2012 AnnuAl RepoRt
Net Sales2
2012
($ Millions)
2011
$ 43,185
$ 28,545
776
536
720
520
3,194
(7,854)
857
612
1,175
(1,832)
$ 38,525
$ 27,888
$
1.34
200
’10
.10
(.24)
$
240
’11
.89
245
’12
.04
(.06)
$
1.20
$
.87
$ 611,877
$ 535,540
69,950
59,493
109,152
95,808
39,202
36,315
30,484
13,107
Ongoing Operating Prof it
245,465
240,392
($ Millions)
9,037
3,457
11,790
16,585
9,984
8,333
63
2,332
2,697
67
79
70
62
59
48,822
128,000
372,252
.96
(4)
32,069
‘10
32,193
68,939
125,000
396,907
3
.18
9
32,057
32,213
’12
’11
$ 26.29
13.49
20.42
(3.8)%
$ 23.00
13.92
22.22
15.6%
Adjusted eBitdA3
($ millions)
Adjusted EBITDA3
(Excludes Corporate Overhead)
($ Millions)
106
101
108
96
126
109
5
12
’11
’10
17
’12
Films
Aluminum
80
70
60
50
40
30
20
10
0
80
70
60
50
40
30
20
10
0
1000
800
600
400
200
0
80
70
60
50
40
30
20
10
0
150
1000
120
800
90
600
60
400
30
200
0
0
80
70
60
50
40
30
20
10
0
150
120
90
60
30
0
Financial HigHligHts
Net Sales2
($ Millions)
FinAnciAl summARy
Years Ended December 31
(In thousands, except per-share data)
Net Income and Diluted Earnings Per Share
Net income (loss) as reported under generally accepted accounting principles (GAAP)
After-tax effects of:
720
520
(Gains) losses associated with plant shutdowns, asset impairments and restructurings
(Gains) losses from sale of assets and other
776
536
857
612
1000
600
800
Income from ongoing operations1
200
240
245
Diluted earnings (loss) per share as reported under GAAP
After-tax effects per diluted share of:
’11
’12
’10
400
200
0
(Gains) losses associated with plant shutdowns, asset impairments and restructurings
(Gains) losses from sale of assets and other
Diluted earnings per share from ongoing operations1
63
67
62
59
79
70
Ongoing Operating Prof it
($ Millions)
Ongoing Operations
Film Products:
Net sales2
Ongoing operating profit
Adjusted EBITDA3
Depreciation and amortization
Capital expenditures
Aluminum Extrusions:
Net sales2
Ongoing operating profit
Adjusted EBITDA3
Depreciation and amortization
Capital expenditures
Financial Position and Other Data
Cash and cash equivalents
Debt outstanding
3
(4)
Shareholders’ equity
Cash dividends declared per share4
Shares outstanding at end of period
Shares used to compute diluted earnings (loss) per share
Closing Market Price Per Share
High
Low
End of year
Total return to shareholders5
720
520
200
‘10
’12
’11
’10
9
1000
200
400
600
800
10
20
30
40
50
60
70
80
0
0
Net Sales2
($ Millions)
80
70
60
50
40
776
536
30
20
10
0
240
’11
857
612
245
’12
See appendix for footnotes.
Adjusted EBITDA3
net sAles
(Excludes Corporate Overhead)
Net Sales2
($ millions)
($ Millions)
($ Millions)
ongoing opeRAting
pRoFit
Ongoing Operating Prof it
($ millions)
($ Millions)
80
70
60
50
40
30
20
10
0
106
101
720
520
200
’10
80
108
96
70
776
536
60
50
40
30
20
5
12
’11
10
240
0
126
109
857
612
17
245
’12
63
67
150
120
62
59
90
60
30
0
(4)
’10
’11
’12
‘10
’11
Films
Aluminum
79
70
3
9
’12
Ongoing Operating Prof it
($ Millions)
63
67
62
59
(4)
3
‘10
30
’11
150
120
90
60
0
79
70
9
’12
Adjusted EBITDA3
(Excludes Corporate Overhead)
($ Millions)
106
101
108
96
126
109
5
12
’11
’10
17
’12
Films
Aluminum
Adjusted EBITDA3
(Excludes Corporate Overhead)
($ Millions)
106
101
108
96
126
109
5
12
’11
’10
17
’12
Films
Aluminum
Tredegar aT a glance
1
Major ProducTs
PrIMarY end MarKeTs
coMPeTITors
Film Products
Personal Care Materials: apertured, breath-
able, elastic and embossed films and laminate
materials for personal care markets
Surface Protection Films: single and multi-
layer surface protection films for high technol-
ogy applications during the manufacturing
and transportation process
Flexible Packaging Films: specialized
polyester (“PET”) films for use in packaging
applications
Polyethylene Overwrap and Polypropylene
Films: films for use in thin-gauge packaging
and other applications
Films for Other Markets: films combining
multiple technology platforms for application-
specific functionality, including optical
management
aluminum extrusions
Mill (unfinished), anodized, painted, fabricated,
machined, assembled, custom packed and
labeled aluminum extrusions for:
• Residential and nonresidential construction
• Transportation
• Consumer durables
• Electrical
• Machinery and equipment
• Distribution
Film Products
Net sales by regioN
($612 million in 2012)
($612 million in 2012)
20%
15%
46%
19%
North America
Latin America
Europe
Asia
Feminine hygiene products, baby diapers and adult incon-
tinence products
Clopay, Nordenia, Aplix, Pantex
High-value components of flat panel displays, including
liquid crystal display (“LCD”) televisions, monitors, note-
books, smart phones, tablets, e-readers and digital signage
Toray, Sekesui, Hitachi
Perishable and non-perishable food packaging; non-food
packaging and industrial applications
Dupont Teijin Films, Toray
Plastics America, Mitsubishi
Overwrap for bathroom tissue and paper towels; medical
devices; automotive and industrial applications
Bemis, Berry Plastics
Lighting, signage, durable goods, automotive and
construction applications
Luminit, Fusion Optix, DuPont
Hydro Aluminum, Keymark Corp.,
Sapa North America,
Western Extrusions
Residential and Nonresidential Construction: Doors,
windows, pre-engineered structures, wall panels, partitions
and interior enclosures, ducts, louvers and vents, curtain
wall, store fronts and entrances, walkway covers, shower
and tub enclosures
Transportation: Automobile, light truck and after-market
accessories
Consumer Durables: Refrigerators, freezers, office and
institutional furniture, serving carts, pleasure boats
Distribution: Metal service centers with stocking programs
and custom fabrication of standard shapes and profiles
Machinery and Equipment: Material handling equipment,
conveyors, industrial erector sets, hospital and office appli-
cations and other industrial uses
Electrical: Lighting fixture components and solar panels
Film Products
Net sales by major
Product category
($612 million in 2012)
($612 million in 2012)
2%
10%
27%
11%
23%
21%
6%
Personal Care–Feminine Hygiene
Personal Care–Baby Diaper
Personal Care–Adult Incontinence
Flexible Packaging
Surface Protection
Polyethylene Overwrap and
Polypropylene Films
Films for Other Markets
alumiNum e xtrusioNs
Volume by eNd market
(115 million pounds in 2012)
(115 million pounds in 2012)
4% 2%
5%
5%
5%
9%
70%
Building & Construction (nonresidential)
Building & Construction (residential)
Transportation
Consumer Durables
Distribution
Machinery & Equipment
Electrical
2
dear shareholders,
there were maNy bright sPots duriNg the year
For tredegar. tredegar’s 2012 Net iNcome From
oNgoiNg oPeratioNs was $38.5 millioN, a 38%
iNcrease oVer 2011’s result oF $27.9 millioN. cash
geNerated From our oPeratiNg actiVities was
stroNg at $82 millioN, uP From $72 millioN iN 2011.
Often at Tredegar, it seems as though we are the
tale of two companies. We deliver strong financial
and operational performance in part of the business
and fall short in another. When comparing the
results of our Bonnell Aluminum division to that of
our Film Products division (particularly the longer-
owned portion of Films), 2012 was truly a tale of
two companies.
Our 2012 tale of two companies includes many
bright spots. Our 2012 diluted earnings per share
of $1.20 from ongoing operations* was a significant
improvement ($0.33) over the prior year, largely due
to the contribution of Terphane, Film Products’
flexible packaging unit acquired in October 2011.
Tredegar’s 2012 income from ongoing operations*
was $38.5 million, a 38% increase over 2011’s result
of $27.9 million. Cash generated from our operating
activities was strong at $82 million, up from $72
million in 2011.
We increased our quarterly dividend by 33% on an
annualized basis, our second dividend increase in
less than two years. We followed this February with
a 16.7% annualized increase, commencing with our
April 1, 2013 dividend. In December 2012, we paid
a special dividend of $0.75 per share.
Another important part of our story is the progress
we made on our strategic initiatives. The acquisition
of AACOA on October 1st, representing our second
acquisition in just under a year, provides important
market diversification to our Bonnell Aluminum
business. We have committed to the addition of a
new press in Bonnell’s Newnan, Georgia facility that
will focus on serving the automotive market. This
market opportunity surfaced as part of Bonnell’s
growth strategy and positions Bonnell to participate
in the widely publicized growth trend for aluminum
in new vehicles to reduce weight and improve fuel
efficiency. We also sold Falling Springs, our mitiga-
tion banking business, which did not match our
focus on manufacturing.
There were bright spots and then there were some
very bright spots in 2012 for Tredegar. One very
bright spot was the overall performance of Bonnell
Aluminum. Bonnell’s 2012 operating profit from
ongoing operations was $9 million compared to
$3.5 million in 2011. This represented a 161% year-
over-year improvement. Bonnell reduced its working
capital to a historic low, continued its aggressive focus
on taking out cost and contributed to Tredegar’s
strong cash flow from operations. And there was so
much more to the story of Bonnell’s 2012 performance
than just the numbers. Early in 2012, Bonnell made
the decision to close its Kentland, Indiana facility.
It is a testament to the Bonnell organization, and
particularly to our Kentland employees, that the
completion of the closure was virtually flawless.
The Kentland employees kept their heads up and
*See appendix for footnote 1.
3
focused on delivering quality to customers as they
transitioned away from the plant. The closure was
managed ahead of schedule and on budget. It is a
story of operational excellence.
There were a number of other significant activities
that the Bonnell organization managed concurrently
during 2012. I’ve already mentioned the new press
for the automotive market. There was also the
upgrade to their resource planning system that was
implemented without missing a beat. And of course,
and very significant to Bonnell’s growth strategy,
there was the acquisition of AACOA.
The union between Bonnell and AACOA was con-
summated after a lengthy and considered courtship
on both sides to be confident that it was the right
combination of culture, markets and capabilities.
As we integrate AACOA, it is raising the bar for the
rest of Bonnell. Applying AACOA’s best practices
and tapping into its strengths is driving us to chal-
lenge our paradigms, even one or two metrics that
we have held as sacrosanct for many years. And
of course, as would be expected with any healthy
marriage, Bonnell has strengths and capabilities that
will benefit AACOA’s operations and customers.
Less bright was Bonnell’s safety performance in
2012. While incident rates were still well below the
industry average, Bonnell ‘s safety performance fell
short of its aggressive internal goals. The severity
rate of the injuries, however, was much less than in
the past, which is encouraging. We believe that the
focus and effort that Bonnell has put into safety is
changing the way employees go about their work in
the plant (and at home).
In Tredegar’s 2012 version of the tale of two compa-
nies, Bonnell is a very good story.
The 2012 performance of our Film Products business,
particularly in our traditional markets, was a more
challenging story. We continued to face headwinds,
which included reduced consumer demand for
products that use our materials. Film Products did
experience year-over-year improvement in volume
(24% growth) and operating profit from ongoing
operations ($69.9 million in 2012 versus $59.5 million
in 2011). The real driver behind that improvement,
however, was the acquisition of Terphane. Excluding
Terphane results, we saw declines in volume (5%),
sales (7%) and operating profit (10%) versus 2011
levels. While some of the difficult market conditions
that negatively impacted our performance in 2011
continued into 2012, we were slower than we should
have been in making important organizational and
process changes. More simply said, we stumbled in
our drive for operational excellence and innovation.
With a number of those key changes in place, how-
ever, we started to see signs of improvement in the
second half of the year.
I wish I could report that all of Film Products’ chal-
lenges are behind us, but they are not. Market con-
ditions in some of our key markets remain uncertain
at best. And we still have work to do to function
consistently throughout the organization on a level
that meets our definitions of operational excellence,
innovation and leadership.
Even within the more disappointing part of our
tale of two companies, our Film Product’s division
enjoyed a number of successes during the last year.
After two years of negative trends in safety, we
experienced a meaningful decline in our recordable
injury rate. Film Products continued to focus on
reducing its working capital as well as driving other
cost saving measures, which contributed to strong
cash flows from operations in 2012. The integration
of Terphane progressed as planned with several key
opportunities for our employees from the combined
company to work side by side and learn from each
other, such as the planning and undertaking of the
approximately $75 million capacity expansion in
our Cabo de Santo Agostinho, Brazil, facility, which
represents the largest capital project in Tredegar’s
history. After a challenging start to the year, we
regained important ground in the surface protection
market by supporting existing customers as their
businesses improved as well as bringing on some
4
We also made progress on our strategic
initiatives. the acquisition of aacoa on
october 1st, representing our second
acquisition in just under a year, provides
important market diversification to our
bonnell aluminum business.
key new customers. We took some big steps forward,
like the remarkable transformation of culture in
Film Products’ Pottsville, Pennsylvania plant, a
plant which is setting a benchmark for employee
empowerment, and the less obvious but truly inspi-
rational examples of employees fighting through
disappointment with heads held high, determined
to translate our setbacks into opportunities.
I would be remiss if I did not highlight another
bright chapter in Tredegar’s 2012 tale. An important
element of Tredegar’s vision is promoting global
citizenship and we took positive steps forward in
this area as well. We have partnered with ChildFund
International for school-related projects in a service
area near our Pune, India plant, which will draw
upon the talent and energy of our employees there.
Tredegar’s Sustainability Committee orchestrated
our first annual Tredegar Earth Day with overwhelm-
ing participation and contribution by our employees
in every one of our facilities around the world. And
our generous and engaged employees continued to
step up their efforts to support non-profit organiza-
tions in their local communities.
As I noted at the start of this letter, Tredegar often
seems to be the tale of two companies. What I can
assure you is that this is not acceptable to Tredegar’s
leadership nor is it to our committed and engaged
group of employees. We are determined to push
every part of our business to be bright spots, to
become the tale of one company, a company that is
delivering on its promises of operational excellence,
leadership and innovation. I hope and expect that
we will be much closer to that goal a year from now.
I want to thank our shareholders for their patience
and support. We are committed to creating value
and a return on your investment.
I am ever grateful to our customers for placing their
confidence in us. Our daily efforts are dedicated to
rewarding you for that trust.
I cannot begin to express my appreciation for the
commitment and sacrifice of Tredegar’s employees
and their supportive families who deserve all of the
credit for our successes and accomplishments.
Many thanks to the members of Tredegar’s Board of
Directors who work tirelessly overseeing, advising
and challenging me and my management team on
the operation of the business and the development
and execution of our strategic initiatives.
Finally, even great stories must come to an end, and
so it is with the long and exemplary Board service of
Dr. Richard L. Morrill. Rich will retire from Tredegar’s
Board of Directors at the conclusion of the Board
meeting that follows Tredegar’s 2013 Annual Meeting
of Shareholders. Rich joined Tredegar’s Board of
Directors in 1997 and served as Chairman of the
Board from 2006 to 2010. He is a true statesman and
gentleman. His strategic insight, strong intellect,
calming practicality and thoughtful leadership are
unsurpassed. It has been Tredegar’s great fortune
to have had access to Rich’s many talents over the
years. Thank you, Rich, you will be missed.
Sincerely,
Nancy M. Taylor
President and Chief Executive Officer
Form 10-K
Table of ConTenTs
Business
Risk Factors
Properties
Market for Tredegar’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Controls and Procedures
Directors, Executive Officers and Corporate Governance
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Exhibits and Financial Statement Schedules
Financial Statements and Supplementary Data
Also see our comments on Forward-looking and Cautionary Statements on page 20.
1–5
5–9
10
11–13
13–19
20–40
40
40–41
42–43
43
44
44–84
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-K
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2012
OR
[ ]
For the transition period from _________ to __________
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10258
TREDEGAR CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
(State or other jurisdiction
of incorporation or organization)
54-1497771
(I.R.S. Employer
Identification No.)
No X
No X
23225
(Zip Code)
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
1100 Boulders Parkway, Richmond, Virginia
(Address of principal executive offices)
Registrant's telephone number, including area code: 804-330-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock
Preferred Stock Purchase Rights
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for at least the past 90 days. Yes X No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ X ].
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large accelerated filer
Non-accelerated filer
Accelerated filer X
(Do not check if a smaller reporting company)
Smaller reporting company
No X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
Aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2012 (the last
business day of the registrant’s most recently completed second fiscal quarter): $391,082,896*
Number of shares of Common Stock outstanding as of January 31, 2013: 32,082,370 (32,113,983 as of June 30, 2012)
* In determining this figure, an aggregate of 5,253,894 shares of Common Stock beneficially owned by John D. Gottwald, William M. Gottwald and the
members of their immediate families has been excluded because the shares are deemed to be held by affiliates. The aggregate market value has been
computed based on the closing price in the New York Stock Exchange Composite Transactions on June 30, 2012.
Documents Incorporated By Reference
Portions of the Tredegar Corporation Proxy Statement for the 2013 Annual Meeting of Shareholders (the “Proxy
Statement”) are incorporated by reference into Part III of this Form 10-K.
Index to Annual Report on Form 10-K
Year Ended December 31, 2012
Part I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Part II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Part III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Part IV
Item 15.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Tredegar’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
Controls and Procedures
Other Information
Page
1-5
5-9
None
10
None
None
11-13
13-19
20-40
40
44-84
None
40-41
None
Directors, Executive Officers and Corporate Governance*
42-43
Executive Compensation
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters*
Certain Relationships and Related Transactions, and Director
Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
*
43
*
*
44
* Items 11, 13 and 14 and portions of Items 10 and 12 are incorporated by reference from the Proxy Statement.
Item 1.
BUSINESS
Description of Business
PART I
Tredegar Corporation (“Tredegar”), a Virginia corporation incorporated in 1988, is engaged, through its
subsidiaries, in the manufacture of plastic films and aluminum extrusions. The financial information related to
Tredegar’s film products and aluminum extrusions segments and related geographical areas included in Note 5 to the
Notes to Financial Statements is incorporated herein by reference. Unless the context requires otherwise, all references
herein to “Tredegar,” “we,” “us” or “our” are to Tredegar Corporation and its consolidated subsidiaries.
Film Products
Tredegar Film Products Corporation and its subsidiaries (together, “Film Products”) manufacture plastic
films, elastics and laminate materials primarily for personal care products and surface protection and packaging
applications. These products are manufactured at facilities in the United States (“U.S.”) and The Netherlands, Hungary,
China, Brazil and India. In October 2011, Film Products acquired Terphane Holdings LLC (“Terphane”), further
expanding our films business in Latin America and the U.S. Film Products competes in all of its markets on the basis of
product innovation, quality, price and service.
Personal Care Materials. Film Products is one of the largest global suppliers of apertured, breathable, elastic and
embossed films, and laminate materials for personal care markets, including:
Apertured film and laminate materials for use as topsheet in feminine hygiene products, baby diapers and adult
incontinence products (including materials sold under the SoftQuiltTM, ComfortQuiltTM, ComfortAireTM,
ComfortFeelTM, SoftAireTM and FreshFeelTM brand names);
Breathable, embossed and elastic materials for use as components for baby diapers, adult incontinence products
and feminine hygiene products (including elastic components sold under the ExtraFlexTM, FabriFlexTM,
StretchTabTM, FlexAireTM and FlexFeelTM brand names); and
Absorbent transfer layers for baby diapers and adult incontinence products sold under the AquiDry®, AquiDry
PlusTM and AquiSoftTM brand names.
In 2012, 2011 and 2010, personal care products accounted for approximately 38%, 45% and 50% of
Tredegar’s consolidated net sales from continuing operations, respectively.
Flexible Packaging Films. Film Products produces specialized polyester (“PET”) films for use in packaging
applications that have specialized properties, such as heat resistance, strength, barrier protection and the ability to
accept high-quality print graphics. These differentiated, high-value films are primarily sold in Latin America and
the U.S. under the Terphane® and Sealphane® brand names. Major end uses include food packaging and industrial
applications. In 2012, flexible packaging films accounted for approximately 16% of Tredegar’s consolidated net
sales from continuing operations. Tredegar did not offer these films until the fourth quarter of 2011, so flexible
packaging films only accounted for approximately 4% of consolidated net sales from continuing operations in 2011.
Surface Protection Films. Film Products produces single and multi-layer surface protection films sold under the
UltraMask® and ForceFieldTM brand names. These films are used in high technology applications, most notably
protecting high-value components of flat panel displays used in monitors, notebooks, smart phones, tablets, e-
readers and digital signage, during the manufacturing and transportation process. In 2012, 2011 and 2010, surface
protection films accounted for approximately 8%, 9% and 12% of Tredegar’s consolidated net sales from continuing
operations, respectively.
Polyethylene Overwrap & Polypropylene Films. Film Products produces various types of polyethylene and
polypropylene overwrap films. Applications for polyethylene films include an emphasis on packaging for paper
products. These products provide our customers with thin-gauge films that are readily printable and convertible on
conventional processing equipment. Film Products also manufactures polypropylene films for packaging
applications. Major end uses for polyethylene and polypropylene films include overwrap for bathroom tissue and
paper towels as well as retort pouches.
Films for Other Markets. Film Products also makes a variety of specialty films and film-based products that
provide tailored functionality for the illumination market as well as various other markets. By leveraging the
combination of film capabilities and our patented microstructure technology, we are able to offer optical
management products for a wide range of applications, including lighting, signage and durable goods.
The operations of Bright View Technologies Corporation (“Bright View”) were incorporated into Film
Products effective January 1, 2012 to better leverage efforts to produce films for new market segments. Bright View is a
developer and producer of high-value microstructure-based optical films for the LED (light-emitting diode) and
fluorescent lighting markets.
Raw Materials. The primary raw materials used by Film Products are low density, linear low density and high
density polyethylene and polypropylene resins, Purified Terephthalic Acid (“PTA”) and Mono-ethylene Glycol
(“MEG”), which are obtained from domestic and foreign suppliers at competitive prices. We believe there will be
an adequate supply of these raw materials in the foreseeable future. Film Products also buys polypropylene-based
nonwoven fabrics based on the resins previously noted and styrenic block copolymers, and we believe there will be
an adequate supply in the foreseeable future.
Customers. Film Products sells to many branded product producers throughout the world. Its largest customer is
The Procter & Gamble Company (“P&G”). Net sales to P&G totaled $264 million in 2012, $280 million in 2011
and $273 million in 2010 (these amounts include film sold to third parties that converted the film into materials used
with products manufactured by P&G).
P&G and Tredegar have had a successful long-term relationship based on cooperation, product
innovation and continuous process improvement. The loss or significant reduction in sales associated with P&G
would have a material adverse effect on our business.
Aluminum Extrusions
The William L. Bonnell Company, Inc. and its subsidiaries (together, “Aluminum Extrusions”) produce
high-quality, soft-alloy aluminum extrusions primarily for building and construction, distribution, transportation,
electrical, consumer durables and machinery and equipment markets. Aluminum Extrusions manufactures mill
(unfinished), anodized (coated) and painted and fabricated aluminum extrusions for sale directly to fabricators and
distributors, and it competes primarily on the basis of product quality, service and price. Sales are made primarily in the
U.S., principally east of the Rocky Mountains.
On October 1, 2012, Aluminum Extrusions acquired AACOA, Inc. (“AACOA”). AACOA produces
aluminum extrusions and provides anodizing services to customers in the consumer durables, machinery and equipment
and transportation markets. Our acquisition of AACOA allows us to add fabrication capabilities to Aluminum
Extrusions’ current array of products and services while providing AACOA with large press capabilities and enhanced
geographic sales coverage in a variety of end-use markets.
2
The primary end-uses in each of Aluminum Extrusions’ primary market segments include:
Major Markets
Residential & nonresidential
construction
Transportation
Distribution (metal service centers
specializing in stock and release
programs and custom fabrications to
small manufacturers)
Consumer durables
Electrical
Machinery & equipment
End-Uses
Windows and doors, pre-engineered structures, wall
panels, partitions and interior enclosures, ducts,
louvers and vents, curtain walls, storefronts and
entrances, walkway covers, bus shelters, point of
purchase displays, shower and tub enclosures,
railings and support systems, venetian blinds,
acoustical ceilings and walls, swimming pools and
storm shutters
Automotive and light truck products, spare parts,
after-market automotive accessories, travel trailers
and recreation vehicles
Standard profiles (rod, bar, tube and pipe), hurricane
shutters, pleasure boat accessories, theatre set
structures and other applications
Refrigerators and freezers, office and institutional
furniture, serving carts and pleasure boats
Lighting fixtures (LED housings and heat sinks),
solar panels, electronic apparatus and rigid and
flexible conduits
Material handling equipment, conveyors and
conveying systems, hospital patient lifts, office
machines and industrial erector sets
Aluminum Extrusions’ sales volume from continuing operations by market segment over the last three
years is shown below:
Aluminum Extrusions closed its manufacturing facility in Kentland, Indiana in the third quarter of 2012. The
plant, whose core market was residential construction, previously employed 146 people.
Raw Materials. The primary raw materials used by Aluminum Extrusions consist of aluminum ingot, aluminum scrap
and various alloys, which are purchased from domestic and foreign producers in open-market purchases and under short-
term contracts. We believe there will be an adequate supply of aluminum and other required raw materials and supplies
in the foreseeable future.
3
% of Aluminum Extrusions Sales Volumeby Market Segment (Continuing Operations) *201220112010Building and construction: Nonresidential70%70%68% Residential91214Distribution565Transportation568Consumer durables522Machinery and equipment421Electrical 222Total100%100%100%* Includes sales volumes for AACOA for the fourth quarter of 2012 (subsequent to accquisition).
Other
In February 2010, we added a new segment, Other, comprised of the start-up operations of Bright View and
Falling Springs, LLC (“Falling Springs”). As previously noted, the operations of Bright View were incorporated into
Film Products effective January 1, 2012 to better leverage efforts to produce films for new market segments. Prior year
balances for Bright View have been reclassified to Film Products to conform with the current year presentation.
Falling Springs develops, owns and operates multiple mitigation banks. Through the establishment of
perpetual easements to restore, enhance and preserve wetlands, streams or other protected environmental resources, these
mitigation banks create saleable credits that are used by the purchaser of credits to offset the negative environmental
impacts from private and public development projects. On November 20, 2012, we sold our membership interests in
Falling Springs to Arc Ventures, LC, a Virginia limited liability company affiliated with John D. Gottwald, a
member of Tredegar’s Board of Directors, for cash and stock proceeds of $16.6 million. The corresponding loss on
sale of $3.1 million and the results of operations related to Falling Springs have been classified as discontinued
operations for all periods presented. With the sale of Falling Springs, there is no longer an Other segment to report.
General
Intellectual Property. We consider patents, licenses and trademarks to be of significance for Film Products. We
routinely apply for patents on significant developments in these businesses. As of December 31, 2012, Film Products
held 342 issued patents (108 of which are issued in the U.S.) and 117 trademarks (19 of which are issued in the
U.S.). Aluminum Extrusions held three U.S. trademark registrations. Our patents have remaining terms ranging from
1 to 20 years. We also have licenses under patents owned by third parties.
Research and Development. Tredegar’s spending for research and development (“R&D”) activities in 2012, 2011 and
2010 was primarily related to Film Products. As of December 31, 2012, Film Products has technical centers in
Bloomfield, New York; Cabo de Santo Agostinho, Brazil; Richmond, Virginia; Morrisville, North Carolina; and
Terre Haute, Indiana. R&D spending was approximately $13.2 million in 2012, $13.2 million in 2011 and $13.6
million in 2010.
Backlog. Backlogs are not material to our operations in Film Products. Overall backlog for continuing operations
in Aluminum Extrusions at December 31, 2012 increased by approximately 77% compared with December 31,
2011, with approximately half of this increase being attributed to the addition of AACOA. Demand for extruded
aluminum shapes continued to improve in 2012. Volume for Aluminum Extrusions, which we believe is cyclical in
nature, was 114.8 million pounds in 2012, 108.0 million pounds in 2011 and 94.9 million pounds in 2010.
Government Regulation. U.S. laws concerning the environment to which our domestic operations are or may be
subject include, among others, the Clean Water Act, the Clean Air Act, the Resource Conservation and Recovery
Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control
Act, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), all as amended,
regulations promulgated under these acts, and any other federal, state or local laws or regulations governing
environmental matters. Compliance with these laws is an important consideration for us because we use hazardous
materials in some of our operations, we are a generator of hazardous waste, and wastewater from our operations is
discharged to various types of wastewater management systems. Under CERCLA and other laws, we may be
subject to financial exposure for costs associated with waste management and disposal, even if we fully comply with
applicable environmental laws.
The U.S. Environmental Protection Agency has adopted regulations under the Clean Air Act relating to
emissions of carbon dioxide and other greenhouse gases (“GHG”), including mandatory reporting and permitting
requirements. Additional regulations are anticipated. Several of our manufacturing operations result in emissions or
GHG and are subject to the current GHG regulations. Compliance with these regulations has yet to require
significant expenditures. The cost of compliance with any future GHG legislation or regulations is not presently
determinable, but it is not anticipated to have a material adverse effect on our financial condition or results of
operations based on information currently available.
Tredegar is also subject to the governmental regulations in the countries where we conduct business.
4
At December 31, 2012, we believe that we were in substantial compliance with all applicable
environmental laws, regulations and permits in the U.S. and other countries where we conduct business.
Environmental standards tend to become more stringent over time. In order to maintain substantial compliance with
such standards, we may be required to incur additional expenditures, the amounts and timing of which are not
presently determinable but which could be significant, in constructing new facilities or in modifying existing
facilities. Furthermore, our failure to comply with current or future laws and regulations could subject us to
substantial penalties, fines, costs and expenses.
Employees. Tredegar employed approximately 2,700 people at December 31, 2012.
Available Information and Corporate Governance Documents. Our Internet address is www.tredegar.com. We make
available, free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such documents are electronically
filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Information filed electronically with the
SEC can be accessed on its website at www.sec.gov. In addition, our Corporate Governance Guidelines, Code of
Conduct and the charters of our Audit, Executive Compensation and Nominating and Governance Committees are
available on our website and are available in print, without charge, to any shareholder upon request by contacting
Tredegar’s Corporate Secretary at 1100 Boulders Parkway, Richmond, Virginia 23225. The information on or that can
be accessed through our website is not, and shall not be deemed to be, a part of this report or incorporated into other
filings we make with the SEC.
Item 1A. RISK FACTORS
There are a number of risks and uncertainties that could have a material adverse effect on the operating
results of our businesses and our consolidated financial condition and liquidity. The following risk factors should be
considered, in addition to the other information included in this Annual Report on Form 10-K for the year ended
December 31, 2012 (“Form 10-K”), when evaluating Tredegar and our businesses:
General
Our performance is influenced by costs incurred by our operating companies, including, for example, the
cost of raw materials and energy. These costs include, without limitation, the cost of resin, PTA and MEG (the
raw materials on which Film Products primarily depends), aluminum (the raw material on which Aluminum
Extrusions primarily depends), natural gas (the principal fuel necessary for Aluminum Extrusions’ plants to
operate), electricity and diesel fuel. Resin, aluminum and natural gas prices are extremely volatile as shown in
the charts on pages 35-36. We attempt to mitigate the effects of increased costs through price increases and
contractual pass-through provisions, but there are no assurances that higher prices can effectively be passed
through to our customers or that we will be able to offset fully or on a timely basis the effects of higher raw
material and energy costs through price increases or pass-through arrangements. Further, our cost control
efforts may not be sufficient to offset any additional future declines in revenue or increases in raw material,
energy or other costs.
Tredegar and its customers operate in highly competitive markets. Tredegar and its businesses compete on
product innovation, quality, price and service, and our businesses and their customers operate in highly
competitive markets. Global market conditions continue to exacerbate our exposure to margin compression due
to competitive forces, especially as certain products move into the later stages of their product life cycles. We
attempt to mitigate the effects of this trend through cost saving measures and manufacturing efficiency
initiatives, but these efforts may not be sufficient to offset the impact of margin compression as a result of
competitive pressure.
Tredegar may not be able to successfully execute its acquisition strategy. New acquisitions, such as our
October 2011 acquisition of Terphane and our October 2012 acquisition of AACOA, can provide meaningful
opportunities to grow our business and improve profitability. Acquired businesses may not achieve expected
levels of revenue, profit or productivity, or otherwise perform as we expect. Acquisitions involve special risks,
5
including, without limitation, diversion of management’s time and attention from our existing businesses, the
potential assumption of unanticipated liabilities and contingencies and potential difficulties in integrating
acquired businesses and achieving anticipated operational improvements. While our strategy is to acquire
businesses that will improve our competitiveness and profitability, acquisitions may not be successful or
accretive to earnings.
Noncompliance with any of the covenants in our $350 million credit facility could result in all debt under the
agreement outstanding at such time becoming due and limiting our borrowing capacity, which could have a
material adverse effect on our financial condition and liquidity. The credit agreement governing our
revolving credit facility contains restrictions and financial covenants that could restrict our operational and
financial flexibility. Our failure to comply with these covenants could result in an event of default, which if not
cured or waived, would result in all outstanding debt under the credit facility at such time becoming due, which
could have a material adverse effect on our financial condition and liquidity. Renegotiation of the covenant(s)
through an amendment to our revolving credit facility may effectively cure the noncompliance, but may have a
negative effect on our consolidated financial condition or liquidity depending upon how the amended covenant
is renegotiated.
Loss of certain key officers or employees could adversely affect our businesses. We depend on our senior
executive officers and other key personnel to run our businesses. The loss of any of these officers or other key
personnel could have a material adverse effect on our operations. Competition for qualified employees among
companies that rely heavily on engineering and technology is intense, and the loss of qualified employees or an
inability to attract, retain and motivate highly skilled employees required for the operation and expansion of our
businesses could hinder our ability to improve manufacturing operations, conduct research activities
successfully and develop marketable products.
Tredegar is subject to increased credit risk that is inherent with economic uncertainty and efforts to increase
market share as we attempt to broaden our customer base. In the event of the deterioration of operating cash
flows or diminished borrowing capacity of our customers, the collection of trade receivable balances may be
delayed or deemed unlikely. The operations of our customers for Aluminum Extrusions generally follow the
cycles within the economy, resulting in greater credit risk from diminished operating cash flows and higher
bankruptcy rates when the economy is deteriorating or in recession. In addition, Film Products’ credit risk
exposure could increase as efforts to expand its business may lead to a broader, more diverse customer base.
Tredegar is subject to various environmental laws and regulations and could become exposed to material
liabilities and costs associated with such laws. We are subject to various environmental obligations and could
become subject to additional obligations in the future. In the case of known potential liabilities, it is
management’s judgment that the resolution of ongoing and/or pending environmental remediation obligations is
not expected to have a material adverse effect on our consolidated financial condition or liquidity. In any given
period or periods, however, it is possible such obligations or matters could have a material adverse effect on the
results of operations. Changes in environmental laws and regulations, or their application, including, but not
limited to, those relating to global climate change, could subject us to significant additional capital expenditures
and operating expenses. Moreover, future developments in federal, state, local and international environmental
laws and regulations are difficult to predict. Environmental laws have become and are expected to continue to
become increasingly strict. As a result, we will be subject to new environmental laws and regulations.
However, any such changes are uncertain and, therefore, it is not possible for us to predict with certainty the
amount of additional capital expenditures or operating expenses that could be necessary for compliance with
respect to any such changes.
Tredegar could be required to make additional cash contributions to its defined benefit (pension) plan. We
sponsor a pension plan that covers certain hourly and salaried employees in the U.S. Recent economic trends
have resulted in a significant reduction in interest rates and plan asset investment returns. Cash contribution
requirements for the pension plan are sensitive to changes in these market factors. We expect that we will be
required to make a cash contribution of approximately $0.2 million to our underfunded pension plan in 2013,
and we may be required to make additional cash contributions in future periods if current trends in interest rates
continue, volatility in investment returns on plan assets persist or if our plan asset investment returns lag market
performance.
6
An information technology system failure may adversely affect our business. We rely on information
technology systems to transact our businesses. An information technology system failure due to computer
viruses, internal or external security breaches, power interruptions, hardware failures, fire, natural disasters,
human error, or other causes could disrupt our operations and prevent us from being able to process transactions
with our customers, operate our manufacturing facilities, and properly report those transactions in a timely
manner. A significant, protracted information technology system failure may result in a material adverse effect
on our financial condition, results of operations, or cash flows.
Material disruptions at one of our major manufacturing facilities could negatively impact our financial
results. We believe our facilities are operated in compliance with applicable local laws and regulations and that
we have implemented measures to minimize the risks of disruption at our facilities. A material disruption in one
of our operating locations could negatively impact production and our financial results. Such a disruption could
be a result of any number of events, including but not limited to: an equipment failure with repairs requiring
long lead times, labor stoppages or shortages, utility disruptions, constraints on the supply or delivery of critical
raw materials, and severe weather conditions.
An inability to renegotiate one of our collective bargaining agreements could adversely affect our financial
results. Some of our employees are represented by labor unions under various collective bargaining agreements
with varying durations and expiration dates. Tredegar may not be able to satisfactorily renegotiate collective
bargaining agreements when they expire, which could result in strikes or work stoppages or higher labor costs.
In addition, existing collective bargaining agreements may not prevent a strike or work stoppage at our facilities
in the future. Any such work stoppages (or potential work stoppages) could negatively impact our ability to
manufacture our products and adversely affect results of operations.
Our investments (primarily $7.5 million of investments in Intelliject and a $3.6 million net investment in
Harbinger) have high risk. The value of our investment in a specialty pharmaceutical company, Intelliject, Inc.
(“Intelliject”), can fluctuate, primarily as a result of its ability to meet its developmental and commercialization
milestones within an anticipated time frame. Intelliject received approval from the U.S. Food and Drug
Administration for its first product in 2012, with market launch of the product in the first quarter of 2013. As
Intelliject continues to invest in its product pipeline, it may require additional rounds of financing to have the
opportunity to complete product pipeline development and bring its technology to market, which may never
occur. The estimated fair value of our investment was $33.7 million at December 31, 2012.
Harbinger Capital Partners Special Situations Fund, L.P. (“Harbinger”) is a private investment fund, and an
investment in the fund involves risk and is subject to limitations on withdrawal. The amount of future
installments of withdrawal proceeds is uncertain, and the timing of such payments is not known.
There is no secondary market for selling our interests in either investment. As a result, we may be required to
bear the risk of our investment in Intelliject and Harbinger for an indefinite period of time.
Film Products
Film Products is highly dependent on sales associated with one customer, P&G. P&G comprised
approximately 31% of Tredegar’s consolidated net sales from continuing operations in 2012, 36% in 2011 and
38% in 2010. The loss or significant reduction of sales associated with P&G would have a material adverse
effect on our business. Other P&G-related factors that could adversely affect our business include, by way of
example, (i) failure by P&G to achieve success or maintain share in markets in which P&G sells products
containing our materials, (ii) operational decisions by P&G that result in component substitution, inventory
reductions and similar changes, (iii) delays in P&G rolling out products utilizing new technologies developed
by us and (iv) P&G rolling out products utilizing technologies developed by others that replace our business
with P&G. While we have undertaken efforts to expand our customer base, there can be no assurance that such
efforts will be successful, or that they will offset any delay or loss of sales and profits associated with P&G.
7
Growth of Film Products depends on our ability to develop and deliver new products at competitive prices.
Personal care materials, surface protection films and polyethylene overwrap and polypropylene films are now
being made with a variety of new materials and the overall cycle for changing materials has accelerated. While
we have substantial technological resources, there can be no assurance that our new products can be brought to
market successfully, or if brought to market successfully, at the same level of profitability and market share of
replaced films. A shift in customer preferences away from our technologies, our inability to develop and
deliver new profitable products, or delayed acceptance of our new products in domestic or foreign markets,
could have a material adverse effect on our business, results of operations and cash flows. In the long term,
growth will depend on our ability to provide innovative materials at a price that meets our customers’ needs.
Failure of our customers, who are subject to cyclical downturns, to achieve success or maintain market
share could adversely impact sales and operating margins. Our products serve as components for various
consumer products sold worldwide. Our customers’ ability to successfully develop, manufacture and market
their products is integral to our success. In addition, many of our customers are in industries that are cyclical in
nature and sensitive to changes in general economic conditions. Downturns in the businesses that use our
products can adversely affect our sales and operating margins.
Continued growth in Film Products’ sale of protective film products is not assured. A shift in our customers’
preference to new or different products or new technology that displaces the need for protective films that
currently utilize our surface protection applications could have a material adverse effect on our sales of
protective films. Surface protection films accounted for approximately 8%, 9% and 12% of Tredegar’s
consolidated net sales from continuing operations in 2012, 2011 and 2010, respectively. Unanticipated changes
in the demand for our customers’ products, a decline in the rate of growth for flat panel displays or
improvements in the durability of flat panel displays could have a material adverse effect on protective film
sales.
Our substantial international operations subject us to risks of doing business in countries outside the U.S.,
which could adversely affect our business, financial condition and results of operations. Risks inherent in
international operations include the following, by way of example: changes in general economic conditions or
governmental policies, potential difficulty enforcing agreements and intellectual property rights, modifications
in foreign tax laws and incentives, staffing and managing widespread operations and the challenges of
complying with a wide variety of laws and regulations, restrictions on international trade or investment,
restrictions on the repatriation of income, fluctuations in exchange rates, imposition of additional taxes on our
income generated outside the U.S., nationalization of private enterprises and unexpected adverse changes in
international laws and regulatory requirements. In addition, while expanding operations into emerging foreign
markets provides greater opportunities for growth, there are certain operating risks, as previously noted.
Our inability to protect our intellectual property rights or our infringement of the intellectual property rights
of others could have a material adverse impact on Film Products. Film Products operates in an industry
where our significant customers and competitors have substantial intellectual property portfolios. The
continued success of this business depends on our ability not only to protect our own technologies and trade
secrets, but also to develop and sell new products that do not infringe upon existing patents or threaten existing
customer relationships. An unfavorable outcome in any intellectual property litigation or similar proceeding
could have a materially adverse effect on the financial condition and results of operations in Film Products.
U.S. and global economic conditions could have an adverse effect on the operating results of some or all of
our operations. As Films Products expands its business into new products and geographic regions, operating
results and our financial condition could become more sensitive to changes in macroeconomic conditions,
including fluctuations in exchange rates. Sales associated with new products and regions tend to more closely
follow the cycles within the economy. Cost reductions and productivity improvements may not be sufficient to
offset the adverse effects on profitability from lower customer demand in an economic downturn. Therefore, as
such product offerings become a greater part of the film products business, our operating results and financial
condition may be adversely impacted by seasonal slowdowns, cyclical downturns in the economy or changes in
foreign currency rates.
8
An unstable economic environment could have a disruptive impact on our supply chain. Certain raw
materials used in manufacturing our products are available from a single supplier, and we may not be able to
quickly or inexpensively re-source to another supplier. The risk of damage or disruption to our supply chain
has been exacerbated as different suppliers have consolidated their product portfolios or experienced financial
distress. Failure to take adequate steps to effectively manage such events, which are intensified when a product
is sourced from a single supplier or location, could adversely affect our business and results of operations, as
well as require additional resources to restore our supply chain.
Aluminum Extrusions
Sales volume and profitability of Aluminum Extrusions is cyclical and highly dependent on economic
conditions of end-use markets in the U.S., particularly in the construction sector. Our end-use markets can be
subject to seasonal slowdowns. Because of the high degree of operating leverage inherent in our operations
(generally constant fixed costs until full capacity utilization is achieved), the percentage drop in operating
profits in a cyclical downturn will likely exceed the percentage drop in volume. Any benefits associated with
cost reductions and productivity improvements may not be sufficient to offset the adverse effects on
profitability from pricing and margin pressure and higher bad debts (including a greater chance of loss
associated with defaults on fixed-price forward sales contracts with our customers) that usually accompany a
downturn. In addition, higher energy costs can further reduce profits unless offset by price increases or cost
reductions and productivity improvements.
Although our sales volumes have improved in recent years, there is uncertainty surrounding the extent and
timing of a full recovery in the building and construction sector. Therefore, the extent and timing of the
recovery of sales volumes and profits for Aluminum Extrusions is uncertain, especially since there can be a lag
in the recovery of its end-use markets in comparison to the overall economic recovery.
The markets for our products are highly competitive with product quality, service, delivery performance and
price being the principal competitive factors. Aluminum Extrusions has approximately 1,200 customers that
are in a variety of end-use markets within the broad categories of building and construction, distribution,
transportation, machinery and equipment, electrical and consumer durables. No single customer exceeds 5% of
Aluminum Extrusions’ net sales. Due to the diverse customer mix across many end-use markets, we believe the
industry generally tracks the real growth of the overall economy. Future success and prospects depend on our
ability to retain existing customers and participate in overall industry cross-cycle growth.
During improving economic conditions, excess industry capacity is absorbed and pricing pressure becomes less
of a factor in many of our end-use markets. Conversely, during an economic slowdown, excess industry
capacity often drives increased pricing pressure in many end-use markets as competitors protect their position
with key customers. Because the business is susceptible to these changing economic conditions, Aluminum
Extrusions targets complex, customized, service-intensive business with more challenging requirements in order
to differentiate itself from competitors that focus on higher volume, standard extrusion applications.
In the past, imports into the U.S., primarily from China, represented an increasing portion of the U.S. aluminum
extrusion market. However, following an affirmative determination by the U.S. International Trade
Commission in April 2011 that dumped and subsidized imports of aluminum extrusion from China are a cause
of material injury to the domestic industry, the U.S. Department of Commerce has applied duties to these
imported products. As a result, aluminum extrusion imports from China have decreased significantly. While the
risk to the domestic industry has been abated for the time being, efforts continue to address the challenges and
circumvention issues that remain.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
9
Item 2.
PROPERTIES
General
Most of the improved real property and the other assets used in our operations are owned, and none of the
owned property is subject to an encumbrance that is material to our consolidated operations. We consider the plants,
warehouses and other properties and assets owned or leased by us to be in generally good condition.
We believe that the capacity of our plants is adequate to meet our immediate needs. Our plants generally
have operated at approximately 40-95% of capacity during 2012. Our corporate headquarters, which is leased, is located
at 1100 Boulders Parkway, Richmond, Virginia 23225.
Our principal plants and facilities are listed below:
Film Products
Locations in the U.S.
Bloomfield, New York
(technical center and
production facility)
Lake Zurich, Illinois
Morrisville, North Carolina
(technical center and production
facility) ( leased)
Pottsville, Pennsylvania
Red Springs, North Carolina
(leased)
Richmond, Virginia (technical
center) (leased)
Terre Haute, Indiana
(technical center and
production facility)
Aluminum Extrusions
Locations in the U.S.
Carthage, Tennessee
Elkhart, Indiana
Newnan, Georgia
Niles, Michigan
Principal Operations
Production of plastic films and
laminate materials
Locations Outside the U.S.
Cabo de Santo Agostinho, Brazil
(technical center and
production facility)
Guangzhou, China
Kerkrade, The Netherlands
Pune, India
Rétság, Hungary
São Paulo, Brazil
Shanghai, China
Principal Operations
Production of aluminum extrusions,
fabrication and finishing
Item 3.
LEGAL PROCEEDINGS
None.
Item 4. MINE SAFETY DISCLOSURES
None.
10
PART II
Item 5. MARKET FOR TREDEGAR’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Prices of Common Stock and Shareholder Data
Our common stock is traded on the New York Stock Exchange (“NYSE”) under the ticker symbol TG. We
have no preferred stock outstanding. There were 32,069,370 shares of common stock held by 2,513 shareholders of
record on December 31, 2012.
The following table shows the reported high and low closing prices of our common stock by quarter for the
past two years.
The closing price of our common stock on February 22, 2013 was $25.65.
Dividend Information
We have paid a dividend every quarter since becoming a public company in July 1989. We paid quarterly
dividends of 4½ cents per share in the first two quarters of 2012 and 6 cents per share in the final two quarters of
2012. We also paid a one-time dividend of 75 cents per share to all shareholders in December 2012. We paid a
quarterly dividend of 4½ cents per share in 2011, and 4 cents per share in 2010.
All decisions with respect to the declaration and payment of dividends will be made by the Board of
Directors in its sole discretion based upon earnings, financial condition, anticipated cash needs, restrictions in our
revolving credit agreement and other such considerations as the Board deems relevant. See Note 11 beginning on page
68 for the restrictions contained in our revolving credit agreement related to minimum shareholders’ equity required and
aggregate dividends permitted.
Issuer Purchases of Equity Securities
On January 7, 2008, we announced that our 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. The authorization has no time limit.
We did not repurchase any shares in the open market or otherwise in 2012 or 2011 under this standing authorization.
We repurchased approximately 2.1 million shares in 2010 of our common stock in the open market at an average
price of $16.54 per share.
We received 209,576 shares in 2012 at a price of $17.70 per share as consideration from Arc Ventures,
LC in connection with our divestiture of Falling Springs. Shares received from the sale of Falling Springs do not
represent shares repurchased under the current approved program.
11
HighLowHighLowFirst quarter26.29$ 19.13$ 21.58$ 18.23$ Second quarter20.51 13.49 22.87 16.97 Third quarter18.95 13.50 20.35 14.15 Fourth quarter20.42 16.54 23.00 13.92 20122011
Comparative Tredegar Common Stock Performance
Comparative Tredegar Common Stock Performance
The following graph compares cumulative total shareholder returns for Tredegar, the S&P SmallCap 600
The following graph compares cumulative total shareholder returns for Tredegar, the S&P SmallCap 600
Stock Index (an index comprised of companies with market capitalizations similar to Tredegar) and the Russell 2000
Stock Index (an index comprised of companies with market capitalizations similar to Tredegar) and the Russell 2000
Index for the five years ended December 31, 2012. Tredegar is part of both the S&P SmallCap 600 Index and Russell
Index for the five years ended December 31, 2012. Tredegar is part of both the S&P SmallCap 600 Index and Russell
2000 Index.
2000 Index.
*$100 invested on 12/31/07 in stock or index, including reinvestmenl of dividends.
Fiscal year ending December 31.
Copyright® 2013 S&P, II division of The McGraw-Hil Companies Inc. AI rights reserved.
Copyright® 2013 Russel Investment Group. AI rights reserved.
12
12
Inquiries
Inquiries concerning stock transfers, dividends, dividend reinvestment, consolidating accounts, changes of
address, or lost or stolen stock certificates should be directed to Computershare Investor Services, the transfer agent and
registrar for our common stock:
Computershare Investor Services
250 Royall Street
Canton, MA 02021
Phone: 800-622-6757
E-mail: web.queries@computershare.com
All other inquiries should be directed to:
Tredegar Corporation
Investor Relations Department
1100 Boulders Parkway
Richmond, Virginia 23225
Phone: 800-411-7441
E-mail: invest@tredegar.com
Website: www.tredegar.com
Quarterly Information
We do not generate or distribute quarterly reports to shareholders. Information on quarterly results can
be obtained from our website. In addition, we file quarterly, annual and other information electronically with the
SEC, which can be accessed on its website at www.sec.gov.
Legal Counsel
Hunton & Williams LLP
Richmond, Virginia
Independent Registered Public Accounting Firm
PricewaterhouseCoopers LLP
Richmond, Virginia
Item 6.
SELECTED FINANCIAL DATA
The tables that follow on pages 14-19 present certain selected financial and segment information for the five
years ended December 31, 2012.
13
FIVE-YEAR SUMMARY
Tredegar Corporation and Subsidiaries
Years Ended December 31
(In Thousands, Except Per-Share Data)
Results of Operations (a):
Sales
Other income (expense), net
Cost of goods sold
Freight
Selling, general & administrative expenses
Research and development expenses
Amortization of intangibles
Interest expense
Asset impairments and costs associated with
exit and disposal activities
Goodwill impairment charge
Income from continuing operations
before income taxes
Income taxes
Income (loss) from continuing operations (a)
Discontinued operations, net of tax (a)
Net income (loss)
Diluted earnings (loss) per share (a):
Continuing operations
Discontinued operations
Net income (loss)
Refer to notes to financial tables on page 19.
1
4
2012
2011
2010
2009
2008
$
882,188
18,119
900,307
712,660
24,846
73,717
13,162
5,806
3,590
(e)
(e)
(d)
(d)
(d)
(c)
(c)
(c)
$
794,420
3,213
797,633
654,087
18,488
67,808
13,219
1,399
1,926
$
738,200
(1,182)
737,018
594,987
17,812
67,729
13,625
466
1,136
$
648,613
8,464
657,077
516,933
16,085
60,481
11,856
120
783
(f)
(f)
$
883,899
10,341
894,240
739,721
20,782
58,699
11,005
123
2,393
(g)
(g)
(c)
5,022
-
838,803
(d)
1,917
-
758,844
(e)
773
-
696,528
(f)
(b)
2,950
30,559
639,767
(g)
12,390
-
845,113
61,504
18,319
43,185
(14,934)
28,251
$
(c)
(a)
38,789
10,244
28,545
(3,690)
24,855
$
(d)
(a)
40,490
13,649
26,841
186
27,027
$
(e)
(f)
17,310
18,663
(1,353)
-
(1,353)
$
49,127
19,486
29,641
(705)
28,936
$
(g)
(a)
$
$
$
$
$
1.34
(.46)
.88
.89
(.12)
.77
.82
.01
.83
(.04)
-
(.04)
.87
(.02)
.85
$
$
$
$
$
14
FIVE-YEAR SUMMARY
Tredegar Corporation and Subsidiaries
Years Ended December 31
(In Thousands, Except Per-Share Data)
Share Data:
Equity per share
Cash dividends declared per share
Weighted average common shares outstanding
during the period
Shares used to compute diluted earnings (loss)
per share during the period
Shares outstanding at end of period
Closing market price per share:
High
Low
End of year
Total return to shareholders (h)
1
5
Financial Position:
Total assets
Cash and cash equivalents
Debt
Shareholders' equity (net book value)
Equity market capitalization (i)
2012
2011
2010
2009
2008
$
11.61
.96
$
12.38
.18
(k)
$
13.10
.16
$
12.66
.16
$
12.40
.16
32,032
32,193
32,069
31,932
32,213
32,057
32,292
32,572
31,883
33,861
33,861
33,888
33,977
34,194
33,910
$
26.29
13.49
20.42
(3.8)
$
23.00
13.92
22.22
15.6
$
20.19
14.93
19.38
23.5
%
%
$
18.68
12.79
15.82
(12.1)
%
$
20.59
11.41
18.18
14.1
%
%
$
783,165
48,822
128,000
372,252
654,857
$
780,610
68,939
125,000
396,907
712,307
$
580,342
73,191
450
417,546
617,893
$
596,279
90,663
1,163
429,072
536,108
$
610,632
45,975
22,702
420,416
616,484
15
SEGMENT TABLES
Tredegar Corporation and Subsidiaries
Net Sales (j)
Segment
(In Thousands)
Film Products
Aluminum Extrusions
Total net sales
Add back freight
Sales as shown in Consolidated
Statements of Income
1
6
Identifiable Assets
Segment
(In Thousands)
Film Products
Aluminum Extrusions
AFBS (formerly Therics)
Subtotal
General corporate
Cash and cash equivalents
Identifiable assets from continuing operations
Discontinued operations (a):
Total
Refer to notes to financial tables on page 19.
2012
2011
2010
2009
2008
$
611,877
245,465
857,342
24,846
$
535,540
240,392
775,932
18,488
$
520,749
199,639
720,388
17,812
$
455,007
177,521
632,528
16,085
$
522,839
340,278
863,117
20,782
$
882,188
$
794,420
$
738,200
$
648,613
$
883,899
2012
2011
2010
2009
2008
$
$
$
$
$
551,842
129,279
-
681,121
53,222
48,822
783,165
-
783,165
368,853
81,731
583
451,167
41,833
73,191
566,191
14,151
580,342
371,639
82,429
1,147
455,215
50,401
90,663
596,279
-
596,279
399,895
112,259
1,629
513,783
50,874
45,975
610,632
-
610,632
$
$
$
$
$
574,571
78,661
-
653,232
40,917
68,939
763,088
17,522
780,610
16
SEGMENT TABLES
Tredegar Corporation and Subsidiaries
Operating Profit
Segment
(In Thousands)
Film Products:
Ongoing operations
Plant shutdowns, asset impairments,
restructurings and other
Aluminum Extrusions:
Ongoing operations
Plant shutdowns, asset impairments,
restructurings and other
Goodwill impairment charge
AFBS (formerly Therics):
Gain on sale of investments in Theken
Spine and Therics, LLC
Total
Interest income
Interest expense
Gain on sale of corporate assets
Gain (loss) on investment accounted for
under the fair value method
Stock option-based compensation costs
Corporate expenses, net
Income from continuing operations
before income taxes
Income taxes
Income (loss) from continuing operations
Income (loss) from discontinued operations,
net of tax (a)
Net income (loss)
Refer to notes to financial tables on page 19.
1
7
2012
2011
2010
2009
2008
$
69,950
$
59,493
$
66,718
$
64,379
$
53,914
(109)
(c)
(6,807)
(d)
(758)
(e)
(1,846)
(f)
(11,297)
(g)
9,037
3,457
(4,154)
(6,494)
10,132
(c)
(5,427)
-
(d)
58
-
(e)
493
-
(639)
(30,559)
(f)
(b)
(g)
(687)
-
-
73,451
418
3,590
-
16,100
1,432
23,443
(c)
(c)
61,504
18,319
43,185
(c)
-
56,201
1,023
1,926
-
1,600
1,940
16,169
(d)
(d)
38,789
10,244
28,545
(d)
-
62,299
709
1,136
-
(e)
(2,200)
2,064
17,118
40,490
13,649
26,841
(e)
(f)
(f)
1,968
26,809
806
783
404
5,100
1,692
13,334
17,310
18,663
(1,353)
(f)
(g)
1,499
53,561
1,006
2,393
1,001
(g)
5,600
782
8,866
49,127
19,486
29,641
(g)
(14,934)
(a)
(3,690)
(a)
186
(a)
-
(705)
(a)
$
28,251
$
24,855
$
27,027
$
(1,353)
$
28,936
17
SEGMENT TABLES
Tredegar Corporation and Subsidiaries
Depreciation and Amortization
Segment
(In Thousands)
Film Products
Aluminum Extrusions
Subtotal
General corporate
Total continuing operations
Discontinued operations (a):
Total
Capital Expenditures and Investments
Segment
(In Thousands)
Film Products
Aluminum Extrusions
1
8
Subtotal
General corporate
Capital expenditures for continuing
operations
Discontinued operations (a):
Total capital expenditures
Investments
Total
Refer to notes to financial tables on page 19.
2012
2011
2010
2009
2008
$
$
$
$
$
39,202
9,984
49,186
73
49,259
10
49,269
36,315
8,333
44,648
75
44,723
12
44,735
34,448
9,054
43,502
74
43,576
12
43,588
32,360
7,566
39,926
71
39,997
-
39,997
34,588
8,018
42,606
70
42,676
515
43,191
$
$
$
$
$
2012
2011
2010
2009
2008
$
30,484
2,332
32,816
436
33,252
-
33,252
-
33,252
$
$
13,107
2,697
15,804
76
15,880
-
15,880
-
15,880
$
$
15,839
4,339
20,178
236
20,414
4
20,418
-
20,418
$
$
11,487
22,530
34,017
125
34,142
-
34,142
-
34,142
$
$
11,135
9,692
20,827
78
20,905
39
20,944
5,391
26,335
$
18
NOTES TO FINANCIAL TABLES
(a) On November 20, 2012, we sold our membership interests in Falling Springs. All historical results for this business have been reflected in discontinued operations. In 2012, discontinued operations also includes an after-tax
loss of $2.0 million from the sale of Falling Springs in addition to operating results through the closing date. On February 12, 2008, we sold our aluminum extrusions business in Canada. All historical results for this business
have been reflected as discontinued operations. In 2012 and 2011, discontinuned operations include after-tax charges of $13.4 million and $4.4 million, respectively, to accrue for indemnifications under the purchase
agreement related to environmental matters. In 2008, discontinued operations include an after-tax loss of $0.4 million on the sale in addition to operating results through the closing date.
(b) A goodwill impairment charge of $30.6 million ($30.6 million after taxes) was recognized in Aluminum Extrusions upon completion of an impairment analysis performed as of March 31, 2009. The non-cash charge
resulted from the estimated adverse impact on the business unit's fair value of possible future losses and the uncertainty of the amount and timing of an economic recovery.
(c) Plant shutdowns, asset impairments, restructurings and other for 2012 include a net charge of $3.6 million associated with the shutdown of our aluminum extrusions manufacturing facility in Kentland, Indiana, which
included accelerated depreciation for property and equipment of $2.4 million (included in "Cost of goods sold" in the consolidated statement of income), severance and other employee-related costs of $1.2 million and
other shutdown-related charges of $2.3 million, partially offset by adjustments to inventories accounted for under the last-in, first-out method of $1.5 million (included in "Cost of goods sold" in the consolidated statement of
income) and gains of $0.8 million (included in "Other income (expense), net" in the consolidated statements of income); a gain of $1.3 million in Film Products (included in "Other income (expense), net" in the consolidated
statements of income) associated with an insurance recovery on idle equipment that was destroyed in a fire at an outside warehouse; charges of $1.3 million for acquisition-related expenses (included in "Selling, general
and administrative expenses" in the consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions; charges of $1.1 million for integration-related expenses and other nonrecurring
transactions (included in "Selling, general and administrative expenses" in the consolidated statements of income) associated with the acquisition of Terphane by Film Products; gain of $1.1 million (included in "Other
income (expense), net" in the consolidated statements of income) on the sale of a previously shutdown film products manufacturing facility in LaGrange, Georgia; losses of $0.8 million for asset impairments associated with
a previously shutdown film products manufacturing facility in LaGrange, Georgia; charges of $0.5 million for severance and other employee-related costs in connection with restructurings in Film Products ($0.3 million) and
Aluminum Extrusions ($0.2 million); charges of $0.2 million for asset impairments in Film Products; charges of $0.2 million for integration-related expenses and other nonrecurring transactions (included in "Selling, general
and administrative expenses" in the consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions; charges of $0.1 million associated with purchase accounting adjustments made
to the value of inventory sold by Aluminum Extrusions after its acquisition of AACOA; and a charge of $0.1 million (included in "Costs of goods sold" in the consolidated statement of income) related to adjustments of future
environmental costs expected to be incurred by Aluminum Extrusions. The gain from the write-up of an investment accounted for under the fair value method of $16.1 million and the unrealized loss on our investment in
Harbinger of $1.1 million in 2012 are included in "Other income (expense), net" in the consolidated statements of income. Income taxes for 2012 include the recognition of an additional valuation allowance of $1.3 million
related to the expected limitations on the utilization of assumed capital losses on certain investments.
(d) Plant shutdowns, asset impairments, restructurings and other for 2011 include charges of $4.8 million for acquisition-related expenses (included in "Selling, general and administrative expenses" in the consolidated
statements of income) associated with the acquisition of Terphane by Film Products; charges of $1.4 million for asset impairments in Films Products; a gain of $1.0 million on the disposition of our film products
business in Roccamontepiano, Italy (included in "Other income (expense), net" in the consolidated statements of income), which includes the recognition of previously unrecognized foreign currency translation gains
of $4.3 million that were associated with the business; charges of $0.7 million associated with purchase accounting adjustments made to the value of inventory sold by Films Products after its purchase of Terphane
(included in "Cost of goods sold" in the consolidated statements of income); charges of $0.5 million for severance and other employee related costs in connection with restructurings in Film Products; charges of
$0.4 million for integration-related expenses (included in "Selling, general and administrative expenses" in the consolidated statements of income) associated with the acquisition of Terphane by Film Products; and
gains of $0.1 million associated with Aluminum Extrusions for timing differences between the recognition of realized losses on aluminum futures contracts and related revenues from the delayed fulfillment by
customers of fixed-price forward purchase commitments (included in "Cost of goods sold" in the consolidated statements of income). The gain from the write-up of an investment accounted for under the fair value
method of $1.6 million and the unrealized loss on our investment in Harbinger of $0.6 million in 2011 are included in "Other income (expense), net" in the consolidated statements of income.
(e) Plant shutdowns, asset impairments, restructurings and other for 2010 include gains of $0.9 million associated with Aluminum Extrusions for timing differences between the recognition of realized losses on aluminum futures
1
9
(f)
contracts and related revenues from the delayed fulfillment by customers of fixed-price forward purchase commitments (included in "Cost of goods sold" in the consolidated statements of income); asset impairment
charges of $0.6 million related to Films Products; a charge of $0.4 million related to expected future environmental costs at the aluminum extrusions manufacturing facility in Newnan, Georgia (included in "Cost of goods
sold" in the consolidated statements of income); charges of $0.2 million for severance and other employee-related costs in connection with restructurings in Film Products; a gain of $0.1 million on the sale of previously
impaired equipment (included in "Other income (loss), net" in the consolidated statements of income) at the film products manufacturing facility in Pottsville, Pennsylvania; and losses of $0.1 million on the disposal of
equipment (included in "Other income (expense), net" in the consolidated statements of income) from a previously shutdown film products manufacturing facility in LaGrange, Georgia. The loss from the write-down of an
investment accounted for under the fair value method of $2.2 million in 2010 is included in "Other income (expense), net" in the consolidated statement of income. Income taxes in 2010 include the recognition of an
additional valuation allowance of $0.2 million related to the expected limitations on the utilization of assumed capital losses on certain investments.
Plant shutdowns, asset impairments, restructurings and other for 2009 include a charge of $2.1 million for severance and other employee related costs in connection with restructurings for Film Products ($1.3 million),
Aluminum Extrusions ($0.4 million) and corporate headquarters ($0.4 million, included in "Corporate expenses, net" in the operating profit by segment table); an asset impairment charge of $1.0 million in Films
Products; losses of $1.0 million associated with Aluminum Extrusions for timing differences between the recognition of realized losses on aluminum futures contracts and related revenues from the delayed fulfillment
by customers of fixed-price forward purchase commitments (included in "Cost of goods sold" in the consolidated statements of income); a gain of $0.6 million related to the sale of land at our aluminum extrusions
facility in Newnan, Georgia (included in "Other income (expense), net" in the consolidated statements of income); a gain of $0.3 million on the sale of equipment (included in "Other income (expense), net" in the
consolidated statements of income) from a previously shutdown film products manufacturing facility in LaGrange, Georgia; a gain of $0.2 million on the sale of a previously shutdown aluminum extrusions
manufacturing facility in El Campo, Texas (included in "Other income (expense), net" in the consolidated statements of income); a gain of $0.1 million related to the reversal to income of certain inventory impairment
accruals in Film Products; and a net charge of $0.1 million (included in "Costs of goods sold" in the consolidated statement of income) related to adjustments of future environmental costs expected to be incurred by
Aluminum Extrusions. The gain from the write-up of an investment accounted for under the fair value method of $5.1 million in 2009 is included in "Other income (expense), net" in the consolidated statement of
income. The gain on sale of investments in Theken Spine and Therics, LLC, which is also included in "Other income (expense), net" in the consolidated statement of income, includes the receipt of a contractual
earn-out payment of $1.8 million and a post-closing contractual adjustment of $0.2 million. AFBS Inc. (formerly Therics, Inc.) received these investments in 2005, when substantially all of the assets of AFBS, 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. Income taxes in 2009 include
the recognition of an additional valuation allowance of $2.1 million related to the expected limitations on the utilization of assumed capital losses on certain investments.
(g) Plant shutdowns, asset impairments, restructurings and other for 2008 include an asset impairment charge of $9.7 million for Film Products; a charge of $2.7 million for severance and other employee related costs in
connection with restructurings for Film Products ($2.2 million) and Aluminum Extrusions ($0.5 million); a gain of $0.6 million from the sale of land rights and related improvements at the film products facility in
Shanghai, China (included in "Other income (expense), net" in the consolidated statement of income); and a $0.2 million charge related to expected future environmental costs at the aluminum extrusions facility in
Newnan, Georgia (included in "Cost of goods sold" in the consolidated statements of income). The gain of $1.5 million from the sale of our investments in Theken Spine and Therics, LLC is included in "Other income
(expense), net" in the consolidated statements of income. The gain from the write-up of an investment accounted for under the fair value method of $5.6 million in 2008 is included in "Other income (expense), net" in
the consolidated statements of income. Income taxes in 2008 includes the reversal of a valuation allowance recognized in the third quarter of 2007 of $1.1 million that originally related to expected limitations on the
utilization of assumed capital losses on certain investments.
Equity market capitalization is the closing market price per share for the period multiplied by the shares outstanding at the end of the period.
(h) Total return to shareholders is defined as the change in stock price during the year plus dividends per share, divided by the stock price at the beginning of the year.
(i)
(j) Net sales represent gross sales less freight. Net sales is the measure used by the chief operating decision maker of each segment for purposes of assessing performance.
(k)
In addition to quarterly dividends of 4 1/2 cents per share in the the first and second quarters and 6 cents per share in the third and fourth quarters of 2012, there was a special one-time dividend of 75 cents per share
paid to shareholders in December 2012.
19
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-looking and Cautionary Statements
Some of the information contained in this Form 10-K 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. For
risks and important factors that could cause actual results to differ from expectations refer to the reports that we file
with or provide to the SEC from time-to-time, including the risks and important factors set forth in “Risk Factors” in
Part I, Item 1A of this Form 10-K. Readers are urged to review and consider carefully the disclosures Tredegar makes
in the reports Tredegar files with or furnishes to the SEC. Tredegar does not undertake, and expressly disclaims any
duty, to update any forward-looking statement to reflect any change in management’s expectations or any change in
conditions, assumptions or circumstances on which such statements are based.
General
Executive Summary
Tredegar is primarily a manufacturer of plastic films and aluminum extrusions. Descriptions of all of our
businesses are provided on pages 1-9.
Sales from continuing operations were $882.2 million in 2012 compared to $794.4 million in 2011.
Income from continuing operations was $43.2 million ($1.34 per diluted share) in 2012, compared with $28.5 million
(89 cents per diluted share) in 2011. Losses associated with plant shutdowns, assets impairments and restructurings
and gains and losses on the sale of assets, gains or losses on investments accounted for under the fair value method and
other items are described in results of continuing operations beginning on page 25. The business segment review
begins on page 38.
Film Products
A summary of operating results for Film Products is provided below:
The improvement in operating results for Film Products in 2012 was primarily driven by higher volumes in
flexible packaging films as a result of our acquisition of Terphane on October 24, 2011. Net sales (sales less freight)
for Terphane were $138.0 million in 2012 compared to $28.3 million in 2011. The impact on operating profit from
ongoing operations directly attributable to the acquisition of Terphane was $19.1 million in 2012, which includes
amortization expense of $5.1 million. In 2011, operating profit from ongoing operations attributed to the addition of
Terphane was approximately $3.0 million, which included $0.9 million in one-time reimbursements for custom duties
and $0.9 million of amortization expense.
As noted above, net sales for 2012 increased in comparison to 2011 primarily due to the acquisition of
Terphane. Higher net sales from the addition of Terphane were primarily offset by lower volumes in the other product
lines of approximately $18.7 million, the unfavorable change in the U.S. dollar value of currencies for operations
outside the U.S. of approximately $10.1 million and a decrease in average selling prices of approximately $4.6 million.
Lower net sales volumes are primarily related to lower volumes for personal care materials and polyethylene overwrap
20
(In thousands, except percentages)20122011Sales volume (pounds)270,265 218,727 23.6 %Net sales611,877$ 535,540$ 14.3 %Operating profit from ongoing operations69,950$ 59,493$ 17.6 %Favorable/December 31(Unfavorable)% ChangeYear Ended
films, partially offset by improved performance in surface protection films in the fourth quarter of 2012. The decrease
in the average selling prices in 2012 compared to 2011 can be primarily attributed to pricing pressures.
The increase in operating profit from ongoing operations in 2012 compared to 2011 is primarily due to the
acquisition of Terphane, partially offset by lower volumes and compressed margins for personal care materials and the
unfavorable impact of the change in the U.S. dollar value of currencies outside the U.S. Excluding the impact of the
acquisition of Terphane, lower volumes in Film Products had an unfavorable impact of approximately $4.8 million in
2012 compared to 2011. Lower volumes in personal care materials were partially mitigated by higher sales volumes
for surface protection films. The change in the U.S. dollar value of currencies for operations outside the U.S. had an
unfavorable impact of approximately $1.4 million in 2012 compared to 2011. The estimated impact on operating
profit from ongoing operations of the quarterly lag in the pass-through of average resin costs was approximately a
negative $0.5 million in 2012 compared to a negative $0.8 million in 2011.
Effective January 1, 2012, the operations of 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
2012 were consistent with 2011 at $3.8 million.
Capital expenditures in Film Products were $30.5 million in 2012 compared to $13.1 million in 2011,
which included approximately $19.6 million in capital expenditures for a project that will expand our capacity at the
manufacturing facility in Cabo de Santo Agostinho, Brazil. Film Products currently estimates that capital
expenditures will be approximately $80 million in 2013, which includes approximately $49 million for the capacity
expansion project in Brazil. This multi-year project will significantly increase capacity in Brazil and primarily serve
flexible packaging films customers in Latin America. Depreciation expense was $33.9 million in 2012 and $34.9
million in 2011, and is projected to be approximately $32 million in 2013.
Aluminum Extrusions
On October 1, 2012, The William L. Bonnell Company acquired 100% ownership of AACOA. The purchase
price, net of cash acquired, of $54.6 million was primarily funded using financing secured from our existing $350 million
revolving credit facility. AACOA operates production facilities in Elkhart, Indiana and Niles, Michigan, and its primary
markets include consumer durables, machinery and equipment and transportation. The acquisition will add fabrication
capabilities to Aluminum Extrusions’ current array of products and services while providing AACOA with large press
capabilities and enhanced geographic sales coverage in a variety of end-use markets.
A summary of operating results for Aluminum Extrusions is provided below:
Net sales in 2012 increased versus 2011 primarily due to the acquisition of AACOA, partially offset by a
decrease in average selling prices driven by lower aluminum prices and lower volume resulting from the shutdown of the
Kentland facility. AACOA, which was acquired on October 1, 2012, had net sales of $19.5 million in the fourth quarter of
2012. Excluding the impact of the acquisition of AACOA and the Kentland plant shutdown, sales volume in 2012
increased 0.6% in comparison to 2011.
Operating profit from ongoing operations increased in 2012 versus 2011 due to improved profitability from the
shutdown of our Kentland manufacturing facility, better pricing, lower energy costs and the acquisition of AACOA.
AACOA had operating profit from ongoing operations of approximately $0.8 million for the fourth quarter of 2012, which
included amortization expense of $0.5 million.
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(In thousands, except percentages)20122011Sales volume (pounds)114,845 107,997 6.3 %Net sales245,465$ 240,392$ 2.1 %Operating profit from ongoing operations9,037$ 3,457$ 161.4 %% ChangeYear EndedFavorable/December 31(Unfavorable)
Aluminum Extrusions closed its manufacturing facility in Kentland, Indiana in August 2012. The plant, whose
core market was residential construction, previously employed 146 people. Charges associated with the Kentland
shutdown were $3.6 million in 2012, and included accelerated depreciation on property, plant and equipment of
approximately $2.4 million, severance and other employee-related costs of approximately $1.2 million and other
shutdown-related charges of $2.3 million, partially offset by an adjustment for inventories accounted for under the last-in,
first-out (“LIFO”) method of $1.5 million and gains on the sale of equipment of $0.8 million. Other shutdown-related
costs are primarily comprised of equipment transfers, environmental assessments, estimated remediation costs, and other
miscellaneous plant shutdown charges. Estimated cash expenditures for shutdown-related activities that are expected to be
recognized in 2013 are approximately $1 million. The shutdown of our Kentland manufacturing facility had a favorable
impact on operating profit from ongoing operations of approximately $2.5 million in 2012 compared to 2011. Starting in
2013, we estimate that on an annual basis the closure of Kentland will have a positive impact of approximately $4-5
million on segment operating profit from ongoing operations in future periods.
Capital expenditures for Bonnell Aluminum were $2.3 million in 2012 compared with $2.7 million in 2011.
Capital expenditures are projected to be approximately $19 million in 2013, which includes approximately $15 million for
an 18-month project that will expand our capacity at the manufacturing facility in Newnan, Georgia. This additional
capacity will primarily serve the automotive industry. Depreciation expense was $9.5 million in 2012 compared with $8.3
million in 2011, and is projected to be approximately $7 million in 2013. Higher depreciation expense in 2012 is primarily
related to approximately $2.4 million in accelerated depreciation on property, plant and equipment at the Kentland
manufacturing facility.
Other
The Other segment was previously comprised of Bright View and Falling Springs, LLC (“Falling Springs”).
Falling Springs develops, owns and operates multiple mitigation banks. As previously noted, the operations of Bright
View were incorporated into Film Products in 2012, and all prior year balances for Bright View have been reclassified
to Film Products to conform with the current year presentation
On November 20, 2012, Tredegar Real Estate Holdings, Inc., a wholly owned subsidiary of Tredegar, sold its
membership interests in Falling Springs to Arc Ventures, LC for cash and stock proceeds totaling $16.6 million. Arc
Ventures, LC is a Virginia limited liability company affiliated with John D. Gottwald, a member of our Board of
Directors. The purchase price paid to Tredegar was comprised of cash of $12.8 million and 209,576 shares of
common stock of Tredegar owned by Arc Ventures, LC. The corresponding loss on sale of $3.1 million, which
includes transaction-related expenses of $0.5 million, and the results of operations related to Falling Springs have been
classified as discontinued operations for all periods presented.
Corporate Expenses, Interest and Income Taxes
Pension expense was $8.1 million in 2012, an unfavorable change of $5.8 million from pension expense
recognized in 2011. Most of the change is reflected in “Corporate expenses, net” in the segment operating profit table
presented on page 17. We contributed approximately $2.3 million to our pension plans in 2012. Minimum required
contributions to our pension plans in 2013 are expected to be $0.2 million as interest rates and expected long-term plan
asset investment returns declined in recent years. Pension expense in 2013 is estimated at $13.3 million. Corporate
expenses, net increased in 2012 in comparison to 2011 primarily due to the higher pension expenses noted above, an
unrealized loss on our investment in Harbinger of $1.1 million, certain acquisition-related expenses of $0.8 million
and higher performance-based incentive compensation of $0.6 million.
Interest expense, which includes the amortization of debt issue costs, was $3.6 million in 2012 in
comparison to $1.9 million in 2011 as a result of an increase in the average borrowings under our revolving credit
facility. Additional borrowings under our revolving credit facility were used to finance a portion of the purchase
prices for the acquisition of Terphane in the fourth quarter of 2011 and the acquisition of AACOA in the fourth quarter
of 2012.
The effective tax rate used to compute income taxes from continuing operations was 29.8% in 2012
compared with 26.4% in 2011. Income taxes from continuing operations in 2012 primarily reflect the benefit of
current year foreign tax incentives, and income taxes for continuing operations in 2011 primarily reflect the
recognition of estimated tax benefits from the divestiture of the film products business in Italy, partially offset by the
22
nondeductible acquisition-related expenses associated with the acquisition of Terphane by Film Products. Significant
differences between the effective tax rate for continuing operations and the U.S. federal statutory rate for 2012 and
2011 are further detailed in the effective income tax rate reconciliation provided in Note 17 beginning on page 76.
Our net debt balance (total debt of $128.0 million in excess of cash and cash equivalents of $48.8 million)
at December 31, 2012 was $79.2 million, compared to a net debt balance (total debt of $125.0 million in excess of
cash and cash equivalents of $68.9 million) at December 31, 2011 of $56.1 million. Net debt, a financial measure that
is not calculated or presented in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), is not
intended to represent debt as defined by U.S. GAAP, but is utilized by management in evaluating financial leverage
and equity valuation. We believe that investors also may find net debt helpful for the same purposes. Consolidated
net capitalization and other credit measures are provided in the financial condition section beginning on page 29.
Critical Accounting Policies
In the ordinary course of business, we make a number of estimates and assumptions relating to the
reporting of results of operations and financial position in the preparation of financial statements in conformity with
U.S. GAAP. Actual results could differ significantly from those estimates under different assumptions and conditions.
We believe the following discussion addresses our critical accounting policies. These policies require management to
exercise judgments that are often difficult, subjective and complex due to the necessity of estimating the effect of
matters that are inherently uncertain.
Impairment and Useful Lives of Long-lived Identifiable Assets and Goodwill
We assess our long-lived identifiable assets for impairment when events or circumstances indicate that their
carrying value may not be recoverable from future cash flows. Any necessary impairment charges are recorded when we
do not believe the carrying value of the long-lived asset will be recoverable. We also reassess the useful lives of our long-
lived assets based on changes in our business and technologies.
We assess goodwill for impairment when events or circumstances indicate that the carrying value may not be
recoverable, or, at a minimum, on an annual basis (December 1st of each year). Our reporting units in Film Products
include, but are not limited to, Polyethylene and Polypropylene Films and PET Films. As of December 31, 2012, each of
the previously identified reporting units in Film Products was carrying a goodwill balance. We have two reporting units in
Aluminum Extrusions, AACOA and Bonnell. All goodwill in Aluminum Extrusions is associated with the AACOA
reporting unit.
In assessing the recoverability of goodwill and long-lived identifiable assets, we estimate fair value using
discounted cash flow analysis and comparative enterprise value-to-EBITDA (earnings before interest, taxes, depreciation
and amortization) multiples. These calculations require us to make assumptions regarding estimated future cash flows,
discount rates and other factors to determine if an impairment exists. If these estimates or their related assumptions change
in the future, we may be required to record additional impairment charges.
Based upon assessments performed as to the recoverability of long-lived identifiable assets, we recorded asset
impairment losses for continuing operations of $1.0 million in 2012, $1.4 million in 2011 and $0.6 million in 2010.
Investment Accounted for Under the Fair Value Method
In August 2007 and December 2008, we made an aggregate investment of $7.5 million in Intelliject, a privately
held specialty pharmaceutical company. This investment is accounted for under the fair value method. At the time of our
initial investment, we elected the fair value option over the equity method of accounting since our investment objectives
were similar to those of venture capitalists, which typically do not have controlling financial interests (venture capital funds
generally use the fair value method to account for their investment portfolios). At December 31, 2012, our ownership
interest was approximately 20% on a fully diluted basis.
We disclose the level within the fair value hierarchy in which fair value measurements in their entirety fall,
segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1),
significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). On the dates of our
investments, we believe that the amount we paid for our ownership interest and liquidation preferences was based on Level
23
2 inputs, including investments by other investors. Subsequent to the last round of financing, and until the next round of
financing, we believe fair value estimates are based upon Level 3 inputs since there is no secondary market for our
ownership interest. In addition, Intelliject had no product sales as of December 31, 2012. Their first product launched in
the first quarter of 2013. Accordingly, after the latest financing and until the next round of financing or any other
significant financial transaction, fair value estimates will primarily be based on assumptions relating to meeting product
development and commercialization milestones, cash flow projections (projections of development and commercialization
milestone payments, sales, costs, expenses, capital expenditures and working capital investment) and discounting of these
factors for the high degree of risk.
At December 31, 2012 and 2011, the fair value of our investment (the carrying value included in “Other assets
and deferred charges” in our consolidated balance sheet) was $33.7 million and $17.6 million, respectively. The fair
market valuation of our interest in Intelliject is sensitive to changes in the weighted average cost of capital used to discount
cash flow projections for the high degree of risk associated with meeting development and commercialization milestones
as anticipated. At December 31, 2012, the effect of a 500 basis point decrease in the weighted average cost of capital
assumption would have further increased the fair value of our interest in Intelliject by approximately $6 million, and a 500
basis point increase in the weighted average cost of capital assumption would have decreased the fair value of our interest
by approximately $5 million. Any future changes in the estimated fair value of our ownership interest will likely be
attributed to a new round of financing, a merger or initial public offering or adjustments to the timing or magnitude of cash
flows associated with development and commercialization milestones. Adjustments to the estimated fair value of our
investment will be made in the period upon which such changes can be quantified.
Pension Benefits
We sponsor noncontributory defined benefit (pension) plans in our continuing operations that have resulted
in varying amounts of net pension income or expense, as developed from actuarial valuations. Inherent in these
valuations are key assumptions including discount rates, expected return on plan assets and rate of future
compensation increases. We are required to consider current market conditions, including changes in interest rates and
plan asset investment returns, in determining these assumptions. Actuarial assumptions may differ materially from
actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter
life spans of participants. These differences may result in a significant impact to the amount of net pension income or
expense recorded in future periods.
The discount rate is used to determine the present value of future payments. The discount rate is the single
rate that, when applied to expected benefit payments, provides a present value equal to the present value of expected
benefit payments determined by using the AA-rated bond yield curve. In general, our liability increases as the
discount rate decreases and vice versa. The weighted average discount rate utilized was 4.21% at the end of 2012,
4.95% at the end of 2011 and 5.45% at the end of 2010, with changes between periods due to changes in market
interest rates. Based on plan changes announced in 2006, pay for active participants of the plan was frozen as of
December 31, 2007. A lower expected return on plan assets increases the amount of expense and vice versa.
Decreases in the level of actual plan assets will also serve to increase the amount of pension expense. The total return
on our plan assets, which is primarily affected by the change in fair value of plan assets, current year contributions and
current year payments to participants, was 8.9% in 2012, a negative 5.1% in 2011, and 11.4% in 2010. Our expected
long-term return on plan assets relating to continuing operations, which is estimated by asset class and generally based
on inflation-adjusted historical returns, volatilities, risk premiums and managed asset premiums, were 8.0% in 2012,
8.25% in 2009 to 2011 and 8.5% from 2004 to 2008. We anticipate that our expected long-term return on plan assets
will be 7.75% for 2013. See page 73 for more information on expected long-term return on plan assets and asset mix.
See the executive summary beginning on page 20 for further discussion regarding the financial impact of
our pension plans.
Income Taxes
On a quarterly basis, we review our judgments regarding uncertain tax positions and the likelihood that the
benefits of a deferred tax asset will be realized. As circumstances change, we reflect in earnings any adjustments to
unrecognized benefits for uncertain tax positions and valuation allowances for deferred tax assets.
For financial reporting purposes, we had unrecognized tax benefits on uncertain tax positions of $0.9
24
million, $1.0 million and $1.1 million as of December 31, 2012, 2011 and 2010, respectively. Tax payments resulting
from the successful challenge by the taxing authority on uncertain tax positions taken by us would possibly result in
the payment of interest and penalties. Accordingly, we also accrue for possible interest and penalties on uncertain tax
positions. The balance of accrued interest and penalties on deductions taken relating to uncertain tax positions was
approximately $0.1 million, $0.4 million and $0.1 million at December 31, 2012, 2011 and 2010, respectively
($37,000, $0.2 million and $0.1 million, respectively, net of corresponding federal and state income tax benefits).
Accruals for possible interest and penalties on uncertain tax positions are reflected in income tax expense for financial
reporting purposes.
Tredegar and its subsidiaries file income tax returns in the U.S., various states, and jurisdictions outside the
U.S. Except for refund claims and amended returns, the Internal Revenue Service (“IRS”) has provided written
confirmation that they do not plan to make any additional changes to our U.S. consolidated tax returns for the years
prior to 2010, although the federal statute of limitations was extended through December 31, 2013 for the tax years
2006-2009. With few exceptions, Tredegar and its subsidiaries are no longer subject to state or non-U.S. income tax
examinations by tax authorities for years before 2009.
As of December 31, 2012 and 2011, we had valuation allowances relating to deferred tax assets of $18.6
million and $12.4 million, respectively. For more information on deferred income tax assets and liabilities, see Note
17 of the notes to financial statements beginning on page 76.
Recently Issued Accounting Standards
In July 2012, the Financial Accounting Standards Board (“FASB”) issued updated guidance for testing
indefinite-lived intangible assets for impairment. The revised standard provides entities with an option to perform a
“qualitative” assessment to determine whether further testing is necessary when performing an annual impairment
assessment for indefinite-lived intangible assets other than goodwill. This new standard is comparable to the guidance
finalized last year for goodwill impairment testing. An entity can still choose to bypass the qualitative assessment for
any indefinite-lived intangible asset in any period and proceed directly to the quantitative impairment test. The revised
standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15,
2012. We do not expect that this FASB accounting standard will have a material impact on our financial statements
and disclosures.
2012 versus 2011
Results of Continuing Operations
Revenues. Sales in 2012 increased by 11.0% compared with 2011 due to higher sales in both Film Products and
Aluminum Extrusions. Net sales increased 14.3% in Film Products primarily due to the acquisition of Terphane,
partially offset by lower volumes in the remaining product lines, the unfavorable change in the U.S. dollar value of
currencies for operations outside the U.S. and a decrease in average selling prices. Net sales increased 2.1% in
Aluminum Extrusions primarily due to the acquisition of AACOA, partially offset by a decrease in average selling
prices driven by lower aluminum prices and lower volumes resulting from the shutdown of the Kentland facility. For
more information on net sales and volume, see the executive summary beginning on page 20.
Operating Costs and Expenses. Consolidated gross profit (sales minus cost of goods sold and freight) as a percentage
of sales were 16.4% in 2012 and 15.3% in 2011. The gross profit margin in Film Products was relatively flat primarily
due to the favorable impact of the acquisition of Terphane and the lag in the pass-through of higher resin costs, offset
by lower volumes and margin compression, primarily in personal care materials. Gross profit margin in Aluminum
Extrusions increased primarily as a result of improved profitability from the shutdown of our Kentland manufacturing
facility, better pricing and lower energy costs. For more information on operating costs and expenses, see the
executive summary beginning on page 20.
As a percentage of sales, selling, general and administrative and R&D expenses were 9.8% in 2012, which
decreased from 10.2% in 2011. The decrease in selling, general and administrative and R&D expenses as a percentage
of sales can be attributed to higher sales and lower acquisition-related expenditures in 2012. Acquisition-related
expenses were $2.0 million in 2012 compared to $4.8 million in 2011.
25
Losses associated with plant shutdowns, asset impairments, restructurings and other charges in 2012 totaled
$5.5 million ($3.6 million loss after taxes) and included:
A fourth quarter charge of $0.9 million ($0.5 million after taxes), a third quarter charge of $0.8 million ($0.5
million after taxes), a second quarter charge of $1.0 million ($0.7 million after taxes) and a first quarter charge of
$0.9 million ($0.5 million after taxes) associated with the shutdown of the aluminum extrusions manufacturing
facility in Kentland, Indiana, which includes accelerated depreciation for property, plant and equipment of $2.4
million (included in “Cost of goods sold” in the consolidated statements of income), severance and other
employee-related expenses of $1.2 million and other shutdown-related charges of $2.3 million, partially offset by
adjustments to inventories accounted for under the LIFO method of $1.5 million (included in “Cost of goods sold”
in the consolidated statements of income) and gains on the sale of equipment of $0.8 million (included in “Other
income (expense), net” in the consolidated statements of income);
A fourth quarter gain of $1.3 million ($0.7 million after taxes) in Film Products (included in “Other income
(expense), net” in the consolidated statements of income) associated with an insurance recovery on idle equipment
that was destroyed in a fire at an outside warehouse;
A fourth quarter charge of $0.9 million ($0.6 million after taxes) and a third quarter charge of $0.3 million ($0.2
million after taxes) for acquisition-related expenses (included in “Selling, general and administrative expenses” in
the consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions;
A fourth quarter charge of $0.1 million ($0.1 million after taxes), a third quarter charge of $0.1 million ($0.1
million after taxes), a second quarter charge of $0.6 million ($0.4 million after taxes) and a first quarter charge of
$0.3 million ($0.2 million after taxes) for integration-related expenses (included in “Selling, general and
administrative expenses” in the consolidated statements of income) associated with the Film Products acquisition
of Terphane;
A fourth quarter gain of $1.1 million ($0.6 million after taxes) related to the sale of a previously shutdown film
products manufacturing facility in LaGrange, Georgia;
A second quarter charge of $0.8 million ($0.5 million after taxes) for asset impairments associated with a
previously shutdown film products manufacturing facility in LaGrange, Georgia;
A fourth quarter charge of $0.2 million ($0.1 million after taxes) and a second quarter charge of $0.1 million
($46,000 after taxes) in Film Products and a first quarter charge of $0.2 million ($0.1 million after taxes) in
Aluminum Extrusions for severance and other employee-related costs in connection with restructurings;
A fourth quarter charge of $0.2 million ($0.2 million after taxes) for asset impairments in Film Products;
A fourth quarter charge of $0.2 million ($0.1 million after taxes) for integration-related expenses (included in
“Selling, general and administrative expenses” in the consolidated statements of income) associated with the
Aluminum Extrusions’ acquisition of AACOA;
A fourth quarter charge of $0.1 million ($0.1 million after taxes) associated with purchase accounting adjustments
made to the value of inventory sold by Aluminum Extrusions after its acquisition of AACOA (included in “Cost
of goods sold” in the consolidated statements of income; see discussion that follows for additional detail); and
A fourth quarter charge of $0.1 million ($49,000 after taxes) related to expected future environmental costs at our
aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the
consolidated statements of income).
Business combination accounting principles under U.S. GAAP require that we adjust the inventory acquired
in the acquisition of AACOA to fair value at the date of acquisition. In particular, finished goods inventory acquired
was adjusted to reflect the cost of manufacturing plus a portion of the expected profit margin. The acquired inventory
was sold in the fourth quarter of 2012. We believe that the adjustment included in “Cost of goods sold” in the fourth
quarter of 2012 should be removed by investors as a means to determine profit and margins from ongoing operations,
which reflect the operating trends of the acquired business.
As previously noted, on November 20, 2012, we sold Falling Springs to Arc Ventures, LC. The
corresponding loss on sale of $3.1 million ($2.0 million after taxes), which includes transaction-related expenses of
$0.5 million, and the results of operations related to Falling Springs (net income of $0.5 million in 2012) have been
classified as discontinued operations.
On February 12, 2008, we sold our aluminum extrusions business in Canada for approximately $25.0 million
to an affiliate of H.I.G. Capital. All historical results for this business have been reflected as discontinued operations.
26
In 2012, an accrual of $13.4 million ($13.4 million after taxes) was made for indemnifications under the purchase
agreement related to environmental matters.
Results in 2012 include an unrealized gain from the write-up of our investment in Intelliject of $16.1
million ($10.2 million after taxes; see further discussion beginning on page 23). An unrealized loss on our investment
in Harbinger of $1.1 million ($0.7 million after taxes) was recorded in 2012 as a result of a reduction in the fair value
of our investment that is not expected to be temporary. For more information on costs and expenses, see the executive
summary beginning on page 20.
Interest Income and Expense. Interest income, which is included in “Other income (expense), net” in the
consolidated statements of income, was $0.4 million in 2012, compared to $1.0 million in 2011. Our policy permits
investment of excess cash in marketable securities that have the highest credit ratings and maturities of less than one
year with the primary objectives being safety of principal and liquidity.
Interest expense, which includes the amortization of debt issue costs, was $3.6 million in 2012, compared
to $1.9 million for 2011. In October 2011, we borrowed $125 million under our revolving credit agreement to help
fund the acquisition of Terphane. In October 2012, we borrowed an additional $51 million under our revolving credit
facility to fund the acquisition of AACOA.
Average debt outstanding and interest rates were as follows:
Income Taxes. The effective tax rate used to compute income taxes from continuing operations was 29.8% in 2012
compared with 26.4% in 2011. Income taxes from continuing operations in 2012 primarily reflect the benefit of
current year foreign tax incentives. Income taxes for continuing operations in 2011 reflect the recognition of estimated
tax benefits from the divestiture of the film products business in Italy, partially offset by nondeductible acquisition-
related expenses associated with the acquisition of Terphane by Film Products. Factors impacting our effective tax
rate for 2012 and 2011 are further detailed in the effective income tax rate reconciliation provided in Note 17
beginning on page 76.
2011 versus 2010
Revenues. Sales in 2011 increased by 7.6% compared with 2010 due to higher sales in both Film Products and
Aluminum Extrusions. Net sales increased 2.8% in Film Products primarily due to the acquisition of Terphane and an
increase in average selling prices from the pass-through of higher average resin prices, partially offset by lower
volume in surface protection films and personal care materials. Net sales increased 20.4% in Aluminum Extrusions
due to higher sales volume in most markets and an increase in average selling prices driven by higher aluminum
prices.
Operating Costs and Expenses. Consolidated gross profit as a percentage of sales was 15.3% in 2011 and 17.0% in
2010. The gross profit margin in Film Products decreased primarily due to lower volumes in personal care materials
and surface protection films, partially offset by the estimated favorable impact of the quarterly lag in the pass-through
of changes in average resin costs, additional operating profits generated from the acquisition of Terphane, improved
27
(In Millions)20122011Floating-rate debt with interest charged on a rolloverbasis at one-month LIBOR plus a credit spread:Average outstanding debt balance112.1 $ 23.6 $ Average interest rate2.1%2.3%Fixed-rate and other debt:Average outstanding debt balance- $ 0.3 $ Average interest raten/a4.3%Total debt:Average outstanding debt balance112.1 $ 23.9 $ Average interest rate2.1%2.3%
manufacturing efficiencies in 2011 and the change in the U.S. dollar value of currencies for operations outside the U.S.
Gross profit margin in Aluminum Extrusions increased as a result of the higher sales volumes noted above.
As a percentage of sales, selling, general and administrative and R&D expenses were 10.2% in 2011, which
decreased from 11.0% in 2010. The decrease in selling, general and administrative and R&D expenses as a percentage
of sales can be attributed to the cost reduction efforts in 2011 and lower performance-based incentive accruals,
partially offset by higher acquisition-related expenditures in 2011.
Losses associated with plant shutdowns, asset impairments, restructurings and other charges in 2011 totaled
$6.8 million ($0.3 million gain after taxes) and included:
A fourth quarter charge of $2.5 million ($2.2 million after taxes) and a third quarter charge of $2.3 million ($2.2
million after taxes) for acquisition-related expenses (included in “Selling, general and administrative expenses” in
the consolidated statements of income) associated with the Film Products acquisition of Terphane;
A fourth quarter charge of $0.6 million ($0.4 million after taxes) and a second quarter charge of $0.8 million ($0.5
million after taxes) for asset impairments in Film Products;
A third quarter gain of $1.0 million ($6.6 million after taxes) on the divestiture of our film products subsidiary in
Roccamontepiano, Italy (included in “Other income (expense), net” in the consolidated statements of income),
which includes the recognition of previously unrealized foreign currency translation gains of $4.3 million that
were associated with the business;
A fourth quarter charge of $0.7 million ($0.5 million after taxes) associated with purchase accounting adjustments
made to the value of inventory sold by Film Products after its acquisition of Terphane (included in “Cost of goods
sold” in the consolidated statements of income; see discussion that follows for additional detail);
A fourth quarter charge of $0.1 million ($39,000 after taxes), a third quarter charge of $0.2 million ($0.1 million
after taxes) and a second quarter charge of $0.3 million ($0.2 million after taxes) for severance and other
employee-related costs in connection with restructurings in Film Products;
A fourth quarter charge of $0.4 million ($0.3 million after taxes) for integration-related expenses (included in
“Selling, general and administrative expenses” in the consolidated statements of income) associated with the Film
Products acquisition of Terphane; and
A fourth quarter benefit of $39,000 ($24,000 after taxes), a third quarter charge of $43,000 ($27,000 after taxes), a
second quarter benefit of $0.1 million ($0.1 million after taxes), and a first quarter charge of $32,000 ($20,000
after taxes) for timing differences between the recognition of realized losses on aluminum futures contracts and
related revenues from the delayed fulfillment by customers of fixed-price forward purchase commitments
(included in “Cost of goods sold” in the consolidated statements of income).
Business combination accounting principles under U.S. GAAP require that we adjust the inventory
acquired in the acquisition of Terphane to fair value at the date of acquisition. In particular, finished goods inventory
acquired was adjusted to reflect the cost of manufacturing plus a portion of the expected profit margin. The acquired
inventory was sold in the fourth quarter of 2011. We believe that the adjustment included in “Cost of goods sold” in
the fourth quarter of 2011 should be removed by investors as a means to determine profit and margins from ongoing
operations, which reflect the operating trends of the acquired business.
The results of operations related to Falling Springs (net income of $0.7 million in 2011 and $0.2 million in
2010) have been classified as discontinued operations as a result of our divestiture of Fallings Springs in November
2012. In 2011, an accrual of $4.4 million ($4.4 million after taxes) was made for indemnifications under the purchase
agreement associated with the 2008 sale of our aluminum extrusions business in Canada. These contractual
indemnifications were related to environmental matters associated with our former aluminum extrusions operations in
Canada.
Results in 2011 include an unrealized gain from the write-up of our investment in Intelliject of $1.6 million
($1.0 million after taxes; see further discussion beginning on page 23). An unrealized loss on our investment in
Harbinger of $0.6 million ($0.4 million after taxes) was recorded in 2011 as a result of a reduction in the fair value of
our investment that is not expected to be temporary. For more information on costs and expenses, see the executive
summary beginning on page 20.
28
Interest Income and Expense. Interest income, which is included in “Other income (expense), net” in the
consolidated statements of income, was $1.0 million in 2011, compared to $0.7 million in 2010. Our policy permits
investment of excess cash in marketable securities that have the highest credit ratings and maturities of less than one
year with the primary objectives being safety of principal and liquidity.
Interest expense, which includes the amortization of debt issue costs, was $1.9 million in 2011, compared
to $1.1 million for 2010. In October 2011, we borrowed $125 million under our revolving credit agreement to help
fund the acquisition of Terphane. Average debt outstanding and interest rates were as follows:
Income Taxes. The effective tax rate used to compute income taxes from continuing operations was 26.4% in 2011
compared with 33.7% in 2010 primarily as a result of the recognition of estimated tax benefits related to the 2011
divestiture of our film products subsidiary in Italy, partially offset by the effect on income taxes from the reduction in
2010 of the estimated value of a dividend received from a foreign subsidiary and the impact of non-deductible
acquisition-related expenses in 2011 associated with the acquisition of Terphane by Film Products. Factors impacting
our effective tax rate for 2011 and 2010 are further detailed in the effective income tax rate reconciliation provided in
Note 17 beginning on page 76. The impact of the change in the estimated value of a dividend received from a foreign
subsidiary is reflected in “Changes in estimates related to prior year tax provision” in the effective income tax rate
reconciliation.
Assets and Liabilities
Financial Condition
Significant changes in assets and liabilities from continuing operations from December 31, 2011 to
December 31, 2012 are summarized below:
Accounts and other receivables increased $2.5 million (2.5%).
Accounts and other receivables in Film Products decreased by $6.8 million due mainly to the timing of cash
receipts.
Accounts and other receivables in Aluminum Extrusions increased by $9.0 million primarily due to the
addition of balances from the acquisition of AACOA and the timing of cash receipts.
Other receivables increased in corporate by approximately $0.3 million due to contractual amounts due from
Arc Ventures, LC from the sale of Falling Springs.
Inventories increased $13.4 million (21.8%).
Inventories in Film Products increased by approximately $7.9 million primarily due to the timing of
shipments.
Inventories in Aluminum Extrusions increased by approximately $5.5 million primarily due to the addition of
balances from the acquisition of AACOA.
Net property, plant and equipment decreased $3.8 million (1.5%) due primarily to depreciation of $43.5 million, a
change in the value of the U.S. dollar relative to foreign currencies (a decrease of approximately $6.0 million) and
asset impairments and property disposals of approximately $2.7 million, partially offset by capital expenditures of
$33.3 million and property and equipment added from the acquisition of AACOA of $15.1 million.
29
(In Millions)20112010Floating-rate debt with interest charged on a rolloverbasis at one-month LIBOR plus a credit spread:Average outstanding debt balance23.6 $ -$ Average interest rate2.3%n/aFixed-rate and other debt:Average outstanding debt balance0.3 $ 0.9 $ Average interest rate4.3%4.0%Total debt:Average outstanding debt balance23.9 $ 0.9 $ Average interest rate2.3%4.0%
Goodwill and other intangibles increased by $17.7 million (7.9%) primarily due to balances added from the
acquisition of AACOA, partially offset by amortization expense of $5.8 million and changes in the value of the
U.S. dollar relative to foreign currencies (decrease of approximately $5.4 million). Identifiable intangible assets
and goodwill associated with the acquisition were $14.6 million and $14.3 million, respectively.
Accounts payable increased by $9.2 million (12.6%).
Accounts payable in Film Products increased by $2.2 million primarily due to the timing of payments.
Accounts payable in Aluminum Extrusions increased by $7.3 million, primarily due to the addition of
balances from the acquisition of AACOA and the timing of payments.
Accounts payable decreased in corporate by $0.3 million due to the normal volatility associated with the
timing of payments.
Accrued expenses increased by $1.6 million (4.0%) from December 31, 2011 primarily due to the addition of
balances from the acquisition of AACOA.
Other noncurrent liabilities increased by $25.7 million (35.8%) due primarily to the change in the funded status of
our defined benefit plans. As of December 31, 2012, the funded status of our defined benefit pension plan was a
net liability of $83.3 million compared with $57.8 million as of December 31, 2011, and the liability associated
with our other post-employment benefits plan was $8.9 million as of December 31, 2012 compared to $8.4
million as of December 31, 2011.
Net deferred income tax liabilities in excess of assets increased by $8.5 million primarily due to numerous
changes between years in the balance of the components shown in the December 31, 2012 and 2011 schedule of
deferred income tax assets and liabilities provided in Note 17 beginning on page 76. Income taxes recoverable
increased by $0.3 million primarily due to the timing of tax payments.
Net capitalization and indebtedness as defined under our revolving credit agreement as of December 31, 2012
were as follows:
30
Net Capitalization and Indebtedness as of December 31, 2012(In Thousands)Net capitalization:Cash and cash equivalents48,822 $ Debt:$350 million revolving credit agreementmaturing April 23, 2017128,000 Other debt- Total debt128,000 Debt net of cash and cash equivalents 79,178 Shareholders' equity372,252 Net capitalization451,430$ Indebtedness as defined in revolving credit agreement:Total debt128,000$ Face value of letters of credit4,532 Other156 Indebtedness132,688$
Under the revolving credit agreement, borrowings are permitted up to $350 million, and approximately $199
million was available to borrow at December 31, 2012 based on the most restrictive covenants. The credit spread and
commitment fees charged on the unused amount under the revolving credit agreement at various indebtedness-to-adjusted
EBITDA levels are as follows:
At December 31, 2012, the interest rate on debt borrowed under the revolving credit agreement was priced at one-
month LIBOR plus the applicable credit spread of 150 basis points. Market exposure related to changes in one-month
LIBOR (assuming that the applicable credit spread remains at 150 basis points) would not be material to our consolidated
financial results.
Noncompliance with any of the debt covenants may have a material adverse effect on financial condition or
liquidity in the event such noncompliance cannot be cured or should we be unable to obtain a waiver from the lenders.
Renegotiation of the covenant(s) through an amendment to the credit agreement may effectively cure the
noncompliance, but may have an effect on financial condition or liquidity depending upon how the amended covenant
is renegotiated.
The computations of adjusted EBITDA, adjusted EBIT, the leverage ratio and interest coverage ratio as defined
in the credit agreement are presented below along with the related most restrictive covenants. Adjusted EBITDA and
adjusted EBIT as defined in the credit agreement are not intended to represent net income or cash flow from operations as
defined by U.S. GAAP and should not be considered as either an alternative to net income or to cash flow.
31
Indebtedness-to-AdjustedCredit Spread CommitmentEBITDA RatioOver LIBORFee> 2.0x but <= 3.0x20035> 1.0x but <=2.0x17530<= 1.0x15025Pricing Under Revolving Credit Agreement (Basis Points)
32
Computations of Adjusted EBITDA, Adjusted EBIT, Leverage Ratio andInterest Coverage Ratio as Defined in the Credit Agreement Along with Related MostRestrictive CovenantsAs of and for the Twelve Months Ended December 31, 2012 (In Thousands)Computations of adjusted EBITDA and adjusted EBIT as defined inrevolving credit agreement for the twelve months ended December 31, 2012:Net income28,251$ Plus:After-tax losses related to discontinued operations14,934 Total income tax expense for continuing operations18,319 Interest expense3,590 Depreciation and amortization expense for continuing operations49,259 All non-cash losses and expenses, plus cash losses and expenses notto exceed $10,000, for continuing operations that are classified asunusual, extraordinary or which are related to plant shutdowns,asset impairments and/or restructurings (cash-related of $4,047)6,379 Charges related to stock option grants and awards accounted for under the fair value-based method1,432 Losses related to the application of the equity method of accounting- Losses related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting- Minus:After-tax income related to discontinued operations- Total income tax benefits for continuing operations- Interest income(418) All non-cash gains and income, plus cash gains and income in excess of $10,000, for continuing operations that are classified as unusual, extraordinary or which are related to plant shutdowns, asset impairments and/or restructurings(1,514) Income related to changes in estimates for stock option grants and awards accounted for under the fair value-based method- Income related to the application of the equity method of accounting- Income related to adjustments in the estimated fair value of assets accounted for under the fair value method of accounting(16,100) Plus cash dividends declared on investments accounted for under the equity method of accounting- Plus or minus, as applicable, pro forma EBITDA adjustments associatedwith acquisitions and asset dispositions6,339 Adjusted EBITDA as defined in revolving credit agreement110,471 Less: Depreciation and amortization expense for continuing operations(including pro forma for acquisitions and asset dispositions)(52,184) Adjusted EBIT as defined in revolving credit agreement58,287$ Shareholders' equity at December 31, 2012 as defined in revolving credit agreementComputations of leverage and interest coverage ratios as defined in revolving credit agreement at December 31, 2012:385,051 Leverage ratio (indebtedness-to-adjusted EBITDA)1.20x Interest coverage ratio (adjusted EBIT-to-interest expense)16.24x Most restrictive covenants as defined in revolving credit agreement:Maximum permitted aggregate amount of dividends that can be paidby Tredegar during the term of the revolving credit agreement($100,000 plus 50% of net income generated beginning January 1, 2012)114,126$ Minimum adjusted shareholders' equity permitted ($320,000 plus 50% ofnet income generated, to the extent positive, beginning January 1, 2012)334,126$ Maximum leverage ratio permitted:3.00x Minimum interest coverage ratio permitted2.50x
We are obligated to make future payments under various contracts as set forth below:
We believe that existing borrowing availability, our current cash balances and our cash flow from
operations will be sufficient to satisfy our working capital, capital expenditure and dividend requirements for the
foreseeable future. At December 31, 2012, we had cash and cash equivalents of $48.8 million, including funds held in
locations outside the U.S. of $28.6 million. We accrue U.S. federal income taxes on unremitted earnings of all foreign
subsidiaries except Terphane Ltda. (a subsidiary of Film Products). Deferred U.S. federal income taxes have not been
provided on the undistributed earnings for Terphane Ltda. because of our intent to permanently reinvest these
earnings. The cumulative amount of untaxed earnings was $23.0 million at December 31, 2012.
From time to time, we enter into transactions with third parties in connection with the sale of assets or
businesses in which we agree to indemnify the buyers or third parties involved in the transaction, or the sellers or third
parties involved in the transaction agree to indemnify us, for certain liabilities or risks related to the assets or business.
Also, in the ordinary course of our business, we may enter into agreements with third parties for the sale of goods or
services that may contain indemnification provisions. In the event that an indemnification claim is asserted, liability
for indemnification would be subject to an assessment of the underlying facts and circumstances under the terms of the
applicable agreement. Further, any indemnification payments may be limited or barred by a monetary cap, a time
limitation, or a deductible or basket. For these reasons, we are unable to estimate the maximum potential amount of
the potential future liability under the indemnity provisions of these agreements. We do, however, accrue for losses
for any known contingent liability, including those that may arise from indemnification provisions, when future
payment is probable and the amount is reasonably estimable. We disclose contingent liabilities if the probability of
loss is reasonably possible and material.
33
(In Millions)20132014201520162017RemainderTotalDebt:Principal payments-$ -$ -$ -$ 128.0$ -$ 128.0$ Estimated interest expense2.6 2.6 2.6 2.6 .8 - 11.2 Estimated contributions required (1) :Defined benefit plans.2 6.4 10.8 11.8 9.1 7.7 46.0 Other postretirement benefits.5 .5 .5 .5 .5 6.4 8.9 Capital expenditure commitments (2)16.4 - - - - - 16.4 Operating leases2.1 2.0 1.3 1.2 1.2 1.1 8.9 Utility contracts4.6 3.0 - - - - 7.6 Estimated obligations relating touncertain tax positions (3)- - - - - 1.0 1.0 Other (4) 1.6 1.2 1.4 - - - 4.2 Total 28.0$ 15.7$ 16.6$ 16.1$ 139.6$ 16.2$ 232.2$ (1)Estimated minimum required contributions for defined benefit plans and benefit payments for other postretirement plansare based on actuarial estimates using current assumptions for discount rates, long-term rate of return on plan assets, rate ofcompensation increases and health care cost trends. The expected defined benefit plan contribution estimates for 2013through 2022 were determined under provisions of the Pension Protection Act of 2006 using the preliminary assumptionschosen by Tredegar for the 2013 plan year. Tredegar has determined that it is not practicable to present defined benefitcontributions and other postretirement benefit payments beyond 2022. (2)Represents contractual obligations for plant construction and purchases of real property and equipment. In February 2012,Film Products signed contracts associated with our multi-year capacity expansion project in Brazil that resulted in futurecontractual commitments of approximately $14 million in 2013. (3)Amounts for which reasonable estimates about the timing of payments cannot be made are included in the remaindercolumn.(4)Includes contractual severance, the expected contingent earnout from our purchase of the assets of Bright View, and othermiscellaneous contractual arrangements.Payments Due by Period
Shareholders’ Equity
At December 31, 2012, we had 32,069,370 shares of common stock outstanding and a total market
capitalization of $654.9 million, compared with 32,057,281 shares of common stock outstanding and a total market
capitalization of $712.3 million at December 31, 2011.
We received 209,576 shares in 2012 at a price of $17.70 per share as consideration from Arc Ventures, LC
in connection with our divestiture of Falling Springs.
We did not repurchase any shares on the open market in 2012 or 2011 under our approved share repurchase
program.
Cash Flows
The discussion in this section supplements the information presented in the consolidated statements of cash
flows on page 49. Cash flows for discontinued operations have not been separately disclosed in the consolidated
statements of cash flows.
Cash provided by operating activities was $82.6 million in 2012 compared with $71.8 million in 2011. The
increase is due primarily to normal volatility of working capital components (see the assets and liabilities section
beginning on page 29 for discussion of changes in working capital).
Cash used in investing activities was $75.6 million in 2012 compared with $195.2 million in 2011. Cash
used in investing activities in 2012 primarily includes the acquisition of AACOA ($54.6 million) and capital
expenditures ($33.3 million), partially offset by net cash proceeds received from the sale of Falling Springs ($12.1
million).
Net cash flow provided in financing activities was $26.7 million in 2012, which is primarily due to the one-
time dividend of $24.0 million in December 2012 and the payment of regular quarterly dividends of $6.8 million (4½
cents per share per quarter in the first and second quarters and 6 cents per share in the third and fourth quarters). Net
borrowings against our revolving credit facility were $3.0 million in 2012.
Cash provided by operating activities was $71.8 million in 2011 compared with $46.4 million in 2010. The
increase is due primarily to normal volatility of working capital components.
Cash used in investing activities was $195.2 million in 2011 compared with $22.2 million in 2010. Cash
used in investing activities in 2011 primarily includes the purchase of Terphane ($181.0 million) and capital
expenditures ($15.9 million).
Net cash flow provided in financing activities was $120.4 million in 2011, which is primarily due to
borrowings of $125 million to fund the purchase of Terphane, partially offset by the payment of regular quarterly
dividends of $5.8 million (4½ cents per share per quarter).
Quantitative and Qualitative Disclosures about Market Risk
Tredegar has exposure to the volatility of interest rates, polyethylene and polypropylene resin prices,
Terephtalic Acid (“PTA”) and Monoethylene Glycol (“MEG”) prices, aluminum ingot and scrap prices, energy prices,
foreign currencies and emerging markets. See the assets and liabilities section beginning on page 29 regarding interest
rate exposures related to borrowings under the revolving credit agreement.
Changes in resin, PTA and MEG prices, and the timing of those changes, could have a significant impact on
profit margins in Film Products. Profit margins in Aluminum Extrusions are sensitive to fluctuations in aluminum ingot
and scrap prices as well as natural gas prices (natural gas is the principal energy source used to operate our casting
furnaces). There is no assurance of our ability to pass through higher raw material and energy costs to our customers.
34
See the executive summary beginning on page 20 and the business segment review beginning on page 38
for discussion regarding the impact of the lag in the pass-through of resin price changes. The volatility of average
quarterly prices of low density polyethylene resin in the U.S. (a primary raw material for Film Products) is shown in
the chart below.
Resin prices in Europe, Asia and South America have exhibited similar long-term trends. The price of
resin is driven by several factors including supply and demand and the price of oil, ethylene and natural gas. To
address fluctuating resin prices, 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 (see the executive summary on page 20 and the business segment review on page 38 for
more information). Pricing on the remainder of our business is based upon raw material costs and supply/demand
dynamics within the markets that we compete.
The volatility of average quarterly prices of PTA and MEG (raw materials for Film Products) is shown in
the chart below:
35
Source: Quarterly averages computed by Tredegar using monthly data provided by Chemical Data Inc. ("CDI"). In January 2010, CDI reflected a 15 cents per pound non-market adjustment based on their estimate of the growth of discounts over the 2005 to 2009 period. The 4th quarter 2009 average rate of 61 cents per pound is shown on a pro forma basis as if the non-market adjustment was made in October 2009. 687480878996105726469737661727473798389827884807677Quarterly Average U.S. Large Buyer Price for Low Density Polyethylene Resin(Cents Per Pound)Source: Quarterly averages computed by Tredegar using monthly data from CMAI Global Index data. 20 25 30 35 40 45 50 55 60 65 70Quarterly Average Buyer Price for Terephthalic Acid and Monoethlyene Glycol (Cents Per Pound)Terephthalic Acid (Cents/Lb)Monoethylene Glycol Fiber Grade (Cents/Lb)
In the normal course of business, we enter into fixed-price forward sales contracts with certain customers
for the sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge our exposure to
aluminum price volatility (see the chart below) under these fixed-price arrangements, which generally have a duration
of not more than 12 months, we enter into a combination of forward purchase commitments and futures contracts to
acquire or hedge aluminum, based on the scheduled deliveries. See Note 9 beginning on page 65 for more
information. The volatility of quarterly average aluminum prices is shown in the chart below.
In Aluminum Extrusions, we hedge from time-to-time a portion of our exposure to natural gas price
volatility by entering into fixed-price forward purchase contracts with our natural gas suppliers. We estimate that, in
an unhedged situation, every $1 per mmBtu per month change in the market price of natural gas has a $75,000 impact
on the continuing monthly operating profit for our U.S. operations in Aluminum Extrusions. We have an energy
surcharge for our aluminum extrusions business in the U.S. that is applied when the previous quarter’s NYMEX
natural gas average settlement price is in excess of $8.85 per mmBtu. The volatility of quarterly average natural gas
prices is shown in the chart below.
36
Source: Quarterly averages computed by Tredegar using daily closing data provided by Bloomberg.133 132 122 117 130 139 127 83 62 68 82 91 98 95 95 107 114 119 109 95 99 90 87 91 Quarterly Average Price of Aluminum (U.S. Midwest Spot Price -Cents Per Pound)Source: Quarterly averages computed by Tredegar using monthly NYMEX settlement prices.6.77 7.55 6.16 6.97 8.03 12.10 8.36 6.94 4.89 3.50 3.39 4.17 5.30 4.09 4.38 3.80 4.11 4.31 4.19 3.55 2.74 2.22 2.81 3.40 Quarterly Average Price of Natural Gas (NYMEX Settlement Prices -$ Per mmBtu)
We sell to customers in foreign markets through our foreign operations and through exports from U.S. plants.
The percentage of sales and total assets for ongoing operations related to foreign markets for 2012, 2011 and 2010 are as
follows:
We attempt to match the pricing and cost of our products in the same currency and generally view the
volatility of foreign currencies (see trends for the Euro, Brazilian Real and Chinese Yuan in the chart below) and
emerging markets, and the corresponding impact on earnings and cash flow, as part of the overall risk of operating in a
global environment. Exports from the U.S. are generally denominated in U.S. Dollars. Our foreign currency exposure on
income from continuing foreign operations relates to the Euro, the Chinese Yuan, the Hungarian Forint, the Brazilian
Real and the Indian Rupee.
In Film Products, where we are primarily able to match the currency of our sales and costs, we estimate that
the change in value of foreign currencies relative to the U.S. Dollar had a negative impact on operating profit from
ongoing operations of approximately $1.4 million in 2012 compared to 2011, a positive impact on operating profit
from ongoing operations of approximately $1.8 million in 2011 compared with 2010, a negative impact of
approximately $1.3 million in 2010 compared with 2009.
For flexible packaging films produced in Brazil, we price our products in U.S. Dollars, and key raw materials
are also priced in U.S. Dollars. However, certain production costs, such as conversion costs and other fixed costs, are
priced in Brazilian Real, which exposes our operating margins to some currency exposure. In general, when the U.S.
Dollar is strengthening versus the Brazilian Real, operating results will benefit from relatively lower costs, and when
the U.S. Dollar is weakening versus the Brazilian Real, operating results will be negatively impacted from relatively
higher costs.
37
% Total% Total% TotalAssets -Assets -Assets -ExportsForeignForeignExportsForeignForeignExportsForeignForeignFromOper-Oper-FromOper-Oper-FromOper-Oper-U.S.ationsations *U.S.ationsations *U.S.ationsations *Canada5 - - 6 - - 7 - - Europe1 13 7 1 16 7 1 16 15 Latin America- 14 23 1 6 24 - 3 2 Asia7 4 4 7 4 4 10 5 7 Total % exposureto foreignmarkets13 31 34 15 26 35 18 24 24 *The percentages for foreign markets are relative to Tredegar's total net sales and total assets from ongoing operations(consolidated net sales and total assets from continuing operations excluding cash and cash equivalents).% of TotalTredegar Corporation - Continuing Ongoing OperationsPercentage of Net Sales and Total Assets Related to Foreign Markets% of TotalNet Sales *Net Sales *201220112010% of TotalNet Sales *
Trends for the Euro are shown in the chart below:
Trends for the Brazilian Real and Chinese Yuan are shown in the chart below:
Net sales and operating profit from ongoing operations are the measures of sales and operating profit used
by the chief operating decision maker for purposes of assessing performance.
Business Segment Review
Film Products
Net Sales. See the executive summary beginning on page 20 for the discussion of net sales (sales less freight) in Film
Products in 2012 compared with 2011.
In Film Products, net sales were $535.5 million in 2011, an increase of 2.8% from $520.7 million in 2010.
Volume decreased to 218.7 million pounds in 2011 from 221.2 million pounds in 2010. Net sales in 2011 increased
compared to 2010 due to the acquisition of Terphane and an increase in average selling prices from the pass-through
of higher average resin prices, partially offset by lower volume in surface protection films and personal care materials.
38
Source: Quarterly averages computed by Tredegar using daily closing data provided by Bloomberg. 0.90 1.10 1.30 1.50 1.70Quarterly Average Exchange Rates of Euro Relative to the U.S. DollarQuarterly Average of U.S. Dollar Equivalent of 1 EuroSource: Quarterly averages computed by Tredegar using daily closing data provided by Bloomberg. 0.1000 0.1100 0.1200 0.1300 0.1400 0.1500 0.1600 0.25 0.45 0.65 0.85Quarterly Avg. Exchange Rates of Brazilian Real & Chinese Yuan Relative to the U.S. DollarQuarterly Average of U.S. Dollar Equivalent of 1 Brazilian Real (Left Axis)Quarterly Average of U.S. Dollar Equivalent of 1 Chinese Yuan (Right Axis)
The slowdown in end-user demand for large-sized LCD panels, particularly in the high-end segment, negatively
impacted the volumes of our surface protection films. In addition, reduced consumer demand for applications that
utilize our premium personal care films also contributed to the reduction in sales volume. Terphane generated net
sales of $28.3 million subsequent to its acquisition in October 2011.
Operating Profit. See the executive summary beginning on page 20 for the discussion of operating profit in Film
Products in 2012 compared with 2011.
Operating profit from ongoing operations was $59.5 million in 2011, a decrease of 10.8% compared with
$66.7 million in 2010. Operating profit from ongoing operations decreased in 2011 compared to 2010 due to the
lower sales volumes in surface protection materials and personal care films. The impact of lower volumes was
partially offset by a reduction in the unfavorable impact of the lag in the pass-through of higher resin costs, additional
operating profits generated by the acquisition of Terphane, cost reduction efforts and improved manufacturing
efficiencies in 2011, and favorable changes in the U.S. dollar value of currencies for operations outside the U.S. The
estimated impact of the lag in the pass-through of changes in average resin costs was a negative $0.8 million in 2011
and a negative $6.4 million in 2010. The estimated favorable impact from U.S. dollar value currencies for operations
outside the U.S. was $1.8 million in 2011 compared with 2010. Terphane had operating profit of $3.0 million from
the acquisition date through December 31, 2011, which included $0.9 million of amortization expense and $0.9
million of one-time reimbursements for customs duties.
Identifiable Assets. Identifiable assets in Film Products decreased to $551.8 million at December 31, 2012, from
$574.6 million at December 31, 2011, due primarily to the depreciation of property, plant and equipment and
amortization of identifiable intangible assets, partially offset by current year capital expenditures. See the assets and
liabilities section beginning on page 29 for further discussion on changes in assets and liabilities.
Identifiable assets in Film Products increased to $574.6 million at December 31, 2011, from $368.9 million
at December 31, 2010, due primarily to the acquisition of Terphane.
Depreciation, Amortization and Capital Expenditures. Depreciation and amortization for Film Products was $39.2
million in 2012, $36.3 million in 2011 and $34.4 million in 2010. The increase in depreciation and amortization in
2012 compared with 2011 is primarily related to the acquisition of Terphane ($10.2 million in 2012 compared to $2.1
million in 2011), partially offset by lower depreciation expense as certain assets becoming fully depreciated. The
increase in depreciation and amortization in 2011 compared to 2010 is related to the acquisition of Terphane. We
estimate depreciation and amortization expense for Film Products will be approximately $37 million in 2013.
Capital expenditures totaled $30.5 million in 2012, $13.1 million in 2011 and $15.8 million in 2010.
Capital expenditures in 2012 include approximately $19.6 million for the project to expand capacity at our
manufacturing facility in Cabo de Santo Agosthino, Brazil. Capital expenditures in 2011 primarily included the
normal replacement of machinery and equipment. Capital expenditures in 2010 included the construction of our new
manufacturing facility in India as well as capital spending to support growth initiatives. Capital expenditures in 2013
are estimated to be approximately $80 million, which includes approximately $49 million in capital expenditures for a
project that will expand capacity at our manufacturing facility in Cabo de Santo Agosthino, Brazil.
Aluminum Extrusions (Continuing Operations)
Net Sales and Operating Profit. See the executive summary beginning on page 20 for the discussion of net sales (sales
less freight) and operating profit from ongoing operations of Aluminum Extrusions in 2012 compared with 2011.
Net sales in Aluminum Extrusions were $240.4 million in 2011, an increase of 20.4% from $199.6 million in
2010. Operating profit from ongoing operations was $3.5 million, a positive change of $7.7 million from operating losses
from ongoing operations of $4.2 million in 2010. Volume was 108.0 million pounds in 2011 compared to 94.9 million
pounds in 2010.
The increase in net sales was due to higher volumes and an increase in average selling prices driven by higher
average aluminum costs. Sales volume increased 13.8% in 2011 compared to 2010 as we developed new customer
opportunities and were able to support key customers who continue to demonstrate strength in a difficult business
environment. The improvement in results from ongoing operations in 2011 reflects higher volumes.
39
Identifiable Assets. Identifiable assets in Aluminum Extrusions were $129.3 million at December 31, 2012, $78.7
million at December 31, 2011 and $81.7 million at December 31, 2010. The increase in identifiable assets between
December 31, 2011 and December 31, 2012 can be primarily attributed to the acquisition of AACOA. The decrease of
$3.0 million at the end of 2011 compared to 2010 is mainly due to depreciation of property, plant and equipment and
lower capital expenditures in 2011.
Depreciation, Amortization and Capital Expenditures. Depreciation and amortization for Aluminum Extrusions was
$10.0 million in 2012, $8.3 million in 2011 and $9.1 million in 2010. The increase in 2012 compared to 2011 is
primarily attributed to approximately $2.4 million in accelerated depreciation on property, plant and equipment
associated with shutdown of the Kentland manufacturing facility and impact of the acquisition of AACOA ($1.0
million in additional depreciation and amortization expense in the fourth quarter of 2012), partially offset by certain
assets becoming fully depreciated and lower than normal capital expenditures in 2012, 2011 and the second half of
2010. The decrease between 2011 compared to 2010 is primarily attributed to certain assets becoming fully
depreciated and lower than normal capital expenditures in 2011 and the second half of 2010. We estimate
depreciation and amortization expense for Aluminum Extrusions to be approximately $8.5 million in 2013.
Capital expenditures totaled $2.3 million in 2012, $2.7 million in 2011 and $4.3 million in 2010. Capital
expenditures are estimated to be approximately $19 million in 2013, which includes approximately $15 million for an
18-month project that will expand our capacity at the manufacturing facility in Newnan, Georgia. This additional
capacity will primarily serve the automotive industry.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See discussion of “Quantitative and Qualitative Disclosures about Market Risk” beginning on page 34 in
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the index on page 44 for references to the report of the independent registered public accounting firm, the
consolidated financial statements and selected quarterly financial data.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
we carried out an evaluation, with the participation of our management, including our principal executive officer and
principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-
15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, our
principal executive officer and principal financial officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
40
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. Tredegar’s internal control over financial
reporting is designed to provide reasonable assurance to Tredegar’s management and board of directors regarding the
reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance
with U.S. generally accepted accounting principles and includes policies and procedures that:
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted accounting principles, and that our receipts and
expenditures are being made only in accordance with authorization of our management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the consolidated financial statements.
Internal control over financial reporting includes the controls themselves, monitoring (including internal
auditing practices) and actions taken to correct deficiencies as identified.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our internal control over financial reporting
based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. In conducting its assessment of the effectiveness of our internal controls
over financial reporting, management excluded its acquisition of AACOA, Inc., which was acquired by Tredegar on
October 1, 2012 and is included in Tredegar’s 2012 consolidated financial statements and constituted less than 8% of
consolidated total assets and less than 3% of consolidated total sales for the year then ended. Based on their
evaluation under the framework in Internal Control — Integrated Framework, our management concluded that our
internal control over financial reporting was effective as of December 31, 2012.
The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited
by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is
included on page 45.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended
December 31, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
Item 9B. OTHER INFORMATION
None.
41
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information concerning directors and persons nominated to become directors of Tredegar to be included in
our Proxy Statement under the headings “Election of Directors” and “Tredegar’s Board of Directors” is incorporated herein
by reference.
The information concerning corporate governance to be included in the Proxy Statement under the headings
“Board Meetings, Meetings of Non-Management Directors and the Board Committees” and “Corporate Governance” is
incorporated herein by reference.
The information to be included in the Proxy Statement under the heading “Section 16(a) Beneficial Ownership
Reporting Compliance” is incorporated herein by reference.
Set forth below are the names, ages and titles of our executive officers:
Name
Age
Title
Nancy M. Taylor
Duncan A. Crowdis
Mary Jane Hellyar
A. Brent King
Kevin A. O’Leary
Larry J. Scott
53
60
59
44
54
62
President and Chief Executive Officer
President, The William L. Bonnell Company, Inc. and Corporate Vice President
President, Tredegar Film Products Corporation and Corporate Vice President
Vice President, General Counsel and Corporate Secretary
Vice President, Chief Financial Officer and Treasurer
Vice President, Audit
Nancy M. Taylor. Ms. Taylor was elected President and Chief Executive Officer effective February 1, 2010. Prior to
February 1, 2010, Ms. Taylor was President of Tredegar Films Products Corporation and Executive Vice President.
She was elected Executive Vice President effective January 1, 2009. She was elected President of Tredegar Film
Products Corporation effective April 5, 2005. She was elected Senior Vice President effective November 1, 2004.
Ms. Taylor served as Senior Vice President, Strategy and Special Projects from November 1, 2004 until April 5, 2005.
Duncan A. Crowdis. As the Company has previously announced, Mr. Crowdis intends to retire effective June 1,
2013. Mr. Crowdis was elected Vice President of the Company effective January 1, 2009. Mr. Crowdis was elected
President of The William L. Bonnell Company, Inc. on June 13, 2005, and continues to serve in such capacity. Mr.
Crowdis served as Plant Manager of The William L. Bonnell Company, Inc. from March 2005 until June 2005. He
previously served as Chief Process Officer of The William L. Bonnell Company, Inc. from December 2002 until
March 2005.
Mary Jane Hellyar. Ms. Hellyar was elected Vice President of the Company and President of Tredegar Film
Products Corporation on September 24, 2012. Ms. Hellyar served as Chief Executive Officer of TechnoCorp Energy
OLED from September 2009 until returning to retirement in September 2010. She served as President of Eastman
Kodak Company’s Film Photofinishing and Entertainment Group from September 2005 until retiring from Kodak in
June 2009.
A. Brent King. Mr. King was elected Vice President, General Counsel and Corporate Secretary on October 20, 2008,
the date that he joined Tredegar. From October 2005 until October 2008, he served as General Counsel at Hilb Rogal
& Hobbs Company. Mr. King was Vice President and Assistant Secretary for Hilb Rogal & Hobbs Company from
October 2001 to October 2008. He served as Associate General Counsel for Hilb Rogal & Hobbs Company from
October 2001 to October 2005.
42
Kevin A. O’Leary. Mr. O’Leary was elected Vice President, Chief Financial Officer and Treasurer effective
December 11, 2009. He was appointed Vice President, Finance, of Tredegar Film Products Corporation, effective
January 1, 2009 until December 11, 2009 and served as Director, Finance, of Tredegar Film Products Corporation
from October 2008 until January 2009. Mr. O’Leary previously served as Vice President, Finance – Mergers and
Acquisitions of the Avery Dennison Retail Information Services Group (“Avery Dennison RIS”), a division of Avery
Dennison Corporation from March 2007 through August 2008. He served as General Manager of the Printer Systems
division of Avery Dennison RIS from February 2006 through February 2007 and as Director, Finance, of Avery
Dennison RIS from August 2004 through January 2006.
Larry J. Scott. Mr. Scott was elected Vice President, Audit, on May 24, 2000.
We have adopted a Code of Conduct that applies to all of our directors, officers and employees (including our
chief executive officer, chief financial officer and principal accounting officer) and have posted the Code of Conduct on
our website. All amendments to or waivers from any provision of our Code of Conduct applicable to the chief executive
officer, chief financial officer and principal accounting officer will be disclosed on our website. Our Internet address is
www.tredegar.com. The information on or that can be accessed through our website is not, and shall not be deemed to be,
a part of this report or incorporated into other filings we make with the SEC.
Item 11. EXECUTIVE COMPENSATION
The information to be included in the Proxy Statement under the headings “Compensation of Directors,”
“Board Meetings, Meetings of Non-Management Directors and Board Committees - Executive Compensation Committee
Interlocks and Insider Participation,” “Compensation Discussion and Analysis,” “Executive Compensation Committee
Report” and “Compensation of Executive Officers” is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information to be included in the Proxy Statement under the heading “Stock Ownership” is incorporated
herein by reference. The following table summarizes information with respect to equity compensation plans under which
securities are authorized for issuance as of December 31, 2012.
Column (a)
Column (b)
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
Column (c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans,
Excluding Securities
Reflected in Column (a)
*1,312,400
-
1,312,400
$17.81
-
$17.81
2,607,001
-
2,607,001
Plan Category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
* Includes performance stock units that give the holder the right to receive shares of Tredegar common stock upon the satisfaction of certain
performance criteria.
43
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information to be included in the Proxy Statement under the headings “Certain Relationships and Related
Transactions”, “Tredegar’s Board of Directors” and “Board Meetings, Meetings of Non-Management Directors and Board
Committees” is incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following is incorporated herein by reference:
Information on accounting fees and services to be included in the Proxy Statement under the heading “Audit Fees;”
and
Information on the Audit Committee’s procedures for pre-approving certain audit and non-audit services to be
included in the Proxy Statement under the heading “Board Meetings, Meetings of Non-Management Directors and
Board Committees - Audit Committee Matters.”
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a) List of documents filed as a part of the report:
(1)
Financial statements:
Tredegar Corporation
Index to Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Financial Statements:
Page
45
Consolidated Balance Sheets as of December 31, 2012
46
and 2011
Consolidated Statements of Income for the Years Ended
December 31, 2012, 2011 and 2010
Consolidated Statements of Comprehensive Income for the
Years Ended December 31, 2012, 2011 and 2010
47
48
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2012, 2011 and 2010
50
Consolidated Statements of Shareholders’ Equity for the
49
Years Ended December 31, 2012, 2011 and 2010
Notes to Financial Statements
51-84
(2)
Financial statement schedules:
None.
(3)
Exhibits:
See Exhibit Index on pages 91-93.
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Tredegar Corporation:
In our opinion, the accompanying balance sheets and related statements of income, comprehensive income, cash flows
and shareholders’ equity, present fairly, in all material respects, the financial position of Tredegar Corporation and its
subsidiaries (the “Company”) at December 31, 2012 and 2011, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). The Company's management is responsible for these financial statements, for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in “Management’s Report on Internal Control Over Financial Reporting” appearing under Item 9A.
Our responsibility is to express opinions on these financial statements and on the Company’s internal control over
financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
As described in “Management’s Report on Internal Control Over Financial Reporting”, management has excluded
AACOA, Inc. (“AACOA”) from its assessment of internal control over financial reporting as of December 31, 2012
because they were acquired by the Company in a business combination during 2012. We have also excluded AACOA
from our audit of internal controls over financial reporting. AACOA is a wholly-owned business whose total assets
and revenues represent approximately 8% and 2%, respectively of the related consolidated financial statement
amounts as of and for the year ended December 31, 2012.
/s/ PricewaterhouseCoopers LLP
Richmond, Virginia
March 1, 2013
45
46
CONSOLIDATED BALANCE SHEETSTredegar Corporation and SubsidiariesDecember 3120122011(In Thousands, Except Share Data)AssetsCurrent assets:Cash and cash equivalents48,822$ 68,939$ Accounts and other receivables, net of allowance for doubtfulaccounts and sales returns of $3,552 in 2012 and $3,539 in 2011100,237 97,785 Income taxes recoverable2,886 2,592 Inventories74,670 61,290 Deferred income taxes5,614 7,133 Prepaid expenses and other6,780 7,780 Current assets of discontinued operation- 343 Total current assets239,009 245,862 Property, plant and equipment, at cost:Land and land improvements12,537 19,118 Buildings110,961 106,237 Machinery and equipment625,655 620,360 Total property, plant and equipment749,153 745,715 Less accumulated depreciation495,736 488,464 Net property, plant and equipment253,417 257,251 Goodwill and other intangibles 241,180 223,432 Other assets and deferred charges49,559 36,886 Noncurrent assets of discontinued operation- 17,179 Total assets783,165$ 780,610$ Liabilities and Shareholders' EquityCurrent liabilities:Accounts payable82,067$ 72,884$ Accrued expenses42,514 40,888 Current liabilities of discontinued operation- 1,967 Total current liabilities124,581 115,739 Long-term debt128,000 125,000 Deferred income taxes60,773 70,769 Other noncurrent liabilities97,559 71,834 Noncurrent liabilities of discontinued operation- 361 Total liabilities410,913 383,703 Commitments and contingencies (Notes 16 and 19)Shareholders' equity:Common stock (no par value):Authorized 150,000,000 shares;Issued and outstanding - 32,069,370 sharesin 2012 and 32,057,281 in 2011 (including restricted stock)15,195 14,357 Common stock held in trust for savings restorationplan (64,654 shares in 2012 and 61,577 in 2011)(1,401) (1,343) Accumulated other comprehensive income (loss):Foreign currency translation adjustment131 11,693 Gain (loss) on derivative financial instruments993 (406) Pension and other postretirement benefit adjustments(103,471) (90,672) Retained earnings460,805 463,278 Total shareholders' equity372,252 396,907 Total liabilities and shareholders' equity783,165$ 780,610$ See accompanying notes to financial statements.
47
CONSOLIDATED STATEMENTS OF INCOMETredegar Corporation and SubsidiariesYears Ended December 31201220112010(In Thousands, Except Per-Share Data)Revenues and other:Sales882,188$ 794,420$ 738,200$ Other income (expense), net18,119 3,213 (1,182) 900,307 797,633 737,018 Costs and expenses:Cost of goods sold712,660 654,087 594,987 Freight24,846 18,488 17,812 Selling, general and administrative73,717 67,808 67,729 Research and development13,162 13,219 13,625 Amortization of intangibles5,806 1,399 466 Interest expense3,590 1,926 1,136 Asset impairments and costs associatedwith exit and disposal activities5,022 1,917 773 Total838,803 758,844 696,528 Income from continuing operations before income taxes61,504 38,789 40,490 Income taxes18,319 10,244 13,649 Income from continuing operations43,185 28,545 26,841 Income (loss) from discontinued operations,net of tax(14,934) (3,690) 186 Net income28,251 $ 24,855 $ 27,027 $ Earnings (loss) per share:Basic:Continuing operations1.35 $ .89 $ .83 $ Discontinued operations(.47) (.12) .01 Net income.88 $ .77 $ .84 $ Diluted:Continuing operations1.34 $ .89 $ .82 $ Discontinued operations(.46) (.12) .01 Net income.88 $ .77 $ .83 $ See accompanying notes to financial statements.
48
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETredegar Corporation and SubsidiariesYears Ended December 31201220112010(In Thousands, Except Per-Share Data)Net income28,251$ 24,855$ 27,027$ Other comprehensive income (loss):Foreign currency translation adjustment:Unrealized foreign currency translation adjustment net of tax of $897 in 2012 and tax benefit of $505 in 2011 and $1,443 in 2010)(11,562) (9,098) (2,678) Reclassification adjustment of foreign currencytranslation gain included in income (net oftax of $1,497 in 2011)- (2,781) - Derivative financial instruments adjustment (net oftax of $818 in 2012, a tax benefit of $423 in 2011and $287 in 2010)1,399 (686) (478) Pension & other post-retirement benefit adjustmentsNet gains or losses and prior service costs (net oftax benefit of $11,145 in 2012, $20,032 in 2011and $2,135 in 2010)(19,285) (34,664) (2,838) Amortization of prior service costs and net gains or losses (net of tax of $3,749 in 2012, $2,232in 2011 and $1,732 in 2010)6,486 3,863 2,995 Other comprehensive income (loss)(22,962) (43,366) (2,999) Comprehensive income (loss)5,289 $ (18,511) $ 24,028 $ See accompanying notes to financial statements.
49
CONSOLIDATED STATEMENTS OF CASH FLOWSTredegar Corporation and SubsidiariesYears Ended December 31201220112010(In Thousands)Cash flows from operating activities:Net income28,251 $ 24,855 $ 27,027 $ Adjustments for noncash items:Depreciation43,463 43,336 43,122 Amortization of intangibles5,806 1,399 466 Deferred income taxes(762) 2,108 (6,392) Accrued pension and postretirement benefits8,311 2,481 1,125 (Gain) loss on an investment accounted for under the fairvalue method(16,100) (1,600) 2,200 (Gain) loss on sale of assets1,219 (653) (15) Loss on asset impairments 2,185 1,376 608 Changes in assets and liabilities, net of effects of acquisitionsand divestitures:Accounts and notes receivables9,454 (4,737) (10,981) Inventories(9,913) 2,410 (7,717) Income taxes recoverable3,193 (1,254) (2,627) Prepaid expenses and other1,883 (271) (969) Accounts payable and accrued expenses9,105 (282) 2,942 Other, net(3,509) 2,597 (2,380) Net cash provided by operating activities82,586 71,765 46,409 Cash flows from investing activities:Acquisitions, net of cash acquired(57,936) (180,975) (5,500) Capital expenditures (33,252) (15,880) (20,418) Net proceeds from the sale of Fallings Springs, LLC12,071 - - Proceeds from the sale of assets and other3,557 1,622 3,768 Net cash used in investing activities(75,560) (195,233) (22,150) Cash flows from financing activities:Borrowings93,250 125,000 - Debt principal payments and financing costs(91,604) (89) (2,815) Dividends paid(30,782) (5,761) (5,141) Repurchases of Tredegar common stock - - (35,141) Proceeds from exercise of stock options and other2,400 1,242 980 Net cash provided by (used in) financing activities(26,736) 120,392 (42,117) Effect of exchange rate changes on cash(407) (1,176) 386 Increase (decrease) in cash and cash equivalents(20,117) (4,252) (17,472) Cash and cash equivalents at beginning of period68,939 73,191 90,663 Cash and cash equivalents at end of period48,822 $ 68,939 $ 73,191 $ Supplemental cash flow information:Interest payments2,992 $ 1,966 $ 911 $ Income tax payments (refunds), net14,721 8,594 23,539 See accompanying notes to financial statements.
50
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITYTredegar Corporation and SubsidiariesGainPension &Trust forForeign(Loss) onOther Post-TotalSavingsCurrencyDerivativeretirementShare-RetainedRestora-Trans-FinancialBenefitholders'SharesAmountEarningstion PlanlationInstrumentsAdjust.Equity(In Thousands, Except Share and Per-Share Data)Balance January 1, 201033,887,550 41,137$ 422,277$ (1,322)$ 26,250$ 758$ (60,028)$ 429,072$ Net income- - 27,027 - - - - 27,027 Foreign currency translation adjustment (net of tax benefit of $1,443)- - - - (2,678) - - (2,678) Derivative financial instruments adjustment (net of tax benefit of $287)- - - - - (478) - (478) Net gains or losses and prior servicecosts (net of tax benefit of $2,135)- - - - - - (2,838) (2,838) Amortization of prior service costs and net gains or losses (net of tax of $1,732)- - - - - - 2,995 2,995 Cash dividends declared ($.16 per share)- - (5,141) - - - - (5,141) Stock-based compensation expense55,298 3,952 - - - - - 3,952 Issued upon exercise of stock options (includingrelated income tax of $204) & other65,225 776 - - - - - 776 Repurchases of Tredegar common stock(2,124,900) (35,141) - - - - - (35,141) Tredegar common stock purchased by trustfor savings restoration plan- - 10 (10) - - - - Balance December 31, 201031,883,173 10,724 444,173 (1,332) 23,572 280 (59,871) 417,546 Net income- - 24,855 - - - - 24,855 Foreign currency translation adjustment (net of tax benefit of $2,002)- - - - (11,879) - - (11,879) Derivative financial instruments adjustment (net of tax benefit of $423)- - - - - (686) - (686) Net gains or losses and prior servicecosts (net of tax benefit of $20,032)- - - - - - (34,664) (34,664) Amortization of prior service costs and net gains or losses (net of tax of $2,232)- - - - - - 3,863 3,863 Cash dividends declared ($.18 per share)- - (5,761) - - - - (5,761) Stock-based compensation expense119,698 2,897 - - - - - 2,897 Issued upon exercise of stock options (includingrelated income tax benefit of $76) & other54,410 736 - - - - - 736 Tredegar common stock purchased by trustfor savings restoration plan- - 11 (11) - - - - Balance December 31, 201132,057,281 14,357 463,278 (1,343) 11,693 (406) (90,672) 396,907 Net income- - 28,251 - - - - 28,251 Foreign currency translation adjustment(net of tax of $897)- - - - (11,562) - - (11,562) Derivative financial instruments adjustment (net of tax of $818)- - - - - 1,399 - 1,399 Net gains or losses and prior servicecosts (net of tax benefit of $11,145)- - - - - - (19,285) (19,285) Amortization of prior service costs and net gains or losses (net of tax of $3,749)- - - - - - 6,486 6,486 Cash dividends declared ($.96 per share)- - (30,782) (30,782) Stock-based compensation expense78,299 2,516 - - - - - 2,516 Issued upon exercise of stock options (includingrelated income tax benefit of $144) & other143,366 2,031 - - - - - 2,031 Shares received from the sale of FallingSprings, LLC(209,576) (3,709) - - - - - (3,709) Tredegar common stock purchased by trustfor savings restoration plan- - 58 (58) - - - - Balance December 31, 201232,069,370 15,195$ 460,805$ (1,401)$ 131$ 993$ (103,471)$ 372,252$ See accompanying notes to financial statements.Common Stock Accumulated Other Comprehensive Income (Loss)
NOTES TO FINANCIAL STATEMENTS
Tredegar Corporation and Subsidiaries
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations. Tredegar Corporation and subsidiaries (collectively “Tredegar,” “we,” “us”
or “our”) are primarily engaged in the manufacture of plastic films and aluminum extrusions. See Notes 10 and 18
regarding restructurings and Note 3 regarding discontinued operations.
Basis of Presentation. The consolidated financial statements include the accounts and operations of Tredegar and all
of its majority-owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation.
On February 12, 2008, we sold our aluminum extrusions business in Canada, and on November 20, 2012, we sold our
mitigation banking business, Falling Springs, LLC (“Falling Springs”). All historical results for these businesses have
been reflected as discontinued operations in these financial statements; however, cash flows for discontinued
operations have not been separately disclosed in the consolidated statements of cash flows. See Note 3 regarding
discontinued operations.
The preparation of financial statements in conformity with United States (“U.S.”) generally accepted
accounting principles (“U.S. GAAP”) requires us to make estimates and assumptions that affect the reported amounts
of revenues, expenses, assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements. Actual results could differ from those estimates.
Foreign Currency Translation. The financial statements of subsidiaries located outside the U.S., where the local
currency is the functional currency, are translated into U.S. Dollars using exchange rates in effect at the period end for
assets and liabilities and average exchange rates during each reporting period for results of operations. Adjustments
resulting from the translation of these financial statements are reflected as a separate component of shareholders’
equity. We have no subsidiaries located outside the U.S. where the U.S. Dollar is the functional currency.
Transaction and remeasurement gains or losses included in income were not material in 2012, 2011 and 2010.
These amounts do not include the effects between reporting periods that exchange rate changes have on income of our
locations outside the U.S. that result from translation into U.S. Dollars.
Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand in excess of daily operating
requirements and highly liquid investments with original maturities of three months or less. At December 31, 2012
and 2011, Tredegar had cash and cash equivalents of $48.8 million and $68.9 million, respectively, including funds
held in locations outside the U.S. of $28.6 million and $42.3 million, respectively.
Our policy permits investment of excess cash in marketable securities that have the highest credit ratings and
maturities of less than one year. The primary objectives of the policy are safety of principal and liquidity.
Accounts and Other Receivables. Accounts receivable are stated at the amount invoiced to customers less allowances
for doubtful accounts and sales returns. Accounts receivable are non-interest bearing and arise from the sale of
product to customers under typical industry trade terms. Notes receivable are not significant. Past due amounts are
determined based on established terms and charged-off when deemed uncollectible. The allowance for doubtful
accounts is determined based on our assessment of probable losses taking into account past due amounts, customer
credit profile, historical experience and current economic conditions. Other receivables include value-added taxes
related to certain foreign subsidiaries and other miscellaneous receivables due within one year.
Inventories. Inventories are stated at the lower of cost or market, with cost determined on the last-in, first-out
(“LIFO”) basis, the weighted average cost or the first-in, first-out basis. Cost elements included in work-in-process
and finished goods inventories are raw materials, direct labor and manufacturing overhead.
Property, Plant and Equipment. Accounts include costs of assets constructed or purchased, related delivery and
installation costs and interest incurred on significant capital projects during their construction periods. Expenditures
for renewals and betterments also are capitalized, but expenditures for repairs and maintenance are expensed as
incurred. The cost and accumulated depreciation applicable to assets retired or sold are removed from the respective
51
accounts, and gains or losses thereon are included in income.
Capital expenditures for property, plant and equipment include capitalized interest. Capitalized interest
included in capital expenditures for property, plant and equipment were not material in 2012, 2011 and 2010.
Depreciation is computed primarily by the straight-line method based on the estimated useful lives of the
assets, which except for certain isolated exceptions, range from 10 to 25 years for buildings and land improvements
and 2 to 15 years for machinery and equipment. The average depreciation period for machinery and equipment is
approximately 10 years in Film Products and for the continuing operations of Aluminum Extrusions.
Investments in Private Entities with Less Than or Equal to 50% Voting Ownership Interest. We account for our
investments in private entities where our voting ownership is less than or equal to 50% based on the facts and
circumstances surrounding the investment. We are required to account for investments under the consolidation
method in situations where we are the primary beneficiary of a variable interest entity. The primary beneficiary is the
party that has a controlling financial interest in a variable interest entity. We are deemed to have a controlling
financial interest if we have (i) the power to direct activities of the variable interest entity that most significantly
impact its economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the
variable interest entity that could potentially be significant to its operations.
If we are not deemed to be the primary beneficiary in an investment in a variable interest entity then we select
either: (i) the fair value method or (ii) either (a) the cost method if we do not have significant influence over operating
and financial policies of the investee or (b) the equity method if we do have significant influence.
U.S. GAAP requires disclosure of the level within the fair value hierarchy in which fair value measurements
in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or
liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3).
Goodwill and Other Intangibles. The excess of the purchase price over the fair value of identifiable net assets of
acquired companies is allocated to goodwill. We assess goodwill for impairment when events or circumstances
indicate that the carrying value may not be recoverable, or, at a minimum, on an annual basis (December 1st of each
year). Our significant reporting units in Film Products include Polyethylene and Polypropylene Films and PET Films.
We have two reporting units in Aluminum Extrusions, Bonnell and AACOA. All goodwill in Aluminum Extrusions is
associated with the AACOA reporting unit. Each of our reporting units has separately identifiable operating net assets
(operating assets including goodwill and intangible assets net of operating liabilities).
We estimate the fair value of our reporting units using discounted cash flow analysis and comparative
enterprise value-to-EBITDA (earnings before interest, taxes, depreciation and amortization) multiples. The goodwill
of Polyethylene and Polypropylene Films was tested for impairment at the annual testing date, with the estimated fair
value of this reporting unit substantially exceeding the carrying value of its net assets. The goodwill of PET Films was
also tested for impairment at December 1, 2012, with the estimated fair value of this reporting unit exceeding the
carrying value of its net assets by approximately 23%. The goodwill of AAOCA is associated with the October 2012
acquisition of AACOA, Inc. (“AACOA”), and carrying value of its net assets approximate the estimated fair value of
this reporting unit at December 1, 2012.
Impairment of Long-Lived Assets. We review long-lived assets for possible impairment when events indicate that an
impairment may exist. For assets to be held and used in operations, if events indicate that an asset may be impaired,
we estimate the future unlevered pre-tax cash flows expected to result from the use of the asset and its eventual
disposition. Assets are grouped for this purpose at the lowest level for which there are identifiable and independent
cash flows. If the sum of these undiscounted pre-tax cash flows is less than the carrying amount of the asset, an
impairment loss is calculated. Measurement of the impairment loss is the amount by which the carrying amount
exceeds the estimated fair value of the asset group.
Assets that are held for sale are reported at the lower of their carrying amount or estimated fair value less cost
to sell, with an impairment loss recognized for any write-down required.
Pension Costs and Postretirement Benefit Costs Other than Pensions. Pension costs and postretirement benefit costs
other than pensions are accrued over the period employees provide service to Tredegar. Liabilities and expenses for
52
pension plans and other postretirement benefits are determined using actuarial methodologies and incorporate
significant assumptions, including the rate used to discount the future estimated liability, the long-term rate of return
on plan assets, and several assumptions relating to the employee workforce. We recognize the funded status of our
pension and other postretirement plans in the accompanying consolidated balance sheets. Our policy is to fund our
pension plans at amounts not less than the minimum requirements of the Employee Retirement Income Security Act
(“ERISA”) of 1974 and to fund postretirement benefits other than pensions when claims are incurred.
Revenue Recognition. Revenue from the sale of products, which is shown net of estimated sales returns and
allowances, is recognized when title has passed to the customer, the price of the product is fixed and determinable, and
collectability is reasonably assured. Amounts billed to customers related to freight have been classified as sales in the
accompanying consolidated statements of income. The cost of freight has been classified as a separate line in the
accompanying consolidated statements of income. Taxes assessed by a governmental authority that are both imposed
on and concurrent with a specific revenue-producing transaction between Tredegar and its customers (such as value-
added taxes) are accounted for on a net basis and therefore excluded from revenues.
Research & Development (“R&D”) Costs. R&D costs are expensed as incurred and include primarily salaries,
wages, employee benefits, equipment depreciation, facility costs and the cost of materials consumed relating to R&D
efforts. R&D costs include a reasonable allocation of indirect costs.
Income Taxes. Income taxes are recognized during the period in which transactions enter into the determination of
income for financial reporting purposes, with deferred income taxes being provided at enacted statutory tax rates on
the differences between the financial reporting and tax bases of assets and liabilities (see Note 17). Deferred U.S.
federal income taxes have not been provided on the undistributed earnings for Terphane Ltda. (a subsidiary of Film
Products) because of our intent to permanently reinvest these earnings. The cumulative amount of untaxed earnings
was $23.0 million at December 31, 2012. We accrue U.S. federal income taxes on unremitted earnings of all other
foreign subsidiaries. The benefit of an uncertain tax position is included in the accompanying financial statements
when we determine that it is more likely than not that the position will be sustained, based on the technical merits of
the position, if the taxing authority examines the position and the dispute is litigated. This determination is made on
the basis of all the facts, circumstances and information available as of the reporting date.
Earnings Per Share. Basic earnings per share is computed using the weighted average number of shares of common
stock outstanding. Diluted earnings per share is computed using the weighted average common and potentially
dilutive common equivalent shares outstanding, determined as follows:
Incremental shares attributable to stock options and restricted stock are computed using the average market
price during the related period. During 2012, 2011 and 2010, the average out-of-the-money options to purchase shares
that were excluded from the calculation of incremental shares attributable to stock options and restricted stock was
632,050, 293,704 and 324,558, respectively.
Stock-Based Employee Compensation Plans. Compensation expense is recorded on all share-based awards based
upon its calculated fair value over the requisite service period using the graded-vesting method. The fair value of
stock option awards was estimated as of the grant date using the Black-Scholes options-pricing model. The fair value
of restricted stock awards was estimated as of the grant date using our closing stock price on that date.
53
2012 2011 2010 Weighted average shares outstanding used tocompute basic earnings per share32,032,343 31,931,962 32,291,556 Incremental shares attributable to stockoptions and restricted stock160,233 281,212 280,565 Shares used to compute diluted earningsper share32,192,576 32,213,174 32,572,121
The assumptions used in this model for valuing Tredegar stock options granted in 2012, 2011 and 2010 are as
follows:
The dividend yield is the dividend yield on our common stock at the date of grant, which we believe is a
reasonable estimate of the expected yield during the holding period. We calculate expected volatility based on the
historical volatility of our common stock using a sequential period of historical data equal to the expected holding
period of the option. We have no reason to believe that future volatility for this period is likely to differ from the past.
The assumed risk-free interest rate is based on observed interest rates (zero coupon U.S. Treasury debt securities)
appropriate for the expected holding period. The expected holding period and forfeiture assumptions are based on
historical experience. Estimated forfeiture assumptions are reviewed through the vesting period. Adjustments are
made if actual forfeitures differ from previous estimates. The cumulative effect of a change in estimated forfeitures is
recognized in the period of the change.
Tredegar stock options granted during 2012, 2011 and 2010, and related estimated fair value at the date of
grant, are as follows:
Additional disclosure of Tredegar stock options is included in Note 13.
Financial Instruments. We use derivative financial instruments for the purpose of hedging aluminum price volatility
and currency exchange rate exposures that exist as part of transactions associated with our ongoing business
operations. Our derivative financial instruments are designated as and qualify as cash flow hedges and are recognized
in the accompanying balance sheet at fair value. A change in the fair value of the derivative that is highly effective as
and that is designated and qualifies as a cash flow hedge is recorded in other comprehensive income. Gains and losses
reported in other comprehensive income (loss) are reclassified to earnings in the periods in which earnings are affected
by the variability of cash flows of the hedged transaction. Such gains and losses are reported on the same line as the
underlying hedged item, and the cash flows related to financial instruments are classified in the consolidated
statements of cash flows in a manner consistent with those of the transactions being hedged. Any hedge
ineffectiveness (which represents the amount by which the changes in the fair value of the derivative exceed the
variability in the cash flows of the forecasted transaction) is recorded in current period earnings. The amount of gains
and losses recognized for hedge ineffectiveness were not material in 2012, 2011 and 2010.
54
2012 2011 2010 Dividend yield.9%.9%.9%Weighted average volatility percentage48.7%46.4%46.6%Weighted average risk-free interest rate1.0%2.5%2.7%Holding period (years):Officers6.0 6.0 6.0 Management5.0 5.0 5.0 Weighted average excercise price at dateof grant (also weighted average marketprice at date of grant):Officers19.30$ 19.84$ 17.18$ Management19.40 19.73 17.13 2012 2011 2010 Stock options granted (number of shares):Officers99,600 140,500 190,000 Management82,500 95,300 126,000 Total182,100 235,800 316,000 Estimated weighted average fair value ofoptions per share at date of grant:Officers8.07$ 8.55$ 7.47$ Management7.81 8.03 7.00 Total estimated fair value of stockoptions granted (in thousands)1,449$ 1,966$ 2,301$
Our policy requires that we formally document all relationships between hedging instruments and hedged
items, as well as our risk management objective and strategy for undertaking various hedge transactions. We also
formally assess (both at the hedge’s inception and on an ongoing basis) whether the derivatives that are used in
hedging transactions have been highly effective in offsetting changes in the fair value or cash flows of hedged items
and whether those derivatives may be expected to remain highly effective in future periods. When it is determined
that a derivative is not (or has ceased to be) highly effective as a hedge, we discontinue hedge accounting
prospectively.
As a policy, we do not engage in speculative or leveraged transactions, nor do we hold or issue financial
instruments for trading purposes. Additional disclosure of our utilization of derivative hedging instruments is included
in Note 9.
Comprehensive Income (Loss). Comprehensive income (loss) is defined as net income or loss and other
comprehensive income or loss. Other comprehensive income (loss) includes changes in foreign currency translation
adjustments, unrealized gains and losses on derivative financial instruments, prior service costs and net gains or losses
from pension and other postretirement benefit plans arising during the period and amortization of these prior service
costs and net gains or losses adjustments, all recorded net of deferred income taxes.
Recently Issued Accounting Standards. In July 2012, the Financial Accounting Standards Board (“FASB”) issued
updated guidance for testing indefinite-lived intangible assets for impairment. The revised standard provides entities
with an option to perform a “qualitative” assessment to determine whether further testing is necessary when
performing an annual impairment assessment for indefinite-lived intangible assets other than goodwill. This new
standard is comparable to the guidance finalized last year for goodwill impairment testing. An entity can still choose
to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to the
quantitative impairment test. The revised standard is effective for annual and interim impairment tests performed for
fiscal years beginning after September 15, 2012. We do not expect that this FASB accounting standard will have a
material impact on our financial statements and disclosures.
2
ACQUISITIONS
On October 1, 2012, The William L. Bonnell Company, Inc. acquired 100% ownership of AACOA.
AACOA operates production facilities in Elkhart, Indiana and Niles, Michigan. Its primary markets include consumer
durables, machinery and equipment and transportation. The acquisition will add fabrication capabilities to Aluminum
Extrusions’ current array of products and services while providing AACOA with large press capabilities and enhanced
geographic sales coverage in a variety of end-use markets.
After certain post-closing adjustments (primarily related to working capital transferred), the purchase price,
net of cash acquired, was $54.6 million. The purchase price was funded using financing secured from our existing
$350 million revolving credit facility.
55
Based upon management’s preliminary valuation of the fair value of tangible and intangible assets acquired
(net of cash acquired) and liabilities assumed, the preliminary estimated purchase price allocation is as follows:
The goodwill and other intangible asset balances associated with this acquisition will be deductible for tax
purposes. Intangible assets acquired in the purchase of AACOA are being amortized over the following periods:
The final purchase price continues to be subject to certain post-closing contractual adjustments. If
information becomes available that would indicate adjustments are required to the purchase price or the purchase price
allocation prior to the end of the measurement period for finalizing the purchase price allocation, such adjustments will
be included in the purchase price allocation retrospectively.
On October 14, 2011, TAC Holdings, LLC (the “Buyer”) and Tredegar Film Products Corporation, which are
indirect and direct, respectively, wholly-owned subsidiaries of Tredegar, entered into a Membership Interest Purchase
Agreement (the “Purchase Agreement”) with Gaucho Holdings, B.V. (the “Seller”) an indirect, wholly-owned
subsidiary of Vision Capital Partners VII LP (“Vision Capital”). On October 24, under the terms of the Purchase
Agreement, the Buyer acquired from the Seller 100% of the outstanding equity interests of Terphane Holdings, LLC
(“Terphane”).
Terphane operates manufacturing facilities in Cabo de Santo Agostinho, Brazil and Bloomfield, New York.
It is a producer of thin polyester films in Latin America with a growing presence in strategic niches in the U.S.
Polyester films have specialized properties, such as heat resistance and barrier protection, that make them uniquely
suited for the fast-growing flexible packaging market. We expect that the acquisition of Terphane will allow us to
extend our product offerings into adjacent specialty films markets and to expand in Latin America.
All post-closing adjustments related to the purchase price for Terphane have been resolved in 2012.
Adjustments to the purchase price were made retrospectively as if the accounting had been completed on the
acquisition date. Upon completing these post-closing adjustments, which were primarily related to working capital
transferred, the total purchase price (net of cash acquired) was $182.7 million. The purchase price was funded using
available cash (net of cash received) of approximately $57.7 million and financing of $125 million secured from
Tredegar’s former revolving credit facility.
56
(In Thousands)Accounts receivable12,477$ Inventories4,708 Property, plant & equipment15,116 Identifiable intangible assets: Customer relationships4,800 Trade names 4,800 Proprietary technology3,400 Noncompete agreements1,600 Other assets (current & noncurrent)42 Trade payables & accrued expenses(6,574) Total identifiable net assets40,369 Purchase price, net of cash received54,625 Goodwill14,256$ Identifiable Intangible AssetUseful Life (Yrs)Customer relationships10Proprietary technology6-10Trade names IndefiniteNoncompete agreements2
Based upon management’s valuation of the fair value of tangible and intangible assets acquired (net of cash
acquired) and liabilities assumed, the final estimated purchase price allocation is as follows:
None of the goodwill or other intangible assets will be deductible for tax purposes. Intangible assets acquired
in the purchase of Terphane are being amortized over the following periods:
The financial position and results of operations for AACOA have been consolidated with Tredegar
subsequent to October 1, 2012. For the year ended December 31, 2012, the consolidated results of operations included
sales of $19.9 million and net income from continuing operations of $1.0 million related to AACOA. The financial
position and results of operations for Terphane have been consolidated with Tredegar subsequent to October 24, 2011.
For the year ended December 31, 2012 and 2011, the consolidated results of operations included sales of $143.3
million and $29.2 million, respectively, and net income from continuing operations of $17.4 million and $2.0 million,
respectively, related to Terphane.
The following unaudited supplemental pro forma data presents our consolidated revenues and earnings as if
the acquisitions of Terphane and AACOA had been consummated on January 1, 2011. The pro forma results are not
necessarily indicative of our consolidated revenues and earnings if the acquisition and related borrowing had been
consummated on January 1, 2011. Supplemental unaudited pro forma results for the years ended December 31, 2012
and 2011 are as follows:
57
(In Thousands)Accounts receivable14,321$ Inventories23,437 Property, plant & equipment86,963 Identifiable intangible assets: Customer relationships32,600 Proprietary technology14,700 Trade names 9,400 Noncompete agreements2,300 Other assets (current & noncurrent)3,680 Trade payables(17,471) Other liabilities (current & noncurrent)(12,216) Deferred taxes(38,167) Total identifiable net assets119,547 Purchase price, net of cash received182,761 Goodwill63,214$ Identifiable Intangible AssetUseful Life (Yrs)Customer relationships12Proprietary technology10Trade names IndefiniteNoncompete agreements2.(In Thousands, Except Per Share Data)20122011Sales946,594$ 1,009,601$ Income from continuing operations44,816 43,407 Earnings per share from continuing operations: Basic1.40$ 1.36$ Diluted1.39 1.35
The above supplemental unaudited pro forma amounts reflect the application of the following adjustments in order to
present the consolidated results as if the acquisitions and related borrowings had occurred on January 1, 2011:
Adjustment for additional depreciation and amortization expense associated with the adjustments to property,
plant and equipment, and intangible assets associated with purchase accounting;
Additional interest expense and financing fees associated with borrowing arrangements used to fund the
acquisitions of Terphane and AACOA and the elimination of historical interest expense associated with
historical borrowings of Terphane and AACOA that were not assumed by Tredegar;
Adjustments to eliminate transactions-related expenses associated with the October 2011 acquisition of
Terphane and the October 2012 acquisition of AACOA;
Adjustments related to the elimination of foreign currency remeasurement gains associated with long-term
borrowings of Terphane that were not assumed by Tredegar;
Adjustments for the estimated net income tax benefit associated with the previously described adjustments;
and
Adjustments to income tax expense for AACOA as it had previously elected to be treated as an S-Corp for
federal income tax purposes.
On February 3, 2010, we purchased the assets of Bright View Technologies Corporation (“Bright View”) for
$5.5 million. Bright View is a developer and producer of high-value microstructure-based optical films for the LED
(light emitting diode) and fluorescent lighting markets. The primary identifiable intangible assets purchased in the
transaction were patented and unpatented technology, which are being amortized over a weighted average period of 12
years.
3
DISCONTINUED OPERATIONS
On November 20, 2012, Tredegar Real Estate Holdings, Inc., a wholly-owned subsidiary, sold its
membership interests in Falling Springs to Arc Ventures, LC for $16.6 million. Arc Ventures, LC is a Virginia limited
liability company affiliated with John D. Gottwald, a member of our Board of Directors. The purchase price was
comprised of $12.8 million of cash and 209,576 shares of common stock of Tredegar owned by Arc Ventures, LC.
The corresponding loss on sale of $3.1 million, which includes transaction-related expenses of $0.5 million, and the
results of operations related to Falling Springs have been classified as discontinued operations for all periods
presented. For the years ended December 31, 2012, 2011 and 2010, sales of $3.2 million, $3.2 million and $2.3
million, respectively, have been reclassified to discontinued operations, and net income of $0.5 million, $0.7 million
and $0.2 million have been reclassified to discontinued operations in 2012, 2011 and 2010, respectively. Falling
Springs was formerly a component of the Other segment.
On February 12, 2008, we sold our aluminum extrusions business in Canada for approximately $25.0 million
to an affiliate of H.I.G. Capital. In 2012 and 2011, accruals of $13.4 million ($13.4 million net of tax) and $4.4
million ($4.4 million net of tax) were made for indemnifications under the purchase agreement related to
environmental matters.
All historical results for these businesses as well as the assets and liabilities included in the historical
statements of positions have been reflected as discontinued operations; however, cash flows for discontinued
operations have not been separately disclosed in the consolidated statements of cash flows.
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4
INVESTMENTS
In August 2007 and December 2008, we made an aggregate investment of $7.5 million in Intelliject, Inc.
(“Intelliject”), a privately held specialty pharmaceutical company. Intelliject seeks to set a new standard in
drug/device combination pharmaceuticals designed to enable superior treatment outcomes, improved cost
effectiveness and intuitive patient administration. Our ownership interest on a fully diluted basis is approximately
20%, and the investment is accounted for under the fair value method. At the time of our initial investment, we
elected the fair value option over the equity method of accounting since our investment objectives were similar to
those of venture capitalists, which typically do not have controlling financial interests. We recognized an unrealized
gain of $16.1 million ($10.2 million after taxes) in 2012 attributed to various factors, most notably:
a favorable adjustment to the timing and amount of anticipated cash flows derived from updated marketing
research;
the passage of time as anticipated cash flows associated with achieving product development
commercialization milestones are discounted at 55% for their high degree of risk; and
a reduction in the weighted average cost of capital used to discount cash flows in our valuation in the first
quarter to reflect the completion of certain process testing and a reassessment of the risk associated with the
timing for obtaining final marketing approval from the U.S. Food and Drug Administration (“FDA”) for the
company’s first product.
We recognized an unrealized gain of $1.6 million ($1.0 million after taxes) in 2011 attributed to the appreciation of
our interest upon changes in the market dynamics and pricing associated with an upcoming product introduction and
the addition of projects to the product pipeline. In 2010, we recognized an unrealized loss of $2.2 million ($1.4
million after taxes) for the estimated changes in the fair value of our investment after Intelliject, which had its new
drug application to the FDA accepted for review during the fourth quarter, reassessed its projected timeframe for
obtaining final marketing approval from the FDA. Unrealized gains (losses) associated with this investment are
included in “Other income (expense), net” in the consolidated statements of income and separately stated in the
segment operating profit table in Note 5.
At December 31, 2012 and 2011, the estimated fair value of our investment (included in “Other assets and
deferred charges” in the consolidated balance sheets) was $33.7 million and $17.6 million, respectively. Subsequent to our
most recent investment (December 15, 2008), and until the next round of financing, we believe fair value estimates are
based upon Level 3 inputs since there is no secondary market for our ownership interest. In addition, Intelliject did not
have any product sales as of December 31, 2012. Their first product launched in the first quarter of 2013. Accordingly,
until the next round of financing or any other significant financial transaction, value estimates will primarily be based on
assumptions relating to meeting product development and commercialization milestones, cash flow projections
(projections of development and commercialization milestone payments, sales, costs, expenses, capital expenditures and
working capital investment) and discounting of these factors for the high degree of risk. As a result, any future changes in
the estimated fair value of our ownership interest will likely be attributed to a new round of financing, a merger or initial
public offering or adjustments to the timing or magnitude of cash flows associated with development and
commercialization milestones. If Intelliject does not meet its development and commercialization milestones and there are
indications that the amount or timing of its projected cash flows or related risks are unfavorable versus our most recent
valuation, or a new round of financing or other significant financial transaction indicates a lower enterprise value, then our
estimate of the fair value of our ownership interest in the company is likely to decline. Adjustments to the estimated fair
value of our investment will be made in the period upon which such changes can be quantified.
The fair market valuation of our interest in Intelliject is sensitive to changes in the weighted average cost of
capital used to discount cash flow projections for the high degree of risk associated with meeting development and
commercialization milestones as anticipated. The weighted average cost of capital used in the fair market valuation of our
interest in Intelliject was 55% at December 31, 2012 and 60% at December 31, 2011. At December 31, 2012, the effect of
a 500 basis point decrease in the weighted average cost of capital assumption would have further increased the fair value of
our interest in Intelliject by approximately $6 million, and a 500 basis point increase in the weighted average cost of capital
assumption would have decreased the fair value of our interest by approximately $5 million.
59
Had we not elected to account for our investment under the fair value method, we would have been required to
use the equity method of accounting. The condensed balance sheets for Intelliject at December 31, 2012 and 2011 and
related condensed statements of operations for the last three years ended December 31, 2012, that were reported to us
by Intelliject, are provided below:
The audited financial statements and accompanying footnotes of Intelliject as of December 31, 2012 and 2011
and for the years ended December 31, 2012, 2011 and 2010 have been included as an exhibit to our Annual Report on
Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission.
On April 2, 2007, we invested $10.0 million in Harbinger Capital Partners Special Situations Fund, L.P.
(“Harbinger”), a private investment fund that is subject to limitations on withdrawal. There is no secondary market for
interests in the fund. Our investment in Harbinger, which represents less than 2% of its total partnership capital, is
accounted for under the cost method. We recorded unrealized losses of $1.1 million ($0.7 million after taxes) and $0.6
million ($0.4 million after taxes) on our investment in Harbinger in 2012 and 2011, respectively, as a result of a reduction
in the estimated fair value of our investment that is not expected to be temporary. The December 31, 2012 and 2011
carrying value in the consolidated balance sheets (included in “Other assets and deferred charges”) was $3.6 million and
$5.2 million, respectively. The carrying value at December 31, 2012 reflected Tredegar’s cost basis in its investment in
Harbinger, net of total withdrawal proceeds received and unrealized losses. Withdrawal proceeds were $0.5 million in
2012 and $0.6 million in 2011. The timing and amount of future installments of withdrawal proceeds was not known as of
December 31, 2012. There were no realized gains or losses associated with our investment in Harbinger in 2012, 2011 and
2010. Gains on our investment in Harbinger, if any, will be recognized when the amounts expected to be collected from
our withdrawal from the investment are known, which will likely be when cash in excess of our remaining carrying value
is received. Losses will be recognized if management believes it is probable that future withdrawal proceeds will not
exceed the remaining carrying value.
5
BUSINESS SEGMENTS
Our primary business segments are Film Products and Aluminum Extrusions. In February 2010, we started
reporting an additional segment, Other, comprised of the start-up operations of Bright View and Falling Springs.
Effective January 1, 2012, the operations and results of Bright View were incorporated into Film Products to leverage
research and development efforts and accelerate new product development. Prior year balances for Bright View have
been reclassified to Film Products to conform with the current year presentation. As discussed in Note 3, Falling Springs
was divested in the fourth quarter of 2012. All historical results for this business have been reflected as discontinued
operations. With the sale of Falling Springs, there is no longer an Other segment to report.
Information by business segment and geographic area for the last three years is provided below. There were
no accounting transactions between segments and no allocations to segments. Net sales (sales less freight) and
operating profit from ongoing operations are the measures of sales and operating profit used by the chief operating
60
(In Thousands)2012201120122011Assets:Liabilities & Equity:Cash & cash equivalents53,288$ 9,625$ Current liabilities13,405$ 1,185$ Other current assets686 4,894 Non-current liabilities1,449 738 Other long-term assets4,278 691 Long term debt, net of discount14,696 - Identifiable intangibles assets2,152 1,868 Redeemable preferred stock20,995 20,017 Equity 9,859 (4,862) Total assets60,404$ 17,078$ Total liabilities & equity60,404$ 17,078$ 2012 2011 2010Revenues & Expenses:Revenues38,179$ 8,839$ 29,099$ Expenses and other, net(13,073) (10,474) (10,426) Income tax (expense) benefit(9,642) 927 (6,584) Net income (loss)15,464$ (708)$ 12,089$ December 31,December 31,
decision maker for purposes of assessing performance. Film Products’ net sales to The Procter & Gamble Company
(“P&G”) totaled $264.0 million in 2012, $280.3 million in 2011 and $273.1 million in 2010. These amounts include
plastic film sold to others that convert the film into materials used with products manufactured by P&G.
61
Net Sales(In Thousands)201220112010Film Products611,877$ 535,540$ 520,749$ Aluminum Extrusions245,465 240,392 199,639 Total net sales857,342 775,932 720,388 Add back freight24,846 18,488 17,812 Sales as shown in consolidatedstatements of income882,188$ 794,420$ 738,200$ Operating Profit(In Thousands)201220112010Film Products:Ongoing operations69,950$ 59,493$ 66,718$ Plant shutdowns, asset impairments,restructurings and other (a)(109) (6,807) (758) Aluminum Extrusions:Ongoing operations9,037 3,457 (4,154) Plant shutdowns, asset impairments,restructurings and other (a)(5,427) 58 493 Total73,451 56,201 62,299 Interest income418 1,023 709 Interest expense3,590 1,926 1,136 Gain (loss) on investment accounted for under the fair value method (a)16,100 1,600 (2,200) Stock option-based compensation expense1,432 1,940 2,064 Corporate expenses, net (a)23,443 16,169 17,118 Income from continuing operationsbefore income taxes61,504 38,789 40,490 Income taxes (a)18,319 10,244 13,649 Income from continuing operations43,185 28,545 26,841 Income (loss) from discontinued operations (a)(14,934) (3,690) 186 Net income (loss)28,251$ 24,855$ 27,027$ (a)See Notes 1, 3, 4 and 18 for more information on losses associated with plant shutdowns, asset impairments and restructurings,unusual items, gains or losses from sale of assets, gains or losses on an investment accounted for under the fair valuemethod and other items.(b)We recognize in the balance sheets the funded status of each of our defined benefit pension and other postretirement plans. The funded status of our defined benefit pension plan was a net liability of $83.3 million, $57.8 million and $8.3 million in "Other noncurrent liabilities" as of December 31, 2012, 2011 and 2010. See Note 14 for more information on our pension and other postretirement plans.(c)The difference between total consolidated sales as reported in the consolidated statements of income and segment andgeographic net sales reported in this note is freight of $24.8 million in 2012, $18.5 million in 2011 and $17.8 million in 2010.(d)Information on exports and foreign operations are provided on the next page. Cash and cash equivalents includes funds held inlocations outside the U.S. of $28.6 million, $42.3 million and $35.7 million at December 31, 2012, 2011 and 2010, respectively. Exportsales relate almost entirely to Film Products. Operations outside the U.S. in The Netherlands, Hungary, China, Italy (sold in 2011),Brazil and India also relate to Film Products. Sales from our locations in The Netherlands, Hungary and Italy are primarily tocustomers located in Europe. Sales from our locations in China (Guangzhou and Shanghai) are primarily to customers located inChina, but also include other customers in Asia. Sales activity at the new film products manufacturing facility in India were notsignificant in 2011.
62
Identifiable Assets(In Thousands)20122011Film Products551,842$ 574,571$ Aluminum Extrusions129,279 78,661 Subtotal681,121 653,232 General corporate (b)53,222 40,917 Cash and cash equivalents (d)48,822 68,939 Continuing operations783,165 763,088 Discontinued operations- 17,522 Total783,165$ 780,610$ Depreciation and AmortizationCapital Expenditures(In Thousands)201220112010201220112010Film Products39,202$ 36,315$ 34,448$ 30,484$ 13,107$ 15,839$ Aluminum Extrusions9,984 8,333 9,054 2,332 2,697 4,339 Subtotal49,186 44,648 43,502 32,816 15,804 20,178 General corporate73 75 74 436 76 236 Continuing operations49,259 44,723 43,576 33,252 15,880 20,414 Discontinued operations10 12 12 - - 4 Total49,269$ 44,735$ 43,588$ 33,252$ 15,880$ 20,418$ Net Sales by Geographic Area (d)(In Thousands)201220112010United States480,041$ 462,479$ 414,617$ Exports from the United States to:Asia57,639 56,050 68,818 Canada46,948 49,428 50,534 Europe5,186 6,171 8,572 Latin America3,145 4,413 2,684 Operations outside the United States:Brazil121,373 43,528 24,302 The Netherlands67,758 80,509 81,945 Hungary41,285 33,824 23,645 China30,636 32,740 35,999 India3,331 - - Italy- 6,790 9,272 Total (c)857,342$ 775,932$ 720,388$ Property, Plant & Equipment,Net by Geographic Area (d)(In Thousands)2012201120122011United States (b)412,822$ 369,173$ 126,072$ 119,650$ Operations outside the United States:Brazil181,663 191,695 77,723 80,992 The Netherlands37,076 40,973 19,443 24,850 China25,167 28,469 16,584 18,931 Hungary17,887 16,480 7,782 7,326 India6,506 6,442 4,653 4,705 General corporate (b)53,222 40,917 1,160 797 Cash and cash equivalents (d)48,822 68,939 n/an/aContinuing operations783,165 763,088 253,417 257,251 Discontinued operations- 17,522 - 23 Total783,165$ 780,610$ 253,417$ 257,274$ See footnotes on prior page and a reconciliation of net sales to sales as shown in the consolidated statements of income. Identifiable Assetsby Geographic Area (d)
6
ACCOUNTS AND OTHER RECEIVABLES
Accounts and other receivable consist of the following:
A reconciliation of the beginning and ending balances of the allowance for doubtful accounts and sales
returns for the three years ended December 31, 2012 is as follows:
63
(In Thousands)201220112010Film Products:Personal care materials327,161$ 352,376$ 358,597$ Flexible packaging films138,028 28,256 - Surface protection films69,627 69,452 85,451 Polyethylene overwrap and polypropylene films63,796 67,282 61,148 Films for other markets13,265 18,174 15,553 Subtotal611,877 535,540 520,749 Aluminum Extrusions:Nonresidential building & construction165,159 166,229 134,467 Residential building & construction23,555 31,444 29,554 Distribution 15,227 14,700 9,793 Consumer durables12,259 4,784 3,532 Transportation11,757 13,176 15,058 Machinery & equipment8,773 5,665 2,571 Electrical6,140 4,394 4,664 Other2,595 - - Subtotal245,465 240,392 199,639 Total857,342$ 775,932$ 720,388$ See footnotes on prior pages and a reconciliation of net sales to sales as shown in the consolidated statements of income. Net Sales by Product Group(In Thousands)2012 2011 Trade, less allowance for doubtful accounts and salesreturns of $3,552 in 2012 and $3,539 in 201196,686$ 95,470$ Other3,551 2,315 Total100,237$ 97,785$ (In Thousands)201220112010Balance, beginning of year3,539$ 5,286$ 5,299$ Charges to expense1,589 1,525 1,779 Recoveries(1,076) (1,489) (1,633) Write-offs(588) (2,508) (25) Foreign exchange and other88 725 (134) Balance, end of year3,552$ 3,539$ 5,286$
7
INVENTORIES
Inventories consist of the following:
Inventories stated on the LIFO basis amounted to $10.9 million at December 31, 2012 and $12.1 million at
December 31, 2011, which are below replacement costs by approximately $20.5 million at December 31, 2012 and
$20.2 million at December 31, 2011. During 2012, 2011 and 2010, certain inventories accounted for on a LIFO basis
declined, which resulted in cost of goods sold being stated at below current replacement costs, by approximately $2.7
million in 2012 ($1.1 million in Film Products and $1.6 million in Aluminum Extrusions), $1.1 million in Film
Products in 2011 and $2.6 million in 2010 ($0.9 million in Film Products and $1.7 million in Aluminum Extrusions).
8
GOODWILL AND OTHER INTANGIBLE ASSETS
The components of goodwill and other intangibles at December 31, 2012 and 2011, and related amortization
periods for continuing operations are as follows:
A reconciliation of the beginning and ending balance of goodwill for each of the three years in the period
ended December 31, 2012 is as follows:
Based on the severity of the economic downturn and its impact on the sales volumes of our aluminum
extrusions business, the resulting operating loss in the first quarter of 2009, possible future losses and the uncertainty
in the amount and timing of an economic recovery, a goodwill impairment charge of $30.6 million ($30.6 million after
taxes) was recognized in Aluminum Extrusions in 2009. At December 31, 2012, the goodwill balance was $162.9
million for Film Products and $14.3 million for Aluminum Extrusions.
64
(In Thousands)2012 2011 Finished goods16,138$ 11,103$ Work-in-process7,451 6,874 Raw materials28,758 24,148 Stores, supplies and other22,323 19,165 Total74,670$ 61,290$ (In Thousands)2012 2011 Amortization PeriodsGoodwill177,181$ 165,372$ Not amortizedOther identifiable intangibles Customer relationships (cost basis of $37,400 in 201231,163 30,850 10-12 yearsand $32,600 in 2011)Proprietary technology (cost basis of $21,516 in 2012 and $18,116 in 2011)17,145 16,042 Not more than 15 yearsTradenames13,332 9,049 Indefinite lifeNon-compete agreements (cost basis of $4,302 in 2012 and $2,702 in 2011)2,359 2,119 2 yearsTotal carrying value of other intangibles63,999 58,060 Total carrying value of goodwill and other intangibles241,180$ 223,432$ (In Thousands)2012 2011 2010 Net carrying value of goodwill, beginning of year165,372$ 103,639$ 104,290$ Acquisitions14,256 63,214 - Increase (decrease) due to foreign currency translation(2,447) (1,481) (651) Net carrying value of goodwill, end of year177,181$ 165,372$ 103,639$
Amortization expense for continuing operations over the next five years is expected to be as follows:
9
FINANCIAL INSTRUMENTS
We use derivative financial instruments for the purpose of hedging margin exposure from fixed-price forward
sales contracts in Aluminum Extrusions and currency exchange rate exposures that exist as part of ongoing business
operations (primarily in Film Products). Our derivative financial instruments are designated as and qualify as cash
flow hedges and are recognized in the consolidated balance sheet at fair value. The fair value of derivative
instruments recorded on the consolidated balance sheets are based upon Level 2 inputs. If individual derivative
instruments with the same counterparty can be settled on a net basis, we record the corresponding derivative fair
values as a net asset or net liability.
In the normal course of business, we enter into fixed-price forward sales contracts with certain customers for
the future sale of fixed quantities of aluminum extrusions at scheduled intervals. In order to hedge our margin
exposure created from the fixing of future sales prices relative to volatile raw material (aluminum) costs, we enter into
a combination of forward purchase commitments and futures contracts to acquire or hedge aluminum, based on the
scheduled purchases for the firm sales commitments. The fixed-price firm sales commitments and related hedging
instruments generally have durations of not more than 12 months, and the notional amount of aluminum futures
contracts that hedged future purchases of aluminum to meet fixed-price forward sales contract obligations was $6.2
million (6.7 million pounds of aluminum) at December 31, 2012 and $10.8 million (11.0 million pounds of aluminum)
at December 31, 2011.
The table below summarizes the location and gross amounts of aluminum derivative contract fair values in
the consolidated balance sheets as of December 31, 2012 and 2011:
In the event that a counterparty to an aluminum fixed-price forward sales contract chooses not to take
delivery of its aluminum extrusions, the customer is contractually obligated to compensate us for any losses on the
related aluminum futures and/or forward purchase contracts through the date of cancellation. The offsetting asset and
65
AmountYear(In Thousands)20136,786$ 20145,628 20154,903 20164,891 20174,891 Balance Sheet Fair Balance Sheet Fair (In Thousands)AccountValueAccountValueDerivatives Designated as Hedging InstrumentsAsset derivatives:Prepaid expensesAluminum futures contractsand other226$ Accrued expenses21$ Liability derivatives:Prepaid expensesAluminum futures contractsand other88$ Accrued expenses677$ Derivatives Not Designated as Hedging InstrumentsAsset derivatives:Aluminum futures contracts-$ Accrued expenses18$ - 18 Liability derivatives:Aluminum futures contracts-$ Accrued expenses18$ December 31, 2012December 31, 2011
liability positions for derivatives not designated as hedging instruments included in the table above are associated with
the unwinding of aluminum futures contracts that relate to such cancellations.
We have future fixed Euro-denominated contractual payments for equipment being purchased as part of our
multi-year capacity expansion project at our film products manufacturing facility in Cabo de Santo Agostinho, Brazil.
We are using fixed rate Euro forward contracts with various settlement dates through November 2013 to hedge
exchange rate exposure on these obligations. We had fixed rate forward contracts with outstanding notional amounts
of €9.9 million as of December 31, 2012 (none at December 31, 2011).
The table below summarizes the location and gross amounts of foreign currency forward contract fair values
in the consolidated balance sheets as of December 31, 2012 (none at December 31, 2011):
We receive Euro-based royalty payments relating to our operations in Europe. From time to time we use
zero-cost collar currency options to hedge a portion of our exposure to changes in cash flows due to variability in U.S.
Dollar and Euro exchange rates. There were no outstanding notional amounts on these collars at December 31, 2012
and 2011 as there were no derivatives outstanding related to the hedging of royalty payments with currency options.
The counterparties to our forward purchase commitments are major aluminum brokers and suppliers, and the
counterparties to our aluminum futures contracts are major financial institutions. Fixed-price forward sales contracts
are only made available to our best and most credit-worthy customers. The counterparties to our foreign currency
futures and zero-cost collar contracts are major financial institutions.
The pretax effect on net income (loss) and other comprehensive income (loss) of derivative instruments
classified as cash flow hedges and described in the previous paragraphs for years ended December 31, 2012, 2011, and
2010 is summarized in the tables below:
Gains and losses on the ineffective portion of derivative instruments or derivative instruments that were not
designated as hedging instruments were not significant in 2012, 2011 and 2010. For the years ended December 31,
2012, 2011 and 2010, unrealized net losses from hedges that were discontinued were not significant. As of December
31, 2012, we expect $0.1 million of unrealized after-tax gains on derivative instruments reported in accumulated other
comprehensive income to be reclassified to earnings within the next 12 months.
66
Balance Sheet Fair (In Thousands)AccountValueDerivatives Designated as Hedging InstrumentsAsset derivatives:Prepaid expensesForeign currency forward contractsand other948$ December 31, 2012(In Thousands)Years Ended December 31, 201220112010201220112010Amount of pre-tax gain (loss) recognized in other comprehensive income(232)$ (802)$ (102)$ 1,421$ -$ (284)$ Location of gain (loss) reclassified from Selling, accumulated other comprehensive income Cost of Cost of Cost of general and into net income (effective portion) sales sales sales admin. exp.Amount of pre-tax gain (loss) reclassified from accumulated other comprehensive income to net income (effective portion)(1,026)$ 308$ 641$ -$ -$ (271)$ Aluminum Futures Contracts Foreign Currency Forwards and Options Cash Flow Derivative Hedges
10
ACCRUED EXPENSES
Accrued expenses consist of the following:
A reconciliation of the beginning and ending balances of accrued expenses associated with asset impairments
and costs associated with exit and disposal activities for each of the three years in the period ended December 31, 2012
is as follows:
See Note 18 for more information on plant shutdowns, asset impairments and restructurings of continuing
operations.
67
(In Thousands)2012 2011 Payrolls, related taxes and medical and other benefits7,088$ 4,700$ Vacation6,124 6,864 Contractual indemnification claims (see note 3)4,316 4,740 Incentive compensation3,840 3,003 Taxes other than federal income and payroll3,056 3,350 Deferred revenue2,564 1,863 Workers' compensation and disabilities2,457 2,599 Other13,069 13,769 Total42,514$ 40,888$ Long-Lived Asset(In Thousands)SeveranceImpairmentsOther (a)TotalBalance at January 1, 2010823$ -$ 3,158$ 3,981$ 2010:Charges165 608 - 773 Cash spent(751) - (1,565) (2,316) Charged against assets- (608) - (608) Balance at December 31, 2010237 - 1,593 1,830 2011:Charges541 1,367 - 1,908 Cash spent(581) (1,593) (2,174) Charged against assets- (1,367) - (1,367) Balance at December 31, 2011197 - - 197 2012:Charges1,562 1,077 2,255 4,894 Cash spent(1,463) (1,670) (3,133) Charged against assets- (1,077) - (1,077) Balance at December 31, 2012296$ -$ 585$ 881$ (a) Other includes primarily accrued losses on a sub-lease at a facility in Princeton, New Jerseyand other shutdown-related costs associated with the shutdown of our aluminum extrusionsmanaufacturing facility in Kentland, Indiana.
11
DEBT AND CREDIT AGREEMENTS
On April 23, 2012, we entered into a $350 million five-year, unsecured revolving credit facility (the “Credit
Agreement”), with an option to increase that amount by an additional $75 million. The Credit Agreement replaced 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 Credit Agreement, which was used, together
with available cash on hand, to repay all indebtedness under our previous revolving credit facility.
Borrowings under the Credit Agreement bear an interest rate of LIBOR plus a credit spread and commitment fees
charged on the unused amount under the Credit Agreement at various indebtedness-to-adjusted-EBITDA levels as follows:
At December 31, 2012, the interest cost on debt borrowed under the Credit Agreement was priced at one-
month LIBOR plus the applicable credit spread of 150 basis points.
The most restrictive covenants in the Credit Agreement include:
Maximum indebtedness-to-adjusted EBITDA of 3.0x;
Minimum adjusted EBIT-to-interest expense of 2.5x;
Maximum aggregate distributions to shareholders over the term of the Credit Agreement of $100
million plus, beginning with the fiscal quarter ended March 31, 2012, 50% of net income; and
Minimum shareholders’ equity at any point during the term of the Credit Agreement of at least $320
million increased on a cumulative basis at the end of each fiscal quarter, beginning with the fiscal
quarter ended March 31, 2012, by an amount equal to 50% of net income (to the extent positive).
At December 31, 2012, based upon the most restrictive covenants within the Credit Agreement, available credit
under the Credit Agreement was approximately $199 million. Total debt due and outstanding at December 31, 2012 is
summarized below:
We believe we were in compliance with all of our debt covenants as of December 31, 2012. Noncompliance with
any of the debt covenants may have a material adverse effect on financial condition or liquidity in the event such
noncompliance cannot be cured or should we be unable to obtain a waiver from the lenders. Renegotiation of the covenant
through an amendment to the Credit Agreement may effectively cure the noncompliance, but may have an effect on
financial condition or liquidity depending upon how the covenant is renegotiated.
68
Indebtedness-to-AdjustedCredit Spread CommitmentEBITDA RatioOver LIBORFee> 2.0x but <= 3.0x20035> 1.0x but <=2.0x17530<= 1.0x15025Pricing Under Revolving Credit Agreement (Basis Points)YearCreditTotal DebtDueAgreementOtherDue2013-$ -$ -$ 2014- - - 2015- - - 2016- - - 2017128,000 - 128,000 Total128,000$ -$ 128,000$ Debt Due and Outstanding at December 31, 2012(In Thousands)
12
SHAREHOLDER RIGHTS AGREEMENT
Pursuant to an Amended and Restated Rights Agreement, dated as of June 30, 2009, with Computershare
Investor Services, as Rights Agent (essentially renewing and extending our Rights Agreement, dated as of June 30,
1999), as amended, one right is attendant to each share of our common stock (“Right”). All Rights outstanding under
the previous Rights Plan remain outstanding under the Amended and Restated Rights Agreement.
Each Right entitles the registered holder to purchase from Tredegar one one-hundredth of a share of
Participating Cumulative Preferred Stock, Series A (the “Preferred Stock”), at an exercise price of $150 (the “Purchase
Price”). The Rights will become exercisable, if not earlier redeemed, only if a person or group acquires 15% or more
of the outstanding shares of our common stock (thereby becoming an “Acquiring Person”) or announces a tender offer
that would result in ownership by a person or group of 15% or more of our common stock. Any action by a person or
group whose beneficial ownership was reported on Amendment No. 4 to the Schedule 13D filed with respect to
Tredegar on March 20, 1997, cannot cause such person or group to become an Acquiring Person and thereby cause the
Rights to become exercisable.
Each holder of a Right, upon the occurrence of certain events, will become entitled to receive, upon exercise
and payment of the Purchase Price, Preferred Stock (or in certain circumstances, cash, property or other securities of
Tredegar or a potential acquirer) having a value equal to twice the amount of the Purchase Price.
The Rights are scheduled to expire on June 30, 2019.
13
STOCK OPTION AND STOCK AWARD PLANS
We have one equity incentive plan under which stock options may be granted to purchase a specified number
of shares of common stock at a price no lower than the fair market value on the date of grant and for a term not to
exceed 10 years. In addition, we have one other equity incentive plan under which there are options that remain
outstanding, but no future grants can be made. Prior to 2012, employee options ordinarily vest two years from the date
of grant. Employee options granted in 2012 and thereafter ordinarily vest over a four year period, with a quarter of the
options granted vesting on each year on the grant date anniversary. The option plans also permit the grant of stock
appreciation rights (“SARs”), stock, restricted stock, stock unit awards and incentive awards. Restricted stock grants
ordinarily vest three years from the date of grant based upon continued employment and/or the achievement of certain
performance targets. No SARs have been granted since 1992 and none are currently outstanding.
A summary of our stock options outstanding at December 31, 2012, 2011 and 2010, and changes during those
years, is presented below:
69
Number ofWeightedOptionsRangeAverageOutstanding at January 1, 2010796,175 13.95$ to19.52$ 16.29$ Granted316,000 16.66 to17.54 17.15 Forfeited and Expired(29,325) 13.95 to18.12 16.37 Exercised(65,575) 13.95 to15.80 15.04 Outstanding at December 31, 20101,017,275 13.95 to19.52 16.64 Granted235,800 16.87 to19.84 19.79 Forfeited and Expired(51,800) 13.95 to19.84 16.78 Exercised(79,775) 13.95 to18.12 15.11 Outstanding at December 31, 20111,121,500 14.06 to19.84 17.40 Granted182,100 18.51 to19.40 19.34 Forfeited and Expired(50,300) 15.80 to19.84 19.34 Exercised(176,600) 14.72 to18.12 16.33 Outstanding at December 31, 20121,076,700 14.06$ to19.84$ 17.81$ Option Exercise Price/Share
The following table summarizes additional information about stock options outstanding and exercisable at
December 31, 2012:
The following table summarizes additional information about non-vested restricted stock outstanding at
December 31, 2012:
The total intrinsic value of stock options exercised was $0.5 million in 2012, $0.4 million in 2011 and $0.2
million in 2010. The grant-date fair value of stock option-based awards vested was $2.1 million in 2012, $1.9 million
in 2011 and $1.9 million in 2010. As of December 31, 2012, there was unrecognized compensation cost of $0.8
million related to stock option-based awards and $1.3 million related to non-vested restricted stock and other stock-
based awards. This cost is expected to be recognized over the remaining weighted average period of 0.9 years for
stock option-based awards and 1.6 years for non-vested restricted stock and other stock-based awards.
Stock options exercisable totaled 714,800 at December 31, 2012 and 600,400 shares at December 31, 2011.
Stock options available for grant totaled 2,607,001 shares at December 31, 2012.
70
Options Outstanding atOptions Exercisable atDecember 31, 2012December 31, 2012Weighted AverageAggregateAggregateRemainingIntrinsicWeightedIntrinsicContract- ValueAverageValueRange ofual LifeExercise(InExercise(InExercise PricesShares(Years)PriceThousands)SharesPriceThousands)-$ to15.00$ 35,500 2.9 14.20$ 221$ 35,500 14.20$ 221$ 15.01 to17.00 218,800 3.5 15.79 1,013 217,000 15.78 1,006 17.01 to20.00 822,400 5.0 18.51 1,572 462,300 17.66 1,276 Total1,076,700 4.7 17.81$ 2,806$ 714,800 16.92$ 2,503$ Maximum Non-vested RestrictedStock Units Issuable Upon Satis-Non-vested Restricted Stockfaction of Certain Performance CriteriaWgtd. Ave.Grant DateWgtd. Ave.Grant DateNumberGrant DateFair Value (InNumberGrant DateFair Value (Inof SharesFair Value/Sh.Thousands)of SharesFair Value/Sh.Thousands)Outstanding at January 1, 201045,750 17.70$ 810$ 72,175 17.64$ 1,273$ Granted56,717 17.23 977 82,750 16.83 1,393 Vested(8,284) 17.84 (148) - - - Forfeited(333) 18.12 (6) (4,000) 17.10 (68) Outstanding at December 31, 201093,850 17.40 1,633 150,925 17.21 2,598 Granted51,360 19.42 997 88,900 19.32 1,718 Vested(18,060) 17.20 (311) (66,925) 17.68 (1,183) Forfeited(1,000) 17.13 (17) (87,900) 16.93 (1,488) Outstanding at December 31, 2011126,150 18.25 2,302 85,000 19.35 1,645 Granted94,949 19.06 1,810 87,200 18.79 1,638 Vested(60,357) 18.01 (1,087) - - - Forfeited(16,842) 18.82 (317) (80,400) 19.31 (1,553) Outstanding at December 31, 2012143,900 18.82$ 2,708$ 91,800 18.85$ 1,730$
14
RETIREMENT PLANS AND OTHER POSTRETIREMENT BENEFITS
We sponsor noncontributory defined benefit (pension) plans covering most employees. The plans for salaried
and hourly employees currently in effect are based on a formula using the participant’s years of service and
compensation or using the participant’s years of service and a dollar amount. The plan is closed to new participants,
and based on plan changes announced in 2006, pay for active participants of the plan was frozen as of December 31,
2007.
In addition to providing pension benefits, we provide postretirement life insurance and health care benefits
for certain groups of employees. Tredegar and retirees share in the cost of postretirement health care benefits, with
employees hired on or before January 1, 1993, receiving a fixed subsidy to cover a portion of their health care
premiums. We eliminated prescription drug coverage for Medicare-eligible retirees as of January 1, 2006.
Consequently, we are not eligible for any federal subsidies.
The following tables reconcile the changes in benefit obligations and plan assets in 2012 and 2011, and
reconcile the funded status to prepaid or accrued cost at December 31, 2012 and 2011:
71
(In Thousands)2012201120122011Change in benefit obligation:Benefit obligation, beginning of year272,436$ 247,969$ 8,422$ 7,350$ Service cost3,657 3,361 58 54 Interest cost13,084 13,024 385 395 Effect of actuarial (gains) losses relatedto the following:Discount rate change26,843 16,986 549 414 Retirement rate assumptions and mortality table adjustments- 6,314 - (52) Retiree medical participation rate change- - - 449 Other(1,372) (3,399) (243) 122 Benefits paid(12,363) (11,819) (292) (310) Benefit obligation, end of year302,285$ 272,436$ 8,879$ 8,422$ Change in plan assets:Plan assets at fair value,beginning of year214,647$ 239,706$ -$ -$ Actual return on plan assets14,455 (13,413) - - Employer contributions2,296 173 292 310 Benefits paid(12,363) (11,819) (292) (310) Plan assets at fair value, end of year219,035$ 214,647$ -$ -$ Funded status of the plans(83,250)$ (57,789)$ (8,879)$ (8,422)$ Amounts recognized in the consolidatedbalance sheets:Prepaid benefit cost-$ -$ -$ -$ Accrued benefit liability(83,250) (57,789) (8,879) (8,422) Net amount recognized(83,250)$ (57,789)$ (8,879)$ (8,422)$ Pension BenefitsOther Post-Retirement Benefits
Assumptions used for financial reporting purposes to compute net benefit income or cost and benefit
obligations for continuing operations, and the components of net periodic benefit income or cost for continuing
operations, are as follows:
Net benefit income or cost is determined using assumptions at the beginning of each year. Funded status is
determined using assumptions at the end of each year. Pension and other postretirement liabilities for continuing
operations of $92.1 million and $66.2 million are included in “Other noncurrent liabilities” in the consolidated balance
sheets at December 31, 2012 and 2011, respectively. The amount of our accumulated benefit obligation is the same as
our projected benefit obligation.
At December 31, 2012, the effect of a 1% change in the health care cost trend rate assumptions would be
immaterial.
Expected benefit payments for continuing operations over the next five years and in the aggregate for 2018-
2022 are as follows:
72
Other Post-Pension BenefitsRetirement Benefits(In Thousands, Except Percentages)201220112010201220112010Weighted-average assumptions usedto determine benefit obligations:Discount rate4.21%4.95%5.45%4.10%4.90%5.35%Rate of compensation increasesn/an/an/an/an/an/aWeighted-average assumptions usedto determine net periodic benefitcost:Discount rate4.95%5.45%5.70%4.90%5.35%5.75%Rate of compensation increasesn/an/an/an/an/an/aExpected long-term return onplan assets7.75%8.00%8.25%n/an/an/aComponents of net periodic benefitcost:Service cost(3,657)$ (3,361)$ (3,315)$ (58)$ (54)$ (76)$ Interest cost(13,084) (13,024) (13,071) (385) (395) (467) Expected return on plan assets19,108 20,448 20,530 - - - Amortization of prior servicecosts and gains or losses(10,377) (6,359) (4,806) 241 264 79 Settlement/curtailment(99) - - - - - Net periodic benefit cost(8,109)$ (2,296)$ (662)$ (202)$ (185)$ (464)$ OtherPost-PensionRetirement(In Thousands)BenefitsBenefits201313,797$ 474$ 201414,559 492 201515,316 507 201615,883 522 201716,442 530 2018 - 202289,505 2,731
Amounts recognized in 2012, 2011 and 2010 before related deferred income taxes in accumulated other
comprehensive income consist of:
The amounts before related deferred income taxes in accumulated other comprehensive income that are
expected to be recognized as components of net periodic benefit or cost during 2013 are as follows:
The percentage composition of assets held by pension plans for continuing operations at December 31, 2012,
2011 and 2010 are as follows:
Our targeted allocation percentage for pension plan assets and the expected long-term rate of return on assets
is as follows:
73
Other Post-PensionRetirement(In Thousands)201220112010201220112010Prior service cost (benefit)(887)$ (1,890)$ (2,966)$ -$ -$ -$ Net actuarial (gain) loss167,009 148,364 102,037 (855) (1,401) (2,598) Other Post-(In Thousands)PensionRetirementPrior service cost (benefit)(1,184)$ -$ Net actuarial (gain) loss15,943 (162) % Composition of Plan Assetsat December 31, 2012 2011 2010Pension plans related to continuing operations:Fixed income securities14.7%9.7%1.9%Large/mid-capitalization equity securities10.915.922.3Small-capitalization equity securities5.46.26.7International and emerging market equity securities10.014.321.6Total equity securities26.336.450.6Private equity and hedge funds50.041.842.7Other assets9.012.14.8Total for continuing operations100.0%100.0%100.0% ExpectedComposition ofLong-termReturn %Pension plans related to continuing operations:Fixed income securities32.0%5.5%Large/mid-capitalization equity securities10.09.0Small-capitalization equity securities4.010.2International and emerging market equity securities13.09.9Total equity securities27.09.6Private equity and hedge funds41.08.4Other assets- - Total for continuing operations100.0%7.8%* Target percentages for the composition of plan assets represents a neutral position within the approved range of allocations for such assets.Plan Assets *Target %
Expected long-term returns are estimated by asset class and generally are based on inflation-adjusted
historical returns, volatilities, risk premiums and managed asset premiums. The portfolio of fixed income securities is
structured with maturities that generally match estimated benefit payments over the next 1-2 years. Other assets are
primarily comprised of cash and contracts with insurance companies. Our primary investment objective is to
maximize total return with a strong emphasis on the preservation of capital. We believe that over the long term a
diversified portfolio of fixed income securities, equity securities, hedge funds and private equity funds has a better
risk-return profile than fixed income securities alone. The average remaining duration of benefit payments for our
pension plans is about 13 years. We expect our required contributions to be approximately $0.2 million in 2013.
Estimates of the fair value of assets held by our pension plans are provided by third parties not affiliated with
Tredegar. At December 31, 2012, the pension plan assets are categorized by level within the fair value measurement
hierarchy as follows:
74
(In Thousands) Quoted Prices in Active Markets for Identical Assets Signficant Other Observable Inputs Significant Unobservable Inputs December 31, 2012Total (Level 1) (Level 2) (Level 3) Large/mid-capitalization equity securities23,845$ 23,845$ -$ -$ Small-capitalization equity securities11,914 11,914 - - International and emerging market equity securities21,827 8,814 13,013 - Fixed income securities32,150 18,080 14,070 - Private equity and hedge funds109,690 - 101,334 8,356 Other assets10,256 10,256 - - Total plan assets at fair value209,682$ 72,909$ 128,417$ 8,356$ Contracts with insurance companies9,353 Total plan assets, December 31, 2012219,035$ December 31, 2011Large/mid-capitalization equity securities34,095$ 31,490$ 2,605$ -$ Small-capitalization equity securities13,281 13,281 - - International and emerging market equity securities30,611 30,611 - - Fixed income securities20,895 10,960 9,935 - Private equity and hedge funds89,620 - 82,628 6,992 Other assets16,899 11,899 5,000 - Total plan assets at fair value205,401$ 98,241$ 100,168$ 6,992$ Contracts with insurance companies9,246 Total plan assets, December 31, 2011214,647$
For fair value measurements of plan assets using significant unobservable inputs (Level 3), a reconciliation of
the balances from January 1, 2011 to December 31, 2012 are as follows:
We also have a non-qualified supplemental pension plan covering certain employees. Effective December
31, 2005, further participation in this plan was terminated and benefit accruals for existing participants were frozen.
The plan was designed to restore all or a part of the pension benefits that would have been payable to designated
participants from our principal pension plans if it were not for limitations imposed by income tax regulations. The
projected benefit obligation relating to this unfunded plan was $2.8 million at December 31, 2012 and $2.6 million at
December 31, 2011. Pension expense recognized for this plan was $0.1 million in 2012, $0.1 million in 2011 and $0.2
million in 2010. This information has been included in the preceding pension benefit tables.
Approximately 101 employees at our films manufacturing facility in Kerkrade, The Netherlands are covered
by a collective bargaining agreement that includes participation in a multi-employer pension plan. Pension expense
recognized for participation in this plan, which is equal to required contributions, was $0.5 million in 2012, $0.6
million in 2011 and $0.6 million in 2010. This information has been excluded from the preceding pension benefit
tables.
15
SAVINGS PLAN
We have a savings plan that allows eligible employees to voluntarily contribute a percentage of their
compensation up to Internal Revenue Service (“IRS”) limitations. Effective January 1, 2007, the provisions of the
savings plan provided the following benefits for salaried and certain hourly employees:
The company makes matching contributions to the savings plan of $1 for every $1 of employee contribution. The
maximum matching contribution is 6% of base pay for 2007-2009 and 5% of base pay thereafter.
The savings plan includes immediate vesting for active employees of past matching contributions as well as future
matching contributions when made (compared with the previous 5-year graded vesting) and automatic enrollment
at 3% of base pay unless the employee opts out or elects a different percentage.
We also have a non-qualified plan that restores matching benefits for employees suspended from the savings
plan due to certain limitations imposed by income tax regulations. Charges recognized for these plans were $2.5
million in 2012, $2.5 million in 2011 and $2.6 million in 2010. Our liability under the restoration plan was $1.6
million at December 31, 2012 (consisting of 78,615 phantom shares of common stock) and $1.6 million at December
31, 2011 (consisting of 70,588 phantom shares of common stock) and valued at the closing market price on those
dates.
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(In Thousands) Private equity and hedge funds Balance at January 1, 20118,042$ Purchases2,554 Sales(663) Distributions(2,673) Actual return on plan assets still heldat year end(268) Transfers in and/or out of Level 3- Balance at December 31, 20116,992 Purchases3,767 Sales- Distributions(2,094) Actual return on plan assets still heldat year end(309) Transfers in and/or out of Level 3- Balance at December 31, 20128,356$
The Tredegar Corporation Benefits Plan Trust (the “Trust”) purchased 7,200 shares of our common stock in
1998 for $0.2 million and 46,671 shares of our common stock in 1997 for $1.0 million, as a partial hedge against the
phantom shares held in the restoration plan. There have been no shares purchased since 1997 except for re-invested
dividends. The cost of the shares held by the Trust is shown as a reduction to shareholders’ equity in the consolidated
balance sheets.
16
RENTAL EXPENSE AND CONTRACTUAL COMMITMENTS
Rental expense for continuing operations was $3.6 million in 2012, $3.2 million in 2011 and $2.9 million in
2010. Rental commitments under all non-cancelable operating leases for continuing operations as of December 31,
2012, are as follows:
Contractual obligations for plant construction and purchases of real property and equipment amounted to
$16.4 million at December 31, 2012. Film Products has various contractual commitments of approximately $14
million in 2013 associated with our multi-year capacity expansion project in Cabo de Santo Agostinho.
17
INCOME TAXES
Income from continuing operations before income taxes and income taxes are as follows:
76
AmountYear(In Thousands)20132,156$ 20141,968 20151,297 20161,198 20171,208 Remainder1,100 Total8,927$ (In Thousands)2012 2011 2010 Income from continuing operationsbefore income taxes:Domestic35,488 $ 29,491 $ 30,430 $ Foreign26,016 9,298 10,060 Total61,504 $ 38,789 $ 40,490 $ Current income taxes:Federal10,905 $ 2,958 $ 14,329 $ State796 639 1,409 Foreign7,372 4,500 4,308 Total19,073 8,097 20,046 Deferred income taxes:Federal1,212 3,243 (6,225) State163 (211) (771) Foreign(2,129) (885) 599 Total(754) 2,147 (6,397) Total income taxes18,319 $ 10,244 $ 13,649 $
The significant differences between the U.S. federal statutory rate and the effective income tax rate for
continuing operations are as follows:
The Brazilian federal statutory income tax rate is a composite of 34.0% (25.0% of income tax and 9.0% of
social contribution on income). Terphane’s manufacturing facility in Brazil is the beneficiary of certain income tax
incentives that allow for a reduction in the statutory Brazilian federal income tax rate levied on the operating profit of
its products. These incentives produce a current tax rate of 15.25% for Terphane Ltda. (6.25% of income tax and
9.0% social contribution on income). The current incentives will expire at the end of 2014, but we anticipate that we
will qualify for additional incentives that will extend beyond 2014. The benefit from the tax incentives was $4.3
million (13 cents per share) and $0.7 million (2 cents per share) in 2012 and 2011, respectively.
77
2012 2011 2010 Income tax expense at federal statutory rate35.0 35.0 35.0 Valuation allowance for capital losscarry-forwards1.9 .9 .5 State taxes, net of federal income tax benefit1.1 1.7 .9 Unremitted earnings from foreign operations.6 1.8 1.3 Non-deductible expenses.3 .8 .3 Non-deductible acquisition expenses- 3.5 - Write-off of tax receivable from indemnification- - 1.8 Research and development tax credit- (1.0) (.8) Deduction for divestiture of subsidiary stock- (15.3) - Valuation allowance for foreign operatingloss carry-forwards(.1) 1.4 1.3 Reversal of income tax contingency accrualsand tax settlements(.5) .3 .6 Changes in estimates related to prior year tax provision(.5) (.1) (4.1) Domestic Production Activities Deduction(.6) - (1.1) Foreign rate differences(.6) (.7) (1.8) Tax incentive(7.0) (1.8) - Other.2 (.1) (.2) Effective income tax rate29.8 26.4 33.7 Taxes for Continuing OperationsPercent of Income Before Income
Deferred tax liabilities and deferred tax assets at December 31, 2012 and 2011, are as follows:
Except as noted below, we believe that it is more likely than not that future taxable income will exceed future tax
deductible amounts thereby resulting in the realization of deferred tax assets. A valuation allowance of $1.3 million at
December 31, 2012 and 2011, respectively, is provided against the tax benefit on state and foreign net operating loss
carryforwards for possible future tax benefits on domestic state and foreign operating losses generated by certain foreign
and domestic subsidiaries that may not be recoverable in the carry-forward period. In addition, the valuation allowance for
excess capital losses from investments and other related items was increased from $9.3 million at December 31, 2011 to
$15.5 million at December 31, 2012 due to changes in the relative amounts of capital gains and losses generated during the
year. The amount of the deferred tax asset considered realizable, however, could be adjusted in the near term if estimates
of the fair value of certain investments during the carryforward period change. The valuation allowance for asset
impairments in foreign jurisdictions where we believe it is more likely than not that the deferred tax asset will not be
realized increased from $1.8 million in 2011 to $1.9 million in 2012.
78
(In Thousands)2012 2011 Deferred tax liabilities:Amortization of goodwill47,956$ 48,407$ Depreciation34,110 40,754 Foreign currency translation gain adjustment8,795 8,638 Derivative financial instruments568 - Total deferred tax liabilities91,429 97,799 Deferred tax assets:Pensions30,488 21,169 Employee benefits10,532 9,841 Excess capital losses and book/tax basis differences on investments4,923 5,514 Asset write-offs, divestitures and environmental accruals3,234 3,177 Inventory2,086 2,439 Tax benefit on state and foreign NOL and creditcarryforwards 1,676 1,898 Allowance for doubtful accounts and sales returns756 919 Timing adjustment for unrecognized tax benefits onuncertain tax positions, including portion relating tointerest and penalties236 360 Derivative financial instruments- 249 Other974 1,024 Deferred tax assets before valuation allowance54,905 46,590 Less: Valuation allowance18,635 12,427 Total deferred tax assets 36,270 34,163 Net deferred tax liability55,159$ 63,636$ Included in the balance sheet:Noncurrent deferred tax liabilities in excess of assets60,773$ 70,769$ Current deferred tax assets in excess of liabilities5,614 7,133 Net deferred tax liability55,159$ 63,636$
A reconciliation of our unrecognized uncertain tax positions since January 1, 2010, is shown below:
Additional information related to our unrecognized uncertain tax positions since January 1, 2010 is
summarized below:
We claimed an ordinary loss on the write-off of our investment in our aluminum extrusions operations in Canada
(sold in February 2008) on our 2008 consolidated tax return (included in discontinued operations in the consolidated
statement of income in 2007). During an audit, the IRS challenged the ordinary nature of the loss, asserting that the loss
should be re-characterized as capital in nature. Had the IRS prevailed in final, non-appealable determinations, it is possible
that the matter would have resulted in additional tax payments of up to $12 million, plus any interest and penalties. Prior to
issuing a Notice of Deficiency, however, the IRS revised their audit report to allow the ordinary loss treatment to
stand. The audit findings have been confirmed by the IRS Joint Committee review, and we expect no further challenge on
this issue.
Tredegar and its subsidiaries file income tax returns in the U.S., various states and jurisdictions outside the U.S.
Except for refund claims and amended returns, the IRS has provided written confirmation that they do not plan to make
any additional changes to our U.S. consolidated tax returns for the years prior to 2010, although the federal statute of
limitations was extended for the tax years 2006-2009 through December 31, 2013. With few exceptions, Tredegar and its
79
(In Thousands)201220112010Balance at beginning of period1,025$ 1,065$ 996$ Increase (decrease) due to tax positions taken in:Current period432 185 184 Prior period(21) 10 493 Increase (decrease) due to settlements with taxing authorities(398) - (375) Reductions due to lapse of statute of limitations(128) (235) (233) Balance at end of period910$ 1,025$ 1,065$ Years Ended December 31,(In Thousands)201220112010Gross unrecognized tax benefits on uncertain taxpositions (reflected in current income tax and othernoncurrent liability accounts in the balance sheet)910$ 1,025$ 1,065$ Deferred income tax assets related to unrecognizedtax benefits on uncertain tax positions (reflected indeferred income tax accounts in the balance sheet)(212) (219) (234) Net unrecognized tax benefits on uncertain taxpositions, which would impact the effective tax rate ifrecognized698 806 831 Interest and penalties accrued on deductions takenrelating to uncertain tax positions (approximately $(300),$200 and $(400) reflected in income tax expense in theincome statement in 2012, 2011 and 2010, respectively,with the balance shown in current income tax and othernoncurrent liability accounts in the balance sheet)60 373 125 Related deferred income tax assets recognized oninterest and penalties(23) (141) (46) Interest and penalties accrued on uncertain taxpositions net of related deferred income tax benefits,which would impact the effective tax rate if recognized37 232 79 Total net unrecognized tax benefits on uncertain taxpositions reflected in the balance sheet, which wouldimpact the effective tax rate if recognized735$ 1,038$ 910$ Years Ended December 31,
subsidiaries are no longer subject to state or non-U.S. income tax examinations by tax authorities for years before 2009.
We believe that it is reasonably possible that approximately $0.1 million of the balance of unrecognized state tax positions
may be recognized within the next twelve months as a result of a lapse of the statute of limitations.
18
LOSSES ASSOCIATED WITH PLANT SHUTDOWNS, ASSET IMPAIRMENTS AND
RESTRUCTURINGS, UNUSUAL ITEMS, GAINS FROM SALE OF ASSETS AND OTHER ITEMS
Losses associated with plant shutdowns, asset impairments, restructurings and other charges for continuing operations
in 2012 (as shown in the segment operating profit table in Note 5) totaled $5.5 million ($3.6 million after taxes), and
unless otherwise noted below, are also included in “Asset impairments and costs associated with exit and disposal
activities” in the consolidated statements of income. Results in 2012 included:
A fourth quarter charge of $0.9 million ($0.5 million after taxes), a third quarter charge of $0.8 million ($0.5
million after taxes), a second quarter charge of $1.0 million ($0.7 million after taxes) and a first quarter charge of
$0.9 million ($0.5 million after taxes) associated with the shutdown of the aluminum extrusions manufacturing
facility in Kentland, Indiana, which includes accelerated depreciation for property, plant and equipment of $2.4
million (included in “Cost of goods sold” in the consolidated statements of income), severance and other
employee related expenses of $1.2 million and other shutdown-related charges of $2.3 million, partially offset by
adjustments to inventories accounted for under the LIFO method of $1.5 million (included in “Cost of goods sold”
in the consolidated statements of income) and gains on the sale of equipment of $0.8 million (included in “Other
income (expense), net” in the consolidated statements of income);
A fourth quarter gain of $1.3 million ($0.7 million after taxes) in Film Products (included in “Other income
(expense), net” in the consolidated statements of income) associated with an insurance recovery on idle equipment
that was destroyed in a fire at an outside warehouse;
A fourth quarter charge of $0.9 million ($0.6 million after taxes) and a third quarter charge of $0.3 million ($0.2
million after taxes) for acquisition-related expenses (included in “Selling, general and administrative expenses” in
the consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions (see
discussion below for further detail);
A fourth quarter charge of $0.1 million ($0.1 million after taxes), a third quarter charge of $0.1 million ($0.1
million after taxes), a second quarter charge of $0.6 million ($0.4 million after taxes) and a first quarter charge of
$0.3 million ($0.2 million after taxes) for integration-related expenses (included in “Selling, general and
administrative expenses” in the consolidated statements of income) associated with the Film Products acquisition
of Terphane;
A fourth quarter gain of $1.1 million ($0.6 million after taxes) related to the sale of a previously shutdown film
products manufacturing facility in LaGrange, Georgia;
A second quarter charge of $0.8 million ($0.5 million after taxes) for asset impairments associated with a
previously shutdown film products manufacturing facility in LaGrange, Georgia;
A fourth quarter charge of $0.2 million ($0.1 million after taxes) and a second quarter charge of $0.1 million
($46,000 after taxes) in Film Products and a first quarter charge of $0.2 million ($0.1 million after taxes) in
Aluminum Extrusions for severance and other employee-related costs in connection with restructurings;
A fourth quarter charge of $0.2 million ($0.2 million after taxes) for asset impairments in Film Products;
A fourth quarter charge of $0.2 million ($0.1 million after taxes) for integration-related expenses (included in
“Selling, general and administrative expenses” in the consolidated statements of income) associated with the
Aluminum Extrusions’ acquisition of AACOA;
A fourth quarter charge of $0.1 million ($0.1 million after taxes) associated with purchase accounting adjustments
made to the value of inventory sold by Aluminum Extrusions after its acquisition of AACOA (included in “Cost
of goods sold” in the consolidated statements of income); and
A fourth quarter charge of $0.1 million ($49,000 after taxes) related to expected future environmental costs at our
aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the
consolidated statements of income).
Total acquisition-related expenses (included in “Selling, general and administrative expenses” in the
consolidated statements of income) associated with the acquisition of AACOA by Aluminum Extrusions were $2.0
million in 2012. Acquisitions-related expenses of $0.8 million were recorded to “Corporate expenses, net” in the segment
operating profit table in Note 5 during the first and second quarters of 2012, and as noted above, acquisitions-related
80
expenses of $1.2 million were recorded to “Losses associated with plant shutdowns, asset impairments, restructurings
and other charges” for Aluminum Extrusions in the segment operating profit table in Note 5 during the third and fourth
quarters of 2012.
Results in 2012 include an unrealized gain from our investment in Intelliject of $16.1 million ($10.2 million after
taxes), which is accounted for under the fair value method. An unrealized loss on our investment in Harbinger of $1.1
million ($0.7 million after taxes) was recorded in 2012 as a result of a reduction in the fair value of our investment that is
not expected to be temporary. See Note 4 for additional information on investments.
The estimated fair value of machinery and equipment that was evaluated for impairment was primarily
based on our estimates of the proceeds that we would receive if and/or when assets are sold. Our estimates of the
remaining fair value for the related machinery and equipment were based on both Level 2 and 3 inputs as defined
under U.S. GAAP.
Aluminum Extrusions closed its manufacturing facility in Kentland, Indiana in August 2012. The plant,
whose core market was residential construction, previously employed 146 people. We estimate that charges incurred
related to the shutdown will be approximately $4.5 million, and include accelerated depreciation on property, plant
and equipment of approximately $2.4 million, severance and other employee-related charges of approximately $1.2
million and other shutdown-related costs of approximately $1 million. Other shutdown-related costs are primarily
comprised of equipment transfers and plant shutdown charges, partially offset by adjustment for inventories accounted
for under the LIFO method. Most of these shutdown charges, which include cash expenditures of approximately $3.5
million, are expected to be recognized over an 18 month period.
Losses associated with plant shutdowns, asset impairments, restructurings and other charges for continuing
operations in 2011 (as shown in the segment operating profit table in Note 5) totaled $6.8 million ($0.3 million gain
after taxes), and unless otherwise noted below, are also included in “Asset impairments and costs associated with exit
and disposal activities” in the consolidated statements of income. Results in 2011 included:
A fourth quarter charge of $2.5 million ($2.2 million after taxes) and a third quarter charge of $2.3 million ($2.2
million after taxes) for acquisition-related expenses (included in “Selling, general and administrative expenses” in
the consolidated statements of income) associated with the Film Products acquisition of Terphane;
A fourth quarter charge of $0.6 million ($0.4 million after taxes) and a second quarter charge of $0.8 million ($0.5
million after taxes) for asset impairments in Film Products;
A third quarter gain of $1.0 million ($6.6 million after taxes) on the divestiture of our film products business in
Roccamontepiano, Italy (included in “Other income (expense), net” in the consolidated statements of income),
which includes the recognition of previously unrealized foreign currency translation gains of $4.3 million that
were associated with the business;
A fourth quarter charge of $0.7 million ($0.5 million after taxes) associated with purchase accounting adjustments
made to the value of inventory sold by Film Products after its purchase of Terphane (included in “Cost of goods
sold” in the consolidated statements of income);
A fourth quarter charge of $0.1 million ($39,000 after taxes), a third quarter charge of $0.2 million ($0.1 million
after taxes) and a second quarter charge of $0.3 million ($0.2 million after taxes) for severance and other
employee-related costs in connection with restructurings in Film Products;
A fourth quarter charge of $0.4 million ($0.3 million after taxes) for integration-related expenses (included in
“Selling, general and administrative expenses” in the consolidated statements of income) associated with the Film
Products acquisition of Terphane; and
A fourth quarter benefit of $39,000 ($24,000 after taxes), a third quarter charge of $43,000 ($27,000 after taxes), a
second quarter benefit of $0.1 million ($0.1 million after taxes), and a first quarter charge of $32,000 ($20,000
after taxes) for timing differences between the recognition of realized losses on aluminum futures contracts and
related revenues from the delayed fulfillment by customers of fixed-price forward purchase commitments
(included in “Cost of goods sold” in the consolidated statements of income).
Results in 2011 include an unrealized gain from the write-up of our investment in Intelliject of $1.6 million ($1.0
million after taxes), which is accounted for under the fair value method. An unrealized loss on our investment in
Harbinger of $0.6 million ($0.4 million after taxes) was recorded in 2011 as a result of a reduction in the fair value of our
investment that is not expected to be temporary. See Note 4 for additional information on investments.
81
The estimated fair value of machinery and equipment that was evaluated for impairment was primarily
based on our estimates of the proceeds that we would receive if and/or when assets are sold. Our estimates of the
remaining fair value for the related machinery and equipment were based on both Level 2 and 3 inputs as defined
under U.S. GAAP.
Losses associated with plant shutdowns, asset impairments, restructurings and other charges for continuing
operations in 2010 (as shown in the segment operating profit table in Note 5) totaled $0.3 million ($0.3 million after
taxes), and unless otherwise noted below, are also included in “Asset impairments and costs associated with exit and
disposal activities” in the consolidated statements of income. Results in 2010 included:
A fourth quarter benefit of $0.4 million ($0.3 million after taxes), a third quarter benefit of $14,000 ($9,000 after
taxes), a second quarter benefit of $23,000 ($14,000 after taxes), and a first quarter benefit of $0.4 million ($0.3
million after taxes) for timing differences between the recognition of realized losses on aluminum futures
contracts and related revenues from the delayed fulfillment by customers of fixed-price forward purchase
commitments (included in “Cost of goods sold” in the consolidated statements of income);
Fourth quarter charges of $0.3 million ($0.2 million after taxes) and a second quarter charge of $0.3 million ($0.3
million after taxes) for an asset impairment in Film Product;
A fourth quarter charge of $0.4 million ($0.2 million after taxes) related to expected future environmental costs at
our aluminum extrusions manufacturing facility in Newnan, Georgia (included in “Cost of goods sold” in the
consolidated statements of income);
A third quarter charge of $0.1 million ($0.1 million after taxes) and a first quarter charge of $0.1 million ($35,000
after taxes) for severance and other employee-related costs in connection with restructurings in Film Products;
A second quarter gain of $0.1 million ($0.1 million after taxes) related to the sale of previously impaired
equipment (included in “Other income (expense), net” in the consolidated statements of income) at our film
products manufacturing facility in Pottsville, Pennsylvania; and
A second quarter loss of $44,000 ($26,000 after taxes) and a first quarter loss of $0.1 million ($36,000 after taxes)
on the disposal of equipment (included in “Other income (expense), net” in the consolidated statements of
income) from a previously shutdown films manufacturing facility in LaGrange, Georgia.
Results in 2010 include an unrealized loss from the write-down of our investment in Intellject of $2.2
million ($1.4 million after taxes), which is accounted for under the fair value method. See Note 4 for additional
information on investments.
The impairment charges in Film Products were recognized to write down the machinery and equipment to
the lower of their carrying value or estimated fair value. The estimated fair value of machinery and equipment that
was evaluated for impairment was primarily based on our estimates of the proceeds that we would receive if and/or
when assets are sold. Our estimates of the remaining fair value for the related machinery and equipment were based
on both Level 2 and 3 inputs as defined under U.S generally accepted accounting principles.
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19
CONTINGENCIES
We are involved in various stages of investigation and remediation relating to environmental matters at
certain current and former plant locations. Where we have determined the nature and scope of any required
environmental remediation activity, estimates of cleanup costs have been obtained and accrued. As we continue
efforts to maintain compliance with applicable environmental laws and regulations, additional contingencies may be
identified. If additional contingencies are identified, our practice is to determine the nature and scope of those
contingencies, obtain and accrue estimates of the cost of remediation, and perform remediation. We do not believe
that additional costs that could arise from those activities will have a material adverse effect on our financial position.
However, those costs could have a material adverse effect on quarterly or annual operating results at that time.
We are involved in various other legal actions arising in the normal course of business. After taking into
consideration information we deemed relevant, we believe that we have sufficiently accrued for probable losses and
that the actions will not have a material adverse effect on our financial position. However, the resolution of the actions
in a future period could have a material adverse effect on quarterly or annual operating results at that time.
From time to time, we enter into transactions with third parties in connection with the sale of assets or
businesses in which we agree to indemnify the buyers or third parties involved in the transaction, or in which the
sellers or third parties involved in the transaction agree to indemnify us, for certain liabilities or risks related to the
assets or business. Also, in the ordinary course of our business, we may enter into agreements with third parties for
the sale of goods or services that may contain indemnification provisions. In the event that an indemnification claim is
asserted, liability for indemnification would be subject to an assessment of the underlying facts and circumstances
under the terms of the applicable agreement. Further, any indemnification payments may be limited or barred by a
monetary cap, a time limitation, or a deductible or basket. For these reasons, we are unable to estimate the maximum
potential amount of the potential future liability under the indemnity provisions of these agreements. We do, however,
accrue for losses for any known contingent liability, including those that may arise from indemnification provisions,
when future payment is probable and the amount is reasonably estimable. We disclose contingent liabilities if the
probability of loss is reasonably possible and material.
In 2011, we were notified by U.S. Customs and Border Protection (“U.S. Customs”) that certain film
products exported by Terphane to the U.S. since November 6, 2008 could be subject to duties associated with an
antidumping duty order on imported PET films from Brazil. We contested the applicability of these antidumping
duties to the films exported by Terphane, and we filed a request with the U.S. Department of Commerce
(“Commerce”) for clarification about whether the film products at issue are within the scope of the antidumping duty
order. On January 8, 2013, Commerce issued a scope ruling confirming that the films are not subject to the order,
provided that Terphane can establish to the satisfaction of U.S. Customs that the performance enhancing layer on those
films is greater than 0.00001 inches thick. The films at issue are manufactured to specifications that exceed that
threshold. On February 6, 2013, certain U.S. producers of PET film filed a summons with the U.S. Court of
International Trade to appeal the scope ruling from Commerce. If U.S. Customs ultimately were to require the
collection of antidumping duties because Commerce’s scope ruling was overturned on appeal, or otherwise,
indemnifications for related liabilities are specifically provided for under the Purchase Agreement.
.
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20
SELECTED QUARTERLY FINANCIAL DATA
Tredegar Corporation and Subsidiaries
(In Thousands, Except Per-Share Amounts)
(Unaudited)
84
FirstSecondThirdFourthQuarterQuarterQuarterQuarter2012Sales216,643$ 215,859$ 216,648$ 233,038$ Gross profit35,450 33,435 38,087 37,710 Income from continuing operations7,737 7,388 14,210 13,850 Income (loss) from discontinued operations(4,739) (35) (6,783) (3,377) Net income2,998$ 7,353$ 7,427$ 10,473$ Earnings (loss) per share:BasicContinuing operations.24$ .23$ .44$ .43$ Discontinued operations(.15) - (.21) (.10) Net income.09$ .23$ .23$ .33$ DilutedContinuing operations.24$ .23$ .44$ .43$ Discontinued operations(.15) - (.21) (.10) Net income .09$ .23$ .23$ .33$ Shares used to compute earnings (loss) per share:Basic32,010 32,051 32,052 32,016 Diluted32,393 32,101 32,101 32,176 2011Sales191,520$ 200,674$ 201,184$ 201,042$ Gross profit29,665 28,858 32,108 31,214 Income from continuing operations6,796 6,027 12,241 3,481 Income (loss) from discontinued operations(128) (324) 495 (3,733) Net income (loss)6,668$ 5,703$ 12,736$ (252)$ Earnings (loss) per share:BasicContinuing operations.21$ .19$ .38$ .11$ Discontinued operations- (.01) .02 (.12) Net income (loss).21$ .18$ .40$ (.01)$ DilutedContinuing operations.21$ .19$ .38$ .11$ Discontinued operations- (.01) .02 (.12) Net income (loss).21$ .18$ .40$ (.01)$ Shares used to compute earnings (loss) per share:Basic31,854 31,946 31,952 31,975 Diluted32,262 32,205 32,060 32,328
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: March 1, 2013
TREDEGAR CORPORATION
(Registrant)
By
/s/ Nancy M. Taylor
Nancy M. Taylor
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on March 1, 2013.
Signature
Title
/s/ Nancy M. Taylor
(Nancy M. Taylor)
/s/ Kevin A. O’Leary
(Kevin A. O’Leary)
President, Chief Executive Officer and Director
(Principal Executive Officer)
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Frasier W. Brickhouse, II
(Frasier W. Brickhouse, II)
Corporate Controller and Assistant Treasurer
(Principal Accounting Officer)
/s/ R. Gregory Williams
(R. Gregory Williams)
/s/ William M. Gottwald
(William M. Gottwald)
/s/ Austin Brockenbrough, III
(Austin Brockenbrough, III)
/s/ Donald T. Cowles
(Donald T. Cowles)
Chairman of the Board of Directors
Vice Chairman of the Board of Directors
Director
Director
85
/s/ George C. Freeman, III
(George C. Freeman, III)
/s/ John D. Gottwald
(John D. Gottwald)
/s/ Richard L. Morrill
(Richard L. Morrill)
/s/ George A. Newbill
(George A. Newbill)
/s/ Thomas G. Slater, Jr.
(Thomas G. Slater, Jr.)
Director
Director
Director
Director
Director
86
EXHIBIT 31.1
I, Nancy M. Taylor, certify that:
Section 302 Certification
(1)
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2012, of Tredegar Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
(2)
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
(3)
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
(4)
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
(a)
be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
(b)
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
(c)
report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
(d)
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting;
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
(5)
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over
(a)
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b)
role in the registrant's internal control over financial reporting.
Any fraud, whether or not material, that involves management or other employees who have a significant
Date: March 1, 2013
/s/ Nancy M. Taylor
Nancy M. Taylor
President and Chief Executive Officer
(Principal Executive Officer)
87
EXHIBIT 31.2
I, Kevin A. O’Leary, certify that:
Section 302 Certification
(1)
I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2012, of Tredegar Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
(2)
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly
(3)
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
(4)
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to
(a)
be designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial
(b)
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
(c)
report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that
(d)
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting;
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
(5)
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over
(a)
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
(b)
role in the registrant's internal control over financial reporting.
Any fraud, whether or not material, that involves management or other employees who have a significant
Date: March 1, 2013
/s/ Kevin A. O’Leary
Kevin A. O’Leary,
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
88
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connection with the Annual Report on Form 10-K of Tredegar Corporation (the “Company”) for the year
ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
I, Nancy M. Taylor, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350,
as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Nancy M. Taylor
Nancy M. Taylor
President and Chief Executive Officer
(Principal Executive Officer)
March 1, 2013
89
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connection with the Annual Report on Form 10-K of Tredegar Corporation (the “Company”) for the year
ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”),
I, Kevin A. O’Leary, Vice President, Chief Financial Officer and Treasurer of the Company, certify, pursuant to 18
U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ Kevin A. O’Leary
Kevin A. O’Leary
Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)
March 1, 2013
90
2.1
2.2
3.1
3.2
3.3
4.1
4.2
4.2.1
4.2.2
4.3
4.3.1
4.4
10.1
*10.2
10.3
10.4
*10.5
EXHIBIT INDEX
Stock Purchase Agreement, made as of October 1, 2012, by and among The William L. Bonnell Company, Inc., AACOA, Inc., the
shareholders of AACOA, Inc., and Daniel G. Formsma, as the representative of the shareholders of AACOA, Inc. (filed as Exhibit 2.1 to
Tredegar Corporation’s (“Tredegar’s”) Current Report on Form 8-K (File No. 1-10258), filed on October 3, 2012, and incorporated herein
by reference). (Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Tredegar agrees to furnish
supplementally to the Securities and Exchange Commission a copy of any omitted exhibit or schedule upon request)
Membership Interest Purchase Agreement, dated as of October 14, 2011, by and among TAC Holdings, LLC, Gaucho Holdings B.V. and
Tredegar Film Products Corporation (filed as Exhibit 2.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on October
19, 2011, and incorporated herein by reference). (Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K.
Tredegar agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibit or schedule upon
request)
Amended and Restated Articles of Incorporation of Tredegar (filed as Exhibit 3.1 to Tredegar’s Annual Report on Form 10-K (File No.
1-10258) for the year ended December 31, 2004, and incorporated herein by reference)
Amended and Restated Bylaws of Tredegar (filed as Exhibit 3.2 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on
May 27, 2011, and incorporated herein by reference)
Articles of Amendment (filed as Exhibit 3.3 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December
31, 2004, and incorporated herein by reference)
Form of Common Stock Certificate (filed as Exhibit 4.1 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year
ended December 31, 2004, and incorporated herein by reference)
Amended and Restated Rights Agreement, dated as of June 30, 2009, by and between Tredegar and National City Bank, as Rights Agent
(filed as Exhibit 1 to Amendment No. 2 to Tredegar’s Registration Statement on Form 8-A/A (File No. 1-10258) filed on July 1, 2009,
and incorporated herein by reference)
Amendment to Amended and Restated Rights Agreement, dated as of June 30, 2009, between Tredegar and Computershare Trust
Company, N.A., as Rights Agent (filed as Exhibit 2 to Amendment No. 3 to Tredegar’s Registration Statement on Form 8-A/A (File No.
1-10258) filed on September 2, 2011, and incorporated herein by reference)
Amendment No. 2 to Amended and Restated Rights Agreement, dated as of June 30, 2009, between Tredegar and Computershare Trust
Company, N.A., as Rights Agent (filed as Exhibit 3 to Amendment No. 3 to Tredegar’s Registration Statement on Form 8-A/A (File No.
1-10258) filed on September 2, 2011, and incorporated herein by reference)
Credit Agreement, dated as of April 23, 2012, among Tredegar Corporation, as borrower, the lenders named therein, JPMorgan
Chase Bank, N.A., as administrative agent, SunTrust Bank, as syndication agent, and Citizens Bank of Pennsylvania, HSBC Bank
USA, National Association, PNC Bank, National Association, and U.S. Bank National Association, as co-documentation agents
(filed as Exhibit 4.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on April 26, 2012, and incorporated herein
by reference)
Guaranty, dated as of April 23, 2012, by and among the subsidiaries of Tredegar Corporation listed on the signature pages thereto
in favor of JPMorgan Chase Bank, N.A., as administrative agent, for the ratable benefit of the Holders of Guaranteed Obligations
(filed as Exhibit 4.2 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on April 26, 2012, and incorporated herein
by reference)
Credit Agreement, dated as of June 21, 2010, among Tredegar, as borrower, the lenders named therein, JPMorgan Chase Bank,
N.A., as administrative agent, SunTrust Bank, as syndication agent, and Bank of America, N.A., HSBC Bank USA, National
Association and U.S. Bank National Association, as co-documentation agents (filed as Exhibit 4.3 to Tredegar’s Current Report on
Form 8-K (File No. 1-10258), filed on June 22, 2010, and incorporated herein by reference)
Reorganization and Distribution Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.1 to
Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by
reference)
Employee Benefits Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.2 to Tredegar’s
Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)
Tax Sharing Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.3 to Tredegar’s Annual
Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)
Indemnification Agreement, dated as of June 1, 1989, between Tredegar and Ethyl Corporation (filed as Exhibit 10.4 to Tredegar’s
Annual Report on Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)
Tredegar Industries, Inc. Retirement Benefit Restoration Plan (filed as Exhibit 10.7 to Tredegar’s Annual Report on Form 10-K (File No.
1-10258) for the year ended December 31, 2004, and incorporated herein by reference)
91
*10.5.1
*10.6
*10.6.1
*10.7
*10.8
*10.9
10.10
10.11
10.12
*10.13
*10.14
*10.15
*10.16
*10.17
*10.18
*10.19
*10.20
10.21
*10.22
*10.23
*10.24
Amendment to the Tredegar Industries, Inc. Retirement Benefit Restoration Plan (filed as Exhibit 10.7.1 to Tredegar’s Annual Report on
Form 10-K (File No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)
Tredegar Industries, Inc. Savings Plan Benefit Restoration Plan (filed as Exhibit 10.8 to Tredegar’s Annual Report on Form 10-K (File
No. 1-10258) for the year ended December 31, 2004, and incorporated herein by reference)
Resolutions of the Executive Committee of the Board of Directors of Tredegar Corporation adopted on December 28, 2004 (effective as
of December 31, 2004) amending the Tredegar Corporation Retirement Savings Plan Benefit Restoration Plan (filed as Exhibit 10.9.1 to
Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on December 30, 2004, and incorporated herein by reference)
Tredegar Amended and Restated Incentive Plan (filed as Exhibit 10.9 to Tredegar’s Annual Report on Form 10-K (File No. 1-10258) for
the year ended December 31, 2005, and incorporated herein by reference)
Tredegar 2004 Equity Incentive Plan as Amended and Restated Effective March 27, 2009 (filed as Annex 1 to Tredegar’s Definitive
Proxy Statement on Schedule 14A (File No. 1-10258) filed on April 14, 2009 and incorporated herein by reference)
Transfer Agreement, by and between Therics, Inc. and Therics, LLC, dated as of June 30, 2005 (filed as Exhibit 10.17 to
Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on July 1, 2005, and incorporated herein by reference)
Intellectual Property Transfer Agreement, by and between Therics, Inc. and Therics, LLC, dated as of June 30, 2005 (filed as
Exhibit 10.18 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on July 1, 2005, and incorporated herein by
reference)
Unit Purchase Agreement, by and between Therics, Inc., Therics, LLC and Randall R. Theken, dated as of June 30, 2005 (filed as
Exhibit 10.19 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on July 1, 2005, and incorporated herein by
reference)
Payment Agreement, by and between Therics, Inc. and Therics, LLC, dated as of June 30, 2005 (filed as Exhibit 10.20 to
Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on July 1, 2005, and incorporated herein by reference)
Form of Notice of Stock Award and Stock Award Terms and Conditions (filed as Exhibit 10.1 to Tredegar’s Current Report on Form 8-K
(File No. 1-10258), filed on February 16, 2011, and incorporated herein by reference)
Form of Notice of Stock Unit Award and Stock Unit Award Terms and Conditions (filed as Exhibit 10.2 to Tredegar’s Current Report on
Form 8-K (File No. 1-10258), filed on February 16, 2011, and incorporated herein by reference)
Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Exhibit 10.3 to
Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on February 16, 2011, and incorporated herein by reference)
Form of Notice of Stock Award and Stock Award Terms and Conditions (filed as Exhibit 10.18 to Tredegar’s Current Report on Form
8-K (File No. 1-10258), filed February 19, 2009, and incorporated herein by reference)
Severance Agreement, effective as of January 31, 2010, between Tredegar and Nancy M. Taylor (filed as Exhibit 10.19 to Tredegar’s
Current Report on Form 8-K (File No. 1-10258), filed March 5, 2010, and incorporated herein by reference)
Form of Notice of Stock Unit Award and Stock Unit Award Terms and Conditions (filed as Exhibit 10.1 to Tredegar’s Current Report on
Form 8-K (File No. 1-10258), filed on March 5, 2012, and incorporated herein by reference)
Form of Notice of Stock Award and Stock Award Terms and Conditions (filed as Exhibit 10.2 to Tredegar’s Current Report on Form 8-K
(File No. 1-10258), filed on March 5, 2012, and incorporated herein by reference)
Form of Notice of Nonstatutory Stock Option Grant and Nonstatutory Stock Option Terms and Conditions (filed as Exhibit 10.3 to
Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 5, 2012, and incorporated herein by reference)
Consulting Agreement, dated March 28, 2012, between the Company and MOMO Partners LLC and Monica Moretti (filed as Exhibit
10.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 29, 2012, and incorporated herein by reference)
Change in Control Severance Agreement, effective March 23, 2012, between the Company and Kevin A. O’Leary (filed as Exhibit 10.2
to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 29, 2012, and incorporated herein by reference)
Change in Control Severance Agreement, effective March 23, 2012, between the Company and A. Brent King (filed as Exhibit 10.3 to
Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on March 29, 2012, and incorporated herein by reference)
Change in Control Severance Agreement, effective September 24, 2012, between the Company and Mary Jane Hellyar (filed as Exhibit
10.1 to Tredegar’s Current Report on Form 8-K (File No. 1-10258), filed on September 24, 2012, and incorporated herein by reference)
+*10.25
Summary of Director Compensation for Fiscal 2012
92
+21
+23.1
+23.2
+31.1
+31.2
+32.1
+32.2
+99
101
Subsidiaries of Tredegar
Consent of PriceWaterhouseCoopers, LLC, Independent Registered Public Accounting Firm
Consent of Dixon Hughes Goodman, LLP, Independent Registered Public Accounting Firm
Certification of Nancy M. Taylor, President and Chief Executive Officer of Tredegar Corporation, pursuant to Rules 13a-14(a) and 15d-
14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Kevin A. O’Leary, Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) of Tredegar
Corporation, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Nancy M. Taylor, President and Chief Executive Officer of Tredegar Corporation, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification of Kevin A. O’Leary, Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) of Tredegar
Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Intelliject, Inc., separate financial statements and Report of Independent Registered Accounting Firm
XBRL Instance Document and Related Items
* Denotes compensatory plans or arrangements or management contracts.
+ Filed herewith
93
APPENDIX – FOOTNOTES
1 The after-tax effects of losses associated with plant shutdowns, asset impairments and restructurings and gains or
losses from the sale of assets and other items (which includes unrealized gains and losses for an investment accounted
for under the fair value method) have been presented separately and removed from income (loss) and earnings (loss)
per share from continuing operations as reported under U.S. generally accepted accounting principles (GAAP) to
determine Tredegar’s presentation of income and earnings per share from ongoing operations. Income and earnings
per share from ongoing operations are key financial and analytical measures used by Tredegar to gauge the operating
performance of its ongoing operations. They are not intended to represent the stand-alone results for Tredegar’s
ongoing operations under GAAP and should not be considered as an alternative to net income or earnings per share
from continuing operations as defined by GAAP. They exclude items that we believe do not relate to Tredegar’s
ongoing operations.
2 Net sales represent sales less freight. Net sales is a non-GAAP financial measure that is not intended to represent sales
as defined by GAAP. Net sales is a key measure used by the chief operating decision maker of each segment for
purposes of assessing performance. A reconciliation of net sales to sales is shown below.
3 Adjusted EBITDA represents income (loss) from continuing operations before interest, taxes, depreciation,
amortization, unusual items, losses associated with plant shutdowns, asset impairments and restructurings, gains or
losses from the sale of assets, investment write-downs or write-ups, charges related to stock option awards accounted
for under the fair value-based method and other items. Adjusted EBITDA is a non-GAAP financial measure that is not
intended to represent net income (loss) or cash flow from operations as defined by GAAP and should not be considered
as either an alternative to net income (loss) (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.
(In Millions)201220112010Film Products611.9$ 535.5$ 520.8$ Aluminum Extrusions245.5 240.4 199.6 Total net sales857.4 775.9 720.4 Add back freight24.8 18.5 17.8 Sales as shown in consolidated statements of income882.2$ 794.4$ 738.2$
APPENDIX – FOOTNOTES, CONTINUED
A reconciliation of ongoing operating profit (loss) from continuing operations to Adjusted EBITDA is shown below.
Amounts relating to corporate overhead for the prior years have been reclassified to conform with the current year’s
presentation.
Adjusted EBITDA for Aluminum Extrusions in 2012 includes an adjustment of $2.4 million for accelerated
depreciation associated with the shutdown of its manufacturing facility in Kentland, IN. Accelerated depreciation
associated with the shutdown of the Kentland manufacturing facility was excluded from operating profit from ongoing
operations. This amount has therefore been subtracted from the amount of depreciation expense added back in
calculating Adjusted EBITDA.
4
In addition to quarterly dividends of 4½ cents per share in the first and second quarter and 6 cents per share in the third
and fourth quarters of 2012, there was a special one-time dividend of 75 cents per share paid to shareholders in
December 2012.
5 Total return to shareholders is defined as the change in the stock price during the year plus dividends per share, divided
by the stock price at the beginning of the year.
(In Millions)FilmAluminum2012ProductsExtrusionsTotalOperating profit from ongoing operations70.0$ 9.0$ 79.0$ Add back depreciation & amortization 39.2 10.0 49.2 Less accelerated depreciation associated with plant shutdown- (2.4) (2.4) 125.8 Corporate overhead- - (22.3) Adjusted EBITDA 109.2$ 16.6$ 103.5$ 2011Operating profit from ongoing operations59.5$ 3.5$ 63.0$ Add back depreciation & amortization 36.3 8.3 44.6 107.6 Corporate overhead- - (15.5) Adjusted EBITDA 95.8$ 11.8$ 92.1$ 2010Operating profit (loss) from ongoing operations66.7$ (4.2)$ 62.5$ Add back depreciation & amortization 34.4 9.1 43.5 106.0 Corporate overhead- - (16.2) Adjusted EBITDA 101.1$ 4.9$ 89.8$
TREDEGAR LOCATIONSCORPORATE HEADQUARTERSRichmond, VirginiaFILM PRODUCTS Division HeadquartersRichmond, VirginiaTechnical CentersBloomfield, New YorkCabo de Santo Agostinho, BrazilMorrisville, North CarolinaRichmond, VirginiaTerre Haute, IndianaManufacturing PlantsDomesticBloomfield, New YorkLake Zurich, IllinoisMorrisville, North CarolinaPottsville, PennsylvaniaRed Springs, North CarolinaTerre Haute, IndianaInternationalCabo de Santo Agostinho, BrazilGuangzhou, ChinaKerkrade, The NetherlandsPune, IndiaRétság, HungarySão Paulo, BrazilShanghai, ChinaBONNELL ALUMINUMDivision HeadquartersNewnan, GeorgiaManufacturing PlantsCarthage, TennesseeElkhart, IndianaNewnan, GeorgiaNiles, MichiganCorporate Officers and Operating Company ManagementNancy M. TaylorPresident and Chief Executive OfficerDuncan A. CrowdisPresident, Bonnell Aluminum and Corporate Vice PresidentA. Brent KingVice President, General Counsel and Corporate SecretaryMary Jane HellyarPresident, Tredegar Film Products and Corporate Vice PresidentKevin A. O’LearyVice President, Chief Financial Officer and TreasurerLarry J. ScottVice President, AuditDirectorsR. Gregory Williams2, 4, 6Chairman of the BoardTredegar Corporation President CCA Financial Services, LLCAustin Brockenbrough, III2, 4, 5, 6Managing Director and President Lowe, Brockenbrough & Company, Inc.Donald T. Cowles2, 3, 5, 6RetiredReynolds Metals CompanyGeorge C. Freeman, III2, 4, 6PresidentUniversal Corporation John D. Gottwald1, 6Retired Tredegar CorporationWilliam M. Gottwald1, 6Vice ChairmanTredegar CorporationRetiredAlbemarle CorporationRichard L. Morrill3, 4, 5, 6PresidentThe Teagle FoundationChancellorUniversity of RichmondGeorge A. Newbill1, 3, 6RetiredAlbemarle CorporationThomas G. Slater, Jr.6PartnerHunton & Williams LLPNancy M. Taylor1President and Chief Executive OfficerTredegar Corporation1) Executive Committee2) Audit Committee3) Executive Compensation Committee4) Nominating and Governance Committee5) Investment Policy and Related Person Transactions Committee6) Independent DirectorShareholder InformationAnnual MeetingThe annual meeting of share-holders of Tredegar Corporation will be held on Wednesday, May 22, 2013, beginning at 9:00 AM EDT at the Westwood Club in Richmond, Virginia. Formal notices of the annual meeting, proxies and proxy statements will be mailed to shareholders on or about April 17.Corporate Headquarters1100 Boulders Parkway Richmond, Virginia 23225 Phone: 804-330-1000 Website: www.tredegar.comNumber of EmployeesApproximately 2,700CounselHunton & Williams LLP Richmond, VirginiaIndependent AuditorsPricewaterhouseCoopers LLP Richmond, VirginiaStock ListingNew York Stock Exchange Ticker Symbol: TGTransfer Agent and RegistrarComputershare Investor Services Canton, MassachusettsInquiriesInquiries concerning stock transfers, dividends, dividend reinvestment, consolidating accounts, changes of address, or lost or stolen stock certificates should be directed to:Computershare Investor Services 250 Royall Street Canton, Massachusetts 02021Phone: 800-622-6757 (US, Canada, Puerto Rico) 781-575-4735 (International)E-mail: web.queries@computershare.comWebsite: www.computershare.com/investorAll other investor inquiries should be directed to:Tredegar Corporation Investor Relations Department 1100 Boulders Parkway Richmond, Virginia 23225 Phone: 800-411-7441 or 804-330-1044E-mail: invest@tredegar.comWebsite: www.tredegar.comCORPORATE INFORMATION Tredegar Corporation
1100 Boulders Parkway
Richmond, Virginia 23225
www.tredegar.com
tRedegAR Film pRoducts
Among the top global leaders in the plastic films industry, Tredegar Film Products manufactures plastic films,
elastics and laminate materials for the personal care, electronic display, flexible packaging, lighting and other
specialty film markets. With a global R&D structure and locations throughout North America, Europe, Asia,
and South America, Tredegar Film Products provides local support and innovative solutions to meet our
customers’ needs.
Bonnell Aluminum
A premier extruder for more than half a century, Bonnell Aluminum manufactures aluminum extrusions for all
major markets including: building and construction, transportation, consumer durables, electrical, machinery
and equipment, and distribution. With the recent addition of AACOA, Bonnell Aluminum now serves more of
North America’s largest and most respected manufacturing companies with design solutions and unmatched
extrusion capabilities and services.
Experience with Confidence