last year, and are projected to be approximately $25 million in 2008. Depreciation expense was $17.8 million in the first six months of 2008 compared with $16.5 million in the first six months of last year, and is projected to be approximately $34 million in 2008.

Aluminum Extrusions

Second-quarter net sales from continuing operations in Aluminum Extrusions were $92.7 million, down 6.7% from $99.4 million in the second quarter of 2007. Operating profit from ongoing U.S. operations decreased to $2.4 million in the second quarter of 2008, down 55% from $5.3 million in the second quarter of 2007. Volume from continuing operations decreased to 35.4 million pounds in the second quarter of 2008, down 14.7% from 41.5 million pounds in the second quarter of 2007.

- - more - -
 
TREDEGAR EARNINGS, page 4
Net sales in Aluminum Extrusions for the first six months of 2008 were $183.7 million, down 9.6% from $203.2 million in the first six months of 2007. Operating profit from ongoing U.S. operations was $3.9 million in the first six months of 2008, down 61% from $10.0 million in the first six months of last year. Volume was 72.5 million pounds in the first six months of 2008, down 13.6% from 83.9 million pounds in the first six months of 2007.

The decreases in net sales and ongoing operating profit from continuing operations in the second quarter and first half of 2008 compared with last year were mainly due to lower volume. Higher charges for bad debts also had an adverse impact on profits (bad debt charges increased by approximately $700,000 in the second quarter and $850,000 in the first half of 2008 versus last year). Shipments declined in most markets. Higher natural gas costs were mostly offset by an energy surcharge.

Capital expenditures for continuing operations in Aluminum Extrusions were $3.3 million in the first half of 2008 compared with $2.8 million in the first half of last year, and are projected to be approximately $18 million in 2008. In January 2008, Tredegar announced plans to spend approximately $24 million over the following 18 months to expand the capacity at its plant in Carthage, Tennessee. In 2007, approximately 65% of the sales of aluminum extrusions from operations in the U.S. were related to non-residential construction, and this additional capacity will increase Tredegar’s capabilities in this sector. Depreciation expense was $4.0 million in the first half of 2008 compared with $4.2 million in the first half of last year, and is projected to be approximately $7.8 million in 2008.

On February 12, 2008, Tredegar sold its aluminum extrusions business in Canada for a purchase price of $25.5 million to an affiliate of H.I.G. Capital. The purchase price is subject to adjustment based upon the actual working capital of the business at the time of sale. The final purchase price is estimated at $24.6 million, with the decline from the amount estimated at February 12, 2008 due to the excess of estimated working capital over actual working capital. Tredegar expects to realize cash income tax benefits in 2008 from the sale of approximately $12 million. All historical results for this business have been reflected as discontinued operations in the accompanying financial tables.

OTHER ITEMS

Net pension income from continuing operations was $1.6 million in the second quarter and $3.1 million in the first six months of 2008, a favorable change of $826,000 (2 cents per share after taxes) and $1.7 million (3 cents per share after taxes), respectively, from amounts recognized in the comparable periods of 2007. 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 approximately $167,000 to its pension plans for continuing operations in 2007 and expects to contribute a similar amount in 2008. Corporate expenses, net also declined due to adjustments to accruals for certain performance-based compensation programs.

- - more - -
TREDEGAR EARNINGS, page 5
 
Interest expense was $557,000 in the second quarters of 2008 and 2007, and $1.4 million in the first half of 2008 and 2007, with higher average debt levels offset by lower average interest rates.

The effective tax rate used to compute income taxes from continuing manufacturing operations was 36.6% in the second quarter of 2008 compared with 34.9% in the second quarter of 2007, and 37.5% in the first half of 2008 compared with 34.9% in the first half of 2007. The increase in the effective tax rate for continuing manufacturing operations for 2008 versus 2007, which had an unfavorable impact of approximately 1 cent per share during the second quarter and 2 cents per share in the first half of 2008, was mainly due to higher effective tax rates for operations outside of the U.S., expiration at December 31, 2007 of the research & development tax credit and lower income tax benefits expected for the Domestic Production Activities Deduction, partially offset by a lower state income tax effective rate.

Overall results for continuing operations for the quarter include special items. After-tax net charges for continuing operations for plant shutdowns, asset impairments and restructurings and gains and losses from the sale of assets and other items were 2 cents per share in the second quarter of 2008 (none in the second quarter of 2007). After-tax net charges for continuing operations for plant shutdowns, asset impairments and restructurings and gains and losses from the sale of assets and other items were 8 cents and 1 cent per share in the first half of 2008 and 2007, respectively. Further details regarding these items are provided in the financial tables included with this press release.

Tredegar’s investment in Harbinger Capital Partners Special Situations Fund, L.P. had a reported capital account value of $31.8 million at June 30, 2008, compared with $23.0 million at December 31, 2007. This investment has a carrying value in Tredegar’s balance sheet of $10 million, which represents the amount invested on April 2, 2007.

- - more - -
TREDEGAR EARNINGS, page 6

CAPITAL STRUCTURE AND ADJUSTED EBITDA
 
Net debt (debt in excess of cash) was $8.5 million at June 30, 2008, compared with net debt of $33.8 million at December 31, 2007. Adjusted EBITDA from continuing manufacturing operations, a key valuation and borrowing capacity measure, was $99.8 million in the twelve months ended June 30, 2008, down from $107.9 million in 2007. See notes to financial statements and tables for reconciliations to comparable GAAP measures.

On January 7, 2008, Tredegar announced that its board of directors approved a share repurchase program whereby management is authorized at its discretion to purchase, in the open market or in privately negotiated transactions, up to 5 million shares of Tredegar’s outstanding common stock. This share repurchase program replaced Tredegar’s previous share repurchase authorization. The authorization has no time limit. During the second quarter of 2008, Tredegar repurchased 381,200 shares for $5.6 million. During the first half of 2008, Tredegar repurchased 850,500 shares for $12.9 million. As of June 30, 2008, Tredegar had approximately 33.9 million common shares outstanding.

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 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 continuing operations in Aluminum Extrusions is cyclical and highly dependent on economic conditions of end-use markets in the U.S., particularly in the construction, distribution and transportation industries 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 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 Tredegar’s 2007 Annual Report on Form 10-K filed with the SEC.

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TREDEGAR EARNINGS, page 7

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.

- - more - -
 
 
TREDEGAR EARNINGS, page 8

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

   
Second Quarter Ended
  
Six Months Ended
  
   
June 30
  
June 30
  
   
2008
  
2007
  
2008
  
2007
  
                   
Sales
  
$
234,008
  
$
234,882
  
$
462,488
  
$
479,769
  
Other income (expense), net
    
663
    
160
    
1,220
    
453
  
     
234,671
    
235,042
    
463,708
    
480,222
  
                           
Cost of goods sold (a)
    
196,249
    
194,597
    
390,488
    
397,249
  
Freight
    
5,797
    
5,210
    
10,898
    
10,265
  
Selling, R&D and general expenses
    
17,139
    
18,290
    
36,108
    
36,949
  
Amortization of intangibles
    
31
    
38
    
63
    
75
  
Interest expense
    
557
    
557
    
1,438
    
1,381
  
Asset impairments and costs associated with exit and disposal activities (a)
   
1,219
    
125
    
5,159
    
858
  
     
220,992
    
218,817
    
444,154
    
446,777
  
                           
Income from continuing operations before income taxes
    
13,679
    
16,225
    
19,554
    
33,445
  
Income taxes
    
4,814
    
5,661
    
6,904
    
11,746
  
Income from continuing operations
    
8,865
    
10,564
    
12,650
    
21,699
  
Income (loss) from discontinued operations (b)
    
(207
)
  
(629
)
  
(930
)
  
(1,431
)
                           
Net income (a) (c)
 
$
8,658
  
$
9,935
    
11,720
    
20,268
  
                           
                           
Earnings (loss) per share:
                          
Basic:
                          
Continuing operations
  
$
.26
  
$
.27
  
$
.37
  
$
.55
  
Discontinued operations
    
(.01
)
  
(.02
)
  
(.03
)
  
(.04
)
Net income
  
$
.25
  
$
.25
  
$
.34
  
$
.51
  
Diluted:
                          
Continuing operations
  
$
.26
  
$
.27
  
$
.37
  
$
.55
  
Discontinued operations
    
(.01
)
  
(.02
)
  
(.03
)
  
(.04
)
Net income
  
$
.25
  
$
.25
  
$
.34
  
$
.51
  
                           
Shares used to compute earnings (loss) per share:
                          
Basic
    
33,997
    
39,402
    
34,231
    
39,337
  
Diluted
    
34,211
    
39,584
    
34,445
    
39,537
  
 
-- more --

 
TREDEGAR EARNINGS, page 9
Tredegar Corporation
Net Sales and Operating Profit by Segment
(In Thousands)
(Unaudited)

   
Second Quarter Ended
June 30
  
Six Months Ended
June 30
  
   
2008
  
2007
  
2008
  
2007
  
Net Sales
                  
Film Products
  
$
135,529
  
$
130,260
  
$
267,843
  
$
266,321
  
Aluminum Extrusions
    
92,682
    
99,412
    
183,747
    
203,183
  
Total net sales
    
228,211
    
229,672
    
451,590
    
469,504
  
Add back freight
    
5,797
    
5,210
    
10,898
    
10,265
  
Sales as shown in the Consolidated
                          
Statements of Income
  
$
234,008
  
$
234,882
  
$
462,488
  
$
479,769
  
                           
Operating Profit
                          
Film Products:
                          
Ongoing operations
    
13,479
    
13,762
  
$
24,265
  
$
30,582
  
Plant shutdowns, asset impairments and restructurings (a)
    
(944
)
  
(26
)
  
(4,649
)
  
(393
)
                           
Aluminum Extrusions (b):
                          
Ongoing operations
    
2,406
    
5,329
    
3,948
    
9,978
  
Plant shutdowns, asset impairments and restructurings (a)
    
(380
)
  
(99
)
  
(615
)
  
(99
)
 
                          
AFBS:
                          
Plant shutdowns, asset impairments and restructurings (a)
    
-
    
-
    
-
    
(366
)
Total
    
14,561
    
18,966
    
22,949
    
39,702
  
Interest income
    
188
    
283
    
446
    
671
  
Interest expense
    
557
    
557
    
1,438
    
1,381
  
Stock option-based compensation costs
    
278
    
196
    
338
    
465
  
Corporate expenses, net
    
235
    
2,271
    
2,065
    
5,082
  
Income before income taxes
    
13,679
    
16,225
    
19,554
    
33,445
  
Income taxes
    
4,814
    
5,661
    
6,904
    
11,746
  
Income from continuing operations
    
8,865
    
10,564
    
12,650
    
21,699
  
Income (loss) from discontinued operations (b)
    
(207
)
  
(629
)
  
(930
)
  
(1,431
)
Net income (a) (c)
 
$
8,658
  
$
9,935
  
$
11,720
  
$
20,268
  
 
-- more --
 
 
TREDEGAR EARNINGS, page 10
Tredegar Corporation
Condensed Consolidated Balance Sheets
(In Thousands)
(Unaudited)

   
June 30,
  
December 31,
  
   
2008
 
2007
 
Assets
              
               
Cash & cash equivalents
  
$
48,509
  
$
48,217
  
Accounts & notes receivable, net
    
120,771
   
97,064
 
Income taxes recoverable
    
10,260
   
323
 
Inventories
    
36,715
   
48,666
 
Deferred income taxes
    
9,492
   
9,172
 
Prepaid expenses & other
    
7,418
   
4,077
 
Current assets of discontinued operation (b)
    
-
   
37,750
 
Total current assets
    
233,165
   
245,269
 
               
Property, plant & equipment, net
    
263,573
   
269,083
 
Other assets
    
120,229
   
116,759
 
Goodwill & other intangibles
    
136,164
   
135,907
 
Noncurrent assets of discontinued operation (b)
    
-
   
17,460
 
Total assets
  
$
753,131
  
$
784,478
  
               
Liabilities and Shareholders' Equity
              
               
Accounts payable
  
$
71,602
  
$
67,161
  
Accrued expenses
    
37,822
   
33,676
 
Current portion of long-term debt
    
585
   
540
 
Current liabilities of discontinued operation (b)
    
-
   
17,152
 
Total current liabilities
    
110,009
   
118,529
 
               
Long-term debt
    
56,397
   
81,516
 
Deferred income taxes
    
83,247
   
68,625
 
Other noncurrent liabilities
    
15,910
   
15,662
 
Noncurrent liabilities of discontinued operation (b)
    
-
   
8,818
 
Shareholders' equity
    
487,568
   
491,328
 
                   
Total liabilities and shareholders' equity
  
$
753,131
  
$
784,478
  
 
-- more --
 
TREDEGAR EARNINGS, page 11
 
Tredegar Corporation
Condensed Consolidated Statement of Cash Flows
(In Thousands)
(Unaudited)

   
Six Months Ended
  
   
June 30
  
   
2008
 
2007
 
Cash flows from operating activities:
              
Net income
  
$
11,720
  
$
20,268
  
Adjustments for noncash items:
              
Depreciation
    
22,379
   
22,785
 
Amortization of intangibles
    
63
   
75
 
Deferred income taxes
    
7,123
   
(2,528
)
Accrued pension income and postretirement benefits
    
(2,825
)
  
(897
)
Loss on asset impairments and divestitures
    
3,337
   
338
 
Changes in assets and liabilities, net of effects of acquisitions and divestitures:
              
Accounts and notes receivables
    
(25,162
)
  
(24,774
)
Inventories
    
15,913
   
2,323
 
Income taxes recoverable
    
(9,803
)
  
5,710
 
Prepaid expenses and other
    
828
   
1,658
 
Accounts payable and accrued expenses
    
2,086
   
11,343
 
Other, net
    
2,180
   
719
 
Net cash provided by operating activities
    
27,839
   
37,020
 
Cash flows from investing activities:
              
Capital expenditures
    
(10,461
)
  
(12,070
)
Investment in Harbinger in 2007 ($10 million) and real estate in 2008 and 2007
    
(1,722
)
  
(11,056
)
Proceeds from the sale of the aluminum extrusions business in Canada (net of cash included in sale and transaction costs)
    
23,616
   
-
 
Proceeds from the sale of assets and property disposals & reimbursements from customers for purchases of equipment in 2007
    
248
   
3,842
 
Net cash provided by (used in) investing activities
    
11,681
   
(19,284
)
Cash flows from financing activities:
              
Dividends paid
    
(2,736
)
  
(3,163
)
Debt principal payments
    
(47,209
)
  
(30,341
)
Borrowings
    
22,000
   
-
 
Repurchases of Tredegar common stock
    
(12,904
)
  
-
 
Proceeds from exercise of stock options
    
-
   
6,437
 
Net cash used in financing activities
    
(40,849
)
  
(27,067
)
Effect of exchange rate changes on cash
    
1,621
   
830
 
Decrease in cash and cash equivalents
    
292
   
(8,501
)
Cash and cash equivalents at beginning of period
    
48,217
   
40,898
 
Cash and cash equivalents at end of period
  
$
48,509
  
$
32,397
  

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TREDEGAR EARNINGS, page 12
 
Selected Financial Measures
(In Millions)
(Unaudited)

 
 
For the Twelve Months Ended June 30, 2008
 
 
 
Film
 
Aluminum
 
 
 
 
 
Products
 
Extrusions
 
Total
 
Operating profit from continuing ongoing operations
  
$
53.1
  
$
10.5
  
$
63.6
  
Allocation of corporate overhead
    
(6.0
)
  
(1.4
)
  
(7.4
)
Add back depreciation and amortization from continuing operations
    
35.3
   
8.3
   
43.6
 
Adjusted EBITDA from continuing operations (d)
  
$
82.4
  
$
17.4
  
$
99.8
  
                     
Selected balance sheet and other data as of June 30, 2008:
            
Net debt (cash) (e)
  
$
8.5
              
Shares outstanding
    
33.9
             

Notes to the Financial Tables         

(a)
Plant shutdowns, asset impairments and restructurings in the second quarter of 2008 include:
 
 
Ÿ
Pretax charge of $854,000 for asset impairments in Film Products;
 
Ÿ
Pretax charges of $365,000 for severance and other employee-related costs in connection with restructurings in Film Products ($90,000) and Aluminum Extrusions ($275,000); and
 
Ÿ
A pretax charge of $105,000 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).

  Plant shutdowns, asset impairments and restructurings in the first six months of 2008 include:
 
Ÿ
Pretax charges of $2.7 million for severance and other employee-related costs in connection with restructurings in Film Products ($2.2 million) and Aluminum Extrusions ($510,000);
 
Ÿ
Pretax charges of $2.5 million for asset impairments in Film Products; and
 
Ÿ
A pretax charge of $105,000 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).

  Plant shutdowns, asset impairments and restructurings in the second quarter of 2007 include:
 
Ÿ
A pretax charge of $99,000 for severance and other employee-related costs in Aluminum Extrusions; and
 
Ÿ
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:
 
Ÿ
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;
 
Ÿ
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
 
Ÿ
A pretax charge of $55,000 for costs related to the shutdown of the films manufacturing facility in LaGrange, Georgia.

(b)
On February 12, 2008, Tredegar sold its aluminum extrusions business in Canada for a purchase price of $25.5 million to an affiliate of H.I.G. Capital. The purchase price is subject to adjustment based upon the actual working capital of the business at the time of sale. The final purchase price is estimated at $24.6 million, with the decline from the amount estimated at February 12, 2008, due to the excess of estimated working capital over actual working capital. Tredegar expects to realize cash income tax benefits in 2008 from the sale of approximately $12 million. All historical results for this business have been reflected as discontinued operations in the accompanying financial tables. The components of income (loss) from discontinued operations are presented below:
 
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TREDEGAR EARNINGS, page 13
 
 
 
Second Quarter Ended
 
Six Months Ended
 
 
 
June 30
 
June 30
 
(In thousands)
 
 
2008
 
 
2007
 
 
2008
 
 
2007
 
                           
Income (loss) from operations before income taxes
  
$
-
  
$
(2,041
)
$
(391
)
$
(3,224
)
Income tax cost (benefit) on operations
    
-
   
(729
)
  
(98
)
  
(1,110
)
    -    
(1,312
)
  
(293
)
  
(2,114
)
Loss associated with asset impairments and disposal activities
    
(207
)
  
-
   
(1,337
)
  
-
 
Income tax cost (benefit) on asset impairments and costs associated with disposal activities
    
-
   
683
   
(700
)
  
683
 
     
(207
)
  
683
   
(637
)
  
683
 
Income (loss) from discontinued operations
  
$
(207
)
$
(629
)
$
(930
)
$
(1,431
)
 
(c)
Comprehensive income (loss), defined as net income and other comprehensive income (loss), was income of $10.8 million for the second quarter of 2008 and income of $16.2 million for the second quarter of 2007. Comprehensive income (loss) was income of $11.8 million for the first six months of 2008 and income of $29.1 million for the first six months of 2007. 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)
Adjusted EBITDA for the twelve months ended June 30, 2008, 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.

(e)
Net debt is calculated as follows (in millions):

Debt
  
$
57.0
  
Less: Cash and cash equivalents
    
(48.5
)
Net debt
  
$
8.5
  
 
Net debt is not intended to represent total debt or debt defined by GAAP. 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.         
 
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